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Demand from fish farms drives crude fish oil prices higher

By Hank Schultz , 12-Nov-2012
Last updated on 12-Nov-2012 at 16:24 GMT

Demand from fish farms drives crude fish oil prices higher

Bulk fish oil prices are rising, driven both by competition from large aquaculture purchasers and lower catch quotas in the all-important Peruvian anchovy fishery.

“The last three fisheries—and by fisheries I mean individual six-month fishing seasons—in a row have shown a steady incline in the cost of crude fish oil,” Joe Agnew, vice president of dietary supplements for DSM/Ocean Nutrition told NutraIngredients-USA.

“The last season saw a realized increase of approximately 42% from the prior fishery six months earlier.”

Fish farms' insatiable demand

The biggest factor driving the increase is the use of fish oil and meal to feed the farmed fish that end up in fish markets and on restaurant plates around the world.  Even though there is strong and rising demand for crude fish oil to supply the omega-3s for use in dietary supplements and functional foods and in pharmaceuticals, that supply is a drop in the bucket compared to what goes into aquaculture.  So human nutrition demand is an insignificant factor in setting crude fish oil base prices.

“The majority buyer of the fish oil crude is the aquaculture and feed industry and because they tend to purchase the majority of the fish oil they tend to set our prices,” Agnew said.

“They don’t have specific specifications for EPA for DHA or other parameters that are important for our segment so they tend to pay the lowest price.

“Because of our specifications, we are typically paying the premium above what the aquaculture set rate is,” he said.

Quota declines by 68%

Complicating the picture is the announcement last week by the Peruvian Ministry of Production’s Fishing Vice-Ministry that the allowable catch limit of anchovy for indirect human consumption will decline by 68% percent from the previous period to 810,000 metric tons. The fishing season will be restricted to the northern part of Peru.

The ministry set the quota following the recommendations of IMARPE, the Peruvian governmental agency responsible for the study of the ocean and in particular how the  El Niño/La Niña cycles affect ocean biomass. IMARPE has put out recommendations on fishing quotas for years, and season-to-season fluctuations like this most recent one are not unheard of, Agnew said.

But the increasing pressure from the aquaculture sector as it relates to the quota fluctuations is something new.  Part of the recent increase in crude prices was driven by a very large purchase by an aquaculture company seeking to ensure their supply, Agnew said.  The big buy skewed the market a bit, legitimizing a higher price point than was expected even with the diminution of supply, he said.

In addition, Agnew said, some salmon farming operations in Chile that were damaged in recent storms are returning to production, adding to the demand from that sector.

The setting of crude fish oil prices doesn’t happen in a vacuum, Agnew said.

“Fish oil trades in the bandwidth of the other seven commodity oils, such as soybean oil, rapeseed oil, palm oil and cottonseed oil, and there an upward price trend on all of them,” he said.

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