Salmon price surfing on commodity rush. But how long will the party last?

Editorial
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Easter salmon is the most expensive since midsummer last year.

On Friday, farmed salmon was traded for EUR 6.9 again. It is the first time since the fairly short-lived price spike in June last year.

The price level is surprisingly high, for several reasons.

Strong
The Horeca segment (hotel, restaurant and catering .ed) is largely still closed in a wide variety of countries. The purchases are run by low-cost grocery chains. On top of this, the market leader Norway’s salmon exports have increased by 25 per-cent in volume so far this year.

This points in a clear direction: the demand for salmon is strong.

And there are many drivers.

Substitute
Salmon is not alone in showing a rising price trend.

Rainbow trout, a close substitute for salmon, is now catching high prices. The last export price, according to the Norwegian Seafood Council, was EUR 6.1 per kilo (in week 11). It’s close to doubling its price of the late summer last year.

At a time when many players are betting that the pandemic will gradually let up, there is a huge demand for many raw materials. Oil, copper, aluminium, iron ore, soy, wheat, corn and fertiliser, to name a few, have all risen sharply on the world’s commodity exchanges. That’s also the case for shipping rates for both raw materials and finished goods.

Price development for oil, aluminium, copper, iron ore and fertiliser. GRAPH: Infront

Pulled down
For many months both for salmon, trout and coho, Chile’s frozen stock has put negative pressure on prices. Severe austerity on international air traffic has presented major logistical challenges to Chilean salmon farmers. Many have chosen to freeze fish, for shipping or in anticipation of better times.

In November last year, Mowi estimated at 55,000-65,000 tonnes, almost double of what hit Norway during the so-called “Salmon mountain” the early 1990s. However, the inventories are not larger than a few weeks’ harvest volume in Norway. Now the Chileans have a golden opportunity to get rid of the entire freezer at a decent price.

Close to the price peak
Land-based salmon has received a lot of media attention in recent months, but an expected harvest volume in 2021 of just over 24,000 tonnes has no real impact on price formation. Land-based salmon is, for so long, a supplement, not a competitor to sea-based salmon.

But how will prices evolve in the future?

The listing of “bid” and “offer” at the Fish Pool salmon exchange suggests that we are close to the price peak in this round. According to the Fish Pool forward curve, salmon prices in the second, third and fourth quarters will be EUR 5.8, EUR 5.2 and EUR 5.5 respectively.