The Peruvian Ministry of Production (PRODUCE) allowed fishing of the essential anchovy and white anchovy supply to begin yesterday (April 16) with a quota of 2.475 million tons (mt), signaling a rebound from low quotas in 2023.
This will come as a relief to the omega-3 industry following concerns that the first season may not take place due to biomass sustainability uncertainty.
Low quotas last year, caused largely by the El Niño event, led to inflation across the omega-3 oils industry.
According to public data published by Peruvian customs, the net weight of exported refined fish oils for human consumption amounted to 43,342,750 kg at a value of $194,557,664 in 2022, reflecting a cost of $4.48 per kg.
In 2023, the total net weight exported was just 19,566,027 at a value of $151,704,443 - amounting to $7.75 per kg. Comparing the start (Jan and Feb) and end (Nov and Dec) of 2023 alone, the price rocketed from $5.83 to $11.12 per kg.
Marine ingredients organization IFFO recently revealed data from its membership, which accounts for 55% of global marine ingredients production (in Peru, Chile, Norway, North Atlantic, USA, African countries, Spain), showing cumulative output of fish oil in February 2024 was 13% down year on year.
The organization welcomes the newly announced quota.
"The industry is positive about this quota, which signals a rebound after last year’s quotas at respectively 1.09m mt (first season, cancelled due to the repercussions of the El Niño event) and 1.68m mt (second season)”, Dr Enrico Bachis, IFFO’s Market Research Director, stated.
Dr Aldo Bernasconi, VP of data science for GOED (the Global Organization for EPA and DHA Omega-3) echoed the positivity.
"The quota for the current season signals a return to normal fishing levels and indicates that the biomass remains healthy after the last El Niño event," he said. "This is good news for an omega-3 industry very concerned about supply."
Odd Brede Langdal, global supply planner omega-3 at Norweigan marine ingredient supplier Epax, noted that even companies like his that have diversified sourcing to reduce reliance on anchovy will be relieved to see quotas return to normal levels.
“We are pleased to see that the Peruvian authorities feel confident in setting a higher quota for the upcoming season, as this means that both the sustainability management of the fishery has been successful, and that we can expect some relief in the pressure in demand for the fish meal and fish oil industries,” he said.
However, he noted the remaining downside is the negative effect El Niño had on the diet of the fish, likely resulting in lean fish, "which in turn translates to low yield in production and thus continued higher than normal manufacturing costs for the industry."
What happened to supply?
The challenges in supply began in 2022 when the production of crude oil was lower than in previous years, leading to increased prices. This led many refiners and concentrators to rely on existing stocks in anticipation of a better season in 2023.
In June 2023, the first of two fishing seasons in the North Central region of Peru was cancelled within a few days of opening due to a high number of juveniles.
The situation was exacerbated by the El Niño event warming the waters and moving the adult anchovy biomass away from the accessible fishing areas.
In October 2023, PRODUCE set a quota of 1.6 million metric tons of anchovy. Of that small quota, oil yields were very low, due to lean anchovy, thereby resulting in even less EPA and DHA oil.
Speaking at the GOED Exchange in January this year, Gonzalo Caceres, commercial director at TASA, the leading producer of fishmeal and fish oil worldwide, predicted that quotas would return to normal this year but noted the question will be the fat content of this year’s supply.
"Looking at projections, we are going to see neutral conditions—normal temperatures in the Peruvian sea—this is telling you the quota should be good, the biomass should be normal," he said. "The question is, what will the fat content be?"
The omega-3 experts at the conference agreed producers would need to look at other avenues of omega-3 oil, consider blending sources and figure out a way to stock inventory when there are peaks in production to avoid the challenges of last year.
Noting the sales impact of the cost rises, Ray Gosselin, EVP and chief operations officer at U.S. supplements brand Pharmavite, said that while dollar value of the market was up, demand dropped due to price increases and general inflation.
"In terms of household penetration, we’ve lost 1.2 to 1.3 million consumers over the past 18 months or so as prices have risen," he told the GOED Exchange audience.