"Virus, Crisis: Perfect Storm Hits Chile Salmon Industry"

PUERTO CHACABUCO (Reuters) - A deadly fish virus and scarce credit have clobbered the salmon sector in Chile, the world's No. 2 producer, and industry workers like Cecilia Leue are panicked.

Packing choice cuts of bright orange Atlantic salmon at a plant in the town of Puerto Chacabuco in Chilean Patagonia, dressed from head to toe in white plastic overalls, Leue has watched the industry shed 6,000 jobs since infectious salmon anemia (ISA) emerged in 2007. She worries she could be next

"Fish is the only industry here. The issue of the ISA virus worries us a lot," the 20-year-old said through a mask.

"Scarce work because of the ISA virus affects us all," she added, stacking packets of salmon destined for a supermarket in Germany. "We are all worried how the market will react."

Leue and a team of around 650 workers wash, decapitate, gut, section and pack around 110 tonnes of Atlantic salmon a day.

Chile exported a record 445,000 tonnes of salmon and trout in 2008, worth just under $2.4 billion, up sharply from 2007 levels of 397,000 tonnes as salmon farmers harvested fish early to avoid ISA, which is like a deadly flu or cold for the most common Salar species, or Atlantic salmon.

But Chile's leading industry association, SalmonChile, expects output to fall around 30 percent in 2009 to around 320,000 tonnes because early harvesting will mean production gaps this year and sees similar output levels in 2010.

It expects to see a recovery in 2011. Salmon is one of Chile's main exports after copper, fruit and wood pulp.

Demand for salmon is firm on international markets and prices are near record highs despite the impact of the global crisis, industry officials say, but the crisis is closing avenues to financing needed to combat the virus.

DOUBLE-WHAMMY

"We call it the perfect storm," said Emilio Rodriguez, who heads operations for Acuinova Chile in the Chacabuco area, part of the Pescanova group which is one of Chile's top 10 producers. "The industry is being pounded on two sides."

"You have the outside world, which will not finance you in times of (global) crisis ... and to that you have to add the sanitary crisis affecting the industry."

Atlantic salmon takes three years to grow from egg to adult, so early harvest means producers miss out on harvesting fully-grown fish later in the cycle.

"We know it is a crisis which is going to last all of 2009 and part of 2010," said Rodriguez, whose company has turned increasingly from Atlantic salmon to other species like Cojo salmon favored in Japan and trout, to which ISA is not fatal.

World No. 1 seafood producer, Norway's Marine Harvest, the biggest industry player in Chile, said last month a "dramatic" deterioration in Chile meant it would no longer be able to break even in that market this year. It expects sales volumes will fall to 30,000 tonnes in 2009.

Chile's salmon industry has faced a series of fish diseases in recent years, as well as algae...