Marine Harvest Scotland’s biological issues leave salmon processors short
Undercurrent News, 18 Dec 2014
Biological problems for Marine Harvest’s Scottish salmon farming operation are causing problems for processors in the run-up to Christmas, the busiest time of the year for the sector.
Problems with sea lice and other biological issues means the UK division of the Bergen, Norway-based farmer and processor has a shortage of 3-5 kilogram fish for the market, sources told Undercurrent News.
Marine Harvest, the largest producer in the UK and in the world, has alerted processors to the problem in the last few weeks, when bad weather in Scotland has also hampered harvesting for farmers.
“In our last quarter report Marine Harvest guided on the fourth quarter in Scotland,” a company spokesman told Undercurrent, in a statement. “The fourth quarter is expected to be a challenging quarter profit wise for our Scottish operations due to biological issues and low harvest volume (negative scale effects).”
The spokesman declined to comment further, stating an update will come in the company’s Q4 presentation, which is due on Feb. 4.
“Sea lice remain the main biological challenge,” the company stated, in its Q3 report. Marine Harvest also incurred costs of NOK 13.4 million in Scotland in Q3, due to jellyfish and algae.
One source, with a processor, said contracts are being fulfilled, but with smaller fish than processors are looking for, causing inefficiency and higher cost. “Processing two 2 kilogram fish is going to cause higher costs than one 4kg fish,” he said.
“You are doing twice the work for the same result. The yield is obviously halved for the same labor input. You will need to run into overtime to process the same yield tonnage,” he told Undercurrent.
This source’s view, supported by others, is that fish were harvested in Q3, because of the biological issues and fast growth, due to warm water temperatures in the summer.
In the report, Marine Harvest guided for production in Q4 of 7,000 metric tons in gutted weight, compared to 11,716t in the fourth quarter of 2013. The production level in Q3 2014 for the company was 13,740t.
For 2014, Marine Harvest claimed a production outlook of 49,500t for 2014, compared to 48,389t in 2013. The plan for 2015 is to hit 63,000t.
This heavy production in Q3 has then left a shortage for Q4, as processors ramped up for Christmas.
For processors such as Young’s Seafood, which is supplying J. Sainsbury via Marine Harvest, the situation is proving problematic, as the retailer has a policy of using only Scottish salmon, sources told Undercurrent.
Young’s declined to comment.
Like Sainsbury’s, Waitrose and The Co-operative Group only use only Scottish, while Marks and Spencer uses Scottish and Irish salmon. Tesco, WM Morrison Supermarkets sell Scottish and Norwegian salmon, giving more flexibility.
“We understand that the situation is very tight from Scotland and this is affecting some processors and leaving some gaps in the market, fortunately we have supply secure for both Scottish and Norwegian salmon and are supplying to forecast,” said Simon Smith, managing director of Icelandic Seachill, Tesco’s chilled salmon supplier.
“As per previous years, Icelandic Seachill is in a full supply situation – we have an unbroken record in salmon supply. This year, business has been brisk and we are fulfilling orders without any problems,” he told Undercurrent.
Gilles Charpentier, chairman of Meralliance, which owns Asda salmon supplier Edinburgh Salmon Company (Esco) and is now part of Thai Union Frozen Products, said the quality of fish from Scotland this year is definitely off.
“We are seeing poorer quality fish from Scotland and supply has been shorter than usual. These problems are continuing. There is more sea lice on the fish than in previous years,” he told Undercurrent.
For Christmas, Asda is using Scottish salmon only from Esco, for hot and cold smoked and chilled, he said.
Several sources told Undercurrent that the situation means there has been a scramble for supply, with processors who have been caught short looking to buy from other processors.
One spot buyer said he is buying from a processor, because Marine Harvest has told him there is no fish available.
“They are clearly taking care of contracts, which is just how it works,” he said. Although supply is always somewhat tight at this time of year, this situation is unparalleled, he told Undercurrent.
Other sources told Undercurrent even those with contracts are having to look elsewhere for some fish.
To add insult to injury, retailers are selling fish at very cheap levels for Christmas.
“Morrisons are selling whole salmon for £3.99/kg. That is cheaper than we can buy it for,” he said.
The tight supply situation, according to one source, means that Scottish prices have not dropped as far as Norwegian.
Last week, Norwegian prices fell NOK 9/kg, to around NOK 40/kg.
Scottish prices have fallen, but not as far. Prices for 3-5 kilogram fish are now £4.80/kg, down from £5.40/kg. “I can get Norwegian fish for £3.80/kg,” one processor said.
This is a switch around from November, when Scottish prices were cheaper than Norwegian. This was because “Marine Harvest had so much fish,” one source told Undercurrent.
The drop in prices is because orders for Christmas delivers is done. “As soon as Morpol and Suempol stopped buying in Poland, the Norwegian price dived,” said one UK source.
Scottish prices came down, but not as much, because of the shortage. The outlook from all sources was Scottish salmon is set to be short in the first half of 2015.