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Global aquaculture - the challenges of blue growth Ragnar Tveterås Gothenburg, 14. April 2015
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Global aquaculture - the challenges of blue growth  

 Ragnar  Tveterås  

 Gothenburg,  14.  April  2015  

A  fascina?ng  sector  with  great  diversity:    Fish  farmers…  

Egyptian fish farmer

A  fascina?ng  sector  with  great  diversity:    Fish  farmers…  

Vietnamese fish farmer

Egyptian fish farmer

A  fascina?ng  sector  with  great  diversity:    Fish  farmers…  

Vietnamese fish farmer

Egyptian fish farmer Chinese fish farmer

A  fascina?ng  sector  with  great  diversity:    Fish  farmers…  

Vietnamese fish farmer

Egyptian fish farmer Chinese fish farmer

Fish farmers from Papua Ny Guinea

A  fascina?ng  sector  with  great  diversity:    Fish  farmers…  

Vietnamese fish farmer

Egyptian fish farmer Chinese fish farmer

Fish farmers from Papua Ny Guinea Norwegian fish farmer

A  fascina?ng  sector  with  great  diversity:    Fish  farmers…  

Vietnamese fish farmer

Egyptian fish farmer Chinese fish farmer

Fish farmers from Papua Ny Guinea Norwegian fish farmer

Cypriotic fish farmer

A  fascina?ng  sector  with  great  diversity:    Fish  farmers…  

Vietnamese fish farmer

Egyptian fish farmer Chinese fish farmer

Fish farmers from Papua Ny Guinea Norwegian fish farmer

Cypriotic fish farmer = SELF-MADE SHIPPING BILLIONAIRE AND TAX PLANNER FROM NORWAY, NOW LARGEST OWNER OF MARINE HARVEST (TURNOVER 2 BILLION EUROS)

A  fascina?ng  sector  with  great  diversity:    Produc?on  technology…  

Earth ponds, tilapia

A  fascina?ng  sector  with  great  diversity:    Produc?on  technology…  

Combination tilapia and rice in Bangladesh

A  fascina?ng  sector  with  great  diversity:    Produc?on  technology…  

Tilapia sea cages in Indonesia

A  fascina?ng  sector  with  great  diversity:    Produc?on  technology…  

Manual feeding of tilapia

A  fascina?ng  sector  with  great  diversity:    Produc?on  technology…  

Norwegian salmon farm with automated feeding

Production of 4000 MT and 4 man-years. With ex farm price of 30 NOK/kg, and 8 NOK/EUR exchange rate, sales are 3.75 mill. EUR per man-year. Typical wage is 60 000 EUR per man-year.

A  fascina?ng  sector  with  great  diversity:    Consumer  products…  

Boiled Burger

Carpaccio

Grilled Salad with smoked salmon

Smoked salmon on biscuit

Sushi Salmon”spread”

Salmon taco

Fisheries  vs  aquaculture  

Higher  degree  of  control  

Primary production

Processing and distribution

Professional buyers Consumers

Processing  and  logis?cs  based  on  same  competencies  and  technologies  

Fisheries  vs  aquaculture  

Primary production

Processing and distribution

Professional buyers Consumers

Primary production

Processing and distribution

Professional buyers Consumers

Professional  buyers  are  conerned  about  the  ability  of  seafood  suppliers  to  

sa?sfy  requirements  in  a  number  of  areas  

Fisheries  vs  aquaculture  

Consumers  tend  to  not  differen?ate  between  wild  and  farmed  fish:  Concerned  about  

taste,  convenience,  healthiness  and  price  

Fisheries  vs  aquaculture  

Primary production

Processing and distribution

Professional buyers Consumers

Expecta?ons  of  a  blue  revolu?on  providing  growth…  

•  “Since  1990  the  industry  has  been  growing  at  an  average  compound  rate  of  around  10%  a  year.  It  is  probably  the  world's  fastest  growing  form  of  food  produc?on.  (By  comparison,  farmed  meat  produc?on  grew  by  2.8%.)  ….Some  people  believe  that,  by  2030,  aquaculture  will  supply  most  of  the  fish  people  eat.”  The  Economist,  7th  August,  2003.  

•  “Aquaculture's  promise  is  that,  within  the  next  three  decades,  it  could  produce  most  of  the  world's  marine  produce.  At  the  same  ?me  it  could  help  to  alleviate  poverty  and  food  shortages  in  some  of  the  world's  poorest  countries.  And  if  it  is  done  well,  it  could  help  to  safeguard  marine  resources  for  future  genera?ons.  That,  surely,  is  something  to  nurture.”  The  Economist,  7th  August,  2003.  

Challenges  related  to  externali?es  and  ins?tu?ons      

 Foreword  by  Árni  M.  Mathiesen,  Assistant  

Director-­‐General,  FAO  Fisheries  and  Aquaculture  Department  in  the  FAO  report  “The  state  of  World  fisheries  and  aquaculture  2012”  

             FAO  report  “The  state  of  World  fisheries  and  

aquaculture  2012”,  page  25.  

High  growth  expecta?ons…  

•  High  ambi?ons  for  the  growth  of  global  protein  supply    from  aquaculture  

•  Different  policies  in  place  by  na?onal  and  regional  governments  to  facilitate  growth  

•  But  how  has  global  growth  rates  developed  over  2me?  

Global  aquaculture  produc?on  

0  

10  

20  

30  

40  

50  

60  

70  

80  

90  

100  

1970  

1972  

1974  

1976  

1978  

1980  

1982  

1984  

1986  

1988  

1990  

1992  

1994  

1996  

1998  

2000  

2002  

2004  

2006  

2008  

2010  

2012  

Million  tonn

es  

Others  

Finfish  

Crustaceans  

Molluscs  

Aqua?c  plants  

Global  aquaculture  produc?on:  Declining  growth  rates?  

Data source: FAO Fishstat database

0  5  

10  15  20  25  30  35  

1970  

1973  

1976  

1979  

1982  

1985  

1988  

1991  

1994  

1997  

2000  

2003  

2006  

2009  

2012  

%  growth  

Crustaceans  Finfish  Total  

Global  aquaculture  produc?on:  Declining  growth  rates  

Data source: FAO Fishstat database

0  5  

10  15  20  25  30  35  

1970  

1973  

1976  

1979  

1982  

1985  

1988  

1991  

1994  

1997  

2000  

2003  

2006  

2009  

2012  

%  growth  

Crustaceans  Finfish  Total  

Produc?on  growth:  1981-­‐1990:  129%  1991-­‐2000:  148%  2001-­‐2010:    87%  

25  

More  recent  development:  Produc2on  of  selected  finfish  species  2002-­‐2015  

Kilde: Kontali and Global Aquaculture Alliance

Asia  is  the  giant….  Produc?on  of  finfish  and  crustaceans  

0  

10  

20  

30  

40  

50  

60  

1970  

1972  

1974  

1976  

1978  

1980  

1982  

1984  

1986  

1988  

1990  

1992  

1994  

1996  

1998  

2000  

2002  

2004  

2006  

2008  

2010  

2012  

Million  tonn

es   Oceania  

Europe  

Asia  

North  America  

La?n  America  

Africa  

Asia  has  around  90%  of  aquaculture  produc?on  of  finfish  and  crustaceans  

0,0  

10,0  

20,0  

30,0  

40,0  

50,0  

60,0  

70,0  

80,0  

90,0  

100,0  1970  

1973  

1976  

1979  

1982  

1985  

1988  

1991  

1994  

1997  

2000  

2003  

2006  

2009  

2012  

%  of  g

loba

l  produ

c2on

 

Africa  

La?n  America  

North  America  

Asia  

Europe  

Oceania  

…with  Europe  and  North  America  loosing  market  share  over  ?me    

0,0  

2,0  

4,0  

6,0  

8,0  

10,0  

12,0  1970  

1973  

1976  

1979  

1982  

1985  

1988  

1991  

1994  

1997  

2000  

2003  

2006  

2009  

2012  

%  of  g

loba

l  produ

c2on

 

Africa  

La?n  America  

North  America  

Europe  

Europe – From 9.2% share in 1970 to 4.5% in 2010

North America – From 2.5% share in 1970 to 0.8% in 2010

Let’s  now  move  down  to  a  more  disaggregated  sector  level  and  examine  growth  pagerns…  

The  story  about  global  aquaculture  is  NOT  the  story  about  the  tree  that  

grew  into  space…  

Year

Production volume

The  story  about  global  aquaculture  is  NOT  the  story  about  the  tree  that  

grew  into  space  …  

Year

Production volume

Year

Production volume

…but  ohen  a  story  about  STAGNATION…  

Year

Production volume

…and  DECLINE…  

Year

Production volume

…and  even  DEATH  

Year

Production volume

Death

For  many  sectors  produc?on  in  2010  was  significantly  lower  than  the  historic  maximum  

0  

200000  

400000  

600000  

800000  

1000000  

1200000  

1400000  

1600000  

1800000  

2000000  

0   500000   1000000   1500000   2000000  

Historiic  m

axim

um  produ

c2on

 (MT)  

Produc2on  in  2010  (MT)  

Blue line: Production 2010 = Historic maximum production

Europe  the  worst  performer  Produc?on  in  2010  versus  historical  maximum  

produc?on  

0,62  

0,73  0,66  

0,52  0,62   0,62  

0,73  

0,54  

0,67  

0,88  

0,00  0,10  0,20  0,30  0,40  0,50  0,60  0,70  0,80  0,90  1,00  

Prod

uc2o

n  2010  /  Historic

al  M

ax.  

Prod

uc2o

n  

Growth  and  decline  of  aquaculture  sectors  

0  

200000  

400000  

600000  

800000  

1000000  

1200000  1961  

1963  

1965  

1967  

1969  

1971  

1973  

1975  

1977  

1979  

1981  

1983  

1985  

1987  

1989  

1991  

1993  

1995  

1997  

1999  

2001  

2003  

2005  

2007  

2009  

Prod

uc2o

n  (M

T)  

Roho  labeo,  India  

Mrigal  carp,  India  

Atlan?c  salmon,  Chile  

Giant  ?ger  prawn,  Thailand  

Flathead  grey  mullet,  Egypt  

Fleshy  prawn,  China  

Milkfish,  Taiwan  Province  of  China  

Growth  and  decline  of  aquaculture  sectors  

0  

50  

100  

150  

200  

250  

300  

350  

400  

450  

500  

Prod

uc2o

n  inde

x  (2010=100)  

Mrigal  carp,  India  

Atlan?c  salmon,  Chile  

Fleshy  prawn,  China  

Common  carp,  Russian  Federa?on  

Giant  ?ger  prawn,  Philippines  

Mozambique  ?lapia,  Indonesia  

Why  do  we  see  these  growth  pagerns  in  aquaculture  sectors?  

 Which  factors  influence  growth  at  different  stages?  

The  role  of  produc?vity  

General  sources  of  produc?vity  growth:  The  menu  

•  Technological  progress  –  New  innova?ons  –  Adop?on  of  more  produc?ve  technologies  (investments)  

•  Learning  about  produc?on  processes/organiza?on  –  From  own  experiences  –  From  others’  experiences  

•  Exploita?on  of  scale  economies  –  Internal  –  External  

•  Externali?es  to  produc?on  •  Regula?on  which  affect  produc?vity  

Some  sources  of  produc?vity  growth  from  previous  menu  

Prod.cost (EUR/Kg)

Production in firm

Old cost frontier

New cost frontier

Technology adoption (investment) Learning

Technological innovations External scale economies Exploit

scale economies

Produc?on  and  produc?vity  growth  

•  In  most  cases  sustained  produc?on  growth  has  to  be  accompanied  by  produc?vity  growth  –  In  aquaculture  significant  produc?vity  growth  will  usually  be  due  to  innova?ons  

–  Innova?ons  in  aquaculture  tend  to  allow  for  more  sustainable    growth  

•  In  some  periods  produc?on  can  also  increase  without  produc?vity  growth  because  increased  market  demand  lead  to  higher  prices  –  There  is  a  risk  that  such  growth  may  be  less  sustainable  (e.g.  Chile)  

Norwegian  export  price  and  produc?on  cost  for  salmon  1985-­‐2010  (2010=1)  

020406080100120

1985198719891991199319951997199920012003200520072009

NO

K/k

g

0

500

1000

1500

2000

2500

1000 tonn

PriceCostProduction

Norwegian  export  price  and  produc?on  cost  for  salmon  1985-­‐2010  (2010=1)  

020406080100120

1985198719891991199319951997199920012003200520072009

NO

K/k

g

0

500

1000

1500

2000

2500

1000 tonn

PriceCostProduction

Norwegian  export  price  and  produc?on  cost  for  salmon  1985-­‐2010  (2010=1)  

020406080100120

1985198719891991199319951997199920012003200520072009

NO

K/k

g

0

500

1000

1500

2000

2500

1000 tonn

PriceCostProduction

Norwegian  export  price  and  produc?on  cost  for  salmon  1985-­‐2010  (2010=1)  

020406080100120

1985198719891991199319951997199920012003200520072009

NO

K/k

g

0

500

1000

1500

2000

2500

1000 tonn

PriceCostProduction

Productivity growth leads to lower costs which in competitive

markets again lead to lower prices

Tilapia  –  development  of  price  and  produc?on  

Kilde: FAO og Global Aquaculture Alliance

Pangasius  –  development  of  price  and  produc?on  

Source: Kontali and Global Aquaculture Alliance

Sea  bass  and  Sea  bream  –  development  of  price  and  produc?on  in  the  Medigeranean  

Source: Kontali and Norges Sjømatråd

Example  of  produc?vity  driven  stagna?on?  US  capish  

Catfish, USA

0

0,5

1

1,5

2

2,5

0

50000

100000

150000

200000

250000

300000

350000

Real price of live catfish (USD per

kg)

Production (Metric tonnes)

Production Real price of live catfish

Underlying  factors  which  influence  produc?vity  and  growth  in  aquaculture  

•  Externali2es  within  aquaculture,  par?cularly  related  to  disease  and  fish  health  

•  Externali2es  to  other  sectors  and  users  •  Ability  to  exploit  internal  and  external  returns  to  scale  

•  Ability  to  innovate  in  several  areas  

Externali?es  from  aquaculture  

Organic emission

Aquaculture

Other sectors & users

Diseases

Habitat loss

Chemicals

= farm

Genetic “pollution” wild fish

Externali?es  influence  produc?vity  and  produc?on  (1)  directly  through  diseases  etc.,    and  (2)  indirectly  through  public  regula?ons  etc.  mo?vated  by  externali?es    

Disease  externali?es  

•  Arguably  larger  nega?ve  animal  disease  externali?es  than  in  agricultural  livestock  produc?on  

•  Have  on  several  occasions  created  huge  produc?on  losses  due  to  mortality  

•  Some  sectors  have  never  recovered  aher  disease  outbreaks  

•  See  the  next  three  examples  

Shrimp  produc?on,  The  Philippines  

0

20

40

60

80

100

1201

,00

0 t

on

nes

Source: FAO

Shrimp  produc?on,  Taiwan  

0102030405060708090100

1,0

00

to

nn

es

Source: FAO

Salmon  produc?on,  Chile  

050100150200250300350400450

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

1,0

00

to

nn

es

Source: FAO, Kontali

Salmon  aquaculture  –  same  technology,  but  different  regula?ons  mo?vated  by  

externali?es  

0  

200000  

400000  

600000  

800000  

1000000  

1200000  

1400000  1987  

1988  

1989  

1990  

1991  

1992  

1993  

1994  

1995  

1996  

1997  

1998  

1999  

2000  

2001  

2002  

2003  

2004  

2005  

2006  

2007  

2008  

2009  

2010  

2011  

2012  

Prod

uc2o

n  in  M

T  

Norway  Chile  UK  Canada  USA  

Chile – regulations too lax?

UK, Canada and USA – Regulations too strict?

Agglomera?on  economies  -­‐  Localized  external  returns  to  scale  in  aquaculture  

•  Thicker  markets  –  New  markets  for  highly  specialized  inputs  –  From  monopoly/oligopoly  to  compe??ve  markets  for  some  inputs  

•  Knowledge  spillovers  –  Labor  migra?on  across  firms  –  Different  arenas  where  firms  meet  

•  Increasing  capacity  for  innova?on  and  sustained  produc?vity  growth  (Tveteras,  2002;  Tveteras  &  Bagese,  2006)  

External  returns  to  scale:  Effect  on  individual  firm’s  produc?on  cost  

Industry size

Level of externalities Marginal

cost (MC)

Production volume

Y Y1 Y2

E1

E2

MC2

MC1

Aquaculture  sector  size  characteris?cs  in  2010  

Production  in  sector  (A)

Production  in  all  sectors  in  country  (B)

Production  in  other  sectors  in  country  (B-­‐A)

World 41  353 2  708  984 2  667  631

World  regions:Africa 6  104 101  958 95  853Asia 96  658 6  740  469 6  643  811Europe 4  143 98  896 94  754Latin  America 8  478 155  495 147  018North  America 16  411 378  398 361  987Oceania 3  901 32  247 28  345

Developing  vs  developed  countries:Developed 6  499 152  360 145  860Developing 61  261 4  169  311 4  108  049

China 537  411 47  800  000 47  300  000Norway 91  637 1  008  010 916  373

The  size  distribu?on  of  443  aquaculture  sectors  in  EU27  in  2010  

0  

200000  

400000  

600000  

800000  

1000000  

1200000  

1400000  

Norway-­‐Atla

n?c  salm

on  

Poland

-­‐Com

mon

 carp  

Russian  Fede

ra?o

n-­‐Atlan?

c  Iceland-­‐Arc?c  char  

Swed

en-­‐Chars  nei  

Croa?a

-­‐Rainb

ow  trou

t  Bu

lgaria-­‐Bighe

ad  carp  

Czech  Re

public-­‐Freshwater  fishes  

Mon

tene

gro-­‐Ra

inbo

w  trou

t  Moldo

va,  R

epub

lic  of-­‐B

ighe

ad  

France-­‐Atla

n?c  salm

on  

Estonia-­‐Ra

inbo

w  trou

t  Po

land

-­‐Nile  ?lapia  

Albania-­‐Silver  carp  

Italy-­‐Brook  trou

t  Ro

mania-­‐W

els(=Som

)  cap

ish  

Norway-­‐Sea  trou

t  Bo

snia  and

 Herzegovina-­‐Rainb

ow  

Greece-­‐M

arine  fishe

s  nei  

Switzerland

-­‐Sea  trou

t  Ita

ly-­‐Porgies,  seabreams  n

ei  

Albania-­‐Grass  c

arp(=W

hite  amur)  

Belgium-­‐Freshwater  fishes  nei  

Austria

-­‐Cyprin

ids  n

ei  

Mon

tene

gro-­‐Eu

rope

an  eel  

Bulgaria-­‐Northern  pike  

Lithuania-­‐Wels(=Som

)  cap

ish  

Greece-­‐Com

mon

 sole  

Latvia-­‐Tilapias  nei  

Austria

-­‐Bighe

ad  carp  

Denm

ark-­‐Atlan?

c  salm

on  

Denm

ark-­‐Eu

rope

an  perch  

Prod

uc2o

n  in  to

nnes  

Over 400 aquaculture sectors in Europe have a production which is less than a single typical salmon farm

Innova?on  as  growth  driver  

•  Innova?ons  have  generally  increased  produc?vity  and  sustainability  in  aquaculture  and  thus  contributed  to  growth  

•  Examples:  –  Feed  and  feeding  equipment  innova?ons:  Lower  local  organic  

emissions,  lower  inclusion  of  fish  oil  and  fishmeal  –  Vaccine  innova?ons:  Reduced  use  of  an?bio?cs  –  Gene?c  innova?ons  (breeding):  More  efficient  conversion  of  feed  and  

increased  disease  resistance  –  Fish  cage  innova?ons:  Reduced  risk  of  escape  

Growth  has  to  be  based  on  innova?ons  

•  For  example,  2-­‐3  ?mes  increase  in  open  cage  salmon  aquaculture  produc?on  from  current  level  is  not  sustainable  with  current  technologies  

•  Innova?ons  required  in  many  areas  –  Feed,  fish  disease,  salmon  lice,  salmon  escape,  etc.  

•  Imply  that  R&D  policy  and  other  policies  that  facilitate  or  impede  innova?ons  will  play  a  crucial  role    

Innova?on  and  R&D  

•  R&D  is  cri?cal  for  many  future  radical  innova?ons  that  are  required  to  ensure  growth  

•  Market  failures  in  R&D,  par?cularly  low  degree  of  appropriability  of  R&D  benefits  by  private  firms  is  a  huge  challenge  

•  A  combina?on  of  private  and  public  funding  is  therefore  necessary  

Which  factors  influence  produc?on  growth?  

 An  econometric  analysis  

accoun?ng  for  some  factors    

Test  hypotheses  on  the  effects  on  aquaculture  sector  growth  rates  of…  

•  Internal  scale  of  sector  •  External  scale  of  aquaculture  in  country  (external  returns  to  scale?)  

•  Age  of  sector  (learning  effects?)  •  Time  –  increasing  or  declining  growth  rate?  

Econometric  model  specifica?ons  

•  Varia?ons  of  the  following  growth  model:    lnYit  –  lnYit-­‐1  =  αiDi  +  βdy1(lnYit-­‐1  –  lnYit-­‐2  )      +  βdy2(lnYit-­‐2  –  lnYit-­‐3  )  +  βy1lnYit-­‐1  +  βy12(lnYit-­‐1)2  

 +  βe1lnEit-­‐1  +  βe12(lnEit-­‐1)2  +  βaage  +  βaaage2    +  βtt  +  βgt2,  •  i  =  aquaculture  sector  subscript  (defined  by  species  and  produc?on  

country),  t  =  year,  Y  =  produc?on  volume  in  metric  tonnes,  E  =  produc?on  volume  in  other  aquaculture  sectors  in  same  country  in  metric  tonnes.  

•  In  some  specifica?ons  ?me  trend  variable  is  replaced  by  year  dummy  variables.  

•  Various  specifica?ons  of  sector-­‐specific  effects  (homogeneous,  random,  fixed).  

•  Robust  standard  errors.  •  Unweighted  and  weighted  models  (using  produc?on  volume  as  weight).  

Variable   Coef.   Std.  Err.   t   P-­‐value  

lprod1   -­‐0.09546   0.00492   -­‐19.40   0.000  

lprod_other   0.04561   0.00363   12.58   0.000  

age   0.00364   0.00090   4.05   0.000  

t   -­‐0.00306   0.00076   -­‐4.05   0.000  

Random  sector  effects  model.  N=34480.  

Growth  model:  Wald  tests  of  elas?ci?es  evaluated  at  sample  mean  

Summary  of  econometric  findings  

•  Internal  scale  of  sector:  Significantly  nega?ve  effect  –  nega?ve  externali?es  dominate?  

•  External  scale  of  other  aquaculture  in  country:  Tend  to  be  posi?ve  effects  –  posi?ve  agglomera?on  effects?  

•  Age  of  sector  (learning):  Ambiguous  effect  •  Time:  Growth  rate  tend  to  decline  over  ?me  aher  having  controlled  for  other  factors  

Conclusions  

•  Aquaculture  is  a  sector  with  significant  externali?es  

•  A  sector  (including  government)  has  to  innovate  to  mi?gate  externali?es  as  it  grows  

•  There  are  probably  external  returns  that  can  be  exploited  in  aquaculture    

Conclusions  

•  Global  aquaculture  is  growing  at  a  slower  rate,  and  North  America  and  Europe  is  growing  even  slower  

•  North  American  and  European  countries  have  small  individual  sectors  and  small  aquaculture  in  total  

•  May  benefit  from  more  specializa?on  into  fewer  species?  – R&D  driven  innova?ons  – External  returns  to  scale  

Time  for  serious  rethinking?  

•  Aquaculture  is  heading  towards  biological  manufacturing  

•  It  needs  to  agract  some  of  the  brightest  people  both  in  the  industry  and  R&D  

•  Scale  will  be  important  at  several  levels  


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