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Fukui's Monthly News Letter

Apply Lessons to Shellfish Operations

Over the last year I have written about a number of topics in the shellfish industry related to improving the operations of all involved. Without doubt, the topics that received the most feedback were related to marketing and/or business planning.

In one of my previous columns, I reported on Mr. Yvon Chiasson of Miscou Island, New Brunswick, Canada, and how a mix of marketing savvy and shellfish growing was allowing him to approach the success of his operation in a very business-like manner.

The question that still needs to be addressed is, why are more individuals and growers not following the directions that Mr. Chiasson, or the handful of people like him on both coasts of North America, have set?

There is a general rule in our society called the "80/20 rule." It states that "20 percent of the people or companies will cause 80 percent of the production or success of whatever the objective is." In other words, "20 percent do 80 percent of the work." This can be applied not only to business, but to other areas of our society as well. My observations of the shellfish industry through my many travels indicates that the 80/20 rule is alive and well - however, sadly, I must report that I believe that it is more like the "90/10 rule."

The causes of this, I believe, are varied, and I have discussed them with many during my travels. In these conversations comments or terms like "ego," "reluctance to change," "government interference," "lack of information," "poor market conditions," "disease challenges," "lack of money" etc. etc. come to mind - and I could go on and on. You may even have a few of your own to add - however be careful because when you point a finger at someone or something else as the cause of your woes there are always three fingers that point back at yourself. This might explain why the top people (10% of growers) never seem to complain very much.

Dr. Brad Hicks from British Columbia, Canada and I were having an industry discussion a few years back, based on where things were going and what needed to be done to have the industry meet the objectives that we both knew were available. Brad was president of International Aqua Foods, a producer of salmon and tilapia (now owned by Stolt Sea Farms), and is now vice-president of Taplow Feeds. Brad, besides being a close associate, has had my respect over the years for his vision and outlook of what the industry has to do and for his quite frank and "to the point" action to make it happen.

His discussion with me was based around the fact that most of the mistakes that happen along the growth of the industry have already happened. On the statement that "smart people learn from their mistakes and really smart people learn from everybody else's mistakes," we discussed why the "80/20" or "90/10" rule was so rampant, especially in the shellfish arena. To quote Brad, "Not enough people study history!" If you look at the development of the land-based farms as a comparison to aquaculture, starting way back with the Egyptians, who first started planting seed in rows and corralling animals, to the modern land based farms of today, a lot can be learned.

It is important to read between the lines and to look at the value of the mistakes, the successes, and the timelines between change and what has caused the change.

To compare aquaculture to agriculture, it is important to understand what to compare. In general, fish or crustaceans, varying species that have to be fed, can be compared in agriculture to cattle, hogs, or poultry. Shellfish and aquatic plants that feed off the nutrients of their habitats can be compared to agriculture-based crops such as corn, soy, wheat, potatoes, etc. There are a number of differences both pre and post harvest that can be isolated and explained, however for demonstration purposes we will continue with the above assumption.

Using this as a guideline, I had a discussion with a very successful farmer friend of mine, on his business of farming corn. When this is compared to shellfish, there are some very interesting dynamics that come out.

First off, my farmer friend plants 3500 acres of corn each year, some on his own land and some on land leased from others. He recognized some time ago that anyone can grow corn but the real money was in mechanization.

Corn being a base line commodity has its price controlled by the market, unlike shellfish which can step outside of the commodity arena through branding, promotion and the fact that it is not a mainstream food stuff.

With this pricing control in place, increasing yield or harvesting more in less time is the only way to improve the profit picture - or in some cases to make any money at all.

In his case he buys equipment large enough to do the job of four normal size harvesters. By planting and harvesting in volume he recovers the best deals he can on his cost per acre inputs. Since as a businessman he understands investment, cost control and return on investment, his numbers per acre in comparison to a lot of smaller farms are interesting.

His gross income per acre is approximately $385. Once you figure in his amortized equipment cost, seed, fertilizer, labour and land leasing cost his net cost per acre is approximately $285 which leaves $100 net profit per acre. He claims that smaller growers who typically have much higher costs because of less volume and higher equipment cost per acre due to smaller acreage, make approximately half that net profit per acre.

Recently we introduced a floating/submersible system for growing oysters (FFN 03/00); when we do the production numbers for this system per acre of surface and compare it to corn, the results are astonishingly different. Keep in mind this is surface only and does not include water column growout which will add significantly to the income per acre and in some cases actually double it.

The floating bag system consists of 100 floating bags formed into an easily managed grid. 18 grids will cover 1/2 acre of surface. Considering space for navigation and carrying capacity ideals we allow 1 acre for 18 grids.

Allow for 150 oysters per bag. 18 grids will produce 270,000 oysters per growout cycle. Using the current market price of 45 each, this works out to $121,500 gross income per acre. If you use 200 oysters per bag (site dependant) your gross income per acre changes to $162,000.

When you analyze the input side per acre you have to take into account many of the similar costs per acre as the corn farmer with a few exceptions. You will have a boat instead of a tractor, seed cost, labour and property leasing costs. You will not have a fertilizer cost, however you will have deployed equipment cost which you have to amortize over the expected equipment life span.

The production per acre is finally broken down for corn into tonnage, or pounds if you wish, while with oysters it should be calculated per animal based on the size and the market you are growing for.

Using the floating bag system, the deployed equipment cost per animal over 6 years at a growout cycle per year is less than 2 per animal grown or approximately $9000 per acre. Seed costs are variable and depend if you collect from wild or purchase from a hatchery, however if we use 2 per animal we are pretty safe. Labour cost will be a function of the husbandry methods as well as the type of boat being used. Add miscellaneous expenses based on your own financial history and you will be able to come up with a cost per animal produced. This amount will have to be decided depending on the size of your operation. What ever this number is we know that your seed and deployed equipment cost is less than 4 per year.

The bottom line is that your gross income per acre far exceeds that of land based farmers and while the input cost per acre is higher as a percentage or cost of doing business it is miniscule in comparison to corn.

Brad was right - not enough people study history!

I would love to have some input from readers on this with the goal or objective to look at the real cost that individuals are experiencing per animal produced. I will then synthesize and average the numbers so as to maintain confidentiality and at a later date share the results with our readers if I do indeed get enough feedback.


Contact Don Bishop at:
Fukui North America
PO Box 669
110-B Bonnechere St.W.
Eganville, Ontario K0J 1T0
CANADA
Tel: 613-625-1704)
Fax: 613-625-2688
Email: kate@fukuina.com

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