GOED perspective on global fish oil supplies
The Peruvian anchovy fishery is the largest source of oil for the global omega-3 dietary supplement industry, as shown in Figure 1 (anchovy oil is the source of the common refined and concentrated categories).
While the cancellation is positive from a sustainability perspective (demonstrates a well-managed fishery), Peru’s anchovy oil shortage comes at a particularly difficult time, as crude oil production in 2022 was very low.
Lower than in the past few years, resulting in higher prices.
As a result, many customers did not buy oil and chose to rely on existing inventory in anticipation of a better season in 2023. This has led to a combination of lower than usual inventories and a difficult supply situation.
Of course, the omega-3 industry is about more than just anchovy oil, as omega-3 products are found on store shelves from many other fish sources including salmon oil, tuna oil, cod liver oil and pollock oil, as well as other marine sources such as krill and… Calanus.
Algae is a fast-growing and desirable alternative source of EPA and DHA, but has historically been priced much higher than fish oil. And last but not least is GMO Canola Oil, a new entrant to the market by offering a plant-based alternative.
Many of these sources are well positioned with inventory available; However, all of these sources combined currently cannot come close to making up for the shortfall in anchovy oil supplies. There is great interest in increasing production from these sources, and this will go a long way to help manage the risks inherent in the volatility of fish oil availability, but efforts to scale up production will take time and will not resolve the current situation.
In the long term, oils that can guarantee production and price stability (even if this price is higher than for anchovy oils) will be considered attractive and will be an important element in managing supply disruptions.
What does this mean for this group? Consumer demand remains strong and brands are working hard to shore up supply for next year, but pricing will certainly be an issue. Even before the Peruvian season was cancelled, prices were at all-time highs and brands were forced to pass on price increases to customers.
An additional challenge is making retailers understand the situation. Mass-market retailers have been exposed to price increases across all categories of consumer packaged goods, and whenever a new price increase is announced, they react with disbelief. Buyers of these retailers are responsible for purchasing many diverse products, and do not understand the Omega-3 category and its market dynamics. Most of them are not aware of recent changes in fish oil prices or do not trust what they hear from suppliers.
Ultimately, omega-3 products are backed by a wide range of science, and consumers have a strong awareness of their health benefits, so demand remains good. Despite short-term supply issues, the EPA and DHA omega-3 class should remain healthy and viable in the long term.
Hunting seasons in Peru
In Peru, there are two fishing seasons per year in the north-central (larger) region with the quota determined by a scientific survey conducted by IMARPE, the government scientific body.
The management of this resource attaches great importance to its sustainability, and shares change from year to year. The first season of 2023, which started several weeks late, was canceled within a few days due to too much events. El Nino, which warms water temperatures and moves adult anchovy biomass away from fishing grounds, has also been reported.
The second season usually begins in early November, once the spawning season is complete, at which point it is too early to predict the size of this quota. However, a short exploratory fishing session has been allowed in August, and there is cautious optimism that the second season of the year could be better than originally thought. It is also important to note that historically, a below-average harvest or short fishing season has typically been followed by higher biomass numbers and quotas, so the general hope is that this is a short-term situation that will improve in the second half of 2024. .
(Tags for translation) Regulation and Policy
