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Aquaculture Enterprises: Considerations and Strategies

by the Fish Site Editor
23 November 2009, at 12:00am

There are many opportunities in the dynamic and expanding aquaculture industry. However, aquaculture has risks similar to those of any farming enterprise. The information provided here by Lance Gegner, NCAT Agriculture Specialist, highlights the many important factors to consider before proceeding with an aquaculture enterprise.

Natural and Personal Resources

Natural resources such as water, land, soil, and climate strongly influence the choice of species and production system. Abundant, high-quality water is usually the single most crucial resource. Land can be limiting if the topography is not favourable for the construction of ponds, or if land is dedicated to other productive uses. Soil properties must be considered in pond construction, and soil fertility will influence pond productivity. Climate does not limit the scale of aquaculture, but it does determine the species that can be grown (except in the case of closed-system aquaculture technology described below).

Production resources;capital, labour, and time all influence the choice of production system and species. Generally, the more intensive the production system (i.e., the more fish grown per volume of water), the more capital, labour, and time required. For example, lightly stocked farm ponds practically take care of themselves, while closed systems need almost continuous monitoring.

Industry resources including supplies, services, and markets are well developed in some areas for certain types of aquaculture. For example, in the Mississippi Delta Region, there are many catfish feed manufacturers and catfish processing facilities and a strong producer association that supports marketing to promote catfish consumption. If aquaculture of certain species is less well developed in other parts of the country, the aquaculturists in these areas must be very resourceful. Producer organisations are valuable sources of information about markets and marketing.

In order for an aquaculture enterprise to remain viable and profitable, it must be environmentally sound. Environmental issues, such as safety of fish and seafood; water pollution by excess nutrients; destruction of coastal habitats; and damage to natural fish stocks by accidental release of farmed, exotic, or bio-engineered species, are major concerns for many consumers and need to be addressed by the aquaculture industry.

Technical resources, information, and expertise are critical to aquaculturists. Environmental and disease problems can develop quickly and threaten an entire crop. Quick access to professional diagnostic services such as fish disease labs can salvage a threatened batch of fish. Contact your county Extension Service for information about aquaculture in your area and for contact information for the state Aquaculture Specialist. Other sources of information are your state’s Sea Grant programme, Regional Aquaculture Centres, or other federal sources of information about the programmes and services available in your state or region.

Regulatory Aspects

In the article “Legal Considerations in Commercial Aquaculture,” James W. Avault, Jr., Louisiana State University Professor Emeritus of the Aquaculture Research Station, discusses the history of laws governing aquaculture.

Historically, wildlife and fisheries have been regulated and monitored by the US Fish and Wildlife Service at the federal level and by departments of wildlife and fisheries at the state level. At both levels, laws and regulations have focused on wild populations of game and fish. As aquaculture developed in the United States, many of these laws were at odds with it. The cottage industry of aquaculture was put under the jurisdiction of federal and state agencies that historically regulated wild populations. In 1976, for example, the National Aquaculture Act recognised aquaculture as an emerging industry, but the Act placed the jurisdiction jointly with the US Fish and Wildlife Service and the US Department of Commerce. The US Department of Agriculture was designated in a supportive role. Eventually, the US Department of Agriculture was designated the lead agency for aquaculture, whereas at the state level the transition to state agriculture departments has been slower.

Make sure that you get all state and/or federal permits or licenses required for an aquaculture operation in your locale. The permit type will vary, depending upon the species grown, culture techniques, local zoning ordinances, public or private water use and discharge regulations, land designated wetland or coastal zone, and marketing strategy. Contact your state agencies concerned with environment, natural resources, and agriculture for more information on the requirements in your state and locale. The National Association of State Aquaculture Coordinators (NASAC) has a Directory of State Aquaculture Coordinators. The State Coordinators are responsible for coordinating aquaculture programmes at the state and territorial levels.

Your state Extension Aquaculture Specialists or state fisheries department may also be able to assist you. Remember, producers need to know the laws that apply to all aspects of the aquaculture operation, including species under consideration. Lack of proper permits, interstate transport of a threatened or endangered species, or a species identified as an invasive pest fish or plant, is punishable by fine or imprisonment.

Many federal programmes work with various aspects of aquaculture regulations, assistance, and research. The USDA, the Department of Commerce (DOC), the Food and Drug Administration (FDA), and the US Department of Interior Fish and Wildlife Service (FWS) all have certain areas of responsibility to the aquaculture industry.

Species

There are about 60 potential aquaculture species that can be used for food. The main species being raised and marketed in the United States are channel catfish, trout, salmon, crawfish, tilapia, and bait species. Whatever the species you finally decide on, you need to have a good knowledge of their biology in order to understand all their environmental requirements and to determine whether a problem is developing.


Rainbow trout fingerlings. Photo by Stephen Ausmus Photo courtesy of USDA/ARS

Coldwater species such as trout and salmon can be successfully farmed wherever water temperature does not consistently exceed 75°F. This usually limits production of coldwater species to northern states and mountainous areas, including the southern Appalachians, Ozark Highlands, Rocky Mountains, and Pacific Coast Ranges. Idaho, North Carolina, and California are the top three trout-producing states, and Washington and Maine are the largest producers of salmon. Coldwater species can also be grown anywhere adequate cold groundwater is available. Coolwater species such as walleye, perch, sturgeon, and certain shellfish tolerate warmer water than coldwater species, but their growth is inhibited at the optimal-growth temperatures of warmwater species.

Warmwater species such as channel catfish, striped bass, paddlefish, and most shellfish need warm water over a relatively long growing season to be economically practical. Some tropical exotics such as tilapia die at water temperatures below 50° and so can only be grown during the warm months in most of the South or in thermal waters elsewhere. Egg and fingerling production has emerged as a specialty operation in the maturing aquaculture industry. Hatchery facilities, especially in the South, can provide advanced fingerlings to more northerly producers with marginal growing seasons. Larval and immature shellfish are also produced in hatcheries. Hatchery techniques are complicated and have many special requirements; therefore, they are not recommended for the beginning aquaculturist.


Striped bass. Photo by Gerald Ludwig Photo courtesy of USDA/ARS

Bait production is a very large component of the aquaculture industry in the US. Louisiana, Minnesota, Florida, and Arkansas are all large producers of bait and ornamental species. Minnows, suckers, goldfish, and crawfish are some of the commonly grown bait animals. Sometimes bait species can be raised along with food species.

Production Systems

Extensive aquaculture is conducted in ponds stocked at a low density that yield small crops, but require little management. Intensive aquaculture is practiced in artificial systems (ponds, cages, raceways, and tanks) stocked at a high density that yield large crops, but require a lot of management.

Open systems allow water to flow through them without reusing the water. Generally, the more intensive an aquaculture system, the more water must flow through it. In open systems, discharged water is lost from the system. Because water, as well as the cost to pump it, is becoming more of a limiting factor, technologies that reuse part or all of the water are being developed.

Closed systems recirculate and recondition all of the water used, largely freeing aquaculturists from water supply constraints. Closed systems have the potential to allow the production of almost any species anywhere, provided the market price can pay for the capital and energy requirements of the system.

Pond aquaculture is the most commonly practiced. Most large-scale aquaculture farmers construct levee-type ponds, but these require large amounts of relatively level land. Many small-scale and a few large-scale aquaculture farms use watershed ponds. Your local office of the Natural Resources Conservation Service (NRCS) will provide technical assistance for pond siting and construction. The University of Arkansas at Pine Bluff Aquaculture and Fisheries Web site has the publications Recreational Fishing in Small Impoundments: Alternative Management Options and Farm Pond Management for Recreational Fishing.

Cage culture, the growing of aquatic animals in floating or anchored net confinements, can be used in farm ponds or other existing water bodies that are otherwise unsuitable for aquaculture. Cage culture is often more compatible with other uses of the farm pond. Cages can be used to alternate warmwater and coldwater species in the same pond.

Tank culture, both open and closed systems, can be adapted to a wide range of species and situations. Tanks made of steel, fiberglass, or plastic can be dismantled and reassembled for transporting or relocating. Advantages of tank culture include minimal land requirements, portability, and ease of expansion. Tanks can be located indoors to reduce climate limitations. High equipment cost, especially in closed systems, is the main disadvantage of tank culture.

Raceways; long, narrow canals with large flows are the most widely used production system for the intensive culture of salmon, trout, and charr.

Rotation systems, alternating aquatic and field crops in levee-type ponds, can benefit both aquacultural and agronomic crops. Crawfish-rice and crawfish-rice-soybean rotations are commonly practiced, but other aquaculture-agriculture rotations have been largely neglected, even though there is much potential for beneficial rotation effects in such systems. Rotation benefits are similar to those seen in other agricultural systems: disease and weed suppression, reduced fertiliser and chemical inputs, and increased biodiversity (due to the mix of aquatic and terrestrial habitats in the landscape).

Integrated, multiple-use systems incorporating fish, livestock, fowl, and horticultural production are widely practiced in some parts of the world, but they have been largely neglected in the US. The beneficial interactions between the different elements of such a system help to reduce purchased inputs. Development of polyculture in commercial US aquaculture will require finding appropriate combinations of marketable species. Many species used in the sophisticated polyculture systems of Asia (e.g., various carps) are not well accepted as food items here.

Integrated aquaculture and hydroponics; termed aquaponics is a subject receiving increasing attention in the US. Beneficial interactions between aquacultural and hydroponics operations reduce some inputs, but such technologies are capital intensive. See ATTRA’s Aquaponics: Integration of Hydroponics with Aquaculture for more information on aquaponics.

Marketing

Marketing strategy is one of the most important aspects of an aquaculture business. When you choose the species you will be farming, you need to consider the market price for it. It is important to identify a reliable market, and even a backup market, before making capital investments in aquaculture. In the Langston University publication Is Fish Farming for Me?, the authors state, “The most often asked question, ‘are there profits to be made in aquaculture?’ requires a qualified answer. Yes, aquaculture can be profitable if the fish farmer has the right natural resources, good management abilities and sufficient capital available for investment in the enterprise."

As David J. Cline, an Extension Aquaculturist at Auburn University, suggests in an article entitled “Marketing Options for Small Aquaculture Producers,” innovative marketing can be the key to financial success or failure.

Most producers would like to sell to one of two high-volume buyers such as a processing plant or distributor. This is a good marketing strategy if you are producing large quantities of fish. However, small-scale producers are not in the same economic level as larger producers are and, therefore, must usually sell for a higher price to remain profitable. Their best option is to establish niche markets for their products.

Niche markets have advantages and disadvantages. The main advantage in niche marketing is that producers become wholesalers, and, in some cases, retailers. Consequently, producers have more control over the prices they set for their products, and retain some portion of the profit, that otherwise would have gone to the middlemen. The main disadvantage of niche marketing is that considerable time must be spent analyzing and developing these markets.

A successful niche marketing aquaculture enterprise will need to exploit markets that are not in direct competition with large-scale aquaculture. Some of these niche markets include selling fingerlings to other producers; selling live or processed fish to restaurants, grocers, ethnic markets, or live for pond stocking; fee fishing or pay lakes for food-size sport fish; bait fish; and ornamental fish or aquatic plants.

Finding niche markets can be confusing, but careful evaluation and a good understanding of market requirements will help producers develop marketing plans that will fit their needs. Kenneth Williams, Langston University Fisheries Extension Programme, states in his publication Marketing Fish in Oklahoma:

It is much more profitable to determine market demand and plan production accordingly. Raising a crop of fish first and then looking for places to sell it can result in low or no profit. To determine possible markets; begin with an inventory of your operation. Ask yourself the following questions:
  • What kinds of fish can I produce?
  • How many pounds of fish can I produce?
  • Can fish be delivered throughout the year, or in annual batches?
  • Can I tailor production schedules to produce the size of fish required for market?
  • Can I transport live or processed fish?
  • Is fee fishing a possibility?
  • Is a processing plant located nearby?
  • Am I willing to process fish? Do I have the equipment and labor force necessary?
  • Can I produce fingerlings, food-size fish or a combination?

Market price will vary with each marketing strategy. Live fish sold directly to the consumer usually bring the highest price, but this requires much time and interaction with the public. Live fish sold to processors usually bring the lowest market price, but large volumes and specific, short harvest times somewhat offset this price difference. Selling processed fish is a value-added strategy that can increase market options and market price, but it also increases labor and regulatory requirements.

Business Planning

Business planning is crucial to success for both new and established enterprises. Going through the planning process increases the chances for success and helps avoid costly mistakes. It can be very helpful to have your plan evaluated by several people to make sure that you haven’t missed any vital components or issues. This critical evaluation will also be helpful when presenting the plan to lenders or other potential funders, because many financial institutes require a formal business plan. A business plan should be a working document that is reviewed and updated at least a couple of times a year.

There is a great deal of information and assistance available for writing and using business plans. Every state has Small Business Development Centers and Cooperative Extension offices that offer such assistance, as do many state economic development agencies. However, many producers would like to have business plan examples and other information that is specific to aquaculture.

The ATTRA publication Agricultural Business Planning Templates and Resources does not tell you how to write a business plan, but it does refer you to sources of business planning information and assistance that are more relevant to the smaller scale or alternative agricultural/ aquacultural entrepreneur.

The Minnesota Institute for Sustainable Agriculture publishes the 280-page Building a Sustainable Business—A Guide to Developing a Business Plan for Farms and Rural Businesses. This guide will help develop a detailed business plan and looks at ways to take advantage of new marketing opportunities. It is available on-line at www.misa.umn.edu/vd/bizplan.html.

Further Reading

- You can view the full report by clicking here.
November 2009

the Fish Site Editor