Saumon & Truite

As global demand shows little sign of abating, prices for farmed salmon have been pushed steeply upwards over the last six months as the market adjusts to multiple supply limiting developments. These include algal bloom mortalities and new regulations in Chile, problems with sea lice in Norway and lower global wild harvests. Profitability is strong for Norwegian farmers, but wild producers, Chilean farmers, processors and wholesales are not benefitting to the same extent.

As Norwegian farmers continue to face difficulties with sea lice, farmed Atlantic salmon production in the country is expected to decrease by 2% this year to approximately 1.2 million tonnes. In May, total standing biomass at farms was down 4% compared with May 2015, with a relatively higher proportion of younger generation fish and a lower average weight. The shortage, particularly for larger sizes, has seen prices spike repeatedly to higher and higher levels. As of week 24, the weighted NASDAQ salmon index hit NOK 74.8 per kg (EUR 8 per kg), some 45% higher than the same week in 2015.
Salmon export volume out of Norway in the first three months of 2016 was 6% lower than the same period in 2015, to total 227 000 tonnes. In value terms, exports were up 20.7% over the same period, due to the elevated price level. The average price for fresh whole Atlantics over the first quarter of 2016 was NOK 58.9, 28.5% higher than in 2015, yet demand in Norway's major markets was not overly affected. In particular, the large EU market, constituting 74% of Norwegian export value, imported NOK 9.9 billions worth of salmon from January to March, 23% more than in 2015.
The most important growth markets for Norway in the first quarter of 2016 were Italy, the USA and Viet Nam. Total volume of Norwegian salmon exports to these markets increased by 5.8%, 10.9% and 83.8% respectively. Buyers in Italy and Viet Nam are primarily interested in fresh whole Atlantics for reprocessing, while in the USA, Norwegian exporters are rapidly expanding their share of the fresh fillet segment, helped by the strong US dollar. Aside from the USA, Asian markets are also being targeted by the Norwegian industry as a growing, urbanized middle-class there represents an enormous source of future demand for salmon. Thailand in particular has been identified as having great potential given the strong increasing trend in salmon consumption.

The Norwegian's industry top challenge remains sea lice, and one possible solution currently being pursued is the development of offshore sites. Salmon kept in offshore pens are generally less susceptible to sea lice infestation and the large aquaculture companies are scrambling to apply for a total of 27 development licenses on offer while also investing in offshore farming technology. For the foreseeable future, however, costs of sea lice treatments will be more than offset by the extreme price levels which are resulting in healthy margins, record profits and soaring stock prices for Norwegian farming companies. And with a widening gap between supply and demand, reflected by regular upward revisions of forward prices over the last six months, the outlook for the industry's producers is ever more positive.