« January 2008 Table of Contents
International Soucring: Chile
An industry in flux has tremendous foothold in U.S. market
By Paul Molyneaux
January 01, 2008
Chile - remote, sparsely populated and replete with
beautiful scenery and bountiful resources - has in the last few
decades become a major international seafood supplier. In 1970
Chile exported $29 million worth of fishmeal and frozen
products to 31 countries. By 2006 seafood exports, driven
mostly by farmed salmon, reached more than 130 countries and a
value of almost $3 billion. Traveling by sea from Puerto Montt
down into the remote archipelagos of Region XI, one passes
coves full of salmon farms, mussel farms, dive boats and a
level of activity that speaks more than statistics about the
importance of seafood to the Chilean economy.
The overall situation in Chile is in flux. Some near-shore
fisheries are finding their way to sustainability, and mollusk
aquaculture continues to grow at a steady rate. But as salmon
farmers learn to work around infectious salmon anemia (ISA) the
way its main rival Norway has, they also face increasing
environmental challenges, including harmful algal blooms
associated with intensive fish farming.
The country's biggest wild card is the fishmeal industry,
which, despite its increasing importance to Chile's growing
salmon industry, relies on volatile stocks of scad, anchovy and
sardines that many observers believe are overexploited. The
reduction of wild stocks of forage fish may also have a
negative impact on catches of the wild species that prey on
While Chile has become the No. 6 seafood producer in the
world, and the United States' fourth most important seafood
supplier, the country's industry is facing crisis on numerous
Chile's all-important Atlantic salmon industry, which
together with trout and coho accounts for 64 percent of the
country's seafood exports in terms of value, is going through
some growing pains.
Chile already had major problems with sea lice and bacterial
disease, resulting in mortalities of up to 45 percent in 2006.
These problems led to a slight decline in Atlantic salmon
production and a 7 percent reduction in exports, but higher
prices led to earnings of $1.417 billion, up from $1.079
billion in 2005.
Things looked to be improving in the first half of 2007,
with exports to the U.S. market up 18 percent in volume and 24
percent in value compared with the first half of 2006. But in
late July a particularly pathogenic strain of ISA appeared at
several sites owned by Marine Harvest near Chiloé Island. Farms
are heavily concentrated in that area, for convenience in
feeding and harvesting, and the disease spread rapidly to the
pens of Mainstream and possibly other companies. Mainstream
initially said its costs as a result of the outbreak would "not
exceed $500,000." But by mid-October Marine Harvest cut its
production estimates by 45,000 metric tons.
What doesn't kill you makes you stronger, it's said, and
Oscar Garay, freshwater manager of Marine Harvest's Chilean
operations, believes the current ISA problems may lead to a
maturing of Chile's salmon industry.
"This may not be politically correct," says Garay. "But in a
way ISA is a gift. It's giving us an opportunity to get our
bio-security system organized."
According to Garay, bio-security had become a priority even
before the ISA outbreak, and early in 2007 Chile's top salmon
producers, Mainstream, Aquachile, Camanchaca, Multiexport, Los
Fiordos and Marine Harvest, formed the G-6, an organization to
"If I am doing things right and the farm upstream from me is
not, then what good is it?" asks Garay. "This way we will start
According to Glenn Cooke, CEO of Cooke Aquaculture of Blacks
Harbour, New Brunswick, Canada, which is currently expanding
operations into Chile, the industry there will suffer more from
ISA than it realizes. Cooke believes that to work around ISA,
Chile should adopt a three-bay management system similar to the
one used in Canada.
According to Cooke, Canada split the New Brunswick salmon
industry into three different bays, and only one of those areas
is stocked every year. That arrangement prevents cross
contamination from market fish to smolts, thus limiting the
vertical transmission of ISA.
But the process is neither easy nor cheap, says Mike
Beattie, a fish health specialist at New Brunswick's Huntsman
"I'd estimate that the new bio-security measures cost the
Canadian industry around $40,000 per cage every year," says
Chile's salmon industry, like Canada's, has been
concentrated in easily accessible areas, but as ISA continues
to erupt in the area of Chiloé, with 11 farms under quarantine
as of December, the industry is being forced to spread out.
"We have to move south," says Garay. "But this will take
time, already I am having to kill smolts or slow their growth
until we have a place to put them."
The move into the isolated archipelago will increase
production costs, but Garay is confident the market will
support higher prices. While demand in Japan has stalled, the
United States, which buys 36 percent of Chile's Atlantic
salmon, still has an expanding market, according to Garay.
He believes Chile's salmon-farming industry will be able to
cope with disease and sea lice.
"At the moment, ISA outbreaks have been low and we have more
products in order to control caligus [sea lice], which is a big
factor in the spread of disease," says Garay.
He predicts modest growth in salmon production in 2007.
"Less than 5 percent," says Garay. "But for 2008 I think we
will see growth around 5 to 10 percent."
That would still be short of the industry's 14.8 percent
annual growth over the last decade, but production of trout and
coho salmon are on the upswing, adds Garay. Exports of trout
and coho in 2006 were $482 million and $248 million,
respectively. Chilean trout production jumped 51 percent in the
first half of 2007 and coho rose 69 percent in the first half
of 2007, according to the Food and Agriculture
Trout exports rose from 75,000 metric tons in 2005 to 93,000
metric tons in 2006, and coho increased slightly from 78,800
metric tons in 2005 to 79,400 metric tons in 2006, with export
values for these species at $481 million and $298 million,
Fishmeal supply tightens
Scad, sardine, Jack mackerel, anchovy, blue whiting and
other pelagic species make their way into Chile's numerous fish
reduction plants, and the country produces 600,000 to 900,000
metric tons annually, second in the world behind Peru. But
fishmeal production is down worldwide and Chile's industry has
slid from a high of 935,000 metric tons in 2004 to 776,000
metric tons in 2006 and production is predicted to be lower
still for 2007.
China is the main export market for Chilean fishmeal. U.S.
buyers, expected to import only 50,000 metric tons of fishmeal
in 2007, shy away from the high price of Chilean product.
Current prices, hovering around $1,000 a ton, are believed to
have bottomed out, and limited supplies along with
strengthening demand herald rising prices across the board.
Aquaculture use of fishmeal has increased from 45 percent of
the world supply in 2002 to more than 57 percent in 2006. For
countries that depend on fishmeal for the expansion of finfish
aquaculture industries - Chile for example, and the United
States with its nascent offshore aquaculture program - a
tightening of supplies could mean limits on growth.
"It's a problem," says Marine Harvest's Garay. "What I think
you will see is people using more fishmeal and oil during the
early stages of growth, when the fish really need it, and more
mixing of substitutes into the feed during grow-out."
Crabmeat demand increases,
hake seeks MSC certification
There is more to Chile than salmon and fishmeal. Steady
supplies and innovative management promise a sustainable future
for shellfish producers, says John Wendt, CEO of Seatech, a
Snohomish, Wash., importer.
Seatech has developed markets for Chilean langostinos,
halfshell scallops with roe, mussels and crabmeat from various
species of Chilean rock crabs.
Wendt believes worldwide competition and the weak U.S.
dollar - down from 750 pesos to the dollar, to 500 in the last
few years - have depressed imports of most Chilean
The exception, he says, is
crabmeat. "Last year we imported
about 350,000 pounds of crabmeat. It was all from the species
found on Chiloé Island and about two-thirds was inexpensive
body meat that we sold to soup manufacturers."
Seatech projects exports to the U.S. market last year
increased by around 30 percent over 2006.
An increasing focus by Chilean regulators on the
sustainability of nearshore fisheries has led to several
changes in the last decade. All along the coast, fishermen's
syndicates have been given control of local resources within
management areas, which they must manage under the purview of
the state. The results, in many cases, have led to increased
production and higher prices. But crab processors supply export
markets and are vulnerable to global variables.
"The small plants that rely on wild and low-volume products
like shrimp and crab are having a hard time keeping their heads
above water when they sell in U.S. dollars," says Wendt.
Seatech's reliance on Chilean crab has led it to become
active in developing sustainable fisheries.
"We are starting up a new crab fishery in North Central
Chile that relies on artisanal vessels and a larger vessel that
has been outfitted with longline pot fishing gear under the
guidance of a longtime Alaska crab fisherman," says Wendt.
"There is also a well-developed fishery around Chiloé Island.
The demand and the harvest seem to be pretty much in
equilibrium in my estimation. With both resources we expect to
have viable fisheries for the long term."
While Wendt lauds the quality of product coming out of
Chile, he warns against overglazed langostinos.
"A market demand has been created for langostinos with a 30
to 35 percent glaze," says Wendt. "This allows an innately
expensive product to be sold at a lower price." Much of the
product, Wendt assumes, "ends up in the hands of unsuspecting
consumers who have no idea how much water they are buying."
Chile has an important fishery for merluza, known as hake or
whiting in the United States. Artisanal and industrial fleets
fished a quota of less than 30,000 metric tons in 2006, down
from a high of 70,000 metric tons in 1988. The United States
imports less than 10 percent of Chile's hake harvest. U.S.
whiting buyers are mainly medium-sized companies that source
direct from Chilean processors.
While global supplies hold prices of whitefish stable,
artisanal producers in Chile are seeking sustainability
certification for their hook-caught hake from the Marine
Stewardship Council (MSC). That process is just beginning, but
fishermen hope to reap higher prices from conscientious
consumers in Europe, and some U.S. retailers are also looking
at marketing eco-friendly whiting.
Paul Molyneaux is a freelance writer and author of "The
Doryman's Reflection" and "Swimming in Circles"