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Analyst raises salmon price projections, expects 'Christmas rally'

Kepler Cheuvreux expects salmon prices to stay high with limited supply growth.

Broker Kepler Cheuvreux upgraded its salmon price prediction to NOK 61 (€6.40/$7.40) per kilo in 2018, NOK 61.50 (€6.50/$7.50) in 2019 and NOK 63 (€6.70/$7.70) in 2020 against its original predictions of NOK 59 (€6.20/$7.20), NOK 60 (€6.30/$7.30) and NOK 61 (€6.40/$7.40) respectively.

The company also upgraded the stock recommendations for salmon producers Bakkafrost from "sell" to "hold" and Austevoll from "hold" to "buy," while Leroy Seafood was downgraded to "hold" from "buy."

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The price target for Bakkafrost was upgraded to NOK 520 (€55/$63.30) from NOK 455 (€48.10/$55.40), while Austevoll was raised to NOK 131 (€13.90/$15.90) from NOK 118 (€12.50/$14.40) and Leroy adjusted up to NOK 75 (€7.90/$9.10) from NOK 65 (€6.90/$7.90).

The firm raised the price expectation for Marine Harvest to NOK 208 (€22/$25.30) from NOK 195 (€20.60/$23.70), Grieg Seafood to NOK 127 (€13.40/$15.50) from NOK 108 (€11.40/$13.10), Norway Royal Salmon to NOK 245 (€25.90/$29.80) from NOK 218 (€23/$26.50), Salmar to NOK 434 (€45.90/$52.80) from NOK 415 (€43.90/$50.50) and Salmones Camanchaca to NOK 81 (€8.60/$9.90) from NOK 75 (€7.90/$9.10).

Farmers' expectations for record prices over the next few years is partly justified, wrote Kepler Analyst Christian Olsen Nordby. He also expects a "Christmas rally" to occur this year, unlike last year, making him positive on developments in the short and long term.

Nordby sees limited supply growth over the coming months, indicating high lice levels and warm sea temperatures.

"We've seen that harvest weights are at the lowest levels for the season, indicating farmers have harvested earlier than the optimal, which limits supply potential in the short to medium term," wrote Nordby, but added that this can change quickly if the fall brings optimal sea temperatures.

In addition there is no estimated supply offer from Chile in the coming months, based on seasonal patterns.

The brokerage places currency as the biggest risk to salmon prices, indicating that a weak Norwegian krone against the Euro has benefited Norwegian farmers to date.

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