Salmon demand ‘not what it used to be’
DNB seminar looks at price volatility and hears about quality concerns
DEMAND for salmon is not what it used to be, with falling prices accompanying low supply growth, according to DNB Bank senior seafood analyst Alexander Aukner. In an eve of exhibition seminar, held in Brussels by DNB and the commodity exchange Fish Pool, he told an audience drawn from across the industry that he saw the market differently from other analysts, and his price estimates were the lowest.
Between 2017 and 2018, there was marginal supply growth but the price dropped in both those years, suggesting demand is not quite as it has been.
Negative developments have happened before but they can be easily explained (for instance, when the Russian market was closed); there is a difference in today’s current global value of salmon.
Looking at prices historically, he said between 1996 and 2012, the value increase was 10 per cent, driven by volume.
From 2012 to 2016 the value increase was 20 per cent, driven by price. In 2017 and 2018, the value increase was between two and five per cent. Aukner said it was ‘quite natural’ that demand was not what it used to be because the price was twice as high.
Looking ahead, he said an 8.1 per cent supply growth was expected in 2019 – ‘if our estimates are correct, the market will have to absorb 150,000 and 200,000 tonnes of new volumes’.
He said Norway seemed to have ‘turned a corner’ after a very challenging summer last year, and has a good basis for further growth.
But this was before the devastating algae outbreak that hit farms in the northern regions of Norway in late May, which was expected to cut supply growth.
Aukner said, in early May, that production in Chile was likely to continue to grow, with the average mortality in the first quarter of this year down to 0.65 per cent.
There had also been a 10 per cent increase in smolt release, an 18 per cent increase in biomass, and harvest weights were ‘fantastic – Chile is doing very well’ and will grow more.
Looking at new ways to sell salmon, Tim Brouwer, general manager of Dutch processor Visscher Seafood, said the industry had to overcome growing consumer criticism. This, he said, was ‘one of the biggest challenges ahead’.
‘Consumer criticism, in my opinion, not in all but in most cases, is based on valid objections. Too often these objections are trivialised or even denied by the salmon industry. We say the problem is not as big as you think it is, or deny there is a problem at all.’
Brouwer spoke of encountering ‘very severe’ quality issues with some farmers. On top of this, there is criticism from the media; ‘in general, opinions towards salmon are not getting better’.
This is resulting in governments in the Nordic countries changing their policies towards salmon. They used to say eat salmon every day of the week and they have now changed this to once a week, he said.
He believes criticism of the industry provides great opportunities for companies to distinguish themselves, with new brands for example.
Brouwer said he was curious to see how the new Mowi strategy will unfold, but he thought it was better to have several specific brands targeting specific customers, instead of having one big brand.
‘I believe in the end of big food brands as we have known them for the last 50 years.’
The biggest trends in seafood were around clean eating – ‘we want to know where our fish is coming from’.
There are many great farmers in Norway and they have great opportunities to set themselves apart. To this end, his company changed its focus to customers with high standards, and sources its salmon not just from Norwegian farmers, but also from Scottish, Irish, Icelandic, and Faroese producers.
Brouwer later told Fish Farmer that his company buys from a ‘selective group’ who he has got to know over the years.
‘Among our steady suppliers we don’t see this issue [poor quality] too much, but for the part we buy on the spot market you sometimes see this.
‘What we have done now is establish pro
“We source from regions that issues” naturally have less
grammes with a few steady suppliers of ours where we really work on quality improvement and also source from regions that naturally have less issues.’
Visscher Seafood used the Brussels show to launch its new Varklaks brand, premium ‘natural salmon’ supplied by producers all above the Arctic Circle, ‘a region where there is less impact from lice, less disease’, said Brouwer.
He said there had been a very good reaction from visitors to his stand, and although the main market would be the US, they are bringing Varlaks to Europe as well.
‘I think the category of consumers willing to pay a bit extra for a better product is bigger in the US than in Europe.
‘We also target in Europe some eco stores for this but I don’t see this going into mainstream retail in Europe.
‘The product is priced between conventional and organic so we’re in the range of 8.50 euros per kilo.’
Visscher has zero customers in France, said Brouwer, and sells 86 per cent of its European sales in the Netherlands, Belgium, Luxembourg, Germany, Austria and Switzerland.
Brouwer said: ‘The future is bright for salmon if we are able to respond well to consumer criticisms, finding answers to the questions the industry is dealing with now.
‘But if we keep on going to think only about short term returns then I don’t think the future is great. If we start looking in the long term and supplying a healthy, sustainable, great quality product then of course the future is bright.’
There was sympathy for salmon farmers earlier in the seminar from Tom Bundgaard, chief analyst at Kairos Commodities.
Comparing the prices of a range of commodities, he said salmon was top of the list in terms of volatility - higher than all other food products and higher than copper, zinc and tin.
‘It takes nerves of steel to work in an industry this volatile,’ he said, adding that the only prediction he could guarantee was that prices would continue to go up and down.
Above: DNB senior seafood analyst Alexander Aukner. Opposite: Tim Brouwer of Visscher Seafood