Chile keeps calm

And carries on growing more stable, says Salmones Austral director

PRODUCTION growth in Chile over the past four years has been stronger than anticipated, Kontali analyst Ragnar Nystoyl told the DNB/Fish Pool seminar in Brussels. He was bullish about Chile’s prospects, especially against declining productivity in Norway, and said Chilean harvest weights were outstripping Norway’s.

But Chilean producers are more circumspect. Salmones Austral director Jose Miguel Barriga Phillips, who has a long history in the industry and whose father, incidentally, was a Scot, said Chile will grow ‘step by step’.

The country currently produces around 250,000 tonnes of coho salmon and trout, and about 700,000 tonnes of Atlantic salmon.

With the Norwegians dominating the Atlantic salmon market with close to 1.3 million tonnes, he said he doesn’t see that Chile can compete.

Salmones Austral is a medium sized company, in Chile’s top ten, with volumes of around 30,000 tonnes of Atlantic salmon a year, and 15,000 tonnes of cockles.

The company arose out of a merger between two old companies in 2013, when the impetus was ‘more on surviving’ because at that time things were very different, and prices were very low, said Barriga Phillips.

‘This was a way to find some kind of synergies to grow. Today, the consolidation is more focused on the long term.’

He thinks there are good opportunities for medium sized players because the market is changing as a result of this greater consolidation.

There were three or four players at around 100,000 tonnes of salmon but now, following the merger between AgraSuper and AquaChile last year, ‘you have a big animal in the ring with close to 200,000 tonnes’.

‘From the market point of view, if you need to move that amount of fish, the company needs to invest in more people, more marketing.

‘I expect we’ll see that, because AgraSuper is coming from a protein company that produces poultry and pork and they know the way to move huge volumes of proteins in different markets.’

Barriga Phillips said Salmones Austral, headquartered in Puerto Montt, is more focused on the frozen market, and Chile is very competitive around the world with frozen fish, against the Norwegians especially.

‘If you have good opportunities you move to the fresh, but in general we’re more frozen,’ he said.

‘In the last two months we sold more fresh to the US because the price was very good. But if the price goes down, you need to move to the frozen market.’

He said his company tries not to sell on the spot market and its main customers for Atlantic salmon are in the US, China, Indonesia and Malaysia, but it also looks for niche markets, such as Dubai and Israel.

‘We try not to move into the typical markets because you need a certain volume for certain big markets, and it’s not easy to move huge volumes. We are very open to new markets, trying to develop frozen products, portions and fillets.’

Some of these markets might have been reluctant to buy from Chile in the past, because of doubts over supplies, and preferred to buy fresh fish from Norway.

But in the newer markets, such as Israel and Dubai and China, Chile is taking a ‘very important role’.

‘In Russia, when the Norwegians moved out with the fresh, Chile took over the position with frozen products,’ said Barriga Phillips.

Air freight makes selling fresh fish too expensive but logistics are improving too. With more airlines – including from China and Korea- coming to Chile, the salmon farmers can shift their products faster and are selling more fresh fish to these markets.

‘Two or three years ago, it was impossible for any airliner to come to Chile to take fish to China. That is a big change in the last year in the fresh market, thanks to the airlines.’

Chilean supply is also more predictable and less volatile than a few years back, helped by factors such as the establishment of Hendrix Genetics in the country two years ago.

Dutch owned Hendrix acquired Troutlodge, the world’s leading supplier of live trout eggs, in 2014, and, with it, a location in Chile.

Hendrix Genetics Aquaculture Chile was then formed to set up an independent Atlantic salmon breeding programme, backed by genetics research.

Barriga Phillips, a former general manager of Skretting, knew Neil Manchester from Hendrix (formerly owned by Nutreco, parent company of Skretting) and Salmones Austral started buying eggs from Hendrix’s Chile base last year.

‘I always told them to start producing the eggs in Chile because they imported eggs from Landcatch (bought by Hendrix in 2010) in Scotland.

‘Today, it’s very difficult because after the ISA disease, Chile are loathe to import genetic material because you can bring disease.’

Barriga Phillips added: ‘From the production point of view, we are more stable today, with the vaccines, with the genetics like Hendrix, with new diets and the special additives for the liver, for the skin, for the gills, nutrition is taking a very important role.’

On top of all this, there are new RAS hatcheries and higher energy sites, with shorter production cycles.

‘This means today we can reach a good cost and a predictable cost,’ said Barriga Phillips.

‘The second point is in the past you could see easily 15 per cent mortality for Atlantic salmon; today, maybe the morality is closer to five.

‘That can produce volatility because if I expect to have a certain volume of losses and they didn’t disappear, it’s good for my cost but I will bring more

“We try not to move into the typical markets… markets” we are very open to new

fish to the market. It’s good news but you must be prepared for this improvement or the other issue – two years ago we harvested at 4.5kg and today we can harvest at 5.5kg, that is 20 per cent more.

‘So with bigger fish and more tonnes, you can bring more fish to the market. This is good but the volatility is coming from this side: better performance and that produces higher volumes.’

But it’s a good kind of volatility and Barriga Phillips believes Chile’s prospects are positive – ‘if nothing strange happens, this is farming!

‘I think the regulations and our experience shows that we need to keep more calm and grow more stable.’

He is sceptical about analysts’ predictions. For example, Kontali will forecast Chile growth of ‘six per cent one month, then the next month the forecast is growth of three per cent, then the next month the forecast is 10 per cent.

‘I don’t know where they get the information. We know the stocking of smolts in the sea gives you the next 16 months’ harvest, the fish is not appearing from one day to another. It’s important to take care that information that looks very sophisticated sometimes has errors because for us it’s not logical, these big changes.’