Demand in US, EU should increase as economies grow

At the Marel Salmon ShowHow event in Copenhagen in February an analyst from Rabobank analysed developments in the salmon market to make forecasts about the next years. Gorjan Nikolik suggested that in 2014 Norwegian production of salmon would grow 5-8%, while the forecast for Chile was more volatile at 1-10%. Looking first at Norway, he said Norwegian salmon production is affected by the maximum allowable biomass (MAB), legislation which determines the biomass in the water.

The salmon displayed in this Riga supermarket is from Norway, where production is likely to increase 5-8% in 2014.

The license to farm salmon specifies the MAB, which is currently 780 tonnes (900 tonnes in Troms & Finnmark). Changes in the MAB legislation, which, for various reasons, are not unlikely, would affect production in Norway. Another important factor is the water temperature. Higher than normal water temperatures as experienced in 2012 make the fish more active therefore increasing their feeding activity and the rate at which they gain weight. The forecast for 2014 is that water temperatures will be higher, so taken together, higher temperatures and changes in biomass legislation could result in higher supply. On the other hand warmer water temperatures also increase the risk of disease which could have a negative impact on the supply, though this was not the case the last time water temperatures were high, in 2011/2012. In general, the analyst felt that 2014 would be a good year to be a salmon farmer in Norway.

Moving to Chile Mr Nikolik painted a different picture. He pointed out that Chilean farmers were suffering from mortality rates of up to 15% at the marine stage reducing the harvest. Lice is another parameter that needs to be considered when looking at supply. In Chile data on lice were sparse until last year, when they started being published more regularly and, although patchy, they show a decline in overall lice numbers. On the other hand, biomass in Chile has been growing and this, according to Mr Nikolik is a bad sign as the larger the biomass the more the pressure on the environment and the greater risk of disease outbreaks. The industry in Chile is only just recovering from an outbreak of disease in 2007-2010, which erupted when biomass was some 650,000 tonnes, and it is now again approaching that figure. Mr Nikolik also referred to the prospects of new legislation in Chile which should work to the benefit of the industry as it looks at the mortality rates and the sanitary conditions and then calculates the density of production. However the impact of the legislation will not be seen until 2015 or 2016 when production is expected to contract. The combination of legislative, biological, and financial issues is likely to result in greater consolidation in the industry and a decrease in production, leaving Norway as the main source of growth after 2015 or 2016.

On the market side Mr Nikolik said demand looked as if it was increasing in both the EU and the US driven by reasonable growth in the economies of the two as well as currencies that were strengthening against the exporters’. Declines in the price of fish feed due to cheaper raw materials should reduce costs for the producers. With regard to the price Mr Nikolik was more reluctant to commit himself saying that it may be a little less expensive at best. For processors visiting the Salmon ShowHow the message was perhaps a little mixed. High salmon prices through 2013 have been hard on the industry, but improvements in overall economic growth may increase demand while new markets such as China and Russia offer exciting prospects.