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Kverva analyst: Norway could triple salmon production within 20 years

But reducing costs will be one of the biggest challenges for the industry in the future.

Gustav Witzoe-controlled Kverva predicts bright prospects for salmon farming, particularly in Norway -- but production costs must be cut back, and that’s a tall order.

That was part of the message from Kverva Analyst Magnus Dybvad, when he addressed Phatos Forum in Aalesund last week.

“The Norwegian marine farming industry has enjoyed a spectacular journey," he said. "The last decade has generated fantastic profits, and provided momentum that I believe will contribute toward the industry taking a huge step forward.

“On an annual basis consumers are paying 10 percent more than they did last year. Few other products can show as strong growth in demand," he said.

Why is that so? He believes the answer is a "simple" one.

"Salmon is an amazing product that people like. It’s wholesome, and development of the product has gone swimmingly. Perhaps the most important part of the equation is that more and more people are gaining access to salmon -- the base of salmon consumers is constantly expanding,” Dybvad said.

Norwegians are “world champions in eating salmon” -- around 8 kilos per capita per year.

“No one is within striking distance of us. Most of the countries we sell to, consume 1-2 kilos annually. Meanwhile, meat consumption in the developed world is typically 70-80 kilos per year. That shows what enormous potential the salmon has," he said.

Tripling volumes?

Kverva can be described as a company of technology optimists.

Dybvad said agriculture -- the world’s oldest industry -- is still developing at a furious pace.

He is convinced Norwegian salmon production could more than triple current volume within 15-20 years.

“We believe in advancement for productivity, in genetic progress and shorter production cycles in the sea. New technology will also play a part -- but as yet we don’t know which technology will be employed,” he said.

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He also referred to the system for development licenses, which he believes will enable more solutions to be introduced.

At the same time Kverva eyes challenges faced by production in all the major, salmon-producing countries. In Norway it is salmon lice and the authorities that determine the limits for growth.

“The industry has always had challenges and problems popping up. Historically we have seen that if the problem is big enough, or level of profitability gained through solving a problem is large enough, then we solve it. One example is vaccines that were developed in the nineties,” Dybvad said.

Think outside the box

Dybvad said the biggest worry is being able to obtain sufficient marine ingredients for fish feed.

“Much research is being concentrated in this area. We’ve shown we are adept at self-development,” he said, adding the percentage of marine content has reduced considerably, and now lies at around 30 percent.

Meanwhile he encouraged the industry to continue “thinking outside the box.

“Just look what we achieved when we started with light management of smolt ... There are very many innovative minds in the industry today," he said.

"If we look at R&D efforts in the industry, these are definitely on the rise. That’s due to realizing the reward for remedying the problems is truly significant.”

Dybvad referred to a survey Kverva carried out among 239 companies, where it saw a distinct positive connection between the amount spent on R&D, and growth.

Turnaround necessary for costs trend

Kverva believes Norway will continue to be the leading nation for salmon production.

“Here we have major companies, research environment and government authorities who are keen for growth.”

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However the salmon doesn’t just live its own life in peace and harmony -- the price is not disconnected from the price for other sources of protein, mainly meat.

“The price for alternatives is crucial. Consumption of fresh salmon in Norway so far this year is down considerably -- and Norway is the country with the highest standard of living per capita. That indicates salmon could quite simply become too expensive,” he said.

Dybvad termed the trend for costs in Norwegian salmon production as “scary.

“Regardless of whether other factors can emerge that lead to salmon prices being lower than they are now, costs must be cut. It’s almost terrifying to see the escalation we have had in costs -- almost the double since 2005. That’s partly due to feed, partly the rate of exchange -- but a considerable part is due to the biology factor [salmon lice, mortalities, lost feed]."

Costs have been reduced for several years through advances in technology and large-scale operation benefits, before they began to rise.

Dybvad is confident this trend can be reversed to return to falling costs modus.

“It starts with the biology factor. Task number one is to ensure that salmon is competitive," he said. "The prospects are bright, but we have a lot of work ahead of us."

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