August 4, 2009

Global salmon prices may increase 10-20 percent this year amid lower Chilean production, and Norway may benefit from the supply gap left open by Chile.

Chilean production has been severely affected by the Infectious Salmon Anemia (ISA) and the impact will be seen in the US market in the next six months, said Jason Paine, head of the US unit of Multiexport Foods.

An ISA outbreak has swept through farms off southern Chile's Chiloe Island, forcing early harvests and emptying cages. That has driven up global prices as US grocers and restaurants turn to alternative salmon suppliers in North America and Europe.

The price of Chilean fresh salmon filets exported to the US has increased 33 percent to US$4.40 per pound this year, while similar cuts from Canada have surged 10 percent, Paine said.

Chilean salmon exports to the US fell 25 percent in the first four months of 2009, and could fall a further 50-60 percent by year end, he said.

But higher prices have yet to deter consumer demand for salmon, which is viewed as a healthy food option, and Multiexport has begun buying more expensive wild Alaskan salmon to maintain its US market share, Paine said.

David Kerstens, a London-based analyst at UBS AG, said prices should climb further amid supply disruptions. But that is not fully reflected in current spot prices in Norway as the export opportunities for Norwegian salmon will only increase further in the second half of the year, he said.

Cesar Barros, president of industry association SalmonChile, said the Norwegian salmon industry is slowly invading their most lucrative and traditional market which is the US.

Chilean producers owe banks about US$2 billion and suppliers about US$1 billion, and 12,000 people may lose their jobs this year because of shrinking output, he said.