Stark contrast in fortunes

According to the most recent report from FAO Globefish, Norwegian salmon prices started off 2015 around NOK 5 (US$ 0.78) per kg below 2014 prices as high early year volumes had to be absorbed without the assistance of the Russian market. However, the situation reversed itself in the third quarter. Harvesting switched to a new generation, fish weights decreased, temperatures fell, biomasses dropped and the krone depreciated against the euro, pushing prices above 2014 levels where they have remained. Forward price consensus at Fish Pool would suggest that the market is also increasingly optimistic about Norwegian prices over the next two years.

This year has so far been another profitable one for the Norwegian salmon industry, with a range of market developments that have allowed exporters to increase the Norwegian share of important markets at the expense of other producers. In the USA, shifting consumer preferences have led to the decision of multiple large retailers to turn to Norwegian salmon at the expense of Chile. It is the EU markets, however, that continue to absorb the largest quantities of Norwegian Atlantics, despite the persistent high prices. Norwegian exporters have successfully filled the large gap in the market left by the Russian trade embargo by taking advantage of a weak krone, strong EU demand and new opportunities in the US market.

For Chilean salmon prices, however, heavily depressed demand in the top markets has seen a steep drop in export prices to almost all destinations. In week 49, the price for fresh Atlantic fillets on the US market was at US$ 7.08 per kg compared with US$ 8.14 per kg for the same week last year.

Chilean salmon farmers has faced falling prices and the devaluation of currencies in target markets such as Brazil and Russia, as well as the advancement of Norway in the United States, one of the main markets for Chile in terms of exports (currently representing about 25% of shipments). Some believe that the Chilean salmon industry is still capable of competing with European producers and overcoming the low prices and poor results suffered during the first half of 2015.

Outlook

The economic outlook for the EU has improved, while retail spending is being boosted by good growth in the USA, and it appears these two markets will continue to be the main focus of exporters for the foreseeable future. However, exchange rate dynamics will continue to be another key influencing factor in determining US supplier composition, while the significant shifts in large US retailer sourcing strategies is set to hit Chile hard. Consolidation is an important step in addressing Chile’s issues, but neither Japan nor Brazil represent very stable alternative markets to the USA at present and such activity will be limited until a clearer picture emerges.

In contrast, the outlook for European producers remains positive so long as production costs can be kept under control, with relatively low supply growth expected and prices forecasted to remain high for at least the next two years.