WWW.WAS.ORG • WORLD AQUACULTURE • JUNE 2016 27 grocery stores that sell live fish are typically located in urban areas where tank space is at a premium, so competition is fierce. Anyone wishing to enter the live market is generally going to have to displace an established producer who already has a relationship with their customers. The bottom line is that live markets are very inelastic and highly competitive and have limited potential to absorb additional product volumes. Some projects were established with the expectation of processing fish from a network of farmers who participated in an integrated project. While the market for fillets is vastly larger than that of live product, every US RAS project that was based on the expectation of selling processed fillets has found that their costs were too high to be competitive in the global marketplace. Small . . . isn’t always beautiful Unlike poultry, hog or cattle farming – sectors with a strong contingent of independent producers – most fish grown by western aquaculture farms are raised by mid-to-large size organizations. Why the difference? The integrators who process and sell terrestrial meat prefer to leave the business of farming to independent growers. This apportions most of the risk to growers and leaves the more complex and capital-intensive activities (breeding, processing and marketing) to the integrator or more specialized businesses. The growers give up a degree of control but benefit through participation in a well-structured supply chain that allows them to focus on what they do best. In contrast, Western aquaculture is dominated by larger producers. This pattern occurs because only larger producers have been able to assemble the experts, specialized knowledge, technology and capital needed to operate successfully, given the inherent complexities of the business. For many aquaculture species, the genetics (and therefore the accessible biological performance) of the animals is still fairly close to a wild state, and the degree to which nutritional requirements and health management protocols and vaccines are available or have been optimized varies widely. Over the past two decades there have been numerous efforts to sell packaged farming systems that were intended to apply the integrator model to aquaculture. Each promoted a novel technology and promised growers the chance to make significant profits. Unfortunately, experience to date has shown that production and processing costs were always greater than anticipated and demand was slow to develop. As a result, the efficient supply chain upon which the system depended never materialized and things ended badly. The Bottom Line The ultimate question is whether fish can be sold at a profit because this is the foundation for economic sustainability in any business. It is essential that costs are known, not just for operation, but also for the critical elements of the supply chain upon which a grower depends. Where will key inputs such as fingerlings and feed come from and how reliable is the quality and supply? Are there alternatives if the primary supplier fails to meet expectations? Where will the fish be processed and at what cost? Who will the customers be and how stable is demand and pricing in those markets? Fillets typically generate a 32-60 percent yield, depending on species and product format, leaving as much as two-thirds of the live weight as an unmarketable or lowervalue by-product. If fillets are the final product form, there should be confidence that there is a robust and scaleable market, willing to pay a price that makes sense in the marketplace and that is sufficient to operate profitably. The expectation of sustaining high prices as output increases should be tested against competing products, which are already successful in the market. If these sell for less than anticipated, after factoring in processing yield, packaging and distribution costs, a potential producer might want to think again. RAS systems are proving to be the best available technology for smolt production and nursery operations of marine fish, and are being widely adapted for these purposes. Producing juveniles in RAS has the advantage of protecting the fish when they are most sensitive to parasites and viral diseases and when growth rates are highest. Higher specific growth rates during the juvenile phase minimizes the ‘area under the curve,’ defined as the inefficiency of investing in and operating systems whose full capacity is not required or used until maximum feed and biomass levels are reached. Additionally, because values are much higher for juveniles on a unit weight basis, it is affordable to invest upwards of US$30,000/t of output for smolt systems. This level of investment would prove uncompetitive for full scale grow-out where the market price of the finished product is much lower. This level of difference in capital cost between RAS and conventional systems (which run closer to $3,000/t) are unlikely to be compensated by improvements in biological performance, despite what some proponents claim. Over many years of operating and advising RAS producers, I have seen and experienced numerous unforeseen challenges. These required ingenuity, patience and capital beyond what operators and investors could have ever imagined at the outset. I believe this is a near universal aspect of the RAS experience—for those who have persevered as well as for those who have not. By studying this history, I hope readers gain a deeper appreciation of the “big five” challenges of siting, achieving capacity, management and staffing, quality assurance and selling profitably to achieve commercial success in RAS grow-out operations. An integrated approach to understanding and managing each of these areas is critical, even as many of the underlying technologies have become more efficient and reliable. Notes Josh Goldman, Australis Aquaculture, One Australia Way, Turners Falls, MA 01376. josh@australis.us A screen shot of a control system showing trends of multiple water quality parameters.
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