How Norway's Salmon Exports Benefitted from a Weaker Krone

Fluctuations in exchange rates can significantly impact agrifood trade flows. The strength or weakness of a currency against the global benchmark, typically the United States dollar (USD), serves as a key incentive for adjusting export/import quantities. A weakening local currency against the US dollar benefits exporters, as they gain more in their local currency without altering export prices (in USD) or volumes. This encourages exporters to allocate a larger share of their products for export to capitalize on higher earnings, potentially increasing overall production. Moreover, if global prices are denominated in the local currency, which happens for some products, exporters can raise prices without affecting external buyers using the US dollar, further fostering growth.

The Norwegian Salmon export market is notably susceptible to exchange rate movements. When the Norwegian krone (NOK) weakens against the US dollar, Norwegian salmon exporters can command higher prices in their local currency, prompting them to prioritize external markets over domestic ones. This strategy maximizes revenue through increased prices and volumes. The events of 2023 exemplify the impact of exchange rate fluctuations on Norwegian Atlantic Salmon exports.

Among 14 major currencies, the Norwegian krone experienced the second-largest depreciation against the US dollar in 2023, dropping by 9.3% compared to the previous year. Second only to the Russian ruble, this Norwegian krone depreciation coincided with a 16% year-on-year (YoY) increase in the export value of farmed fresh Norwegian Atlantic Salmon, reaching NOK 21.18 billion. While the increase in value in 2023 stemmed primarily from price adjustments, the correlation between a weaker krone and export volumes remained evident, as salmon volumes were mostly unchanged in a year marked by unrelated pressures in supply, much lower seafood demand due to gluts created by overestimated demand in 2022, and lower purchasing power due to generalized inflation.

Figure 1. Norway Salmon Export Value and USD/NOK Exchange Rate

Source: Tridge and Statistics Norway

Outlook for 2024

In Feb-24, the USD/NOK exchange rate averaged NOK 10.54, representing a 3.1% depreciation of the Norwegian krone versus the US dollar in YoY terms. While the depreciation rate has slowed down compared to previous months, the decline remains in place. Forward rates for the following months suggest the USD-NOK pair will slightly weaken (meaning a stronger krone). Moreover, a consensus of analysts predict a stronger krone in 2024. Yet, other variables, such as concern over geopolitical tension and volatility in oil prices, as well as an increasingly regulated Norwegian economy, continue to pose downward risks for the Norwegian currency. Tridge’s view is that, while probable, an appreciation of the krone will remain limited.

In the same line, salmon prices are predicted to remain relatively higher than their historical averages, and a weaker krone (relative to recent years) will aid in keeping them that way. On the other hand, supply is expected to recover versus last year, which means that with a relatively weak krone and high export prices, export volume will increase.

Exchange Rate and Agrimarkets Overview 2024

The Norwegian salmon market and its currency, the Norwegian krone, illustrate the intricate relationship between markets and currencies. Keep an eye out for Tridge’s Exchange Rate and Agrimarkets Overview 2024, featuring the analysis of over 10 products and currencies, expected to be released this March.