After Prices Leap, Salmon Devotees to Fork Out More

After a leap in prices to record levels last year, salmon devotees should prepare to pay more for their smoked fish or grilled fillets.

Noting the first decline in six years and the steepest fall in a quarter of a century, supplies of global farmed salmon fell almost 9 per cent from the previous year, due to severe outbreaks of sea lice in Norway and Scotland as well as a deadly algae bloom that hit Chile in early 2016.

Wholesale contract prices between salmon producers and their customers this year are expected to rise sharply which would reflect the price surge on the spot market.

Food industry executives and analysts say that restaurateurs could be most likely forced to opt for other types of fish, such as cod or sea trout, or raise prices or cut portion sizes due to this.

“We’re expecting the price to remain high for the rest of this year, simply because of the time it takes for young fish to grow to the size that chefs want,” says Rachel Dobson, managing director of Lynx Purchasing, a UK catering and food service buying specialist. “As a result, we are seeing some operators reduce the size of salmon portions or remove salmon from menus altogether.”

A severe toxic algae tide killed millions of fish in the first half of last year in Chile’s salmon farms. According to estimates from Norwegian bank Nordea, the outbreak led to Chilean salmon production declining almost 25 per cent last year and is believed to have been caused by high sea temperatures due to the El Niño weather phenomenon and a lack of rainfall.

There was a 6 per cent production fall in the world’s largest supplier of salmon, Norway later in the year due to issues of sea lice. Noreda says that due to this, global 2016 supplies fell 8.7 per cent to a three-year low of 2.1m tones.

Spot prices soared, jumping to almost NKr80 a kilogramme, with last year’s global demand estimated to have grown about 25 per cent, according to the Norwegian Seafood Council.

Thanks to the rising popularity of convenient fillets in supermarkets and the increasing health consciousness among consumers, demand for salmon has been growing steadily over the past decade. Since 2002, there has been a rise of 12 per cent in the consumption on an average. Paul Aandahl, analyst at the NSC, says that for prices to remain stable, supplies need to grow on average 200,000 tonnes a year.

Kolbjorn Giskeodegard, analyst at Nordea says that the fish has “completely decoupled from competing proteins over the past 18 months” due to the sharp rise in salmon prices. “We expect to see cod and other convenience seafood products conquering retail shelf space at the expense of salmon.”

The prices in the market the year before are largely reflected in the long-term contracts between salmon producers and their buyers since normally they have a 9-12 month duration.

“In early 2017, we expect there to be massive repricing in the contract market,” which is likely to mean higher prices for consumers, says Mr Giskeodegard. “This also represents a risk of a demand setback.”

(Adapted from Financial Times)

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