Peru’s extended fishing ban and possible ‘super’ El Niño test omega oil supply resilience

El Niño, the natural Pacific weather pattern that raises global temperatures, officially began on June 11, confirming predictions made by the World Meteorological Organization (WMO) earlier this year.

The start of the event was marked by a 0.5°C (0.9°F) rise in average sea surface temperatures in the central and tropic Pacific. In addition, the WMO predicts a 63% chance that temperatures could rise by 2°C (3.6°F) from November to January, which would make the event one of the most extreme on record.

El Niño episodes have historically caused flooding, drought and wildfires, impacting agriculture and global food stocks. They also disrupt global fish supply by suppressing the natural upwelling of cold, nutrient-rich water, stunting the production of phytoplankton and starving smaller fish. Some fish—such as the Peruvian anchoveta which account for more than half the global supply of fish oil—either relocate or move to deeper waters, significantly depleting catch volumes.

This year, Peru’s fishing season has progressed slowly due to the resulting high proportion of juvenile fish, leading to the extension of the fishing ban that had been in place since May 27.

Dr. Enrico Bachis, market research director at The Marine Ingredients Organisation (IFFO), said a full cancelation, as seen in 2023, remains possible and that this could drastically alter the fish oil market, limiting supply and amplifying costs.

“El Niño‑driven effective shortages or anticipated shortages typically reduce volumes and affect prices across the entire global feed and aquaculture system, with fish oil hit hardest,” he said. “Peru accounts for a large share of global fishmeal and fish oil supply, so disruptions quickly tighten availability. Buyers adjust their procurement strategies while exporters and traders hold inventory longer and demand higher premium prices.”

Low quotas and high juvenile rates already constraining supply

Peruvian fishing quotas are determined by biomass assessments and environmental conditions. A high level of juvenile fish indicates that the biomass could be under stress, a situation which is only exacerbated if they are harvested before they reach adulthood and reproduce.

As a result, Peruvian authorities closely monitor these characteristics and set catch quotas or suspend fishing seasons altogether to safeguard the stock’s future sustainability.

Peru’s regulatory body, PRODUCE, set this year’s total allowable catch (TAC) limit at 1.9 million tonnes—one of the smallest and most restrictive initial quotas for a first fishing season in a decade. Of this conservative limit, only 490,000 tonnes reached the shore (roughly 26% of the quota) before the authorities announced the ban.

Oyvind Ihle, CEO of Global Sustainable Seafood Initiative (GSSO), said the fish were also producing lower oil yields, meaning that overall output is likely be significantly lower than usual.

“The fish is less oily, spending energy when swimming deeper or migrating to the south for colder waters and having less available plankton,” he said. “The resulting fish oil output could be a fraction of a normal season, potentially closer to 6,000 tonnes than the 70,000–100,000 tonnes in good years.”

However, the extent of the impact will largely depend on whether a ‘super’ El Niño event comes to pass. There are currently two working predictions: one from the Multisectoral Commission for the National Study of the El Niño Phenomenon (EFNEN) and one from National Oceanic and Atmospheric Administration (NOAA).

“If ENFEN, the Peruvian meteorological authority, is right, we will get a moderate coastal El Niño,” Ihle said. “This would still imply uncertain and curtailed fishing volumes. We’d also see continued poor fatty acid profiles. Industry observers expect the annual totals to end up around 30–35,000 tonnes.

“Or, if NOAA’s more severe Pacific-wide outlook ultimately translates into stronger coastal impacts than ENFEN currently expects, we’ll see a very strong El Niño in Peru’s all-important central-north zone. In this scenario, there will be either a full anchovy fishing ban or only very selective fishing down south, towards the Chilean border.”

Ihle added that while EFNEN’s prediction currently appears more likely, supply is expected to be constrained either way, which will push prices higher.

Managing stock and cost fluctuations

Following the cancelation of the entire 2023 fishing season, fish oil production dropped significantly. Data published by Peruvian customs shows that in 2022, the net weight of exported refined fish oils for human consumption was more than 43,000 tonnes. That figure fell by more than than half in 2023, dropping to about 19,500 tonnes.

In 2022, the price of fish oil was around $4.48 per kg, rising to $5.83 per kg in early 2023 before surging to $11.12 per kg by the end of the year. Suppliers had to decide whether to absorb these costs to secure a market advantage or pass them onto consumers.

While there are concerns that similar price hikes could materialize later this year, particularly if the fishing ban remains in place, Ellen Schutt, managing director of Global Organization for EPA and DHA Omega-3s (GOED), noted that suppliers seem better prepared than previous years.

“We have doubts that the fishing season will reopen because fishing is usually only permitted until July,” she said. “Once the anchovy starts spawning, then the season is closed for sustainability reasons, so this is going to have a huge impact on supply.

“However, from speaking to our members, most companies seem to have enough supply to see them through to the end of the year. The question becomes next season, which happens in November and December—we don’t know what this season will bring.”

Erik Hessen Troøien, operations director at marine omega-3 oil supplier Epax, said crude fish oil prices have already risen and warned that a strong El Niño later this year could drive those prices even higher. In the face of potential constraints, the company has undertaken measures to ensure that supply remains healthy, including diversifying across species and regions and stockpiling crude oil.

“Managing crude oil fluctuation is not something new to Epax or other major players in the industry,” he said. “Epax has taken several steps to even out supply chain fluctuations; we are vertically integrated through our owner Pelagia AS giving us increased access to supply; we hold a very healthy safety stock level of crude oil; we have an extremely efficient production layout which enables us to utilize the crude oil in the best way possible; and we maintain sourcing diversity across both species and regions.”

Importantly, the supplement industry is also competing with the aquaculture industry for supply, with at least 80% of the Peruvian catch directed to animal consumption.

“Compared to 2023, the supplement industry is much more aware of the aquaculture industry as a competitor,” Schutt said. “The fish feed companies who are selling to salmon farmers need EPA and DHA in their feed or the salmon won’t survive. So, they are definitely competing for the same oil as the supplement industry, which makes the situation more challenging.”

Stability and security in diversity?

Schutt noted that GOED has long advised its members to prioritize the category’s long-term stability by diversifying their sourcing strategies and exploring alternative raw materials instead of returning to dependence on the more cost-effective Peruvian anchoveta when fishing seasons reopen.

As climate volatility continues to impact marine ingredient supply, Matts Johansen, CEO of krill and algae oil supplier Aker BioMarine, said that sole reliance on fish oil is not sustainable.

“I believe that without diversification, we will run out of omega-3s in the next 12 months leading to empty shelves worldwide,” he said. “There is simply not enough fish oil available now to meet rising demand from aquaculture as well as existing products for human consumption. In collaboration with other subject matter experts, we strongly recommend that retailers and brand owners with fish oil in their portfolios reassess their omega-3 strategies and incorporate alternative sources such as krill and algae-based oils.”

Among companies broadening their omega-3 portfolios as part of civersification strategy, is KD Pharma, which launched its branded algae oil ingredient, Alga3, in 2021.

Adam Ismail, chief business officer at KD Pharma Group, said algae and other omega-3 sources should be used as complementary source rather than a replacement for fish oil, particularly given that algae oil is still significantly more expensive to produce than fish oil.

“Algae-based omega-3 sits outside the marine catch cycle entirely, so it isn’t exposed to El Niño in the way wild fisheries are,” he noted. “We see real opportunity in algae and in algae-marine blends, [which] add resilience to the overall supply picture and give formulators more options.

“We also see this as an opportunity for the plant-based sources of long-chain omega-3s that have been in research for a long time and are starting to come to market. Disruption tends to accelerate exactly this kind of diversification and innovation, and we’d rather help lead it than resist it.”