July 10, 2017 / 8:38 PM / in 4 months

Chile's salmon output may increase more than expected, help shares

SANTIAGO (Reuters) - Chile’s farmed salmon production could increase more than expected this year, helping share prices of Chilean producers at a time when salmon from leading global producer Norway is limited, according to a trade association and analysts.

As stricter regulations are implemented to tackle environmental problems that have decimated fish populations, local companies had forecast stable output in 2017 after a 20 percent decline a year earlier due to a deadly algae bloom.

Production now looks likely to surpass expectations, said Felipe Sandoval, president of the SalmonChile association, which represents producers.

“The companies are in better sanitary conditions. There has been less mortality,” Sandoval told Reuters last week. He said production could reach 720,000 tonnes in 2017.

Chile’s department of fish and agriculture, part of the Finance Ministry, said last year’s salmon harvest was 675,000 tonnes in the world’s No. 2 salmon producer, a level last seen in 2011. The low global supplies sent international prices soaring.

Norway has also struggled to raise output levels in recent years due to outbreaks of sea lice and disease.

After gains of as much as 200 percent in 2016, shares of Chilean salmon producers like Multiexport Foods, Camanchaca, Invermar and Australis Seafoods rose between 20 and 50 percent in the first half of the year, well above growth rates of Santiago’s benchmark index.

Analysts and traders said the shares have continued last year’s gains due to a combination of solid growth and demand.

“We have been aiming to improve our efficiency levels, focused on reducing costs, which, in spite of the production cycles, has already been reflected in our results,” said AquaChile, Chile’s largest salmon producer, in an e-mailed response to questions.

Salmon producers have benefited from lower food costs as fishmeal production rises, while the use of antibiotics has decreased, according to government data.

AquaChile lowered costs by 13 percent in the first quarter of 2017, in line with other competitors. The company’s shares rose 60 percent in 2016 and 13 percent in the first half of the year to 323 pesos and could rise another 25 percent, Guillermo Araya, analyst at local brokerage Renta 4 Chile said.

“According to technical indicators, this stock I see easily at 400 pesos,” he said. “(AquaChile) isn’t the only one that looks good, the whole industry does,” he said.

Reporting by Felipe Iturrieta; Writing by Caroline Stauffer; Editing by Sandra Maler

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