Rabobank’s view: Very tight salmon supply expected in 2021, all eyes on RAS developments, bullish forecast for shrimp prices, and higher demand seen for fishmeal
As a result of COVID-19 and low prices in Chile's main export markets – the US, Brazil, and Russia – the Chilean industry reduced smolt numbers during 2020, which will lead to an 8% to 9% contraction of salmon supply in 2021, said the analysts.
Globally, they said they expect salmon supply to expand by 0.5% to 2% in 2021, which is much lower than demand growth or historical supply growth.
High salmon prices the forecast
However, the team does expect demand to recover, on the gradual reopening of foodservice, combined with lifting price expectations.
“During most of 2020, salmon has been an 'at-home' eating experience for consumers in Europe and the Americas. It has been the go-to seafood species during the pandemic, registering a 3% to 4% increase in consumption in 2020, albeit at a lower price point. We believe that consumers' newfound confidence to cook salmon at home will translate to increased long-term demand, even as foodservice returns.”
RAS trend
Commercialization of recirculating aquaculture systems (RAS) based salmon will be a key development to watch in 2021, says Rabobank.
Some of the first harvests of large-scale RAS operations occurred in 2H 2020, and ongoing scaling of these production systems will be a key point to watch during 2021. How the new systems perform on cost and price will determine how much capital flows toward them in the future, said the farmed fish market specialists.
Currently, the global list of publicly announced land-based projects has an expected output of 1.6m metric tons, or 70% of 2020 salmon production – even though only a few are in construction and just a few thousand tons have been harvested, noted the outlook.
Recovery predicted for shrimp industry
Supply recovery in 2021 is forecast for the shrimp industry, after contraction in 2020, according to the Dutch bank's report.
Shrimp prices should be higher than the record lows seen in 2020, and shrimp producers are likely to diversify the markets they supply, added the team.
“2020 was one of the most challenging years in memory for the global shrimp industry. Global demand dropped due to lockdowns, and supply faced many interruptions, which led to low prices and an estimated 10% supply contraction. This contraction is probably skewed toward 2H 2020, with the industry hoping the potential shortage will lift the record-low price.”
Nevertheless, the enormous shift of consumption to retail – albeit at a lower price point – means more households now have the confidence to cook shrimp at home, said the analysts. Some markets, like the US, have probably increased shrimp consumption in 2020. The hope is that, as foodservice gradually improves into 2021, demand and prices will recover, they reported.
“With a relatively short cycle, shrimp producers can respond quickly and are currently expecting supply to rebound by 8% in 2021.”
Learnings from COVID-19
Shrimp supply regions tend to focus on and specialize in certain markets/products, such as Ecuador supplying China with head-on shell-on shrimp, and India supplying the US mostly with peeled shrimp, but a change in market direction is underway it seems.
“As different markets locked down, production for certain products was impacted (such as peeling stations in India), and Chinese officials banned Ecuadorian shrimp after discovering minute traces of COVID-19 on the outside of the frozen packaging – the shrimp market descended into chaos. Some markets and product types were in oversupply, while others faced shortages.
“The key learning point was that specialization has a risk, both for buyers and sellers. From now on, we expect producers to diversify more and increase competition in each other’s markets. This will create a more competitive, but more resilient industry in the future.”
Stable fishmeal supply
Despite the pandemic, fishmeal supply seems stable, noted the Rabobank report. So far, supply of fishmeal in 2020 has been roughly in line with 2019, they added.
“Pelagic fishing has not been impacted by COVID-19 as much as other species. The main surprise of 2020 came with the announcement of a 2.7m metric ton quota for Peru’s winter season, starting in November 2020. This is slightly below last year’s level; however, a lower quota was expected, as this is at the higher end of what is possible. It leaves open the important question as to how much of this quota will be filled.
"In 2019, due to precautionary bans, only one-third of the quota was actually caught. It is likely 2020 will be better, which will probably increase supply of fishmeal in early 2021, although the expected La Niña event could also impact the catch."
Global production of fishmeal is concentrated around a few producers, and Peru is the biggest producer and exporter. Most Peruvian fishmeal exports go to China.
“COVID-19 and unfavorable weather conditions softened Chinese demand for fishmeal in 2H 2020. In the first three quarters of 2020, Chinese imports decreased by around 25% YOY. With the recovery of piglet farming and the foodservice sector in China, we expect stronger fishmeal demand for 2021.”
Fishmeal prices softened in 2020, but should rebound in 2021, said the team.
Fishmeal prices have been historically volatile. ASF in China in 2019, COVID-19 in 2020, and relatively stable supply have generally softened prices, according to the publication.
“However, constrained supply and continuous demand coming from aquaculture support fishmeal prices in the long term. In general, 2020 prices have been lower than 2019 levels. In 2021, we expect prices to range from US$1,300/metric ton to US$1,600/metric ton, depending on climatic conditions.”
