The chief executive of High Liner Foods says higher prices are expected for shrimp over the next six to 12 months due to the massive oil spill in the Gulf.
Henry Demone of High Liner Foods Inc. said during a conference call Wednesday there's been an international shortage of fresh shrimp supply since the catastrophe.
"Buyers are out on the market trying to replace that supply and that's led to higher shrimp prices," he said, while answering a question from research analyst Carolyn Dennis. Demone said the reduced supply of fresh shrimp from the Gulf is being replaced by farmed shrimp worldwide, and that has tightened overall supply.
He predicted over time aquaculture operations will increase production and prices will stabilize.
While prices for raw materials may be on the rise, High Liner Foods still reported strong results in its first quarter.
Sales volumes increased three per cent from the same period a year earlier.
"It represents the first quarter of growth in this market since the economic downturn," said Demone. "We are hopeful that this is signalling the recession is behind us and consumers will be frequenting restaurants again."
Net income was $7.2 million or 39 cents per share in the quarter. A year earlier, net income was $6.7 million or 36 cents per share before adjustments and $7.3 million or 40 cents per share after excluding one-time and non-operating items.
Demone didn't address whether the strong results would be set back by the higher prices of fish.
However, he was clear that price hikes in the raw products were coming in shrimp, as well as in salmon.
"There were marginal shortages of shrimp before this sad environmental tragedy in the Gulf of Mexico and that has pulled a large volume of fresh supply that typically went into the southern U.S.," he explained.
Demone said it isn't necessarily a permanent increase.
"It tends to be a farmed product rather than a wild product. ... It will attract more supply and farmers will stock more in their ponds."
The executive said the price of salmon is also headed upwards, and that this price increase could last longer than the shrimp price hikes.
The salmon comes from the North Pacific, as well as from farmed production in Norway, Chile, Canada and the Faroe Islands.
The Chilean production has been sliced due to serious disease outbreaks in both the aquaculture farms and in the wild.
"We don't think that is a temporary increase. We think that increase will persist at least through 2011 and maybe a little bit longer," said the executive.