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 Fresh^TM and Reel Brainfood^TM for promotional purposes,and Arnhem Shoals 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 Brainfood^TM” 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.