Aquaculture

See all articles

Is Newfoundland the right place to farm salmon?

Mowi's recent mortality and political issues reflect challenges with the farming environment, say analysts.

Equity analysts covering the Norwegian salmon farming giant Mowi see elevated risks from farming in Newfoundland in general, rather than in the company's operational capacities, after a mass mortality killed 5,000 metric tons of salmon in the region last month.

Mowi says half of Northern Harvest farmed salmon dead, admits failure in reporting mortalities

Read more

Newfoundland fisheries minister suspends Mowi's Northern Harvest salmon farming licenses over 'mass mortality'

Read more

Would land-based producers be winners in a BC netpen salmon farming ban? Not so fast

Read more

"Even though this might be an extraordinary situation, it shows that it can be challenging to produce salmon in Newfoundland," Danske Bank Equity Analyst Knut-Ivar Bakken told IntraFish, reducing estimates for the company's 2020 and 2021 production by 4,000-6,000 metric tons as a result of the mortalities witnessed. "However, when it comes to the suspension of licenses it shouldn't affect smolt releases and production."

Newfoundland Minister of Fisheries and Land Resource Gerry Byrne announced that he may be suspending 10 farming licenses after the incident last month.

"It highlights the elevated risk of producing in the East Coast of Canada," SpareBank 1 Markets Equity Analyst Tore Tonseth told IntraFish. "Seeing licenses suspended temporarily also highlights the risks related to politics and regulations in Canada generally."

And the situation doesn't differ particularly on the west coast, where Justin Trudeau's Liberal party launched its full campaign proposing a ban on netpen salmon farming and transitioning to closed containment systems by 2025.

Is it going to affect Mowi?

"If you isolate it on the suspended licenses, that shouldn't affect Mowi too much since the bottleneck has been on smolt and not licenses," Bakken said. "The company should have alternative sites available to potentially produce in more suitable circumstances."

The authorities suspended 16 percent of Mowi's licenses in Canada East, which lead Mowi to cut its 2019 volume guiding by 1,000 metric tons.

Mowi has a lot of licenses in the area, although whether they are better or worse than the ones under sanction is still a key question to Pareto Securities Equity Researcher Carl-Emil Kjolas Johannessen.

Either way, with a 5,000-metric-ton total biomass loss, the impact will be felt going into 2020, Tonseth said, following a Sparebank 1 Markets report reducing its volume forecast for Canada to 47,000 metric tons.

However, Mowi can recover some of the losses since the biomass was insured and the company will receive compensation for production costs.

"I don't have insight into the structure of Mowi in Canada, but after acquiring Northern Harvest there is definitely a lot of potential and sites," Tonseth said.

SpareBank 1 Markets therefore stuck to its share price recommendation to buy at NOK 235.

"The financial market does not like the words suspension of licenses because you need licenses to operate and they don't like the risk so it is affecting the value of the company," Tonseth said.

Latest news
Most read