“The future of the seafood industry is marked by a positive growth in demand contrasted by a diminishing growth rate of supply in both aquaculture and wild catch. The result is increasingly value-based growth and lower volume-based growth of the seafood industry than what we have seen in the past.
In the last two decades aquaculture has expanded by more than 7% per year while even until the early 2000s wild catch was still increasing.
In the short and medium term, aquaculture will expand significantly slower than in the past and also below long-term expectations. This is mainly because key species which drive the sector such as tilapia, shrimp, salmon, pangasius, bass, and bream suffer from various supply constraints and biological challenges.
We expect most of these challenges to be resolved in the next 2-3 years and supply will resume growing possibly 2-4% with higher percentages possible for certain species. We do not expect a return of the double digit growth figures for any of the key species, for any prolonged period of time.”
“Regarding the most relevant wild catch industry – the ground fish – after a number of years of increasing catch quotas, the sector is now entering a period of stability. Following years of overfishing, supply of ground fish reached a low point in 2008 as the main producing regions of Norway, Russia, the US, and Iceland reduced the catch quotas to ensure sustainability.
This resulted in strongly improving wild biomass and increasing (but this time sustainable) catch quotas. Currently the wild biomass of the key ground fish species Alaska Pollock and Atlantic Cod are the healthiest they have been in many years.
Nevertheless, to maintain a healthy wild biomass the current catch quotas of approximately 7 million ton will not be increased further in any material way.”
“There is a myriad of trends that effect different seafood markets. In the West, on the demand side, the key driver remains the need for healthy food, while in the short term we also expect a positive influence from the macroeconomic cycle, as key Western economies exit from the recession.
The U.S., U.K., and Germany report strong growth while key seafood consuming regions such as Spain and Italy are no longer contracting. In developing countries, demand is driven by a larger array of factors.
Growing disposable income and expanding middle class are among the key drivers, but improving availability due to better logistics, development of retailers and food service chains, as well as urbanization are other important drivers.
A key value change is expected in developing countries, particularly China, as increasingly more processed and packaged food will be required by the increasing numbers of time-short and food-safety conscious consumers.”
“However in the seafood industry, supply is a far more important and volatile factor then demand – this is still a largely supply-driven industry. The key developments in wild catch are mostly related to sustainability, traceability, and controlling the amount harvested through quota legislation.
The more regulated the sector becomes, the more sustainable it becomes, with potentially increasing profitability at the quota holder (harvester) level. Although the last decade has seen great improvements in most developed countries, much still needs to be done, particularly in Asia and Africa.”
“From the processing side there are major shifts occurring. As China's wages are rising the question becomes, How long will this region be the leading processor of frozen seafood?’A number of trends are emerging. Firstly, Chinese processors invest in automation to try to maintain competiveness.
However some developing countries are positioning to increase their role in seafood processing, such as Vietnam, Russia, and Mexico. And lastly, increased automation means more is being processed at source or on vessels – even in high labor cost counties such as Iceland.
“Regarding fresh processing, the trend towards low income regions such as Poland is also no longer as clear cut as in the past. With automation, a larger part of processing can be done close to the source, for instance in the Norwegian or Scottish salmon industry.”
“Regarding the profitability of aquaculture farming, we expect a strong short-term increase in profit margin for all producers with a good biological environment.
A combination of record prices for key species – shrimp, salmon and tilapia – and low cost for fish meal and soy bean meal should swell profit margins to a new record. Moreover certain high-value niche sectors, such as oyster or abalone faming, are experiencing both record growth and profitability.
However as mentioned there are major challenges across nearly every sector of the aquaculture industry from a biological point of view. Leading aquaculture industries such as Chilean salmon farmers or Thai shrimp farmers are recording losses despite the high price environment. Profitability in the sector is very volatile and varies from company to company as the industry undergoes rapid technological advances.
Advances in the aquaculture industry in terms of genetics, husbandry skills, and feed formulation are occurring in a fraction of the time it took for the same improvements to occur for land animal proteins. However, volatility is the price of this rapid development.”
Gorjan Nikolik is a senior industry analyst with Rabobank, focusing on the global seafood sector including aquaculture, wild catch, seafood trade, and processing.
Nikolik is a regular speaker at global seafood and aquaculture conferences and has published research reports covering the seafood industry.