'Anchovy price leap causes food industry chain reaction' diff viewer (0/1)

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Anchovy price leap causes food industry chain reaction	Anchovy price leap causes food industry chain reaction
2012-08-24 18:10:04 UTC	2012-08-24 18:50:05 UTC (40 minutes later)
"If you like anchovies on your pizza you'd better be careful," warns Mark Livingston, investment director of Fidelity Worldwide Investment.	"If you like anchovies on your pizza you'd better be careful," warns Mark Livingston, investment director of Fidelity Worldwide Investment.
You ~~wouldn't~~ expect the head of a global asset fund managing £138bn of pensions and investments to care about the cost of pizza toppings. But the global nature of the food chain means severe storms off the coast of Peru have led to a dramatic jump in the price of the oily fish – which will in turn lead to a spike in Scottish farmed fish, Chinese pigs and even Omega 3 tablets in Holland & Barratt.	You would not expect the head of a global asset fund managing £138bn of pensions and investments to care about the cost of pizza toppings. But the global nature of the food chain means severe storms off the coast of Peru have led to a dramatic jump in the price of the oily fish – which will in turn lead to a spike in Scottish farmed fish, Chinese pigs and even Omega 3 tablets in Holland & Barratt.
"That's the nature of today's food business – everything's connected," Livingston says. "If you can catch some anchovies you'll make some serious money."	"That's the nature of today's food business – everything's connected," Livingston says. "If you can catch some anchovies you'll make some serious money."
And that's why Livingston cares about this silvery-coloured fish. Three years ago Fidelity spotted the growing importance of the "forgotten fish" and invested in Copeinca, a Norwegian company that owns a fleet of 30 Peruvian anchovy fishing boats and five processing plants across the country.	And that's why Livingston cares about this silvery-coloured fish. Three years ago Fidelity spotted the growing importance of the "forgotten fish" and invested in Copeinca, a Norwegian company that owns a fleet of 30 Peruvian anchovy fishing boats and five processing plants across the country.
Just a few years ago no one outside of the fish oil industry really paid much attention to anchovies and they were lumped together with other unloved fish under the unappetising label "industrial fish".	Just a few years ago no one outside of the fish oil industry really paid much attention to anchovies and they were lumped together with other unloved fish under the unappetising label "industrial fish".
"It covers all the stuff we don't consume directly. We caught 18m tonnes of industrial fish last year, which represents 20% of all fish caught worldwide," says Gorjan Nikolik, associate director of animal protein at Rabobank.	"It covers all the stuff we don't consume directly. We caught 18m tonnes of industrial fish last year, which represents 20% of all fish caught worldwide," says Gorjan Nikolik, associate director of animal protein at Rabobank.
These fish are caught in massive quantities, dried, minced and ground down into fish meal [a brown powder made mostly from fish bones and fish offal] and fish oil [which is extracted from the tissues of oily fish].	These fish are caught in massive quantities, dried, minced and ground down into fish meal [a brown powder made mostly from fish bones and fish offal] and fish oil [which is extracted from the tissues of oily fish].
"After two years of declining prices, fish meal and fish oil are becoming expensive again. And people are now paying attention," says Nikolik from his office in Utrecht, the Netherlands' fourth city.	"After two years of declining prices, fish meal and fish oil are becoming expensive again. And people are now paying attention," says Nikolik from his office in Utrecht, the Netherlands' fourth city.
He says the price of fish oil has increased from $1,500 (£950) a tonne at the beginning of the year to $2,000 per tonne this month; fish meal has jumped from $1,300 a tonne to a record $1,700.	He says the price of fish oil has increased from $1,500 (£950) a tonne at the beginning of the year to $2,000 per tonne this month; fish meal has jumped from $1,300 a tonne to a record $1,700.
The price is rising due to the growth in farmed fish [mostly salmon and prawns], which feed on them, and the substitition of fish meal as animal feed because corn has become too expensive: the corn price has hit a record high as a result of the severe drought in the US.	The price is rising due to the growth in farmed fish [mostly salmon and prawns], which feed on them, and the substitition of fish meal as animal feed because corn has become too expensive: the corn price has hit a record high as a result of the severe drought in the US.
Fish oil has soared even further because a new consumer has emerged: humans. "Direct consumption in the form of Omega 3 pills has increased to 14% [of the global fish oil production] from 2%-3% five years ago," says Nikolik.	Fish oil has soared even further because a new consumer has emerged: humans. "Direct consumption in the form of Omega 3 pills has increased to 14% [of the global fish oil production] from 2%-3% five years ago," says Nikolik.
Peruvian anchovy fishermen – and their investors – are the biggest beneficiary of the fish oil spike because, Livingston says, "the Peruvian anchovy is the best fish in the world to produce fish oil as they have the most calories".	Peruvian anchovy fishermen – and their investors – are the biggest beneficiary of the fish oil spike because, Livingston says, "the Peruvian anchovy is the best fish in the world to produce fish oil as they have the most calories".
The anchovy price [which is not available separately but calculated from the fish oil price] has increased still further because since 2009 the Peruvian government has imposed quotas on the number of anchovies that can be caught in their waters. "They've limited the supply, which will all know lifts the price."	The anchovy price [which is not available separately but calculated from the fish oil price] has increased still further because since 2009 the Peruvian government has imposed quotas on the number of anchovies that can be caught in their waters. "They've limited the supply, which will all know lifts the price."
Additionally, unusually severe Pacific storms have made anchovies much harder to catch. "The strange weather patterns have made the sea more turbulent and less people are willing to go out into the sea – which increases the cost of fishing."	Additionally, unusually severe Pacific storms have made anchovies much harder to catch. "The strange weather patterns have made the sea more turbulent and less people are willing to go out into the sea – which increases the cost of fishing."
"And on top of that," Livingston adds pausing for breath. "There's this push into organic fertiliser." Fish meal will pass an approved organic feed, as consumers increasingly demand food that hasn't been plied with chemical fertiliser.	"And on top of that," Livingston adds pausing for breath. "There's this push into organic fertiliser." Fish meal will pass an approved organic feed, as consumers increasingly demand food that hasn't been plied with chemical fertiliser.
In any ordinary year the soaring price of fish oil and meal should force up salmon prices, Nikolik says. But this is no ordinary year. This year salmon have been hungry.	In any ordinary year the soaring price of fish oil and meal should force up salmon prices, Nikolik says. But this is no ordinary year. This year salmon have been hungry.
"In 2012 the water temperature has been a couple of degrees warmer in the north Atlantic than normal. This has had a big affect on the appetite of salmon, which has led to a record growth rate."	"In 2012 the water temperature has been a couple of degrees warmer in the north Atlantic than normal. This has had a big affect on the appetite of salmon, which has led to a record growth rate."
Norway, the world's biggest salmon farmer ahead of Chile and Scotland, only expected a 5% increase in the salmon crop this year but global salmon production is already up 30% in the first half of the year. Chile's salmon fisheries are also recovering from a disease that forced them to kill 75% of the stock two years ago.	Norway, the world's biggest salmon farmer ahead of Chile and Scotland, only expected a 5% increase in the salmon crop this year but global salmon production is already up 30% in the first half of the year. Chile's salmon fisheries are also recovering from a disease that forced them to kill 75% of the stock two years ago.
"This has led to a dramatic price drop of 35-40%," he says. "Last year salmon was changing hands at 38-43 Norwegian kroner per kilo, it's crashed to 25 kroner."	"This has led to a dramatic price drop of 35-40%," he says. "Last year salmon was changing hands at 38-43 Norwegian kroner per kilo, it's crashed to 25 kroner."
Nikolik says the salmon industry has not been subject to such a steep price change since the fish farming industry took off in the 1970s and 80s.	Nikolik says the salmon industry has not been subject to such a steep price change since the fish farming industry took off in the 1970s and 80s.
The price collapse has translated into cheaper prices and promotions in supermarkets across the world.	The price collapse has translated into cheaper prices and promotions in supermarkets across the world.
"It is a great deal for consumers and producers," he says. "The prices are so low that new people are trying salmon – and if they get hooked producers will have new customers. It's like a year-long special promotion."	"It is a great deal for consumers and producers," he says. "The prices are so low that new people are trying salmon – and if they get hooked producers will have new customers. It's like a year-long special promotion."
Nikolik says prices have been so depressed that even hard-pressed consumers have taken to eating more of a once exclusively upmarket fish. European salmon consumption in the first half of the year is up to 419,00 tonnes from 342,000 tonnes last year. "We've seen growth in Portugal, Greece, Spain – places where you would expect recession to have reduced demand."	Nikolik says prices have been so depressed that even hard-pressed consumers have taken to eating more of a once exclusively upmarket fish. European salmon consumption in the first half of the year is up to 419,00 tonnes from 342,000 tonnes last year. "We've seen growth in Portugal, Greece, Spain – places where you would expect recession to have reduced demand."
The fast-developing Bric nations are also increasingly keen on salmon. Industry figures show Russian salmon consumption is up 67% to 75,000 tonnes in the first six months of the year, while Latin Amercia (particularly Brazil) is up 85%, even China which does not have a tradition of eating fish fillets has seen salmon consumption rise by 34%.	The fast-developing Bric nations are also increasingly keen on salmon. Industry figures show Russian salmon consumption is up 67% to 75,000 tonnes in the first six months of the year, while Latin Amercia (particularly Brazil) is up 85%, even China which does not have a tradition of eating fish fillets has seen salmon consumption rise by 34%.
While salmon is leaping, its more down-to-earth cousin mackerel is plunging. A diplomatic dispute between Iceland and the Faroe islands against the EU, Ireland and Norway has led to severe overfishing of north Atlantic mackerel stocks.	While salmon is leaping, its more down-to-earth cousin mackerel is plunging. A diplomatic dispute between Iceland and the Faroe islands against the EU, Ireland and Norway has led to severe overfishing of north Atlantic mackerel stocks.
~~Simon Coveney, Ireland's agriculture minister, has accused Iceland of making a "financial killing" from fishing mackerel in defiance of a ~~European~~ ~~Union-agreed~~ quota.~~	Simon Coveney, Ireland's agriculture minister, has accused Iceland of making a "financial killing" from fishing mackerel in defiance of a EU-agreed quota.
Iceland claims that rising sea temperatures have led to a "dramatic change" in mackerel's migration route into its territorial waters. "We've seen 1.1m tonnes of mackerel in Icelandic waters in 2012, 2011 and 2010, compared to very little in 2006 and 2005," says Friirik Arngrímsson, head of the Federation of Icelandic Fishing Vessel Owners. "The mackerel is feeding here and increasing its weight here – we have a right to fish our mackerel."	Iceland claims that rising sea temperatures have led to a "dramatic change" in mackerel's migration route into its territorial waters. "We've seen 1.1m tonnes of mackerel in Icelandic waters in 2012, 2011 and 2010, compared to very little in 2006 and 2005," says Friirik Arngrímsson, head of the Federation of Icelandic Fishing Vessel Owners. "The mackerel is feeding here and increasing its weight here – we have a right to fish our mackerel."
The International Council for the Exploration of the Sea (Ices), which advises governments on fish quotas, has counselled landing not more than 630,000 tonnes of mackerel. Iceland says the EU and Norway have allocated themselves 90% of that catch.	The International Council for the Exploration of the Sea (Ices), which advises governments on fish quotas, has counselled landing not more than 630,000 tonnes of mackerel. Iceland says the EU and Norway have allocated themselves 90% of that catch.
"That leaves 10% to Iceland, the Faroes and Russia – that's not a fair share," argues Arngrímsson. "We cannot accept that the EU can decide whether or not we should fish mackerel. They have claimed that it is their fish, but it is also our fish."	"That leaves 10% to Iceland, the Faroes and Russia – that's not a fair share," argues Arngrímsson. "We cannot accept that the EU can decide whether or not we should fish mackerel. They have claimed that it is their fish, but it is also our fish."
While Arngrímsson admits that until recently Iceland regarded mackerel as only a bycatch to herring, he strongly refutes the suggestion that Iceland has only started to bother catching mackerel since its financial system went into meltdown in 2008. "There is absolutely no link between the Icelandic banks and the mackerel. It is just a coincidence that the mackerel has migrated into Icelandic waters."	While Arngrímsson admits that until recently Iceland regarded mackerel as only a bycatch to herring, he strongly refutes the suggestion that Iceland has only started to bother catching mackerel since its financial system went into meltdown in 2008. "There is absolutely no link between the Icelandic banks and the mackerel. It is just a coincidence that the mackerel has migrated into Icelandic waters."
Back on dry land, drought in the US has wiped out 45% of the corn and 35% of the soya bean crop in the worst harvest since 1988. As well as leading to soaring price of those commodities [corn is up 64% since June] it has also caused a spike in all other cereals and animal feeds, including wheat, hay and fish meal [which is increasingly used to feed China's growing demand for pork].	Back on dry land, drought in the US has wiped out 45% of the corn and 35% of the soya bean crop in the worst harvest since 1988. As well as leading to the soaring price of those commodities [corn is up 64% since June] it has also caused a spike in all other cereals and animal feeds, including wheat, hay and fish meal [which is increasingly used to feed China's growing demand for pork].
Many cattle farmers are no longer able to afford to feed their cows and the US herd has shrunk to its smallest since 1973. Cattle prices have risen by 8.5% to $1.35 a pound. ~~Fast-food~~ ~~chain~~ ~~Wendy's~~ ~~has~~ ~~already~~ ~~warned~~ it ~~will~~ be ~~forced~~ to ~~raise~~ ~~the~~ ~~price~~ of ~~burgers.~~	Many cattle farmers are no longer able to afford to feed their cows and the US herd has shrunk to its smallest since 1973. Cattle prices have risen by 8.5% to $1.35 a pound.
The real losers will be the world's poorest. "If the current food price rises continue it will lead to food inflation, which will be very bad for poor countries," says Livingston. "It doesn't matter where prices are rising, it is always the poorest people that suffer most because food makes up a much bigger part of their outgoings. We can afford to absorb the rise … "	Fast-food chain Wendy's has already warned it will be forced to raise the price of burgers. The real losers will be the world's poorest. "If the current food price rises continue it will lead to food inflation, which will be very bad for poor countries," says Livingston. "It doesn't matter where prices are rising, it is always the poorest people that suffer most because food makes up a much bigger part of their outgoings. We can afford to absorb the rise … "
He warns that if prices keep going up it will become a food crisis that could match the severity of the 2008 food riots that helped spark the Arab spring.	He warns that if prices keep going up it will become a food crisis that could match the severity of the 2008 food riots that helped spark the Arab spring.
While most dread the repeat of such a crisis some of the multimillionaires that control the global food market are anticipating the opportunity to make vast profits. ~~The~~ ~~head~~ of ~~Glencore's~~ ~~food~~ ~~trading~~ ~~business~~ ~~this~~ ~~week~~ ~~said~~ ~~the~~ ~~food~~ ~~crisis~~ ~~would~~ be ~~"good"~~ ~~for~~ ~~business.~~	While most dread the repeat of such a crisis some of the multimillionaires that control the global food market are anticipating the opportunity to make vast profits.
	The head of Glencore's food trading business this week said the food crisis would be "good" for business.
Chris Mahoney, the trader's director of agricultural products, who owns about £500m of Glencore shares, said: "The environment is a good one. High prices, lots of volatility, a lot of dislocation, tightness, a lot of arbitrage [the purchase and sale of an asset in order to profit from price differences in different markets] opportunities.	Chris Mahoney, the trader's director of agricultural products, who owns about £500m of Glencore shares, said: "The environment is a good one. High prices, lots of volatility, a lot of dislocation, tightness, a lot of arbitrage [the purchase and sale of an asset in order to profit from price differences in different markets] opportunities.
"We will be able to provide the world with solutions… and that should also be good for Glencore."	"We will be able to provide the world with solutions… and that should also be good for Glencore."