Matt Craze: ‘Big ag’ omega-3 solutions in canola oil, algae stoke fears for fishing companies

[Chile] Cargill’s recent announcement that it can obtain docosahexaenoic (DHA) and eicosapentaenoic (EPA) fatty acids from canola oil could mean fish feed suppliers essentially have no need for fish oil.

The world’s biggest fishmeal producers are in danger of losing their most lucrative market after a massive multi-year R&D effort which has been led by big agriculture – namely the big four of Archer-Daniels-Midlands, Bunge, Cargill and Louis Dreyfus — known collectively as the “ABCD”, to unlock the secret of replacing the essential omega-3 amino acids found in fish oil.

Cargill, through the 2015 acquisition of Norwegian feed supply company EWOS, has been one the most aggressive entrants of all in looking for a game-changing solution.

In particular, it has developed a secretive R&D initiative with Germany’s BASF in the rural US state of Montana that stands out as potentially the biggest game changer of them all —  a method of mass-producing the essential omega-3 fatty acids EPA and DHA, that is currently only found in diminishing anchovy supplies from the Pacific Ocean.

A host of rivals are working on algae-based feed and have made a string of announcements in recent months of early product development.

“We are very, very close to having alternatives,” Einar Wathne, director of Cargill Aqua Nutrition told Undercurrent News at the company’s new R&D plant in Colaco, Chile. “They are coming and we have a handful of suppliers in semi-commercial volumes.”

Cargill’s collaboration with BASF predates its €1.35 billion acquisition of EWOS last year from private equity funds Altor Fund III and Bain Capital Europe III. The two companies started their canola oil joint venture in 2011, initially targeting the omega-3 supplement industry.

Back in 2011, the companies said the global market for foods, beverages and supplements incorporating omega-3 was worth $7.5bn in 2010 and was predicted to grow at double digit rates.

The salmon industry, which has also expanded exponentially in the past decade, targeted limited fish oil supplies as the one of industry’s biggest challenges back in 2008 and allocated capital to be used in grassroots R&D, said Geir Molvik, CEO of Cermaq, the world’s second-largest salmon farmer behind Marine Harvest.

“As an industry I think we really identified this as our problem in 2008, that was because we then saw that Omega-3 could be the limiting factor for long-term growth and the only source was marine oils,” Molvik told Undercurrent. “We started to work with this, to try and identify potential sources and encourage the industry, our suppliers, to look for solutions.”

Animal nutrition company Alltech, Switzerland’s DSM Nutritional Products and Germany’s Evonik Nutrition & Care are all working on their own formulas for commercially-scale algae oil. Skretting, the fishmeal arm of Holland’s Nutreco, said on Oct. 3 it will start to sell the DSM/Evonik joint venture product.

Massive investment would be required to ramp up algae oil production capacity to meet the demands of the global aquaculture industry, besides the human nutrition segment, according to Leslie van der Meulen, chairman of GOED (Global Organization for EPA and DGH omega-3s).

But it has the been the ABCD’s cozying up to the aquaculture industry that has made the threat to the traditional fishing industry real.

Cargill, besides the BASF joint venture, is working with biotech start-up Calysta to build a new larger plant for its methane-based fishmeal substitute, after inaugurating a sample-quantity factory in Teesside, UK in September.

Bunge partnered with algae specialist company TerraVia to expand its algae formula at a plant in Brazil, and the joint venture company is looking to expand into other areas of the world. The product will be used by Denmark-based feed company Biomar.

Archer Daniels Midland’s announced the entry of its DHA Natur algae biomass in June, that uses heterotrophic algae which is easier to grow than phototrophic algae. Of the big four, only Louis Dreyfus is yet to announce an expansion into aquaculture feed.

“The big players and smaller players are coming up with new solutions now, but maybe the best solutions haven’t come up yet,” Marine Harvest CEO Alf-Helge Aarskog told Undercurrent. “This is like new cars, where the next model is always slightly better. This is about technology.”

The evolution in aquaculture feed away from marine ingredients is now well into its late infancy. Feed suppliers have been slowly switching to agricultural feeds to substitute fishmeal and even other animal proteins. However, the fish oil has been the mainstay source of protein and omega-3 for its “very good mix of amino acids”, according to a 2014 Rabobank study.

The salmon industry has been putting in question the health benefits of eating fish by using too little fish oil and therefore omega-3, and excess omega-6, another fatty acid that interferes with the health benefits of omega-3, according to Humberto Speziani, managing director of Tecnologia de Alimentos, known as TASA, the world’s largest fishmeal processor.

“There is a growing imbalance in the proportion of the fillets, and the informed consumer is going to question that,” Speziani told Undercurrent in the company’s Lima headquarters in September. “They are playing with fire if they decrease the quantity. It can turn into a ‘chicken of the sea’,” he said, referring to scientists who have questioned the nutritional value of some varieties of canned tuna.

The fish feed industry’s use of omega-3 in aquaculture has already been steadily fallen in recent years, according to a study by Stirling University.

Fish oil also comes with micronutrients from the sea that make up the overall dietary supplement of farmed fish and forms part of its immune system, Speziani said. The executive, who has worked in the fishing industry since the 1960s, says the fishing and feed industries need to recalibrate the commercial relationship between the different actors in the market.

The solution lies in rebalancing the way fish oil is used. TASA would be happy to sell directly to the fish and feed aquaculture industries, instead of to the human nutrition market in the form of supplements, he said.

“There is sufficient oil, if it doesn’t go to humans there is enough oil, but they [the fish feed industry] have to pay the price,” Speziani said. “This is a question of price.”

Fishmeal prices have been a rough ride for the feed industry. The Peruvian fishing industry has suffered from three years of El Nino weather, which brings warmer, saltier waters to the  Humboldt current and saps the cold waters of its main inhabitant — anchovy. Prices for superprime fishmeal shot up to $2,388 per metric ton in December 2014 on news on a devastatingly bad fishing season in the key center-north area. The price currently trades at about $1,600/t.

Monthly fishmeal and pellet prices, CIF Peru, 65% protein, in US dollars per metric ton, from September 2014 to August 2016. Source: World Bank / Undercurrent News prices portal
Monthly fishmeal and pellet prices, CIF Peru, 65% protein, in US dollars per metric ton, from September 2014 to August 2016. Source: World Bank / Undercurrent News prices portal

Fishmeal will have a long-term future even as fish feed companies reduce their formulas of marine ingredients, especially as the aquaculture market is poised to rapidly expand Raul Briceno, CFO of Peruvian fishmeal company Exalmar told Undercurrent.

“There is always going to be a market for our product, but not at the prices we have seen before,” Briceno said from his company’s office in Lima. “I think at the level of current prices, at about $1,600/t, the market will want our product.”

One of the fishing industry’s other potential solutions to the aquaculture industry – using trimmings that are tossed back into the sea from fishing trawlers – is not very easy to accomplish because many vessels are not equipped with the storage facilities to store the extra biomass.

“In wild catch where the fish are processed onboard, the norm is to let offcuts and guts return to the ocean,” Aarskog said. “There is big potential to collect these raw materials as a valuable input to the feed industry for farmed fish.”

 

 

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