Prices have plummeted 35 percent over nine weeks, but the nose-dive ain’t over yet

Editorial
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Heavy falls all around so far this summer. But down in the depths even lower salmon prices are yet to come.

The upward spiral peaked in Week 19. The second week of May. The price of salmon clocked in at a lush 8,4 EUR/kg. But since then it has plummeted long and hard, more precisely about EUR 3,2.

On Friday Salmon Business reported sales prices (to the producer) were around EUR 5,3. This applied to fish, purchased on the spot market, that are to be delivered to the end market this week.

No end in sight
Such a precipitous plunge in prices is not an everyday occurrence.

However, we have seen this happen before. The last decade can reveal two similar instances of sudden, hefty price falls; last year in fact, 2017, and 2011. The lesson to be learned from both for the current situation is that it won’t stop here.

It’s highly unlikely that prices have reached rock-bottom at the start of July, and certainly not this year with its markedly heavy drop in prices. The seasonal pattern is undisputable: Salmon prices normally flatten out when the colours of autumn are at their most vibrant. Late autumn’s traditional price recoil is also often more languid in years with drastic descents.

Growth
However, the Norwegian Seafood Council (NSC) is among those still predicting growth for salmon in the second half of the year. Analyst Paul T. Aandahl of the Norwegian Seafood Council pointed out a positive currency development is on the cards for Norwegian salmon farmers. “Reduced domestic supplies of salmon in the EU and strong Euro and British currencies have also contributed positively” added Aandahl.

Hardly any recognition has been given this year to the ‘helping hand’ the all-important Asian market has provided. Here access to fish of the right weight and quality has been in scarce supply for the key Chinese market. If one takes into account last week’s signals concerning export opportunities opening up for producers in Trøndelag, Nordland and Troms (three regions in Central and Northern Norway former banned from exporting salmon to China due to alleged fish health issues) to export to China this should indicate the “eye of the needle” will become considerably wider in the months ahead.

Delicate balance
A whole 35-percent drop in prices in the space of two months shows first and foremost that a delicate balance prevails between supply and demand in this business. But at the same time, one has to remember there is scarcely nothing more effective in stimulating demand for salmon than low prices.

It is precisely the dynamics, the end market’s subdued inclination to buy highly priced fish – and the higher interest after the price fall – has been the most important and toughest lesson to learn for the investment banks that met the New Year of 2018 with pessimism and recommendations of “sell”.

Having said that, salmon customers can – to all intents and purposes – prepare themselves to buy at even lower prices than we’re seeing currently.

As the prices’ hurtling plunge is not stopping here.