The report analyses the market situation over the year 2016 and the first quarter 2017.

With high prices now the new normal, industry stakeholders all along the supply chain are focusing on identifying effective ways of coping with the widening gap between supply and demand. A number of countries are viewing the situation as an opportunity to develop their salmon aquaculture sectors, while interest in land-based farming options is increasing. On the market side, product developers are looking to maximize the value to consumers using a minimum of raw material.

Norway

Growth in export revenue for the Norwegian farmed Atlantic salmon industry over the last three years has been truly remarkable. This significant growth has been driven by low global supply, positive demand developments in major markets and favourable exchange rate conditions. In 2016, sea lice challenges contributed to a drop in Norwegian production of some 6 percent which compounded the global supply shortage resulting from the mass algal bloom mortalities in Chile, sending prices soaring. Even as total Norwegian export volume declined in 2016, total export value broke the all-time record, while the average export price for fresh whole salmon was NKr60.1 (US$7.15) per kg for the year, representing a 40 percent increase compared with 2015. In these conditions, even rapidly rising production costs associated with feed and sea lice control have not prevented Norwegian salmon aquaculture companies from realizing record earnings.

The core EU markets for farmed Norwegian salmon, particularly Poland and France, have been largely willing to pay the steeply rising prices for product without significantly scaling back their purchase volumes. The continuing firmness of demand is reflected in the observation that a 36 percent increase in the unit value of Norwegian farmed salmon exports to the EU in 2016 occurred in parallel with only a 5 percent drop in total volume. However, EU buyers are finding themselves in increasing competition with US and Asian buyers to secure Norwegian fish. In Asia, Viet Nam stands out in posting a 152 percent increase in the volume of imports of fresh whole salmon from Norway in 2016, while many US importers have turned to Norway as an alternative source of fresh fillets after the Chilean sector suffered from negative media coverage on high antibiotic use as well as from the impact of the algal bloom.

In 2017, industry analysts expect Norwegian production volumes to return to slow growth, with Nordea markets predicting total harvest volumes of 1.17 million tonnes (whole fish equivalent) for the year, 1% higher than 2016. Along with the expected increase in supply from other sources, downward pressure on Norwegian prices could result. Other factors that could contribute to a decrease in prices include a strengthening Norwegian krone versus the euro and a delayed consumer reaction to pricey fish as processors increasingly pass on raw material costs. The forward price markets are reflecting these possibilities and have softened their expectations of 2017 prices somewhat, particularly towards the end of the year, although there is still little confidence in any sustained dips below the NKr60 (US$7.14) level.

Trout

As the salmon industry reaps the rewards of soaring prices, the farmed trout sector in Norway has not been left behind. Successful development of a diverse range of markets in Europe, Asia and North America in response to the Russian Federation trade embargo has seen demand for Norwegian trout grow rapidly. Due to this strong demand, biomasses have now been significantly depleted and 2016 price levels were some 41 percent above 2015. Belarus, Japan, Poland, the USA, Thailand and Ukraine are now all buying large and increasing volumes of Norwegian trout and the outlook for the sector is dependent only on the availability of fish to supply the booming demand.

Chile

2016 ended with historic high prices for both Atlantic salmon and trout in Chile. Outstanding prices were also reported for coho salmon, although its main market, Japan, had a significant devaluation of its currency, which impacted prices negatively. The average annual salmon export price was US$7.38 per kg during 2016.

According to Subpesca, total salmonids harvests during 2016 reached 675 500 tonnes, a drop of 19.3 percent compared with 2015. Atlantic salmon amounted to 502 400 tonnes (-17.2 percent) while rainbow trout production was 71 400 tonnes (-26.9 percent). These declines are explained by the shift towards Atlantic salmon farming. In terms of coho, 101 800 tonnes were registered (-23.5 percent). The Central Bank of Chile indicated that despite the decline in production, the value of Chilean exports of all salmon species increased by 10 percent from US$3 510 million in 2015 to US$3 862 million in 2016.

Chilean salmon farmers have been working since October 2016 to prevent further mortalities from the algal bloom by increasing the number of monitoring stations to detect the phenomenon in the future. Meanwhile, rising salmon prices resulted in growing stock values for salmon companies on the Santiago Stock Exchange. Chile has also already harvested early in some areas (January–February) to avoid similar problems as in the last season. Analysts do not expect serious production issues due to good weather in areas with high biomasses.

UK

Scottish salmon producers also benefitted from high prices in 2016 despite ongoing struggles with sea lice and Brexit. The implications of leaving the EU for the salmon sector are complex and as yet not fully clear. The weakening of the pound certainly boosted export revenues in the latter half of 2016, but the UK is also a major importer of salmon and thus importer purchasing power suffered. The production outlook is for steady but slow growth in Scottish salmon production over the coming years, so long as the extremely costly sea lice issues can be addressed effectively.

UK consumers are still showing strong interest in farmed salmon even at current extreme price levels, although there was a notable drop in imports during the later part of 2016. A recent Nielsen survey put total 2016 retail purchases of salmon in the UK at 58 000 tonnes worth £847 million, increases of 2.7 percent and 0.6 percent respectively. Canned salmon, for which raw material comes primarily from US wild fisheries, did not perform well, and was down 10.9 percent for the year.

Wild salmon

After exceptionally high catches in 2015, Alaskan wild salmon fisheries saw a pronounced drop in volumes in 2016, both in comparison to the previous year and the last even year. The total volume for 2016 came to 298 000 tonnes, 44 percent lower than 2015 and 17 percent lower than 2014. This decline was not uniform across all species however, and good sockeye catches went some way towards offsetting low pink catches. The Russian Federation salmon fisheries were much more productive in 2016, coming in 32 percent higher than forecasted with landings of 437 200 tonnes of salmon, including 264 700 tonnes of pink salmon.

Markets

The global shortage of salmon has seen import volumes fall in almost all major markets, with only a few exceptions. One of these is the USA, where a strong dollar and positive economic conditions have put buyers in a good position to compete with the rest of the world for limited quantities of fish. The Russian Federation and Brazil, in contrast, are struggling with their own individual economic challenges which are making the high price of salmon difficult to swallow. The current price level is also driving industry participants globally to maximise efficiency at all points of the supply chain. One means of doing this is making the most use of whatever raw material is available, and there is growing industry investment in increasing yield at the processing level and developing value-added convenience products. Soaring raw material costs are also prompting operational and structural changes amongst processors, who are seeking to protect themselves against the dual impact of price volatility and delayed price transmission.

France

France is the largest EU market for salmon, and the consistent growth of French demand has been an important factor behind the meteoric rise of European salmon producer revenues, particularly in Norway, its number one supplier. After a temporary backlash against Norwegian origin salmon due to negative consumer perception, Norway has recovered its lost share of the French market and the Norwegian share of French salmon import volumes has actually increased each year for the last three years. Consumer resistance to rising prices is not unlimited, however, and the expectation is for a shift towards alternative seafood items such as cod as raw material costs continue to filter down to the retail level. Importers have responded in part by increasing purchases of relatively cheaper frozen fillets from Chile in place of fresh fillets from Norway.

Germany

Germany is another major market where demand for salmon has shown resilient growth over the last few years. Both fresh and smoked salmon are popular products in Germany, although the latter makes up the major proportion of German imports, sourced almost entirely from neighbouring Poland where a large smoking industry imports raw material from Norway. The total value of German imports of salmon has almost doubled since 2012, and in the case of fresh products has more than doubled. Large volumes of fresh salmon in Germany are sold through discount retail chains.

USA

According to NOAA, the USA consumed an estimated 353 000 tonnes of salmonids in 2016 worth a total of US$3 211 million. These figures represent an increase of 2.5 percent in volume and 18 percent in value compared with 2015. Three countries account for 76 percent of the total volume imported. Chile was the leading supplier (131 300 tonnes worth US$1 349 million), followed by Canada (99 500 tonnes worth US$768 million) and Norway (38 200 tonnes worth US$412 million). Chile was the only one of these three countries that registered a decrease in terms of volume (-1.5 percent), while Canada grew 9 percent and Norway 3 percent.

Japan

Japan imports significant volumes of three different species of salmon: coho, sockeye and Atlantic. Coho and Atlantic salmon are supplied from farms in Chile and Norway respectively, while sockeye comes from Russian Federation and US wild fisheries. Japanese demand for seafood is waning in the long-term and there has been no consistent salmon market growth trends over recent years, with year to year fluctuations in salmon import volumes largely dependent on the relative strength of the yen and the availability of supply. Compared with 2015, 2016 import volumes across all three species were generally flat or marginally down, with Atlantic salmon the only species showing a significant price increase.

Outlook

After a year of record-breaking prices in 2016, early 2017 has been marked by a steep decline in global farmed salmon prices from the peaks reached in December. This is partly due to a relatively greater availability of fish but is also the result of a seasonal drop in demand which is exacerbated by the continuing absence of a major early year buyer, the Russian Federation. However, prices in both the US and European markets are still at or above last year’s levels, and despite a softening of forward prices, the outlook remains strong.

There is now widespread acceptance of the firmness of the new price plateau supported by rapid global demand growth and a number of physical and regulatory constraints on supply growth. All of these factors have created a strong motivation for stakeholders to seek ways of maximizing their share of the enormous revenues being generated on relatively little raw material. Secondary producing countries such as the Russian Federation, Canada, Ireland, Iceland and Australia have all invested in developing new aquaculture production sites, while the large-scale viability of land-based farming is increasingly a question of “when” rather than “if”. There is also a strong focus on developing technologies for efficiency gains at both the farm and processing level, while product developers are scrambling to find new ways of adding value while reducing raw material requirements. 

The report analyses the market situation over the year 2016 and the first quarter 2017.