"The worst year in commercial terms ever"
As the Chilean salmon industry emerges from a very complex and challenging year, the president of the salmon farming association of Magallanes, Drago Covacich, spoke to our South American sister publication, Salmon Expert, about the key events, and offered some predictions for 2016 and beyond.
What variables have affected the Chilean salmon industry?
Sanitary problems - SRS and sea lice mainly - have forced repeated treatments and increased production costs. Moreover, there is a strong Norwegian marketing campaign to the detriment of the Chilean products. Today, a Norwegian salmon is sold nearly for US$ 2 more than its Chilean equivalent and it also costs them about US$ 1 less to produce each fish. The devaluation process of some currencies in purchasing countries has also had an impact.
Is there any short term solution? What is the outlook for the sector?
Of course there are solutions, but not in the short term, since smolt stocking levels were only reduced fractionally last year and this won’t be noticed before the second half-year. Recently, the industry has asked the authority for measures to reduce stocking levels. With less production, sanitary problems should be reduced, which would lead to improvements in production costs; while a reduced supply from Chile should cause prices to improve.
We believe that the decline in smolt stocking levels will be very noticeable between last November and the first months of this year. And, due to the difficult economic situation in different companies, it will be very difficult to endure a second year of crisis. In that scenario, it is not ruled out that there will be new mergers or purchases of some salmon producing companies.
How do you evaluate 2015 for the region of Magallanes?
Overall, 2015 was a very good year in production terms. We had a 31 per cent increase in our harvest volumes, from around 37,000 tonnes in 2014, to almost 50,000 tonnes last year.
In 2016 we expect to harvest 70,000 tonnes (Atlantic salmon and trout), which should represent about 10 per cent of the total Chilean salmon production. In addition we expect to stock about 22 million smolts in 2016.
Despite the crisis, the returns of the industry in the region of Magallanes will be about US$ 200 million. Our contribution to the regional GDP is evident. We will be able to consolidate once the missing areas for relocation of licenses are defined and pending applications are delivered. We can grow without any fear, since the wide distribution of sites where you can operate does not allow situations like those experienced in other regions.
