Yes. Good morning, everyone, and welcome to the third quarter results and the presentation of it. With me today, I have our Chief Financial Officer, Kristian Ellingsen. He will walk through the financial figures and the fundamentals. My name is Ivan Vindheim. As usual, we start with the highlights. EBIT, EUR 80 million, in line with the trailing update. Q3 was a quarter highly impacted by COVID-19 restrictions and our seasonal high supply, which put pressure on salmon prices. The shortfall we have seen in the food service market has not been fully offset by the strong growth we have in retail sales. According to our intelligence, the net effect is approximately -5% to -10% . Despite that, Mowi's operations have been running and are running close to normal despite further COVID-19 restrictions. We have seen a resurgence of COVID-19 in many countries after the third quarter.
Again, our operations, they are running as close to normal as we get under the prevailing circumstances. We are maintaining strict sanitary measures to secure the health and safety of our employees, but also to secure the quality of our products. Farming volumes in the third quarter, all time high, 126,000 tons. 2020 volume guidance is maintained at 442,000 tons. Guidance for 2021, 445,000 tons. I.e., we take a temporary break in our growth trajectory. Excuse me. That should not be regarded as something that will be permanent. We will come further into details later on in the presentation. Blended farming cost this time around, EUR 4.23, down from EUR 4.33 last year in the third quarter and down from EUR 4.47 in the second quarter this year. I.e., a cost improvement, which is satisfactory. Record high third quarter volumes also in consumer products and feed.
Under the prevailing circumstances, the Board considers it's of utmost importance to preserve cash and maintain a strong financial position. We have decided, or the Board has decided, not to distribute a dividend after the third quarter either. Key financial. I will not spend too much time on it. Kristian will go into details here later on. Top line decline of 6% this time, driven by already mentioned falling prices on seasonal high supply and COVID-19 restrictions. Operational EBIT, EUR 80 million. Harvest volumes, as said, 126,000 tons, up by 8% year-over-year. The margins and the margin spread, we will come back to when we address the various entities. Prices down in the quarter by 11% in Europe in market currency, 20% in Americas as the COVID-19 pandemic epicenter was in Americas in the third quarter.
Although we have seen a resurgence now in Europe in the fourth quarter so far, which will impact the price achievement for October obviously. Asia is looking better. They have a better COVID-19 situation than what is the case in Europe right now and Americas. Price achievement good in the quarter. Overall, price achievement was 104% compared to reference price on good superior share and contracts. The EBIT water flow this time, not surprisingly, highly impacted by the falling prices. Farming reduced cost in the quarter, increased volumes, so the price effect is actually higher than the EUR 84 million we see here. In total, the price effect was in the range of EUR 560 million. The other divisions, entities, performed well in the quarter. They all improved their earnings.
Operational-wise, a good quarter for Mowi, I would say, and reasonably good results taking the situation in which we are into account. We know that food service is a very important market for the salmon, accounting for 35%-40% of it. With the COVID-19 pandemic, it goes without saying that that will have a hit on prices and results accordingly. Our biggest entity, first, Norway. Good growth, relatively good biology in the quarter. However, results, again highly impacted by COVID-19 and COVID-19 resurgence. In addition, we also had an FX hit in Norway in the quarter. As many of you are already aware of, we are a Euro company. We also run Mowi Norway in Euro. That means that we do not benefit from the weak and the weakening of the Norwegian Krone like the Norwegian farmers do.
This quarter, the hit was NOK 3.8 per kg. In the second quarter, it was NOK 6.5 per kg. In steady state, it is neutral if you are running Mowi Norway in Euro or in Norwegian Krone. The price effect you get immediately, the cost you incur over a three years time cycle. Consequently, you have a lag on the price cost effect. Again, in steady state, this is neutral. Because of the COVID-19 situation, we have seen an unprecedented weakening of the Norwegian Krone this year, which has highly impacted our Norwegian figures with the FX strategy we have. Cost in the quarter, stable year-over-year, EUR 3.84, equivalent to NOK 38.4. The relevant FX rate is 10.01 in the quarter. I will not say more about FX. Kristian will go further into details later on in the presentation. Over to the various regions.
Good cost in the North, EUR 3.61, equivalent to NOK 36.1 per kg. Region Mid, EUR 3.98 or NOK 39.8. A little bit too high, I would argue, but bear in mind that our Region Mid, it is made up of Production Area 4, Sogn og Fjordane, Production Area 5, Sunnmøre and Far North, and Production Area 6, which is old South Trøndelag. Consequently, our cost basket is impacted by geography. We see that our cost in Production Area 6 is substantially better than in Production Area 4. Region South, NOK 39.3 per kg or EUR 3.93 per kg. A good cost, I would say. Remember that biology is highly impacted by the marine temperature curve, and the longer south you get in Norway, the warmer the seawater is in the summer and in the challenging third quarter. A relatively good cost position in Region South.
Also a good cost position in Far North. In Mid, we have room for improvements. Overall, of course, we also have room for improvements. You can always do something a little bit better, and this is what we try to do every day. We are working along two pillars in farming, and that is cost and that is volumes and growth of volumes. Over to the sales contract portfolio for Norway. Quite stable into the fourth quarter on stable prices, so not any substantial changes there. In terms of next year, we are negotiating contracts for next year as we speak, so we will not go into details in this presentation since it's business sensitive. Most of the contracts for next year, they are to be contracted. With that, I think we move on to Scotland.
Reduced results in Scotland on lower prices and also challenging biology. This obviously impacts our full cost in box. That being said, we expect substantial cost improvements into the fourth quarter. We are harvesting bigger fish, and biology has improved from the third quarter. Again, we have higher expectations for the cost curve in Scotland in the fourth quarter. Over to Canada. Canada, I think is the entity that has been hit the most on price in the third quarter. On a positive note, prices have increased into the fourth quarter for Canada. That bodes well for improvements in results. Stable costs in box year-over-year in the third quarter, but cost level in general in Canada is higher than what we like. This is something we address going forward, but I do not think we can expect any material improvements in the near future.
As most of you are aware of. It takes three years from roe to plate in this industry and the seawater phase in Canada is close to two years. That means it takes time to change the performance. Biology in 2020 is impacting our volume guidance for next year. Unfortunately, we have a temporary setback in our growth ambitions in Canada. That doesn't change the long-term potential here. We still strongly believe that we have good conditions and a good basis for increasing our volumes in Canada substantially going forward. I'm thinking particularly of Canada East or Atlantic Canada. Yeah. Again, prices have increased in Canada or for the Canadian fish into the fourth quarter. All else being equal, that should indicate improved results, but still early days. We are in November, and December is also yet to be seen. Then Chile.
Very good biology in Chile. Good cost, I would argue. We do not state it here, but I think we state it in the report, $4.01. Very impressive mortality rates. In terms of cost, in terms of the farming part, we do well, I would say. Unfortunately, it's a very tough market. The main market for Chilean fish is East Americas, which has been the epicenter of the pandemic in the third quarter, but also so far in the fourth quarter. Prices for the Chilean salmon is demanding. We are not carrying any frozen inventory in Chile or neither in rest of Mowi. We have sold all the fish we produced. I also think it's positive to see that we can manage to turn a profit under these circumstances. That is a much stronger achievement than many tend to believe, I think.
Aided by the downstream setup we have in the U.S., of course, but also driven by good farming and good cost. Ireland and the Faroes, two small entities for Mowi, but still two important ones. Both turned a reasonable margin in the quarter, EUR 1.87 million in Ireland, and EUR 1.27 million In the Faroes. Good margins in Ireland and the Faroes. Again, remember that all entities outside Norway, they do not benefit from the weakening of the Norwegian Krone as the Norwegian farmers do. Right now, the Norwegian farmers, they have an advantage to the rest of the farming industry. When you are reading these margins, you should also put that into perspective. Again, impressive margins according to myself. Consumer products, yet another good quarter. We capitalize on the shift we have seen in demand from food service to retail.
We also expect to benefit from this leg going forward. Feed, as said, record high volumes. I mean, record high sold volumes. Good growth in Norway in the quarter. Solid operation. The ramp-up phase we are into in Scotland is progressing well. In total this year, we produce 136,000 tons in Scotland, but the capacity is 240,000 tons and the aim is to utilize this over time. Again, feed is progressing well and has had yet another good quarter. Kristian, the floor is all yours, and you can walk us through the financials, markets and the volumes. Thank you.
Thank you very much, Ivan. Good morning everybody? Hope everybody is doing well. As usual, we start with the overview of profit and loss, where the top line shows a revenue of EUR 958 million. This was down 6% from Q3 2019, and that also corresponds to the decrease in achieved prices in farming. The significant price reduction is the main driver behind the 46% decrease in operational EBIT. The decrease was EUR 67 million, of which prices explains EUR 106 million. Lower costs, higher volumes, and increased earnings in sales and marketing and feed partly offset this effect. As usual, the largest item between operational EBIT and financial EBIT is the net fair value adjustment of biomass. This time, EUR 37 million, mainly due to increased biomass and improved prices in Canada at the end of the quarter versus the end of the second quarter. Income from associated companies.
This is mainly related to our 48% share of Nova Sea. This result here turns into an operational earning of EUR 1.49 per kg on 11,500 tonnes in the quarter. Costs were at the same level as Mowi Region North. Nova Sea has benefited from the NOK weakening. Another strong result from Nova Sea, which is very good. Net financial items, EUR -10 million approximately, in line with Q3 2019. As we see, the P&L key figures are impacted by the reduction in operational EBIT, almost 50% reduction. Underlying earnings per share down from EUR 0.20 to EUR 0.10 per share. Operational EBIT margin down to 8.4%. Although earnings are reduced and we are below target levels, the return on capital employed is still over 9% in a quarter with very challenging market conditions.
Also this quarter, it is necessary to consider FX effects to fully understand our performance. Ivan commented also upon this. I will go a little bit further into detail. Mowi and Mowi Norway, as is stated here, they have a functional currency, Euro. The cash flow is managed in Euro, which is the main market currency for salmon. As a Euro company, we eliminate currency fluctuations, and our Euro financing means that we have a lower financing cost. It also means that Mowi Norway does not benefit from the immediate positive effect of the Norwegian Krone weakening. In 2020, as we see here in the chart, the weakening of the Norwegian Krone has been unprecedented. This is driven by COVID-19 and the turmoils in the financial markets. The effect was particularly high, as we see in the second quarter, but it also was significant in the third quarter.
To illustrate, the NASDAQ spot salmon price in Q3 2020 versus Q3 2019, that was down 11% in Euro terms. The reduction was lower, at 3% in Norwegian Krone terms. The difference is the weakening of the Norwegian Krone in the period. The difference between the salmon price in Euro and Norwegian Krone is illustrated in the graph below here. For a Norwegian Krone farmer, a Norwegian Norwegian Krone farmer, this FX effect on prices, that comes immediately. That gray area there is a benefit you get immediately. When it comes to farming costs, they are accumulated over the three-year production cycle for a salmon. Consequently, it takes a long time before costs exposed to FX are impacted by this weakening we have seen. Consequently, a Norwegian Krone farmer benefits from this price cost lag effect in the current environment. The effect is a lag.
It is neutral in steady state. This is very important. A Norwegian Krone farmer has also a cost exposed to FX, such as feed, and it has Norwegian Krone-denominated costs. Over time, the FX-exposed costs, they will drive cost on inventory upwards. Over time, even if the rates stay as they are today, we will reach a steady state where the lag effect is neutralized. The lag effect will of course be neutralized sooner if the Norwegian Krone starts to strengthen, because you then get an immediate effect with an opposite sign on prices. This is partly what we have seen now in the third quarter. The effect is lower in the third quarter than it was in the second quarter.
The FX loss, which is baked into the margin of Mowi Norway, is NOK 3.8 in the third quarter, while it was as much as NOK 6.5 in the second quarter. The FX gives an immediate boost on prices, but costs have been aggregated on a lower FX, the FX loss from the Norwegian Krone weakening in Q3, that should be attributed to price per kilo and not cost per kilo. Costs are aggregated, as I said, over the production cycle.
In our accounting systems, we have double records in both euro and Norwegian Krone, so we are able to track the Norwegian Krone costs for Mowi Norway, and the relevant euro-Norwegian Krone rate is 10.01 in the third quarter. That is much lower, as you know, than the spot rate. That gives the Norwegian Krone costs which are listed here and as Ivan already commented upon when he talked about the Norwegian farming operations.
Much for currency. We move on to the balance sheet, which is relatively stable from 2019. The financial position is solid, with an equity ratio of 51.6%. Net interest-bearing debt, slightly above the long-term target of EUR 1.4 billion. Yeah. Then we have the cash flow and the net interest-bearing debt. We started the period with a NIBD of EUR 1,380 million and ended with EUR 1,459 million, and that translates into a cash flow per share of EUR -0.15. There was a seasonal tie-up of working capital, EUR 59 million in the quarter, of which EUR 48 million related to farming, mainly due to increased biomass in sea. Biomass in sea at the period end is record high, 322,000 tonnes live weight.
We tied up EUR 14 million working capital in sales and marketing, most of which is explained by higher accounts receivable on the EUR 48 million increased sales compared to the second quarter. Paid taxes, as we see, relatively high in the third quarter. This is due to the fact that we delayed some payments from the second quarter due to the COVID-19 aid packages from the authorities in Norway. When it comes to CapEx, this is a number which includes the effect of the MAB auction payment. The MAB auction in Norway, where we acquired 20 25 licenses in Norway. EUR 28 million is that payment. We can talk about the cash flow guiding. We maintain the cash flow guidance from the previous quarter.
Working capital tie-up year to date is around EUR 60 million. We expect a seasonal tie-up in the fourth quarter in farming and also in sales and marketing. Core CapEx guidance is still EUR 265 million. This is then excluding the MAB growth this year in Norway, the payments related to that in the fixed price part of the scheme and the auction part. Some of the projects this year are somewhat delayed. The risk is still somewhat on the downside, i.e. lower spend this year. As it looks now, this effect will not be material. Interest payments approximately EUR 45 million. Tax payments approximately EUR 140 million. Under the prevailing circumstances, the Board considers it very important to maintain a strong financial position and preserve cash, and thus has decided not to distribute dividends for the third quarter. Financing.
We have approximately EUR 475 million in cash and undrawn lines. We are comfortably within the boundaries set by the equity covenant of 35%, as the ratio is currently 51.6%. Mowi has no earnings covenant. This overview describes our financing, where the backbone is the bank facility, EUR 1.4 billion. The bank facility with DNB, Nordea, ABN Amro, Rabobank, Danske Bank, and SEB, all of which we have a close and good relationship with. We have no debt maturing until the summer of 2022. We move on to market fundamentals in the quarter. We start with the supply development. Supply grew by 5%, as we see here. This was in line with expectations. Somewhat lower growth in Norway, but higher in Chile. In Norway, there were lower harvest weights than expected. A troublesome late summer with early harvesting.
While in Chile, supply growth as much as 16% higher than expected on high feeding rates. Record-high harvest rates. Smolt stocking is down 2% year- to- date, September. Volumes are expected to decline in 2021. We will come a little bit back to that. Also to comment briefly on Scotland, where volumes were lower than expected due to impact from algal bloom and environmental challenges in the quarter. If you look at the volume by market, we have the situation during the quarter that the food service demand increased at the beginning of Q3. As you know, restrictions were tightened over the course of the quarter. Retail demand has been strong in the quarter. This has partly compensated for the lost food service demand, but the net effect is still negative, between -5% to -10% compared to the situation before COVID-19.
We see that in Europe, there was good growth, in E.U. +7%. We have continued to see very strong retail sales in Europe in Q3. The quarter started a bit slow on holiday season, barbecue season, but then improved, and the promotions have increased penetration. Frequency of consumption has increased in all key European markets, and retail volumes have increased by 15%-25% in key European markets such as Germany, U.K., France. Promotions have fueled demand, and the current price level is supportive for the long-term development towards more elaborated products, which we believe Mowi is in the right position to benefit from. Food service in Europe was improving in July and August as lockdown measures were somewhat eased. Then we started on the second COVID-19 wave, which we are still in, and which is still affecting our key markets.
In Americas, we see that there was a strong growth in the U.S., 14%. Retail sales have continued strong. Low prices in combination with increased home consumption as a result of the lockdown measures, they have boosted the demand, and the prepacked sales are very strong, very positive. Also, home deliveries, e-commerce, in-store pickup are continuing to grow. The COVID-19 situation in Americas is still, of course, difficult, but food service improved somewhat from Q2. Outdoor serving at the start of the quarter, but this is now, of course, reduced as we are approaching a colder time of the year, and COVID-19 figures are also difficult. In Asia, there was a bit of a mixed picture. We see all in all, Asia down 10%, but in several markets, demand has been relatively good, as illustrated by the figures here.
We see very good figures in Japan, Korea, Taiwan, increased versus Q3 2019. The COVID-19 situation in Asia is better than in Europe and Americas. They are ahead of the curve, so to say, with the outbreak starting in Asia. Fewer lockdown measures are in place in Asia. Also, air cargo rates continued to drop in the third quarter, although at a slower pace than in the second quarter. They are, of course, still higher than before COVID-19. We have China. As we see, a significant reduction from Q3 last year. It has, however, picked somewhat up after the second wave with these COVID-19 incidents in China. Weekly volumes are still only 30% of what they were before this second wave. That's at least an improvement from the second quarter when we, at the same time last quarter, were up only 20%.
We have seen an improvement nevertheless. Okay. We have prices, and of course, with the increased supply of 5% and the net negative COVID-19 effect on demand of 5%-10%, there has been a hit on spot prices in the quarter. In Euro terms, prices are down 11%, as we see here. For Mowi, the reduction in achieved prices was lower than this, so we benefited from contracts in the quarter. All in all, the salmon market has managed decently during this very special situation. Knowing Q3 volumes were seasonably high, volumes are expected to be reduced in November and December. If we look ahead, we believe in a recovery in 2021. We believe that the supply and demand balance will consequently be tighter than this year. The shift from food service to retail, increased penetration, and new customers will be beneficial going forward.
In the supply outlook, no significant news with regards to 2020. As we only have a couple of months left of this year, it's time to start focusing on 2021. We expect total supply to grow by -1% to 3%. This is in line with Kontali estimate. This means that in 2021, we will see the biggest reduction in supply year over year since 2016 and the Chilean algae bloom. In Norway, we expect growth of 2%-5%. In Chile, we expect a reduction of between 5% and 10%, mainly due to less individuals from lower smolt stocking. We have our own volume guidance. We have grown volumes considerably since 2017 when we were at 370,000 tons. We maintain our guiding for this year of 442,000 tons.
The group is unchanged, but there are some minor differences within the regions between Canada, Chile, and Ireland versus the previous guiding, but the total is the same. For 2021, our volume guidance is 445,000 tons. Norway stable, some growth in Scotland and Chile. In Canada, volumes are reduced by 5,000 tons from 2020 to 40,000 tons next year. This is due to high marine temperatures resulting in difficult environmental conditions, which has taken its toll on the biomass available for harvesting next year. The long-term potential for Mowi in Canada is still good, remains unchanged. While we are a bit delayed due to a challenging 2019 and 2020, we believe the potential is still there. This is a temporary halt in our growth plans in Canada. Ivan, I will hand the word back to you if you can please go through the outlook.
Thank you, Kristian. The outlook. To wrap up, as Kristian said, notwithstanding the current COVID-19 resurgence we see now in October, we still believe in a market recovery next year. We see that current low price level attracts new customers and new segments and fuels the long-term development towards more elaborate products. We strongly believe that Mowi's extensive downstream business will continue to capitalize on this shift, as we have seen in the second and the third quarter. Mowi Feed is expected to continue growing in the years to come, driven by the new Scottish feed plant. Bear in mind that we are producing 136,000 tons this year as against a capacity of 240,000 tons. Following a substantial growth in farming volumes from 370,000 tons in 2017, we are unfortunately guiding on stable volumes next year of 445,000 tons.
As Kristian said here two, three minutes ago, this must be regarded as a temporary break. Mowi Farming is working along two pillars. One is volumes and volume growth, the other one is cost. We see that there is a great demand for more salmon in the market under normal circumstances. We think there will be growth in harvest volumes from the industry going forward, and we contemplate to take at least our fair share of it. This we will address in depth in the coming Capital Markets Day on March 17th next year. Hopefully in Oslo if things are under control with regard to hygiene measures. In near term, we believe in a tighter market balance next year, supported by a supply growth as low as 1%. We haven't seen such a figure since the algal bloom in Chile in 2016.
Under normal circumstances, this would have indicated very good prices next year. Whatever happens with the COVID-19 situation, we think we will have a tighter market balance next year. We believe in stronger prices next year. We see that we are building markets in retails. We see that we are getting new customers buying more elaborated products. If we could get the food service market back again, accounting for 35%-40% of total market, then this could be interesting. Anyway, we think that the recovery will happen. The question is just at which pace. With this, I think we can start on the Q&A session. If Kristian comes back on the podium and our Investor Relations Officer, Kim, can facilitate.
Yes. The first question here comes from Carl Emil Johannessen in Pareto. He's asking, can you say something more about the volume guiding in Canada? What is the split between the two regions, East and West? What can we expect longer term? You have previously harvested 40,000 tons on the West Coast alone, and East Coast Northern Harvest has been about 15,000 tons, plus significant growth potential.
A good question. We are not reporting Canada separately. I think we can address it separately since we have the question. Canada West has been through a challenging year biological-wise. In Canada West, we are down to approximately 31,000 tons- 32,000 tons next year. If you go back in time, you will see that we have had a temporary setback in Canada West, 2018, 2014. We were down to 31,000 tons, if I remember correctly. 2014, we were down to 28,000 tons. From time to time, we have, unfortunately, biological setbacks in Canada West. It's a challenging area to farm Atlantic salmon because of high marine temperatures in the third quarter, but also because of low DOs. At some farms, the DO saturation is as low as in the 60s.
For those of you who are familiar with the DO numbers, you know that you are at a critical level for what the salmon can take. This is not something you can change. The nature as nature is. Obviously we can always improve, and we think we will do that going forward. One measure we will take is to change the stocking pattern, so carry less biomass into the challenging third quarter. What you do is that you stock more S1 at the expense of S0. We will also try to change the farm structure, so the site structure, applying fewer but larger sites. In that way, utilizing more of the good sites. This has a cost effect, but it also has an effect on mortality. There are difference between sites. Plus, we take a lot of other measures.
Long story short, we think Canada West will come back to previous level at around 40,000 tons. We have managed that in the past, and we will manage that again. Over to Atlantic Canada or Canada East, where we have the big growth potential in Canada. We bought this back in 2018. In 2019, we had unfortunately, a large mass mortality incident. We lost 2.7 million fish, which took volumes down to a record low 4,000 tons-5,000 tons this year. It takes time to come back on track. We are aiming at 10,000 tons-11,000 tons next year. The capacity, the potential in Canada East is obviously much higher. What Kristian said here previously, the growth potential in Canada East is unchanged, and we still have the same target. Unfortunately, we have had a current setback, which will delay us in reaching to those targets.
Yeah, it was a very long answer. Hopefully I touched base upon the question, too.
Yeah, I think that covers it very well. The next question comes from Martin Kaland in ABG. He's also got a question about volume guidance more in general. If you can share some thoughts about the different regions for 2021 in Norway, Scotland, and Chile in particular.
Yeah. To start with Norway, 260,000 tons, that is in line with this year. No growth. That doesn't mean that we do not have a growth potential in Norway. We are on industry average when we measure license utilization or MAB utilization to our Norwegian peers. License utilization is better as farther north we get. Obviously we have the highest potentials in region south and region mid. This is something we will address going forward, and we will go further into details on this on, again, the Capital Markets Day that is coming up on March 17. We are growing in Scotland next year somewhat. That being said, go back a few years and have a look at the Scottish numbers. We have turned Mowi Scotland from a 40,000 tons farmer to a 60,000 tons farmer, and in good years, 60,000 tons plus.
I think that is unprecedented if you compare it to our peers. In Scotland, I think we have been quite successful on our growth strategy so far. That doesn't mean that it's over, and we still have potential to grow this further. Again, this we will come more into details on the Capital Markets Day next quarter or March, in the first quarter. I also think he asked about Chile?
Yes.
In Chile, we are aiming at 70,000 tons next year. We haven't seen 70,000 tons in Chile after the ISA crisis in 2007, 2008. That's 13 years back. Biology in Chile is good. We have a good biomass number there supporting this target. We are reasonably confident in that number. I guess his question is more about going forward, 2022 onwards. We do not guide on 2022 onwards. Chile, we will also address on the Capital Markets Day. As I assume most of the audience is aware of, that there is a so-called traffic light regime in Chile as well. In order to grow, you have to meet some biological indicators. Still, if you meet it, your growth potential is limited.
All the numbers of licenses you can read about, that doesn't carry much value, I'm afraid, under this regime. Although Chile is different, they also have restrictions on growth, which impact our business down there. We will utilize the capacity we can, but we will not start to stock and take a big cost hit in order to prioritize volume over cost. Remember that the Chilean salmon has a disadvantage to prices. Chile is far from all markets. High transportation cost means that you achieve a lower price over time. Although Chile is competitive on cost, that doesn't help much when you get a poorer price. We are fine with this. We will not look into a big, significant growth for our Chilean operation. We think the size we have today is fine when we take into account risk.
If there are cheap growth opportunities, i.e. meeting the biological figures, then we will utilize it. Chile is not on the top of the list when it comes to prioritization of our capital allocation in farming going forward.
Okay, very good. Another question on the biomass from Alexander Aukner in DNB. He is asking about the record high biomass in sea being 322,000 tons, up 7% year-over-year. The 2021 harvest guidance is in line with the 2020 harvest volumes. How does this match up?
The average weight of this biomass is higher year-over-year due to that we will harvest a record high volume also in the fourth quarter. You have to adjust for that. At the same time, it's supportive to meeting the guidance next year. One thing is to guide, but even more importantly it is to meet the guidance, and that is not always the case. This is a number we believe in. Of course, if next year turn out to be great, mortality substantially down, et cetera, then there is upside in these numbers. We like to assume current level and taking into account the improvements we know of. We do not like to be too aggressive on our guidance. We try to meet it as good as we can.
Again, of course, mortality in the industry and in Mowi is far too high, particularly out of Norway. If we could manage to take it down, there is again upside in these numbers. This is our best guesstimate for next year. I think the audience should take it for what it is. It's our estimate. Again, this is a temporary break. It's not on purpose, obviously. We are not happy with it, so we will address this. The Board will prioritize growth initiatives going forward because, again, the demand for the salmon is great. There is a need for more salmon going forward under normal circumstances, and we want to take our fair share of that growth at least. Over time, we have not, and that is not satisfactory.
Very good. The next question is from Christian Nordby, Kepler Cheuvreux. He is asking about why Mowi only had 100% price achievement in Chile when you had a contract share of 30% in the quarter.
Yeah. There were some downgrading in Chile as a resource, and that impacted price achievement somewhat. That is at least one part of the explanation.
Another part is that we allocate the part of the margin I think he misses, that margin we allocate to consumer products in the margin. It's two-fold. Overall, we have made money on these contracts. If you include the contribution margin, the price achievement for the Chilean salmon is good. It's also about how do you allocate this, what goes to farming and what goes to our processors.
That's an important point because, in general, we don't allocate the sales and marketing and feed margin into the price achievement part of our operation. That's a very important point to note.
Yeah. If you had done so, this bar would have looked completely different. It was a very good question, I must say. Good spotted. I hope this was clearing the picture for all of us.
Very good. The next question from Nils Thomassen in Fearnleys. He is asking if you can give some color on the overall biology in Norway during Q3 compared to Q3 last year, and how the costs will develop in the next quarters to come in Norway.
We do not guide on costs going forward. We normally give a heads-up in the next quarter if we see that costs will increase, and we have not this time around. I have indirectly answered on cost guidance in the fourth quarter. In general, biology in Norway has been reasonably good in the third quarter, but we are struggling with the same suspects as last year and as previously. As everyone knows, third quarter is the most challenging quarter. It follows marine temperatures, and the lice is still there. There is still no silver bullet available. We struggle with lice-induced diseases. I will not name them all here because it's a long list. It's not like nothing has particularly changed. Under the circumstances, I would say that the biology is under control and has been reasonably good in the quarter.
Again, not great. Don't get me wrong. I think we managed reasonably well. Into the fourth quarter, marine temperatures, they drop, and then biology improves. When you have a good start of the new quarter, most likely that quarter ends up okay biology-wise, unless you end up in some surprising incident. Okay.
Okay. The next question's from Alexander Jones from Bank of America. He is asking about costs. How do you expect the costs to evolve in Norway and Canada sequentially in the fourth quarter? I guess you already commented on the costs in Norway. The question is about Canada.
Yeah. I do not think we have given any heads-up on cost for Canada either in the fourth quarter. It follows the same methodology. Nothing that we know that should change this materially. In general, at least based upon the intelligence we have today, the fourth quarter is in line. I am not talking about the blended cost for total Mowi Farming. It is in line with the third quarter. It is October, sorry, it is in the beginning of November, but we have not closed our books for October yet, and we also have December. This is biology. You start with one life, and then it can only go wrong. The distribution of likelihood in this industry is unfortunately skewed. That means that you never know until you have booked your last figure.
Nothing that we know today that should rock any boat when it comes to the cost in the fourth quarter. Again, this can change. We don't know.
The second question is on contract negotiations. Can you comment on how price negotiations are going for the next year and whether you intend to keep the share of volumes contracted roughly similar for 2021 compared to 2020?
We do not like to go into depth on contracts since we are negotiating as we speak, and our clients, they are also following this. I think on this question, we must ask for forgiveness and say that we will revert to it in rough details when we go through our fourth quarter results. This is about the strategy next year. We like to be transparent, but there are also limitations to our transparency.
There's no more questions from the web.
Thank you. Thank you, and stay safe, everyone, and we meet again in February.