Print This Page

 

Sino Agro Food’s Mega Prawn Farm

Shrimp News Interviews Dr. Anthony Ostrowski

 

At the World Aquaculture Society Meeting in Las Vegas, Nevada, USA (February 22–26, 2016), I interviewed Dr. Anthony Ostrowski, Chief Scientific Officer at Sino Agro Food, Inc. (SIAF), which has embarked on the development of a “mega” freshwater prawn farming project in China.  Many of you will remember “Tony” as director of the United States Marine Shrimp Farming Program at the Oceanic Institute in Hawaii, USA, and later as the President and Chief Executive Officer of the Oceanic Institute from 2009 to 2012.  Most recently, he was general manager and CEO of Wanshida Ocean Bio-tech, Ltd., a Chinese aquaculture R&D firm located in Yangjiang, China.  He represents SIAF at aquaculture and food product conferences and in trade and professional journals.

 

Dr. Ostrowski was born in 1957 and is a citizen of the United States.  He joined Sino Agro Food in August 2015 and will lead SIAF’s initiatives to improve product traceability and achieve third-party process certification.  He will also lead the company’s research and development programs, which are key to SIAF’s competitive position in aquaculture.  He holds a Ph.D. and M.S. from Michigan State University, USA, and a B.S. from Penn State University, USA.

 

Sino Agro Food, Inc., develops and operates protein food production facilities in the People’s Republic of China.  The Company produces, distributes, markets and sells sustainable seafood and beef to the rapidly growing middle class in China.  Activities also include production of organic fertilizer, animal feed, and produce.  It is a global leader in developing land-based recirculating aquaculture systems (RAS), and with its partners, it’s the world’s largest producer of sustainable RAS freshwater prawns (Macrobrachium rosenbergii).

 

Shrimp News: Tell me a little bit about Sino Agro Food.

 

Tony Ostrowski: SIAF was incorporated in Nevada, United States, and our operations and corporate headquarters are in China.  We are primarily a holding company of joint ventures, but we do own some of our businesses.  In China, a foreign company, like our company, can’t own land, it can’t own permits and it can’t own licenses.  Basically, it can’t own anything, but it can joint venture with Chinese entities.  Sometimes our joint venture partners come in with cash, and sometimes they come in with land.  We provide the technology, management, organizational and construction skills.  We also market the products produced by the joint ventures.  If our joint ventures prove successful, we can contractually take on a majority stake in the company, and therefore, under Chinese law, own the company including its assets, permits and land.  That is our corporate strategy of operating in China.

 

Solomon Lee, Chief Executive Officer and Chairman of Sino Agro Food is the brains behind SIAF.  He was born in Hong Kong and is an Australian citizen.  The board of directors are of mixed nationality, and they all speak English.  Dan Ritchey, an American investment banker and analyst, is on the board, and so is Nils-Erik Sandberg, who’s Swedish and chairman of the Jordan Fund.  He was one of the early investors in SIAF.

 

SIAF shares are listed on the Norway’s Oslo Børs’ Merkur Market and the OTCQX Market in the United States.  Our total assets are about $625 million, and we achieved total revenues of $429 million in fiscal year 2015.  It’s a very profitable company with good growth potential.  Right now, we’re somewhat cash flow restricted because all our money is being reinvested into the company, primarily for building the mega farm.  From 2016 to 2024, that project will cost about $2 billion to build out.

 

Our Aquaculture Division accounts for about 40–45% or our revenues.  Our other major division is our fully integrated cattle and beef operations in Qinghai Province, Xining City. There we do fertilizer, bulk and concentrated feed (using our own patented enzyme formulas), cattle breeding, growing and fattening, slaughter, deboning and packaging, value-added processing, and marketing and distribution.

 

Our Corporate Division handles all our import and export and product distribution through our distribution centers located in Shanghai, Guangzhou and Xining cities.  Our Leonie’s Restaurants in Guangzhou and Zhongshan are named after Solomon’s daughter.

 

 

The $2 Billion Mega Prawn Farm

 

   

 

Shrimp News: Tell me about the recirculating technology you plan to use at the mega prawn farm.

 

Tony Ostrowski: We call our aquaculture technologies “A Power Recirculating Recirculation Aquaculture Systems (APRAS)”.  I asked my Chinese colleagues what “A Power” meant.  It is the translated version of the Chinese description of the technology and means “A No. 1”, the best of the best.  It’s a licensed technology that’s been under continuous improvement for eleven years and essentially has evolved into our “know-how”.  There’s nothing radical about the RAS technology, except in the elegance of its engineering simplicity.  As opposed to most RAS facilities, to which most of us are accustomed, with many individual and complicated components located alongside the tanks, APRAS is basically two concrete tanks with a baffled filtration and water purification system between them build as a single contiguous unit.  The smallest units are six meters by twelve meters, and the filters consist of mechanical filters and biofilters.  The water is sterilized with ultraviolet light, which also produces some ozone.  There’s nothing outside the tanks.  We call that basic unit an “A Power Module”, and the tanks are called “A Power Tanks”.  They all reside in a building called an “A Power Building”.  There are two types of modular buildings, each 8,500 square meters, but configured differently.

 

Shrimp News: Your literature refers to “Prawn Farm One” and “Prawn Farm Two”.  What’s that all about?

 

Tony Ostrowski: This terminology refers to our existing A-Power growout farm and hatchery, respectively.  The farm is a prototype of our mega farm that has been operating successfully since 2011.

 

Shrimp News: Is the mega freshwater prawn project your biggest project?

 

Tony Ostrowski: Yes, by a long shot.  The mega project is on 600 acres of land in Zhongshan, Guangdong Province, about 45 kilometers across the bay from Hong Kong, in the heart of one of the most urbanized regions of the world.  Aquaculture buildings will occupy 400 acres, and the remaining 200 acres will be dedicated to waste water collection and treatment ponds, ornamental plant and vegetable culture (aquaponics, grown on the effluent from the prawn tanks), research and development facilities, offices, worker housing, a cafeteria, tourism related facilities and a wetland and bird sanctuary.

 

On February 23, 2016, we stocked the mega farm’s first two A Power nursery tanks with a total of 1,200,000 specific-pathogen-free M. rosenbergii postlarvae (PL).  The remaining nursery tanks will be stocked progressively, depending on the results and upon fine-tuning the performance of associated support equipment like biofilters and heat exchangers.  The nursery tanks are the beginning of a four-phase growout cycle, with each phase lasting 3 to 4 weeks.  One growout cycle for each batch of animals therefore takes about 14 weeks.  Phase 1-3 growout occurs in one type of building; phase 4 occurs in another type of building.  Three A Power Buildings make up a production unit designed to produce a minimum 10,000 metric tons of prawns per year, making us one the largest RAS operations in the world.

 

Currently, two of the first three buildings planned for Phase 1 are completed; the third building will be completed by the end of the third quarter of 2016.  This first phase of construction and operation should have either harvested and/or have in tanks 10,000 metric tons by the end of 2017.  A total 38 buildings are planned in subsequent phases, with all phases to be completed by 2024.

 

Building 1 and 3 of a 10,000 metric ton production unit house 48 A Power Modules, each with two tanks and a filtration system between them.  They are used as nursery tanks (phase 1 of growout) and for phase two and three of growout.  Each phase 1 growout nursery tank is 6 x 12 x 3 meters deep; each phase two and phase three growout tank is 12 x12 x 3 meters deep.  Building 2  also houses the equivalent of 48 standard A Power Modules, based on biofilter capacity, but it’s configured with six very large (40 x 20 x 2 meter) phase 4 growout tanks, with larger filtration units.

 

Shrimp News: Will there be any effluent from the mega farm?

 

Tony Ostrowski:  Yes, both soluble and insoluble waste as with any RAS facility.  We’re going to run effluent water through our aquaponics systems to utilize the soluble waste and capture all of the solid wastes and use them as fertilizer on our vegetable farms and sell the fertilizer to other farmers.  Since the solid wastes will be coming from freshwater facilities, we won’t have to worry about their salt content.  All the effluent water will be passed through oxidation ponds, just like in a sewage treatment plant, and then go back into the growout modules.  We’ll be using a lot of water, and we’ll lose some of it to evaporation, which will be replenished with disinfected well water and river water.

 

Shrimp News: It appears that you are primarily an aquaculture company.  Is that correct?

 

Tony Ostrowski: Right now our Aquaculture Division  produces about 42% of our total revenues.  Eventually, we plan to carve out our aquaculture operations to streamline the administration, management, and investment profile.  The aquaculture division will be vertically integrated and will be huge.  We plan a feed mill, hatchery, nucleus breeding center, growout, distribution—all focused largely on the mega prawn farm, which is designed to produce a minimum 100,000 metric tons of prawns a year.  Our long-term master plan is designed for upwards of 250,000 to 300,000 tons a year—80% of it prawns.  The other 20% will be eels (Anguilla mormorata and some A. mossambica) and sleepy cod (Oxyleotris marmoratus), which is really a gobi, nothing like the cod in the northwest Atlantic Ocean.  As its name suggests, it’s kind of sedentary, just lies there and grows.

 

We will also be looking at other species.  We are currently and will continue to raise Pacific white shrimp (Penaeus vannamei) and other penaeid species in our open, recirculating ponds, but not in our indoor recirculating buildings, at least not in the current design.  We do plan to explore P. vannamei in our indoor systems using different approaches.  Basically, we will look at whatever species fits our model at the right time.  Right now, our aquaculture division produces about 6,000 metric tons a year, using indoor RAS and outdoor recirculating ponds raising various species.  By outdoor recirculating ponds, I mean a series of connected growout ponds that circulate water through settling ponds with oyster shells for bio-filtration.  The water then flows back into the growout ponds.  Notably, we have experienced no disease outbreaks in our outdoor RAS ponds.  I believe that has to do with using “old” or “seasoned” recycled water that has very stable, good bacteria populations, combined with SPF stocks.

 

Shrimp News: Do you have a freshwater prawn hatchery?

 

Tony Ostrowski: Yes, at what we call our Prawn Farm 2, but we don’t have a breeding program.  That’s one of our R&D goals, to develop a pedigreed breeding program for Macrobrachium rosenbergii.  Currently, we get our prawn broodstock from CP Foods.  We have a good relationship with CP and their hatchery facility is on land they rent from us.

 

Shrimp News: Does CP have a prawn breeding program?

 

Tony Ostrowski: They produce SPF stocks, but I am not aware of whether they have a pedigreed program for these freshwater prawns.  Certainly, there is not one dedicated for optimizing biological performance of M. rosenbergii in RAS.  Since 2007, there has been a breeding program for prawns at Vietnams’ Research Institute of Aquaculture No.2 that uses local strains for pond culture.  However, our breeding program is planned to be more robust and dedicated primarily to optimize our RAS technology.

 

Shrimp News: How many prawn postlarvae do you produce a year?

 

Tony Ostrowski: Last year we produced about one billion from Prawn Farm 2.  This year we will produce two billion, and as we move closer to full production, those numbers will increase dramatically, with help from our hatchery on the mega farm.  There’s also a local market for five billion prawn PLs a year, which are currently selling for 700 yuan (or $107 USD) per 10,000.  We’re going to build another hatchery, and that’s where I plan to house our nucleus-breeding center and program.  Right now, the total production of freshwater prawns (M. rosenbergii) in the world is around 400,000 metric tons, and about 300,000 tons of that is from China.  Also, China produces a sizable amount of M. nipponense, a smaller freshwater prawn.  We will compete in the nipponense market with a small rosenbergii.

 

Shrimp News: Isn’t Sino Agro going to have to raise a boatload of money to develop this project?

 

Tony Ostrowski: Absolutely!  That is one of the reasons for separating out the aquaculture operations—to attract more investment.  We will also be generating a lot of cash flow which could finance the project on its own.  However, investment would allow us to achieve our goals faster.  My role currently is to educate investors and analysts on the technology so they can understand exactly what they are investing in, how it works, and especially how it makes money.

 

Shrimp News: Why did you choose freshwater prawns over marine shrimp?

 

Tony Ostrowski: First, because prawns fit our model.  We choose a species to fit our production model and strategy, not the other way around.  Freshwater prawns are highly amenable to our phased-growout, partial-harvest strategy in RAS.  We have not done enough R&D on RAS culture of vannamei in salt or brackish water in our system, so this species does not fit our model, currently.  Second, there is a robust live market for freshwater prawns in China, and we can sell animals throughout the entire growout cycle and achieve very good prices.  They are also a much better species for long, live transport (up to 1,000 km), with fewer mortalities upon arrival at their sales destinations in China. There is a lot of room to grow with this species.  Third, and importantly, because we can control the entire life cycle of rosenbergii and therefore we can control our own destiny with this species.

 

Shrimp News: Ok, so just how does RAS culture of prawns make economic sense?

 

Tony Ostrowski: Let’s compare the economics of M. rosenbergii farming using our APRAS technology and strategy with P. vannamei pond culture as the comparative example.  I know it’s comparing apples and oranges, but I just want to give you some idea of the approach and scale of what we can do with freshwater prawns using the actual stocking numbers we plan for the mega farm.  Let’s do the comparison using 21 million PL’s per stocking cycle, the targeted stocking rate of nursery (stage 1 growout) tanks in Buildings 1 and 3 of an A-Power production unit defined above.  With vannamei, ifyou’re going to be stocking 21 million PLs, at 150 per square meter, you would need 54 quarter-hectare ponds, which is the typical size of a growout pond in China.  Altogether, you would need 400,000 PLs per pond.  After a 90-to-120-day growout period, with about sixty percent survival, you would harvest about 240,000, 20-gram animals.  Since you are limited by season to two crops a year in uncovered open ponds in China, and you are producing shrimp using an “all in, all out” production strategy, you produce 518 metric tons a year, or about 9.6 metric tons per hectare per year.

 

With prawns, we purposely overstock 21 million PLs in nursery tanks and grow them for three to four weeks.  We achieve growth to about 6 grams with 10% mortality.  Because biomass has increased greatly for the second stage, we split them into two growout tanks, then grow them for another 3-4 weeks.  After this phase, the biomass has gotten too great for even our phase 2&3 growout tanks, so we partial harvest those tanks, to thin out the batch.  At this point they are large enough to sell.  Based on our calculations, we can get about 52 metric tons of prawns from the original 21 million PLs.  Mortality is only 2% in this and less in subsequent phases.   After phase 2, we hand sort animals for culling and stock remaining animals into phase 3 growout tanks.  It takes a lot of labor, but it’s a lot of cheap labor.  Rosenbergii is notorious for its great size differences during growout, so we’re size grading and working with only the large animals during the third phase of culture.  When we harvest the third phase of growout, we get 163 tons of prawns.  Finally, after phase 4, we harvest another 253 tons of prawns of an average size of 66 grams, much bigger and with much less mortality than can be achieved in pond culture because of the grading and reduction in cannibalism and agonistic behaviors among males.  All along, of course, we’re restocking the previous production tanks after they been harvested with a new batch of animals.  That production strategy works out to about 14 crops per year, as opposed to the “all in, all out” strategy that yields only two crops a year with vannamei.  The prawn yield is over 1,000 tons a hectare.  That works out to about 100 times more yield in metric tons per unit area per year than you get from the marine shrimp example.  We get super-intensive production without super-intensive stocking densities.

 

Our strategy therefore is yield maximization with rapid product turnover, which results in much higher returns per capital expenditures than typical RAS culture strategies.  High capital expenditure costs and the associated depreciation costs limit the economic viability of RAS aquaculture in most instances.  That is the paradigm shift in our approach!

 

Our mega farm project phase-one target is for 10,000 metric tons of prawns a year, and we’ve already begun stocking for that production, but we won’t really reach full capacity until later in 2016 when the biofilters are properly primed.  Our next phase of construction targets a minimum 50,000 metric tons.  At the end of the day, by 2025, we hope to be producing a minimum 100,000 to a maximum 300,000 metric tons of freshwater prawns each—all from indoor production facilities—based on recirculating technology, increased efficiency and greater yields from our phased growout and partial harvest strategy.  This production strategy combined with the relatively high product price, lower capital expenditures and operating costs and a large local market for live seafood results in high returns.

 

In addition, when finished, the farm will employ about 8,000 people.  The multiplier on that is about ten when you consider distribution and the wholesale and retail value chain, so about 80,000 people will have jobs as a result of the project.  This is another among several reasons why the Chinese government is so supportive of the project, as it fits perfectly with their current five-year plan of modern agriculture development and improving the lives of its people.

 

One key feature of operating in China where live seafood, or live anything is preferred, is that live product always fetches higher prices.  It’s a cultural thing that I learned living in China.  You would be amazed by how much Chinese consumers of all classes are willing to pay for live seafood.  All seafood restaurants in China have aquaria filled with a variety of species, some fetching over $100 a kilo.  There are 120 million people in the Pearl River Delta.  The town of Guangzhou has 15 million people.  We don’t plan to export seafood to Europe, Japan and the United States because we have a gigantic market right in our backyard.  We do plan on third-party process certification to prove our sustainable farming practices using the highest environmental standards.  That is supported by the central government, and frankly being increasingly demanded by the rising Chinese middle class.  It is also a hedge for us if and when we do plan export.

 

Shrimp News: Where do you plan to market the production from the mega farm?

 

Tony Ostrowski: To the rising Chinese middle class, which currently has a per capita income of approximately $9,000 a year and represents sixty percent of the current urban population.  If you look at the growth of the Chinese middle class over the next ten years, it will grow by fifty percent.  That means 25 to 35 percent of low-income people are moving up into the middle class.  If you do the calculations, that is a population of between 500-700 million, almost twice the population of the entire United States!  If you look at that in terms of per capita consumption, it means the world will have to produce about 25 million more tons of high-value seafood products in the next ten years to feed this rising class of people in China alone.

 

I’m on the research and development and certification side of the business.  Solomon has years of experience with our technology, and he has the contacts for marketing products in China.  Basically, we will put our prawns on trucks and take them to the city of Guangzhou, which has the largest live seafood market in the world.  When you go to a restaurant in China, there’s no seafood in the freezer, no gutted fish on ice, no oysters in jars—everything is alive.  The restaurants buy it from the live seafood markets, which are scattered all over the Pearl River Delta.  We’ll probably be able to sell a good majority of what we produce at live seafood markets, locally and further into the interior of the country.  We’ll have a fleet of trucks to make the deliveries.  We’ll be selling larger prawns for around $15 a kilo, the current average farm-gate price for live prawns.

 

Shrimp News: Will you be looking at any other ways of marketing your prawns?

 

Tony Ostrowski: We may plan to export some of our products, but we’re also looking at value-added processing to get into different product niches.

 

Shrimp News: How profitable do you expect the mega farm to be?

 

Tony Ostrowski: Gross profits could be as high as 60%.  The key is to maximize economic efficiency in the production and value chain.  Two growout periods a year—all in and all out—does not maximize your production or yield.  We’re also looking at the shortest time to hold something to get the maximum value out of it.

 

It turns out that our phased, partial-harvest strategy circumvents the size variation problem that most prawn farmers experience.  Our animals grow faster with less size variation and much higher survival rates than prawns raised in open ponds, which is the traditional way of raising this species.  I don’t know of any other operation in the world that raises prawns in recirculating systems.

 

As incredible as it may sound, our calculations are that by 2025, Sino Agro could be producing as much seafood as the entire country of Vietnam from only one-ten thousandth of the space.  That is real out-of-the box, or paradigm-shift, thinking!

 

Importantly, we actually have a track record as a company, which can be confirmed by our United States Securities and Exchange Commission filings.  We have been producing M. rosenbergii from our indoor RAS technology since 2013 and other species since 2011.  Production has increased every quarter and the prices we receive have increased, likely due to the perceived high quality of our product and increasing sales into higher-end markets.  During the Chinese, New Year prices shoot up, and we may be able double our prices on some products during that period.

 

If you look at Sino Agro’s projected sector revenues from the mega farm, 80% will be coming from aquaculture, and 80% of those revenues will be from sales of M. rosenbergii.

 

We currently are partnered with a Chinese entity in the mega prawn farm, but plan to take controlling interest eventually, under what is called a “Sino Foreign Joint Venture”, the legal route by which a foreign company like SIAF can effectively own a company in China.  Solomon typically sets up a joint venture with a minority equity interest as part of the deal, and when it starts making money, he contractually increase the percentage of his ownership in it and effectively takes over the company.  We’ve already done that with some of the companies we own.

 

We see a very bright future for Sino Agro Foods’ mega prawn farm!

 

Information: For background information on freshwater prawns farming, click here.

 

   

Information: Dr. Anthony Ostrowski's presentation at the 2016 North Atlantic Seafood Conference in Oslo, Norway, “The SIAF APRAS Model: A Paradigm Shift in 21st Century Aquaculture," is available for viewing at https://vimeo.com/158286943.

 

Information: Dr. Anthony Ostrowski, Chief Scientific Officer, Sino Agro Food, Inc., Room 3801, Block A, China Shine Plaza, No. 9, Linhexi Road, Tianhe District, Guangzhou, China 510610 (Mobile Phone USA + 01-808-386-7420, Phone in China +86-20-3888-0923, Email tony.ostrowski@sinoagrofood.com, Webpage http://sinoagrofood.com).

 

Information: Peter Grossman, Investor Relations/USA (Phone +1-775-901-0344, Email info@sinoagrofood.com), or Erik Ahl, Nordic Countries (Phone +46-0-760-495-885, Email erik.ahl@sinoagrofood.com).

 

Sources: 1. Dr. Anthony Ostrowski.  Interview by Bob Rosenberry, Shrimp News International, Las Vegas, Nevada, USA, February 23, 2016.  2. Email to Shrimp News International.  Subject: Shrimp News’ Questions.  From: Anthony Ostrowski.  January 10, 2016.  3. News Release.  Sino Agro Foods, Inc.  Subject: Sino Agro Food Approved for Trading on the Oslo Børs’ Merkur Market.  Peter Grossman.  January 4, 2016.  4. News Release.  Sino Agro Foods, Inc.  Subject: Sino Agro Food Begins Stocking Zhongshan Aquaculture MegaFarm.  Peter Grossman.  February 26, 2016.  5. Email to Shrimp News International.  Subject: Bio of Dr. Anthony Ostrowski.  From: Javad Baharian (javad@ssecapital.com).  March 11, 2016.

 

Print This Page