Tassal walks from Coles contract

As global salmon prices soar amid falling supply, suppliers are changing their game.

Tasmanian salmon producer Tassal has today announced Aquaculture Stewardship Council (ASC) certification across its full salmon farming operation. Pictured is Peter Trott of WWF Australia (Policy manager of fishery martkets) and Linda Sams - head of sustainability, Tassal.

The much-loved snack of a bagel, cream cheese and smoked salmon might find itself short of salmon or a whole lot more expensive.

A salmon supply shortage from Norway to Chile and now Tasmania could threaten access to the premium seafood and put a rocket under prices, with Australia’s biggest salmon producer Tassal today withdrawing from two key supermarket contracts to redirect limited supply to other customers.

It has also forced up global salmon prices, with spot prices for Norwegian salmon recently jumping to 30-year highs.

The publicly listed salmon producer said it would walk away from tenders for two domestic Atlantic salmon retail supply contracts — a deal to sell its salmon to Coles, where it is sold at the chain’s deli counter, and another contract to supply US food giant Simplot with packaged salmon which is also sold in Coles.

The supply contract for Coles deli ends on June 4, while the contract with Simplot ends on June 30.

Tassal chief executive Mark Ryan said the decision to pull out of both contracts when they expire was to generate sustainable returns for the business in light of warmer water conditions that have hurt growing conditions for near-term supply of its Tasmanian-grown salmon.

And it’s not just a problem for Tassal. Last month Huon Aquaculture, which is also listed on the ASX, said hotter temperatures since December along the west coast of Tasmania — and in particular at its farms in Macquarie Harbour — had adversely hit oxygen levels and led to reduced salmon growth rates.

A smaller salmon harvest in Tasmania comes as the world’s two major producers, Norway and Chile, are not tipped to deliver additional supply to the market after four years of stock expansion. This means imports into Australia are expected to drop sharply and in turn ratchet up pricing.

Several Norwegian salmon firms have already started laying off staff as they have less winter salmon to slaughter. In January spot prices for farmed Norwegian salmon rocketed to the highest levels in 30 years.

Tassal shares slumped 8 per cent today on news of it pulling out of the two supermarket contracts and the shares were down almost one-third in value since the beginning of the year. In afternoon trading Tassal was down 28 cents, or 7.3 per cent, at $3.53.

Mr Ryan said the switch from Coles and Simplot would give the company the opportunity to redirect salmon production into other domestic markets to optimise returns.

“The export market continues to present favourable conditions given supply shortages globally that are expected to continue for the next two years, with increased pricing and a low Australian dollar.

“Tassal will continue to utilise the export market to balance sales volumes in line with optimising shareholder returns.”

Mr Ryan said the decision didn’t mean Tassal would stop supplying the supermarket chain.

“Tassal has had a long and enduring relationship with Coles. This relationship is not expected to change, and Tassal will continue to supply a wide range of salmon and seafood products to Coles.”