Strong salmon growth casts doubt on price recoil – E24

The amount of farmed salmon in Norwegian fjords is growing much faster than expected, and creates fears of weaker prices in 2021. The seafood index will fall above two percent on Thursday.

GROWS WELL: More salmon are swimming than ever in Norwegian fjords.

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byoutline Ole Martin Wold

Published:Published: November 19, 2020 12:44 PM

The standing biomass of salmon and trout in Norway was at a record high of 928,713 tonnes at the end of October, according to recent figures from the Norwegian Directorate of Fisheries.

This is an increase of eight percent from the same time last year, and up four percent from the previous month.

The increase comes in a period where the salmon price has been at very low levels for several months, at 42-47 kroner per kilo.

Prices usually start to rise sharply in the second half of November, as European shoppers prepare for increased consumption during the Christmas season. Now it’s a joke for the traditional Christmas rally in the industry.

LOWER PRICE EXPECTATIONS: For customers at Fish Pool and trading manager Simen Thorbeck.

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byoutline Fish Pool

– Price expectations for the fourth quarter have fallen sharply recently, not least because more and more countries have tightened coronary restrictions again, says Simen Thorbeck, trading manager at the salmon exchange Fish Pool.

At Fish Pool, buyers and sellers of salmon can lock in the price of trades ahead of time, and these form the basis for so-called future prices (forwards) which are continuously updated on Fish Pool’s websites.

At the beginning of October, the forward price for the fourth quarter was NOK 53.57 per kilo. Now it has come down to 47.53 kroner, says Thorbeck.

Salmon stocks are falling

Demand for salmon globally has fallen significantly as a result of closed restaurants and hotels around the world.

The salmon shares on the Oslo Stock Exchange therefore moved sharply upwards in the wake of the news of positive tests of coronary vaccines last week. Among other things, Mowi put on 15 percent throughout the week, and Lerøy as much as 19 percent.

In recent days, however, the mood has changed. On Thursday, the seafood index OSLSFX falls above two percent, and is down five percent in the last three days.

Thorbeck sees several reasons why Norwegian biomass is increasing so significantly.

– We have seen from high feeding figures that the fish grow well in the sea, helped by favorable sea temperatures and more efficient de-lice methods. At the same time, not as many fish were slaughtered in October as expected, says Thorbeck.

– It is perhaps tempting to hold back on slaughter when prices have been so low?

– Yes, it must also be included in the calculation. It is also worth mentioning that the fish farmers have an extra 27,000 tonnes in license capacity compared with last year after the spring auction round. Thus, they also have the opportunity to have more fish in the sea and make the most of their licenses, says Thorbeck.

Seeing lower prices next year as well

In an update on Thursday, Carnegie analyst Lars Konrad Johnsen writes that the biomass growth that emerges from the Directorate of Fisheries’ figures is higher than both he and the market expected.

“We have an estimate of 5.7 percent volume growth from Norway in 2021. Now that the strong growth for the generation of fish released into the sea in 2020 seems to continue, as well as a general trend that fish farmers are holding back fish to fully utilize licensing capacity, we see that our expectations for volume growth are too cautious “, writes Johnsen.

The analyst concludes that this is negative for salmon price expectations in 2021, since volume growth next year looks set to be significantly higher than the market has expected.

At Fish Pool, it is currently possible to sell salmon for delivery in 2021 at an average price of NOK 56.85 per kilo, down from a level of NOK 60 at the end of September.

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