The future of fishmeal and fish oil in aquaculture diets Andrew Jackson International Fishmeal & Fish Oil Organisation Institute of Aquaculture 28 September 2011

IFFO International Fishmeal and Fish Oil Organisation is the global trade association representing fishmeal and fish oil producers and related trades. Represents two thirds of world production and 80% of trade in fishmeal and fish oil worldwide with producers in Europe, South America, Africa, USA, China and India.

Production of fishmeal & fish oil Seasonal surplus of less desirable fish and inedible by-products are collected.

They are efficiently converted into concentrated stable products which can be economically shipped to where they are required

IFFO estimates 2008

Raw Material for Marine Ingredient Production ,000 tonnes 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

2000

2001

2002

2003

Whole fish raw material

2004

2005

2006

By-product raw material

2007

2008

Where are the raw materials of the future going to come from? Fewer whole fish and more by-products By 2020 50% of the fish raw material could be coming from by-products

The growth of aquaculture will mean more and more of the by-products will come from farmed species New sources of raw material : krill & algae

Global Fishmeal & Fish Oil Production 1963-2010 thousand tonnes 8000 7000

tonnes ,000

6000 5000 4000 3000 2000 1000 0

Fishmeal Fish Oil

Production of fishmeal and oil has remained relatively steady although the introduction of precautionary quotas & increased use for direct human consumption has resulted in reduced volumes of whole fish going for fishmeal & oil

Important feed ingredients Fishmeal is an excellent high protein feed ingredient used at least at some stage in almost all intensive aquaculture systems and also commonly in pig feeds Fish oil is the best source of the omega-3 fatty acids EPA & DHA and its use in feeds ensures a healthy product for the final consumer However, despite the growth of aquaculture the global production of both fishmeal & fish oil has remained fairly static IFFO data

Consumption of fishmeal is increasingly being concentrated in Asia with China continuing as by far the single largest market. In fish oil Europe continues to dominate the market with Latin America using less with the reduction in salmon production in Chile

Fishmeal use in China has not grown for the last 10 years Production & Imports in China 1986-2009 2500

Tonnes ,000

2000

1500

Imports 1000

Production

500

IFFO Data 0

Fishmeal usage moves from ‘Agri’ to ‘Aqua’ sector

Two species (chicken & pigs) used over 98% of production in 1960 but dropped to 40% of usage while production grew from 32 to 182 million tonnes

IFFO data

We estimate that in 2009 63% of global fishmeal production went to aquaculture and that was split almost equally between salmonids, marine fish, crustacean and others.

The transition of fishmeal from commodity to strategic ingredient has been accompanied by an upwards trend in relative value

Why are fishmeal prices again at a historical high? All feed commodities have risen strongly – current ratio with soymeal is still around 4:1 Continuing strong demand for fishmeal from SE Asia - particularly China Last year’s El Niño in Peru resulted in a large number of immature fish which has caused the early closure of the fishery – but the fish will mature and breed Issue with uncontrollable fishing in international waters has given problems to the Chilean jack mackerel fishery

Fish oil usage moves from hydrogenated fat to aquaculture & capsules mm A growing recognition of the importance of EPA & DHA

We estimate that in 2009 81% of global fish oil production went to aquaculture and that 68% of that went to salmonids. •Direct Human Consumption, •** Other usage including fat hydrogenation & industrial use Source IFFO

The easy replacement of fish oil by rapeseed oil in salmon diets has meant the price ratio of feed grade oil has slightly trended down although current ratio is around 1.2-1.3:1

However, the growth of fish oil for direct human consumption is opening up a significant market (currently 20-25% of volume) with a price premium (12-15%)

GOED 2009 estimates

The result of the growing replacement of fish oil in salmon diets: Salmon farming has been a tremendous deliverer of omega-3

The nutrient requirements of the salmon can be met by low dietary levels of fish oil (5%)

The final level of EPA/DHA in the fillets will decrease

Salmon have been sold on their health giving properties and this will be increasingly challenged

Trends in the oil market Very rapid change from hydrogenated fats to omega 3 feed oil Equally rapid change now from omega 3 rich animal feed to omega 3 supplements & pharma

Further opportunities to add value New sources of raw material : krill & algae Aquaculture will make use of GM plant EPA & DHA as they become available

Global aquaculture production has continued to grow while usage of fishmeal & fish oil is static 60

3.50

3.00

50

Tonnes millions

2.50

40 Aquaculture

2.00 Fed Aquaculture

30 1.50

20 1.00

10

Fish meal used in aquaculture

Fish Oil used in aquaculture

0.50

0

0.00 2000

2001

2002

2003

2004

2005

2006

2007

2008

Data FAO & IFFO

Responsible management of fisheries World’s largest feed fishery - the Peruvian anchovy – now well managed Europe re-building their feed fisheries Still concern over feed fisheries in Asia – mostly due to the use of trash fish and a lack of fisheries information It is becoming increasingly important to be able to demonstrate responsible fisheries management of the raw material

There is continued value chain concern over two critical areas

The need to demonstrate that any whole fish processed come from well managed fisheries and that there are no illegal, unreported or unregulated (IUU) fish included. Also that any fisheries by-products do not come from endangered or IUU fish

The need to demonstrate that production in the factory ensures pure and safe products. Also that the supply-chain then maintains the purity and identity of the products with a chain of custody demonstrating traceability

IFFO developed its Global Standard for Responsible Supply (IFFO RS) RS is a B-to-B initiative following the ISO-65 Standard Standard developed by multi-stakeholder committee including producers, traders, feed companies, fish farmers, major retailers, standard setters & NGOs

A 3rd party Certification Body was appointed to conduct audits into each application Currently undergoing ISO 65 Accreditation to ensure compliance with ISO-65

To comply with the Global Standard for Responsible Supply (RS) a factory must: Source its whole-fish raw material from fisheries managed according to the FAO Code of Conduct for Responsible Fisheries (MSC certification is accepted as proof of this) Avoid the use of Illegal, Unreported & Unregulated fish (IUU) Not source fisheries by-products from IUCN red listed fisheries or from IUU fish Manufacture under a recognised quality control scheme to ensure product safety, purity & traceability

IFFO RS Standard audits

IFFO-RS progress to date - 1 Country

Peru

USA

First factory was awarded certification in February 2010

N° of certified factories

N° of factories pending certification

(Engraulis ringens)

10

53

7

(Brevoortia patronus)

3

3

0

7

9

2

2

3

0

Fishery

Peruvian anchovy

Gulf menhaden Blue whiting

Launched to members in October 2009

N° of companies

(Micromesistius poutassou)

Atlanto spring spawning herring (Clupea harengus) Iceland

Capelin

(Mallotus villosus)

Summer spawning herring

(Clupea harengus)

6 Species of By-products

Denmark

Norway pout

(Trisopterus esmarkii)

Sand eel

(Ammodytes marinus) 2 Species of By-products

UK/Ireland

19 Species of By-products

1

3

0

Norway

1 species of By-product

1

2

0

Total

24

73

9

IFFO-RS progress to date - 2

This represents over 25% of world production of fishmeal and fish oil

There are more factories with their fisheries & by-products in assessment including in new countries

The IFFO-RS standard is under continuous development e.g. Chain-of-Custody, Improvers programme

The programme is currently undergoing Accreditation to ISO 65

Acceptance by GAA BAP standard After June 1, 2015, 50% of all fishmeal and fish oil from reduction fisheries shall be certified as compliant with approved standards. The preferred approved standard is the Marine Stewardship Council Environmental Standard for Sustainable Fishing (ISEAL compliant), provided it is combined with the MSC chain of custody compliance for the producing factory. The secondary approved standard is the Global Standard for Responsible Supply of the International Fishmeal and Fish Oil Organization (ISO 65 compliant), which includes the fishery as well as traceability, and good manufacturing practice for the producing factory.

Inclusion in draft ASC standards Auditing guidance The International Fishmeal and Fish Oil Organization’s Global Standard for Responsible Supply is one option for demonstrating compliance with standards related to traceability of fishmeal and fish oil, as well as the exclusion of by-products from IUU catch and vulnerable, endangered, and critically endangered fisheries.

Improvers Programme It is clear that factories in some countries will struggle to meet the current RS standard Many of the fisheries used as raw material are data deficient or the factory requires investment to meet good manufacturing practice standards This could exclude local producers from participating in some areas of feed production as customers strive to meet demanding new internationally recognised aquaculture certification programmes IFFO is working to produce an Improvers Programme which will offer the opportunity for local businesses to demonstrate their commitment to achieve the standard over an agreed period The area of fisheries improvement to provide compliant raw material present the biggest problems

Key takeaways • Aquaculture relies on safe, healthy and nutritious feeds to produce quality seafood • Fishmeal is a key natural ingredient for fish feeds to promote growth and welfare • And the healthiest omega-3 is from fish oil • Responsible sourcing of marine ingredients is a must – the IFFO RS program allows this • Aquaculture will continue to grow by reducing inclusion levels of fishmeal & oil and using them as strategic ingredients