Tassal has increasing fish volumes which must be sold. Their core performance hinges on the Australian market. The forward trading dynamics are unfavourable imo: - excess international supply, collapsing prices - excess local supply, peak prices holding
Imo, this is unsustainable. My guess is that local bulk buyers will start demanding better prices. I suspect local market growth is limited at high prices, though there would be growth at lower prices and margins.
Due to import requirements, there is some de facto protection of local producers – which has tended to mean Australians pay higher prices.
Another possible outcome is that, at some price point, genuine international competition starts when the low international price warrants the big international players incurring those extra entry costs - to sell into the Australian market.
With the international supply, prices are on the biggest % slide since 1983. I was concerned to see that Tassal are not pursuing additional exports, as year-end spot prices were BELOW THEIR MARGINAL COSTS of production (which itself, will be considerably lower than their full cost of production).
The forecast is for a greater global excess of salmon. Zero margin, on marginal cost, is very serious if it continues.
I'm sitting on my hands at preent and waiting to see how the dynamics pan out.
TGR Price at posting:
$1.24 Sentiment: None Disclosure: Held
