The sky-high salmon prices that continue to rise were the main topic of conversation within the industry at this week's Seafood Expo Global in Barcelona.

"In November 2021, I thought I was being optimistic when I estimated that the salmon price in 2022 would be 70 kroner per kilo," DNB Markets Analyst Alexander Aukner told IntraFish.

The salmon price is, of course, now far above this level. Last week, the industry reported prices of close to NOK 110 per kilo for core sizes, and prices are up to NOK 120 (€12.21/$12.85) per kilo for some batches of large fish. In comparison, the production costs are NOK 40-45 (€4.07-4.58/$4.28-4.82) per kilo.

The point of no return

DNB risk management executive Staale Johansen believes that salmon prices will not return to what was previously the "normal level" of around NOK 60 (€6.11/$6.43) per kilo.

"It is about inflation, which is not isolated to just salmon," he said. "Prices of consumer goods generally increase by around 8 percent on an annual basis, both in the EU and the USA. It is quite dramatic."

The banker warned everyone with a lot of debt.

"Be prepared because interest rates will increase significantly in the future, both in Europe and the USA. High inflation and higher interest rates will also affect salmon prices, which will settle at a new and higher level," he said.

Johansen also said that feed prices are rising significantly as a result of rising prices for raw materials such as wheat, vegetable oil and maize.

"One feed producer I spoke to had increased its feed prices by 11 percent in one quarter. This will affect the salmon market," he said.

Fixed price strategy

Most salmon is sold on the spot market, but some players also trade part of their volume on fixed-price contracts of various durations.

Johansen estimates that processors secure around 30 percent of planned purchases at fixed prices. But there must be balance, he believes.

"Processors can find themselves in very challenging positions if there is no correspondence between the fixed price for purchasing and sales," he said.

It is a predicament processors and wholesalers laid out to IntraFish when we spoke to them earlier this month.

Surprisingly strong

Analyst Alexander Aukner is surprised at how fast and how high the price of salmon has risen.

The main driver is that harvest volumes this year are expected to fall by 1 percent compared with 2021. In 2023, on the other hand, an increase of around 6 percent is expected, which may soften the market.

Aukner said that he constantly has to update the Y-axis in his price graphs.

"We are almost unable to update our Excel sheets quickly enough," he said.

And it is not just the prices that have taken him by surprise, but also the strength of demand that has, in part, led to these higher prices.

"The supply is falling, something we have seen a few times before. But the price response also tends to be quite strong.

Production costs rising

But not everything is fantastic for salmon producers.

Production costs have risen, partly as a result of higher feed prices.

"The big cost driver is biology, which Baard Misund at the University of Stavanger has written a lot about," said Aukner. "If you get control of salmon lice, it will fall significantly."

But the analyst also pointed out that salmon is a relative winner compared to other farmed animals because salmon eat less feed than cattle, pigs and chickens.

"We are surprised by the strength of the market, and I will not be surprised if the salmon price stabilizes at a higher level than we have seen before," he said.

On Friday, Norwegian salmon prices reached their highest levels since Norway began compiling price data in 2000.

With little salmon being processed, an already hot market is now scorching.

"It's completely wild. Now it is only those who absolutely must have fish who buy," an exporter told IntraFish.

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