Can cod farming make a profit?

It can cost between NOK 40 and 43 ($4.09 - $4.40) per kilogram of round weight to farm a cod until it is ready for harvest, making it hard for cod farmers to compete with wild-caught cod in terms of price.

“A profitable industry requires either high prices for wild cod, or that cod farming actors are able to differentiate farmed cod from wild cod, so that one can justify production costs in terms of market price,” said Morten Heide, market researcher at Nofima.

He has led the work on a recent report, which highlights the potential of farmed cod – quality, market perception and economy. Eleven Nofima scientists with different professional backgrounds have compiled the report.

Overview

The report concludes that there are no major issues in terms of quality, and the market seems to welcome farmed cod. Economically important parameters such as slaughter weight, mortality rates and sexual maturation have been significantly improved through initiatives such as the breeding programme, and better knowledge among the fish farmers about raising the fish.

“Profitable production requires that one achieves sales prices that outweigh the costs,” Heide states.

Improved genetics

Five generations of farmed cod have been produced at the Aquaculture Research Station in Tromsø. The sixth generation is being raised at the Centre for Marine Aquaculture, which Nofima runs on behalf of Norway’s Ministry of Trade, Industry and Fisheries. Over the course of five or six generations of breeding, the cod has become domesticated, which thrive, grow well, and no longer escape. Fifth-generation cod have better characteristics in terms of survival, growth and behaviour than has been the case for previous generations of farmed cod.

“Biologically speaking, farmed cod are therefore ready for commercial operations,” said Øyvind Hansen, head of the cod breeding programme at Nofima.

According to Nofima, there have so far been very few available economic studies related to cod farming. Since there are few commercial actors currently engaged in cod farming, there are no statistics on production costs. Therefore, the scientists had to resort to a bioeconomic model of a production cycle to calculate these costs. The model is based on several conditions with varying degrees of uncertainty.

“We calculate the sum of fixed and variable costs during the production period in order to estimate the average costs per kilogram of cod produced. The largest variable costs are associated with feed, slaughter and packing costs. We have estimated average production costs to be NOK 40-43 per kilogram of round weight, and this includes slaughter, packing and capital commitment costs,” said scientist Ekaterina Nikitina.

She points out that profitable production obviously requires a sales price of the fish and its by-products that exceed production costs.

Improvements in the last decade

Although the scientists are currently uncertain about the profitability of cod farming, they report significantly better conditions now compared to 8-10 years ago.

The previous generation of farmed cod achieved an average weight of 3.85 kilograms in 22-23 months. Ten years ago, only a very small percentage of the farmed cod achieved this weight.

“Less feed is required than before, which reduces the largest cost item in cod farming, and there is better knowledge about light regimes which means that one avoids the negative effect of sexual maturation. This reduces the costs for the cod farmers,” said Nikitina

The development has also given cod farmers better conditions for the stable production of fish over two kilograms. This weight class achieves the best market prices.

The mortality rate of farmed cod also appears to have decreased, which improves the economic side of things. Nofima’s most recent cohort had a mortality rate of approximately 14 percent, a significantly lower figure than 10 years ago.

In general, knowledge about all aspects of production has improved. The positive development contributes to a decline in all unit costs for the farmers, the report states.

“It improves the basis for efficient and profitable commercial cod farming,” said Nikitina.

Facts about the study

• The farmed cod in the study were mainly harvested at between 3.0 and 5.0 kilograms in round weight, with an average weight of 3.85 kilograms.
• Production losses in the form of mortalities were 14 percent.
• Yields from round fish to gutted fish without heads were 63 percent, and approximately 75 percent of the fish were in the 2-4 kilogram weight class.
• 1.24 kilograms of feed were used per kilogram of cod produced.
• The juveniles were 117 grams when transferred to the sea and grew to 3.85 kilograms in 22-23 months.