Emerging Dominance of Aquaculture:
The Future of the Seafood Market
and Fisheries Management
James L. Anderson
Department of Environmental and Natural Resource
Economics
University of Rhode Island
Kingston, RI 02879
USA
IIFET 2008
Nha Trang, Vietnam
July 21-25, 2008
Key Themes
Aquaculture will dominate the seafood
market – esp. international trade
Winners will control costs and manage for
markets
Fisheries managed more like ‘aquaculture’
--- win
Aquaculture sectors managed more like
fisheries (US marine aquaculture) --- lose
Seafood Sector
Extremely Complex and Diverse
– 100s of species, many technologies, many areas
Highly International
Bureaucratic Regulatory Environment
Fragmented
Wasteful
Marketing is Not Advanced
Highly Misunderstood by Consumers
including Chefs
Volatile – in Prices and Quantities
Simple Realities
Demand for Fish
Fishermen Catch Fish
Poorly Defined Rights and Responsibilities (Traditional Fisheries
Management)
Overfishing, Rent Dissipation
Reduced Supply and Unmet Demand
Enter Aquaculture
Inefficient Fisheries Management and/or Unmet Demands
are the Stimuli for Aquaculture and Innovation
Simple Realities
People whose lives depend on the harvest of seafood
want:
–
–
–
–
–
Better control of cost
Minimize environmental/exogenous shocks
Better control fish stock and growth rates
Manage to meet the market demand
Sustainable profits
CONTROL
of production and marketing through
Ownership, Information and Technology
If the Future will be Dominated
by Aquaculture
What does it mean for the future of the
seafood sector?
What does it mean for the future of
fisheries/aquaculture management?
U.S. Per Capita Consumption of Red Meat,
Poultry, and Fish and Shellfish, 1909-2006
140
Pounds per Capita
120
100
80
60
40
20
0
1909
1915 1921 1927
1933 1939 1945 1951
Red Meat
1957 1963 1969
Poultry
Source: USDA/Economic Research Service.
*2004-2006 Red Meat and Poultry data are forecasts.
1975 1981 1987 1993
Fish & Shellfish
1999 2005*
Approximate World Production of
“Food” Fish and Seaweeds
Aquaculture accounted for 47% of world food fish production in 2006.
144
Aquaculture accounted for only 15% in 1984.
132
120
108
Million MT
96
84
72
60
48
36
24
12
0
1984
1986
1988
1990
1992
Farmed
Source: FISHSTAT (2008).
1994
1996
1998
Wild
2000
2002
Total
2004
2006
To develop expectations about the future of
the seafood sector, we must consider
aquaculture and fisheries interact?
In the ecosystem?
In the market ?
Aquaculture and Fisheries:
Ecosystem
Use of wild fish for inputs
Disease transmission and related interactions
Intentional releases or unintentional escapes
Use or enhancement of habitat
The growth of aquaculture influences
fisheries through its use of wild fish as
inputs
Feed
– Small pelagics for fishmeal and fish oil
Wild-Based Aquaculture
–
–
–
–
–
Tuna
Post-larval shrimp
Eel
Grouper
Mussel
Broodstock
– Salmon (in past)
– Shrimp (mostly in past)
A Note on “The Feed Issue”
Using fish to feed fish is “unsustainable” (ex. salmon, shrimp farming)
Growth of aquaculture farming will exhaust the fishmeal
and fish oil supply and cause overfishing
– This is a fisheries management/governance problem
not an aquaculture problem
Reality
The majority of fishmeal is used by poultry and pigs
Increasing relative price of fishmeal & fish oil
– Provides economic incentives for innovation
– Improving feed conversion ratios, new feed
formulations/substitutes, new species
Aquaculture and Disease
Example:
¾ Parasite, B. ostreae, was introduced
(probably) into France in oysters
imported from California which
originated from the NMFS Aquaculture
Lab in CT
NRC. 2004. Nonnative Oysters in the Chesapeake Bay. Nat. Academy Press. Washington DC. p 40.
NRC. 2004. Nonnative Oysters in the Chesapeake Bay. Nat. Academy Press. Washington DC. p 16.
Chesapeake Bay Oyster “Fishery”
Management Options
Replenish/Restore oyster habitat = Aquaculture
Oyster sanctuaries (fallow fields) = Aquaculture
Introduce disease resistant native oysters = Aquaculture
Introduce triploid native oysters that grow fast enough to
harvest before they get disease = Aquaculture
Introduce triploid Asian C. ariakensis oysters = Aquaculture
Introduce diploid Asian C. ariakensis oysters = Aquaculture
Traditional
Traditional Fisheries
Fisheries Management
Management isis Largely
Largely Irrelevant!
Irrelevant!
Introduction of a Nonnative Species
May become invasive but it may help save or create an industry
Introduction of Asian Oyster in France and West Coast US –
saved/created and industry
Introduction of White Shrimp from S. America to Asia – reduced cost
Introduction of Salmon to Chile, Australia and New Zealand – created
an industry
Introduction of Channel Catfish from the US to China – created an
industry
Introduction of Tilapia from Africa to Everywhere – created
industries/became invasive some places
Aquaculture (Hatchery)-Based
Fisheries
Can result in increased harvest - so fishermen
like it, but…..
It is inefficient
In some cases it has resulted in large production
of lower-valued species (ex. AK chum and pink;
Japan chum; Russia pink and chum)
Problems with genetic diversity and integrity of
wild stocks
Alaska Commercial Salmon Catches Since 1960:
Natural Wild Salmon and Hatchery Salmon
250,000
150,000
Hatchery
Natural wild
100,000
50,000
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
0
1960
thousands of fish
200,000
Source: Data for 1960-1978: ADF&G Catch Data; Data for 1979-2005:
ADF&G Hatchery Data
Aquaculture (Hatchery)-Based Fisheries:
Integrity of wild stocks
Hatchery fish do not face the same selective
pressure as wild stocks
Hatchery releases can displace wild stocks and
compete for food and habitat
Million Fish
Historical Hatchery Contribution to
Total Commercial Harvest of Pink Salmon
Prince William Sound, Alaska
55
50
45
40
35
30
25
20
15
10
5
0
1979
1981
1983
1985
1987
1989
Natural Wild
1991
1993
1995
1997
1999
Hatchery reared
Source: Prince William Sound Annual Management Reports, ADF&G (2007, 2006).
2001
2003
Aquaculture and Habitat
Negative for wild fish stocks
Shrimp farms in the estuary - mangrove
Excessive finfish cage culture and pollution
Positive for wild fish stocks
Oyster reef building
Rotational Management of Scallops (like
forestry) – creates marine protected areas
(fallow fields)
Aquaculture and fisheries interact in the
ecosystem.
Aquaculture is a fisheries management option.
Very little economic research has been done to
evaluate the interactions.
Aquaculture and Fisheries:
International Trade and the Market
Aquaculture has had a Tremendous
Influence on Fisheries through
International Trade and the Market
Increased supply has influenced prices
– Influenced effort in some fisheries (ex. salmon)
Changed consumer behavior and developed new markets
(ex. catfish)
Accelerated globalization (ex. shrimp, tilapia, salmon)
– Reaction more trade barriers
Increased concentration and vertical integration (ex. salmon)
New product forms and improved quality and consistency (ex.
tilapia, salmon)
Forward thinking and market driven (ex. salmon, oysters)
Improved stability and reduce uncertainty (ex. salmon)
Growing Market Share and
Product Innovation
Consistently Available
Consistent Quality
Stable or Declining Cost
Meet Consumer Demands
US Seafood Consumption is Concentrating
in Fewer Species
Edible kg per Capita
1987
71%
1
2
3
4
5
6
7
8
9
10
Tuna
Shrimp
Cod
AK Pollock
Flatfish
Clams
Catfish
Salmon
Crab
Scallops
Other
Total
Source: NFI (2008).
2006
1.59
1.04
0.76
0.40
0.33
0.30
0.27
0.20
0.15
0.15
2.16
7.35
56%
90%
Shrimp
Tuna
Salmon
AK Pollock
Tilapia
Catfish
Crab
Cod
Clams
Scallops
Other
Total
2.00
1.32
0.92
0.74
0.45
0.44
0.30
0.23
0.20
0.14
0.75
7.48
% change
+92
-17
72%
+359
+86
N/A
+63
+101
-70
-33
-8
-65
+2
U.S. Retail Sales, 1994 vs. 2007
Source: Seafood Business
Best Sellers (Seafood Case)
1994
2007
1
Shrimp
Shrimp
2
Salmon
Salmon
3
Pollock, Cod, Haddock
Crab
4
Catfish
Tilapia
5
Flounder
Catfish
Sources: Perkins, C. (1994) and Robinson, F. (2004)
Large Retailer and Chain
Restaurant Demands have:
Encouraged vertical and horizontal integration
Stimulated globalization
Encouraging various certification programs –
Sustainability and Safety
–
–
–
–
Farmed Salmon
Wild Salmon
Shrimp
Alaska Pollock
Note on Selling Sustainability and Health
to US Consumers
Sustainability and Safety are essentially required esp. now that
companies like WalMart and Darden Restaurants are involved
Healthfulness is important but secondary to the US consumer – We
are Fat!
Priorities for the Bulk of Real Consumers (not Green Peace members,
Gourmets, pregnant mothers or movie stars)
– Convenience
– Taste
– Price
– Perceived Value
Photo: Jingjie Chu
Photo: Jingjie Chu
Real Price Trends of Seafood
7.50
7.00
Wild Cod, fillet,
frozen
6.50
6.00
5.50
2000 US$/lb
5.00
4.50
4.00
Farmed Salmon,
2-3 lb fillet,
fresh
3.50
3.00
2.50
2.00
1.50
1.00
Farmed Catfish,
fillet, frozen
0.50
0.00
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Sources: USDA, 1990-2008; Urner-Barry Publications, 1990- 2008; USDC/NMFS, 1990-2008.
%
Standard Deviation
-20
6
4
1985-1992
3
1993-1999
5.62
5
3.77
2.83
2
1
0
2000-2008
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Jan-87
Jan-86
Jan-85
%
Rate of Change
20
US Fresh Atlantic Dressed Imports – Price
Monthly Percentage Rate of Change
and Standard Deviation
15
10
5
0
-5
-10
-15
Cost Share: Aquaculture vs. Fishery
Item
Labor
Maintenance
Fuel
Fingerlings
Feed
Aquaculture
Fishery
4-10%
2-4%
1-4%
2-15%
40-60%
25-45%
9-23%
4-11%
—
—
Cost Factors Influencing
Competitiveness
Aquaculture
Biotechnology
Disease Management
Feed Cost/ Quality
Consolidation/
Restructuring
Farm Management
Regulations
Fishery
Fisheries Governance
Fish Stock
Environment
Crew-share
Arrangements
Maintenance/Repair
“Technical Progress has been Futile”
Rolf Willmann, FAO, Loss in Resource Rents Session,
IIFET 2008
Production Cost: Salmon Aquaculture vs.
Capture Fisheries
100
9.00
90
8.00
Salmon Aquaculture in Norway
7.00
70
2 0 0 6 U S $ /k g
2 0 0 6 N O K /k g
80
60
50
40
30
6.00
5.00
4.00
3.00
20
2.00
10
1.00
0
0.00
1985
1988
1991
Export Price
1994
1997
2000
2003
Production Cost
Sources: Norwegian Directorate of
Fisheries (2005); Guttormsen (2007).
Bristol Bay Drift Gillnet Sockeye
Salmon Fishery
2006
1985
1988
1991
Ex-vessel Price
1994
1997
2000
2003
Production Cost
Sources: ADF&G (2007); Valderrama
(2008).
2006
Norway: Salmon Farming
Photos: J.L. Anderson
Wild Salmon
Fishery
MSC Certified
Sustainable Alaska
Sockeye Fishery
Alaska’s Bristol Bay drift gillnet salmon
fishery -2005.
(Photograph by Bart Eaton, Source:
Gunnar Knapp)
Norway: Salmon Processing
Photos: J.L. Anderson
Alaska Salmon Handling
Sockeye salmon in a
Bristol Bay gillnet
at low tide –Source
G. Knapp
Internal bruises in a wild
chum salmon fillet -Source
G. Knapp
Permit Market Value and
Percent of Permits Fished in the Bristol Bay Sockeye Fishery
Drift Gillnet Fishery
300
80%
240
60%
180
40%
120
20%
60
0%
0
1988
1990
1992
1994
Permit Market Value
Source: CFEC (2007).
1996
1998
2000
2002
2004
2006
Percent Permits Fished
T housand Dollars
Percent Permits Fished
100%
Competition with farmed salmon has
increased efficiency through reduction of
effort
– Bristol Bay Salmon, Alaska
Competition with farmed salmon has
increased efficiency through attempts to
restructure the fleet
– Chignik Salmon Coop., Alaska
The Aquaculture Sector Creates
New Markets
Salmon Farmers created new markets in
southern US
Farmed Salmon created new markets premium
wild salmon
New Products – Pin-Bone-Out Salmon Fillet
New markets are all being developed by
aquaculturists: ex. sturgeon, barramundi, tilapia,
basa, oysters, cobia, mussels and many other
species
Diesel Fuel:
Producer Price Index 1990 = 100
500
450
400
350
300
250
200
150
100
50
0
1990
1992
1994
1996
1998
2000
Source: U.S. Bureau of Labor Statistics (2008).
2002
2004
2006
2008
Implications of Rising Fuel Cost
Stronger competitive position of farmed fish
and shellfish
over:
Wild-caught seafood
Fishmeal and Soymeal Prices
1,500
Fishmeal
Soybean meal
US$/MT
1,200
900
600
300
0
1991
1993
1995
1997
1999
2001
Fishmeal: 64/65%, any origin, wholesale, CIF Hamburg.
Soybean meal: 44%, any origin, CIF Rotterdam/Hamburg.
Source: Oil World / GLOBEFISH (2007).
2003
2005
2007
Implications of Rising Feed Cost
Stronger competitive position of farmed
shellfish (clams, oyster, mussels, scallops)
compared to:
Farmed Finfish and Shrimp
Beef, Pork and Chicken
3.5
3
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
C a tc h (M ill. m e tric to n n e s )
Global Cod Fisheries –
A Stimulus for Aquaculture
Atlantic cod
Pacific cod
2.5
2
1.5
1
0.5
0
Farmed Atlantic Cod
14000
12000
10000
8000
6000
4000
2000
0
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
FAO and Tveteras
MT
World Tilapia Production
2.8
2.4
Global production of tilapia grew at an average annual
rate of 7% (farmed 12%) between 1981 and 2005.
Tanzania
Mexico
2.0
Million MT
Other
Taiwan
1.6
1.2
Brazil
Photo: J.L. Anderson
Thailand
Uganda
Philippines
0.8
Indonesia
0.4
Egypt
China
0.0
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Source: FISHSTAT (2007).
US Imports of Tilapia
180
160
Average annual rate of growth between 1992 and 2007: 30%
140
MT (000's)
120
100
80
60
Photo: J.L. Anderson
40
20
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Tilapia Fresh Fillets
Tilapia Frozen Fillets
Tilapia Frozen (Exc. Fillets)
Total
Source: USDC/NMFS (2008).
Tilapia Market
Very rapid growth
Competition for flatfish,
snapper and other
whitefish
Fillets – Market innovation
Many environmental
NGOs are positive about
tilapia
Increase globalization
Wal-Mart
Photo: J.L. Anderson
500
U.S. Imports of Salmon vs. Tilapia
Actual (1989-2006) and Forecast (20072015)
450
437
400
360
MT (000's)
350
300
250
200
150
100
50
0
1989
1991
1993
1995
1997
1999
2001
Salmon & Trout
2003
2005
2007
Tilapia
Source: USDC (2006); Seafood Market Analyst, SeafoodReport.com: U.S. Imports Edition, 2006.
Upper and lower bounds represent 95% confidence intervals.
2009
2011
2013
2015
Expect Continued Rapid Growth
Rough Est. 2006
Tilapia – 2.8 million MT
Pangasius – over 500,000 MT
Channel Catfish – over 400,000 MT
Flatfish – 140,000 MT
Barramundi – 35,000 MT
Cod – 15,000 MT
Cobia - ?
Blue Revolution?
With all this technological change, one might
expect countries that think they are
adaptive and entrepreneurial
- like the US – to be leaders
Maybe Not
Times are Changing
Marine/Coastal Aquaculture Production
in China, Norway, and the U.S.
Why isn’t the US
participating in the
‘Blue Revolution”?
20
China - Million MT
1.00
0.80
15
0.60
10
0.40
5
0.20
0
0.00
1985
1987
1989
1991
China
Source: FISHSTAT (2008).
1993
1995
1997
Norway
1999
2001
USA
2003
2005
Norway & USA - Million MT
25
Fisheries Management “The integrated process of information gathering, analysis,
planning, decision-making, allocation of resources and
formulation and enforcement of fishery regulations by which the
fishery
management authority controls the
present and future behavior of
interested parties in the fisheries,
in order to ensure the continued productivity of the living
resources.” (FAO 1999).
The difference between traditional fisheries
management and “aquaculture” management
boils down to:
Who is in CONTROL
What is being CONTROLLED
Traditional fisheries management
– Governing institutions CONTROL individual or group
behavior – but not the aquatic organism
Aquaculture
– The individual or group, CONTROLS the production, harvest and
marketing of the aquatic organism - the individual or group receives
rights for CONTROL from by the governing institution
Typical Fishery
Management
Regulated Access
Management
Institutions CONTROL
participants
“Aquaculturalized” Management
Rights & Responsibility Based
Management
Institutions transfer CONTROL to
participants
Wild ‘Fishery’
Sector
Rent Dissipation, High
transaction cost –
ex. many fisheries
Positive rents ex. NZ Fisheries
‘Aquaculture’
Sector
Rent Dissipation, High
transaction cost ex. US Marine Aquaculture
Positive rents ex. Norway Salmon Farming
Bureaucracy is large
Regulatory costs are very high
Special Interests greater
influence
Bureaucracy stable or limited
Regulatory costs relatively low
Special Interests reduced influence
Bureaucracy,
Police &
Non-Government
Special Interest
“Aquaculturization” of Fisheries - Taking Control
Assign Ownership Rights
Individual or community fisheries quota
Cooperative area management fisheries
Plant the Field / Breed the Animals:
Salmon hatcheries (nearly 40% of AK harvest originates in hatcheries)
Oyster/scallop enhancement
Crop and Forest Rotation
Rotational Scallop Fisheries
Fallow Fields/Range Management
Marine Reserves/Sanctuaries
Land/Habitat Restoration
Rebuild Oyster Beds
Remove dams
Artificial Reefs
Feed/Fertilize
Maine Lobsters get ~ 80% of the feed from bait
Capture-Based Aquaculture - Bluefin Tuna farming
Control Predators/Provide Protection
Lobster pots
Harvest starfish in oyster beds
Eliminate Costless Access (Cattle Rustlers)
Eliminate unregulated open access
Marine Aquaculture
Norway – Well defined Rights and Responsibilities
China – Late 1970s Rural Reforms and rapid market
liberalization – trend toward shifting more responsibility
from the government to individuals
US – Moving toward more government over sight in aquaculture
–
–
–
–
Costly, time consuming, fragmented and uncertain regulation
Multiple agencies at all levels – local, state and federal
Fishery management regulations imposed on aquaculture
Don’t even have enabling legislation to regulate offshore
aquaculture in federal waters !
Note on China
Photo: Jingjie Chu
Photo: Jingjie Chu
Photo: J.L. Anderson
China: International Seafood Trade
($1000)
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
Export Value
Import Value
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
China: #1 Seafood Exporter #6 Seafood Importer
Source: FishStat, FAO 2008
China: International Seafood Trade
(MT)
4,000,000
3,500,000
3,000,000
2,500,000
Export Quantity
Import Quantity
2,000,000
1,500,000
1,000,000
500,000
0
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
China: #1 Seafood Exporter #1 Seafood Importer
Source: FishStat, FAO 2008
US Imports from China: 2007
(Source: NMFS 2008)
Breaded Shrimp - #1 (Thailand #2)
Squid - #1 (Thailand #2)
Scallops - #1 (Canada #2)
Tilapia - #1 (Ecuador #2)
Alaska Pollock - #1 (South Korea #2)
Flatfish Fillets - #1 (Canada #2)
Cod Fillets - #1 (Iceland #2)
2006: Total - #1 in Quantity.. #3 in Value (Canada #1)
US Exports to China:2007
(Source: NMFS 2008)
Salmon - #1 (Canada #2)
Flatfish - #1 (Canada #2)
Groundfish - #1 (Germany #2)
Frozen - #1 (Japan #2)
Total - #1 Quantity: #3 Value
(Japan #2 Quantity: # 1 Value)
Conclusion
Aquaculture grows because managed fisheries
have failed to meet market demands
Aquaculture will dominate and lead the seafood
industry
Aquaculture is forcing change in fisheries:
¾ Through competition (supply)
¾ By developing new technology (hatchery-based fisheries)
¾ By example (marketing & quality control)
¾ By creating new demand – both for inputs and outputs
Control of cost and marketing is essential for
growth
Conclusion
In the Long Run
All significant commercial Seafood supplies will come from three sources:
Fish Farms/Aquaculture
Aquaculture-Enhanced Fisheries
Fisheries that adopt systems of management that are more
like “aquaculture” management
clearly define rights and responsibilities
incorporate principles of husbandry, range management, forestry and
farming
More market and quality driven
– Fisheries that do not will be marginalized or driven into niches
Thank You