Future growth in salmon farming

Future growth in salmon farming through traditional farming at sea or with new technology on land? Currently the traditional salmon farmers around the world face the following facts:
  • Prices are high
  • Demand is good
  • Fish health is driving production cost
  • Increasing feed prices drives production cost
  • Growth is limited due to strict regulations and biological challenges

Taking Norway as an example, the government has stopped all calls for new production licenses until the Norwegian aquaculture industry can control its sea lice challenges. The only available growth offered, comes with strict regulations - growth of 5% with a demand of a maximum level of 0,2 mature female salmon lice per fish and maximum 2 medicamental treatments per production period.

In these circumstances, development of new technology for both treatment and preventive measures against sea lice are ever increasing and different research and industry projects have achieved promising results. However, despite significant efforts, none of these have so far been able to solve the biological challenges, only to a certain extent mediated them.

It is this reality, combined with a steady improvement of RAS technology and production experience, a constant push towards a new paradigm: post smolt and land based farming, has arrived. Classic arguments against land based farming
have been too high investment and energy costs and not enough available land area.

Through detailed calculations, Deloitte disagree with these argruments. We have looked at the production and investment cost for both traditional open pen farming and land based farming in RAS. The calculations shows an estimated production cost per kilo at 26,50 NOK for the traditional production regime with smolts transferred to sea at 100 grams. The interesting result is that the estimated production cost on land is nearly the same, at 26,75 NOK per kilo.

With regards to investments, a production of 5000 metric tons of salmon in open pen cages at sea, the cost is in the range of 325-400 million Norwegian Kroner. This includes four licenses with a market price of 60-80 million Norwegian Kroner. Looking at land based farming – where we assume that the licenses will be free – the investment cost of a correspon-ding production volume is estimated to be in the range of 300-450 million Norwegian Kroner.

With these figures in mind, prepare for an increase in the worlds salmon production, not at sea but on land.

Anders Milde Gjendemsjø
By Anders Milde Gjendemsjø, PhD
Head of Seafood
Deloitte AS