Wild currency fluctuations provides both opportunities and threats.
The Salmon Exchange Fish Pool noted the effect of the largest fluctuations in the foreign exchange market that we have ever seen.
“Buyers in the EU are naturally very uncertain about the demand situation, and expect prices to be clearly lower than last year. Buyers in the EU were willing to make contracts of around EUR 4.60 / kg for the rest of 2020. With exchange rates around 11.50, as we have seen in recent days, it yielded NOK 52.90 / kg, but no fish farmer was willing to sell so low. Spot prices for the remaining year 2019, April-Dec were EUR 5.85 / kg (average currency 9.90 and average spot price was NOK 57.90 / kg). The sellers at Fish Pool demanded NOK 59.00 / kg, which means increased revenue compared to last year’s spot prices,” Søren Martens told SalmonBusiness.
He is the general manager of the Bergen company Fish Pool, which trades financial contracts in the future market for salmon.
Wednesday, and Thursday in particular, led to large movements in the foreign exchange market, and with that the conditions for trading. Over a short period of time, the Norwegian krone depreciated sharply, and was for a period as high as 13 against the Euro.
“Then suddenly buyers could pay NOK 59.00 / kg to Norwegian fish farmers and secure a cost of EUR 4.60 / kg, ie EUR 1.25 / kg lower than average spot prices in the same period. In just a few hours, therefore, more than 6,000 tonnes were traded in the remaining year at 59.00 NOK / kg and the whole of 2021 to 61.50 and 61.75 NOK / kg,” says Martens.
“In an uncertain market, it is nice that fish farmers can secure future income at prices that are significantly higher than spot prices for last year 2019,” he adds.
Fish Pool is experiencing an increased interest in hedging transactions in today’s highly uncertain market.
“In an uncertain world, there is also increased concern about whether buyers can stand by their fixed-price delivery contracts, and sellers fear payment problems and that buyers demand Force majeure and termination of contracts when authorities in practice close hotels, catering and restaurants. Then we notice increasing interest from sellers who want financial contracts where settlement is guaranteed by banks and Nasdaq Clearing,” says Martens.