Salmon shares dip ahead of the festive season

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The price development for salmon is the weakest in five years. Is the customary pre-Christmas price surge in jeopardy?

On Friday, SalmonBusiness was able to report on the lowest salmon prices recorded since October 2015. Covid-19 has left a deep mark, not least among the salmon buyers in the processing industry and the Horeca segment.

On Monday, salmon stocks were down. Market leader Mowi led the dip, falling 4.7 per-cent on the Oslo Stock Exchange. Lerøy, Grieg Seafood, and SalMar also struggled, with share price declines of 4.8 per-cent, 4.8 per-cent, and 2.9 per-cent respectively.

Production costs
The land-based salmon farmers were even harder hit as they have significantly higher production costs than those who produce salmon in open cages in the sea. Atlantic Sapphire fell 6.4 per-cent, Andfjord Salmon 6.8 per-cent and Salmon Evolution fell by 4.1 per-cent.

Read more: The price is approaching break-even levels. This should worry salmon farmers – especially those who produce on land

2020 has been tough. Only two salmon shares, namely the cost leaders Bakkafrost and SalMar, are on the rise on the Oslo Stock Exchange so far this year.

Signs of weakness
You don’t need to spend much time looking for the main explanation. The salmon price is showing significant signs of weakness as October makes way for November. It is far behind schedule for the annual upswing before Christmas. Has this year’s Christmas event been canceled?

“It’s a good question,” investment bank Pareto analyst Carl-Emil Kjølås Johannessen told SalmonBusiness. “There is obviously weak demand at the moment, and the volumes going forward seem to be holding up well, referring to strong feed sales lately.”

Uncertainty
“I think that when you get to November, the volumes will go down a little bit. And some demand will increase up until Christmas, I think. Although there are a lot of lockdowns in Europe. So I think prices will be above NOK 50 (EUR 4.5 .ed) again by the end of the year,” said Kjølås-Johannessen.

Saying that the price should exceed EUR 4.5 before the New Year is not too bold. What does consensus say about the salmon price? To what extent is this discounted into the estimates and share prices?

“Consensus for Q4 is probably around NOK 50 (EUR 5 .ed), I would bet. To get there, you probably have to be over NOK 60 (EUR 5.5 .ed). There’s perhaps a little more uncertainty around it. But Fishpool’s forward prices for Q4 have come down to NOK 51 (EUR 4.6 .ed), so this is probably partly reflected in share prices, even if the estimates haven’t been fully adjusted yet,” he replied.

Carl-Emil Kjølås Johanessen is an analyst at Pareto. Photo: Katrina Poulsen