ECONOMIC ANALYSIS OF EXPERIMENTAL AQUAPONICS AND HYDROPONICS PRODUCTION IN THE U.S. MIDWEST

The US Midwest has experienced frequent investments into the aquaponics business but very few have remained viable. The focus of production in aquaponics tend to center on the vegetables. There are no established aquaponics business models in the US Midwest that potential investors can examine to help them make informed decisions concerning entry into the aquaponics business. Most of aquaponics operations in the region are small-scale producers. Given that vegetables provide the most revenues from aquaponics production, an analysis of the financial risks associated with aquaponics and hydroponics, would provide useful financial guidelines. This study sought to examine the different systems and scales of production to help answer questions relating to the financial viability under the different production systems and risks associated with the business.

The two experimental systems involved the production of basil, lettuce and cherry tomato in a hydroponics system, and for the aquaponics system, tilapia was added for a 90-day production period.  Economic analysis conducted on the experimental systems was then extrapolated for a 10-year project period with a 6% annual discount rate. First, we compare the economic viability using the same vegetable price. Then, we use different vegetable prices for aquaponics production because some farms report premiums for organic vegetables from their operation.

The initial investment in aquaponics is 8% higher than hydroponics due to the use of aquatic heaters, biomedia and media bag, and dissolved oxygen probe. The cost of aquaponics is 11.6% higher mainly from consumables of water testing, fish feed, and fingerlings. In both systems, labor is the more expensive item representing more than 49% of operating costs. The cash flow results are presented in Table 1. Hydroponics and aquaponics showed feasibility in a 10-year production project even using non-organic prices. For hydroponics, all results show very good financial return on investment. A payback of 3.13 shows that the investment can be recovered in a rapid way. For aquaponics, results from non-organic prices are worse than hydroponics. However, with an increase in prices due to organic production, aquaponics generates better revenues than hydroponics. An increase of 19.7% in vegetables prices makes NPV of both systems equal.