Spot prices of Norwegian farmed Atlantic salmon fell by almost one-third, to NOK 48.1/kg, in the five-weeks to 15th July. At NOK 53.7/kg, the average spot price for the first half of July lagged the full-month June average by 17%, and further downward momentum appears increasingly likely. Growing consensus among market observers suggests prices may fall to NOK 40/kg, which is close to break-even levels for some marginal Norwegian producers, and an indication of the ‘COVID-19 effect’.
Global Atlantic salmon production is predicted to reach 2.7m tonnes in 2020, representing 5% year-on-year(y-o-y) growth and continuing a trend of increasing supply evident since 2017. The outlook is supported by indications that Norway, the top Atlantic salmon exporter with around 50% of the global export market, increased monthly harvest volumes y-o-y from January to April. Norwegian salmon growth waned in May due to several issues, including unseasonably cold seawater and disrupted feed supply. Thus, in the five-weeks ending 10th June, Norwegian salmon prices increased by 45% to NOK 71/kg. The second half of the year is typically the period where Norwegian exports accelerate, and firm feed demand for June and July suggests that global supply in 2020 will indeed surpass the previous year.
Given the firm supply outlook, a significant upward shift in global demand is required to support a price rally. European markets will need considerable time to reset in the post-COVID-19 landscape, which presents subdued and volatile demand and pricing scenarios. Added to the mix is Chile, the second largest exporter, with around a quarter of the global export market. Lack of demand from Chile’s major export markets – Brazil, US and Russia – has led to Chilean exporters competing for European market share, which is atypical for Chilean salmon and likely to keep prices under heavy pressure over the next few months.