As of recent, we have seen the press release announcement of several "New" pilot intensive shrimp production systems. Intensive shrimp production in pilot systems is certainly not new - though any actual profitable intensive shrimp production system would be. Many of these "New" systems are rehashes of old concepts - and none that I have seen thus far actually address the primary weakness of intensive shrimp productions systems - their significantly  higher production costs for shrimp.

Recently Bob Rosenberry provided basic information on three such "New" shrimp production systems. One in Texas developed by Texas AgriLife Research Mariculture Laboratory, one in Blue Oasis Pure Shrimp in Nevada, and one in China by Sino Agro Food, Inc. While none of these systems post any production economics that might tell you how real they are, the Texas and Chinese systems tweaked my attention most.

The Texas system is a "New" stacked tray system. As most of us senior members of the shrimp production have witnessed, there have been lots of stacked raceways systems over the past four decades. King James used stacked raceways in the 80s, and even before that - in 1973 Ron Wulff and Durwood Dugger developed a stacked raceway system for the Ralston Purina Mariculture Research Center's intensive shrimp production efforts  (See photo below.) Photos of the Purina stacked tray system were shown at the 2008 WAS/Purina Reunion. The Ralston Purina stacked raceway appears surprisingly similar to the "New" stacked raceway technology of AgriLife system nearly 40 years later.

Ralston Purina Stacked Tray System                 TEXAS A&M Stacked Tray System

                      1974                                                                   2011

Other surface multiplying/footprint minimizing concepts like the more cost effective single volume/multilayered systems were developed from the stacked raceways - like the ones we produced for AMFAC in 1986 (See drawings on "Refining the Business" in BCI web page index above). 

I don't see the stacked raceway system - the ones we developed at Purina, or those stacked raceways that others have developed, including the Texas AgriLife system above as being economically competitive - production cost wise in the current global shrimp market. This is because they don't economically and effectively address - or significantly change the primary production costs of shrimp production. 

   

As an example, the PR from Texas AgriLife claims "success," but does not define what their idea of "success" means (true of most other intensive system PR as well). Today the acquisition of the technology to produce shrimp with technical reliability isn't that much of a challenge. However, without any production economic data, it would be rather hard to determine if a system such as the AgriLife's - "New" technology of stacked raceway systems (or any of the other aforementioned systems) can be economically competitive with other lower intensive, but demonstrably successful economic shrimp production models in Asia. The current Asian lower intensity shrimp production models that are so successful that they currently dictate the price structure of global shrimp markets. I think the current new Chinese intensive shrimp production system under development as detailed on Bob Rosenberry's Shrimp News International's website might be far more economically interesting than the AgriLife system. I say this because the Sino Agro Food system is being created right in the middle of - and knowingly in direct competition with the world's lowest cost shrimp production models - the typical lower intensity shrimp production systems of Asia .

For any shrimp production model to be successful there are a number of basic economic hurdles that have to be overcome - beyond the standard technical ones. The first of which is feed cost - which accounts for up to 60% of shrimp production costs. Depending on the particular system and its location - seed, energy and technical management costs compete for the largest secondary top production costs. Stacked raceways' most significant contribution to shrimp production economics is the reduction in foot print (land and building costs) - though the raceways themselves are generally spectacularly more expensive per unit of shrimp production surface compared to simple single layered, lined and covered ponds. As aquaculture economist have been telling us for the past 40 years, most aquaculture production isn't particularly capital sensitive. This even more so at today's exceptionally low interest rates. This means unless a shrimp production system can make direct and significant reductions in primary production operating costs (feed, seed, energy, and technical management) over competing system designs - it really isn't going to be competitively, or economically viable. Just increasing the production of shrimp per square surface unit of facility foot print, really doesn't contribute much economically to reducing the primary production costs of shrimp. Failing to reduce primary production costs is the most common economic downfall of most intensive systems - they really don't provide significant cost reductions in operation costs over low intensity systems. Just designing a shrimp production system that produces more shrimp per square foot isn't enough when the production cost of those shrimp per square foot are higher than other systems. Whereas in lower intensity systems nature (albeit less than predictable) does provide significant economic inputs (secondary nutrients, water filtration, degassing, and larger more stable heat sinks, etc.) at much lower costs than intensive systems - especially in warmer climates.

As we all know, there have been lots of intensive shrimp production efforts in the US over the last few decades. As yet, none have been even close to being lowest cost producers, or for that matter - profitable. Of course, many seem to think they are going to find a market niche in the shrimp market that will support their intensive systems comparative (compared to lower intensive systems) higher operating costs. Apparently, most failed to realize that by definition most if not all niche markets are ephemeral at best. There are almost no niche markets that competitors won't invade if there are sufficient economic incentives to do so. I can't count the number of prospective clients we have had that were going to lay claim to the "premium live shrimp market," the "premium fresh on ice market," or the premium "locally produced markets," the "direct to restaurant", the "direct to consumer," etc., etc.  In almost every case the clients underestimated their assumptions for the 'cost of sales' in these markets. Those underestimations ate up any envisioned "premium niche market margins" they had projected - and then some, which subsequently led them to economic failure. 

Shrimp is a commodity market. Effective shrimp production today is accomplished by very efficient vertical integration at optimum economies of scale. I know of no small scale production models for shrimp that have demonstrated sustained profitability. Niche markets are generally small and specialized and rarely if ever have the necessary scale to allow for optimized production economies - and competitive production costs. All one has to do is examine the US shrimp markets. Look at the prices for the absolutely best shrimp over the lowest quality shrimp and you will find a very small difference - something like 10-15% tops. There are actually greater price differentials and preference for size than there is for quality. This is primarily because most of the shrimp sold and consumed in the US go to restaurants. However, they first go through a very organized wholesale seafood distribution system controlled by large and well run companies. The wholesale distribution and the restaurants act as firewalls preventing effective shrimp producer efforts at advertising or educating their end user market regarding any premiums their particular shrimp might have to offer the consumer.

The only way around this wholesale distributions system for the shrimp producer is to by-pass the wholesale distributors by selling and distributing to only their own restaurant chain - dividing the margins more evenly between production, distribution and end user sales.  However, to be this vertically integrated just on the marketing side

(producer, distributor and restaurant chain) you necessarily need to be at a very large scale on the production side (hatchery, growout, feed mill and value added processing plant). Over the past 40 years a few companies have tried to grow shrimp and sell them to their own restaurants, but none that I am aware of ever reached sufficient scale to survive long enough, or grow large enough to truly test this fully vertically integrated and highly competitive shrimp production/marketing model. 

Personally, I think ultimately shrimp and other aquaculture species will be produced intensively - perhaps even as the lowest cost producer. However, as yet I don't see the necessary technical (nutrition and energy)/economic breakthroughs to allow this to happen. I also don't see the investors of the necessary stature and vision out there to make it happen. Admittedly, I would be surprised to see those investors venturing forth in these times of peak resources (oil and phosphates) and other major economic paradigm changes. Most investors today are strategically waiting, hedging with gold or other assets that maintain value.  On the other hand while you can do without gold completely, no one does without food.  As long as human populations continue to grow, there will be few if any more predictable market demands and human needs  - and therefore more secure investment arenas for investors - than food production.