An Economic Analysis of FRDC Investment in Diet Development for Aquaculture Industries (Excluding Tuna)

Background

Aquaculture had been growing around the world and in Australia due to quota reductions and increased emphasis on conservation of wild fish stocks. There has been a high dependence on an increasing amount of imported and local baitfish for the protein needed for aquaculture industry growth in Australia. About 80% of the fish meal used in the aquaculture industry was imported from overseas. Some was produced locally from baitfish and from Atlantic salmon residues. As fishing operations plateaued around the world, both prices and the frequency of shortages of fishmeal had risen. Fishmeal production had been relatively stable but demand had grown due to increased demand from aquaculture and other intensive animal industries. Also, imported fish meal was heat treated but carried a risk (albeit low) of importing diseases.

Feed formulation was perceived as a critical factor in successful aquaculture operations as there is a need to maintain a high growth rate in the fish being farmed, maintain a favourable feed conversion efficiency, minimise the cost of the feed (feed can be between 30-40% of the input costs), and minimise both metabolic and direct nutrient waste from entering waterways.

The projects in this cluster focused on diets for growing out fish and, while including a project on ingredients, focused primarily on optimal nutrient requirements and diet formulation for a number of aquaculture species. Some of these aquaculture operations were new industry developments where the industry was small and required research resources for further development.

Finfish aquaculture operations in Australia rely on the culture of fish eggs and raise the larvae as the source of young fish. Feeding larvae in hatcheries was therefore also a critical operation. Such feeding up to 1996 had depended largely on harvesting Artemia cysts as live food was considered essential for raising larvae in hatcheries. The cost and physical shortages for importation had been significant constraints to the use of Artemia. In addition, there was an ongoing risk of importing diseases due to the harvesting process for cysts. Alternatives to Artemia, particularly artificial diets rather than live diets, were thus pursued in one of the cluster projects.

These investments followed an earlier FRDC subprogram into fish meal replacement. This earlier investment placed an emphasis on the replacement of high cost imported fishmeal with local feed material and covered barramundi, silver perch, prawns and Atlantic salmon. Some progress had already been made in commercialising the results of this earlier investment. 

Lessons Learnt for Future Investment

Lessons learnt from this analysis included:

• Knowledge from projects is being used in other projects. More recent projects on Artemia have built on the project in this cluster and are likely to deliver benefits in the future. The input from the original project (2001/220) in this cluster needs to be noted and acknowledged in any future evaluation of ensuing projects.
• For three of the four projects there were large gaps between the first few years of the investment and the final year of investment (See Table 3). The timing of arrival and acceptance of final reports, and the final payment for each project should be investigated. Either draft reports in this cluster were very late, it took significant time to between the draft and finalising reports, or final reports were finalised but then it took considerable time to make final payments.
• Innovations that apply to new industries that are growing (whether stimulated by the investment or not) have a greater capacity to provide higher return to R&D than small and /or slow growing industries.
• FRDC could consider developing cost of production models for aquaculture enterprises that include unit feed costs, feed conversion ratios and other production parameters in order to assess research priorities and individual research proposals, as well as assist in the communication of research results to the relevant industries.

Conclusions

While most aquaculture operations still use imported fish meal in their feeding regimes, the projects in this cluster, together with those in the earlier subprogram, have made a significant contribution to a the increased use of domestically produced feed ingredients in some Australian aquaculture fish diets. While this may not have reduced costs of production to any extent, it has reduced the reliance on imported fish meal for a number of aquaculture industries. Supporting these studies at the time was a relatively high priority for FRDC as aquacultural production was increasing and imported fish meal was perceived as fluctuating in price and quality.

However, a major boost to productivity in the farmed barramundi industry has occurred due to the investment from the adoption of high energy density diets developed in one of the projects. The principal benefit therefore valued in the investment analysis was the higher growth rates achieved from barramundi.

On the basis of the number of benefits listed in Table 8, and equal weighting for each benefit, it could be concluded that public benefits to Australia could make up 31% of the total benefits. If the subjective weightings provided in Table 8 are taken into account, then 22% of the total benefits could constitute public benefits to Australia.

The total investment in the four projects was $17.2 million (present value of costs). The investment criteria estimated for the cluster were positive with a net present value estimated at $22 million and a benefit-cost ratio of over 2 to 1 (expressed in 2008/09 $ terms and using a 5% discount rate over 30 years from final year of investment). It should be noted that this estimate is probably an underestimate since some benefits would have accrued to other aquaculture industries, particularly from the greater confidence in the use of domestically grown feeds which have delivered flexibility and where usage has increased.

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