Chilean biomass has gained further weight and is now 20% higher than a year ago

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Chilean biomass build-up continues – though SpareBank Markets 1 analyst says that it could take some time before increasing Chilean volumes has a negative impact on fresh EU prices, as half of the Chilean harvest goes into the frozen market.

Yesterday SalmonBusiness reported that Chile’s cumulative Atlantic salmon harvest reached 633 thousand tonnes by end of play 2018. That’s 8.6 per cent higher than the year before, representing 50.9 per cent of all the country’s aquaculture output.

Realistic
Tore Tønseth salmon analyst from SpareBank Markets 1 now believes that an 8-10 per cent growth forecast for 2019 is realistic, he wrote in a financial bulletin on Tuesday.

He was referring to newly released numbers from Chilean analyst Aquabench, who found that Chilean harvest of Atlantic Salmon grew only 2 per cent YoY in February. With 16 per cent YoY more biomass in sea going into February, it means that the Chilean biomass has gained further weight and is now 20 per cent higher than a year ago.

Source: SpareBank Markets 1 & Aquabench

Surprised
“Although we lifted our 2019 Chilean volume forecast to 4% in January, we now find this too conservative. Lower harvest weights are not going to offset this kind of biomass growth, and a 8-10% growth forecast for 2019 now seems more realistic. The implication of this is around 1.0%p higher global supply, and based on our estimates this equals a total volume growth of 6.6% (5.6%) in 2019,” wrote Tønseth.

“We are surprised that Chilean farmers are not harvesting out more fish, as a larger proportion of the biomass growth (approx. ½) lies in fish above 4.5kg in average weight, meaning there should be plenty of harvestable fish available in Chile. If we look at fish planned for 2019 (>3kg), we are talking about over 30% increase YoY in available fish, as there is no growth in the biomass of smaller sizes. This indicates strong supply growth from Chile next 6-8 months, then a complete stop going in 2020,” he added.

In terms of affecting prices in Norway, Tønseth said: “Luckily, from a farmer perspective, this is complete opposites growth pattern than Norway has. Where available biomass for the next 6-8 months is 2 per cent negative YoY (2017S0 and 2018S1), but significantly more is available for 2020. In total, we could end up with flattish price development in the period, although the supply pressure from Chile now looks stronger than we anticipated.”

Negative volume scenario
He added that SpareBank Markets 1’s initial estimates for 2019 were too conservative and have been adjusted. “We expect harvest weights to gradually come down in Chile, February numbers also shows a 100g decline from January, but this will only partly offset the strong biomass growth.”

Tønseth concluded that SpareBank Markets 1’s negative volume scenario for “Chile in 2020 is still intact as there is no growth in the biomass for fish below 3kg in weight”. He added that “combined with falling harvest weights and more biological problems, a contraction in Chilean volumes for 2020 is still likely.”