Soft prices in 2012, but pick up expected next year.
Nikolik is expecting a 13.7 per cent increase in salmon production worldwide in 2012. He says the growth continues to be driven by Chile, but the warm winter in Norway has led to a 9 per cent growth of the biomass by December 2011 relative to the same period in 2010, indicating to a strong production expansion potential in 2012.
“Most analysts forecast a growth for Norway between 8-12 per cent. This is quite a lot. They produced 1 million tons of Atlantic salmon in 2011 - four times more than Chile, and it would mean close to 100,000 tons extra on the market.
“In 36 months, stating Jan 2011, the world supply will grow with 37 per cent. This is one third of the market. And now we are in the middle of this expansion,” Nikolik says.
The first low point for the salmon spot price came in November 2011, when the spot price was at 19NOK, well below production cost. But Nikolik says prices have improved in 2012: “We have seen something interesting in the beginning of 2012. The strong volumes have continued, but the prices have been improving and even reached 29NOK.
“It has now gone down to about 27NOK.
“There seems to be strong demand at this price level probably because retailers have been reducing the prices. There is more and more promotional activity. The retailers are competing against each other and it is driving consumption. It is a seesaw effect, and we are seeing it across Europe” he says
However, he predicts prices could dip again half way through the year. The Norwegian production is very close to reaching the maximum biomass limits before the end of 2012. This could force harvesting and create a large temporary increase in supply.
“Also in the second half of 2012 there will be a cumulative effect and impact on consumption, with two consecutive years of increasing supply – it’s hard to predict the impact of this on prices,” he says.
In Chile, Nikolik says financing, availability of sites and the business model with the new barrio system that needs more space per tonne farmed than previously, could slow production growth down by 2013. The biological performance could also decrease the supply growth, as there have been reports of increasing lice levels, although some say this is to be expected with a growing industry capacity utilisation.
“It depends on who you talk to. Some are concerned that Chile is growing too fast. But then others say don't worry, we monitor the sector much better than in the past and when needed we can take immediate action, maintaining high sanitary conditions across the industry.”
However, he says regardless of this, it is certain that the significant growth will occur in 2012, and that prices will be relatively low. “But when they will pick up exactly it is hard to say,” he adds.
