Fish feed. (Photo: Stock File)

Fishmeal shortages spur mergers and investments in aquaculture

Fish farming is increasingly becoming more important as the world is eating more farmed fish than wild one. And this implies the existence of a developing market that drives business and investment.

With fishmeal production unlikely to meet the demand of feed producers, companies are looking for alternatives to stay in business, said Mike Velings, a managing partner at Aqua-Spark, a fund investing in aquaculture.

Fishmeal production is estimated to be about 300,000 metric tonnes lower than consumption this season, according to the US Department of Agriculture (USDA) data, while in Peru, the world's largest fishmeal producer, prices have more than tripled since 2001, Bloomberg reports.

Velings foresees, "In the next five years, there is actually going to be a structural shortage in the market for fishmeal, so everyone sees a market opportunity in the short term."

Large companies prefer to invest in feed rather than on aquaculture production because it tends to grow a little faster and has no risk of diseases that may hinder production. Besides, it is less exposed to commodity-cost fluctuations, seafood industry analysts point out.

Cargill, for example, completed last October the purchase of Ewos, a world leader in salmon nutrition. And it plans to continue its expansion in the area of aquaculture, given that it is anticipated that the need for protein worldwide will grow 70 per cent by 2050. 

The Minneapolis-based food producer, along with Aqua-Spark and others, provided USD 30 million in funds to fish-feed maker Calysta Inc. this month, Bloomberg report informed.

As part of the growing trend of mergers and acquisitions in the sector, the purchase of salmon food supplier Nutreco NV by SHV Holdings NV, and the purchase of salmon farmer Cermaq ASA by Mitsubishi Corporation were also materialized.

For a plant to be profitable, producers need to invest to bring technology to a level at which the output can be expanded at a reasonable cost, Aqua-Spark manager stressed. Calysta hopes to bring its first commercial scale plant online by 2018, and it will probably be in the U.S.

Meanwhile, analysts foresee Chinese companies may also join the rush for mergers and acquisitions in this promising sector.

Related article:

- Cargill completes Ewos acquisition
- SVH increases its offer for Nutreco
- Mitsubishi offers USD 1.4 billion for Cermaq

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