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Analyst: Salmon prices could drop below NOK 50 in fall

The crazy high prices of last year will not happen again in 2017.

The extreme high farmed salmon prices of last year are unlikely to repeat themselves this year, according to Kolbjørn Giskeødegård, senior analyst at Nordea Markets.

Instead, Giskeødegård is forecasting an average price of NOK 53 (€5.70/$6.70) for the second half of 2017.

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After an average price of around NOK 67 (€7.20/$8.50) per kilo of salmon in the second quarter of this year and in the fourth quarter last year, extreme margins are now over, with the expectation of “a more standardized range combined with more normalized prices,” he said.

Nevertheless salmon farmers will still earn money.

“Our estimate is production costs between NOK 35 (€3.70$4.40 and NOK 37 (€4/$4.70) per kilo -- with the lowest production cost in the north and highest in the west, Giskeødegård told IntraFish.

His predictions are in line with Kontali Analysis' latest monthly report, which predicts a 20 percent drop in the price per kilo in the second half of the year compared with the first half.

But he believes the drop is volume driven rather than currency driven.

"The salmon price cannot be explained by the krone exchange rate, because the krone is not so much up. The fall in salmon prices is volume driven,” he said.

He is referring to retailers replacing salmon on the shelves as a result of the high prices.

Giskeødegård said when salmon prices rose sharply after Easter, it broke the buying interest in some EU markets.

There has also been little activity and interest from supermarket chains on the continent to run campaigns.

“They have also been looking for filling the shelves with salmon replacements, and this has also been the case in Norway,” said Giskeødegård.

According to figures from the Norwegian Seafood Council (NSC), the price was up 60 percent in the first quarter. In the same period sales fell as much.

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“But the salmon has been relatively cheap in Norway compared to many other markets since it is traded in kroner.”

Overseas demand

Giskeødegård said what has saved salmon prices is surprisingly good global demand, especially in overseas markets such as Asia and North America.

“For a long year and until April there has been chronic undercutting, but from May, the supply has normalized -- and prices for Chilean and Canadian salmon have fallen as a stone in North America.”

Corrections in Europe have been smaller, but the price range in July is considerably below last year.

Far below NOK 50

Giskeødegård said he is not surprised if the salmon price falls to well below NOK 50 (€5.30/$6.30) per kilo in fall.

“That's what it will have taken into account when we estimate our estimation for the NOK 53 (€5.70/$6.70) per kilo,” he said.

“This means that a few weeks the price will be well below that. The difference between 2016 and 2017 is that it has been significantly longer before we have received the recoil this year.”

Giskeødegård wonders when, not if, prices are going to return for Christmas and how high they are going to go.

“Will we get an average price of NOK 50 (€5.30/$6.30) to NOK 55 (€5.90/$7) -- or NOK 60 as the future price of Fish Pool indicates?” he asked.

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