Salmon Supply Shortage Nears Breaking Point for US Importers

By in 12 HL on September 18, 2013

Salmon Supply Shortage Nears Breaking Point for US Importers

Salmon

The perfect storm of factors has combined to create a salmon supply shortage in the United States that is worrying importers, particularly since the busiest seafood season of the year — the 40-day Lenten holiday that runs from mid February through March 30 — continues.

“The underlying theme of the global farmed salmon industry is one of hesitation and trepidation,” the Seattle Fish Company said in its March 19 market report. “Supply remains constricted, and prices ratchet upward.”

Slade Gorton concurred in its recent market report, stating that supply has not yet met the US or global demand for farmed Atlantic salmon.

“The supply of Altantic salmon is very tight, versus a robust market demand at this time of year,” Bert Bachmann, vice president of the Miami-based division of Chilean salmon farming company Camanchaca, told Undercurrent News.

Not only is Norway’s unseasonably cold weather creating less biomass than expected, Chilean producers are also producing less than anticipated.

To make matters worse, Chile’s big salmon farmers are opting to ship to other markets instead of the United States now — Russia, Japan, Korea, China, the Far East – sources told Undercurrent.

On top of that, there is a lack of Styrofoam boxes available for shipping fresh product due to an influx of need for those boxes for Easter flowers, a source in the Chilean salmon industry toldUndercurrent. A US importer of Chilean salmon also noted the Styrofoam box shortage.

The source, who imports fresh and frozen Atlantic salmon from Chile, told Undercurrent even as prices in the US creep up to quite attractive levels, Chilean producers are already committed to contracts overseas.

“Nobody predicted the prices we are seeing,” he said, indicating the US market looks much more attractive now than it did a few months ago, when some of these commitments may have been made.

Russian buyers had been looking for product from Chile due to the high price of salmon in Norway last year, he added.

The importer said production problems are the biggest factor in the Chilean salmon supply shortage. Sea lice levels, which are on the increase, are causing fish to be harvested at smaller weights than anticipated.

“The average weight is between 3.7 and 4.1 kilos today, and they were expecting to be harvesting 4.9 or close to 5 kilos,” he said.

Now, the total harvest for Chile for the year is expected to be at 500,000 metric tons or less, a much lower level than the original prediction of 550,000 to 580,000 metric tons, the source added.

Kontali has predicted a 33% increase in Chilean production this year to 478,000t, up from 358,000t for 2012. Multiexport’s chairman Jose Ramon Gutierrez has forecast that production will grow 38% to 522,000t, from 379,000t last year.

Established companies such as Duck Trap River of Maine, a Marine Harvest-owned salmon smokehouse, have been able to get access to the product it needs so far, but not without work.

“We had to call suppliers we haven’t bought from in a while,” Don Cynewski, general manager of the operation, toldUndercurrent.

The company also had to raise prices on its smoked salmon, which is something it tries to avoid doing unless absolutely necessary.

Less established salmon buyers are having trouble getting enough product to meet their demand.

“We are only able to get three quarters of the amount of product that we want to buy,” Joshua Watts, category and accounts manager with E&E Foods, told Undercurrent.

The Seattle-based company just started buying farmed salmon in December, and in its second month was able to get its hands on 25% more product than it can now.

Meanwhile, Canadian Atlantic salmon farmers are not selling to any new customers, leaving companies like E&E out in the cold, Watts said.

“It seems to be getting to a somewhat critical point in some areas for sure,” said Harry Mahleres, director of purchasing for Denver-based Seattle Fish Company.

“We’re looking for some relief in April with demand tapering a bit, and hopefully with the (Alaska) wild season we’ll see a little bit of relief also,” he said. The Alaska salmon wild season does not start until the end of May or beginning of June, however.

The Alaska season will bring relief to Duck Trap, which notes that demand for wild Alaska sockeye is also limited.

“Sockeye sales are up quite a bit, so what we bought (last season) expecting it to last us and it isn’t lasting us,” Cynewski said.

As for the farmed supply shortage, Mahleres sees an end in sight with Easter next week and the seafood-heavy 40-day Lenten period set to end on March 30.

Yet there remains much uncertainty in the industry over where the end to this supply-demand imbalance is. Bachmann said the supply situation was a major point of industry chatter at the Boston seafood show last week.

“The biggest news is salmon is in short supply, and it’s manifesting itself pricewise,” Bachmann said.

Commentary

The article discussed about a short in the supply of salmon. This is because of the supply of salmon was already very tight, and the biomass that they produce is smaller during this year. Therefore, the government planned to import from other farmer but they already ship to other places. Moreover, there is a shortage in the boxes for the shipping of fishes. This also causes the shortage in supply of the salmon, because it is hard for the fresh good to be shipped if there are no enough boxes. These factors worsen the situation of the salmon market.

When there is a shortage in supply, the supply curve decrease, and the price of the salmon in the market will increase. The shortages of the boxes worsen the situation of keep increasing the price.

Diagram of the salmon

supply

This diagram shows that the supply is decreasing and leads to an increase in price and it is all because of the shortage in salmon.

 

Diagram of the boxes

supply

This diagram shows the supply curve for the boxes that ships salmon. The boxes are in shortage Therefore; the box is getting more expensive. This means that the shipping cost of the salmon is increasing rapidly. Therefore, as the article already said, the salmon price is boosting right now.

 

Moreover, the new farmer they found cannot ship salmon to them even if the salmon is given at an attractive price; this is because that they already sign the contract to the other company. The government had figured that the major problem is the small production of the salmon; it cannot support the demand for the people who are able and willing to purchase. Hence, it will be a mission for them to find a solution to the balance in demand and supply. I think that a effective way to increase the production will be to give subsidies or incentives to the producer of salmon, it will encourage them to work harder and the subsidies lower their production cost and shipping cost; this could bring the supply back to its normal and lower the salmon price.

 

 

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