By Nathan Gill and James Attwood

     July 22 (Bloomberg) — Salmon prices, which gained as much as a third in the U.S. this year, may extend the rally as a virus hurts output in Chile, the nation’s biggest publicly traded producer said.

     Prices may rise a further 20 percent this year amid tumbling output in Chile, the world’s second-largest supplier of the fish, said Jason Paine, head of the U.S. unit of Puerto Montt, Chile-based Multiexport Foods SA. Exports to the U.S. could fall as much 60 percent by year’s end, he said.

     “Realistically we could see a 10 to 20 percent price increase globally,” he said. “In the next six months we are going to see the impact of this disease in the U.S. market.”

     An outbreak of Infectious Salmon Anemia, or ISA virus, has swept through farms off southern Chile’s Chiloe Island, forcing early harvests and emptying once-teeming cages. That’s driving up global prices as U.S. grocers and restaurants turn to alternative salmon suppliers in North America and Europe.

     The price of fresh salmon filets from Chile imported into the U.S. has risen 33 percent to $4.40 a pound this year, while similar cuts from Canada have gained 10 percent, according to Paine. Chilean exports of the fish to the U.S. fell 25 percent in the first four months of 2009 and could fall a further 50 percent to 60 percent by the end of the year, he said.

Not Deterring Demand

     Higher prices have yet to deter demand for salmon, recommended by the American Heart Association for its heart-healthy Omega-3 fatty acids, Paine said. Multiexport has begun buying more expensive wild Alaskan salmon to maintain its market presence in the U.S., he added.

     “That healthy lifestyle trend is still fairly strong,” he said. “The wildcard here is demand, when will that consumer start looking for another protein in place of salmon? That’s the million dollar question.”

     Frank Patti, manager at Pensacola, Florida-based Joe Patti’s Seafood Company, said he’s absorbed salmon price rises since last year to keep customers happy. Prices for the Norwegian wild salmon he buys have increased at least 30 percent to $5.15 a pound since November, he said.

     “All I know is I’ve got customers wanting salmon,” Patti, who buys about 2,000 pounds of the filets a week, said in a July 17 telephone interview. “There’s been more than one occasion when I’ve run out of it and customers get angry.”

     David Kerstens, a London-based analyst at UBS AG who covers Marine Harvest ASA, the world’s largest salmon farmer, said prices should climb further amid supply disruptions.

Spot Prices

     “I don’t think that’s fully reflected in current spot prices in Norway yet as the export opportunities for Norwegian salmon farmers to the U.S. will only increase further in the second half,” Kerstens said. “All factors equal, you would expect that prices should continue to benefit from that.”

     Slumping supplies from Chilean producers such as Multiexport and Invertec Pesquera Mar de Chiloe SA are boosting the earnings outlook for producers elsewhere, according to Kerstens. He’s advising clients to buy Marine Harvest as higher prices and sales from Norway offset lost Chilean output.

     “The Norwegian industry is slowly invading our most profitable and traditional market which is the U.S.,” said Cesar Barros, president of industry association SalmonChile, whose members represent about 90 percent of the country’s salmon and trout exporters.

Producer Debts

     Chilean producers owe banks as much as $2 billion and suppliers another $1 billion, Barros said in a June 24 interview. About 12,000 people may lose their jobs this year in Chile because of shrinking output, Barros said.
     Still, not all producers in Chile are cutting back. Alan Cook, chief executive officer of Salmones Cupquelan SA, a unit of New Brunswick, Canada-based Cooke Aquaculture, said his company has so far escaped the virus in Chile and is “actively” seeking acquisitions in the country.