Market Analysis – 70101703 – Fish production

Market Analysis Brief: Fish Production (UNSPSC 70101703)

1. Executive Summary

The global fish production market is a vast and transforming industry, with a total first-sale value of approximately USD 424 billion in 2022. Driven by population growth and health trends, the market is projected to grow at a est. 4.1% CAGR over the next three years, with aquaculture now surpassing wild-capture fisheries as the primary source for human consumption. The single greatest challenge and opportunity is the transition from supply-constrained wild fisheries to technologically advanced, sustainable aquaculture to meet escalating global demand. Failure to manage this transition poses significant supply and ESG risks.

2. Market Size & Growth

The global market for fish production (fisheries and aquaculture combined) represents a significant portion of the global food system. Growth is now almost entirely dependent on the expansion of aquaculture, as wild-capture volumes have remained static for over three decades. Asia, led by China, overwhelmingly dominates global production.

[Source - FAO, OECD, internal analysis]

Top 3 Geographic Markets (by production volume): 1. China 2. Indonesia 3. India

3. Key Drivers & Constraints

1. Demand Driver: Growing Protein Needs & Health Focus. A rising global middle class is increasing per capita protein consumption. Fish is favored for its health benefits (e.g., Omega-3 fatty acids), driving demand above population growth rates.
2. Supply Constraint: Stagnation of Wild-Capture Fisheries. Wild-catch volumes have plateaued at ~90 million tonnes annually since the late 1980s due to fully exploited or overfished stocks. This places a hard ceiling on supply from traditional sources. [Source - FAO, 2022]
3. Input Cost Volatility. Production costs are highly sensitive to price fluctuations in fish feed (soy and fishmeal), which can constitute 50-70% of aquaculture operational expenses, and marine fuel for fishing fleets.
4. Regulatory & ESG Pressure. Governments and consumers are demanding greater sustainability and traceability. Regulations targeting Illegal, Unreported, and Unregulated (IUU) fishing, carbon emissions, and aquaculture effluent are tightening, increasing compliance costs.
5. Technological Shift to Aquaculture. Aquaculture is the only viable path for growth. Investment is pouring into higher-intensity systems like Recirculating Aquaculture Systems (RAS) and offshore farms to increase yields and manage environmental impact.
6. Climate Change Impact. Ocean warming and acidification are altering the distribution and abundance of wild fish stocks. Extreme weather events pose a direct physical risk to aquaculture infrastructure.

4. Competitive Landscape

The market is highly fragmented. While a few large, vertically integrated players exist, the vast majority of production comes from small-scale, independent operators.

⮕ Tier 1 Leaders * Mowi ASA: World's largest producer of Atlantic salmon, demonstrating deep vertical integration from feed production to consumer products. * Maruha Nichiro Corp.: Japanese conglomerate with a massive, diversified portfolio across wild-capture, aquaculture, and processed seafood. * Thai Union Group PCL: Global leader in shelf-stable tuna and a major producer of shrimp and other seafood products.

⮕ Emerging/Niche Players * Atlantic Sapphire: Pioneer in land-based (RAS) salmon farming, aiming to disrupt traditional sea-cage farming with a lower-carbon, localized model. * AquaBounty Technologies: Focuses on genetically engineered salmon that grows to market size faster, offering a potential boost to production efficiency. * The Kingfish Company: Specializes in high-value, land-based production of Yellowtail Kingfish, targeting the premium restaurant market.

Barriers to Entry are high, including significant capital intensity (vessels, farm construction), complex and lengthy permitting processes, biological risk (disease, mortality events), and the need for established cold-chain logistics.

5. Pricing Mechanics

The price build-up begins at the farm-gate (aquaculture) or ex-vessel (wild-capture) level. This initial price is determined by daily supply and demand, species, quality grade, and size. For wild catch, auction systems at major ports are common. For aquaculture, prices are often set by contracts that may include feed-price adjustment clauses.

From this base price, costs are added for primary processing (gutting, filleting), secondary processing (smoking, canning), packaging, cold-chain logistics, and import/export tariffs. Distributor and retailer margins are the final components. The entire value chain is exposed to volatility from key inputs.

Most Volatile Cost Elements: 1. Fish Feed: The cost of fishmeal and soy, primary ingredients, is highly volatile. The global fishmeal price index has seen swings of +/- 25% in the last 18 months. 2. Energy/Fuel: Marine diesel for vessels and electricity for land-based pumps are critical. Brent Crude prices have fluctuated by over 40% in the last 24 months. 3. Logistics: Air and sea freight costs, particularly for fresh products requiring an unbroken cold chain, remain elevated and subject to disruption.

6. Recent Trends & Innovation

• Land-Based Aquaculture Investment (Ongoing): Significant capital continues to flow into large-scale RAS projects globally. For example, Nordic Aqua Partners began its first harvest from its land-based salmon farm in Ningbo, China, aiming to supply the premium local market. [Q1 2024]
• Alternative Feed Commercialization (2023-2024): Companies like Protix (insect protein) and Veramaris (algal oil) are scaling up production to provide sustainable alternatives to fishmeal and fish oil, gaining traction with major feed producers and farmers.
• AI and Automation in Farming (2023-2024): Adoption of AI-powered camera systems (e.g., from Aquabyte, Observe Technologies) for automated lice counting, biomass estimation, and optimized feeding is increasing, promising improved efficiency and animal welfare.
• Consolidation M&A (February 2024): JBS S.A., a global protein giant, completed its acquisition of Huon Aquaculture in Australia, signaling a trend of large protein companies diversifying into the high-growth aquaculture sector.

7. Supplier Landscape

The global market is highly fragmented; market share estimates below often refer to a supplier's dominance in a key sub-segment (e.g., Atlantic Salmon).

8. Regional Focus: North Carolina (USA)

North Carolina presents a balanced profile of traditional fisheries and emerging aquaculture. Demand is robust, driven by a growing population, a strong tourism sector, and proximity to major East Coast metropolitan markets. Local wild-capture capacity, focused on species like blue crab, flounder, and shrimp, is significant but constrained by stock health and quotas managed by the NC Division of Marine Fisheries. The key opportunity lies in aquaculture, which the state actively promotes. The industry includes mountain trout farms and coastal plain operations for hybrid striped bass and oysters. While the state offers agricultural tax incentives, the primary hurdle for new projects is the complex and lengthy permitting process for water access and discharge, which is designed to protect sensitive coastal ecosystems.

9. Risk Outlook

10. Actionable Sourcing Recommendations

1. Diversify into Certified Aquaculture. The stagnation of wild catch (0% growth) versus aquaculture (~5% CAGR) is a structural shift. To de-risk supply, procurement should mandate that at least 40% of total fish volume be sourced from aquaculture by FY2026. Prioritize suppliers with Best Aquaculture Practices (BAP) or Aquaculture Stewardship Council (ASC) certifications to mitigate ESG risk and ensure responsible production practices.

2. Implement Indexed Pricing for Key Contracts. Feed and fuel account for over 60% of production costs. For strategic contracts exceeding $2M/year, negotiate pricing indexed to public benchmarks (e.g., a blend of a soybean index and Brent crude). This creates a transparent, formula-based mechanism for price adjustments, protecting against margin erosion from supplier-led increases and improving budget forecast accuracy.