Salmon de­mand ‘not what it used to be’

DNB sem­i­nar looks at price volatil­ity and hears about qual­ity con­cerns

Fish Farmer - - Brussels – Seafood Expo Global 2019 -

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.

Crit­i­cism

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.

Volatil­ity

‘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

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