The spot-forward relationship in the Atlantic salmon market

This study examines the Fish Pool salmon futures contract with respect to how well the market performs in terms of the futures price being an unbiased estimator of the spot price and whether the market provides a price discovery function. Using data for 2006–2014 and with futures prices with maturities up to 6 months we find that spot and lagged futures prices are cointegrated and that the futures price provides an unbiased estimate of the spot price. We also find that, with the exception of the front month, that the causality is one-directional. The spot prices lead futures prices between 1–6 months maturity. Hence, while the spot and lagged futures prices are unbiased estimates, we do not find support for the hypothesis that futures prices provide a price discovery function. Rather, it seems that innovations in the spot price influence futures prices. This finding is not uncommon in new and immature futures contracts markets. Hence, the salmon futures market is still immature and has not yet reached the stage where futures prices are able to predict future spot prices.     

Forecasting weekly salmon prices: Risk management in fish farming

Abstract

Production of farmed salmon has increased substantially during the last decade. Most of the salmon production is sold spot, resulting in large price fluctuations both for the producer and for the exporter. No derivative markets exist; consequently, no one can hedge prices. If prices could be forecasted within reasonable confidence bounds, risk would be reduced. This study used six easily applicable procedures to forecast weekly producer prices for salmon. The procedures tested were Classical Additive Decomposition (CAD), Holt Winters Exponential Smoothing (HW), Auto Regressive Moving Average (ARMA), Vector Auto Regression (VAR) and two different naïve models: post‐sample predictive accuracy was evaluated. Results indicated that the CAD model forecasted the direction of price movements best, whereas the VAR model performed best according to accuracy measures.     

Farmed fish to supermarket: Testing for price leadership and price transmission in the salmon supply chain

In this article, we measure the extent of price transmission and test price leadership in the salmon supply chain. The data represent monthly observations (2005–2014) on export price of fresh salmon from Norway and on retail prices for a variety of salmon products in France and United Kingdom. The contribution is to use a Johansen bivariate time-series approach to quantify the degree of price transmission on a broader set of consumer salmon products than has been previously studied. Of the original 17 retail products examined only 8 cointegrate with export prices. Of these, all but one reject a null of full price transmission and all show price causality from export to retail level. Price transmission to retail prices decreases, as more processing is involved and increases for packaged salmon products compared to salmon sold in the fresh fish counter.     

COVID-19 impacts on the Bangladesh shrimp industry: A sequential survey-based case study from southwestern Bangladesh

Shrimp farming is fundamental to the national economy of Bangladesh, particularly through earning foreign currency. The nationwide lockdown and international cargo restriction jeopardized the sector and breaking its marketing chain. Assessing the degree of farming socio-economic peril from COVID-19 and suggesting early coping strategies and long-term mitigation measures are pressing to build resilience for this food production sector. To collect survey data, two key-informant face-to-face surveys with 51 shrimp farmers and 62 consumers in southwest Bangladesh were accomplished. As national lockdowns restricted access to export markets and movements within the country, farm incomes decreased against rising production costs. To compensate, farmers reduced their workforce (29.4%), but even with the sale of co-cultured finfish still suffered from large drops in revenue (42.8% average profit reduction). Furthermore, we present evidence that shrimp farmers should consider diversification of aquaculture product type as co-culture of additional shrimp species was a poor mitigation strategy against large market price fluctuations. Product price reductions were passed on to the consumer, who enjoyed falling product prices including more expensive shrimp products, but the markup for nearly all aquaculture products increased. The current jeopardy and consequences of shrimp farming future are discussed, including coping strategies to help policymakers in building resilience against future uncertainties.

     

An overview of salmon trout aquaculture in Finland

Abstract

In this case study, we describe the evolution of Finnish salmon trout aquaculture; how salmon trout farming grew as a vital industry, how Finland became the world's leading producer of salmon trout, and how the opening of markets to international competition led to a decline of the industry. The focus is on the continuous interaction between the changing market situation and production decisions. The study reveals the impact of national environmental policy on the competitiveness of the industry. At the moment, the industry is undergoing major structural changes; production has moved to neighbouring countries, and the value chain is concentrated. In future, closer interaction and co‐operation between the actors along the entire fish value chain will be the key factors for success.     

BIOECONOMICS OF CAPTURE-BASED AQUACULTURE OF COD (GADUS MORHUA)

This study formulates and parameterizes a bioeconomic model of capture-based aquaculture (CBA) of cod (Gadus morhua). The model is solved for the optimal harvest pattern and calculates economic profit and net present value for a model farm. The biological sub-model incorporates knowledge from interviews with existing farmers, research trials and existing cod aquaculture literature. Economic components are obtained from interviews and sales statistics from exporters. A farm of the modeled scale is likely to influence market prices, hence sales prices were estimated assuming a supply response based on the price elasticity. Taking into account the opportunity cost of selling the fish directly, NPV is found to be marginally positive. Sensitivity analysis revealed that profitability is sensitive to changes in several parameters. Hence, further research is valuable and care should be taken when considering investments in cod CBA.     

The Economics of Kappaphycus Seaweed Cultivation in Developing Countries: A Comparative Analysis of Farming Systems

The farming of the red seaweed Kappaphycus alvarezii and related species as raw material for the hydrocolloid carrageenan rapidly spread from the Philippines in the late 1960s to Indonesia, Tanzania, and other tropical countries around the world. Although numerous studies have documented positive socioeconomic impacts for seaweed farming, factors such as diseases and distance to export markets have led to an uneven development of the industry. Using standard budgeting techniques, this study adapted production and market data from a FAO-led global review of seaweed farming to develop comparative enterprise budgets for eight farming systems in six countries (Indonesia, the Philippines, Tanzania, India, Solomon Islands, and Mexico). Although the basic technology package is the same across countries, the study revealed large differences in the economic performance of systems due to wide variations in farm prices and the scale of operations. Although seaweed farming is a suitable activity for small-scale producers, a minimum of 2,000 m of cultures lines are still necessary to ensure adequate economic returns. Greater farming plots may be needed if farm prices are well below the average farm prices paid in Indonesia and the Philippines. Policy recommendations are made to improve the economic potential of underperforming systems.     

Economic analysis of land based farming of salmon

Abstract

Land-based farming of salmon is emerging for a number of reasons. The demand for salmon is increasing in many parts of the world. In recent years there has been limited growth in production due to binding government regulations and environmental challenges in sea-based salmon aquaculture. This is true both for Norway (sea lice, salmon escapes) and Chile (sea lice, disease problems), the two largest producers of salmon. Growing demand and limited expansion in production have made for a very profitable industry. At the same time, there have been technological developments when it comes to land-based farming (a technology used for smolt production and species such as sole and turbot), and cost of production has changed. Currently, land-based salmon farming is in operation or in development in several countries including the USA, Denmark, and Norway. In this paper, the economics of land-based salmon farming in a Norwegian context is presented, with an emphasis on the relative competitiveness of this vis-à-vis sea-based farming. If successful, land-based farming could potentially have an important impact on the dynamics of the salmon market.     

Pricing efficiency across destination markets for Norwegian salmon exports

This paper investigates how pricing efficiency of Norwegian salmon exports varies across destination market characteristics. Efficiency is defined as the rate at which individual transaction prices adjust to common market information, and is estimated by dynamic fixed effects panel models with parameters conditional on trade attributes using micro-level trade data. Our results show that contract type (Incoterms) used in transactions can be used to segment the Norwegian export markets into three types: (1) high-value trade to large distant markets, (2) medium-value trade to close high-income markets, and (3) lower-value large bulk trades to lower-income close markets. We find that pricing efficiency is lowest for committed trades over long distance using planes, and highest for less committed large bulk trades to close markets. Despite significant heterogeneity, the majority of salmon price variation (around ¾) is common, providing a clear justification for the representativeness of a salmon price index.     

Aquacultural development,institution building and research and development policy: Norwegian salmon and Arctic char farming as cases

Abstract

During the past 20 years, Norwegian salmon fanning has grown to achieve export sales of 7 billion Norwegian kroner (NOK). In the same period, Arctic char has been promoted as a lucrative farmed species. Paradoxically, despite the well‐documented advantages of Arctic char farming, this commercial activity has not prospered. Here I study the interaction between research and development and fish farming, and how this interaction affects industrial development within salmon farming and Arctic char farming, respectively. Effective communication between these systems presumes organization by some superior structure that controls the flow of industrial information to the research system, and prepares research results for industrial utility. The focus here is on: the perceptions of industrial actors of tasks for the research community; how researchers interpret and respond to these tasks; how the results are imparted to the fish‐farmers; and how the research results function in practice. I contend that adequate conditions for interaction between research and industrial activity exists for salmon farming, but not for Arctic char farming.     

Forecasting monthly catfish (Ictalurus punctatus.) pond bank and feed prices

Volatility in catfish pond bank and feed prices lead to profit uncertainty in the catfish industry. Analysis of the factors that affect those prices and development of a forecasting model would provide guidance to catfish farm managers. Error-correction models (ECM) based on cointegrating relationships among variables were specified following development of a single-equation ARIMAX model. Factors identified as those that influence catfish price were: lagged value of catfish, feed and substitute product prices, while those that influenced feed price were: lagged value of feed, corn and soybean prices. ECM estimates implied that fish price adjusts approximately 6% and feed price 22% to the long-run equilibrium in 1?month. The analysis showed that it takes less than 17?months and 5?months to correct for long-run disequilibrium for catfish and feed prices, respectively. The ARIMAX model demonstrated a better fit for both in-sample and out-of-sample forecasting for catfish price and had better out-of-sample predictive ability for feed prices.     

RECENT TRENDS IN SALMON PRICE VOLATILITY

The price of farmed Atlantic salmon from Norway has increased in recent years. This new regime follows several years of consistently falling prices. At the same time price volatility has increased substantially. This article models the volatility of salmon prices and establishes empirically that volatility is on an increasing trend. Further empirical analysis suggests that the volatility trend is largely accounted for by the common trend in other food prices relevant to salmon, including meats, cereals, oils and fish meal observed in recent years. Other potentially contributing factors to volatility are also discussed. This includes the role of the 2005 maximum total allowable biomass restriction, the 2006 introduction of the Fish Pool ASA futures market for salmon, the Chilean Salmon crisis and the increasing use of bilateral contracts.     

Development of an integrated aquafarming system

The integration of aquaculture into agricultural production systems to intensify profitable food production without the usual environmental degradation appears to be a promising option for a large number of small farmers in many developing countries. However, for the adoption of novel production systems, economic considerations are the main driving force. The farmer has to be convinced of the long- and short-term benefits and profits of different farming systems options. The potential farmer-aquaculturist needs site-specific holistic information packages of different production options, as contrasted with packages of technology only, in order to combine traditional knowledge with modern scientific results. These all-embracing data packages for different production systems must take into account the environmental conditions, the availability and price of the stocking material for aquaculture, of farm animals and seeds, seasonal farm and off-farm labour demands, and the socio-economic situation of the farmer and the neighbourhood. The possible production intensities, profits and risks have to be quantified, and the impacts on the environment, the family and society have to be determined. Such information would serve as a guideline for the selection of management options best suited to his/her farming system and would allow a choice of alternatives in case of unforeseen events. The multifaceted obstacles to developing a sustainable integrated aquafarming system are presented for a case in the Philippines.     

Precision biometrics data of Atlantic salmon (Salmo salar L.) in commercial grow-out sea-cages: Manual sampling and infrared diode frames compared to processing plant

One of the critical challenges that the global salmon farming industry will confront when upscaling production is accurate biomass control. Commercial salmon farming requires a significant level of certainty regarding fish count, average weight measurement, live weight distribution, and other production indicators. A reliable control system for assessing the biomass of farmed Atlantic salmon is essential for sustainable and cost-effective precision aquaculture. A study was done in four production sea-cages in a Chilean Atlantic salmon marine grow-out farm to estimate the average weight and frequency distribution utilizing the Vaki Biomassdaily® diode frames as an alternate technology to manual weight measurement. From post-smolt reception to fish harvest, diode frames were put in each sea-cage in a secure position for 15 months. There were no significant changes in length or average weight between manual sampling and frame estimate. The mean degree of accuracy for the average weight estimation was 98.83 % for the frames utilized in the four sea cages. The diode frames also achieved a high degree of precision in predicting the frequency distribution of fish. There were no statistically significant variations between the distribution variances of the diode frame measurements and the distribution variances of the fish received at the fish processing facility (FPF). The maximum difference between the average weight calculated by the frames and the average weight of the fish received in the processing facility was 2.4 %, with 99.66 % being the highest accuracy with only 19 g of difference. We determined that diode frames might replace manual weight assessments with greater reliability for growth monitoring and production management. To assure the optimal performance of the diode frames in terms of accuracy and precision for future commercial-scale validations in the salmon farming business, the development of a standard best practice manual is necessary.     

Challenges and emerging technical solutions in on-growing salmon farming

Farming of Atlantic salmon has grown rapidly from its start in the early 1970s until today, with production approaching two million tonnes. Sea cages are the dominant production system for the on-growing stage of salmon farming. It represents an effective production system with lower investment and running costs than land-based systems. The development and improvement of the sea cage farming system has been one of the most important factors for the growth of the salmon farming industry. However, during recent years certain problems related to their placement in the open marine environment have proved highly challenging, increasing operating costs and impacting on industry public relations. The problems are mainly due to parasites, diseases and escape of fish. In this article, emerging technical solutions for solving those problems are described.     

Impact of Caligus treatments on unit costs of heterogeneous salmon farms in Chile

We measure the impact that sanitary treatments that control ectoparasite Caligus rogercresseyi abundance have on unit production costs of Salmo salar farms in Chile. We follow complete production cycles for a sample of farms between 2009 and 2015. We estimate a simultaneous salmon biomass growth and Caligus abundance model. The statistical analysis determines the effect of antiparasitic treatments, location of farms, environmental conditions and Caligus abundance on the salmon growth profile. Using outside cost information, we simulate how unit production costs vary by treatment and farm characteristics. Our results suggest that unit production costs increase on average by $1.4?US/kg with Caligus and treatments. Treatment costs are compensated by higher harvesting levels, and unit production costs are invariant to the situation without treatment. All estimated effects differ depending on farm’s environmental and spatial conditions, suggesting that the design of cost-effective intervention calls for discriminatory regulation under heterogeneous conditions.     

Comparison of growth rate in Atlantic salmon,pink salmon,Arctic char,sea trout and rainbow trout under Norwegian farming conditions

Growth rates of Atlantic salmon, pink salmon, Arctic char, sea trout and rainbow trout were compared under Norwegian farming conditions. During the juvenile, freshwater period, growth was fastest in pink salmon, followed by rainbow trout and Arctic char. Freshwater growth of sea trout and, especially, Atlantic salmon, was slow. After transfer of smolts or fingerling to sea water, Arctic char failed to survive the autumn. Sea water growth of sea trout was slow, but the three species, rainbow trout, Atlantic salmon and pink salmon, all grew rapidly through all seasons. When in sea water, rainbow trout and pink salmon were regularly attacked by vibriosis, while Atlantic salmon were rarely attacked, and sea trout never. It is concluded that, for commercial farming in Norway, rainbow trout are of value for production of fish of any size up to 3–4 kg, and pink salmon for production of small fish of 0.5–1.5 kg. Atlantic salmon is the only species suitable for production of a very large salmonid, i.e., more than 4–5 kg.     

Salmon price volatility: A weight-class-specific multivariate approach

Salmon spot price has been highly volatile and hard to predict since mid-2000s, obscuring the industry players’ planning decisions. ARMA-GARCH and dynamic conditional correlation (DCC) models were employed on weekly data for 1995–2013 to examine the behavior of weight-class-specific prices which are directly relevant for salmon production and risk management. Two periods of different volatility regimes were identified, before and after 2006 when the salmon market was undergoing fundamental changes. Both volatility and conditional correlations increased from 1996–2005 to 2007–2013, and return dynamics became more homogenous across weight classes. This development is conducive to the functioning of the salmon futures and options exchange.     

SALMON AQUACULTURE: LARGER COMPANIES AND INCREASED PRODUCTION

Salmon farming is among the most successful aquaculture industries with a production growth that is substantially higher than aggregate aquaculture production in recent decades. It is well known that innovations and productivity growth are the main sources for this development. In this article we look closer at two potentially important factors in production growth, development of farm size and company size directly through economies of scale and indirectly through capacity in R&D, innovation, sales and marketing. In Norway, production per license has increased from 26 tons in 1980 to 1,130 tons in 2010, suggesting a substantial intensification in the industry. In all five leading salmon producing countries, the degree of concentration has increased and the large firms have become bigger over time.     

Potential disease interaction reinforced: double-virus-infected escaped farmed Atlantic salmon,Salmo salar L., recaptured in a nearby river

The role of escaped farmed salmon in spreading infectious agents from aquaculture to wild salmonid populations is largely unknown. This is a case study of potential disease interaction between escaped farmed and wild fish populations. In summer 2012, significant numbers of farmed Atlantic salmon were captured in the Hardangerfjord and in a local river. Genetic analyses of 59 of the escaped salmon and samples collected from six local salmon farms pointed out the most likely source farm, but two other farms had an overlapping genetic profile. The escapees were also analysed for three viruses that are prevalent in fish farming in Norway. Almost all the escaped salmon were infected with salmon alphavirus (SAV) and piscine reovirus (PRV). To use the infection profile to assist genetic methods in identifying the likely farm of origin, samples from the farms were also tested for these viruses. However, in the current case, all the three farms had an infection profile that was similar to that of the escapees. We have shown that double-virus-infected escaped salmon ascend a river close to the likely source farms, reinforcing the potential for spread of viruses to wild salmonids.