Fishmeal, oil prices high but market ‘sleepy’ due to poor fishing, signs of waning El Nino

Super prime fishmeal prices from Peru, FOB, are in the $1,930 per metric ton range as just two-thirds of the season’s anchovy quota has been caught, with less than ten days to go until the fishing ends.

Some producers feel prices could reach the $2,000/t mark once the season ends and buyers realize that the quota will not be met.

On the other hand, prices could go down as normalized sea temperatures are giving hopes of a better second season (November – January) ahead. On July 21, Peru’s El Nino institute Enfen said the El Nino phenomenon affecting catches should ebb away in August, with little risk of coming back by the end of the year.

Season extension?

With no hopes of catching the full quota by July 31, there is talk that the season could be extended by a week or more.

By July 21, just 66.2% or 1.63 million metric tons of the total allowable catch of 2.53m had been caught, said one leading fishmeal producer.

This producer estimated that companies would manage to catch 1.8m to 1.9m tons of the TAC by the end of the month.

However, he is skeptical that authorities will extend the season, citing the high levels of juvenile anchovies in catches. “I think they will not extend the season to protect the spawning of the anchovy,” he told Undercurrent News. “Last Thursday we had a ban for five days and the landings during the weekend were poor.”

He said prices were in the $1,930/t range, FOB Peru, for super prime meal (minimum 68% protein). That’s a jump from levels of just around $1,600- $1,620 at the start of the season in late April, and up from levels of $1,880/t in June.

Prices from the World Bank, tracking CIF prices for fishmeal and pellets out of Peru with 65% protein, shows a big spike in June to just over $2,000 CIF Peru, from $1,820 in May (see chart).

‘Sleepy market’ keeping prices down, for now

The season’s uncertainty has dampened demand, and is keeping prices from climbing further, said exporters.

An executive at one Peruvian exporter described the market as “sleepy”.

The afore-mentioned producer gave a similar picture.

“The demand is very quiet, waiting for news,” he said. “Prices remain at $1,930, no transactions at higher levels are registered.”

“Some of the producers are trying to build up the price up to $2,000 but the reality is that the buyers are not reacting.”

In his view, prices will climb once the season is over, as buyers realize that the TAC will not be met.

“I think that prices will reach to $2,000 when the season is over. The real demand will come at that moment.”

“China is quiet mainly waiting for the end of the season,” he added. “The rumors about an extension of the season to the middle of August made them keep firmly quiet but for sure the demand will come very soon.”

An executive at another leading producer confirmed that demand was quiet due to anticipation over the season’s turnout.

“Part of the market is expecting how this season will finish,” said this exporter. “Some buyers think that the Peruvian fishing sector can finish all the quota and are waiting for a bigger supply.”

However, he had a less bullish view on prices. “If we don’t catch all the quota, as I believe, prices can stay at this level or maybe a little less,” he said.

Prices could then return to the levels of late 2013 if authorities confirm that the worst of the El Nino has passed by the end of August, he said.

“Prices for the next months depend first on how this quota will finish and second, on the evolution of El Nino for the next months.”

Waning El Nino effect

He pointed to Enfen’s latest report, in which the institute says water temperatures have normalized, and that El Nino is now forecast to be over in August. “I think the phenomenon is really decreasing, the temperature of the sea is now at usual levels, so the next season would not be affected.”

If this is confirmed, he said, “prices can return to similar levels of the last quarter of 2013″, depending on the TAC set for the second season.

Peru in the first half of the year was impacted by three Kelvin waves bringing hot water in April, May and June. “But know the Humboldt current (cold waters) from the south part of the continent is strong and everything’s coming back to normality,” said another producer.

Low oil yields

The first producer added that the fish oil yield has also been very low in this season. The fish is “very thin” and with a low fat content, driving down the yield from normal levels of 5% to 1.8%.

“The profiles of EPA and DHA are not reaching 30%, they are around 26-27%.”

He said fish oil prices for aqua feed with at least 26% EPA and DHA is around $1,950/t FOB Peru.

Fish oil for human consumption (minimum 29% EPA and DHA) is selling at around $2,500/t, FOB Peru.