Salmon prices and demand

Salmon prices and demand Kolbjørn Giskeødegård Director Seafood Food, Beverages & Ingredients sector coordinator [email protected] + 47...
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Salmon prices and demand Kolbjørn Giskeødegård Director Seafood Food, Beverages & Ingredients sector coordinator [email protected] + 47 22 48 79 83 / + 47 90 04 42 15

«A fantastic strong demand»

25,0 %

20,0 %

15,0 %

10,0 %

5,0 %

0,0 % Week Week Week Week Week Week Week Week Week Week Week Week Week 1 2 3 4 5 6 7 8 9 10 11 12 13 -5,0 % Weekly change volumes

Average Q1

2•

Fuelled by the top 10 list YTD!

70,0 % 59,6 % 60,0 %

y/y growth YTD

52,3 % 50,0 % 40,0 % 30,0 %

33,2 % 33,1 % 31,9 % 24,6 % 21,0 %

20,0 %

17,4 % 15,7 % 15,5 %

10,0 % 0,0 %

3•

Strange question – is there a demand growth in Q1? • Yes, the volumes are up 10% in Q1 and the sales growth has been fantastic! • But is this demand growth or just distribution of supply growth? • Demand growth, a simple approach •

Supply +10% => price drop less than 10% (even price increase!)

4•

A positive shift in demand

P0

V0

V1

5•

Otherwise, you just move down the demand curve

P0 P1

V0

V1

So – Q1 has brought more volumes, what about prices?

6•

Q1 2015: Spot prices down 16.9%, harvesting up 9.8%

-16,9 %

-20,0 %

-15,0 %

-10,0 % -5,0 % Price EUR

9,8 %

0,0 % 5,0 % Supply growth

10,0 %

15,0 %

=> implicit negative demand growth of 7.1%

7•

..which should not come as a surprise with Russia closed…

8•

So, let’s add the Russian Q1 2014 volumes to the equation:

-16,9 %

-20,0 %

-15,0 %

9,8 %

-10,0 % -5,0 % Price EUR

0,0 % 5,0 % 10,0 % Supply growth Russia

7,6 %

15,0 %

20,0 %

At least this brings demand growth into positive territory: +0.5% 9•

Demand growth is ~0%, what happened??

50 % 40 % 30 % 20 %

10 % 0%

Q1-13

Q2-13

Q3-13

Q4-13

Q1-14

Q2-14

Q3-14

Q4-14

Q1-15

-10 %

-20 % Implicit grwt

Ex Russia

10 •

Demand growth - From hero to zero • 2013: fantastic demand growth driven by •

low 2011-12 prices



massive marketing efforts and



product development roll-out.

• When a 25% supply growth (2012 figures) momentum suddenly were turned off, prices exploded, prices in local currency up 40% on a 3% harvest drop (Norway) • This continued through Q1 2014, then the low price demand driving effect seem to have been taken out. • During 2013, spot prices were high, but contact prices were low, protecting price sensitive segments and preserving a certain image of «cheap salmon»

11 •

Contract/forward prices

12 •

Contracts up NOK 10 (31%) in 2013-14 50 %

44,00

40 %

42,00

30 %

40,00

20 %

38,00

10 %

36,00

0%

34,00

-10 %

32,00

-20 %

30,00

Implicit grwt Ex Russia

Contract price

Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15

13 •

Too heavy burden for price sensitive segments • During 2013, spot prices increased 40% from 2012. A lot of this was most likely a «catch up» effect after the low 2011-12 prices • A the same time (2013), contract prices remained much lower. Long term contracts with price sensitive segments hence protected these segments from the highest prices in 2013. • From late 2013 however, contract prices started to allign, hence climbed up and all market segments were hurt. • Demand dropping after Q1 2014 might hence not be so shocking…

14 •

Another 2011? • From late 2009 through Q1 2011, salmon prices were in record high territory for one and a half year. Then in Q2 2011, prices collapsed driven by supply increase. • Looking back, supply increase was not that big in the first round, just 7%, but enough to burst the bubble. • We see a parallell with higher 1H 2015 supply bringing prices to a much lower than expected level. • Prices are still NOK 10 higher than in June 2011 and more importantly – no one expects a massive ramp up of supply next 2 years • In addition there is an upside in a Russian come-back. • BUT: A salmon price of NOK 35 today, corresponds to NOK 27 in 2011/12 when considering higher cost. • That’s the «margin pacman» 15 •

Prices going forward • Nordea Markets: «The rainman» • Even the rainman expects salmon prices around NOK 39 in 2015 • And NOK 41 next year driven by a normalization in Russia. • That’s not too bad, is it?

• A balanced price is important for the long term growth and market development, supply growth will be moderate next 2 years, but willingness to pay is a different story. • That might be the main 2015 lesson

16 •

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