Guide to Recirculation Aquaculture: Chapter 4

Chapter Four: Project planning and implementation

The idea of building a recirculation fish farm is often based on very different views on what is important and what is interesting. People tend to focus on things they already know or things they find most exciting, and in the process forget about other aspects of the project.

 Four major issues should be addressed before launching a project: 

• Price and market for the fish in question
• Site selection and production technology
• Work force including a committed manager
• Financing the project all the way to a running business

 

Figure 4.1 Flow from project idea to end product

 

Survey the market as a first step

As discussed earlier, the very first thing to identify is whether the fish in question can be sold at acceptable prices and in sufficient volumes. It is therefore important to carry out a proper market survey before any further steps are taken. It is also important to identify what kind of production system will be needed to make the product in question, and also find out where to build it. A pre-project design will most often be helpful, so that the relevant authorities can be approached for permits for construction, water usage, discharge etc. Finding skilled employees is vital, so that the management of the farm can be well taken care of. It is of utmost importance to find an overall manager, who is fully committed to the job, wanting to succeed as much as the shareholders do.

The requirement for financing is far too often underestimated. The capital costs are very high when starting up a new plant from scratch, and investors seem to forget that producing fish is a long-term affair. The time from starting the construction and getting the first pay-back from fish sold takes typically from one to two years. Careful preparation of budgets is therefore of vital importance.

In order to get a systematic overview of the whole project, a business plan should be elaborated. It is beyond the scope of this guide to go into details on how to write a business plan or how to conduct a market survey for that matter. Detailed information on such subjects must be sought elsewhere. However, in the following, a draft for a business plan and examples of budgets and financial calculations are given in order to guide the reader and make him aware of the challenges when setting up a fish farming project. A good introduction for starting up a business can be seen at www.businesslink.gov.uk/bdotg/action and samples of business plans are available at www.bplans.co.uk/sample_business_plans.cfm (Palo Alto Software Ltd).

 

Update the production plan regularly

It is also important to plan in detail the production of the fish, and incorporate the plan carefully into the budgets. The production plan is the basic working document when it comes to the success or failure of the production output. The production plan should be revised regularly as farmed fish most often perform better or worse in practice than planned in theory. Working out a production plan is basically a matter of calculating the growth of the fish stock, typically from one month to the next. Several software programs are available for calculating and planning the production. They are however all based on computation of interest using the growth rate in percent per day of the fish in question. The growth rate depends on the species of fish, the size of fish and the water temperature. Different species of fish have different optimal rearing temperatures depending on their natural habitat, and smaller fish have higher growth rates than larger fish.

Figure 2. Main items of a business plan (modified from Palo Alto Software Ltd.).

The feed intake, and the feed conversion rate (FCR) of the feed, is of course an integrated part of these calculations. An easy way of approaching the production plan is to obtain a feeding table for the fish in question. Such tables are available at the feed manufacturers, and the tables take into consideration the fish species, the size of fish, the water temperature (see Figure 4.3). Dividing the feeding rate by the FCR will give you the growth rate of the fish. The weight gain from one day to the other can hereafter be calculated using the computation of interest expressed by:

Kn = K0(1+r)


where “n” is the number of days, “K0” is the fish weight at day 0, and “Kn” is the fish weight at the “n”th day. A fish of 100 grams growing at 1.2% per day will in 28 days weigh:

K28days = K100 gram (1+0.012)28 days

= 100(1.012)28 = 139.7 gram 


Whatever the size or numbers of fish, this equation can be used for calculating the growth of the fish stock, making a precise production plan and incorporating when to grade and divide the fish into more tanks. Also, it should be remembered to subtract losses in the population when working out the production plan. It is advisable to calculate on a monthly basis, and to use a mortality factor of approximately 1% per month depending though on experience. A month should not be calculated as 30 full days as there will normally be days in a month where the fish are not fed due to managerial procedures, which is why 28 days is used in the example above.

To sum up on the budgets required in the business plan, these include:
• Investment budget (total capital costs)
• Operational expenses budget (starting up the business)
• Cash budget (business up and running)

It is always advised to consult a professional accountant to make thorough budgets in order to account for all expenses. A well documented budget is also necessary for convincing investors, getting a bank loan and for approaching funding institutions. For new EU countries there are support programmes that in some case can support up to 70% of the needed investment.

Figure 4.3 Example of recommended feeding rate for different sizes of sturgeon given in percentage of fish weight at different water temperatures. Source: BioMar

 

Several factors determine costs

The investment budget depends strongly on the construction of the recirculation plant, which again depends on the country and local conditions in the construction area. An example of an investment budget with estimated figures in percent is shown. Purchase of land is not included.

Construction costs depend not only on local building costs, but also on fish species and farm size. Generally grand total investment cost all included will reach up to 10 EUR per kg produced for systems of 100 tonnes per year with all facilities from broodstock over weaning and fry rearing to final grow-out. The less expensive end systems will cost as little as 2.5 EUR per kg produced for systems of 1,000 tonnes designed only for grow-out and without roofing. Examples from western European countries of the establishment costs are in the area of 3 million EUR for a complete 1,000 tonnes recirculation outdoor trout farming system (in 2009). The overall costs are highly dependent on whether the system is supposed to take care of all fish stages or just the grow-out phase, and if the system is to be installed inside a building or not. Such decisions depend on climate, fish species and biological stages among other things. There is a clear tendency that the higher the rate of recirculation, the higher the probability of choosing a facility installed inside a building. Regarding purchase of land, the footprint of a recirculation plant also depends on fish species and the intensity of the production. In general, the footprint of a recirculation facility is roughly about 1,000 m2 per 100 tonnes fish (pelagic). The larger the total production the smaller the area needed per 100 tonnes produced.

 

The biggest cost is for feed

From Figure 4.5 it is interesting to note that the consumption of energy is only 7% of the costs. Focusing on the usage of electricity is of course important, however, it is by no means the dominant cost. In fact this is equivalent to many traditional farms where the use of paddle wheels, return pumps, oxygen cones and other installations use quite a substantial amount of energy. The cost of feed is by far the most dominant cost, which also means that good management is the most important factor. Improving the FCR will have a significant impact on the efficiency of the production.

As in other food producing sectors, the larger the production unit the lower the cost of production per unit produced. The same applies to fish farming. However, it seems that making production systems much larger than 2,000 tonnes per year does not give a significant reduction in direct costs. Stepping up the way from a few hundred tonnes per year towards a thousand does though give significant reductions in costs. The benefit of going up in farm size depends greatly on which species is reared, and the way of extending the production must be carefully considered. Wise planning may save a lot work and money.

The Appendix has a checklist of biological and technical issues that can affect the implementation of a recirculation system. This check-list is most suitable for identifying details and possible obstacles when the project is about to be realised.

Figure 4.5 Example of cost distribution of a large farm for portion sized trout (2000 tonnes/year) taking in fingerlings and growing them to 300-500 grams. Total production cost per kilo live fish produced is less than 2 EUR per kg. The total investment cost for such a fully recirculation in-house system is around 4 EUR per kg production (total 8 mio. EUR).