31 August 1998 00:00 [Source: ICB Americas]By Jim Papanikolaw
Prices for fish meal and oil remain high as El Niûo continues to hamper production in Peru and Chile, giving US producers new opportunities for exporting.
USDA expects world fish meal production to be only 5.2 million metric tons this year, down 1.2 million metric tons from 1997. This would be the lowest level since 1983, when production was undermined by another severe El Niûo. USDA forecasts 1998 world production of fish oil at 960,000 tons, down from 1.2 million tons in 1997.
St. Albans, UK-based International Fishmeal & Oil Manufacturers Association (Ifoma) expects its members' fish oil production to be 745,000 tons this year, a decrease from 1.1 million tons in 1997.
The Fishmeal Exporters Organization (FEO)--which consists of Peru, Chile, Denmark, Norway and Iceland--met with Ifoma earlier this year and predicted that their members' production during the first nine months of the year would not exceed 1.63 million tons of meal, half of last year's figure of 3.2 million tons for the same period.
"The warmer Pacific waters reduced catch and caused fish to yield less oil than usual," a producer explains.
Industry analysts say price ratios for both fish meal and oil are at all-time highs, with fish meal costing three-and-a-half times as much as soybean meal, as opposed to its usual two-to-one premium. Fish oil has become more expensive than soybean oil, which usually does not happen.
The bulk price for fish meal is $500 per short ton, f.o.b. the Gulf Coast, and the oil is priced at 31 cents per pound. Insiders expect pricing to remain stable at its high levels or even increase during the rest of 1998, depending on when the current El Niûo subsides. "Although we see a recovery in sight, it could be a slow recovery," cautions Ian H. Pike, a spokesperson for Ifoma.
Even though USDA expects 1998 world fish meal exports to fall to 2.4 million metric tons, a decline of 1.7 million metric tons, US producers report increased overseas demand because domestic fish meal is cheaper and more available than product from South America.
"Usually about 95 percent of the US fish meal produced is consumed domestically, but this year it may only be between 65 percent and 70 percent," says Scott Herbert, vice-president of meal marketing for Omega Protein, the largest US supplier of fish meal and oil.
Mr. Herbert notes that foreign consumers have not always viewed the US as an ideal source for fish meal protein because the protein level in US meal is guaranteed at only 60 percent compared to a 65 percent protein content in meal produced in Peru and Chile. High freight costs have also been a concern.
That, however, has changed. "I think we have developed some markets overseas and that should continue for us in the future," says Mr. Herbert. "They have been happy with the performance of our product. The key will be whether or not we can remain price competitive."
Mr. Herbert notes that meal has traditionally been priced high enough to maintain the strongest possible profit margins but low enough to remain competitive against foreign material. What will happen when South American supplies recover remains to be seen.
Fish meal is primarily used as an animal feed. Some land animal feed manufacturers have switched to cheaper sources of protein, but people involved in aquaculture, particularly with carnivorous fish like trout and salmon, continue to purchase fish meal. These fish require growth factors and other components not found in alternative foods.
Fish oil is used in food production, mainly in Europe and Asia, and aquaculture. Analysts say demand in the food industry has declined slightly because of the high prices, but the oil still remains popular because of its health benefits.
Fish farmers require fish oil for their feeds because of the oil's constituents, such as the Omega-3 fatty acids eicosapentaenoic acid (EPA) and docohexanoic acid (DHA).
Omega Protein, which produces about 85 percent of all US fish oil, says European and Asian consumers are buying foods fortified with fish oil, which contains Omega-3 long chain fatty acids, for potential nutritional and disease prevention benefits.
The company is marketing refined menhaden fish oil, which is rich in Omega-3 fatty acids, as a food ingredient and a direct supplement in the US. The product is the only fish oil source of Omega-3 long chain fatty acids approved by the FDA as a Generally Recognized as Safe (GRAS) ingredient for human consumption.
OILSEEDS--USDA expects global oilseed production to be 288.1 million tons for 1998-99, an increase of nearly 3 million tons from 1997-98. Most of the gain is in the US, though foreign oilseed supplies are up from last year to 201.8 million tons.
USDA expects US oilseed production to reach a record 86 million tons in 1998-99, which is about a 2 million ton increase from 1997-98.
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