By Dan Burden, AgMRC, Iowa State University, firstname.lastname@example.org.
Revised June 2013 by Diane Huntrods, AgMRC, Iowa State University.
Revised March 2012 by C. Greg Lutz, professor, Louisiana State University Agricultural Center, email@example.com.
For thousands of years, people have harvested the bounties of the sea and also cultivated its “crops." As global demand for fish increases, these farm-raised stocks will become more important to the food supply.
The United Nations reports that around 40 percent of the world's total fish supply comes from aquaculture. World aquaculture remains a fast-growing food-producing sector, yielding nearly 60 million metric tons with an estimated value of over $119.4 billion in 2010, or an average annual growth rate of 8.8 percent in the last three decades. About 600 aquatic species are raised in captivity in about 190 countries by farming systems of varying input intensities and technological sophistication. (FAO 2012).
Aquaculture is a catch-all term that encompasses the subsistence, medium-scale or industrial production of commercially important finfish (such as catfish, trout, salmon, tilapia, and various marine species); reptiles (such as turtles, crocodiles and alligators); mollusks (oysters, mussels and clams) and crustaceans (lobsters, shrimp, crabs and crawfish). A distinction can be made between “aquaculture” and “mariculture,” or marine aquaculture. Aquaculture systems tend to be pond, confinement or recirculating systems, and mariculture systems tend to be pen-type enclosures, tended nearshore seabeds or off-bottom containment systems within the sea.
In 2010, the top ten producing countries accounted for 87.6 percent by volume and 81.9 percent by value of the world's farmed food fish. Asia accounted for 89 percent of world aquaculture production by volume, with China remaining, by far, the largest aquaculture producing country. In 2010, the FAO estimated that China accounted for 60 percent of global aquaculture production (FAO 2012). As population demographics and economic forces combine to increase the demand for seafood in the Asia-Pacific region over the coming decade, the dynamics of import-export competition among aquaculture producing countries may shift considerably.
In the coming decades many developing countries will feel pressure to shift more resources toward aquaculture production, due to its environmental and economic efficiencies. Aquaculture species such as tilapia, catfish and crawfish are far more efficient at converting traditional feedstuffs into edible protein than are traditional livestock and poultry species. As a result, many forms of aquaculture production also result in reduced environmental impacts when compared to traditional animal husbandry (Lutz 2001). In most developing countries, if one used the same amount of land (but in the form of a pond) and all the inputs required to produce a 1,000-pound cow, they could produce roughly 4,000 pounds of tilapia and perhaps even more under some conditions.
The International Seafood Industry and Aquaculture Markets
Any aquaculture venture must consider the dynamic nature of the overall seafood industry, whether local, regional or international. Seafood is the “most international” of all proteins, and this trade has been valued at more than twice the combined trade of all other meat and poultry (FAO 2004). Seafood trade occurs in a highly volatile global marketplace that often lacks transparency. Aquaculture industries must compete not only with each other but with wild-caught products as well.
World-wide demand has been projected to increase from 133 million metric ton (MT) in 1999/2000 to around 183 million MT by 2015 (Delgado et al. 2003), although the actual figure may be somewhat lower at that point in time. Aquaculture is expected to provide products for the majority of this increased demand, with traditional wild-catch fisheries providing the remainder. Product demand is also expected to change over time, and product diversity in the form of new species (tilapia) and product lines (coatings, flavors, sauces, quick-to-prepare meal offerings) will play important roles in established and emerging markets. Almost all innovative new product offerings are currently based on the top four aquaculture species, and much of the demand is driven by retail outlets that demand supply stability, consistency and product standardization (NFI 2011). In various parts of the globe, however, aquaculture entrepreneurs may find increasing opportunities by focusing on alternative species, siting and planning their operations for targeted markets of defined scope, and avoiding competition with major “commodity” products.
Aquaculture production has contracted in the United States (FAO 2012). Private sector aquaculture is in competition with global imports of other aquaculture products, which suggests that greater transparency in supply chains and by retailers with respect to origin-of-product, or local or regional production, could go a long way to aid U.S. producers in securing market share. However, significant increases in feed costs over the past decade have impacted competing aquaculture producers in all parts of the globe. These increased costs have caused many U.S. producers to leave the business as profit margins have eroded or completely disappeared (NASS 2013). As feed costs increase, the relative importance of higher labor costs and regulatory constraints becomes more apparent when comparing aquaculture production budgets in North America and Europe to those in developing countries.
It should be noted that local aquaculture production can have profound economic impacts on the surrounding area (for example, catfish production in the southern United States and salmon production in British Columbia), in the form of job and hard infrastructure creation, technical support and the value addition to other agricultural commodities used for feed in the same way that cattle, hogs and poultry add value to feed grains. Related industries such as equipment production, health management products, feed and nutrition companies, and aquaculture consulting service firms also provide support to the aquaculture industry in many regions.
The U.S. catfish industry stated in a 2002 promotional brochure that the 950 million pounds of feed used in 2001 within one state could be hauled in a train of 4,950 96-ton hopper cars or a caravan of 19,800 18-wheel 24-ton feed trucks. They calculated that at least 4 acres of grain crops were required to support one acre of food-size fish production. However, this relationship also has an international dimension, as U.S. soybean growers have worked diligently to create markets for their product in manufactured feeds used overseas for fish species that eventually compete with U.S. aquaculture products in the North American marketplace (SoyAqua 2012).
During the last two decades, the value of U.S. aquacultural production rose to nearly $1.1 billion. Results of the 2007 Census of Agriculture (NASS 2009) indicated that sales of fish, shellfish and related products grew by 11.7 percent over the previous five years. Since that time, however, production has declined in some sectors.
The largest single sector of the U.S. aquaculture industry has historically been catfish, followed by shellfish(including clams, crab, lobster, oysters, scallops and shrimp) and then trout and other stocking and food fish. Figures from the 2007 Census (NASS 2009) indicated sales of catfish at $455.4 million, and combined food (slaughter) and stocking sales of trout at $210.6 million. Sales of cultured shellfish totaled $293.9 million.
By 2012, catfish sales had dropped to $341 million, down 20 percent from the previous year, while the value of trout for food and stocking had fallen to $178.6 million, which was actually a 6 percent increase from 2011 (NASS 2013). In contrast, the value and landings of commercially caught shellfish increased from $2.1 to $2.7 billion and from 1.1 billion to 1.4 billion pounds, respectively, between 2007 and 2011 (NMFS 2012).
Currently, U.S. aquaculture production takes place mainly on land in ponds or in coastal waters under states’ jurisdictions. A handful of recirculating production systems continue to provide live fish and high-value species to specialty markets. Recent advances in offshore aquaculture technology have enabled several commercial finfish and shellfish operations to locate in more exposed, open-ocean sites in state waters off Hawaii and New Hampshire.
Value-added Economic Impacts
Aquaculture also includes the production of ornamental fish for the aquarium trade and plant species used in a range of food, pharmaceutical, nutritional and biotechnology products. In many developed nations, the production of fish for stocking natural or private waters also represents an economically important aspect of aquaculture production.
Within the United States, producers will have to focus on targeting local and regional high-end markets and adding value in order to side-step competition from lower-cost commodity-scale imports. Considering that much of the wholesale cost of seafood products in the United States involves cold storage, transportation and warehousing, opportunities will emerge for producers who can side-step some of these costs.
Experts say further growth is possible in the production and trade of fish species and products that meet consumers' preference for moderately priced white-meat fillets (FAO 2012).
The U.S. Food and Drug Administration initiated import controls for certain species of farmed seafood from China in recent years. The action was in response to numerous cases of contamination. The five species listed were catfish, shrimp, basa (a species similar to catfish), dace (a species similar to carp) and eel. Quality control in imported products such as these can be expected to continue to improve in the coming years.
Aquaculture production will increasingly focus on price competition, with certain regions and countries becoming more specialized in certain species. Shrimp and tilapia production can be expected to continue increasing, but only in those regions with the most suitable climate and natural resources, and only where governments are willing to invest in infrastructure and regulatory frameworks that foster industry development. Similar trends will occur with many species, such as salmon and even catfish. One limiting factor for many industrial operations will be access to inputs such as high-quality manufactured feeds.
As legitimate environmental concerns begin to shape food policy in both developed and developing countries, pond-based aquaculture can offer significant advantages. As a result, science-based policies will promote the use of aquaculture in many countries. In addition to superior feed conversion efficiency over traditional livestock protein sources (and the resultant conservation of water and soil otherwise lost in row crop production of grains) aquaculture can also provide a natural means of reducing impacts from natural by-products of the feeding process. Natural biological, chemical and physical processes in ponds continually cycle nutrients not utilized by the fish crop itself. For example, a well-managed catfish production pond receiving 10,000 kg of feed per year, discharges as little as 30 kg of nitrogen, 2 kg of phosphorus and 400 kg of organic matter annually over a 5 year period. This represents waste reductions of 92 percent, 97 percent and 87 percent, respectively (Lutz 2001).
Aquaculture will also be recognized increasingly as a means to foster soil and water conservation. By managing levee- and watershed aquaculture ponds to capture rainfall and runoff, effluent discharges and solids resulting from erosion can be significantly reduced, improving water quality in surrounding watersheds. The improved food conversion efficiency of many aquatic species may become an even more important consideration for policy makers when annual suspended solids runoff from row-crop production can typically approach 7 metric tons per hectare. Under such circumstances every kilogram of grain must be used wisely.
There are various licensing and inspection protocols that vary from state to state. While many states have made some effort to streamline the licensing process in order to foster or support local aquaculture industries, many others have stifled industry growth through a proliferation of permit requirements from various state and local agencies. Usually, your state Department of Natural Resources or Wildlife and the Department of Agriculture should be contacted as soon as possible to determine what permits are needed for your operation (in addition, local zoning, health and other regulations may also apply). For example, the following laws and regulations are taken from those required for producers from one Midwestern state:
- Aquaculture unit license: Needed to operate a hatchery, to engage in the business of propagating fish in private waters or to hold fish for commercial purposes. The state conservation officer in your area must approve the application before a license can be issued. The licensee is allowed to possess, propagate, buy, sell, deal in and transport fish produced from breeding stock lawfully acquired.
- Operators must secure breeding stock from licensed private fish hatcheries in the state or from lawful sources outside the state.
- When purchasing fish, keep the bill of sale that allows possession to spawn, rear and harvest fish. Additionally, anyone bringing fish or fish eggs into the state that are not native must submit an application to the DNR and receive a permit prior to transporting the fish into the state. The DNR may require certification that the source of fish or fish eggs is disease-free.
- Bait dealer's license: required if minnows, frogs, or clams are sold for fish bait. The license also allows the licensee to obtain bait from lakes and streams where permitted.
- NPDES permit: This permit, from the National Pollutant Discharge Elimination System (NPDES), is needed for discharge of “used” water. Generally, only relatively large operations or flow-through hatcheries will need an NPDES permit.
- Water withdrawal permit: This permit is required if withdrawal from a groundwater or surface water source is in excess of 25,000 gallons per day.
- Water storage permit: The permit is needed if natural runoff is captured and stored (e.g., a dam across a waterway) and the permanent storage is in excess of 18 acre feet.
- Well construction permit: This permit is required prior to construction of new water wells.
- Floodplain development permit: This permit may be needed if a fish farm is constructed on the flood plain of a stream or if a dam is constructed across a waterway or stream.
- Processing plant permit to operate a packing plant or slaughterhouse where fish are killed or dressed for food.
In general, most small- to medium-sized companies do not take the time to think about or establish sound business plans that include procedures for business development. This is especially true for many aquaculture start-up ventures. They rely on existing contacts and perhaps the charisma of the entrepreneur behind the venture. This can be a fatal flaw in running the business.
Successful small- to medium-sized companies create business plans and stick with them. Big businesses even go a step further by developing formal “pipelines” within their short-term business plans where potential clients are assigned staff to service their needs and develop sales. Progress is routinely recorded and analyzed with respect to the underlying reasons for wins and losses, progress of opportunities in relation to the sales process, note the most successful staff working with the potential client and adjust the team accordingly, and if sales are underway, look at the sales customer service situation. They may even set up and manage alliances with third-party companies to leverage one another’s contacts and expertise.
The procedures and process of the big players may seem out of the ballpark to the small aquaculture producer, but this could not be further from the truth. Successful businesses of all sizes have universal procedures for ensuring success, even in tough economic times. By researching sound business-development practices, developing a business and sales plan, and networking, any size operation will benefit. Assume from the start that as much time and effort will be spent on marketing as on production within any successful aquaculture venture.
So, where does one start? To get an order for your aquaculture product, you need to do a few things. First, identify companies (restaurants, distributors, institutional food services) and other potential outlets (farmers' markets, direct-to-consumer sales). MarketMaker found on the AgMRC homepage will help a great deal, making this an easy exercise. Once you have your businesses and outlets targeted, you need to identify the name of the key person in that organization to whom you hope to sell the product. This person is a decision-maker. Don’t settle for anyone else. If it is a restaurant, it may be the chef and not the owner, or both may be important in your sales call.
A major challenge for any seller today is identifying the decisionmaker in another organization. In many cases, you may need to make your first pitch to a designated buyer who is only really authorized to say “no.” Sometimes this can be a secretary or receptionist. The person who says “yes” is another level up in the organization. This is the person you are trying to locate and with whom you want to get on a first-name basis. You need to do this by not aggravating the person initially screening your product. Get this person on your “team,” while thinking about legitimate reasons why you need to introduce yourself to the decision-maker. Remember, you are there to introduce them to a great product that will make them a happy customer or their customers happy. Never belly-crawl or simper, communicate from a position of honesty and equality. Always make it clear to your initial contact that you really appreciate their time and attention, and that you would really appreciate their taking time to introduce you to others in that organization.
Once customers have been identified and engaged, a critical aspect in aquaculture marketing involves accommodation: giving those customers what they want in terms of size, presentation, consistency, quality and scheduling. All these qualities must be translated into successful production management (inventory control, nutrition, health management, etc.) before the product ever leaves the farm.
- The Aquaculture Effluents Issue: Considerations. Lutz, C.G. Aquaculture Magazine 27(1):36-40, 2001.
- Aquaculture Sold: 2007 and 2002, 2007 Census of Agriculture, National Ag Statistics Service (NASS), USDA, 2009.
- Catfish Feed Deliveries, NASS, USDA, 2013.
- Catfish Processing, NASS, USDA, 2013.
- Catfish Production, NASS, USDA, 2013.
- Fish and Seafood: World Markets and Trade, Foreign Ag Service, USDA, 2008.
- Fish to 2020: Supply and Demand in Changing Global Markets, Delgado, C.L., N. Wada, M.W. Rosegrant, S. Meijer and M. Ahmed, International Food Policy Research Institute, 2003.
- Fisheries of the United States - 2011, NMFS, NOAA, U.S. Department of Commerce, 2012.
- The State of World Fisheries and Aquaculture 2011, FAO Fisheries and Aquaculture Department, United Nations (UN), 2012.
- Top 10 Consumed Seafood, National Fisheries Institute, 2011 - Lists the top ten species consumed in the United States by pounds per person.
- Trout Production, NASS, USDA, 2013.
- Soy-Fed Fish, SoyAqua.
Links checked July 2013.