“In all, as an entire value chain, there are negatives across the board. Price point, distribution, labour, costs. It’s going to be a really difficult couple of months”.
Rabobank Seafood Analyst’s Gorjan Nikolik laid out the rocky road ahead. “We are looking at it on three levels,” he told SalmonBusiness.
Three levels
“Demand level, which is food service consumption, logistics (planes and trucks) and the labour issue is particularly strong in processing,” he explained.
“In the demand side – we soon realised that 25 per cent of salmon consumption is at the service level, and is most likely to be roughly compensated for retail”.
One problem, he said, was that very large fish are not sold at retail. “That has had a decline in the price point of the larger fish – though they were already declining as they were exposed to China – which has now dropped,” he said.
Nikolik said that the price decline – which slid to below EUR 5kg on Friday – will particularly hit the EU and also the USA, especially the latter where foodservice consumption is a lot larger, at around 60 per cent. “Will people eat that much salmon at home (in the USA)? Probably not,” he said.
Transportation
SalmonBusiness has been covering how there is currently a scramble to get fish out. Not easy with so many grounded flights. The decrease in price and an increase in transportation costs of the available flights will have an impact, explained the analyst.
“There are a considerable amount of problems to get salmon from EU into the US. Norway, Scotland, Faroes have to sell more of the product in Europe but there are fewer flights available. That will put pressure on European prices and in the USA its food service which is affected at the price point,” he said.
Workforce
The analyst said that complications in the workforce are something that affecting every part of the supply chain, particularly in processing. Salmon farmers and processers use shifts and rotate staff but he explained that they are taking extra precautions though social distancing is difficult. Though, workers already wear protective clothing and masks.
“In all, as an entire value chain, there are negatives across the board. Price point, distribution, labour and costs. It’s going to be a really difficult couple of months,” he said.
On a final point for the industry, he said that salmon farmers will have frozen stock and some will increase biomass in water which will also add a lot of costs which has no sales revenue now. “This will create cash flow issues for the next few months,” he added.
Silver lining
The most overlooked thing, he said, was will be the rise of online retail.
“When all this blows over, we will see that older people are ordering food online. It’s been phenomenal, something that would have taken 10 years has happened over two weeks, that’s going to stick. That will not go away, people don’t rate the supermarket experience, online delivery could be huge”.
