The Economics of Recirculation Aquaculture

Peter Rawlinson and Anthony Forster. Fisheries Victoria.

Department of Natural Resources and Environment. Australia.

Abstract. This paper investigates the financial and economic efficiencies of three scales of recirculation
aquaculture production growing Murray Cod (Maccullochelli peelli peelli) at tonnages of 25 tonne, 50
tonne and 150 tonne. Best practice industry data is used (growth, FCR, mortality, equipment and running
costs) in conjunction with AQUAFarmer feasibility software1 to determine the relationship between key
bio-economic variables such as the sale price of the product, FCR, stocking density and growth.

Keywords: Recirculation aquaculture, financial feasibility, farm modelling.

1. INTRODUCTION In addition, the tendency that has been observed

Recirculation (intensive) aquaculture systems lately towards healthy nutrition is going to
are a relatively new technology for holding and significantly increase demand for seafood since
growing a wide variety of fresh water and fish is considered one of the healthiest foods.
marine finfish in Australia. These systems come By the end of this year cultured fish is expected
in an array of capacities and efficiencies. to account for 30% of total world fishery. (FAO
Through the effective management of 1995)
production variables, recirculation technology
offers relatively more independence from the 2.2 Australia
external environment. This translates to an Australian aquaculture production is relatively
increased level of control, which can provide a small compared with world production with
basis for improved risk management. 32,000 tonnes (worth AUD$602 million) being
produced in 1998/99. Production is largely
This paper investigates the financial and marine based using extensive aquaculture
economic efficiencies of three scales of systems (85% of total production, consisting of
recirculation aquaculture production growing Pearl Oysters 30%, Blue Fin Tuna 28%,
Murray Cod (Maccullochelli peelli peelli) at Atlantic salmon 12%, Edible Oysters 8% and
tonnages of 25 tonne, 50 tonne and 150 tonne. Prawns 7%)(ABARE 1999)
Best practice industry data is used (growth,
FCR, mortality, equipment and running costs) in Victoria, like most other states in Australia, is
conjunction with AQUAFarmer feasibility currently experiencing a boom in private
software to determine the relationship between aquaculture investment. Investment in
key bio-economic variables such as the sale freshwater finfish recirculation systems has
price of the product, FCR, stocking density and nearly doubled in the last year. Total investment
growth. reached over $16 million in 1999/2000. See
figure 1 below for a breakdown of this
investment. This increase has partly been
2. AQUACULTURE PRODUCTION encouraged by an increasing government
recognition and support for aquaculture
2.1 World Production development in inland regional areas. There is
Within a global context, aquaculture is the also a national push to integrate aquaculture
primary means by which the shortfall in world (both intensive and extensive) with more
fish production will be met. Aquaculture traditional land based agriculture that uses
production has grown at an average rate of 10% irrigated water for production.
since 1984 compared with captured fisheries at
1.6% and livestock meat at 3%. Overall global More importantly however, the private sector is
production of aquaculture production (including demonstrating increased aquaculture investment
finfish, shellfish and aquatic plants) is 34 confidence. This confidence is buoyed by global
million tonnes (valued at US$46.5 billion) of and regional trends that indicate decreasing
which the majority is finfish and shellfish (59%) availability of wild fish stocks, increasing
(FAO 1998) seafood demand and falling prices of traditional
farm based commodities.
1
AQUAFarmer (V1.1) is a propriety software developed by Fisheries Victoria. It is specifically
designed to analyse recirculation aquaculture efficiency and viability. It is a 10 year accounts
simulator that creates farm scenarios based on bio-economic inputs.
 x waste management control
Type 1998/99 1999/00 % change x fish health control
Marine 3.8 5.6 47 x stock management
Freshwater 5.1 9.7 90 x site flexibility
Other .25 1 300 x increase stocking density
TOTAL 9.15 16.3 78
Fisheries Victoria, 2000 Improvements in feed formulations, nutrition,
Figure 1 Investment in
Victorian Aquaculture ($mill)
water chemistry, disease prevention and
treatment, and selection of species with
Notwithstanding these important trends, economically desirable traits could well lead to
aquaculture investment demands a case by case continuous production improvements. The
examination of the opportunities and risks. identification of species with economically
Successful identification and management of desirable traits include those which have the
risk and a comprehensive understanding of the following important aspects:
many bio-economic variables which affect farm
income and performance is more often than not, x Established markets
what separates success from failure. x High value
x Tolerance for poor water quality
Private expenditure in aquaculture is all too x High stocking densities
often characterised by unrealistic business x Feed on pelleted food
expectations. While enthusiasm for industry x Efficient food Conversion ratio
development remains high, aquaculture (FCR)
investment is fraught with danger for the x Available from local sources
uninitiated. Not unlike many other emerging (hatcheries or wild)
agribusiness sectors, for every successful
development in aquaculture, multiple failures 3.2 Managing Risk
are apparent and seemingly re-occurring. The level of control inherent in recirculation
Undoubtable, at the heart of most failures is systems can provide a basis for improved risk
poor business planning. management. The trade off, of course, is a
necessary increase in technology dependence
The realisation that aquaculture is by its nature and associated expense and the expertise to
inherently risky and operating in a competitive manage it. Low cost, small-scale entry into the
high value end food industry market place is industry is often recognised as a means of
often overlooked. A combination of high limiting financial exposure while gaining
business expectations and limited technical and valuable experience. This approach is now
business planning skills can result in a lack of widespread and yet it can lead to complex
appropriate venture capital and/or poor equipment retro-fitting, higher production risk
investment decisions. margins and technological shortcuts that may be
costly in the medium to long-term.

3. INTENSIVE AQUACULTURE While there may be a cost incentive to de-

SYSTEMS construct recirculation systems into component
parts by adding or subtract from established
3.1 Advantages designs, in practice this should not be
Recirculation (intensive) systems represents considered lightly. It must be recognised that
relatively new technology with a wide variation water re-use systems involve complex water
in system design and quality. Through the chemistry in a finely tuned balance and that
effective management of production variables, deviation from proven designs increases the fish
recirculation technology may offer relative farmer’s risks significantly.
independence from the external environment.
In best practice recirculation systems more than
Recirculation aquaculture systems are receiving 90% of the water is recirculated through a series
increasing interest in intensive fish culture of purpose built biological and mechanical
operations as technological advances in closed filtration systems so that only a fraction of the
systems technology. Small business ventures in water is actually consumed. The importance of
particular are attracted to enclosed and modular the biological filtration sub-system cannot be
recirculation systems. The closed system offers overemphasised. The capacity to efficiently
several advantages, including: nitrify the bacteria which break down the
ammonia and nitrite in the water is critical to
x water and heat conservation the success of the system. A recirculation

1
system in effect grows two organisms – fish and
bacterial culture resident in the bio filter. The The quality of investment decision making is
bio filter must be constantly managed to ensure related to the degree of pre start up business
optimum performance and hence optimum fish planning which requires a comprehensive
growth. assessment of production costs, markets and a
sound identification of risk. The lack of
A recent bio-economic simulation of expertise and knowledge of both production and
recirculation aquaculture was carried out for economic variables will increase risk in venture
Tilapia by Kazmierczak and Caffey (1996). The failure. This is particularly relevant where
simulation carried out an optimisation sequence traditional agricultural operators look to
for: diversify into aquaculture without access to the
x 7 levels of biological filter appropriate skills. Intensive recirculation
efficiency (BE) ranging from 1 to 0.7, aquaculture systems demands a high degree of
x 4 levels of mechanical efficiency - technical dependency and the expertise to
solid removal efficiency (SRE) ranging manage it.
from 1 to 0.25,
x 3 levels of dietary protein (20, 30,
40% dietary protein),and 4. THE MURRAY COD PROJECT
x 4 levels of stocking density ranging
from 0.07 g per litre to 0.13 g per litre. 4.1 Introduction
Murray Cod (Maccullochelli peelli peelli) is
The bio-economic simulation model suggests becoming a premium species for aquaculture in
that movements in biological filtration Australia, especially Victoria. In 1999 trials
efficiency (BE) has a far greater impact on net were carried out by the Marine and Freshwater
returns than combinations of the other three Resources Institute (MAFRI) which indicated
variables. As biological filter efficiency falls that stocking densities of over 100k/g per cubic
then: metre could be obtained with little mortality and
x time to harvest increases at an a grow out period to plate size (500-1000gms)
increasing rate, and in 10 months. This was despite previously held
x net returns decreases at an views that the species were territorial and
increasing rate. aggressive and therefore unsuitable to high
density stocking. See figure
x higher stocking levels may lead to
economic failure
x economic trade offs between feed
quality (dietary protein) and
stocking occur over a narrow
range.
x A higher degree of management
expertise is required in optimising
system to maximise returns.
The simulation model concludes that the
efficiency of biological filtration is critical to
the success of the venture. Biological filtration
efficiency has lower limits whereby alternative
management of other parts of the system may
not compensate and the system may fail.

One of the greatest problems associated with

this technology is that while emerging technical
blockages may be overcome technically they
may not be economically solvable. As producers
intensify their aquacultural activities the margin
for management error becomes more acute as
the more intense bio feedbacks occur. The
inevitable link between stocking densities,
necessary to cover the higher fixed and variable
costs associated with closed systems as
compared to open or semi closed systems, and
margins of error suggests that economic success
is more allusive.

2
 1200
1000
800
600
400
200
0
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
Wild(Min) Wild Aqua.(Min) Aqua
Source: Fisheries Victoria 1999
Figure 2: Murray Cod Growth: Farmed and Wild 4.3 Fish Farming
Murray Cod is proving to be a very suitable
Murray cod is one of the largest freshwater fish species to grow in recirculation aquaculture
in the world and is an endemic Murray-Darling farms. The adoption of European enclosed
river system. It is valued for recreational, recirculation systems for on-growing Murray
commercial and conservation purposes. In the Cod has from the outset produced promising if
wild they attain maturity at 4-5 years weighing not outstanding results in recent years.
between 2.5 and 5 kg and can grow up to 113
kg. A female can produce between 14,000 and Preliminary investigations have been completed
30,000 eggs (Kaiola 1994). into nutritional requirements and development
of artificial diets for Murray Cod at the Marine
It is highly sought after as a table fish (with a and Freshwater Resources Institute and Deakin
high protein content) and up until recently has University. Some private fish farms are
supported a lucrative but otherwise relatively beginning to commercially produce market-size
small commercial fishery for many decades. Murray cod in tanks and ponds with both
However, the distribution and abundance of the natural and artificial diets under a range of
species have declined markedly since European intensive/semi-intensive and ambient/controlled
settlement, and commercial fisheries production environmental conditions.
is now restricted to small quantities of Murray
Cod being landed from within South Australia 4.4 Marketing
and Victoria on an irregular basis. New South There is considerable interest in farmed Murray
Wales has recently banned commercial fishing Cod (both plate size and larger). Producers,
for Murray Cod. wholesalers and retailers see Murray Cod as an
ideal species to satisfy a significant latent
4.2 Stocking domestic and export demand. Such a demand is
Over the last 10-15 years, techniques have been in part driven by the premium and associated
developed that enable routine, large-scale ongoing demand placed by Asian markets in
hatchery production of Murray cod. This cultured grouper, and the perception that
technology however, is largely limited to the Murray Cod are a like species which could be
seasonal production of fry and small fingerlings equally well marketed throughout Asia (Stoney
between 30-50 mm, or 0.5-1.5g. Private and 2000). A recent preliminary market appraisal of
state government fish hatcheries in Victoria, Murray Cod in Taiwan, Hong Kong, Singapore
New South Wales and Queensland annually and Japan has indicated positive market
produce fish for stocking public and private response. On product quality parameters,
waterways for both recreational and Murray Cod was considered highly competitive
conservation purposes. Australian annual with other premium freshwater finfish present in
production of pond reared juveniles was those export markets.
645,000 fish in 1995/96.
At the present time, approximately 25% of the
annual Australian pond production of Murray
Cod fry has been laid down for grow-out
purposes, with at least three producers in

3
Victoria and two in NSW having dedicated assumed to be in place but the cost of
systems already in place. Both the numbers of specialised buildings are assumed to be part of
fish and actual producers involved is likely to the capital setup cost. The system consists of 20
increase significantly over the next five years. final grow tanks. The salary component is
Existing strategies involve harvesting pond- $40,000.
reared fry, acclimatising them to tank conditions
and then weaning the fry onto artificial diets for (ii) Medium Scale Farm
the purpose of over winter production in A 50 Tonne medium scale specialised single
specially designed tanks enclosed in insulated venture where fish farming is the only activity
sheds. Current farming methods are producing of the enterprise. Land is assumed to be in place
market size fish (1 kg) in 10 months. This but the cost of specialised buildings are
usually takes 3 –4 years in the wild. Figure 2 assumed to be part of the capital setup cost. The
below shows the minimum and maximum system consists of 39 final grow tanks. The
growth rates of Murray Cod in the wild and salary component covers two staff at a cost of
grown under intensive aquaculture. $80,000.

(iii) Large Scale Farm

5. ECONOMIC ANALYSIS OF A 150 Tonne large scale specialised single
RECIRCULATION AQUACULTURE venture where fish farming is the only activity
FARMS of the enterprise. Land is assumed to be in place
but the cost of specialised buildings are
5.1 Introduction assumed to be part of the capital setup cost. The
Business planning that is attuned to the complex system consists of 119 final grow tanks. The
interplay of bio-economic variables will have an salary component covers five staff at a cost of
overriding influence on the viability of an $190,000.
aquaculture venture. Best practice industry data
is used (growth, FCR, mortality, equipment and The data used to produce the results have been
running costs) in conjunction with estimated from industry sources and should be
AQUAFarmer feasibility software to determine taken as a guide only. The grow out period is 10
the relationship with key bio-economic months with product ranging from 500g to 1kg
variables such as the sale price of the product, (see figure 7 for growth details of the cohort
FCR, stocking density and growth. streams). It is assumed that stocking occurs after
complete sale of fish, therefore in years 4, 7 and
In developing AQUAFarmer, particular 10 there are two growouts within a financial
attention was focused on generating feasibility year. Based on industry data 10% mortality
reports that reveal the critical link between key occurs in the first 2 months of growth only and
bio-economic variables and financial 85% is recovered for HOGG product.
performance. AQUAFarmer provides a model
or platform that can be used to run different 5.2 Common Base Data
case studies or scenarios based on the use of In order to compare and contrast the three
different key inputs that can present best different scales production farm cost and bio-
case/worse case scenarios. The scale of economic parameters were standardised as
production is a critical element in determining much as possible. These common cost items and
the costs associated with producing fish. The bio-economic parameters are detailed in 3
cost per fish will decline as scale increases. below:

Recirculation systems come in many shapes,

sizes and cost (depending on the quality of the
system). AQUAFarmer V1.1 was loaded with
three fish farm examples. The examples
represent a small (25 tonne), medium (50 tonne)
and large (150 tonne) scale operation.

(i) Small Scale Farm

A 25 Tonne Farm small scale diversification
venture. This type of venture is best suited to a
diversified venture (eg. Land based farmer
utilising water resources to supplement main
farm operations). Land is

4
 Description Value
Price (HOGG) $20.00
Cost of fingerlings $0.50
Cost of Water $0.65 per kilolitre
Electricity Cost per Kilo of Fish $0.60
Cost of Weaning Tanks $ per cubic metre $350
Cost of Grow out Tanks $ per cubic metre $200
Tank Volume (Weaning) 2 cubic metres
Tank Volume (Grow out) 10 cubic metres
Aquaculture Fees $2,000
Feed Costs $1.80 per kilo
Property Tax $3,000
Biological Parameters
Stocking Density 100 K/G per cubic metre
FCR 1.2
Mortality (Month 1 and 2) 10%
Recovery rate (fillet) 70%
Recovery rate (HOGG) 85%
Grow out period 10 months
Financial
Loan Interest 1 10%
Repayment period 1 10 years
Discount Rate 8%
Corporate Tax 36%
Stock Insurance (% of turnover) 4%
Figure 3: Common Cost items and bio-economic parameters
1. It is assumed for the sake of comparison that there is no borrowing’s and that the
feasibility results are based on a debt free venture
accompanying administrative and maintenance
5.3 Scale Specific Running Costs costs etc. These estimates are detailed in Figure
There are a number of running cost variables 4 below
that will change as the scale of the farm
increases due to the increasing production and
Cost Description 25 Tonne 50 Tonne 150 Tonne
Labour $40,000 $80,000 $190,000
Administration $1,000 $5,000 $15,000
Office Consumables $1,000 $5,000 $15,000
Research $0 $2,000 $10,000
Marketing $0 $2,000 $15,000
Fuel (Vehicles) $3,000 $3,000 $10,000
Repairs and Maintenance $5,000 $10,000 $20,000
Building Insurance $5,000 $10,000 $20,000
Equipment Insurance $2,000 $5,000 $20,000
Figure 4: Cost Variables and Farm Scale

In all three examples it is assumed that land

5.4 Scale Specific Capital Expenditure does not have to be purchased but is an asset
Each scale of farm will require appropriate bought into the project by the farmer and that
capital expenditure to meet the pressures of there is no borrowing’s. Capital start up costs
producing increasing tonnages. These costs are also includes the initial stock of fingerlings to
one off costs that occur in capital setup. It is be grown out and also that there is only one
assumed that no new capital equipment will be stocking occurring each year in July. However,
required to be replaced over a 10 year period. multiple stockings (up to 12 per year) can be
Depreciation is calculated on a straight-line accommodated by the software.
basis and shows up in the profit and loss
accounts. Recirculation technology consists of the
following capital goods items, however smaller
farms may not employ all of the components:
 x Plumbing
x Mechanical and Biological Filtration
Systems The building required to house the fish farm is a
x Fractionator purpose built insulated design to ensure that

x Degassing Equipment temperatures are kept as stable as possible and

x Ozone and Oxygen Equipment that systems maintenance and harvesting are
x Ultra violet Equipment optimally designed into the floor plan.
x Pumps
x Monitoring and Control Systems Each of the farm scale specific capital items
x Backup Equipment required for start up are listed below in Figure 5.

Cost Description 25 Tonne 50 Tonne 150 Tonne

Recirculation Technology $230,000 $615,000 $1,850,000
Buildings $100,000 $175,000 $350,000
Vehicles $30,000 $30,000 $60,000
Tanks $41,000 $81,000 $240,000
Power Installation $15,000 $15,000 $25,000
TOTAL $416,000 $916,000 $2,525,000
Figure 5: Capital Expenditure and Farm Scale
and their proportion of biomass can be seen in
5.6 Growth Parameters Figure 6 below.
Data from best practice farms reveal that there
are 4 cohorts growing from an initial fingerling It is also assumed that size grading takes place
weight of 1 gram. The revenue stream from the on a monthly basis to ensure that fish of equal
operation assumes that all fish are sold at the size and weight are placed together in the same
end of the grow out period and restocking tanks. This ensures that the fish grow at their
occurs 1 month later. Therefore over a ten year optimum by not being discriminated against in
period there will be 3 years (Years 4,7 and 10) their food requirements.
of double production due to the fact that the fish
are sold after 10 months and restocking in
month 11. The final weights of the fish for sale
Weight Proportion
500 g 40%
625 g 30%
875 g 20%
1000 g 10%
Figure 6: Weight distribution on Final Grow out

1
 x Year 1 Running Costs (Working
Figure 7: Growth of Murray Cod under Capital)
intensive aquaculture through 4 graded cohorts
(ii) Profit Margin
6. FARM SCALE COMPARISONS Profit Margin is the sales return before interest.
The Profit Margin is equal to the Net Income
6.1 Key Profitability Indicators (NI) before interest {NI + after tax interest
The following key profitability indicators are expense (ATI)} (averaged over 10 years)
examined for each of the farms over a range of divided Revenue (averaged over 10 years). This
prices. Currently (June) the wholesale price for ratio indicates the percentage of sales revenue
Murray Cod is $20.00 per kilo (HOGG). Prices that ends up as income. It is a useful measure of
of up to $30.00 to $35.00 are likely to be performance and gives some indication of
attained for live export product. pricing strategy or competitive intensity.

(i) Internal Rate of Return (iii) Return on Assets

The Internal Rate of Return (IRR) is the This is the operating return which indicates the
discount rate that equates the present value of company’s ability to make a return on its assets
net cash flows with the initial outlay. It is the before interest costs. ROTA equals Profit
highest rate of interest an investor could afford Margin (PM) times Asset Turnover (AT).
to pay, without losing money, if all of the funds Figures 9,10 and 11 below detail each of these
to finance the investment were borrowed, and indicators for each of the three farm sizes over a
the loan was repaid by application of the cash range of prices. The current wholesale price of
proceeds as they were earned. Conventional $20.00 is marked on each graph. At this price
projects involve an initial outlay followed by a the indicators reveal a scale of economy impact.
series of positive cash flows. In this case if the Figure 8 shows these indicators at the current
IRR is higher than the required rate of return wholesale price ($20.00) and the % movement
then the NPV is positive. between the small scale and the large scale
farms. The indicators show that an improvement
The initial capital investment which is used to in the indicators of around 20%. The bracketed
calculate IRR and NPV includes the following: figures in the IRR row are calculated with a risk
x Capital Goods Purchased
acknowledgment (Year 1: 50% of production,
Year 2: 70% of production, Year 5: 20% of
x Capital Goods and Land Value
production)
bought to the venture by farmer

Indicator Small Medium Large % movement

Profit Margin 23.5 26.9 28 19
IRR 16.5 (13.2) 18 (14.8) 19.7 (16.45) 19
Return on Assets 10.3 11.3 12.5 21
Figure 8: Comparison of key indicators with
farm size

25 TONNE FARM
% 50

40

30 IR R
P ro f it M a r g in
ROA
20

10

0
14 16 18 20 22 24 26 28 30 32 34 36

1
 Figure 9: Feasibility Indices for 25 tonne Fish Farm

Figure 10 : Feasibility Indices for 150

tonne Fish Farm

50
TONNE FARM
50

40

30 IRR
PM
ROA
20

10

0
14 16 18 20 22 24 26 28 30 32 34 36

Figure 9 : Feasibility Indices for 50

tonne Fish Farm

150 TONNE
FARM
50

40

30 IRR
PM
ROA
20

10

0
14 16 18 20 22 24 26 28 30 32 34 36

1
6.2 Hasagawa Index
The Hasegawa index (Hirasawa, 1979) is a
convenient way to obtain and indication of
profitability of an aquaculture venture. The
index compares the ratio of the selling price and Figure 11 : Feasibility Indices for 150
the price of feed to the ratio of the conversion tonne Fish Farm
ratio and the ratio of feed cost to total costs.

a = Feed Conversion Ratio

b = Cost of Feed to Total Operating Costs

A = Selling Price per kilo

B = Feed Price per kilo

a/b
A/B < 1

In order to decrease the index and make the

venture more profitable then
either of the following will need to take place
(or both at the same time)

(i) Decrease numerator by improving Feed

Conversion Ratio
[ ie decrease (a) ]and/or cut costs other than
feed costs [ ie increase b]

(ii) Increase denominator by increasing Selling

Price (A) and/or reduce cost
of feed (B)

Figure 11 below shows how changes in the sale

price will affect the Hasegawa Index for a 150
tonne farm. The index ranges from 0.6 at $14.00
to 0.25 at $36.00. Japanese open system prawn
farming where getting an index of between 0.6
to 1.2.

Hasegawa Index

0.7
0.6

0.5

0.4

0.3

0.2

0.1

0
14 16 18 20 22 24 26 28 30 32 34 36

1
6.3 The FCR and Profitability
The Feed Conversion Ratio (FCR) has an
important impact on running costs (feed
represents 26% of total running costs at FCR of
1.2) as more food is required to achieve the
same weight gain. The increase in FCR could be
due to many reasons, including:
x Poor feed quality
x Inappropriate diet mix (protein and
fat content of feed)
x Poor feeding regimes
x Poor water quality and
oxygenation
x Poor husbandry techniques and
fish stress
x Stocking regime

Figure 12 below details the impact of the FCR

on key indicators for a 150 tonne farm. The
largest effect (through the FCR range of 1.0 to
2.0) is on the IRR which falls from 20.8% to
15.3% or 26%. Profit Margin and Return on
Assets both fall by 23%.

35

30

25

20 IRR
PM
15 ROA
10

0
1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2

Figure 11 : Feasibility Indices for 150

tonne Fish Farm

2
6.4 Equity as owners investment plus assets not purchased
Equity is defined in the accounting framework but bought to the enterprise plus cumulative net
as total assets minus liabilities (loan profit after tax. Double production in years 4,7
repayments). Assets include the cumulative cash and 10 are revealed in Figures 13 and 14 below.
in bank, which increases each year from annual Figure 12 below shows the range of equity
cash surplus and depreciated capital items. It accumulations after 10 years.
can also be calculated (giving the same amount)
Farm Equity after 10 years ($mill)
25 tonne 1.995
50 tonne 4.018
150 tonne 12.20

3
25 T
50 T
2

0
1 2 3 4 5 6 7 8 9 10

Figure 13: Cumulative Equity for 25 tonne

and 50 tonne farm

14

12

10

8
150 T
6

0
1 2 3 4 5 6 7 8 9 10

Figure 14 Cumulative Equity for 150 tonne

farm

3
7. CONCLUSIONS margins and the return on assets rival the best
The main conclusions that can be drawn from performing sectors in the economy. However it
this paper include the following: must be remembered that the data is dependent
¾ Recirculation systems offer greater on best practice husbandry and recirculation
control of key production and technology. It presents a best case scenario that
economic variables and afford assumes optimal production (100% production
improved risk management through out the ten year project) and sale of all
control. output once fish have completed their grow out
¾ Key bio-economic variables period. This may not be the case in reality, as
influencing viability include: real time data will change from year to year.
Scale of the farm However, the model farms do give an indication
Species biological attributes of the inherent viability of growing Murray Cod
(mortality and growth) in recirculation aquaculture systems.
Species market attributes
(products and price) The influence of production scale on the cost of
Feed Conversion Ratio production (per kilo) reveals that 8% fall in the
¾ There are significant opportunities cost from a 25 tonne farm to a 50 tonne farm
for improved risk management in and a 3% fall from a 50 tonne farm to a 150
larger systems. tonne farm. Overall the reduction in the cost of
¾ Achieving optimal output requires production from moving from a 25 tonne farm
total system control including to a 150 tonne farm is in the order of 8%. The
bacterial growth in bio-filters. Profit Margins, on the other hand, show an
increase of around 20% when moving from a 25
Fisheries Victoria, while a small producer of tonne farm to a 150 tonne farm.
aquacultured products, is leading Australia in its
research of Murray Cod in terms of fish health, These figures are obviously influenced by the
feed developments, product and marketing configuration of annual running costs, for
development. The improvement in investment example feed and labour accounts for between
during the last year reveals a promising future 45% - 50% of total costs. There is no doubt that
for Murray Cod throughout the range of farm as more work is done on specialist diets for the
scales. Victoria, like the rest o Australia, is Murray Cod and as more farms come on stream
searching for ways to improve water utilisation then feed prices may well be reduced.
and environmentally friendly systems to
produce food products. Recirculation
aquaculture provides an manageable solution to Example 1
farm diversification and stand alone ventures. Example 2
Example 3
Each of the farms analysed reveals very strong
indicators of financial success. The profit
Farm 25 Tonne Farm 50 Tonne 150 Tonne
Bio-economic variables (small scale) (medium scale) (large scale)
Number of juvenile fish 36,500 72,000 220,000
Stocking density 100 k/g per cubic metre 100 k/g per cubic metre 100 k/g per cubic metre
Cost per kilo (ex. Dep.) $9.21 $8.54 $8.50
Cost per kilo (incl. Dep.) $12.67 $11.60 $11.26
Equipment (ex land) $416,000 $916,000 $2.53 mill
Operating Outflows Y1 $230,000 $413,435 $1.30 mill
Sales $333,000 $656,829 $2.007 mill
Net Present Value $352,873 $838,000 $2.830 mill
Internal Rate of Return 16.7% 18% 20%
Profit Margin 23.5% 27% 28%
Av. Closing Cash balance $170,300 $360,700 $1.1 mill
Asset Turnover .44 .42 .45
Return on Assets 10.4% 11.3% 12.5%
Notes
Capital Investment: Includes recirculation technology and Profit Margin: Net income (before interest) divided by
tanks, purpose built insulated shed, power installation and revenue. % of sales that ends up as income
initial stock. Av. Closing Cash Balance: 10 year annual average of yearly
Internal Rate of Return: Highest rate of interest a borrower cash balance. This money could be used for capital
can afford to pay for startup finance expansion or faster debt repayment. These funds are in
addition to owner salary.

1
Table 15: Feasibility Results of 3 Farm
Scenarios Using AQUAFarmer (V1.1)

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