An Economic Analysis of FRDC Investment in Salmon Aquaculture Subprogram (Cluster 7)

Background

Atlantic salmon and three species of trout were introduced to Australia in the 1800s, for the purposes of populating rivers in Tasmania and New South Wales for sport fishing. However, no populations of Atlantic salmon established until the 1960s, with imports from Nova Scotia in Canada to the Snowy Mountains in NSW. From 1984 to 1986 eggs were transferred from the Gaden hatchery in the Snowy Mountains to a quarantine hatchery near Hobart, and used as the founding stock of a salmon farming industry in Tasmania.

Marine farming of salmonids involves the use of cages suspended in seawater, where the salmon are fed and grown during the marine phase of their lifecycle. The majority of these farms are located in the south east of Tasmania (including the Huon River, Port Esperance and D’Entrecasteaux Channel), as well as other farms in Macquarie Harbour on the west coast and in the Tamar estuary on the north coast. There are also small commercial operations also in South Australia (off Cape Jaffa) and north east Victoria (freshwater systems).

Production of farmed salmonids in Tasmania has grown significantly over the last 20 years. In 1989/90, 1,750 tonnes were produced. In 2006/07, this number had risen to 23,637 tonnes (for 2008/09 the production is anecdotally reported at some 30,000 tonnes). The level of production varies from year to year, largely due to climate conditions. In 2006/07 the gross value of salmon produced through aquaculture in Tasmania was $272 million (ABARE, 2008).

The Salmon Aquaculture Subprogram (SAS) commenced in July 2000, initiated partly as an outcome of an MOU between the FRDC and the Tasmanian Salmonid Growers Association Ltd (TSGA) outlining mutual responsibilities, including a commitment by the TSGA to a self-imposed annual FRDC research levy proportional to industry GVP. The SAS has the following broad objectives:
1. Involve industry in all facets of research and development to ensure adoption of the outcomes.
2. Empower industry to actively participate in its own research and development program.
3. Develop research outcomes that result in increased profitability and reduced risk.
4. Develop a communication strategy that delivers results in a timely and readily usable form.

The subprogram was developed to address a number of biological constraints and socio-economic issues through a coordinated research effort to ensure economic and ecological sustainability, and to develop the industry to its full potential. In particular, research was required that addressed issues of immediate concern while acknowledging that some projects required long-term timeframes. The subprogram sought to use a strategic plan to develop collaborative research projects that addressed industry bottlenecks and avoided duplication and unnecessary expenditure of a finite research fund. The subprogram also had a significant relationship with the CRC for Sustainable Aquaculture of Finfish (Aquafin CRC) with many of the projects being carried out as part of the CRC.

The subprogram has considered a wide range of issues and sought to address a number of challenges that have threatened the sustainability and profitability of the industry including cost, control and management of disease, jellyfish and algal blooms, reliability of supply year-round and monitoring and minimising environmental impact.

Lessons Learnt for Future Investment

Three points are noted:

• The results demonstrate the importance of identifying and addressing high priority issues for the industry and utilising existing research from overseas that can be adapted to Australian situations. For example, the trials on the use of artificial lighting and manipulating maturation periods successfully identified simple practices to address key issues affecting industry productivity.
• It should be noted that strategic research outputs have not been valued in the current analysis but are critical in ensuring future benefits continue to be delivered. The strategic investments not valued should be noted, and their investment costs recorded, so that future analyses can attribute benefits to them.
• Win-win situations for addressing environment and productivity issues in aquaculture have been demonstrated, a similar situation to that observed in research and development success for agriculture.

Conclusions

The majority of the benefits identified are private in nature and accrue to the Tasmanian commercial producers of Atlantic salmon and their input supply and market supply chains. The public benefits include lowered environmental impacts of the industry with regard to biodiversity and water quality. There were also a number of social benefits identified. Investment was made in a total of nine projects within the cluster with the FRDC contribution approximating 42% of the total costs involved. The investments were divided into five themes and benefits were valued in three of these themes.

The three themes where benefits were valued were environmental considerations, amoebic gill disease and maturation. The highest level of benefits was apparent in the environmental considerations theme.

The investments were regarded as a high priority by both the FRDC and the aquaculture industry. In the event that public funding to FRDC were cut by half and assuming an industry contribution was still in place, it is likely that the production oriented projects in the cluster (health, genetics, reproduction, etc) would have still been funded by FRDC, industry and state agencies, but that the environmental oriented projects would have been somewhat curtailed. Further, it is estimated that whilst selected investment would have gone ahead as planned, overall projects may have been somewhat less well coordinated and some projects would have started later and taken longer to complete.

Overall, the investment criteria estimated for the 9 projects in the cluster were positive with a net present value estimated at $78 m and a benefit-cost ratio of 7 to 1 (using a discount rate of 5%, with benefits measured over 30 years from the final year of investment).

 

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