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Contents of this page
Who are we? Economics of Aquaculture Imports vs Australian Promotion of Australian Seafood
Wild vs Aquaculture Pond Farms vs Cage Farms Supermarkets Marketing Marketing Fish in the "Home of Barramundi"
Business Sustainability
Who are we?
We are a family company that has been in the Aquaculture business
since 1987. Adam and Sarah Body are the directors, and Adam is the
manager. Both Adam and Sarah come from farming families, Sarah from
the high country near Cooma in NSW and Adam from north-west of
Inverell, also in NSW. Three children arrived back in the 80's,
and they all like to help on the farm during the brief interludes
when they can get away from their busy city lives “down south”.
The farm at Berry Springs has been in operation since 1998 firstly as
a prawn farm, then since 2004 as a barramundi farm. We operate under
a variety of names, originally Aquaculture Resource Development
Australia which was shortened in 1992 to ARDA-Tek. We also
use Flicking FreshTM and Reel
BrainfoodTM for promotional
purposes,and Sandbar Barramundi to describe our farmed
barramundi.
Economics of Aquaculture
Our farm is an intensive animal husbandry enterprise. Intensive
means we have to feed the fish because the numbers of barramundi held
in the pond are much higher than what the pond could support through
its own natural production. Our farm produces about 30 tonnes of
barra per ha every 18 months or about 5 tonnes per week. The feed
accounts for a little over 50 % of the costs of running the farm.
Other production costs are labour, electricity, repairs and
maintenance, fuel and fingerlings (total about 34%). The remaining
costs are insurances, licencing, phone costs etc etc. It can be
appreciated that feed is the overarching contributor to the costs of
running a barra farm. So the objective of the management is to keep
feed costs to a minimum while ensuring optimum growth and maximum
survival of the fish. This means using quality feed and ensuring the
fish remain in a good state of health. It also means that optimum
growth of the fish does not mean maximum growth, as aiming for
maximum growth can cause increased mortalities and increased costs.
The other side of the aquaculture economic equation is selling
price. In general terms the price the farm sell its fish for is less
than half the final retail price. Costs incurred off the farm on the
way to the fish shop include transport and packing, filleting and
final distribution. In aquaculture, like any farming, selling price
is supply and demand dictated. When supply is low, prices are good.
Often farmers will look at prices and decide to go into barra
production because the prices are good. Chances are though that other
farmers or “get rich quick merchants” have also spotted the
opportunity and dive in as well. This then leads to massive
oversupply some months later and a resultant drop in prices to levels
that are not sustainable. Farms or the “profit merchants” then
are in a pickle and a shake up of the industry occurs where the
lowest cost producers with adequate capital reserves are able to
survive while the rest have to look for other jobs.
Aquaculture then is like any other intensive farming. Operators
tend to chase the markets where prices are high. Buyers always tend
to amplify their desire to purchase the produce when it is in short
supply, and this gets the producers even more excited. The results is
oversupply, low prices and losses for the growers. When you throw
into this mix the “cowboys” who sell aquaculture as an investment
things can get very interesting indeed. These investment companies
tend to distort the supply side even more. In order for the
investment to provide a return to the investors that justifies the
investment, these operations must (on paper at least) produce lots
and lots of tonnes of fish. The selling price quoted in the
investment literature is of course that which exists when there is
not much supply of fish. The problem is obvious. As soon as the
volumes start increasing, prices drop, and the operation can not keep
going. Investors lose their money, supply drops away as the operation
scales down, prices rise and the cycle with the next lot of investors
looking for magic returns starts again.
Imports vs Australian
The ratio of imported fish sold in Australia to Australian produce
is about 3:1. Indeed, the Asian farms could easily supply all of
Australia's seafood requirments at cheaper prices than currently
being paid. So what is the point of using Australian fish? Surely it
makes sense to use imported fish which is cheaper, then the seas
around Australia can be protected as National Parks, and the fish
farmers can become importers. If your viewpoint is that
environmental issues are global then you would agreee that well
managed and sustainable fisheries and aquaculture such as practiced
in Australia are worth paying a little more for. If on the other
other hand you think that Australians should consume the cheapest
food from producers with less than stringent environmental credentials then you would back the
the imported option
Imported fish keeps the price of Australian farmed (and fished)
produce down to levels that keep many fishing and farming businesses
marginal at best. The margins between production costs and selling
price are so thin that there is little incentive for new producers to
come into the market. Why is there such a big difference between
imported and Australian? In terms of the fish competing with
barramundi, the overseas producers are all from tropical and
subtropical South East Asia, namely Indonesia, Thailand, Vietnam and
Taiwan. This is in stark contrast to salmon, which are produced in
the cold waters of Norway, Canada, Scotland and Chile. These salmon
producing countries have similar cost structures to Australia. The
Asian producers on the other hand do not. So salmon producers in
Australia are competing with imports on a more or less level playing
field. Australian tropical and subtropical growers on the other hand
compete against producers from Asia with vastly different business
models. The prime difference is labour cost. In Australia we deal
with this at the farm by mechanising as much as possible: for example
we use forklifts for moving feed on pallets, while Asian farmers use
manual labour to move feed. So actual labour on the farm can be
compensated for pretty well so that farms in Australia will employ
far less people per ton of production compared to a farm in Asia.
However, all our input costs such as transport of feed to the farm,
cost of electricity, cost of mechanical repairs also have a labour
component that is out of the control of the farm management. On the
downstream side as well, transport of fish, filleting and packing and
distribution all carry labour costs that is out of the farm's
control. In fact the retail price of the fish is between 2 and 3
times higher than the farm gate price due to the costs incurred
after the farm
has sold the fish. In Asia, fish are harvested then go direct to
massive factories employing hundreds of people who fillet and pack
the fish. For the cost of employing one Australian, 50 or more of
these workers can be employed.
Although labour is important in the cost differential, one other
factor is also vital. The fish farmers in Asia, like us in Australia,
have to contend with very thin business margins. The prices that they
get for their produce is usually very low making their enterprises
marginal. Like us, they must try as much as possible to cut their
costs in order that they can continue to make some profits. Like us,
they must try to find the balance between overstocking and therefore
taking high risk that the crop may not survive, and understocking and
getting a good healthy crop, but not enough to provide a reasonable
income. However, unlike Australian growers, Asian farmers tend to
make use of chemicals, antibiotics and other medications. Thus they
tend to take greater risks with their stocking rates, crowding the
fish and applying medications when things go wrong. Often, the fish
will be harvested immediately following the application of a chemical
disregarding any “withholding period” that is meant to allow the
chemical to dissipate. The farmers must do this harvest in order to
get a return on their crop. The result is that there is a chance that
fish sourced from these countries may contain traces of chemicals
that should not be in food. As well the frequent and high use of
chemicals has deleterious effects on the environment, and can for
example lead to the development of chemical and antibiotic resistant
strains of disease-causing microorganisms.
The Northern Territory has been very proactive in regulating the
way seafood is sold. One of the major problems has been
representation of imported seafood as Australian. This is often done
passively by restaurants and hotels. Foe example, people in the NT
may be forgiven for thinking that the barramundi they are eating is
local, given that the NT is the home of barra. The fact however is
that much of the so-called barra is imported. Recently, the rules
have changed such that the retailers of seafood must specify whether
the seafood is imported. However these are simply rules, and rules as
we all know are there to be broken. So the only way to ensure that
the seafood you buy is quality Australian is to insist that you are
getting what you pay for.
Promotion of Australian seafood
Given that about ¾ of seafood consumed in Australia is imported,
and that the Australian fishermen and farmers have to compete with
these imports, the question is why bother with Australian seafood? The answer is that the imports
that happen to come from countries that have controls on the
environmental sustainablility of their farmers and fishermen, and on
the food safety of their product, have every right to compete with
Australian product. The problem arises when Australian product has
to compete with product from places that have no effective controls.
If Australian producers could a) ignore any environmental regulation
b) use any chemicals available from any supplier c) harvest with no
concerns of food safety or chemical residue and d) fillet and pack
their fish using cheap labour then the “playing field” would be
more level. As it is Australian producers take great pride in
producing in an environmentally sensitive way, in building long term
sustainable businesses, in minimal or zero use of heavily regulated
medications and strict adherence to food safety measures.
It is
essential that the quality and the environmental credentials of Australian produce are promoted by our industry and recognized by consumers and
that it is understood that the extra price that the consumer pays for Australian produce is
a reflection of the measures taken in this country to farm and fish such that the environment remains healthy and maintains its ability to produce quality food for many generations to come.
Wild vs Aquaculture
In the Northern Territory there is a vibrant, healthy and well
managed wild barramundi fishery. These fishermen use gill nets to catch the wild fish
which they fillet and freeze on board the fishing boats. However
there is a lot of competition for the barramundi from the amateur fishing sector which includes the tourism industry. The result is
that sections of the fishing industry are being bought back by the NT
government which sees more value in the resource being utilised for
tourism than for commercial fishing.
As far as the quality of the wild vs aquaculture fish...this can
be a topic of stormy discussion. As long as barra are farmed in salt
water, there is no issue with “muddy taste”. Muddy taste can
sometimes occur in both wild and farmed fish taken or grown in fresh
water. Farmed fish are by their nature usually fresher than wild fish
because the whole fish can be harvested, packed and transported to
market very rapidly. Fishermen can be at sea for weeks, so the
fillets must be frozen. Farmed fish do tend to be a little more oily
than wild fish, much like lot-fed beef compared to lean grass-fed
animals, though the bonus is that fish oil is good for you!
Pond farms vs cage farms
Pond farms are built on the land and water is supplied to them
from rivers or from the sea. In the case of ARDA-Tek, our water comes
from the sea via a river estuary. Ponds are built from the soil on
the site. Fish in ponds are “free range” with stocking densities
rarely exceeding a fish per cubic meter. Fish in cages are held at up
to 20 times this density. Cage farms are situated in the sea, and
are simply big net cages that are designed to hold the fish. Both
types of farms have pros and cons. On the pro side, pond farms are
easy to manage due to their accessibility, fish cannot escape and
waste can be managed readily. On the con side, pond farms require
power to run aeration equipment and pumps and are limited by the land
area available as to how much fish they can grow. On the plus side
for cage farms, they can keep getting bigger and bigger by simply
putting in more cages, and they do not require extra aeration or
pumping. On the negative side, cages are not biosecure and fish
often escape; disease outbreaks can spread very quickly within the
cage due to the very high stocking densities and it is very difficult
to contain the outbreak; and the cages are subject to the vagaries
of open sea weather and wildlife such as sharks and crocodiles. In
general terms, cages are good for protected deep water areas, such
as the fiords of Norway and Scotland. Time will tell whether cages or
ponds are more sustainable for barramundi farming in Australia.
Supermarkets
The major sellers of food in Australia are the supermarket duopoly
of Coles and Woolworths. A lot of fish are sold through these shops
which are keen to keep the price down to levels that they know the
shoppers are comfortable with. However these companies also need to
make a margin on their sales, and the margin that they require is
about 40% on their buying price. This is easy to do with imports
which have a cheap buying price. In order to a) keep the price to a
level that the shoppers are comfortable with and b) maintain the 40%
margin, the supermarkets bargain very hard with Australian growers to
push prices down. This causes a “race to the bottom” with
competition between growers and often the prices that the grower must
accept are simply not sustainable for the longer term. Growers have
the option of banding together to form co-operatives, but this course
of action is expensive and time consuming requiring the growers to
work together through the intricacies of Trade Practices rules which
have the effect of favoring the much larger companies over the
smaller ones. And they must try to do this while still trying to run
their operations. The options open to smaller growers are therefore
limited and the one most often followed is to cut costs to the bone
to try to maintain profitability. The other option is not to deal
with the duopoly but rather with independent fish wholesalers and
retailers which helps maintain margins but limits volumes that can be
sold.
Marketing
We market our barra as Sandbar Barramundi. We also use
“Flicking Fresh TM”
and “Reel BrainfoodTM”
as catchy words for our advertising. In Darwin we sell through
Neptune's Warehouse (formerly Wahning Seafood) which
distributes to restaurants and retailers including Fresh Obsession around the NT. For the rest
of Australia we sell through Wild River and NT
Fish, who buy our fish fresh from the farm and
distribute to buyers around the country. Although we help our buyers with promotional activities for our produce
we do not get actively involved in marketing. We have found that
marketing and dealing with buyers is a whole business on its own, and
we prefer to concentrate our efforts on our core business which is
growing quality fish in a sustainable way.
The process of marketing seafood can be partitioned into different
activities as follows a) locating the source of supply b) locating
the buyer c) entering a contract to sell d) physically transporting
product to seller e) collection of proceeds. From the point of view
of the marketer, this process is easy when product is in short supply
in relation to demand. When product is in oversupply relative to
demand, then an extra activity – promotion- must be added to the
list. Promotion is necessary to lift demand to try to match supply.
However, once one of the “protein food” sectors begins to promote
and is seen to be taking demand from somewhere else (chicken, pork,
beef, lamb) then those other sectors will begin to promote as well.
So it can be appreciated that once supply outstrips demand, which is
common in fish farming, then marketing and promotion become keys to
maintaining or restoring the business viability of the farming
enterprises.
Fish can be produced very quickly from fish farms. The business of
building demand for these fish in order to maintain the business of
farming is a much tougher and longer term exercise. This fact is
almost always overlooked or ignored by by the “regulators” and by
the businesses themselves,often until it is too late.
Marketing Fish in the "Home of Barramundi" Darwin and the Top End of Australia are recognized as the home of the barramundi. This is where fishermen come to catch the big fish of the north. The people of Darwin are well known for their appetite for fish, and when they go out to a restaurant they are very particular about the quality of fish that they order. Likewise, when purchasing fish for home cooking, they want to be sure that the fish they are buying is fresh and safe. Selling farmed barramundi into this market which is accustomed to "catching their own" is a true test of the quality of the farmed fish. Although it has taken time and effort, Darwin restaurants and shoppers have come to appreciate the quality of Sandbar Barramundi, the fact that it is consistent in supply throughout the year, that it is fresh, and that due to the fact that it is grown in saltwater, there is no risk of "muddy taste" that can sometimes occur with fresh water farmed fish.
Business Sustainability
Some decades ago, fish farming was seen as a highly profitable
venture and get rich quick merchants were the order of those bygone
days. During those years, it was enough to get in, grow a crop or
two, and exit with lots of profit. This type of activity was
prevalent in South East Asia and South America but was held in check
in Australia by complex and frustrating (for the proponents) local
planning and environmental regulations, so that although such schemes
were spruiked few if any actually got up and running. Nowadays,
things have changed a lot and aquaculture is simply another farming
activity which endeavors to endure for the long term. There is no
such thing as a quick profit in aquaculture. There are good years when prices are
good and the seasons have been kind, and there are bad years, when
production follows last year's good prices and subsequently leads to
oversupply and poor prices or when the season has been severe or when
disease strikes. In general terms, like in any farming enterprise,
fish farming needs to be sustainable year after year so that there is
a profit at the end of each decade that justifies the initial capital
that went into starting up the business. ARDA-Tek farm is a family
enterprise that puts capital away in the good years because there is
no doubt that like all other forms of farming the hard years are
always just around the corner.
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