September 2008

Iowa Shrimp Confinement Production Idea Moves Ahead – and South


With research, planning and feasibility analysis, good, new business ideas often evolve into something even better – but perhaps different. 

That’s been the scenario since 2002 for what soon will become Aquaventures Investment, LLC, an Iowa-based value-added company that plans to enter the shrimp production market.

“Our original thought was to develop an intensive shrimp production facility here in Iowa,” said Keith Gelder, who farms near Jewell. This would primarily serve the domestic shrimp market in a way that:

• Produces larger quantities of uniform, quality controlled shrimp than the already established, but small pond farms that exist in the southern part of the U.S.
• Produces shrimp in a disease free, controlled environment.
• Puts a domestically raised product into the marketplace that can be controlled for quality and food safety, decreasing the reliance of American restaurants and retailers on imported shrimp products.
• Makes use of the large quantities of heated water that is a byproduct of the growing ethanol industry in Iowa.
• Introduces new, proven technology into shrimp production in the U.S.

Assistance was sought from Ag Ventures Alliance, an Iowa group that serves as a support incubator for new agricultural business and ideas. Its headquarters is in Mason City. Five members formed the initial exploratory committee for the proposed shrimp project: Gelder; his son Brian Gelder, a post doctoral student at Iowa State University with a Ph.D., in agricultural engineering and experience with aquatic systems; Brad Petersburg, a founder of Rural Development Associates; Steve Bodensteiner, manager of Farmers Coop in Marble Rock; and Bob Cole of Mason City, a former ISU Extension staff member. 

With Ag Ventures’ help, the group sought and received a $149,000 planning grant through the Value Added Producer Grant (VAPG) program in 2002. Funds were used through last year to conduct research into the technology for intensive production, markets and existing supply in the industry, develop exploratory relationships with ethanol producers, learn about others already in the shrimp industry and use a South Carolina firm to conduct a feasibility study for the business.

What was learned in these endeavors has turned the tide for the entrepreneurs and set the Aquaventures committee on the path of beginning a pilot operation by spring 2009.

“The feasibility study determined it was not the prudent thing to do here (in Iowa), but that in a better environment, the production costs were lower and the idea was feasible,” said Gelder. “Our initial motivation was utilizing all of this heat we’re producing in Iowa during the ethanol process, rather than using cooling towers and venting it out,” he said. The group started with the idea of raising fresh water prawn as a product, but found they were not conditioned to survive in crowded confinement conditions.

Further research brought them to salt-water shrimp. Questions arose about having a well trained labor force in Iowa to serve the industry, or about whether enough well-trained people could be enticed from the Southern-framed industry. 

Instead, the group intends to form a partnership with an established pond shrimp producer in the milder climate of rural Alabama. The new venture will combine year around confinement production with seasonal pond production. This winter, investors will be sought in Iowa to build a pilot confinement facility in the west central Alabama location. Eventually, a second LLC will be formed in Alabama, securing investors and further development in the plant’s home state. “It will be a 50/50 venture,” said Gelder.

While the goal remains to build a 20-acre farm with 10 acres of water for large-scale shrimp production, the early-stage pilot project will be about one-twentieth that size. Gelder said the company will be able to make sure that the proper procedures, technical designs and employees are in place. Very shortly thereafter, he envisions doubling the size of the production facility, soon doubling it again, and again several times.

By starting out on a smaller scale pilot project, Gelder said the company will look for changes it can make up front to keep risk and costs down and increase performance.

The new confinement facility will use a “raceway” system, developed in South Carolina. It is a self-contained oval facility that recycles the water used in production. When coupled with the pond system their partner now uses, year around production can quickly multiply in size. Initial shrimp production will go toward stocking the partner’s Alabama ponds, extending its growing season and yielding the more profitable jumbo shrimp, Gelder added. 

The group is further investigating use of distiller dried grains with solubles (DDGS) to enhance the value added nature of the business. Another partner in the venture, Midwest Grain Processors (MGP) Cooperative in Lakota, Iowa, which also is invested in the ethanol industry, has assisted in conducting research at Iowa State on using DDGS. The study looked at appropriate substitution formulas with traditional shrimp food. 

Gelder sees a potential to produce larger shrimp and better control the quality of shrimp product in the U.S. While the shrimp industry is a longstanding one in this country, the majority of shrimp product is imported and hence the quality and safety of food is less certain, he said.

The biggest challenge in the original Aquaventures idea was climate – that one has been met. Supplying labor was another bump in the road that has been handled. Finding a suitable partner in a warmer client was another. That, too, has been accomplished.

“One of the pluses has been finding a partner company – that’s probably the biggest accomplishment of our whole endeavor so far,” he said. This has allowed the group to work with knowledgeable people. The two principals in the Alabama company previously worked in Extension at Auburn University in Alabama.  

A few shrimp production companies in the U.S. have used the raceway technology, Gelder explained. It isn’t untested, but no one has utilized facilities on a large enough scale to be considered competition to Aquaventures. Even traditional pond production facilities are fairly small and fresh catch methods are on the decline. 

Additional information about the project can be obtained from Gelder, gelder@netins.net, or through Ag Ventures Alliance at www.agventuresalliance.com.