Atlantic Salmon Guide

The global salmon sector has felt the impact of Covid-19 all along the supply chain, with production, processing, logistics, and markets all suffering to varying degrees. However, some observers are pointing to the lower prices and shift in focus to retail as an important opportunity that will benefit the sector in the long term.

The ongoing pandemic has introduced a large amount of uncertainty and led to some significant changes at the farm level. Poor market conditions and logistical challenges have seen many producers delay harvesting as long as possible, which means that supply in the first half of 2020 has been tighter than expected. The key markets for exported salmon have been heavily impacted by Covid-19. Market weakness and restrictions on movements affecting seasonal labor in processing plants and aboard fishing vessels are contributing to the reduction in supply.

Any distribution channel that can accommodate the needs of consumers that are conscious of the need to remain socially distant is now accounting for a steadily growing share of the market. The fresh segment, which is of key importance to the salmon sector, is suffering due to soaring logistical costs and a general preference for frozen and prepared foods amidst a general atmosphere of uncertainty. The retail sector saw a slowdown in demand for salmon due to the Covid-19 pandemic, particularly for fresh fillets as well as in the whole fresh fish segment. The impact of Covid-19 is driving some unusual dynamics. Firstly, the closure of foodservice is dragging down the prices of larger fish favored by the restaurant trade, which otherwise command a significant premium.

Sources:

Widespread disruption in the salmon sector

Salmon’s upward growth trajectory grinds to a halt over COVID-19 

As per 2019 data, the world Atlantic salmon production was 2.32 million MT (metric ton). The supply of Atlantic salmon has increased by 478% since 1995 (annual growth of 8%). The annual growth has diminished in recent years with 7% annual growth in the period 2010-2019. Kontali Analyse expects growth to diminish further, and has projected 3% annual growth from 2019 to 2023.

The background for this trend is that the industry has reached a production level where biological boundaries are being pushed. It is therefore expected that future growth can no longer be driven only by the industry and regulators as measures are implemented to reduce its ecological footprint. This requires progress in technology, development of improved pharmaceutical products, implementation of non-pharmaceutical techniques, improved industry regulations, and intercompany cooperation.

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Mowi Salmon Farming Industry Handbook 2020

There are two methods in producing salmon, Includes fishing (wild-caught) and farming.

• Salmon Fishing (Wild Caught)
  

Fishermen use a wide range of gear to catch salmon. Every type has its own effects on the ocean. By selecting the right gear for the right job, the fishing industry can help minimize its impact on the environment. The gears are as follows:

- Beach and Boat Seines

- Bottom Trawls

- Dredges

- Gillnets

- Handlines and Jigs

- Harpoons

- Longlines

- Midwater Trawls

- Pole-and-lines

- Pots

- Purse Seines

- Trolling Lines

• Salmon Farming
  

Salmon fish farming is a three-stage process. Salmon eggs are hatched in freshwater tanks. The young salmon are raised in the tanks or in channels of running water for twelve to eighteen months. Then transferred to cages along the seashore where the salmons are grown to maturity. The salmon farming production cycle lasts about 3 years. The first year of production takes place in controlled freshwater environments, and then the farmed salmon are transported to seawater cages. Once the farmed salmon reach a harvestable size, It will be transported to processing plants to be prepared for sale. For consumers, most farmed salmon is sold as salmon fillets, although people can also purchase the whole fish.

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Salmon Fish Farming 

Fishing and Farming Methods

About Salmon Farming

• There has been a rise in large vertically integrated companies with direct ownership of production activities including hatcheries, fish processing and exporting. 

• In 2020, about half of salmon production was wild caught and half aquaculture.
•  Aquaculture production is soon to exceed wild caught production.

• Once harvested, the fish are slaughtered, gutted, and graded – this is HOG (head on, gutted) form.

• From here, if of superior quality, salmon is exported fresh/chilled.

• For lower quality salmon, they are sent to secondary processing.
  
• However, very little value-added processing of fish products occurs in Australia for either export or domestic markets.
  
•  Most businesses undertake only basic processing, such as cleaning, filleting, chilling, freezing and packaging.

• About 80% of salmon exports are sent via air freight. 

As per 2019 data, the biggest salmon exporting countries are dominated by European countries. Norway is in the first position as the biggest salmon exporter with an export value of USD 25.97 million and represents 26.3% of export value worldwide. This is followed by the United Kingdom in the second position with USD 25.54 million export value and contributes 25.8%, Sweden (21.5%) with an export value of USD 21.21 million, Iceland (7.0%) with an export value of USD 6.96 million, and the Netherlands (6.9%) with an export value of USD 6.86 million.

As per 2019 data, the biggest salmon importing countries are dominated by European countries. France and Spain are the biggest importers of salmon, accounting for 35.8% and 26% of the world’s imports. France’s import value of USD 35.45 million, is followed by Spain with an import value of USD 25.75 million, Portugal (18.4%) with an import value of USD 18.21 million, Italy (10.7%) with an import value of USD 10.62 million, and also Greece (5.5%) with an import value of USD 5.4 million.

In 2021, more than half of Australia's fresh salmon exports went to China (51%). China was followed by Indonesia, with 10%, Japan, with 9%, Thailand, with 8%, Viet Nam, with 7%, and the US, with 4%. 

There are 6 top varieties of salmon based on consumer choice and its taste, including:

• Chinook Salmon / King Salmon
  

Oncorhynchus tschawytscha, also known as King salmon, is considered by many to be the best-tasting of the salmon bunch. It has a high-fat content and corresponding rich flesh that ranges from white to a deep red color.

• Coho Salmon / Silver Salmon
  

Oncorhynchus kisutch are sometimes called silver salmon or "silvers" because of the silver skin. It has bright red flesh and a slightly more delicate texture than Chinook salmon but a similar flavor.

• Pink Salmon / Humpies / Humpback Salmon
  

Oncorhynchus gorbusha are the most common Pacific salmon. It has a very light-colored, flavored flesh and low-fat content. Pink salmon are often canned but also sold fresh, frozen, and smoked. Sometimes called "humpies" or humpback salmon due to the distinctive hump that is developed on the back when laying eggs.

• Red Salmon / Sockeye Salmon
  

Oncorhynchus nerka salmon are noted for the bright red-orange flesh and deep rich flavor. It also known as "reds" both for the dark flesh color and because the salmon can turn deep red when moving upstream to spawn.

• Salmo Salar / Atlantic Salmon
  

While the Pacific is home to several species of salmon, the Atlantic has but one, the species Salmo salar, commonly known simply as Atlantic salmon. All commercially available Atlantic salmon is farmed.

• Silverbrite Salmon / Chum Salmon / Keta Salmon / Dog Salmon
  

Oncorhynchus keta is also called dog salmon for its dog-like teeth. Keta comes from its species name and is a way to get away from the negative association chum sometimes has. Keta is a smaller fish—averaging about 8 pounds—with pale to medium-colored flesh and a lower fat content than other salmon.

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Types of Salmon

The Five Main Pacific Salmon

Salmon Description

As per 2019 data, Norway is in the first position as a salmon producer with a production volume of 1.2 million MT and representing 51.6% of salmon production worldwide. This is followed by Chile in the second position with 621,200 MT and contributing 26.71%, Scotland (7.4%) with a production volume of 166,100 MT, North America continent (6.35%) with a production volume of 147,600 MT, and Faroe Islands (3.36%) with a production volume of 78,200 MT.

Source:

Global harvest volume of salmon of Mowi ASA in 2019, by country

Mowi Salmon Farming Industry Handbook 2020

There are four grades of grading classification of salmon. Includes:

• Premium Grade
  

Handling: All Premium fish will be bled and chilled upon harvest. There will be no skin or internal cuts or tears. There will be no punctures or bruises. The meat will be resilient when subjected to finger pressure. Scale loss will not exceed 15%. Scale adherence will be uniform. Some scale loss due to the method of harvest handling can be expected.

Odor: Odor will be sea-fresh. There will be no off-odor.

Eyes: Eyes will be normal in appearance, bright and clear.

Gills: Gills will be bright red, and will smell sea-fresh and odorless.

Skin: Skin color will be characteristic of fresh fish that is typical of the species, sexual maturity, district of harvest, and time of year it was harvested. (Refer to ASMI Skin Color Evaluation Guide for Pacific Salmon). Skin will be bright, shiny, and not hold wrinkles when bending fish slightly. There will be no skin indentations, perforations, or scars. Slime will be clear. There will be no tail damage or fin loss.

Belly Cavity: Color will be bright and natural. There will be no belly burn or protruding ribs. The belly will be free of viscera and the collar free of gill membrane.

• Grade A
  

Same as Premium Grade with the following exceptions: Bleeding will be optional. Scars may be present if less than 1 and well healed. There may be one skin cut less than 1. Scale loss will not exceed 25%. There may be up to 2 protruding ribs

• Grade B
  

Same as Grade A with the following exceptions: Smell may be neutral. Eyes may be dull, but not milky or cloudy. There may be slight to moderate indentations, scars up to 1.5 in size, and one skin cut up to 1.5. Scale loss may not exceed 40%. There can be no tail damage and fin loss will not exceed 50%. There may be slight fading of belly lining natural color and slight discoloration. There may be a slight belly burn with up to 6 protruding ribs. There may be internal cuts not to exceed 0.5 total. There may be no viscera, but traces of blood are acceptable.

• Grade C
  

Same as Grade B with the following exceptions: There may be a slight odor, eyes milky or cloudy, and gills pink to buff. Slime may be dull and copious. Scars and punctures will be allowed. Cuts and scale loss may be more than Grade B. Tail damage may be present and fin loss may be more than Grade B. Belly cavity discoloration may be more than Grade B. Bruising, belly burns, and cuts may be more than Grade B. Viscera traces and blood more than Grade B.

• Key quality attributes in salmon are color, odor, flavor, and texture.
  

• Fat content can vary from fish to fish, partly dependent on diet. Some markets prefer fattier fish, others prefer more lean fish. For processing (e.g. smoked salmon) there are preferences as to fat content.
  

• Omega 3, the fatty acid highly valued in salmon, is related to the total fat content, but the amount may also vary by fish and farm. Customers would normally require a minimum of marine omega 3 fatty acids in the salmon.
  

• Color is what characterizes salmon, and comes from antioxidants in the feed. As wild salmon may vary in color depending on what they eat, producers can also adjust the color of the salmon to customer preferences by adjusting their diet. Color preferences vary between markets.
  

• The standard grading system in the industry also includes quality parameters for skin, filet firmness, and texture, and dark spots which may come from the concentration of natural pigments.
  

The development of the global salmon market in the second half of 2020 is difficult to predict given the number of unknowns facing the industry. With the notable exception of the United States of America and Brazil, most of the major salmon markets are staging a gradual recovery. The spike in supply volumes of 5 to 10 percent in the second half of the year from delayed harvests will likely keep prices down, even if the positive demand trend continues. Export revenues for the year are also set to take a significant hit. FishPool forward prices for Q3 and Q4 2020 are stable at NOK 48.45 (USD 5.63) per/KG and NOK 52.60 (USD 6.12) per/KG respectively, which is well below figures for the same period in 2019.

The financial challenges associated with the difficult market environment will see smaller businesses along the supply chain, particularly processors, acquired by larger entities if survived. In the longer term, however, there are potentially some positives to be taken from the upheaval of 2020. Lower prices, good volumes, and a boost to retail could create new sources of demand as well as act as a catalyst for product and distribution innovation.

Source:

Widespread disruption in the salmon sector

• Australia is the world’s 8th largest fresh or chilled Atlantic Salmon exporter but only makes up 2% of the global export market.

• The 2 largest exporters, Norway and Sweden, make up 47% and 22% of the export market, respectively.

• The 3rd largest exporter, the UK, lags far behind, making up only 6% of the export market.

• Tasmania’s Atlantic Salmon Industry is Australia’s most valuable seafood sector, with a production of about 62 thousand mt in 2020.

Australian salmon exports typically remain subdued during the first months of the year, to begin recovering in July-August, reaching their peak in November through January. 

• A significant portion of Australian production is exported, rather than used to supply the domestic market due to price.

• About 35% of salmon production is sent to the export market, typically the export spot market.
  
• Only about 6% of export revenue comes from contracted volume in Asia

• Australian salmon exports almost doubled in value in 2020 and then grew over 40% in 2021. 
  
• Increased exports to China, Indonesia and Thailand drove most of 2021's increase. 

• During the first half of 2022, exports increased by 49% compared with the corresponding period of last year.

• One of the most significant threats to Australian seafood exporters is the current lack of market diversification – there is too much dependence upon a few Asian markets (mainly China)