Norway’s fish exchange plans to develop salmon futures. http://www.ft.com/cms/s/2698ca92-f1ce-11db-b5b6-000b5df10621.html. This announcement is an important milestone in aquatic agribusiness. The development of fish farms for salmon has actually led to a market environment that makes futures trading rational. Fish farming has created homogeneous product with salmon. It has also created production risk which needs to be managed and can be hedged.
Fish production through farms is similar to the risk management issues faced by cattle feedlot operators. Along with the price risk during the production phase, there is a seasonal risk when the fish mature and are brought to market. Hedging with futures can lock-in price on production and may allow the further development of aquatic farming. Hedging can lower financing risks. Salmon farmers may be able to receive the same benefits as traditional agricultural users of futures.
The need for salmon futures did not exist until fish farming was created on a large scale. This was not possible a decade ago. Though most futures markets fail, it will be exciting to watch this potential market develop.
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