Economics

In nations where fish are produced for recreational fishing, funding for hatcheries is often raised from user fees such as fishing licenses. Such hatcheries are usually government facilities. For most private aquaculture companies to get started, outside funding is required. Funding may come through banks and other commercial lending sources or from venture capitalists. The high risks associated with aquaculture have made it difficult for many firms to obtain bank loans, although that situation is changing as bankers become more knowledgeable and comfortable with underwriting aquaculture ventures. Large corporations have also entered the aquaculture field. Some have abandoned aquaculture after a few years, but others continue to diversify into the arena. Highly profitable corporations may have an easier time obtaining the requisite funding for establishing aquaculture ventures than small entrepreneurs.

A key factor in obtaining funding support for aquaculture is development of a sound business plan. The plan needs to demonstrate that the prospective culturist has identified all costs associated with establishment of the facility and its day-to-day operation. One or more suitable sites should be identified and the species to be cultured selected before the business plan is submitted. Cost estimates should be verifiable. Having actual bids for specific tasks at specific locations, for example, pond construction, well drilling, building construction, and vehicle costs, in a particular geographic region will strengthen the business plan.

Land costs vary enormously both between and within countries. Compare, for example, the cost of coastal land in south Florida, where it might be possible to consider rearing shrimp, with that of Mississippi farmland suitable for catfish farming. The former might be thousands of dollars for every meter of oceanfront, while the latter may be obtained for one or two thousand dollars per hectare.

The amount of land required will also vary, not only as a function of the amount of anticipated production, but also on the type of culture system that is used. It may take several hectares of static culture ponds to produce the same biomass of animals as one modest size raceway through which large volumes of water are constantly flowing, for example. Construction costs vary from one location to another. Local labor and fuel costs must be factored into the equation. The experience of contractors in building aquaculture facilities is another factor to be considered.

Much of the world's aquaculture is conducted in tropical or subtropical regions that feature long growing seasons (often year-round). Many such areas lie within developing nations where labor and land are typically inexpensive and where governments sometimes offer tax incentives to prospective aquaculturists. Problems with obtaining good quality feed, parts, dependable energy supplies, and other infrastructure are common and represent a trade-off that needs to be considered. Skilled technical personnel, such as hatchery managers, may have to be brought into facilities sited in developing countries because individuals with the required credentials may not be available. Expatriate labor can be quite expensive but may be necessary.

The need for redundancy in the culture system needs to be assessed in conjunction with each facility. Failure of a well pump that brings up water to supply a static pond system may not be a serious problem in countries where new pumps can be purchased in a nearby town. However, it can be disastrous in developing countries where new pumps and pump parts are often not available but must be ordered from another country. Several weeks or months may pass before the situation can be remedied unless the culturist maintains a selection of spares. If the culture system requires constantly flowing water (eg, an open raceway system or a recirculating system), loss of flow due to pump failure for even a few minutes may result in disaster. A pump may break down, or there may be a power failure that results in pump failure. In either case, having a backup that will automatically come on to keep the system operational will help ensure against tragic losses. In the case of power failures, a backup diesel generator with an automatic switching mechanism is a popular choice.

Redundancy is not restricted to pumps but should be considered for all types of equipment where failure can lead to rapid loss of environmental control. The up-front costs of backup systems can be quite high, but loss of a crop may cause a business failure.

The business plan should provide projections of annual production. Based on those estimates and assumed food conversion ratios, an estimate of feed costs can be made. Food conversion ratio (FCR) is calculated by determining the amount of feed consumed for each unit of weight gain. For example, if a fish grows from 1 to 2 kg on 2 kg of feed, the FCR is 2 kg of feed consumed divided by 1 kg gain or 2.0. For many aquaculture ventures, between 40 and 50%

of the variable costs involved in aquaculture can be attributed to feed.

Aquaculturists may elect to purchase animals for stocking or maintain their own broodstock and operate a hatchery. The decision may rest on such factors as the availability and cost of fry fish, postlarval fish, oyster spat, or other early life history stages in the location selected for the aquaculture venture. In regions where the species selected is being produced in large quantity (eg, channel catfish in Mississippi or penaeid shrimp in Thailand), sufficient local hatchery production may be available to supply a new venture. A catfish farmer in Nebraska or shrimp farmer in Alabama might find it more economical to establish a hatchery than to ship in young animals from long distances.

For aquaculturists working with banks and other types of lending institutions, money for land purchase, site preparation, and facility construction can be obtained through loans of 15 to 30 years. Equipment such as pumps and trucks are usually depreciated over a few years and are funded with shorter-term loans (often seven years). Operating expenses for such items as feed, chemicals, fuel, utilities, salaries, taxes, and insurance may require periodic short-term loans to keep the business solvent. The projected income should be based on a realistic estimate of farmgate value of the product and an accurate assessment of anticipated production. Each business plan should project income and expenses over the term of all loans to demonstrate to the lending agency or venture capitalist that there is a high probability the investment will be repaid. Realistic business plans often show losses for up to several years while the facility is being constructed and put into full production. Some aquaculturists even plan for an occasional crop loss when developing their long-range projections of profitability.

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