Lower herring price reflects oversupply on market

By Ahmed ElAmin

- Last updated on GMT

Related tags: Scandinavia, Norway

Europe's herring prices look to remain at their current low levels
as a high supply and lower demand continue to affect the industry,
according to a Food and Agriculture Organisation (FAO) report.

Prices for Norwegian herring have dropped considerably compared to 2005. As an example, herring in the 350g+ grade fell by NOK 2.50 per kilo in the course of one week in recent months.

" This is a familiar scenario in the herring industry, steep price increases are followed by a volatile price situation with prices adjusting downwards,"​ the report stated.

Norway, which supplies the bulk of the EU's herring, has a high amount of the fish in storage. The large catch quota set for this autumn combined with increasingly hesitant markets will lead to lower profits this year, says Globefish, an analytical division of the FAO.

"At the same time not much has happened to reduce overcapacity in the Norwegian industry,"​ FAO analyst Ann-Mari Haram said. "This is, once again, likely to result in the industry paying raw material prices above those justified by current demand conditions."

According to a report by Kolbjørn Giskeødegård, a Norwegian bank analyst, the amount of round frozen herring in storage in Norway was about 50,000 tonnes at the end of May, she noted.

It is unusual that the Norwegians have unsold herring at this time of the year. The report recommended the Norwegian industry sell off the stored herring sooner rather than later. However, the hot summer months are not a seasonally strong selling period and the opening of this year's fishing is approaching rapidly.

Even though the total quota for this year is about five per cent lower than last year, the quota is still considerable, she noted. Some 470,000 tonnes of herring are due to be caught by Norwegian vessels this fall.

There are also indications that there is herring in storage in several of the important markets which adds to the uncertainty perceived by Norwegian processors.

Norwegian exports of herring fillets have increased by some 20 per cent to a total of 46,000 tonnes in the first half of 2006 compared to the same period in 2005. Poland, Russia and Germany have increased their imports from Norway, although at a lower unit price than in 2005.

Norway is by far the largest supplier of herring in Europe. The UK and Icelandic catches are modest in comparison and their herring is normally smaller.

The Norwegians have a great advantage in fishing herring of naturally good quality in terms of size and fat content. At the same time, the Icelanders have increased their production of fillets over the last few years. According to figures from Hagstofa, Icelandic production increased three fold from 2005 to 2006 with a total production of 30,000 tonnes in 2006, the Globefish report stated.

A large share of the Icelandic herring production goes to Poland.

"However, some Norwegian exporters note that competition now must be seen in a more global perspective as the availability of local varieties of pelagic species as well as other seafood is important for the market position of herring,"​ the report stated. "In general, the variety of seafood available in key markets has increased and this represents a challenge also for herring suppliers."

Russia and Ukraine are seen as possible markets to expand further in. Markets like Egypt are emerging for Norwegian herring, reflecting the downward price trend as well as the larger share of smaller sizes in Norwegian catch levels.

Also other African countries are buying more herring from Norway. Some exporters mention that China could become an interesting herring market provided that the necessary marketing efforts are made, Globefish reported.

Related topics: Processing & Packaging

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