Aquaculture Industry Faces Challenges Amid Fish Meal and Fish Oil Shortages

Growing Demand Drives Supply Concerns

The aquaculture industry is currently grappling with increasing demand for fish meal and fish oil, as detailed in a recent RaboResearch report. This surge is primarily fueled by the expansion of high-value species and more intensive farming practices. However, the industry is met with stagnant availability of marine ingredients, exacerbating the vulnerability to supply disruptions linked to climate change and recurring El Niño events.

High-Value Aquaculture Species Expand, Driving Aquafeed Demand

Global aquaculture production is on the rise, presenting a challenge in securing a stable supply of essential omega-3 fatty acids and proteins. Novel Sharma, a Seafood analyst for RaboResearch, emphasizes that “from 2024 to 2033, the production of mid-value and high-value fed aquaculture species is projected to grow at a compound annual growth rate of 3%, resulting in an increase of approximately 12 million metric tons over the next decade.” This growth is largely attributed to higher-trophic-level finfish and crustaceans, which have a considerable dependency on wild-caught fisheries for their primary dietary protein and lipid sources. Unfortunately, the current supply of commercial feed ingredients, particularly fish meal and fish oil, is not expected to meet the demands of this anticipated growth.

Rising Demand Outpaces Supply, Leading to Increased Prices

Fish meal and fish oil, derived from wild-caught fisheries, are facing limited potential for supply growth. The ongoing disparity between rising demand and stagnant supply foreshadows a tightening gap. Sharma warns, “Given the limited availability of effective substitutes at scale, even minor supply disruptions can trigger significant price hikes.” Recent supply disruptions have already had substantial impacts on fish meal and fish oil pricing, with shortages projected to become evident by 2028 for fish meal and escalating throughout the decade for fish oil. Such shortages may lead to heightened demand inelasticity, further fueling price volatility and establishing new pricing benchmarks in future supply shocks.

Climate Change and Supply Predictability Challenges

The production of fish meal and fish oil, which ranges from 5.5 to 6 million metric tons annually, heavily relies on the harvests and by-products from commercial fisheries. Many of these fisheries have reached sustainability limits, and the impacts of climate variability are further complicating supply stability.

Navigating Increasing Price Volatility

The aquaculture market is experiencing worsening price volatility, signaling a structural vulnerability within its value chain. Peru, the world’s foremost producer and exporter of fish meal and fish oil, significantly influences global prices; a drop in its output can lead to a 20% reduction in global supply. A notable supply shock in Peru in 2023, exacerbated by climate-related disruptions, pushed prices to unprecedented levels, showcasing the market’s responsiveness to supply changes. Although past disruptions were often transitory, the widening gap between supply and demand suggests that such volatility will likely continue.

Strategies for Stability in the Aquaculture Sector

To foster sustainable growth, Sharma advocates for the aquaculture industry to adopt proactive strategies aimed at securing access to essential feed ingredients. Future feed formulations will increasingly require novel sources, such as algal oil and insect meal, not only as alternatives but as critical components in ensuring resource stability. Emphasizing these innovations will be vital for building resilience and ensuring long-term sustainability in a resource-constrained environment.

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