The global salmon-farming industry shows an unusual situation this year. A small growth in world production, a rise in US demand, and an unfavorable currency evolution in the European producing countries are some of the sector's characteristics for the year.

At present, very few events or situations occurring in a salmon-producing or salmon-consuming region do not affect the salmon-farming industry's global setting. This has been evidenced with the change in supply in some regions or in demand in others, environmental demands or economic upheavals, to mention a few.

As a result of this situation, the industry is facing significant challenges this year.

Production and markets.

World salmon farming has shown steep growth since its onset in the '70s. In 1992, the industry harvested approximately 380,000 tons of whole salmon and after ten years, harvest totaled in the order of 1.4 million of whole salmon. In the 1992-2002 ten-year period, annual average growth was around 14%.

However, between 2001 and 2002 the industry grew only 2% and the 2003 world harvest of farmed salmon and trout is expected to remain at the same level than the previous year or to decline slightly.

In addition, while Europe produced 65% of the industry's total in 1992, in 2002 this percentage fell to 55% and it is likely that this year it may drop to 50%. At the same time, Chile has increased its share of total production year after year.

Like in the beginning of the '90s, Atlantic salmon continues being the most representative species of global salmon and trout production in terms of volume, number and distribution of producing countries.

Atlantic salmon accounted for 68% of the harvested volume in 1992. This figure rose to 74% in 2002. Rainbow trout has maintained its 15%-16% share; whereas Pacific salmon (coho and chum) shrunk from 16% in1992 to 10% in 2002.

An outstanding characteristic in Atlantic salmon supply shown this year is the unbalanced division in demand per salmon harvests between Europe and America. During the past two years, the US market has proved to be the one with greatest growth potential. In addition to the reduction of smolt release during the second half of 2001 and first half of 2002, serious health problems (virus, parasites and fish freezing due to extremely low temperatures) occurred, significantly affecting US supply during 2001 and 2002, which practically showed a flat growth at the end of 2002 and 2003.

During the first months of this year, there were no signs of a decline in production in Europe and, if we consider that the trade flow from Europe to the United States has not grown, the European market -already highly competitive- has had to support the pressure of the increase in supply.

The plunge in Atlantic salmon consumption in Japan and a European share of 70% in that market only worsen the picture.

Notwithstanding, there are signs that make it possible to state that the panorama will improve in 2004 and 2005. Although the trend in most of the countries will be to reduce smolt release, Chile is starting to increase its harvests.

Currency evolution

The unfavorable evolution of the currency in European countries seems to be one more obstacle that European producers must overcome this year. The principal European currencies have strengthened in relation to the Japanese yen (JPY) and the United States dollar (USD), which are the most important destination markets of their salmon-farming industry. Their currencies have also strengthened with respect to the currencies of competing regions like Chile and North America.

Globalization and the exchange rate affect the industry both in terms of expenses and revenues. This situation causes unequal alterations in the different producing countries. Therefore, while a relatively high percentage of the Chilean salmon-farming industry operations are carried out in dollars, the Norwegian Faroe Islands and Scotland depend more on the local currency.

dWithout considering the magnitude of the effect of the exchange rate on the industries' competitiveness, the fact is that while the Norwegian salmon-farming industry's competitiveness has weakened over the past three to four years, the contrary has occurred in the Chilean industry.

The charts below show the evolution of the Chilean peso (CLP) and the Norwegian crown (NOK) with respect to the principal trade currencies weighted by the importance of the different salmon and trout markets. While the USD and the JPY are the two most important currencies for the Chilean industry, the EURO is the most relevant one for Norway and its escalating curve evidences a weakened NOK.

Global challenges for the industry

The "distance" mentioned in this article between the US and European markets, as well as the "distance" that occurs between supply and demand, disappears at the time of dealing with forces that act against the industry as a whole. Bad news travels fast.

In Europe and particularly in the United States, the industry that opposes salmon farming has grown and strengthened from the organizational and financial points of view. They target their accusations and actions to many different areas of the industry. The salmon-farming industry, on the other hand, is permanently surveying the industry's sustainability with respect to the use of marine resources and any discharges into the environment.

The capacity to coexist with the industry of wild fisheries and consumer protection groups, as well as being able to main the image of an industry that does not represent a threat to biodiversity or local communities, shall determine the success of the salmon-farming industry.

Based on the assumption that the industry is able of successfully facing the foregoing challenges, the industry's more motivating challenge will be obtaining people to consume more salmon.