Early November the Norwegian Seafood Council (NSC) announced that in October the value of salmon exports broke records once again. "The most significant contribution to the increase in value is the increased price", Paul T. Aandahl, Seafood Analyst at the NSC, said in the report. However, it also included a wake-up call: reports suggest a decline in seafood domestic consumption. "We live in demanding and troubled times, with high food inflation and a fierce battle for proteins worldwide", said the NSC CEO, Christian Chramer. So, the present is encouraging, but what does the future look like? Will salmon be able to keep prices this high if demand falls?
Since the pandemic and until this announcement, demand for Atlantic salmon has only increased in recent years. An increase that, as Finn-Arne Egeness, Chief Analyst Seafood at Nordea, explains, has been driven by market and product development, as well as by economic development, a growing world population, and also by the increased attention to health and eating habits in various consumer segments. Despite this increase, total salmon production will decrease in 2022, to 2.862 million tons compared to 2.894 million tons in 2021.
So far, that hasn't affected prices – quite the contrary. "This year, salmon prices have been all-time high. This is due to increased demand post-pandemic, increased food prices, and a negative growth in the global salmon supply", says Egeness. Paul T. Aandahl comments the same, although the Seafood Analyst at the Norwegian Seafood Council adds a nuance: "We see a reduction in consumption at home, it's a global trend", he says, "the prices are going up on the salmon products as we see for all other types of protein if we compare with the same period last year".
From Chile, Arturo Clément, COB & CEO at SalmonChile, tells WeAreAquaculture something very similar. "We have seen a recession that has affected the main markets where Chilean salmon arrives, but the important thing is that despite this there has not been a big impact on demand", he says. Although, unlike other markets, they have already noticed some changes in prices. Nevertheless, they remain optimistic. "While it is true that prices have dropped from the peak shown a few months ago, the market has remained dynamic", says Clément.
So, we have a positive present but, what will happen next? According to Egeness, forward prices for fresh Norwegian salmon are very strong for both Q1 and Q2 2023 (FishPool). At the same time, all feed prices have increased due to higher feed prices following the war in Ukraine and rising inflation. "With this in mind, it is reasonable to believe that salmon prices will remain at a high level in the future", the Nordea analyst states. "With a limited supply growth going forward, the price outlook is strong", he adds.
In explaining the reasons for the increase in demand after the pandemic, Finn-Arne Egeness makes special mention of food service. "The hotel, restaurant and catering (HORECA) segment has been of increasing importance for the salmon", he says. Paul T. Aandahl agrees. "Since the volume to the market is approximately the same as last year, it means that the sale in food service is much higher compared last year", he explains. "We can see a shift from at-home consumption towards out-of-home consumption, that's a general trend", the NSC analyst adds, "a little bit higher in the EU compared to the US, but still a high increase in demand for salmon as a raw material or for consumption", he claims.
However, the current economic situation could change this trend, as Finn-Arne Egeness warns. "If increasing energy prices and increasing interest rates reduce the number of restaurant visits, this will have a negative impact on the demand for salmon", he says. Although he assures us that, "this is mainly the case in Europe, the US market is not hit by the same energy crisis". But, this is not his only clarification.
The Chief Analyst Seafood at Nordea also stresses that a big advantage of salmon is the "lack of substitute", especially when consumed raw in the sushi and sashimi segment. "If you want to eat sushi, you will eat salmon in most markets and market segments", he thinks. The data seem to prove him right, even in inflationary times. As Aandahl points out, "even though we have the huge price increase, people are paying more for electricity, fuel, etcetera, there is still a huge demand in food service", he says. Although he qualifies, they expect that to change and see a shift back to home consumption because people are going to have less money to spend on food consumption.
Nevertheless, both agree that this change does not necessarily have to be negative as far as demand for salmon is concerned. "Sushi is also perfect for take away, so if the consumption drops in the restaurant, take away may increase", believes Finn-Arne Egeness. And Paul T. Aandahl adds a new variable. "I expect consumers to go less out on restaurants next year, this winter, maybe. But it doesn't necessarily have to be very negative for the salmon because salmon is easy to prepare at home, we saw that during the pandemic", the NSC analyst tells us.
That variable, household consumption, was strengthened after the pandemic. "During the pandemic, people learnt how to cook salmon at home, so they have this knowledge now, and so I think it's very easy for them to go back and prepare salmon at home", Aandahl remarks. To which Finn-Arne Egeness adds, "during the pandemic, there was a massive development of high-end products in retail, this is an advantage of the economic development reduces the number of restaurant visits".
So, when it comes to indulging, indoors or out, salmon will continue to be an option. As Egeness mentioned earlier, Aandahl also believes that raw salmon is the key. "I think, raw consumption will still be in a positive trend", he states. "It means that, even though you have less money to spend, you will kind of prioritize this, the raw salmon because you expect to buy very high-quality fish, and you buy it because you want to treat yourself with something while kind of extra if you want to celebrate something or whatever".
But salmon is not just a premium option. The reality is that it has become a must in the basic shopping basket for many families, even in countries where it is an imported fish. "That's why I think the consumption will be quite robust, even though people are getting less money to spend, they will still continue to buy salmon. They might buy some, well, kind of cheaper salmon products, could be an effect, but they will still buy salmon", says NSC's Seafood Analyst.
Finn-Arne Egeness agrees. "In the fresh fish counter in retail, consumers hit by prices inflation and higher energy costs might choose cheaper alternatives than salmon", he tells us, "if possible, some consumers might choose frozen salmon ahead of fresh salmon, if frozen salmon is more economically affordable".
With all this in mind, to talk about the future, analysts review the past. Thus, while they are aware that difficult times lie ahead, both Finn-Arne Egeness (Nordea) and Paul T. Aandahl (NSC), recall what happened in previous financial crises. "Regarding the salmon, what we've seen historically is that the negative market trends have a really very small effect on salmon sales", Aandahl says, "our assumption is that the salmon demand is quite robust regarding these negative macro trends we expect to see in near future".
"Following the international financial crisis in 2008, salmon prices increased both in 2009 and 2010. However, this was due to a negative supply growth, following ILA challenges in Chile", Egeness recalls. Therefore, he thinks that "with a limited supply growth going forward, the price outlook is strong" and, according to his data, Kontali expects growth of 4%, to a total production of 2.977 million tons.
"Next year we expect maybe 3-4 % global growth, and you can see that, every year, after the spikes in price we can see a reduction", supports Aandahl, "that's the historical trend". According to the analyst at the Norwegian Seafood Council, next year, they expect a slightly lower global increase in production than we have seen, for example, in 2017 to 2018-20119, so, maybe a reduction in price. "We don't know the price, of course, but historically it has fallen after these spikes in price", he says, adding that for next year, because of the contracts in the salmon end market and the level of consumption, he expects "to see a higher price on the raw material to some of the markets and then that would affect the consumer price at the end". And, even if it takes a while, that ends up affecting the volume of demand.
As we said at the beginning, we are living in demanding and troubled times, and difficult times are ahead. Of course, no one can be one hundred percent sure, but everything indicates that, although with some ups and downs, salmon -and its price- will be maintained. So yes, after talking to the experts, we can say 'in salmon we trust'.
