Scottish salmon sector looks poised for a strong 2016

Interview with Dominic Welling – Intrafish – 23.02.16

Last year saw challenges with changing market dynamics and prices, but this year is already shaping up to be a winner for the country.

Scottish salmon exports experienced a “challenging” year in 2015, in stark contrast to a record 2014, primarily due to the Russian ban changing market dynamics, ScottLandsburgh, chief executive of the Scottish Salmon Producers Organisation (SSPO), told IntraFish.

In 2015, Scottish salmon exports sunk 17 percent in volume to 83,415 metric tons, down from 100,719 metric tons in 2014, while in terms of value, sales fell 22 percent from£494 million (€633.7 million/$705.9 million) in 2014 to £385.9 million (€495 million/$551.4 million).

“2015 wasn’t a great year,” said Landsburgh, “but then 2014 was a great year, so when seen in context 2015 was not necessarily that bad, rather 2014 was significantly good.”

The main factor impacting exports from the country was the Russian trade embargo, which resulted in a significant displacement in the market, said Landsburgh.

The ban meant significant Norwegian product had to find a new home, which, combined with the weaker kroner, meant exporters from Norway were able to make inroads into some of Scotland’s markets.

“As a consequence of the fact their currency has devalued against the GDP by a lot – between 25 and 30 percent in the last 18 months they were at a distinct advantage to make inroads into our markets, which theydid,” he said. “So that’s been a challenge for us.”

The sudden influx of Norwegian product into Scotland’s established markets also meant prices were driven down significantly, Lansburgh said.

“Suddenly we had a surfeit of product chasing a home and if it goes into markets we’re already in it’s going to pull the price down a bit,” he said.

Scotland’s three major markets are the United States, France and China – and two out of three of these took a hit in 2015. Exports to the United States fell 27 percent to 30,039 metric tons, whileexports to China dropped 15 percent to 11,340 metric tons.

“But the EU held up very well and actually improved its performance,” said Landsburgh. “Not a lot by 2 percent in volume but it did pick up which is great.”

In particular France, which traditionally is one of Scotland’s strongest export markets when it comes to salmon, increased by 14 percent compared with 2014 to reach 27,270 metric tons. Exports to France already leaped up 55 percent in volume and 39 percent in value in 2014.

““So it’s had a good run for the last two to three years, it’s really bounced back for us,” said Landsburgh.

“I don’t know if that’s because Norwegian salmon has not been so strong in that market, but whatever’s happened there has been good for us.”

While overall the indication is there has been a big drop in Scotland’s exports in 2015, Landsburgh reiterated that 2014 “was the best year weever had.”

“We became the UK’s largest food export in 2014 because of such a strong performance so we have to put it in that context really,” he said.

Scotland exports around 65 percent of its production, with the remaining 35 percent heading into the domestic market.

According to figures from the Marine Scotland Science annual survey, the country produced an estimated 185,000 metric tons in 2015, up from the 179,000 metric tons produced in 2014.

Levelling out in 2016

The prediction is that the market price for salmon is going to rise quite significantly in the next 12 months – around 10 percent and if that is the case, it will bring a lot of confidence back into the market, saidLandsburgh.

“Let’s hope it brings confidence into the markets where we are strong,” he said. France, for example, is a consequence of the bounce back in the European Union over the last two years.
The US is likely to bounce back a bit in 2016, Landsburgh predicts.

“I think things will level out a bit more in 2016, I think with the projected rise in market price we will see more stability in export markets and maybe as such we can regain a bit more of our traditionally strong exportmarkets,” he said.

When markets become more confident, prices stabilise at a better level and the appetite for premium products increases.

“When market prices are strong – the price differential for premium is not so great, therefore the appetite improves and we can benefit from that,” headded.

Need to increase capacity

One of the problems facing Scotland in the US and China, it that both these markets prefer larger sized fish, Landsburgh said.

“It’s a challenge for us to produce large fish all year round we do not have the critical mass of production capacity,” he said.

While the country produces around 180,000 metric tons, only a small percentage of that is large sizes.

“Trying to get that all year round is quite a challenge,” he said. “I think it’s much easier when you’ve got bigger capacity because we can fulfill orders.”

And this is the SSPO’s message to the Scottish government – that it is not just about production capacity for the sake of it, rather it is about being able to fulfill the different demands of the different markets, saidLandsburgh.

“I think we need to get new licences – I think we need to be developing more sites whereby we can look at growing our fish to a larger size eventually – but it will take time to do that, and be able to do that all yearround, but that’s one of our aspirations,” he said.

The government is supportive of growing the industry as well, and is behind the SSPO’s target to reach 210,000 metric tons of production by 2020.

It is also requesting a target for 2030, said Landsburgh. “But first we need to find the means to be able to do that and support it and make it sustainable in both commercial and environmental terms – sothere is quite a bit of work to be done to get there,” he said. But Scotland does have the space to grow and new licences are being awarded, such as the recent Scottish Sea Farms site in Orkney. This is one of a number that have been approved in recent years, said Landsburgh and there is one in Skye going to be approved shortly. “I think all of these, if they kick in at the same time, then we should see a bit of a difference in production next year,” he said.

When markets become more confident, prices stabilise at a better level and the appetite for premium products increases.