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…
Combination tilapia and rice in Bangladesh
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
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
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?
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
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
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
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