Aquaculture Profile

Revised January, 2022

OverviewBarrels in a warehouse for raising fish

Archeological findings in China suggest that people have been cultivating aquatic crops for at least 8,000 years, but aquaculture only became a global phenomenon during the past century. As demand for fish and other seafood continues to increase, farm-raised seafood has become an important component of the world’s food supply. In fact, over half of the edible fisheries products consumed worldwide are farmed. Consumers in the U.S. typically spend over $100 billion on seafood each year, most of which is produced on farms in other countries.  Although an estimated  $1.52 billion worth of aquacultured products were produced on over 2,930 farms in the U.S. in 2018 (the most recent estimates available), this production represented a negligible portion of the nation’s total seafood consumption.    

Although definitions often vary, aquaculture is a catch-all term that encompasses the subsistence, medium-scale or industrial production of commercially important aquatic organisms in a controlled environment for some or all of the life cycle.  In the United States, most fish and crustacean production takes place in ponds, raceways and recirculating systems, while mollusks are usually cultivated along the coasts on water bottoms or using off-bottom gear.

The United Nations reports that around 46 percent of the world's total fish supply comes from aquaculture, but aquaculture accounts for over 52 percent of those fishery products destined for human consumption. Although aquaculture remains a fast-growing food-producing sector throughout the globe, the rate of growth has slowed somewhat over the past decade.  In 2018 global aquaculture production (excluding seaweeds) was approximately 82.1 million metric tons with an estimated value of $250.1 billion. Some 600 aquatic species are raised in captivity in about 190 countries, in farms that range from simple earthen ponds to technologically advanced recirculating systems.  

What differentiates aquaculture from more traditional forms of agriculture production? 

Aquatic species such as tilapia, catfish and crawfish are far more efficient at converting traditional feedstuffs into edible protein than are traditional livestock and poultry species. As a result, many forms of aquaculture production also result in reduced environmental impacts when compared to traditional animal husbandry. In most developing countries, if one used the same amount of land (but in the form of a pond) and all the inputs required to produce a 1,000-pound cow, they could produce roughly 4,000 pounds of tilapia and perhaps even more under some conditions. For these reasons, many developing nations are promoting aquaculture to enhance food security and as a means of economic development. Industrialized operations are also looked upon favorably in many of these countries, due to their potential to generate employment and foreign exchange through exports.  

What is the industry outlook? 

Any aquaculture venture must consider the dynamic nature of the seafood industry, whether local, regional or international. Seafood is the “most international” of all proteins, and global seafood trade has been valued at more than twice the combined trade of all other meat and poultry products. Seafood trade occurs in a highly volatile global marketplace that often lacks transparency. Aquaculture industries must compete not only with each other but with wild-caught products as well. Aquaculture is expected by many authorities to fill the increased demand for seafood products in the coming decades, but with the assumption that wild-catch fisheries harvests will remain relatively stable.

Policy decisions at the national and international level can often have unintended impacts on aquaculture producers.  For example, when the federal government mandated the inclusion of ethanol in U.S. gasoline supplies, significant corn inventories were diverted from feed production to ethanol plants.  Corn prices rose rapidly and this in turn increased prices for soybeans. In most of the U.S. catfish producing region, floating catfish feed more than doubled in price in less than two growing seasons.  Many smaller and less efficient operations could no longer turn a profit, and as acreage and production declined throughout the country seafood importers took notice. Some traditional farmed catfish customers began to seek out substitute products such as pangasius from Vietnam and channel catfish from China. This is one illustration of the “international” aspect of seafood that U.S. producers must confront. 

Economic Considerations

Accurate and detailed cost projections are essential when establishing an aquaculture business.  Projected costs (variable, fixed, marketing and opportunity costs) must be compared to prevailing market prices for the products you intend to produce. Keep in mind economies of scale – a smaller operation will have higher costs and will require small-volume markets that are willing and able to pay higher prices. Input suppliers must be reliable and trustworthy, even when larger customers are competing with you.  Consider your feed requirements – who will supply it, at what cost, and in what quantities will it be delivered?  Where will your fingerlings / post-larvae / spat come from? Again – how often, at what price and in what quantities? 

Will your customers require some amount of processing prior to taking delivery? If so, costs of processing (labor, water, sewage, electricity), cold storage, permits/licenses and product liability insurance must all be taken into account. Once processing becomes a part of the business, local, state and federal regulations must be understood and followed. Packaging must meet both regulatory standards and customer preferences.  

Competitive payment terms are an important aspect of building customer relationships, but they must be taken into consideration when developing cash flow projections. The same holds true for key suppliers of inputs such as feed, fingerlings and packaging materials.  

Marketing Considerations

Does your business concept make sense?

Begin your analysis with some basic questions. Is there an opportunity in the marketplace …or not really? To answer this question you must understand what the competition is, whether you can offer a superior product and how you will differentiate it. Enthusiasm is not enough. In fact, at this stage of the process enthusiasm can be counter-productive. Embrace a healthy dose of skepticism when evaluating your business concept. 

Seasonality of demand is an important consideration, because you will have to structure both production management and finances around this factor.  Markets must be available to accommodate your production when it is ready for harvest because maintaining the crop beyond a harvestable size requires excessive feed, labor and energy costs as well as unproductive use of facilities and capital. As a producer you will need to provide value through quality control and customer service, but your customers must also be willing to provide reliable outlets for your production when you need to move it.  

The scale of demand, and therefor production, will impact your marketing options. Will you be large enough to work with a broker or will you handle all the legwork and logistics yourself? If not, you may be able to work with an aggregator, but this approach will also require structuring production schedules and finances within a relatively inflexible framework. Most potential buyers will demand sufficient quantities of uniform size on a regular basis, so be sure your product can be grown reliably with available technology and equipment. If you can offer more than one product, or more than one product form, this will usually provide more market access.   

How are you marketing your product? 

Successful small- to medium-sized companies create business plans and stick with them. Big businesses even go a step further by developing formal “pipelines” within their short-term business plans where potential clients are assigned staff to service their needs and develop sales. Progress is routinely recorded and analyzed with respect to the underlying reasons for wins and losses, progress of opportunities in relation to the sales process, noting the most successful staff working with each potential client and adjusting the team accordingly, and if sales are already underway, evaluating customer service situations. Large organizations may even set up and manage alliances with third-party companies to leverage one another’s contacts and expertise.

Assume from the start that within any successful aquaculture venture as much time and effort will be spent on marketing as on production. Successful businesses of all sizes have universal procedures for maximizing success, even in tough economic times. By researching sound business-development practices, developing a business and sales plan, and networking, any size operation will benefit.


Are you targeting specific distribution, retail or consumer groups? 

To get orders for your aquaculture product, you need to do a few things. Consider the various point-of-first-sale options outlined in Table 1, taking into consideration your overall production capacity and typical harvest volumes per sale.  If you will not be selling to a large processor (or any processor for that matter), identify alternative buyers (restaurants, distributors, institutional food services) and other potential outlets (farmers' markets, direct-to-consumer sales). State agencies responsible for fish and wildlife or natural resources can often supply contacts for live haul companies with licenses or permits to operate in your state. MarketMaker materials found on the AgMRC homepage will help a great deal in identifying potential buyers, making this an easy and organized exercise.

Focus on the communication tools and skills you will need to successfully engage potential customers. Once you have your businesses and outlets targeted, you need to identify the name of the key person in each organization to whom you hope to sell the product. This person is a decision-maker. Don’t settle for anyone else. If it is a restaurant, it may be the chef and not the owner, or both may be important in your sales call.



Product differentiation

What makes your product unique? This could be the local production aspect, the specific production environment (animal welfare, water source, hormone- and antibiotic-free systems, etc.), the culinary quality of your product or its suitability for special presentations.

Once customers have been identified and engaged, a critical aspect in aquaculture marketing involves accommodation: giving those customers what they want in terms of size, presentation, consistency, quality and scheduling. This, in turn, requires fine-tuning production practices, scheduling, and grow-out management to assure your ability to meet these requirements. And, once the production plan is clearly defined, farm finances must be evaluated to insure sufficient cash flow, with a significant safety cushion. An equally critical point is conveying to the customer the attributes of your product and/or the service associated with your company that makes purchasing your product, rather than that of the competition, an easy and logical decision.

Who or what is your competition?

 This question should have been answered early on when creating your business plan. The best starting point is to do a realistic cost-of-production analysis in the business plan that will determine the wholesale and retail price points of your product. 

Certification and promotional programs

 Any certification program that improves quality control or reduces operational risk is well worth your time. Additionally, certification programs are strong additions to your marketing communications. Some programs, for example, ISO-9000-type programs for agriculture, are quality-assurance, efficiency-improvement, and production-risk-reduction systems that are designed to continually improve all aspects of the business. Additionally, determine if there are any local, state or federal agencies and organizations (especially agriculture-related agencies) that can assist with marketing and promotional activities and costs.  

Production Considerations

Currently, U.S. aquaculture production takes place mainly in inland ponds or in coastal waters under states’ jurisdictions. The largest single sector of the U.S. aquaculture industry has historically been catfish, followed by shellfish (including clams, oysters, scallops and other mollusks), crawfish, trout, alligators, baitfish and ornamentals, but some changes have occurred over the past decade. The 2018 Census of Aquaculture listed total sales of catfish at $366,843,000 with $341,915,000 accounted for by food-size fish. Sales of oysters were reported as $284,938,000 and those of clams as $136,153,000 for a total of $421 million, with an additional $21 million attributable to other mollusks. By comparison, sales of food-size trout, tilapia and hybrid striped bass were $116,704,000, $37,986,000 and $32,800,000 respectively. Sales of ornamental fish were reported at $45,534,000 and baitfish were valued at $32,778,000. Farmed crawfish and alligators are mainly produced in Louisiana, and although underreported in the census numbers, in 2018 their actual farm-gate values in that state were $209,509,840 and $102,362,934 respectively.        

Recent production advances have enabled several commercial finfish and shellfish operations to locate offshore operations in more exposed, open-ocean sites, for example in state waters off Hawaii and New Hampshire. Unfortunately, regulatory frameworks and negative public perception have limited the development of this approach in the U.S. while it advances in other parts of the world. The regulatory authority of various agencies with regard to offshore aquaculture is still being debated in the courts. On-shore, other advances have driven the establishment of recirculating-production systems with the potential to offer high-value species to specialty markets, grocery distributors and restaurant chains. Non-fish species such as tank-raised saltwater shrimp are also allowing enterprising entrepreneurs to address high-value specialty markets in many parts of the country. 

Closed- and “semi-closed” systems

These are systems where the fish are kept in tanks, ponds or raceways where contact with the surrounding environment is strictly limited. An example of a “closed” system would involve fish production in recirculating tanks within a building; while a semi-closed system would be catfish, bass or some other species in an outdoor pond with controlled water depth and protection from predators and pathogens. Usually, the more “closed” the system, the more critical are the needs for water -quality and temperature control, system monitoring, complete diets, etc.

In recirculating aquaculture systems (RAS) producers can maintain control by monitoring almost every production variable and using artificial means (pure oxygen, biological filtration, degassing, denitrification, etc.) to increase carrying capacity. Although operating costs are generally high, these systems can be stocked at very high densities. Production of high-value species in RAS can provide high potential returns on initial investments and operating costs. These systems, however, are capital intensive and require reliable (if not completely failure-proof) energy and mechanical components to circulate water, remove toxins and maintain sufficient dissolved oxygen levels. Closed systems generally lend themselves to enhanced biosecurity and food safety and diseases are more easily and efficiently identified, isolated and treated in indoor systems. 

Many species can be produced in RAS, but some are more suitable than others. The important trade-offs usually involve production costs vs market prices.  As a result, numerous species can be raised more efficiently and economically in outdoor ponds, cages or raceways. Information on a number of species suitable for RAS production is available here on the AgMRC aquaculture pages.

In pond systems, production environments tend to be more volatile with shifts in temperature, oxygen, pH and other variables contributing to stress that can reduce growth and increase susceptibility to diseases. Pond systems can be profitable if they are used for aquatic species that are well suited to variable conditions. Such species generate harvestable products with wide market demand, typically providing acceptable returns on investment. The simplest pond systems may not require any energy inputs, but most have some artificial aeration capacity and use regular feeding of floating pellets. Large commercial operations tend to be located in areas of the country where temperatures allow year-round or mostly year-round production, depending on the species’ requirements.

Fish species well suited to outdoor pond systems in various parts of the country include: tilapia, yellow perch, walleye, trout, catfish, hybrid striped bass, largemouth bass, koi/carp, golden shiners and other baitfish, sunfish and tropical ornamentals. Various “non-fish” species such as crawfish, turtles and shrimp are also well suited to pond-system production in suitable climates. The AgMRC aquaculture pages contain information on a number of species suitable for pond production in various regions of the U.S.

 

Management Considerations

Labor needed for the enterprise

 Like any livestock operation, aquaculture systems need human monitoring and attention. Personnel demands increase with the size and/or complexity of the operation. For example, a simple pond system may do well with regular attention from the owners. A hatchery operation or a complex recirculating system will require regular checks, data recording and system maintenance. Most commercial ventures have full-time and part-time employees trained in production and post-harvest handling; as well as emergency procedures.

Facilities and inputs required 

Pond systems will require enough land for the ponds, levees, drainage systems, and support and storage buildings. Recirculating systems can be housed in new purpose-built construction or in re-purposed industrial property, warehouses or farm buildings.

There are various licensing and inspection protocols to consider, and these will vary from state to state. While many states have made some effort to streamline the licensing process in order to foster or support local aquaculture industries, many others have stifled industry growth through a proliferation of permit requirements from various state and local agencies. Usually, your state Department of Natural Resources or Wildlife, and you state Department of Agriculture should be contacted as soon as possible to determine what permits are needed for your operation (in addition, local zoning, health and other regulations may also apply). A visit with your local County Extension Office may also provide useful leads for tracking down aquaculture-related contacts.

Here is an example of some of the laws, regulations and permit requirements for producers from one Midwestern state:

  • Aquaculture unit license: Needed to operate a hatchery, to engage in the business of propagating fish in private waters or to hold fish for commercial purposes. The state conservation officer in your area must approve the application before a license can be issued. The licensee is allowed to possess, propagate, buy, sell, deal in and transport fish produced from breeding stock lawfully acquired. Operators must secure breeding stock from licensed private fish hatcheries in the state or from lawful sources outside the state. When purchasing fish, the bill of sale must be retained to allow possession to spawn, rear and harvest fish. Additionally, anyone bringing fish or fish eggs into the state that are not native must submit an application to the DNR and receive a permit prior to transporting the fish into the state. The DNR may require certification that the source of fish or fish eggs is disease-free.
  • Bait dealer's license: required if minnows, frogs, or clams are sold for fish bait. The license also allows the licensee to obtain bait from lakes and streams where permitted.
  • NPDES permit: This permit, from the National Pollutant Discharge Elimination System (NPDES), is needed for discharge of “used” water. Generally, only relatively large operations or flow-through hatcheries will need an NPDES permit.
  • Water withdrawal permit: This permit is required if withdrawal from a groundwater or surface water source is in excess of 25,000 gallons per day.
  • Water storage permit: The permit is needed if natural runoff is captured and stored (e.g., a watershed pond or a dam across a waterway) and the permanent storage is in excess of 18 acre-feet.
  • Well construction permit: This permit is required prior to construction of new water wells.
  • Floodplain development permit: This permit may be needed if a fish farm is constructed on the flood plain of a stream or if a dam is constructed across a waterway or stream.
  • Processing plant permit to operate a packing plant or slaughterhouse where fish are killed or dressed for food. Back to top.

Resources

 

Chart showing percent of product sales in 2018 Agricultural Census

Revised by C. Greg Lutz, Louisiana State University Agricultural Center