Spend Matters welcomes this guest post from Michael Liberty, of Mintec.
A lot has happened in the industry since we last wrote about salmon in January, with prices surging by approximately 50% since our last article. We wrote that if Norwegian salmon prices continued to climb this could represent a problem for US salmon — and they did. However, world supply also experienced a second slap in the face.
Chilean salmon is now experiencing problems. There are two main issues: a harmful algal bloom (HAB) damaging production and then disruption caused by subsequent protests. In early 2016, the Chilean salmon harvest crashed, due to a HAB which hit their west coast. The HAB was made official on Feb. 22, which caused Chilean fillet prices in the US to soar 38% by the end of March.
Algae are the tiny microscopic plants that float along ocean tides and act as food for many of the ocean sea life. Algal blooms typically occur naturally across the sea in low concentrations, remaining mostly unnoticed. However, warmer sea temperatures from El Niño allowed the bloom to flourish around Chilean waters in the South Pacific Ocean. The HAB harms salmon by absorbing too much sunlight and oxygen from the water and releasing fatal neurotoxins, which can cause the fish to become unsafe to eat.
The HAB caused large financial losses to both Chilean salmon producers and exporters. In response, the Chilean government quickly set up a compensation scheme to help support the industry by offering payment to producers to offset the losses. However, producers felt the payments were not adequate enough for the losses they were incurring.
This led to widespread protests resulting in the closure of roads and factories in some of the key producing regions in Chile, exacerbating the supply problems. The Chilean government responded by renegotiating better compensation terms with the producers. By the end of May, the last road blockade in the island of Chiloe in the South of Chile had been lifted, allowing salmon production to continue. However, the industry is coming to terms with a loss of approximately 123,500 tonnes of salmon over the past six months.
Chile’s salmon industry is not out of hot water yet, and the rapid decline in Chilean salmon production has shown just how important and fragile fishing can be. Chilean salmon production is now forecast to fall 16% year-over-year throughout 2016, to 494,000 tonnes, showing potential further trouble ahead.