February 11, 2014   

 

Norway's salmon production may rise over 5% after 2014

 

 

The salmon industry is set to return to following Norway's lead as more good years for farmers are expected, after a rapid increase in Chilean salmon production.

 

Chilean salmon production will begin to be controlled by legislation put in place by Chile's undersecretariat for fisheries and aquaculture (Subpesca) after 2015. Through these changes, Chilean producers will be asked to reduce their stocking density in certain regions, depending on the sanitary conditions of their ponds in those regions.

 

Given this, there is "no way Chile will carry on growing after 2015, meaning Norway's will be the driving growth in the industry", said Rabobank analyst Gorjan Nikolik.

 

Norway should see growth in production of around 5–8%, he estimated, while longer term this figure will depend on political decisions over maximum allowed biomass (MAB). Beyond 2014 growth could be anywhere between 5% and 20%.

 

Through legislative changes to Norway's MABs, based on upping the levels based on a yearly average biomass, the Norwegian government could allow an increase of around 10% in salmon production, Nikolik said.

 

With water temperatures starting 2014 comparatively warm, farmers could see a repeat of 2012′s conditions, when warm waters prompted heavy feed consumption and an increase in biomass.

 

So, between legislation and environmental conditions, salmon producers could expect to see a few more highly profitable years.

 

The extent to which diseases will thrive in the warm waters is still unknown - Nikolik admitted he had recently heard amoebic gill disease (AGD) was something that could have an impact (though it did not thrive in 2012′s warm conditions), while Elvin Bugge of Aquatic Concept warned AGD could be a key factor for 2014.

 

Farming profits could be further boosted by the price of salmon feed coming down in 2014. Soymeal prices have dropped from a peak seen at the end of 2012. A record harvest is expected to be confirmed from 2013, with prices in decline possibly into 2014. Fishmeal production too is expected to improve, as Peru's biomass stands at a 10-year record of 12 million.

 

Opportunities for salmon farmers to grow, either organically or via acquisitions, are limited, meaning profits could be invested in feed operations or in improving processing facilities, the Rabobank analyst suggested.

 

The improving European economy, and accompanying gross domestic product (GDP) growth of important salmon markets, could be a boon to processing operations, with demand for premium and value-added products potentially returning.

 

New markets will remain important, with processing salmon in China for the Chinese market one strategy that some key producers have already looked to, and others could follow, he added.

 

Chile's increased production, and consequent exporting to new markets, opens possibilities for processors too - for instance, exports to Russia of frozen whole Atlantic salmon increased from 5,400 tonnes to 25,500 tonnes in 2013, and European processors could find an opportunity here.

 

Nikolik identified Poland as an important growing hub for European processor, with others such as Belarus and Lithuania potentially joining in.