2025 global salmon growth forecasts overestimated, new paper argues

Global salmon growth forecasts to 2025 could be overestimated by 6 to 8 percent, according to a new briefing paper from financial think tank Planet Tracker. The culprit is global warming, the paper argues.

In “Salmon Feels the Heat,” researchers analysed reported fish losses attributed to recurring environmental shocks over the past nine years, as reported by the 10 largest publicly listed salmon producers in Norway, Chile, and the United Kingdom. They found that the aggregated production and earnings losses relative to forecast production reached 5 percent for the period between 2010 to 2019.

The 10 companies – Australis Seafood, Bakkafrost, Blumar, Camanchaca, Grieg Seafood, Invermar, Lerøy Seafood, Mowi, Norway Royal Salmon, and Salmar – account for almost 50 percent of salmon production in Norway, Chile, the U.K., and Canada, and have a combined market capitalization of USD 30 billion (EUR 27 billion). In the period under review, the companies’ aggregated losses as a result of environmental constraints amassed to 206,000 metric tons (MT), with a market value of USD 1.2 billion (EUR 1.1 billion).

The paper argues that if these losses were applied to forecast global farmed salmon production between 2020 and 2025, the total loss of fish would be approximately 580,000 MT gutted weight, worth around USD 4.1 billion (EUR 3.7 billion).

In 2018, Atlantic salmon was the second-most valuable farmed species in the world (behind shrimp), with a market value of USD 18 billion (EUR 16 billion). Its dominance is expected to continue as the overall aquaculture sector experiences double-digit growth to 140 million MT by 2050.

However, the paper warns that such a trajectory is far from assured, with limited availability of coastal sites, environmental stocks, and biological problems related to intense production cited as potential limiting factors. Issues associated with increasing production volumes, such as feed supply, eutrophication, algal blooms, parasites, disease, and waste leakage, are all forecasted to increase, and capital markets are advised to consider key sustainability issues in their investments.

Atlantic salmon grows best in the temperature range from 8 degrees Celsius to 14 degrees Celsius, yet Norway, the world’s largest producer, experienced maximum coastal seawater temperatures higher than 14 degrees Celsius in June, July, August, and September 2018. The situation is only likely to get worse as the effects of global warming increase, experts say – the Intergovernmental Panel on Climate Change (IPCC) forecasts increases in seawater temperature of 1.6 degrees Celsius between 2000 and 2050 for Norway and Scotland, and 1.1 degrees Celsius for Chile.

Producers fear that prolonged periods of higher water temperatures could increase the frequency and intensity of algal blooms, disease, and parasites impacting salmon health and mortality.

At best, this could result in a major re-imagining of salmon aquaculture. At worst, it could make farms and associated processing facilities commercially unviable for longer periods of the year, or increase costs due to the need to move fish and pens to cooler waters.  

As a direct result of predicted production volatility, earnings per share of salmon companies could be adversely affected. As an illustration, the Planet Tracker paper cites the loss of 5,000 MT of salmon in 2018 by Northern Harvest Sea Farms in Canada, a division of Mowi, which was attributed to water temperature increases. Mowi’s share price fell 5 percent the day after the news was made public. 

Looking towards the future, the paper explains that in order to lessen the effects of environmental issues, some salmon farming companies are now seeking to expand beyond the coastal zone into offshore aquaculture. However, investors are advised to weigh up the higher operating costs of offshore farming, with the risk mitigation benefits that offshore technology can bring in reducing production losses. Evidence to date demonstrates to investors that fast growth at all costs is not sustainable.

Ownership of the salmon industry is increasingly concentrated on a few key investors which, according to Planet Tracker, makes it important for investors to demand long-term sustainable industry growth through the implementation of effective environmental and financial risk management policies.

Investors are advised to ensure that disease resilience, genetics, site selection, technology type, and operational resilience to climate change are adequately addressed in sustainability policies if they are to avoid declining profit margins and increasing environmental risks driven by growing market demand.

The paper concludes that by investing now in making the industry more sustainable, investors will enable sustainable growth to continue, while mitigating environmental risks.

Photo courtesy of Valentyn Volkov/Shutterstock