Multi-level Aquaculture Production Structure Economics.

Durwood M. Dugger

150124

 

Recently, I provided a response to an aquaculture investor  in Texas interested in the economic feasibility and profit potential of multi-level aquaculture production structures. I thought the response might benefit others attracted to this concept. It in some ways is a continuation of the my earlier Comment - Intensive Shrimp Production Economic Challenges.


"Other than the cost is there a reason not to consider multi-level aquaculture structure production?" I think your question should be worded differently.  "Considering costs - is there any reason to consider multi-level aquaculture production structures."

What many would-be aquaculturist fail to understand is that aquaculture isn't capital cost sensitive, but aquaculture is very operating cost sensitive. Consequently, capital costs have little impact on profitability - unless they produce significant operating/production cost savings. 


Any design concept that doesn't produce significant operating cost savings - and or similar costs to the prevailing production cost paradigms (i.e. tropical pond production in the case of shrimp, or off-shore cage production in fish) isn't going to be economically feasible or competitive in the long run. This is the primary problem with multi-level or stacked aquaculture production systems - they don't significantly reduce operating costs, but generally increase them and consequently increase the cost of production - making them less competitive - not more so. In spite of what you might have heard, aquaculture products are produced from commodity products and consequently they become commodity products themselves. 


Since feed costs are the single largest operating and production cost, it will be very difficult for any kind of stacked aquaculture concept to improve feed cost and or utilization efficiency. Because stacked aquaculture production system concepts are generally shallower to reduce weight and corresponding structural considerations and costs - the shallow systems can and do increase circulation/energy costs due to higher surface to volume friction ratios - not to mention increasing gas dissolution energy inputs (O2 in and CO2 and N going out). Since multi-level concepts elevate all production input materials (water, feed, labor, product) compared to single level systems - these systems can't help but produce higher energy and labor costs comparatively. 


The "local" production concepts we hear so much about aquaculture wise - are economic myths. Those espousing them fail to understand that in general for every pound of finished aquaculture product produced - three pounds of feed is hauled to the aquaculture production site from where ever the closest ag. commodity feed component locations are. Most major population centers are not necessarily located adjacent to major ag. commodity feed production regions. You should examine the how the intended local site costs - compete with other non-local producers. Local markets tend to be highly price sensitive and consequently have very small volume, easily saturated and easily collapsed price structures for supposed "premium" aquaculture products.


From our studies  (both design and economic analysis) we have found no offsetting production cost savings from multi-level production systems. Unless something makes transportation drastically more expensive - "down-town" aquaculture real estate locations will never offset nearby country side locations with far lower real estate costs and other lower production costs (cheaper ag. rate utilities, etc.). The possible exception would be for very small production "hobby" aquaculture systems whose owners have other shared costs and incomes to support them. 


Real estate investment success may be dependent on "location, location, location" - but aquaculture production investment success i"s dependent on understanding all of its inherent "economics, economics, economics. "