A Look at Marine Harvest Opportunities & Challenges

Supply and demand

Limited supply and high demand caused salmon prices to peak in 2010 and early 2011. After a considerable and rapid increase in harvest volumes they began to fall towards the end of 2011. For the salmon market, one which is accustomed to high prices and short supply, the fall in prices did have an impact on the industry, says Mr Aarskog.

Marine Harvest has reduced the smolt stocking in Norway, Canada and Chile by 11.3 million smolt throughout 2011 and 2012.

The high prices in 2010/2011 had the opposite effect and in the short run the industry will see an increase in production. However in the long run production will drop, reflecting the fall in prices.

The global industry supply growth was the highest increase observed in a third quarter (2011) since 1996, namely 19.1 per cent, Mr Aarskog says. "We expect a global supply growth of 13 – 17 per cent in Q4 (2011) and 8 – 12 per cent in 2012."

Mr Aarskog says that Marine Harvest is expecting a growth of six per cent in 2012.

Whilst supply is increasing, so is demand. Mr Aarskog says that the EU, the US and Russia are the major salmon importers.

Sustainability

Sustainability is a big issue for salmon farming, however Mr Aarskog comments that in his experience retailers are engaged in sustainability, but find it hard to evaluate the issues and the risks.

"Marine Harvest has prioritized transparency and increasing the understanding of sustainability. We work closely with several of the largest retailers to develop sustainable programmes and ensure sustainable seafood."

As well as this the full extent of salmon farming and its affects on wild salmon populations are unknown, causing great controversy. Mr Aarskog says that the company is constantly working with environmental groups through dialogue and transparency to ensure best practices for salmon farming, and minimal effect on the surrounding environment.

Escapes

Marine Harvest has a clear goal of zero escapes. Throughout 2007 - 2010 it experienced low numbers of escapes in Norway. Unfortunately, says Mr Aarskog, in 2011 numbers started to increase, with three major escape events.

During the Christmas period the company recorded an escape in Nordfjord after a hurricane. So far 547 fish have been recaptured, although it is estimated that just under 2,000 salmon escaped.

The situation is now being evaluated to look at how Marine Harvest can improve its equipment further to withstand the challenge of a climate which Mr Aarskog believes will get even tougher in the future.

New technology is one way to deal with the increasing challenges. A new technical standard is being introduced in Norway in 2012, which will require not only all parts of fish farm equipment to be certified, but also implications of how they impact each other in rough weather.

Disease control

Disease is an ongoing challenge in all farming practices. Chile, which is still recovering for the crippling infectious salmon anemia (ISA) outbreaks, still sees the control of Salmon Rickettsial Syndrome (SRS) a problem. In Norway, as has been seen with the recent outbreaks, pancreas disease (PD) is still an issue.

Mr Aarskog appeared confident in Marine Harvests current biosecurity and disease management measures, saying that although PD had being diagnosed outside the designated PD zone in Norway, the company had not changed their PD management.

Other diseases that Marine Harvest are watching closely are gill diseases across the world, although Mr Aarskog says that this isn't an issue in Canada. Viral diseases are always a concern, he adds.

Chile's recovery

Chile got hit with ISA in 2007, and the production of salmon virtually came to a stand still. Previous to this production had been booming, and growth in the industry was substantial.

Since the outbreak the country has become a lot more conservative in salmon production, and strict regulations have been put in place. Mr Aarskog says that Marine Harvest units in Chile are still not fully stocked.

"We have a very cautious approach in Chile, with limited production volumes and we will not grow our smolt stocking in 2012."

Marine Harvest outlook for 2012

Quarter 4 saw higher volumes harvested for Marine Harvest due to high sea temperatures and correspondingly good growth, says Mr Aarskog.

Whilst volumes harvested are set to continue to increase, profitability will depend greatly on uncontrollable factors such as salmon prices, weather and disease control.

January 2012