Biological problems pose a challenge to the salmon sector

This is one of the main themes of Rabobank’s H2 report on aquaculture, published this week. It details how farmers are struggling with high mortality and a significant decline in the production of higher-quality fish, caused by a combination of factors.

The setback surprised industry analysts who had previously forecast strong results this year.

“In 2023, we expected Q4 or Q1 2024 to be the first positive quarter in a while, but the period of low production was getting longer and longer. We had the first problem with winter ulcers (which caused a drop in production levels in Norway) in 2022, but we attributed the drop to the extraordinary results in 2021 and expected a return to growth in 2023. But there was no growth in 2023,” explains senior seafood analyst Gorjan Nikolik.

“So we were saying that there would be growth in Q1 and Q2 2024 and maybe 7-8 percent growth year-on-year, but it didn’t meet expectations. There is still a turning point, but it’s happening now and it’s very mild,” he added.

As Nikolik explains, the sector is trapped in a vicious cycle, as the increase in the use of mechanical methods to control sea lice in the warmer months causes damage to the mucous membranes of salmon, making them more susceptible to diseases such as winter sores as coastal waters cool.

These problems have led to low average catch weights in Norway and – perhaps more importantly – to a sharp increase in the reduction in quality of fish caught.

“Typically, about 90 percent of the salmon are top-quality fish, while only about 5 percent are the lowest-quality fish, known simply as production fish. However, over the past few quarters, there have been weeks when production fish made up as much as 35 percent of the catch,” Nikolik notes.

This led to price spikes for top-quality salmon – which reached as much as NOK 130 per kg. However, as Nikolik notes, the average prices achieved by farmers were significantly lower due to the high proportion of production-grade fish.

Still, he adds, the last few months have been more positive.

“We are now seeing a revival, but we are starting from a low level,” Nikolik explains.

“The share of production salmon has now returned to near normal, supply is returning and prices have now corrected below the levels reached in 2022 and 2023,” he added.

Chile, Scotland and Canada

Meanwhile, Chilean salmon production has been hit by issues brought on by El Niño – such as algal blooms and low oxygen levels – as well as regulatory issues, with H1 numbers down 11 percent year-on-year, according to Nikolik.

“There is uncertainty around regulations and companies are concerned about exceeding production limits,” he notes.

In Scotland, production rose by 13 per cent in the first half of the year after two weak years.

“The mortality rate is much lower and breeding larger individuals is effective,” Nikolik explains.

Canada has also seen an impressive economic recovery, with some months in the first half of 2024 seeing growth of as much as 33 per cent year-on-year.

That helps explain why U.S. prices have been consistently lower than they were in 2022 or 2023, despite a reduction in Chilean imports. But Nikolik adds that there has also been a drop in salmon demand, unlike other key markets such as the EU, China and Brazil.

Looking to the second half of 2024, Nikolik forecasts production growth in Norway and the UK.

Shrimp Market

Looking at the shrimp sector, Nikolik sees a partial recovery in U.S. prices and demand in 2023 from a 20-year low and predicts growth of around 1 percent to 3 percent this year, though with the caveat that some of that growth could be short-lived.

“We know that people were buying additional quantities to increase stockpiles and get ahead of the planned countervailing and antidumping duties in the U.S.,” he explains.

Meanwhile, Europe is also seeing an increase in demand.

“The West is coming out of a tough period where disposable incomes were really hit. But China – which is a more complex market – is almost a mirror image of the West. My colleagues in China tell me that demand is growing, but their domestic producers have increased production, so their import levels may not increase,” he notes.

Shrimp production

In terms of production, Nikolik notes that Ecuador saw an improvement in April and May – achieving record export results after a weak start to the year,

“A few months ago, we predicted that Ecuador’s exports would be lower than in 2023, but now we expect growth of up to 5%, driven mainly by the West,” he notes.

“This will intensify competition in the West, especially since India – which is also focused on exports to the West – grew 3.7 percent YTD in April. The only producer that is really down is Indonesia, down 17 percent, so I am not sure whether this price recovery will be very long or as significant, it is still a buyer’s market,” he added.

Sea ingredients

Fortunately for beleaguered farmers, there is hope that feed prices could fall significantly thanks to improved supplies of fishmeal and fish oil as the El Niño phenomenon gives way to the cooler La Niña phenomenon off the Pacific coast of South America.

“We’ve already had one good season in Peru, where 2.47 million tonnes of anchovies were landed, almost 100 percent of the quota. And the fish oil harvest was very high, so we expect supply to rebound and prices to correct downwards, especially if we have another good season – and I think we will. I think the price of fishmeal will drop by several hundred euros per tonne. So we expect a 5-10 percent drop in the price of feed by the end of 2024, which will help the shrimp sector in particular,” he notes.