May 8, 2014 3:18 pm
Price jump threatens to make salmon
a luxury buy
By Emiko Terazono
Before smoked salmon sandwiches and trays of salmon sushi on supermarket
shelves, there was a time when the fish was an expensive treat rather than casual
takeaway. Salmon farming changed that. But after a sharp rise in prices on the back
of growing global demand, industry executives are warning that the fish could soon
lose its mass market status.
“In the past, salmon was a luxury product. If prices rise higher, it could again be
reduced to something only for people with money,” says Philippe Barbe, chief
executive of Ocean Direct, a French salmon distributor.
Salmon prices leapt above NKr50 ($8.50) a kilogramme to a record high last year on
the back of strong demand in countries such as the US and emerging markets such as
Brazil. And many of the fish producers and investors gathered in Brussels this week
for the annual Seafood Expo are hoping for another good year.
Sushi’s growing popularity, and increasing awareness of salmon as a good source of
omega-3 fatty acids, is behind the rise in demand.
“There has been a shift on the demand side,” says Klaus Hatlebrekke, chief operating
officer at Norway Royal Salmon, a fish farming group.
Demand for the fish in 2012-13, which grew about 6 to 7 per cent a year, has been
much stronger than historical trends, he says. The sharp rise in prices has meant that
the value of Norwegian salmon exports in 2013 rose 35 per cent from a year before.
Salmon producers have also reported a jump in profits. Earnings at Oslo-based
Marine Harvest, the largest farmed salmon grower with operations in Norway, Chile
and Scotland, rose sixfold in 2013, while Norway Royal Salmon reported the best
results in its 21-year history.
There could be further support on the supply side. Salmon farming faces structural
challenges that are limiting supply growth, says Georg Liasjø, analyst at ABG Sundal
Collier, an investment bank based in Oslo.
In Norway, the largest producer of farmed salmon, production is restricted by the
government, which issues licences, while the risk of disease puts a limit on how much
fish can be grown in existing farms, he told an audience in Brussels this week.
Higher prices for fish feed – a result of more farming and limited sources of
anchovies because of climate change – and other raw materials are also pushing up
the cost of production.
Prices in 2013 were also affected by an important cyclical factor – sea temperatures.
Norway suffered colder than usual seawater last year, inhibiting fish growth.
Fish growers and analysts expect prices to stay high. Compared with a 2013 average
of NKr39 a kilogramme, the highest since the 1980s, the price for 2014 is expected to
be about NKr40, while for 2015 forecasts range from about NKr38 to NKr40.
“In the long run, physical and regulatory limits on supply growth coupled with a
booming demand from emerging markets across the globe should lead to high
salmon prices continuing,” says the Food and Agriculture Organization, based in
Others caution against too much optimism. Børge Prytz Larsen, chief executive of
Severnaya, which imports salmon into Russia, warns that higher prices are putting
off consumers and distributors in mature markets.
The Russian market, for example, has been hit by the sharp fall in the rouble, he says.
Warmer sea temperatures this year also point to better fish growth, hence increased
supplies. “I would be surprised if we don’t see prices below NKr30 at some point this
year, and there is a lot of uncertainty in 2015,” says Mr Larsen.
Mr Barbe adds that producers may be reaping gains, but in mature markets such as
France, where consumers are more price sensitive, processors such as smoked
salmon operators and retailers have been losing money on salmon.
Against current wholesale price levels of about NKr45 per kg, the market needs to be
below NKr38-NKr40 for processors, distributors and retailers to make money. And
unless prices stabilise at levels where operators in the salmon supply chain can see
returns, the salmon market will end up shrinking, he says.
If prices continue to rise, salmon will again become a rare delicacy. This would be a
sad outcome, says Mr Barbe. “We all know that luxury means small volumes.”