Salmon farming on the Faroe Islands

For 50 years, fish farming has developed from fumbling experiments to becoming the Faroe Islands’ largest single export, and the country is currently the fifth largest salmon producer in the world. In 2020, the country’s three farming companies had a total of 1,600 employees. Salmon exports in 2019 totalled 78,000 tonnes, and the export value of salmon and salmon products was around DKK 4 billion.

Historical developments

The first attempts to farm trout and salmon were carried out in 1968 when the former skipper Júst í Túni started to farm rainbow trout. His experiments were based on Norwegian trout farming in the sea. Marine biologist Andrias Reinert travelled to both Denmark and Norway in the 1960s to acquire knowledge, and farming in the Faroe Islands is largely based on his study trip report.

Farming in the 1970s was experimental. The public company Fiskaaling (fish breeding) took over the farming in 1973 and slowly built up knowledge about both trout and salmon farming. The first private companies were established in 1980 based on this knowledge. Although annual exports in the years 1975‑80 only reached about 100 tonnes, production was stable; it was only trout, and the Danish supermarket chain Irma sold the product as trout portions.

Fishing opportunities at sea became extremely limited when the fishing boundary was extended to 200 nautical miles in 1977. It therefore became necessary to look after and cultivate the waters in a different manner, and this made the political authorities look at the opportunities offered by farming. In 1980, the Faroese farmers organised themselves in Føroya Havbúnaðarfelag (the Faroe Fish Farming Association), but it was not until 1988 that the politicians drew up the first farming act. Salmon farming was new worldwide and demand was high. The price continued to rise and reached DKK 70 per kilo in 1986.

The high salmon price led to an enormous interest in farming. But any notion of sustainability was virtually absent, and many farms were located in the same areas, which led to serious disease among the populations. Together with the economic crisis, the situation led to a severe setback in the farming industry during the first half of the 1990s. Credit solutions and political intervention led to a fall in the number of farming businesses from 65 to 20, and foreign capital helped revive the industry. However, to avoid that it would end up entirely in foreign hands, the Faroese Government changed the law so that foreigners can now only own up to 33 % of a company.

The next major setback came during the years 2000‑05 in the form of the ILA virus, which put a stop to almost all farming. The price dropped as the disease ravaged the populations. The risk of financing the release of fry, where both fry, feed and wages might be lost, deterred the banks from granting loans to the industry. So the players in the industry therefore collaborated with the politicians and the health authorities to implement a disease prevention plan. This entailed that all farms in the country had to be dormant for six months before farming could resume. This new system, which specified that only one year of fish was allowed in a farm at a time, was primarily intended to ensure a clean environment and natural conditions to avoid stressing the salmon.

In 2005, the farming industry started to move forward again, but at this point only a few companies were left. After the subprimecrisis of 2007‑08, the number of farming businesses dropped further to about five, and in 2012, there only three were left.

Great power and great responsibility

The current industry structure emerged as a result of the changes made in the early 2000s and the mergers in 2012. Over the past 10‑15 years, the Faroese salmon industry has grown into a decisive international player while also being a force in society.

The largest of the three farming companies is Bakkafrost, which accounts for over 80 % of the total production. Established in 1968 as a family company with trout production and other fish products, the company began to farm trout and salmon in 1980. Bakkafrost is a strong, vertically branched company that has been successful on the Oslo Stock Exchange since 2011 – for a long period as the farming company with the highest profit per kilo. The 2019 profit exceeded DKK 800 million.

The second largest company is Hiddenfjord (formerly Luna), also originally a family business, whose history goes back to 1929 and which has long held on to the family-based structure.

The third and smallest company is Mowi, formerly Marine Harvest. Mowi has activities in 25 countries and was the world’s largest producer of Atlantic salmon in 2020.

The Faroese farming companies paid a total of DKK 435 million in share tax, fishing fee and dividend tax in 2018. In addition, the farming industry pays 5.0 % in fishing fee for each kilo of salmon sold. The fee decreases when the price of salmon falls below DKK 36 per kilo.

In 2010‑20, exports primarily went to Europe, the USA and China, but since 2013, exports to the Russian market have also increased significantly. This followed Russia’s boycott of food imports from the EU and a number of other countries in response to political sanctions imposed by the EU. Since the Faroe Islands are not a member of the EU, the country was not covered by this boycott. It might therefore be a step backwards for Faroese exports if relations between Russia and the EU were to normalise again. Overall, however, Faroese exports are more geographically dispersed now than in the 2000.

Challenges ahead

The farming industry is biologically sensitive, and despite excellent results in recent years, the industry is in fierce international competition on a daily basis. It has therefore proven vital to engage in research and continuously develop methods that can optimise farming so that it remains competitive.

The future offers great challenges. It was a useful step on the way, when the board of Fiskaaling and the political authorities in 2007 decided that focus in the future should be on research, development, consultancy and the provision of services, and that roe production should be discontinued. This happened at the same time as Bakkafrost undertook to save the Faroese salmon population and embark on roe production in the Faroe Islands after much of the roe had been imported since 2005. As in other countries, salmon farmed in the Faroe Islands is also plagued by salmon lice. The hope is that investments and research will lead to a tenable solution to this problem.

In 2020, there were a total of 38 places with sea farming, fry farming and experimental farming, respectively. In order to increase production, the farming industry has extended the fry production time on land, while at the same time experiments with farming in the open sea continue.

Further reading

• Agriculture on the Faroe Islands
• Bakkafrost
• Energy supply on the Faroe Islands
• Government and constitution on the Faroe Islands
• Health and care on the Faroe Islands
• Hiddenfjord
• Industry and labour market on the Faroe Islands
• Municipalities on the Faroe Islands
• Politics and plans on the Faroe Islands
• Population and housing on the Faroe Islands
• Restaurant KOKS
• Shipping Company Varðin
• The fishing industry on the Faroe Islands
• Veltan

Read more about Society and business on the Faroe Islands