Record export revenues as demand and supply drives soaring prices

Christian Pérez Besides, the persistent threat of disease in Chile and much higher feed costs this year present additional challenges for producers, while widespread industry consolidation continues. According to a recent report published by FAO Globefish, the strong upward price trend that began in late 2012 continued unabated throughout the first five months of 2013, defying industry expectations and approaching record levels on EU markets in late May. For Chilean producers, low frozen Coho prices in the first few months were beginning to pick up in Japan in May, and the positive trend continues in the USA. Demand in most markets has shown considerable resilience in the face of rapidly rising prices, with the EU and the US posting increased year-on-year volumes in the first quarter. France, Germany and the UK in particular are performing well, as are key emerging markets such as Brazil and China. This is at least partly due to the similarly high prices of meat, forecast to persist in the medium term, which mean limited availability of cheaper basket alternatives for the consumer. However, the full impact of the high raw material prices that processors are paying is only just beginning to be felt at the consumer end, and demand is likely to suffer. Nevertheless, this could also be an important opportunity for Chilean producers, who are now trying to use the relatively more attractive prices of frozen, valued-added product to increase their market share in the EU. France The inflated price levels slowed salmon import growth in France, and first quarter volumes were more or less flat compared with Q1 2012 at 36 283 tonnes, with total import value up 16% to USD 272 million. Product and supplier composition have shifted somewhat, however, and imports of frozen Pacific fillets were up 12% to 5 508 tonnes, with Chile as the major supplier. Overall in Q1 2013, France imported 55% more Chilean salmon by volume, and 19% more by value, at 1 954 tonnes worth USD 13.4 million. Meanwhile imports of fresh Pacific fillets, mainly from Norway, were up 30% to 5 003 tonnes.   Germany Germany imported 29 887 tonnes in the first 3 months of 2013, 4% more than last year. Total import value was up to USD 28.2 million, an 11% increase. Imports of whole fresh Atlantics from Norway were down 6% to 9 597 tonnes, while smoked and frozen fillet imports were up 10% and 11% to 9 475 tonnes and 7 581 tonnes respectively. These figures reflect the large growth in imports from Chile, Germany’s main supplier of frozen fillets. Chilean-origin import volumes have tripled compared with Q1 2012, and, although the relative share is still small at 4.6%, it seems that Chilean producers are taking advantage of high Norwegian prices and the greater quantities they have available. Poland, Germany’s major supplier, also saw increased first quarter volumes of 8 900 tonnes (23% up) at USD 121 million (28% up), almost entirely smoked salmon.   Japan In terms of volume, Japan imported 3% less salmon (85 331 tonnes) in the first 4 months of 2013 than in 2012, but the decrease in value was 36% (USD 343 million). The large drop is mainly the result of weaker early-year prices – now recovering somewhat – for frozen Pacific salmon from Chile, which is meeting with lukewarm demand this year. This is partly due to poor trade conditions, specifically a weak yen and high freight costs, as well as left over inventories from 2012. Chile still supplies the vast majority of Japan’s salmon imports, although the 2013 January to April volume of 69 502 tonnes represents an 8% drop compared with last year. Meanwhile, Norwegian-origin imports dropped by 27% to 5 373 tonnes over the same period, further evidence that overall demand in Japan is not robust enough to absorb large volumes at current prices. In response to the high prices of Norwegian and Chilean farmed, Japan imported five times more salmon from Russia, New Zealand and Canada, to a total of 7 803 tonnes.   USA The USA imported salmon during this period mainly from Chile with 30 269 tonnes for a total value of USD 256 million and Canada with 22 364 tonnes worth USD 142 million. Overall the market situation has improved since last year, and in the first quarter of 2013 USA imported 77 000 tonnes of salmon products, representing an increase of 14% compared with the same period in 2012. The total value of exports between January and March rose by 15% totalling over USD 578 million.   In terms of exports, there was a 5.2% decrease in quantity and a 2% drop in the value of total exports, in comparison with the same period in 2012.   Brazil Brazil is one of the world’s fastest growing markets for salmon, importing almost 9 times more salmon products in 2012 (63 300 tonnes) than in 2000 (7 300 tonnes). The total value of these imports in 2012 was USD 296.5 million. Continued economic growth, only briefly slowed by the financial crisis, combined with an increasing population, has seen a rapid expansion of the target middle class demographic seeking higher quality seafood products. This trend should see sustained growth in salmon demand over the coming years, and it is Chilean producers that will be able to take advantage. Chile supplies 100% of Brazilian salmon imports, of which 78% were fresh whole Atlantics in 2012. Frozen whole salmon made up 9% of the total volume, while frozen fillets accounted for 11%. Export prices to the Brazilian market generally follow the US market trend but are lower overall - average FOB price for fresh Atlantics in 2012 was USD 5.46 per kg. This is compensated for, to an extent, by lower transport costs and logistical conveniences resulting from the geographic proximity of the two countries. Chilean trout competes with salmon for market share, with import volumes peaking in 2010 at 6 630 tonnes when Chilean salmon farmers were hit by the ISA outbreak. By 2012, volumes had declined to 4 270 tonnes for the year, worth approximately USD 17 million. Frozen whole trout made up 64% of these imports by volume, while frozen fillets took a 28% share.   In the first 5 months of 2013, the Brazilian salmon market continued on its upward trajectory, importing 31 600 tonnes of salmon worth USD 170.7 million, increases of 32% and 41% respectively. Prices are also rising, recovering from significantly lower levels in 2012. Meanwhile, trout imports fell by 35% to only 963 tonnes compared with the same 5 months last year.   Outlook Although still strong in most markets, underlying demand is not expected to sustain prices at current levels once intermediaries in the value chain begin to pass costs onto the consumer. Supply is still likely to be inadequate to push prices very far down, however, particularly if wild harvests are low or disease spreads. If the supply pressure persists for too long, the high cost of salmon may result in a loss of some of the valuable ground gained last year in terms of market penetration. Chile can take advantage of the price situation, however, in order to gain a foothold in traditionally Norwegian markets, while wild salmon producers are now in a good position to expand supply to farmed-dominated markets. Meanwhile, feed prices will continue to put pressure on margins.