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IFFO Conference 2023: Key takeaways from the Market Demand session (25 October)

Key takeaways: Market Forum demand session

The Market Forum focusing on demand took place on day 3 of the IFFO Annual Conference.

Global trends of fishmeal and fish oil demand

EBIFFO’s Market Research Director Dr Enrico Bachis provided an overview of the latest trade trends, starting with fishmeal exports. India exports have increased dramatically pushing the country to become the fourth largest exporting country.  Vietnams exports also made great strides, while Peru shipments decreased due to La Niña. In terms of imports, the farming countries lead, with China being the biggest importer. Moving to consumption, there was growth in all sectors, with aquaculture continuing to take the lion’s share. As for species’ breakdown of global fed aquaculture, the dominant species in 2022 were carps, followed by crustaceans and fresh water fish (mainly farmed in Asia and China). Regionally, more than 80% of aquaculture production happened in China and Asia, with Latin America following on.

As for the use of fishmeal in aquaculture per species, the largest consumer in 2022 was crustaceans, followed by fresh water (Asia and China), which replaced marine fish. No surprise then to see that the main markets were by far Asia and China, with Latin America following. Looking at pig meat markets, the Chinese pig sector is struggling with the high feeding costs, with a significant impact on feed formulations going forward, while consumption trends in the poultry sector as consistent with previous years. As for Petfood, world’s consumption of fishmeal was estimated at 200,00mt in 2022.

For fish oil, exports were led by Peru, although with a smaller share compared to 2021 on the back of a smaller production. For imports, consistent trends from previous years with Norway being the biggest importer again in 2022. In terms of fish oil usage, aquaculture is taking the bulk with more than 70%, followed by nutraceuticals and petfood. By species, salmonids remained the largest consumers, with Europe being the largest consumer of fish oil. Human consumption, there was growth by 4% in fish oil used by the pharmaceutical sector, with North America being the largest consumer. The other large consumer is petfood which slightly increased again in 2022.

Insights from China

MXFocusing on markets and the demand of ingredients in China, IFFO’s China Director Maggie Xu presented a complete overview of the China market. In general, the Chinese economy is faltering with dampening capital flows devaluating the Chinese RMB against the USD. The recovery of domestic consumption has been slower than expected following COVID-19. For marine ingredients consumption in China, there has been the combined challenges of oversupply and financial loss for both the pig and aqua sectors. Fishmeal inclusion rates in both aqua and piglet diets were lowered in response to sluggish farm gate prices and tight fishmeal supplies. However future growth points are in land-based RAS, off-shore farming, and most notably the P. Vannamei Shrimp Market.

In terms of China’s Marine Ingredients output, the current fishing season is not very promising, with a reduction in tilapia by-products due to low volumes of farming and processing. Fishmeal production in China might be slightly lower compared with 2022 which was at 345,000 mt. The lower supply of marine harvested whole fish might be compensated partially by imported sardine and frozen fish for human consumption. Fish oil outputs however are expected to grow in 2023, with increased supply of whole fish for direct human consumption and increased imports from Russia. In terms of imports, with fishmeal this has slowed down with the high season of the country’s aquaculture industry. Imports from India and Vietnam have been leading in response to reduce imports from Peru, followed by Mexico and Chile. Imports of fish oil to China have dropped, with the exception of Morocco, who tripled their exports to China at the start of this year.  In terns of fishmeal consumption, China’s aquaculture industry was the main consumers at 89.6%, with the pig sector consuming the majority of the rest. For fish oil consumption, aquaculture again led consuming 68.4%,. Looking at the aquafeed, the sector in China the industry faced an overall loss and oversupply and prices of aquaculture products remained low, but this is pushing the sector to focus on innovation and business viability.  

Building resilience in shrimp farming

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Next to shrimp farming in Asia, Olivier Decamp (INVE Aquaculture, Thailand) introduced the challenges faced by shrimp famers, including diseases, climatic changes, rising costs for all inputs, and fluctuating farm gate prices impacting the profitability. In terms of global shrimp production, the market has been flat for the last 2 years, due to oversupply, with prices dropping following the increase in supply. Ecuador is by far the largest supplier in the world and its production is expecting to continue to increase, followed by China, India and Vietnam. In terms of trends of species, Monodon shrimp prices are going up, while Vannamei shrimp prices are going down, which will impact fishmeal consumption as Monodon shrimp are a carnivorous species.

Asian farmers have been particularly affected by the current crisis, with many of them unable to make profits. This had led farmers to postpone production or look at ways to reduce the financial risks, by revising their rearing protocols. Aquafeed costs are now the biggest challenge for farmers (around 50-65% of total investment), leading to aquafeed manufacturers have had to adapt to the situation by considering or reconsidering alternative and additive ingredients. Reducing investments will lower financial risk but in turn lower the performance of the farm. Dietary changes can include increasing protein content in the early larval stages, using diets with lower protein content, and revising fishmeal inclusion rates and varying the fishmeal sources. It is a challenge to find fishmeal alternatives as it delivers a unique mix of protein and nutrients. The way forward is to improve production efficiency, and profitability, by providing the right feeding protocol with the right combination of feed (including probiotics), while adapting to the shrimp stage and rearing protocol, such as shrimp stocking density, farm infrastructure or target harvest size.

Update on the Omega-3 Market

ABGOED’s Vice President of Data Science Aldo Bernasconi gave their latest insights into the Omega-3 market demand and future forecasts. This market is mostly consumer brands such as nutraceuticals and petfood. He noted that this industry has complex layers and is greatly impacted by changes in fishing and reduced supply, but this doesn’t impact consumers directly. Globally, Omega-3 markets grew by 3.8% in 2022, it is a huge increase in demand and growth is expected to continue, especially in Asia and Latin America. Growth in Europe and Australasia was more modest, whereas the US and Canada experienced faster than usual growth, due to continued interest in prevention. China saw healthy growth as result of the easing of COVID-related logistic issues.  

As expected, the volume of EPA+DHA used by the omega-3 market grew faster than the volume of crude oils. With most of the gains in volume going to dietary supplements and pet foods, the largest categories in volume. However, in the USA, the pharmaceutical sector and petfood grew slower than in previous years. Regarding the demand for crude oils, it increased by 3.8% from the previous year, with 77.7% going to direct human consumption and the rest to petfood. If current trends continue, the demand for crude oils will continue growing at an average 2.7% per year to 2025, despite the expected challenges of both short supplies and inflation. Price increases started reaching consumers in early 2023, as there can be a delay of up to six months for costs to be passed from raw material purchases to end consumers, with brands reluctant to pass the totality of cost increases to consumers. This may impact the demand for dietary supplements and changes the distribution of products in the market, however the largest impact will of course be fishing in Peru. In regards to algae oils, companies are investing more here to steady supply.

Fish oil trade: Impacts of prices and certification

CMMoving to fish oil markets, Chr. Holtermann AS Managing Director Christian Meinich gave an outline of the markets and likely future developments. He noted that prices have continued in a climb pattern, but recently flattened out, caused by reduced fishing in Peru. Recent higher-than-expected oil production from mackerel in Scandinavia and Iceland has acted as a counterbalance, but it’s unclear if this balancing act will last. Stocks remain tight for omega-3 grade oils, due to this reduced supply from Peru, but stocks for feed grade oils are sufficient thanks to supply from Scandinavian/Icelandic mackerel. There is potential for oil stocks to improve later in the year, depending on fishing in Peru. A recent trend of note is signs of a growing two-tier market in feed grades depending on sustainability, with certified vs. non-certified oils.

Future proofing fish supply chains

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Introducing their fish sustainability strategy, Andrew Russell from Mars Petcare detailed the vital role played by fish ingredients in providing key nutrition to pets, and that Mars is committed to future proofing supply chains so that these resources remain available. Mars is committed to a net zero roadmap, to reduce pressure on fish ecosystems, while minimizing competition with the human food chain and ensuring no souring comes from endangered species. They are working to protect critical habitats through collaboration, partnering with communities to restore coral reefs in coastal ecosystems. As with other industries, traceability is growing in importance, so they are investing heavily in supply chain diligence as well as focusing on human rights, to advance the rights for all in the seafood industry. Mars are prioritising the use certified raw materials and supporting Fishery Improvement Projects (FIPs), which includes investing in WWF and Finance Earth’s Fisheries Improvement Fund.

The use of marine ingredients by petfood is growing with approximately 4% of fishmeal and 11% of fish oil was used in petfood and other materials in 2020. Fishmeal and fish oil provide vital nutrients at inclusion levels of 0.5% – 2%, varying between products and brands. By-products are being increasingly used as a valuable raw material that promotes the circular economy and avoiding impacts on the human food value chain. Russell noted that “we are committed to move more to by-products, maximising their use more in the future.”  There is also a supplementary move towards algae oils that is expected to increase over time. Finally, fishmeal and fish oil are important for pets as they provide essential omega-3 fatty acids, iron, iodine, vitamin D, and vitamin B12.