The University of Georgia
Center for Agribusiness and Economic Development
College of Agricultural and Environmental Sciences
Feasibility of Marine Shrimp Production in Georgia
Christopher Ferland and Kent Wolfe
FR-03-04
April 2003
Table of Contents
U.S. Shrimp Market Trends .............................................................................................................1
Imports and Domestic ......................................................................................................................1
Table 1. Quantity and Value of Shrimp Imports.................................................................1
Regulations for Marketing and Transporting Aquatic Species........................................................2
Domestic Aquaculture Production.......................................................................................2
Exotic Aquaculture Production............................................................................................2
Contact Information .............................................................................................................3
Local Area Live Market Demand ....................................................................................................3
Local Market Area ...........................................................................................................................3
Likelihood to Visit Aquaculture Farm............................................................................................ 4
Table 2. Likelihood to Buy Shrimp From Local Farm .......................................................4
Table 3. Likelihood to Purchase Farm Raised Shrimp and Estimated
Visitor Potential (Estimated Area Market) ...........................................................5
Direct to Consumer Market or Secondary Market...........................................................................5
Metro Atlanta Live or Whole Seafood Market ................................................................................5
Restaurant Survey ............................................................................................................................6
Conclusion .......................................................................................................................................6
1
Feasibility of Marine Shrimp Production in Georgia
U.S. shrimp consumption has trended upward since the early 1930's. The United States
Department of Agriculture=s Economic Research Service (ERS) reported annual per capita
shrimp consumption grew from one to over three pounds between 1990 and 2000.
According to the National Fisheries Institute (NFI), shrimp consumption is second only
to canned tuna. The NFI states that shrimp constitute 20% of all seafood consumed in the U.S.
The continued growth in demand has opened the door for farm-raised shrimp. Currently, it is
estimated that 7% of all shrimp consumed in the U.S. are farm raised, combining domestic and
foreign farm raised shrimp.
The year-round availability combined with the downward shrimp prices over time, has
changed shrimp=s product position. Once shrimp was considered a luxury seasonal product, now
it has become one of many commodities in the shellfish market. Gulf Coast shrimp (20 and
under count) appear to have a niche in the high end product market, while the other counts
compete directly with imported shrimp.
Imports and Domestic
U.S. shrimp imports increased 16% between 2000 and 2001; however, the price fell 3.6%
during this same time period (USDA, ERS, 2002). It is believed the greatest growth in the
import market came from the frozen and prepared category with Ecuador and China leading the
way. Table 1 indicates the quantity, value, and change in shrimp imports for the past few years.
Table 1. Quantity and Value of Shrimp Imports
1999
2000
2001
7.31 million
7.60 million
8.83 million
Percent Change
---
4%
16%
Value (dollars)
3.13 billion
3.75 billion
3.62 billion
Percent Change
---
17%
3.6%
Quantity (pounds)
Source: USDA Economic Research Service, 2002
Table 1 indicates that the import shrimp market increased 1.52 million pounds between
1999 and 2001; this increase is estimated to be equivalent to about half of the total US
production of shrimp.
Eight countries control about 66% of the import shrimp market. Some countries, which
are grouped as >other= by the USDA, have begun producing large quantities of shrimp and are
expected to continue to increase production and exportation into the U.S.
2
According to the ERS, the average shrimp price per pound in 2001 was $4.11, although
the large market shrimp (10 count) was $6.95, and the smallest market count was $2.58. The
shrimp production facility in Hawkinsville will have to decide what size shrimp it will market to
produce a more accurate economic analysis.
Domestic shrimp harvests amounted to approximately 332 million pounds, with roughly
165,000 pounds being farm raised. Total domestic shrimp placed on the market compromises
26% of the total shrimp market. Domestic harvesting increased 5% over the last two years, but is
expected to slow down due to lower import prices and increased regulations (ERS).
Regulations for Marketing and Transporting Aquatic Species
Since the proposed aquaculture initiative is going to market live and whole shrimp, the
CAED investigated regulations pertaining to the transportation and marketing of live shrimp
were investigated. According to Mr. Mark Norton with the Georgia Department of Agriculture,
live shrimp are not regulated by the Department of Agriculture. Mr. Norton indicated that live
shrimp are regulated by the Georgia Department of Natural Resources. However, if any
processing occurs the supplier must file with the Department of Agriculture under a food
processor status. Mr. Ted Hendricks with the Georgia Department of Natural Resources
indicated that if aquatic species were produced in an approved re-circulated system, there are no
regulations impacting the transportation of aquatic species except the farmer registering as an
aquaculturalist. The aquaculturalist application can be obtained by contacting Mr. Ted Hendricks
(Contact information on page 3).
If the shrimp are not sold in a live state and packed on ice, they are subject to regulation
by the Georgia Department of Agriculture. This is true if the shrimp are sold directly to
consumers or to wholesalers. However, if the shrimp cross state lines, those states need to be
contacted to determine their regulations regarding the transportation of live shrimp. In Georgia,
for instance, to transport live shrimp a company must have a wholesale seafood dealer license.
Domestic Aquaculture Production
If an aquaculturalist is producing, selling, or re-selling species indigenous to Georgia or
the species was recognized before 1992 as having an established population in Georgia=s public
waters, registration is free. The certificate expires on April 1st two years after registration. For
more information on determining whether a species is considered to be indigenous or colonized
in Georgia, prior to 1992 contact Mr. Ted Hendricks.
3
Exotic Aquaculture Production
No license is needed for exotic aquaculture species if they are held in containers where
no water is discharged except for periodic cleaning. This water must be filtered to remove all
impurities that may be discharged and can only be disposed in a septic tank permitted by the
county wastewater treatment system and the Environmental Protection Division. Depending on
the system to be utilized, it is important to explore these regulations in more detail with the
Georgia Department of Natural Resources.
Contact Information
Mr. Mark Norton
Georgia Department of Agriculture
19 Martin Luther King, Jr. Drive, S.W.
Atlanta, Georgia 30334
(404) 656-3685
Mr. Ted Hendricks
Georgia Department of Natural Resources
Fisheries Management Section
2070 U.S. Hwy. 278, S.E.
Social Circle, GA 30279
(770) 918-6418
Local Area Live Market Demand
One component of the CAED=s research was to investigate the local market for farm
raised shrimp. To complete this task, a telephone survey was administered by The University of
Georgia=s Center for Survey Research, to obtain a better understanding of northeast Georgia
residents as well as South Carolina and North Carolina residents and their willing to purchase
farm raised seafood products. The survey examines consumer awareness, purchasing habits,
consumption habits, and the likelihood of residents to purchase live, unprocessed shrimp from
local farmers. In addition, this survey investigated the most effective method of informing
consumers about the availability of farm raised aquatic species.
A screening question was used to eliminate respondents that do not eat seafood products.
The interviewer asked to speak to the primary seafood consumer. If no one in the household
eats seafood, the survey was terminated. A random sample of 232 people was contacted and 71
indicated they did not eat seafood products. Therefore, it was determined that 69% of area
residents were consumers and potential customers of the proposal aquaculture initiative.
4
Local Market Area
It is important to obtain a thorough understanding of the area market when considering a
new business opportunity. The following are some highlights from the telephone survey:
C
C
C
C
C
C
53% eat seafood one or more times per week.
Roughly one in five residents purchases fresh seafood weekly.
On average, the households eat roughly 4.0 pounds of fresh seafood per month. (Aided
awareness of all shrimp was high).
One-quarter to one-third of respondents would be likely to purchase shrimp. Sixty
percent or more of the respondents have eaten shrimp.
42% would purchase live or whole, unprocessed products from a local aquaculture farm.
Respondents would travel approximately 27 miles to a local aquaculture farm.
Likelihood to Visit Aquaculture Farm
To determine the local market potential for an aquaculture initiative, it is important to
first determine area residents= interest in visiting and purchasing aquaculture products from such
an operation. However, it is important to remember that 31% of area residents indicated that they
do not eat these types of products and need to be taken into consideration when calculating
market potential.
The information in Table 2 indicates how likely respondents are to visit a local
aquaculture facility to purchase live or whole, unprocessed aquaculture products. Approximately
42% of the respondents would visit such a facility. Given this figure, there appears to be a
significant number of potential consumers in the local area.
Table 2. Likelihood to Buy Shrimp From Local Farm (n = 161)
Response
Percentage
Very Likely
20.5%
Somewhat Likely
21.7%
Neither
2.5%
Somewhat Unlikely
13.7%
Very Unlikely
40.7%
No Response
1.2%
Using the reported likelihood to visit and purchase figures, it is possible to estimate the
market potential in terms of likely visitors based on the area population figures. However, the
total area population must be adjusted to reflect adult consumers since they are generally the
5
head of household. According to census data, approximately 23%-24% of the area population is
less than 18 years of age. Therefore, the total population must be adjusted down to reflect the
adult population.
Additional analysis is needed to determine interest in purchasing live or whole,
unprocessed shrimp. The first step is to determine how likely area residents are to purchase farm
raised shrimp. The information contained in Table 2 provides insight into the likelihood of
residents to purchase shrimp from a local aquaculture farm as well the estimated market potential
in terms of people. A distance of 30 miles was used because residents indicated they would drive
27 miles to visit a local farm.
Table 3. Likelihood to Purchase Farm Raised Shrimp and Estimated Visitor Potential
(Estimated Area Market)
Product
Shrimp
Likely to Purchase*
Population within
30 miles
(2,002,358)**
Monthly
Consumption
(lbs)***
31.70%
32,203
2.1
*Percentage has been re-based to all respondent including those who were unlikely to
purchase shrimp from a local aquaculture farm. This provides a more accurate representation
of potential customers.
** Population used in calculating consumption by distance was derived from Census
Population estimates.
*** Average Monthly consumption of shrimp as stated by survey respondents.
The estimated shrimp market potential is estimated to be 67,627 pounds per month based
on stated consumption and the number of likely consumers residing within 30 miles of the
Hawkinsville farm. Again, these numbers are very encouraging but additional calculations are
needed to derive the estimated consumption for the different species by distance.
Direct to Consumer Market or Secondary Market
The CAED attempted to interview consumers at several identified ethnic markets in
metropolitan Atlanta. However, only a few completed interviews were obtained due to language
and communication problems as well as skepticism of potential respondents. To compensate for
the lack of direct consumer interviews, the CAED conducted a limited survey of Chinese
residents in the Athens area. The results should only be used as a guide due to the small number
of competed surveys.
According to the limited survey data, it appears that Chinese residents in the Athens area
are willing to drive about 30 miles to purchase live or whole, locally grown unprocessed seafood
from an aquaculture farm. This is consistent with the people surveyed in the telephone survey.
6
Metro Atlanta Live or Whole Seafood Market
The CAED representatives visited eight ethnic food retailers in the eastern Atlanta
metropolitan area. The retailers all carried seafood products with seven of the eight offering both
live unprocessed and processed seafood.
The CAED conducted in-depth surveys with the food retailers= seafood department
managers to determine product movement of shrimp, and their willingness to consider farm
raised shrimp from a local supplier. All of the managers reported their suppliers were out of
state. The seafood department managers all expressed interest in meeting and working with new
local suppliers. The managers were looking for a consistent year-round supply of quality product
that is competitively priced. Headless shrimp in these markets were selling for as low as
$1.99/pound. These retailers want to purchase shrimp on a weekly basis year-round. After
discussing their needs, it does not appear that supplying a large quantity of shrimp twice a year
would benefit the ethnic retailers. Therefore, if the project wishes to sell shrimp in the ethnic
retail and wholesale markets, a system to raise the shrimp year-round needs to be developed. If
the shrimp is harvested only twice a year, even staggered by a couple weeks the markets would
become saturated as large quantities of shrimp enter the market at one time. This would lead to a
fall in shrimp prices. Another issue is that farm production competes with Georgia=s coastal
harvesting during the same period.
Restaurant Survey
The CAED surveyed high-end restaurants in the metro Atlanta area to determine the
marketability of producing and retailing marine shrimp in Georgia. Ten restaurants responded
with various statements:
C
C
C
C
C
C
A year round supply is needed for a restaurant to be interested in switching suppliers
The 10-15 and 15-20 count sizes are the desired size
Prices ranged between $7.50 and $9.00 per pound for headless shrimp (which would be
$3.75 to $4.50 for whole shrimp)
Prefer fresh over frozen shrimp
Eight (8) restaurants purchase 4,600 pounds monthly or an average of 575 pounds per
restaurant per month.
Extrapolating this data to all Atlanta high-end Seafood restaurants (38 establishments)
and assuming each seafood restaurant uses an average of 575 pounds monthly, the total
market is estimated to be 21,850 pounds of shrimp monthly.
8
Marketing Conclusion
These results indicate that the Hawkinsville shrimp project will have a difficult time
marketing to restaurants, ethnic markets, and wholesalers because the farm cannot supply them a
product year around. In addition, the larger seafood restaurants and ethnic markets are wary of
adding another vendor, especially one that offers a limited quantity, seasonal product.
A potential market may be the direct to consumer market, where consumers travel to the
pond and purchase directly from the farm.
Economic Analysis
This next section investigates the economic feasibility of producing marine shrimp in a 1
acre pond in Georgia. The cost figures and other assumptions were obtained through multiple
meetings with the Department of Industry, Trade, and Tourism and their consultants.
Capital Cost
Capital cost figures include equipment and structures for producing marine shrimp on the
farm. Land costs are minimal and not included in this analysis.
Working capital is included in the capital costs. Working capital are resources used to
support a business until it begins to generate its own support, generally in the form of positive
net revenues. Initial working capital is obtained from start-up and/or short-term loans. Enough
capital is needed to cover expenses incurred by the business during the startup phases and slow
sales periods to remain in operation. Enough working capital is needed to cover 6 months of
operation until the shrimp are large enough for market sales.
Table 4 indicates a total capital cost of $17,079. This does not include any land price.
Table 4. Capital Cost for a 1 Acre Shrimp Facility
Equipment
$9,525
Working Capital
$7,554
Total Capital
$17,079
Fixed Costs
Total fixed costs are expenditures which do not change with the number of days used.
Stated another way, it does not matter if the facility is used for one weekend or every weekend
during the operation period; these cost remain the same. Fixed costs are consistent with the
same costs occurring each period, whereas other costs are related to the level of use. Included in
fixed costs are interest, depreciation, and taxes and insurance. The tax is property for the
equipment and structure and not income tax. Economic depreciation is used to cover physical
9
deterioration of equipment. If helpful, depreciation can be thought of as annual average
principal debt payment occurring if a 100% loan is structured for the entire useful life of the
facility. Return on invested capital can be thought of as average annual interest payment for a
loan capitalized over the anticipated useful life of the facility. Annual fixed costs associated
with the shrimp production totaled $2,218. (Table 5).
Table 5. Fixed Cost
Taxes and Insurance
Depreciation - Equipment
Interest - Equipment
Total Fixed Cost
Total
Per Pound Head On
$476
$.16
$1,361
$.45
$381
$.13
$2,218
$.74
Direct Labor
Labor needed for the facility came from the Dr. Bill MacGraff and Jeff Peterson
consultants working with Geogia’s Department of Industry, Trade and Tourism. It was assumed
that 3 hours of labor is needed daily for the entire grow out season (150 days) to feed and
monitor the water. Additional labor was required during the harvest period of three days. The
hourly rate was $11.25, consisting of $8 per hour and the remainder was payroll tax, workers
comp and miscellaneous benefits (Table 6).
Table 6. Labor Cost
Daily Labor
Harvest Labor
Total
Total
Per Pound Head On
$4,950
$1.65
$792
$.26
$5,742
$1.91
Direct Shrimp Cost
Based on information provided by Dr. Bill MacGraff and Jeff Peterson, 160,000 shrimp
larvae will be needed for the annual production process. The cost for the larvae are $10 per
1,000. Multiplying the 160 thousands needed by $10 create a larvae cost of $1,600 per acre.
10
Variable Costs
Other direct variable costs associated with this project include utilities, repairs, interest
on working capital, and operating costs (Table 7). Positive relationships exist among the days
used and the variable costs, although this is not linear. An increase in use increases the variable
costs. This is seen significantly in the operating materials and larvae. A detailed list of these
costs can be found in the Appendix.
Table 7. Larvae and Variable Cost
Total
Per Pound Head On
Larvae Cost
$1600
$.53
Variable Cost
$8369
$2.79
Total
$9,969
$3.32
Income
Income for this project was derived by multiplying the price per sound by the total
pounds produced (Table 8). This study utilized three different prices per pound $4, $6, and $9 to
see the income obtained at the different levels. However, it should be noted the income figure
assumes 100% of the produced product is sold.
Table 8. Income for Shrimp Operation
$4 Per Pound*
Income
$12,000
$6 Per Pound*
$18,000
$9 Per Pound*
$27,000
* 3000 Head on Pounds Harvested
Total Cost & Net Revenue
Total costs can be determined by adding variable (labor, supplies, and operating cost) and
fixed (administrative labor, depreciation, taxes and insurance) costs. Table 9 summarizes the
total net revenue/loss costs. Table 10 summarizes per pound costs and returns at the different
income levels.
11
Table 9. Projected Net Revenue/Loss
$4 Per Pound*
$6 Per Pound*
$9 Per Pound*
$12,000
$18,000
$27,000
Labor
$5,742
$5,742
$5,742
Variable
$9,969
$9,969
$9,969
Fixed
$2,218
$2,218
$2,218
Total Cost
$17,929
$17,929
$17,929
Net Revenue/Loss
-$5,929
$71
$9,071
$4 Per Pound*
$6 Per Pound*
$9 Per Pound*
$4.00
$6.00
$9.00
Labor
$1.91
$1.91
$1.91
Variable
$3.32
$3.32
$3.32
Fixed
$.74
$.74
$.74
Total Cost
$5.98
$5.98
$5.98
Net Revenue/Loss
-$1.98
$.02
$3.02
Income
* 3000 Head on Pounds Harvested
Table 10. Projected Net Revenue/Loss
Income
* 3000 Head on Pounds Harvested
Sensitivity Analysis
Net Revenue versus Budgeted Cost
In order to determine the potential viability and risk of a project, a sensitivity analysis is
performed. The sensitivity analysis adjusts the budgeted cost by 5% increments to test net
revenue of the operation if cost increased.
Budget numbers included operating expenses (utilities, taxes, labor, and supplies), fixed
costs (interest on start-up cost, depreciation), and income. Total costs are subtracted from
income, resulting in net revenue/loss.
This information is useful for decision planning and risk aversion, as costs are subject to
change. Utilities for example, can fluctuate periodically through the year depending on supply
of their inputs. The CAED suggests allowing for a 10-15% over budgeted cost for this size
project. Often, costs change after the start up of the business or the feasibility report. To ensure
12
all cost are covered, a buffer should be included.
Graph 1 indicates how the facility responds to an increase in cost at 5% intervals and the
potential net revenue/loss incurred when costs fluctuate.
Graph 1. Change in Net Revenue vs. Change in Budgeted Cost at 3,000 pounds of production.
$20,000
$15,000
$13,222$12,361
$14,083
$11,500 $10,639
$9,778 $8,917
Net Revenue/Loss
$10,000
$5,000
$8,056
$7,195
$5,083
$4,222
$0
$3,361 $2,500
$5,472
$1,639 $778
($2,639)
($917)
($3,500)
($1,805)
($83)
($944)
($6,083)
($1,778)
($5,000)
$6,334
($4,361)
($5,222)
($7,805)
($6,944)
($2,666)
($3,528)
($8,666)
($10,000)
($9,528)
($15,000)
75%
80%
85%
90%
95%
100%
105%
110%
115%
120%
125%
Percent Change in Cost
$4 Per Pound
$6 Per Pound
$9 Per Pound
Graph 1 demonstrates that neither the $4 nor $6 per pound at the maximum harvest rate of 3000
pound is profitable at the current cost or any increases.
13
Graph 2. Change in Net Revenue vs. Change in Budgeted Cost at 2,000 pounds of production.
$10,000
$5,000
$4,222
Net Revenue/Loss
$5,083
$3,361
$2,500 $1,639
$778
$0
($917)
($83)
($944)
($1,778)
($2,639)
($3,500)
($4,361)($5,222)
($6,639)
($5,000)
($4,917)
($5,778)
($1,805)
($2,666)
($3,528)
($7,805)
($8,666)
($6,944)
($10,083)
($11,805) ($9,528)
($12,666)
($10,944)
($6,083)
($7,500)
($10,000)
($8,361)
($9,222)
($15,000)
75%
80%
85%
90%
95%
100%
105%
110%
115%
120%
($13,528)
125%
Percent Change in Cost
$4 Per Pound
$6 Per Pound
$9 Per Pound
Graph 2 indicates that no prices are profitable at the current cost or modified cost when the yield
is 2000 pounds. If cost could be reduced and prices were $9 per pound head on then the 2000
pound yield would be profitable.
Conclusion
Due to the limited market and the high breakeven cost for the shrimp it will be difficult to
create a profitable venture with marine shrimp. The yields need to be 3000 with prices in the $9
per pound with the head on to have any returns to the operation.
The Center for Agribusiness
& Economic Development
The Center for Agribusiness and Economic Development is a unit of the College of
Agricultural and Environmental Sciences of the University of Georgia, combining the
missions of research and extension. The Center has among its objectives:
To provide feasibility and other short term studies for current or potential Georgia
agribusiness firms and/or emerging food and fiber industries.
To provide agricultural, natural resource, and demographic data for private and
public decision makers.
To find out more, visit our Web site at: http://www.caed.uga.edu
Or contact:
John McKissick, Director
Center for Agribusiness and Economic Development
Lumpkin House
The University of Georgia
Athens, Georgia 30602-7509
Phone (706)542-0760
caed@agecon.uga.edu
The University of Georgia and Fort Valley State University, and the U.S. Department of
Agriculture and counties of the state cooperating. The Cooperative Extension Service
offers educational programs, assistance and materials to all people without regard to race,
color, national origin, age, sex or disability.
An equal opportunity/affirmative action organization committed to a diverse work force.
FR-03-04
April 2003
Issued in furtherance of Cooperation Extension Acts of May 8 and June 30, 1914, the
University of Georgia College of Agricultural and Environmental Sciences, and the U.S.
Department of Agriculture cooperating.
J. Scott Angle, Dean and Director