Salmon prices scale 30-yr high after record sushi sales

Jan 29 2016 13:38
Whitney McFerron

London - Tighter supplies of salmon this year may mean fewer sales on salmon in grocery stores or smaller pieces on sushi.

Sushi restaurants account for 10% to 15% of Norway’s salmon exports, according to the Seafood Council.

European consumers got used to eating cheap salmon after Russian imposed a ban on Norwegian shipments in August 2014 in retaliation for EU sanctions related to the dispute over Ukraine, Giskeodegard said.

Global salmon consumption was about 2.3 million tonnes last year, with almost half in the EU, where demand rose more than 7% to 1.1 million tonnes, Seafood Council data show.

“The portion of the sushi meal that is actually fish is very low,” Giskeodegard said. “Most of it is rice. The bits and pieces can be adjusted slightly up and down, so it’s easier to hide the price increase.”

It’s a pretty good time to be a salmon farmer in Norway.

Export prices surged to a 30-year high, global demand has been growing, and profit margins have ballooned. As recently as 2014, the world’s largest salmon-producing country was mired in a slump, forced to sell the fish at discounts when trade sanctions led to a halt in shipments to Russia, a major buyer.

The rebound began late last year with an outbreak of parasitic sea lice, which may cut output in the first half of 2016 by 5%, the Norwegian Seafood Council said.

The country’s seafood exports were the highest ever in 2015, and prospects for improved demand sparked billions of investment in the past two years by companies including Cargill and Mitsubishi. Norway accounts for about half of the world’s salmon, a fish that has become popular in restaurants and can be eaten raw in sushi or smoked as hors d’oeuvres.

“We will see more growth in overseas markets for salmon,” said Paul Aandahl, an analyst at the Norwegian Seafood Council. “Consumers will have to pay more for salmon in the future than they’ve done so far because we don’t expect any growth in production, at least within the next two years.”

Since October, salmon for export jumped as much as 53% to 61.64 krone per kilogram on January 17, weekly data from the government’s Statistics Norway show. That’s the highest domestic-currency price in about three decades, according to the Seafood Council and Nordea Bank in Oslo.

In 2014, salmon fetched a low of 33.60 krone. Futures on the Fish Pool exchange in Bergen reached a high of 60.30 krone in mid- January.

Sea lice

While some of those gains have been lost in the past week - mostly on concern that significantly higher prices would hurt demand - European consumers probably will see more expensive salmon this year, according to the Seafood Council.

That’s because supplies will be tighter than normal for a few months. Norway produces almost all its salmon from farms in the ocean, or about 1.2 million metric tonnes a year.

In November, some in central Norway were afflicted with sea lice, a type of parasitic crustacean that latches onto salmon and feeds off them. To get rid of the pests, fish pens were cleaned and salmon had to be harvested earlier than usual and at smaller sizes. About 30 000 tonnes of output was affected, the Seafood Council estimates.

London fishmonger

At the Billingsgate wholesale fish market near London’s Canary Wharf, fishmonger Bobby Unwin said he’s paying about 15% more for salmon than two months ago, forcing him to raise prices to customers by 3% to 4%.

“If the Norwegians put the prices up, then the Scottish push the prices up and others follow suit,” Unwin (65) said January 15 while standing in his market stall next to a row of whole salmon resting on ice.

Higher prices have been a boon to farmers. Even with the sea-lice outbreak, some are seeing profit margins as much as 50% above production costs, said Kolbjorn Giskeodegard, an analyst at Nordea Bank who focuses on the seafood industry.

Shares of Oslo-based Marine Harvest ASA, the world’s biggest supplier of farmed Atlantic salmon, have rallied 18% since the end of August. The company is scheduled to report its fourth-quarter results on February 17.

Export surge

The weaker krone has helped to blunt some of the increased cost for importers who use stronger currencies like the pound, euro or dollar, Nordea’s Giskeodegard said. Norwegian salmon exports rose to a record 47.7 billion krone ($5.4bn) last year, with the EU accounting for about three-quarters of the total, according to the Seafood Council. Sales to Asia and the US also gained.

The gains for Norway’s salmon farmers are in stark contrast to the petroleum industry, which generates about a fifth of the country’s economic output. With crude-oil prices down about 70% since June 2014, the industry is in crisis after losing more than 30 000 jobs.

Norway’s salmon producers also are faring better than competitors in Chile, the number two supplier, where farms are seeing increased losses because of over-production and rising costs related to the use of more antibiotics to control disease.

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salmon  |  agribusiness  |  sushi



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