|
| |
The Risky Business of Offshore Marine Aquaculture
From: Woods Hole Oceanographic Institution
| By:
Tracey Crago |
EDITOR'S INTRODUCTION |
As increasing demand for fish, shellfish and seaweeds by consumers outgrows the capabilities of traditional commercial fishing, the field of aquaculture, which focuses on the farming of marine life, has gained importance. However, like its dryland counterpart, agriculture, the field of aquaculture is highly susceptible to risks from hindrances to its day-to-day operations and the volatility of its markets.
In this feature, policy analysts from the Marine Policy Center at the Woods Hole Oceanographic Institution explore the feasibility of offshore aquaculture. For example, are the possibilities for production of blue mussels or sea scallops in offshore aquaculture great enough to outweigh the risks of such an unusual venture |
 efore lending money to start-up businesses, lending institutions require borrowers to submit a business plan. A sound business plan considers--and accounts for--risks involved with a particular business venture. Imagine trying to develop a business plan for an offshore marine aquaculture operation, where many of the risks involved are unknown. |
 | |
| Blue mussels are growing well at the offshore aquaculture test site in Rhode Island Sound. It will take approximately 12 to 18 months for the mussels to reach market size. | |
|
That is precisely what policy analysts Di Jin, Hauke Kite-Powell and Porter Hoagland, and their colleagues at the Woods Hole Oceanographic Institution (WHOI) Marine Policy Center are attempting to do. By combining financial business planning with risk assessment techniques, they hope to better understand the viability of prospective offshore marine aquaculture operations in New England. Initially, they are developing bioeconomic feasibility models of grow-out operations for blue mussels, sea scallops, summer flounder, cod and haddock. |
With WHOI Sea Grant support, and recent funding from the National Marine Fisheries Service (NMFS) Saltonstall-Kennedy Program, the NOAA National Marine Aquaculture Initiative, the US Environmental Protection Agency (EPA) and the University of New Hampshire's Cooperative Institute for New England Aquaculture and Fisheries (CINEMar), the investigators are looking at the feasibility of offshore aquaculture from two major angles: operations and markets. |
"The operations of different types of farms include costs and details associated with running the farms," explains Hoagland, a research specialist. "Some people call this the 'economics' of aquaculture, but it is really just a method of business accounting." |
"While the economics of nearshore operations have been well studied," explains Hoagland, "it's really only within the last five to 10 years that entrepreneurs have begun to look at operating aquaculture facilities in offshore waters. |
"With nearshore operations, other users are the biggest problem," says Hoagland, referring to the conflicts that can erupt between fishermen, shellfishermen, homeowners, recreational users and others. "In an offshore situation, you are moving away from those conflicts, but there are others to consider: higher transportation costs to and from a site, biological uncertainties about spawning and grow-out, and interactions with fishing boats and gear." |
Calculating risk in aquaculture
To develop the models, researchers consider, individually, everything that could go wrong--and the likelihood that it would--and quantify that likelihood by assigning a numerical value or range of values. These values are factored into a model to determine profits or losses. The model is used to estimate the economic feasibility of one operation at one location and to determine the minimum efficient scale of operations. In other words, at what level of production can the venture be considered profitable? |
"We have a good feeling for the major categories of risk," he says, "but we will be able to develop better quantitative estimates of risk only when entrepreneurs get out there and start doing it." |
The group has access to several pilot projects from which they can gather data. Two are offshore facilities designed to grow blue mussels--one in Rhode Island Sound, the other off the Isles of Shoals in the Gulf of Maine. Another project is an experimental sea scallop farm located off Martha's Vineyard. |
Obtaining the necessary permits for the Rhode Island Sound site took several months and substantial effort. "There really aren't any 'rules' yet specifically tailored to permit the siting of offshore aquaculture," explains Hoagland. As such, the authority for permitting is now divided between several agencies: the Army Corps of Engineers, NMFS, the New England Fisheries Management Council, EPA, the US Coast Guard and state coastal zone management agencies. |
From a market perspective--the other main component of this study--issues affecting supply and demand become critical. The market for blue mussels varies widely by country. The European market for blue mussels is roughly $1 billion per year. And, while the US market is growing, its value is only between $10 million and $11 million. Timing plays a key role: the peak market, and therefore optimal harvest time, is July through September. |
Though some risk factors still need to be worked into the model, preliminary data suggest that an offshore blue mussel aquaculture operation would become profitable at a market price of $.80 per pound. To put this figure in perspective, Canadian cultured blue mussels now sell for between $.90 and $1.00 per pound. |
In terms of the scale of the operation, Hauke Kite-Powell believes that an ideal scenario would require "one boat for one year, operating at its full capacity, with at least 300 long lines." He acknowledges that "a smaller scale operation could be feasible if the boat was rented or if boat time was purchased on a day-to-day basis," given the significant costs associated with owning and maintaining a boat. |
While blue mussels require the longline array for growout, sea scallops can be seeded directly on the seafloor. Cages, the alternative method for sea scallop growout, have a lower risk of loss, but a higher cost. This higher cost, says Kite-Powell, "greatly outweighs the lower probability of mortality in the cages." Under baseline assumptions--one being a loss of 50 percent--Kite-Powell and Hoagland conclude that, "the only profitable alternative is seabed seeding." |
 Like most species, the market for sea scallops varies by season. Historically, December prices are highest for sea scallops, in part due to lower supply and higher demand around the holidays. This poses an inventory challenge for growers. Essentially, the sea scallops would have to be "held" fresh--that is, not harvested--until the price is optimal. |
Using the experimental project as a test for their model, Kite-Powell reports that an offshore operation yielding 100,000 pounds of scallops per cycle could be "marginally profitable at loss rates as high as 50 percent with a $4 per pound market price." If the market price was $6 per pound, he says, the operation could tolerate losses of nearly 70 percent and still be profitable. On average, New Bedford sea scallop prices fall within that range. |
"The trick [to offshore aquaculture]," says Hoagland, "is getting a handle on the risks involved, including those associated with the regulatory environment. Some states, including Connecticut and Maine, have permitting processes that are more streamlined. However," he adds, "there is a lot of interest in just what a system to deal with offshore access might look like." The WHOI Marine Policy Center research team hopes that is just the motivation necessary to get things moving. |
|
| |
