January 7, 2014

 

US market for Chilean frozen salmon remains tight

 

 

Due to historically high levels of the Chilean frozen market prices, buyers have no choice but to back off, while the fresh market is becoming difficult as well.

 

It's no secret that Norway's supply on Atlantic salmon in general has been tight this year, but now there is another obstacle in the supply mix - lack of supply out of Canada.

 

"Volumes have been cut by almost 50% on premium," Harry Mahleres, director of purchasing for Seattle Fish Company, said, referring to the premium Canadian Atlantic salmon he sources from Western Canada's British Columbia. Currently, the company cannot find any supply available out of Western Canada.

 

The British Columbia-based divisions of Norwegian fish farmers Grieg Seafood and Cermaq are currently not selling any fish at all in the wake of the high demand Christmas season; and Marine Harvest Canada (MHC) - the only other West Coast option - is not making up for the deficit, MHC communications director Ian Roberts said.

 

Although MHC is still selling at the same levels it was leading up to Christmas, its volumes are down from normal due to a prolonged production lull it announced in October of 2011 in response to the global increase in supply. Since then the company's annual production volume dropped by 25%, from 40,000 tonnes of headed and gutted product per year to 30,000 tonnes, Roberts said.

 

Having just begun normal smolt stocking at the beginning of 2013, production levels will not return to normal until September. Meanwhile, fish from Scotland has been less available as well due to wind which made prices to rise significantly, said Mahleres.

 

Supply out of Norway has also been down, with prices extremely high. Due to low production levels, Norway's spot prices rose to NOK54 (US$8.77) before Christmas and only just dropped below NOK50 (US$8.12) per kilogramme this week.

 

Although the drop is fairly significant, prices remain well above historic norms, and supply is so tight. This recent price dip appears to have been short lived. A major Chilean Atlantic salmon buyer said that prices had already moved up again.

 

As for Chilean, prices also had a short-lived dip this week, having averaged US$4.81 per pound for three to four pound fresh fish fillets this week, US$0.03 less than last week, according to a report by Salmonex.

 

Chilean salmon producers continue to show resistance to meeting the demand for frozen portions in the US.

 

"We've had resistance from plants packing for us," Don Kelley, procurement manager for Western Edge Seafood said, referring to frozen portions.

 

Supply on frozen Atlantic salmon has grown tight as Chilean salmon farmers pull back from frozen, and the price alone is enough to deter buyers. Frozen portions from Chile are at the historically high level of US$6.85 per pound for six to eight ounce skinless frozen portions, Kelley said.

 

That price point hasn't changed for 60 days, he said, but stability is likely little consolation with prices this high. To put things in perspective, last year at this time, that price was US$4.50 per pound, 34% less.

 

Currently, supply is tight because Chileans - despite the attractive prices on frozen - much prefer to sell fresh, likely due to a need for cash.

 

Fresh salmon ships to the US much faster than frozen, which means producers get paid quicker, a key benefit in the cash-strapped state the Chilean industry is in.

 

There's no doubt cash flow is important, considering the rocketing production costs in Chile this year. New sanitary control measures for sea lice and other diseases, not to mention a higher prevalence of sanitary issues in general, sent costs soaring for Chilean producers, eating at margins and making it hard to stay profitable even with the huge price increases.