© Loc Tran
A year ago, when I last met Tran, he was looking for investors to help him build a new model farm: one that he hoped could rescue a sector that was on its knees, due to high production costs, poor economies of scale and – above all – the shockingly low price of shrimp on the global market.
“I see a lot of inefficiencies with our traditional shrimp farming: small farmers lack enough access to finance, we have too complex a supply chain and distribution network. It drives up the cost, and it makes the traceability impossible,” he reflects.
It’s a situation that has come to a head after a run of profitable years, as the industry has evolved over the course of Tran’s lifetime.
“When I was a child, we only captured shrimp from the wild, then maybe 30-plus years ago, we started the small scale farming model. It was very much like farming and hunting and was very primitive, but we could make good money, as the environment was good. But, since we started to intensify, we started to face many challenges: we have environmental issues, we have food safety issues, we have traceability issues, animal welfare issues and – very importantly – issues with the production cost and efficiencies,” Tran explains.
As a result of these factors, Tran began to look for backers to help him establish a modern, efficient farm that could produce shrimp for a cost below the abysmal prices being offered, while at the same time safeguarding the environment.
His initial scheme was for a $15 million model farm that could produce up to 5,000 tonnes a year, but in the intervening period – as the price crisis continued – he decided that he didn’t want to wait.
“I thought, why don’t we just go ahead and see how much it really costs? Instead of building 100 ha, why don't we build 30 ha? Instead of investing $15 million, why don't we start small?” he explains.
“We ran some economics models and they showed that the optimal scale for a farm should be somewhat in between 1,000 and 2,000 metric tonnes. So from that we generate a revenue of $5 to $8 million a year. At that scale, we start to have some bargaining power, but it’s not too big to manage. A gigantic farm becomes too complex to fix so we’ve made it modular in terms of design, waste treatment, operation, warehousing and management,” he adds.
Tran decided to build the farm on the site of a non-productive, extensive shrimp farm, where declining returns made the landowners willing to sell.
“Now, due to the climate change and diseases and waste from irresponsible intensive farms, extensive farming now is dying,” he reflects.
As a result, he is trying to make his new farm as low impact as possible.
“I want to make sure that when we do intensive farming, we do very proper environmental impact assessments, and make it transparent in terms of the wastewater discharge. Everything will be monitored in real time and broadcast live. So that means we can intensify the farming without damaging the traditional way of doing extensive farming,” Tran points out.
One of the key ingredients to achieve this is to plant 25-30 percent the farm’s area with mangroves in order to absorb nitrogen and phosphorus from the discharge water. And he has recently received a $100,000 grant from the Dutch government to do the full life cycle analysis of his shrimp. As he points out, shrimp have one of the highest carbon footprints in aquaculture: about 13 kg of carbon per kg of shrimp.
“In the short term we want to be 70 percent more efficient, which would means we only emit maybe 30 percent of that figure. And eventually, once we have large enough scale and we put more innovation in, we can go carbon neutral. That's my goal,” he emphasises.
Tran’s business plan
To minimise risks Tran decided to draw up a business plan in which suitable technologies are carefully selected
“I built some golden rules for the budget: fancy equipment is only likely to depreciate so I wanted to have a good ratio of assets to liabilities. So I spent around $1 million for the land and around $1 million for the infrastructure – that includes the contract to excavate the ponds, building the power grid, liners, equipment and warehousing. But everything we build must be very robust and must survive at least ten years,” he explains.
As a result he calculated that the fixed costs – spread over 10 years – would equate to a comparatively modest $150,000 per year. And if the farm produced 1,500 tonnes of shrimp per year, then, even if the prices remain rock bottom, he established that he’d still be making a profit of $1 for every kg of shrimp produced.
“That means we only need to operate about maybe 10 to 15 percent of the overall capacity to make the break even financially, for any fiscal year,” he observes.
This is helped by huge efficiencies produced by the economies of scale.
“I only need about 15 workers to operate the entire farm, which means the productivity of each worker is about 100 tonnes per year, which is ten times more efficient compared with normal shrimp farming,” he explains.
Despite its large size, Tran can run the farm with a fraction of the workforce needed for traditional farming methods © Loc Tran
Plans to expand
With his first farm is nearing completion Tran is already building another two modules and aims to continue to double the number of modules he builds annually.
He’s also looking to add some form of technology transfer system into his business.
“Hopefully, by 2030, we will have about 50 modules like this across Vietnam and the business model to transfer the technology to the younger generation of shrimp farmer investors so they can copy the model,” he explains.
If all goes to plan he believes it’s possible to spearhead meaningful growth in the sector on a national level, on a fraction of the land currently used by the industry.
“My best assumption for vannamei production now in Vietnam is somewhat around 500,000 tonnes, which includes domestic consumption of around 150,000 to 200,000 tonnes, so if I can make 200 modules like this, it would be almost about the same size as the industry in Vietnam, but only cover 6,000 ha – about 1 percent of the total area available for shrimp farming in Vietnam. And we will get all those farms ASC and BAP certified and we can apply any higher standard in terms of food safety, animal welfare,” he explains.
According to Tran this goal should be feasible – not least as Vietnam’s shrimp farmers are going through “a generational crisis” – they’re getting older and their children are looking for less back-breaking work.
“They're small, they're not efficient, they're losing money, they're in bad debt. We need to find a way out for the industry,” he points out.
However, he adds that he first needs to show landowners that his system works as well as his forecast – hence his commitment letting people visit, and learn from, his own farms.
© Shutterstock
Support for the project
Although it’s still early days, Tran notes that he’s has a great deal of interest in his project from a range of sources, including shrimp buyers and feed mills.
“I see many feed plants on board with me. Many of them need somebody to revolutionise the way we do the farming so they can continue to sell the feed,” he observes.
He has also had to bring his own staff and investors on board.
“Each module is ten times bigger than our experimental farm. And that means there's some challenges for us. But at the same time, it's so super interesting for us to learn how to build high capacity power grid, how to build high capacity backup generator, how to build a strong contingency plan when we run the farm. I see it a very interesting and inspiring journey for all of us,” he reflects.
While Tran has made much faster progress than he initially anticipated, the project has not been without challenges – the recent run of typhoons to hit the country have delayed the project by two months. However, he now hopes to stock the farm in November and have the first harvest by the advent of the lunar new year, at which point he aims to draw more attention to his concept.
“We need to somehow modernise and revolutionise the way we do shrimp farming, making it a real business that’s profitable and sustainable so our children can enjoy the growth of this industry instead of seeing it collapse,” he concludes.
