Global aquaculture - the challenges of blue growth · Combination tilapia and rice in Bangladesh ....

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


Vietnamese fish farmer

Egyptian fish farmer



Egyptian fish farmer Chinese fish farmer




Fish farmers from Papua Ny Guinea




Fish farmers from Papua Ny Guinea Norwegian fish farmer





Cypriotic 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


Combination tilapia and rice in Bangladesh


Tilapia sea cages in Indonesia


Manual feeding of tilapia


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


Primary production



Primary production



Professional buyers are conerned about the ability of seafood suppliers to

sa?sfy requirements in a number of areas


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

taste, convenience, healthiness and price


Primary production



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


020406080100120

1985198719891991199319951997199920012003200520072009

NO

K/k

g

0

500

1000

1500

2000

2500

1000 tonn

PriceCostProduction


020406080100120

1985198719891991199319951997199920012003200520072009

NO

K/k

g

0

500

1000

1500

2000

2500

1000 tonn

PriceCostProduction


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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