Trading Salmon derivatives at Fishpool

Fish Pool ASA is operating an authorized marketplace for the trading of derivates within fish and seafood at a global level. The first product offered is financial salmon contracts.

Atlantic Salmon is a commodity traded at a global level and is a product still experiencing a tremendous growth rate both in supply and demand. The prices, which are highly volatile, represents a continuous risk for all parties involved. The lack of predictability makes it difficult for the buyers and sellers to plan their investments and operational activities in a longer time perspective. The industry needs an instrument for risk management which can offer a better predictability for the bottom line and at the same time offer the flexibility needed in order to trade an underlying biological product.

Financial contracts represents such a tool. A financial contract works independent of the physical delivery of fish. The fundament of this kind of concept is that a buyer and a seller – with Fish Pool as intermediate- agree on a price and a fixed volume for a future delivery. When the contract has come to the realisation period, the buyer and seller will either receive or pay the difference calculated in between their contracts and the last months average Fish Pool Index TM.

Fish Pool in brief:

1. Two Trade members at Fish Pool agree today about a price in NOK/kg and a volume in 10 tonnes lots for a future month. This is the Contract price.
2. The Contract price reflects the expected future price for fresh, gutted salmon 3-6 kg, Superior Quality, delivered FCA Oslo.
3. Fish Pool Index TM reflects the average total monthly market price for fresh, gutted salmon delivered FCA Oslo. This is called the spot price (NOK/kg).
4. If the spot price for the contracted month is higher (lower) than the Contract price, the seller (buyer) pays the buyer (seller) the difference between the Contract price and the spot price multiplied by the Contracted volume in kg.

Illustrative example:

A buyer and a seller agrees on a contract in December 08 for a price of 24,50 NOK/kg for a volume of 100 ton at Fish Pool. The contract is to be settled in January 2009.

When January 2009 arrives, the following happens:

• The average market price (reflected by the Fish Pool Index TM) for December 08 turns out to be 25,50 NOK/kg.
• The buyer and seller are settled against the Fish Pool Index TM. In our example the difference between the contract price and the index is 25,50 NOK/kg – 24,50 NOK/kg = 1,00 NOK/kg. In our example, the buyer receives a payment of 1,00 NOK/kg x 100 t = 100.000 NOK, which is to be covered by the seller of the contract.
• Both parties has managed to secure their price at a level of 24,50 NOK/kg at the time of settlement.
• When entering December 2008, both parties will be able to buy or sell their fish in the physical spot market at a level of approximately 25,50 NOK/kg.

What are the advantages with this concept?

In contrast to the traditional physical contract, well known to the salmon industry, the financial contracts offers the following advantages:

• Opportunities for a more stable and predictable income.
• Long term horizon. Focus on prices up to 2 years ahead.
• Insertion of smolt based on factual price information.
• Ability to make back-to-back fix price agreements
• Opportunity to secure a price but still have the full flexibility concerning decisions related to harvesting, processing or trading of fish.
• Easy and flexible to enter and to exit contract positions.
• Trading the next 2 years independently of biomass.

Contact Information

Address:
Storetveitvegen 98
5070 Bergen
Norway

Tel.: +47 55 70 67 00
Fax.: +47 55 70 67 01

e-mail: post(at)fishpool.eu
Web: www.fishpool.eu

Direct lines:

• Søren Martens, Managing Director: +47 930 82 235
• Birgitte Sørheim, Marketing Manager: +47 901 98 860
• Francois Perrone, Market Manager: +47 404 00 464
• Øyvind Hegset, Key Account Manager: +47 909 38 878
• Tor Ole Rognaldsen, Market Operator: +47 414 03 284