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Recirculating Versus Open Pond Systems

Shrimp News (bob@shrimpnews.com): Patrick Wood (patrickjwood@yahoo.com) started this discussion with a question about aeration in recirculating aquaculture systems (RAS), however, the discussion quickly evolved into a discussion on a wide range of RAS topics.  This is a long report, so I’ve highlighted some of the most salient points.  You can scroll down this page and read them quickly.  Check the list of subjects in the sources at the end of the report, and then go to The Shrimp List’s webpage to read the full discussion.
 
Durwood Dugger (ddugger@biocepts.com): Having grown shrimp in RAS systems since the early 1970s (Ralston Purina, Sun Co., AMFAC, the University of Florida and a number of other pilot developments) that were technically successfully—but not economically successful—my approach in the last decade has been to prioritize the economic sensitivities of RAS systems in order to describe the necessary design parameters for a profitable business.  The technology is known and works, but remains a jumble of puzzling parts that need to be ordered properly.  What’s not known is how to finance RAS projects for success.

 

As Patrick indicated, there are a large number of factors that contribute to the operating and capital costs of RAS.  Non-competitive operating costs limit economic feasibility of shrimp RAS.  With feed costs at about 50% of operating costs (similar to other shrimp production systems), until you make significant changes in their numbers, it doesn’t much matter what you do to the other operating costs.  After feed and labor, all the other operating costs are under 10% of total operating costs and most are under 5%.

 

Consequently, you get the most bang for your cost-reduction buck by cutting feed and labor costs.  My numbers are based on work by Dr. Tzachi Samocha at Texas A&M University, Dr. Terry Hanson at Auburn University and some RAS demonstration projects, none of which, unfortunately, were anywhere near the needed scale to truly represent the economic potential of shrimp RAS.

 

Optimizing the economies of scale seems to be the easiest way of lowering feed and operating costs in RAS shrimp farming.  The savings from optimized vertically integrated scale through small fractional savings of the most sensitive overhead categories could be successful in achieving costs comparable to those of pond production systems—at least on paper.

 

Aside from reducing input costs, some of the game-changing economics come from successfully changing the recycling process from an expense to profitable byproducts.

 

To my knowledge, there are no commercial-scale or technically scalable RAS production systems with a five-year history of profitability in current operation.  In my opinion, as long as RAS operators focus solely on the technology without understanding the basic economics of RAS and capital markets, there will be little change in this situation.  Also, until investors are willing to invest in large-scale, well-financed, long-term projects, there will be no successful RAS shrimp farms.

 

Of course, if there were a sudden collapse of traditional pond farming system and shrimp prices were to rise drastically, RAS shrimp farming would have a better chance of succeeding economically.  Shrimp disease epidemics in Latin America and Asia have caused this to happen in the past, but conventional shrimp farming methods have always come back and lowered prices.  I notice a flourish of RAS entrepreneur activity each time shrimp market prices climb—and then a collapse as conventional systems recover and prices drop.  RAS shrimp farming won’t be economically sustainable until it can compete with traditional shrimp farming technology.

My experience indicates that the major limitation to RAS shrimp farming is that it can’t compete with other investments.  Other investment types can and do offer higher projected incomes in shorter projected periods and with lower perceived risks.
 
Investment access has been a persistent problem in recent decades for most forms of industrialized food production systems—including aquaculture.  While ideal shrimp RAS designs (especially in the USA) can reduce many of the risks associated with open shrimp production systems and produce a more even year-round cash flow (six crops per year) of quality shrimp than open-pond shrimp production, the investment scales required to accomplish this are not competitive pound for pound with tropical open shrimp production system’s significantly lower capital thresholds.  This is true even with the open system’s much higher risks (theft, disease, extreme weather events, expropriation, environmental costs, lack of recycling ability and lack of legal recourse found in many developing nations) are considerably higher.

Shrimp RAS is the most complicated, technically-sophisticated form of shrimp production, perhaps of any food production system.  Instead of seeing this technical sophistication as an opportunity for risk and cost control, most non-technical investment analysts (95%?) see technical sophistication itself as a form of risk (and undeniably it is in many cases where shrimp RAS management under identifies and underestimates risks and costs)—simply because they don’t have the training and background to understand it.

Even the great investor Warren Buffet says, “I like to invest in things I can understand easily,” which I think means businesses in which he can or already has familiarity and experience.  Buffet would not be a likely investor in RAS shrimp farming.  Though he is more successful than most investors, his idea of seeking the familiar and comfortable is not limited to the most successful investors.  If you have much experience with investment fund and venture capital managers, you might have noticed that they want the same things: a company to invest in that is demonstrably and consistently profitable over a period of five or more years and one that can increase production—a lot.  Essentially, they want to invest in companies that don’t need their money.  In which case, they provide debt financing at higher than market interest rates and take a big piece of the company’s equity.

So, why do people like me continue to maintain interest in the uphill economic battle to successfully commercialize shrimp RAS.  Perhaps the best answer, though not in exact context is my favorite Salvador Dali quote on the coffee cup resting on my desk that I use as a personal reminder and on bad days mental reinforcement: La sola differencia entre un loco y loco es que…Yo no estoy loco, which translates into English as “The single difference between crazy and crazy is that I'm not crazy.”

Juan Aguirre (jxaguirre58@yahoo.com): Tropical shrimp systems are using solar power in the most efficient way.  I don’t think we can beat phytoplankton with any man-made process—at lease not for a long time.

What is the longest time any commercially (or demonstrably scalable to commercial scale) successful RAS shrimp system has been run?  For commodity prices, not niche market prices?  Has anyone seriously evaluated the potential for new diseases emerging from these ultra-intensive RAS?

Durwood Dugger (ddugger@biocepts.com): Patrick, Juan and everyone else who’s tuned into this discussion: Feed companies, Purina and Cargill, for example, were some of the first investors in large-scale shrimp farming.  However, their primary interest was in selling feed, rather than selling shrimp.  Once the feed market develops from the livestock production businesses, the feed company exits from the livestock production process.

The recent Trane/Ingersoll Rand association with Natural Shrimp I can only assume is to sell temperature management equipment and services.  It seems like an odd-couple relationship to me.  Do you think Trane has any interest in selling shrimp?  Natural Shrimp has a 15-year history in RAS shrimp farming, and although it’s a publicly traded company, it has reported only minimal sales and no profits.

Ralco’s Tru-Shrimp is one of three or four industrial scale RAS shrimp farms in the United States.  There are or were (a number have closed) about 30 small-scale (under 20,000 pounds a year) RAS shrimp farms in the United States that sell directly to local niche markets at far above commodity shrimp prices.  Ralco’s interest in shrimp production is to be a supplier of shrimp feed and feed supplements.

While shrimp may well be a commodity by definition, it is still a commodity largely supported by discretionary income spending.  Seafood sales in the USA track discretionary income pretty closely.  Additionally, if you think you can create a national industrial-scale shrimp production business on local consumers in the USA, you don’t understand the impacts of having 85% of the USA shrimp consumed in restaurants—not at home.  The underestimated cost-of-sales in servicing small niche markets has been a primary factor in the failure of what now must be near a hundred USA shrimp production ventures over the past four decades.

Russ Allen (shrimpone@aol.com): Durwood, you need to write the book on the economics of RAS shrimp farming systems.  You are spot on with past attempts at RAS shrimp farming, venture capital, lack of experience and knowledge of the industry.  I, however, believe it can be done.  I’ve been at it for 22 years.  I hope to provide the answer in the very near future.  The USA is a VERY tough place to do RAS shrimp farming.

Durwood Dugger (ddugger@biocepts.com): Russ, I agree with you and think shrimp RAS can be accomplished technically and economically—under very specific circumstances.  The biggest limiting factor is enough investment capital to scale up for the long term.

Daniel Gruenberg (seagardenfoods@mac.com): Durwood, I have successfully raised over $10 million from venture capital (VC) investors for RAS through two rounds of funding.  It is not true that VCs are not interested in risk.  There may be an issue on the due diligence/expertise issue, but there are VCs specialized in aquaculture.  VCs are typically looking for a compounded return on investment of 40% per annum compounded.  When investment costs are high and growth periods are long, that goal is difficult to achieve.  That’s the problem, not a lack of risk appetite.  One must properly understand a problem before it can be remedied.

Whether the shrimp are in a RAS or a pond, the highest cost is feed.  Many of you know that we have done a lot of work on primary productivity and zooplankton, a concept that converts solar energy into food, cleans the water and adds oxygen to the water—all which work synergistically together to improve productivity and lower FCRs.

So far, no RAS I have seen anywhere has had better FCRs than a well-managed pond.

Prior to early mortality syndrome (EMS), our farm had a commercial farm-wide FCR of 0.8.  Theoretically, a floc system should be converting some waste into edible biomass, but for some, reason RAS FCRs are always much higher than mine.

In my humble opinion, until RAS systems can get FCRs down, they will never be competitive because you have to deal with higher feeding, depreciation, land, energy and labor costs.

Although I cut my teeth on RAS, I am now focusing on improving pond culture.  Due to the inherent advantage of solar energy and diatom feed, I have a huge advantage.  The days of throwing seedstock, feed and lime into a pond and hoping for the best have come to an end.

I think we will be able to further reduce FCRs significantly.  Under our Shrimp 2.0 scheme, we are aiming for FCRs in the 0.5 to 0.6 range and growth rates of 2-3 grams per week.  We will use Internet-of-Things technology to monitor and control key aspects of pond and feed management, low-power, hyper-efficient aeration and automation to increase farm production per person by a factor of 10.  RAS technology will have to scramble to keep up with us.

Patrick Wood (patrickjwood@yahoo.com): Hi Durwood, I agree with your analysis.  VCs are looking to get into profitable ventures.  Investments in intensive shrimp farming almost always come from private capital.  What we need is someone like Tesla’s Elon Musk, someone with deep pockets, commitment, vision, no fear of failure and maybe an X prize.

That said how do we know that this is not already happening and someone is doing the work?  Private equity tends to be just that—private.  People keep their technologies close to their chests—but what for?  Well possibly to sell the technology as being more lucrative than selling shrimp.  Or because they don’t want to come out of the closet until their technology is proven successful?

What I would like to see is an open source project where the best minds could be put to work on a collaborative project to advance RAS biofloc shrimp farming.  It should be outside the university research setting and done by the private sector.

Daniel, there are many extensive shrimp farms in Ecuador with FCRs of zero.

Daniel Gruenberg (seagardenfoods@mac.com): Yes Patrick, but I’m not talking about extensive farms.  I’m talking about semi-intensive to intensive farms with stocking densities of 50-150/m2 with productivity in the range of 10-15 metric tons per hectare, not the few hundred kilograms farmers get from extensive farms in Ecuador.

Durwood Dugger (ddugger@biocepts.com): Daniel, great that you were able to raise your funds.  That was a real accomplishment.  I agree that feed costs are the key, but don’t agree that a RAS system can’t compete with open pond system.  Unfortunately, $10 million is a small fraction of what you would need today for a profitable, vertically integrated RAS system in the USA.  Most investors are not willing to deal with a long payoff period, especially when there are no large, profitable, RAS shrimp projects to mimic.

Over the years I have raised funds for aquaculture ventures and can testify to the difficulty.  I’m currently on advisory boards for two aquaculture international venture capital funds with existing aquaculture investments.  They will not consider RAS without an existing profitable model.

Shrimp RAS ventures to date (USA and Europe) have relied on ephemeral, niche-market pricing to offset higher costs.  They saturate these markets very quickly.

Daniel, you have used a multi-trophic model with diatoms, algae and other organisms to increase your feed efficiency.  A similar multi-trophic concept can be employed in RAS, but with infinitely more options, control, lower risks and lower trophic species that would lower feed costs, input costs and offset other system operating costs.  Like I said, it is complex, but the potential rewards for managing the complexity are there.

Dallas Weaver (deweaver@me.com): Daniel, with your system, the higher nutritional value of live algae, driven by your photosynthetic-based biomass growth to remove pollutants from the water, will provide a more efficient nutrient recycle than a biofloc system.

The only way a bacterial suspension culture system could compete is to obtain some control over the microbiological ecology, and that would require using multi-compartment systems, for example, sequential batch reactors in series.  If the initial treatment of the waste water utilized fast growing bacteria operating at very short SRTs (sludge retention times), you could have better nutritional value of the biomass; however, the discharge concentration and residual pollution levels would be higher.  You would then need a second stage treatment operating at a high SRT to maintain slower growing bacteria eating more refractory chemicals in the waste, but higher SRT biomass is more stabilized. and the chemistry looks more like mature compost (aquatic equivalent) that has little nutritional value to animals like shrimp.

Your system has another big advantage, especially with deep ponds where you can average daily dissolved oxygen swings and save the oxygen produced near the surface in the depths of the pond for nighttime usage.  You get oxygen addition and carbon dioxide removal as a byproduct, not an added costs of gas/liquid mass transfer.

However, your production per hectare is coupled to photosynthesis, which is limited to about 10 grams of carbon fixation per square meter a day.  This implies limits on production per hectare.  Nonetheless, I think you’re on the right path.
 
Daniel’s and related ecological approaches to shrimp farming utilizing photosynthesis for waste treatment have the potential for making shrimp cheaper than chicken, which could change the world.

Dallas Weaver (deweaver@me.com): Durwood, as a consultant in designing RAS facilities, clients always want to tell me about their densities and growth rates, but my primary interest is in how many kilograms of dry-weight feed they are going to put into their system every day.  I generally neglect the wastes that come out of the system in the form of sellable product and focus on the 80+% of what went into the system that must be dealt with.  Even the fraction that is metabolized by the animals represents oxygen consumption (requiring gas/liquid mass transfer) and carbon dioxide production that impacts pH and heat transfer (minimum gas transfer flow rates with heat losses).

By neglecting the fraction of the feed input that actually comes out as product, my design calculations are on the safe side.

Daniel Gruenberg (seagardenfoods@mac.com): I agree that shrimp diet composition will change as different technologies scale up and become more economical.  Algae-based ingredients are one hot area of research.  Insect meals and different floc meals are another areas of interest.

Until recently the only way to improve shrimp growth significantly and reduce FCRs at the same time was to spend many years doing genetic selection.

Now with the new functional feeds coming online, growth rates will be up 50-100%, FCRs down 30-50% and health and natural immunity increased—all from how we formulate the diet.

These new “Super Feeds” will transform shrimp farming, and data has proven that on top of all their other benefits, they allow ample flexibility in choosing land-based ingredients—less fishmeal—without any detrimental impact on performance.

I think people underestimate the importance of FCR.  An economic FCR of 0.5 would allow almost 300% more biomass in the same unit area and the main metabolic consumption is linearly related to the feed input.  So if I can feed 150 kilograms a day in a pond with 8,000 kilograms of biomass, the Super Feeds would allow 16,000-24,000 kilograms per hectare on the same amount of feed.  There is less oxygen consumption to deal with, resulting in less nitrogenous waste and healthier shrimp.  It also allows a lot more economic flexibility in choosing diet ingredients because at a FCR of 0.5, even if my diet is $1.80 or $2.00 per kilogram, my feed cost per kilo of shrimp is still under a dollar.

I convert feed to sellable biomass, my sale price is higher due to larger sizes, my production cost is cheaper and my growout period is shorter, producing more cycles per unit of time.

Although Super Feeds are only one, but a very vital piece of the puzzle, the coupling of them with Internet-of-Things technology, intelligent sensors and automation will completely disrupt the old paradigm in shrimp farming.

By creating a sustainable algae bloom dominated by diatoms (yes we use fertilizers), we not only get the services discussed by Dallas, namely an increase in oxygen and a decrease in nitrogen, but we also recreate a very close facsimile of the natural feeds that these animals evolved to eat for millions of years, including the “right” kinds of bacteria in the gut.

If you look at stomach contents of wild shrimp, detrital diatoms and copepod carcasses are the most common finding.  With all the relevant research done on gut microbiome, I now believe this is another reason we have been able to get improved health and why the naive “kill everything first” paradigm produces weak animals that are more susceptible to everything.

Nelson Gerundo (nelsongerundo@yahoo.com): The majority of farmed shrimp that the world is producing today, whether in outdoor earthen ponds or in indoor biosecure tanks, are produced almost entirely via the development and breeding of Penaeus vannamei broodstock in RAS.

Daniel Gruenberg (seagardenfoods@mac.com): Nelson, we are just focusing on growout in this discussion.

Nelson Gerundo (nelsongerundo@yahoo.com): RAS will always be there as special, inland biomass production ventures for the niche markets of live and fresh shrimp for fine dining restaurateurs, connoisseurs, environmental conscious seafood lovers and the wealthier segment of the human population.

Patrick Wood (patrickjwood@yahoo.com): This discussion seems to indicate that the best sustainable growth model for shrimp farming is Penaeus vannamei (not necessarily SPF) as it is being done in Ecuador using the sun, open ponds, lowered FCRs, disease management, genetic selection and mature routes to markets.  RAS are unproven.  Shrimp RAS in the west is aspirational, but that does not put any “meat” on the table.  SPF failed spectacularly in the Western Hemisphere.

Daniel Gruenberg (seagardenfoods@mac.com): Nelson, there has been a significant change in Thailand in the last couple years in that broodstock from local professionally run breeding programs are outperforming SPF broodstock from the United States, and now there is not much demand for Hawaiian broodstock.

Nelson Gerundo (nelsongerundo@yahoo.com): Daniel, China, Thailand, Vietnam, Indonesia and India are the leading shrimp exporting countries in Asia.  Development of shrimp breeding programs in these prime shrimp exporting countries are all but inevitable.  The Philippines is not a vannamei exporting country at the moment.  Our current production (more than 20,000 metric tons a year) is intended for domestic consumption, with plans to export in the near future.

The Philippines is importing Penaeus vannamei broodstock from Thailand and Indonesia.

Durwood Dugger (ddugger@biocepts.com): Daniel and everyone else who is following this discussion: I’m not a big fan of probiotics because in none of the investigations that I’ve done in either ponds or tank systems have I found that probiotics contribute significantly to any positive outcome.  I know a lot of farmers in Asia think probiotics are great, but my experience doesn’t match that.  I have used biofilter inoculates, but even they were disappointing compared to the producer’s claims.  To believe that a probiotic supplement is going to thrive in your pond, you have to believe that you created a condition where those microbes (or similar species) are absent from your environment to start with—and that’s an extremely improbable circumstance.

My working hypothesis on microbes is that the air, water, plants and animals around us are full of a huge variety of viruses, bacteria and fungi that have access to our open systems.  Near the coasts, they drift about in the wind and spray and have been called “flying alga and diatoms.”  They are constantly inoculating outdoor ponds, yet 99.99% will not dominate your pond’s microbe communities.

Consequently, in outside growout environments, it is extremely tough to overcome any microbe species that has constant inoculations from the surrounding environment.  Much smaller amounts of bioreactor-cultured microbes (probiotics) that you might insert into your system don’t have a chance.  Neither the math, volume, biology nor “The Force” is with you if you use probiotics.  Using them is like trying to grow ducks on the surface of an alligator pond.

The only successful means that I have seen for controlling the pond microbe community is by controlling the macronutrients and the pH/alkalinity conditions in the pond.  Limited by the optimum chemical parameters of our shrimp and the surrounding environment, we have few management options.  Of course, there are natural inputs—solar effects, the wind, turbidity, seasonal temperature variations and the metabolism of the primary species—that are constantly changing the pond environment.  They are sufficient enough to occasionally shift dominant microbe communities beyond our limited ability to control and manage them.  Quite literally—shit happens—and it has consequences.

One of the potentials of RAS is that there are more options to create a stable environment.  This assumes the operator knows what a healthy microbe environment is and that he can to create it.  RAS’s higher control potentials make for precise design tasking of those microbe communities.  Because system volumes are somewhat smaller and the system can be started from a relative sterile starting point, unlike outside systems, it is possible to introduce and control the species of “designer” microbe communities that will imitate natural ones, but hopefully be more efficient without the unexpected shifts from external inoculations.
 
 I use the term “RAS potential” a lot, and as everyone has noted, that potential hasn’t happened yet, and it isn’t affordable at the current scale of RAS production systems.  That doesn’t mean the knowledge, technology and equipment don’t exist.  They’re just waiting for the optimum combination of design/management/economics/investment to come together.

Jeff Thompson (jthompson@ec.rr.com): I agree.  Pond culture was part of my curriculum.  Due to our location on the east coast of the United States, it isn’t feasible to produce shrimp year round in open ponds.  RAS whether in clear water, green water, biofloc or hybrid systems allows us to capitalize on the year-round aspect of shrimp farming.

Our model does not rely on scare tactics or the bloated reports of atrocities that are used to stigmatize all imported shrimp, but on the assurance of a product grown with all natural inputs, traceability and transparency.

Our production costs aren’t the lowest in comparison to other methods.  Mercedes, BMW and Lexus aren’t the cheapest vehicles to manufacture either.  People pay more for them with an expectation of a better product.  I think quality is a perception that can be capitalized on based on consumer expectation.  You have to learn what your target market wants and provide it with that product.  Some want inexpensive and convenience, others want size, texture and appearance.

The market that makes the most sense for RAS utilization is based on a consumer who wants a consistent local product year round that is fresh—and never frozen.  It is a potentially vast and profitable niche.

In my opinion, it comes down to knowing your target market and fine-tuning a system that you can understand and manage while meeting the need to make a profit.  From there it’s more learning, fine-tuning, sharing successes and failures while growing as a business and an industry.

Durwood Dugger (ddugger@biocepts.com): Jeff, your assumptions sound like they follow the very similar logic of most USA RAS shrimp farmers—none of whom have been successful.  There are people out there that will pay ridiculous prices for shrimp that they perceive as being “premium”.  That’s true.  Unfortunately, the people who are willing to pay the necessary premium for your business to survive are few and far between.  While your assumptions sound logical, the real shrimp market is a commodity market for a highly discretionary income sensitive food.

If any significant premium market exists for shrimp in the USA, it comes from less than 5% of the population of shrimp consumers.  That 5% is scattered across the country making servicing the cost-of-sales very expensive, generally offsetting any premiums, real or imagined.  Underestimating price-point saturation of “premium niche shrimp markets” and the resulting insignificant volumes of those markets has been the downfall of all the USA shrimp RAS ventures.  Your assumption that you can “manage” and “fine tune” a “target market” that doesn’t exist at any sustainable volumes—while having higher than average shrimp production costs—is a serious and probably fatal problem in your business plan.

I sincerely wish you well, but I encourage you to find a better understanding of the USA shrimp market, the cost-of-sales experienced by distributors servicing restaurants, the even higher cost-of-sales in direct sales to consumers—and especially review the experiences of major USA shrimp RAS ventures over the past ten years.

Dallas Weaver (deweaver@me.com): Another big issue in niche marketing to the 5% who will pay the premium is whether you’re shipping “super fresh dead” or live shrimp.  The problem is that live shipping has very high logistic costs and requires the customers to have a holding system, and it helps if they know how to keep something alive.  Asian supermarkets and high-end restaurants in California have live holding facilities, but the actual tonnage for all of them is relatively small.

If you are shipping a non-frozen, super-fresh product, you get into a customer turnover issue.  In a day or so, it is no longer “super fresh” and has to compete with imports that can be equally fresh because they can move larger amounts per day.  You have to deliver with a high frequency, and the customer has to turn the product in a very short time.

Jeff Thompson (jthompson@ec.rr.com): My assumptions aren’t based on astronomical prices.  We aren’t looking for $8-plus wholesale prices.  We aren’t aiming to target small farmers markets with $14-$18 retail prices either.  We don’t want consumers stopping by the farm to interrupt daily activities and increase biosecurity issues so we can scoop out a few pounds on demand at Indiana prices.  [Most of the small-scale, RAS shrimp farmers in the USA state of Indiana, claim to be getting more that $15 a pound for whole, fresh animals.]  Those aren’t realistic goals.
 
Instead, we have secured distribution directly to a few select restaurants.  Having come from that industry, I have connections within a two-hour radius that can purchase about 25-30% of our production.  The remaining 70-75% is going to one middleman who sells to restaurants in several metropolitan areas where land and build-out costs exceed my current conservative threshold for debt servicing.  That middleman also operates two retail locations and participates in farmers markets.

We have negotiated two pickups per week utilizing two trailers and two totes.  Customers will pick up a loaded one  on Tuesday.  Friday they will return it and pick up the second one, loaded and ready to go.  We will sanitize and prep it for the following Tuesday and continue the cycle.  We are selling these shrimp whole, head-on in an ice slurry.  We don’t process which helps to keep our cost down.

Initial costs, redundant systems and automation are expensive, but in the long run, they offer us opportunities to become more efficient and to streamline our methods.  Energy efficiency and management is crucial.  We don’t use pure oxygen, and we combine circulation and aeration in one package.

Our initial indoor tests and greenhouse tests utilized four 1.5 hp circulation/aeration pumps.  Our new design has reduced that to one custom 2.5 hp pump with an identical automatic redundant pump.  The new pump runs on a variable speed drive that obtains it signal from an oxygen monitor and regulates energy consumption on demand.  This has drastically cut our electrical expenses.

I also designed a closed-loop, on-demand heating system that utilizes passive solar.  It has proven to be very efficient.  I have plans to improve version three of it in the near future.

Granted, we won’t be producing tons of shrimp at our phase-one location, only 200,000 to 300,000 pounds annually, based on harvests of 4,500 to 6,000 pounds per week.  This amount meets the current demand for the market area we are covering.  Our footprint is just over one acre.  We will utilize a 7,000-square-foot nursery, office and workshop and two 21,000-square-foot growout buildings (upon facility completion).  If demand increases, our system is scalable.  We have a 35-acre site, which will allow for expansion.

From past businesses, I have learned that keeping overhead down is the best way to increase profits.  We don’t have engineers, layers of corporate officers or other unnecessary personnel that increase the payroll.

When I spoke of fine-tuning, I wasn’t talking about the market or marketing.  I was referring to always striving to improve our system and processes.

I tested for two years while I was in school and learned quickly that one plus one isn’t always two in aquaculture.  We tried combing many systems that I researched, and all had proven beneficial in one way or another only to find that sometimes we ended up with the same results we had achieved before, or worse on occasion.

One of the issues that I consistently ran into, and I say this with the utmost respect for researchers because I consider myself an amateur, was that I found a lot of “five-gallon bucket” research out there.  I learned to weed through most of the BS, but continually found small-scale studies that extrapolated their results to claim them suitable for commercial applications.

Unfortunately, most commercial RAS operations fail; successful ones don’t publish research or divulge too much about their systems.

I enjoy this forum and appreciate the input, feedback (positive or negative) and being pointed in the right direction for information.  Thanks to everyone who is actively participating.

Patrick Wood (patrickjwood@yahoo.com): Well done Jeff.  Going into shrimp farming with a solid experience in local foodservice markets gives you a much better chance of success than selling into the commodity market.

Best to steer clear of branded chains and supermarkets.  They do not add value.  They work best with portion-controlled, year-round commodities that are shelf-life stable.  Frozen is just easier to manage (and make a profit on) at supermarket chains.  Interestingly, defrosted whole shrimp is sold in Europe.  If it doesn’t sell, it is cooked and marked as “freshly cooked.” If that doesn’t sell, it is frozen again and sold as “frozen cooked” shrimp.

In foodservice restaurants, menu prices are fixed, and promotions and price changes can take months to implement.  I had problems trying to supply “catch of the day” seafood to a famous USA brand in the Middle East.  Big operations don’t want the extra burden of something that is not routine.

Distributors and chains will always source their products from the major shrimp farming countries, where they can cut better long-term deals.  Finding smaller, independent, local restaurants is the way to go for shrimp farmers in Europe.

Selling head-on shrimp in the USA is probably not the easiest of markets, unlike Europe where even 12-gram, imported whole shrimp can be found, and fresh/organic/live seafood already appears in many restaurants.

Production costs in Europe shrimp RAS are probably higher than those in the USA because of postlarvae and feed costs—but, in the future, with more projects coming onRecirculationg xxxline, this will probably change.  Also, there are some good grant funding opportunities in the European Union, which help at start up but are not to be relied on.

There is even a market here for two-gram, head-on shrimp, which get folded into omelets.

I am wary of getting into shrimp RAS in Europe until I have a sure thing in the marketplace.  It’s not only about the technology, but mainly about the marketing.

There should be no competition because imported farmed shrimp should be seen as a different sub-category to locally produced fresh shrimp.
 
Sources: 1. The Shrimp List (a mailing list for shrimp farmers).  Subjects: (1) Sustainable Aquaculture and The Real World Economic Sensitivities of Hot Air, (2) The Economics of Shrimp RAS That No One Really Wants to Hear—Or Act Upon, (3) More on the Economics of Shrimp RAS, (4) FCR and Feed Cost Reduction Potential in RAS and (5) RAS.  October  17 to 24, 2016.  2. Bob Rosenberry, Shrimp News International, October 30, 2016.

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