The S-word

Don’t talk about it, don’t mention it.

If you’re speaking to anyone in the industry processing salmon this year, you get the same reaction: People are rolling their eyes at you, we got the odd “what can I say” and more often “nothing we can do about it, I guess.”

Salmon prices would most definitely win the award of the least-liked subject this year, if we had to name a winner.

Processors in Europe and across the world have been struggling with the topsy-turvy pricing. Some of them even told IntraFish reporters the impact on processors' profitability has been bigger than in 2013.

Back then, continuously high prices and low profitability forced several processors across Europe into bankruptcy, resulting in a wave of consolidation.   

While we haven’t seen the same thing happening this year, both Peter Bamberger, chairman of the Danish Seafood Association, and Romain Marce, general director at Suempol France, recently told us the situation seems to be worse.

It’s a toxic mix, processors are facing volatile and high pricing, competition for raw material, retailers yielding all the power, and fixed-price agreements with buyers -- resulting in a pretty bad deal for processors, since not many expected spot prices to spike as much as they have this year.

Many of them now sit on contracts that at times don’t even cover processing costs.

And it’s not going to end. Expectations are raw material prices coming from Norway will climb further in the run-up to Christmas.

During Marine Harvest’s quarterly presentation on Wednesday, CEO Alf-Helge Aarskog said prices “are supposed to reach €7.40 ($8.20) per kilo. I don’t think we’ve seen anything like it before.”

He believes “the sky is the limit for demand.” But there will be a limit, and it won’t be the sky.

Consumers will buy their smoked salmon for Christmas, yes. But what if prices finally hit them in the face next year? Will they still choose salmon over other fish, and over other animal proteins?

Only time will tell, but it won't take too long.

The Norwegian Seafood Council (NSC) released its latest export figures this week, showing some of the key markets in Europe, such as Spain and France, already bought significantly lower volumes this year, compared to 2015.

What is certain is that prices will remain high well into the New Year, as global salmon supply is expected to remain tight.

Will there be a way out of the predicament? I do hope so -- it would be a real shame if salmon priced itself out of the market.

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Twitter: EF_IntraFish


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