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Why there has been so much fluctuation in salmon prices 2 minutes

  Oct 30, 2017

Very few types of consumer seafood products are able to compete on the same levels of supply and international demand as farmed Atlantic salmon. The increasing global appetite for this fish has seen the salmon farming industry’s output increase by 384% since 1995, with an annual growth of 8%.

However, last year we witnessed a decline in the total global harvest – to less than 2 million tonnes from a record 2.3 million tonnes in 2015 – and many stakeholders in the sector are expecting only a marginal increase on that when the 2017 output is confirmed, with no notable supply increase for at least another year.

Along with some other major food sources containing animal protein like pork and lamb, salmon had become relatively cheaper over the past few decades. Recently, though, the price of salmon has increased more than other proteins, and the high prices and declining availability of salmon has occasionally left many buyers and processors in key markets struggling to fill orders.

BIOLOGICAL INTERFERENCES

Obvious questions centre on why this is happening to the salmon sector, and specifically why salmon farmers don’t simply produce a lot more fish to solve the supply stagnation and price issue. There are, however, a number of reasons for this supply trend, including naturally occurring biological challenges in key farming areas – predominantly sea lice infestations in Norway and algal blooms in Chile. Historically, these two countries account for around two-thirds of the world’s salmon production, but both saw their respective outputs fall by 100,000 tonnes in 2016.

While there was, and continues to be, some modicum of good news in the market in terms of pockets of increased salmon supply, such as higher outputs from Scotland and Canada, these contributions did very little to offset last year’s overall decline. Reduced availability combined with unprecedented demand for salmon has led to the “perfect storm” – so that at numerous times over the past 12-18 months, salmon prices have reached levels that were as much as 40-50% more than just a few years previously.

RISK REDUCTION

There is a general acceptance in the salmon farming sector that while it’s possible to tackle some of its production challenges, the industry as a whole has more or less reached a production level where biological boundaries are being pushed. As a result, future growth can only come from radical technological progress, the development of improved pharmaceutical products and implementation of non-pharmaceutical techniques, as well as improved industry regulations and intercompany cooperation.

Some comfort can be taken from the salmon industry being the aquaculture sector’s technological frontrunner. Many of its leading players are actively seeking, through heavy investment, new production areas, alternative feed sources, new technologies etc., that can help solve the biological challenges cost-effectively and bring greater stability to the market. For example, most large producers have projects in the pipeline or on trial that are specifically aimed at ramping up production without impacting marine environments or exposing the fish to biological challenges such as sea lice. These concepts include enclosed technology, fully-submersible facilities designed to endure the roughest weather in remote locations, and land-based farming systems.

While only time will tell which, if any, of these innovations will be launched commercially, there is a clear determination in the industry to get salmon production back on a growth trend, which will hopefully bring prices down accordingly.

SHORT-TERM OUTLOOK

It is clear that prices can go up and down quickly. With sea lice, algal blooms and other biological challenges remaining unwanted forces to be reckoned with, not to mention fast-growing demand for salmon coming from existing and new regions, we can’t predict what the near future brings.

Pittman Seafoods has the commitment to follow up the market intensively, to be flexible and to adapt to the market prices.


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