Economic Overview of Biofloc-Dominated, Super-Intensive Litopenaeus

vannamei Grow-out Raceway

Terry Hanson, Ph.D. Auburn University

School of Fisheries, Aquaculture and Aquatic Sciences

Biofloc Workshop WAS Seattle, WA February 10, 2014

Overview of Today’s Talk

Introduction Bio-economic shrimp production model Factors affecting profitability Comparison of last five years of trials

Technology, production, enterprise budgets and cash flow

What’s best? Q & A

Introduction Indoor super-intensive recirculating systems

continues to attract attention High quality shrimp Produced under controlled conditions

Drawbacks High initial investment Volatile shrimp prices

Economic analyses performed on: Several years of trials conducted at the Texas AgriLife

Research Mariculture Lab at Flour Bluff, Corpus Christi, Texas

Earlier Study Findings • Many factors affect the COP and financial viability • Some are more controllable than others

More controllable • Location choice & its impact on investment, inputs &

costs • Increasing stocking density and juvenile size • Reducing crop duration => more crops per year • Nursery and growout survival • FCR • Water usage

Less controllable • Growout and juvenile feed cost • Year round supply of PLs • Shrimp selling price

Economics – What is the measure? Cost of production Investment Net return Net present value Internal rate of return (IRR) Payback period

Economics – What is the measure? Changing price for shrimp, feed cost, etc. Set infrastructure Comparison of trials run over time Measures of profitability

Enterprise Budget => sales, operating costs, investment costs, net returns, cost per pound produced

Cash flow => net present value, internal rate of return, payback period

What the Bio-economic model does? Extrapolates research results to commercial-

scale operations Calculates cost of production Through sensitivity analyses, determine:

Critical variables most affecting profitability Variable range for profitability Economically viable options for each system

Economic Model User Input Spreadsheets Parameters to Enter

Biological parameters Stock density, survival, growth rate, initial PL and harvest size,

FCR With or without nursery component

Physical parameters Growout/Nursery rearing tanks, greenhouses and service areas Length, width, depth

Production cost information Shrimp selling price & alternative ways to enter them Variable input prices….

Capital investments, interest and tax rates Land and tax costs

Commercial Bio-secure Indoor Recirculating Saltwater Shrimp Production System Revised 2-8-14 This model represents a feasibility study of a bio-secure recirculating shrimp nursery and grow-out production system without access to saltwater. Instructions for PARAMETERS to be ENTERED: WAS 2014 Feb 2014

HI-35, 324pl/m3, 4.7 g to 27.22g, 1.59 FCR, 77 days

Cells with RED fonts are those that YOU can ENTER your own numbers to run a projection. Cells with BLUE fonts are those that should NOT be adjusted by anyone. Cells with BLACK fonts are those that are calculated and are NOT to be adjusted. DESCRIPTION OF GROW-OUT COMPONENT

Cost Unit Quantity Remarks Biological Parameters Initial Stocking density PL/m3 324 As per Tzachi Samocha's team Survival rate % 93.1% As per Tzachi Samocha's team Growth rate g/wk 2.05 As per Tzachi Samocha's team Stocking size g 4.70 As per Tzachi Samocha's team

Desired harvest size g

27.22 As per Tzachi Samocha's team

Net feed conversion

g feed/g shrimp,….yield,

kg/m3 1.59 As per Tzachi Samocha's team Length of growout crop days 77 As per Tzachi Samocha's team No. of GO crops per year # 4.7 Calculated

Economic Model User Input Spreadsheets, Main Parameters to Enter

Physical Dimensions of Rearing Tanks, m2 500 Rearing tank length ft & m 180 54.86 Rearing tank width ft & m 30 9.11 Center aisle width ft & m 0.00 0.00 Rearing tank depth ft & m 3.70 1.13 Tank & Greenhouse Facility Information Rearing tanks per house # 8.00 8.00 Nursery tanks per house # 2.00 2.00 Total rearing greenhouses # 1.00 1.00 Greenhouse length ft & m 408.00 124.36 Greenhouse width ft & m 138.00 42.06 Total rearing area: Growout area ft2 & m2 43,056 4,000 Nursery area ft2 & m2 10,764 1,000 Sub-total ft2 & m2 53,820 5,000

Economic Model User Input Spreadsheets, Main Parameters to Enter

DESCRIPTION OF NURSERY COMPONENT Item Unit Quantity

Biological Parameters PL 12 stocked, millions 3.44 PL12 stocking density PL12/m2 405 Survival rate % 80% Growth rate g/wk 0.3500 Stocking size g 0.0010 Desired harvest size g 4.70 Net feed conversion 1.30 Length of shut-down period day/crop 2.80 Annual rate of nursery capacity usage Year 1 % 100% Year 2 % 100% Year 3 % 100% Year 4 % 100% Year 5 % 100% Length of nursery crop days 40 No. of NURSERY crops per year # 8.50 No. of weeks in facility in operation wk/yr 52 Physical Dimensions of Nursery Tanks Nursery tank length ft 180 Nursery tank width ft 29.90 Center aisle width ft 0.00 Nursery tank depth ft 3.70 Tank & Greenhouse Facility Information Nursery tanks per house # 2.00 Greenhouse length ft 408.00 Greenhouse width ft 138.00

Economic Model User Input Spreadsheets, Main Parameters to Enter

Annual production from system lb & kg 338,044 153,308 PRODUCTION COST INFORMATION Shrimp, whole, heads-on, selling price, Ave. % change & $/lb $3.27 VARIABLE COST ITEMS PL 12 cost from another commercial nursery $/1000 $8.00 Electricity cost $/kwh $0.08 Electricity usage kWh per day 1,359 Electricity cost kWh per day per 10 GH 1,359 Grow-out feed quantity - GO Feed per raceway per crop lb 11,913 - GO Feed per GH per crop (8 GO raceways) lb 95,305 - GO Feed per GH per year (8 GO raceways) lb 444,756 - GO Feed per FARM per year (80 GO raceways) lb 444,756 Grow-out feed cost Feed Discount & $/lb $0.8740 Nursery feed quantity lb kg - Mix of larval diets for 1 GH (2 nursery RW) lb & kg 46,405 21,045 - Mix of larval diets for ALL GH (20 nursery RW) lb & kg 46,405 21,045

Nursery feed cost, mix of larval diets Feed discount & $/lb & $/kg $0.549 $1.21

Nursery feed cost, mix of larval diets $/ton $1,097.51 Nursery feed cost, mix of larval diets for 1 GH/year $/year for 2 RW (in 1 GH) $25,465 $25,465 Nursery feed cost, mix of larval diets for ALL GH/year $25,465 $25,465

Economic Model User Input Spreadsheets, Main Parameters to Enter

Artemia cysts $/lb $27.50 PL 40-9 w/V-Pak 1/2 Crumble blend $/bag (25kg) $22.89 PL 40-9 w/V-Pak 2/3 Crumble blend $/bag (25kg) $22.25 PL 40-9 w/V-Pak 5/64" pellet (1.98 mm) $/bag (25kg) $25.00 Telephone expense $/wk $50.00 Gasoline cost $/gal $3.30 Diesel cost $/gal $3.95 Natural gas cost Discount % & $/therm $0.00 Annual heating costs PER GREENHOUSE $/year 0 - Percent decrease in therms required per GH % Liquid oxygen tank rental $/month for 11,000 gal tank 1 $1,500 - Liquid oxygen supply 100 ft.3 volumes / day / GH : Price 147.84 - Liquid oxygen supply price discount Discount % Water, fresh (initial fill, evaporation refill and sludge mix) $/m3 & $/1,000 gallon $0.14 Volume of water required to fill ALL raceways 5,639 $208 Volume of water required to replace evaporation, 80 RW

gal/day/10 GH & $/d/10GH 23,047 $3.23

Trace minerals (water supplement) $/year/GH $10,000 Sludge removal $/gallon $15.00 Salt, Red Sea $/2,220/lb bag $650.00 Sodium bicarbonate $/lb $0.165

Economic Model User Input Spreadsheets, Main Parameters to Enter

CAPITAL COSTS, INTEREST and TAX RATES Capital outlay index % 100% Capital Financing $ investment required $991,997 - Percentage of capital investment from BANK % 100% $991,997 - Percentage of capital from EQUITY % 0% $0 Investor Initial Operating Cost Contribution $ $0 Annual long-term capital cost % 8.00% Length of long-term loan years 7 Annual intermediate-term capital cost % 8.00% Length of intermediate-term loan years 7 Annual operating cost loan % 8.00% Annual grow-out liability insurance 0.21% of total investment 991,997 $2,067 What percent of total investment? 0.21% Land Cost Land cost (Iowa, near Mason City) $/ac $10,000 Land acres per Greenhouse acres/GH 1.6 $16,000 Total land required for entire Farm: Land for GH acres/farm 1.6 Land for Waste treatment acres/farm 4.0 Land for processing plant & office acres/farm 1.0 Total land required for GH acres 6.6 Land preparation cost $/acre 200.0 Tax for equipment purchase & building cost % 0.00% $991,997 Annual property tax (a*b*c) $/acre $9.48 a. Land use value $/acre 645 b. Assessment rate % 15 c. Millage rate mills 98

Economic Model User Input Spreadsheets, Main Parameters to Enter

Financial and Economic Spreadsheets

1. Investment and replacement costs 2. Intermediate- and long-term loan repayment

schedules 3. 10-year financial cash flow 4. Economic costs and returns

10-yr Cash Flow for Super-intensive Shrimp Recirculating Sysem. Cash flow, Year 1, for a recirculating bio-secure shirmp production facility.Year 1

Month Annual Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 TotalPrice, $/lb Unit Quantity

Shrimp sales price, heads-on 3.27 18g (21-25 count) 3.29 3.33 3.38 3.43 3.43 3.32 3.23 3.21 3.19 3.13 3.12 3.13Shrimp produced, heads-on lb 338,044 71,924 71,924 71,924 71,924 287,697

BEGINNING CASH BALANCE 0 500 500 180,775 117,783 54,620 230,556 -230,364 500 500 500 161,637 0Farm-gate shrimp value, heads-on $3.27 $/lb 338,044 0 0 243,438 0 0 238,928 0 231,001 0 0 224,129 0 937,496 TOTAL CASH INFLOW 0 500 243,938 180,775 117,783 293,548 230,556 637 500 500 224,629 161,637

Operating ExpensesFeed Grow-out $1,748 ton 222 32,393 32,393 32,393 32,393 32,393 32,393 32,393 32,393 32,393 32,393 32,393 32,393 388,717 Nursery $1,098 ton 23 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 2,122 25,465Labor, nursery and growout Farm management $140,875 annual 1 11,740 11,740 11,740 11,740 11,740 11,740 11,740 11,740 11,740 11,740 11,740 11,740 140,875 Hired labor, hourly $62,818 hour 1 5,235 5,235 5,235 5,235 5,235 5,235 5,235 5,235 5,235 5,235 5,235 5,235 62,818Hatchery supplies $962 crop 8.5 682 682 682 682 682 682 682 682 682 682 682 682 8,179Post larvae, PL12 $8.00 $/1,000 3,444 3,242 2,296 2,296 2,296 2,296 2,296 2,296 2,296 2,296 2,296 2,296 2,296 28,501Utilities Fuel, gasoline $3.30 $/gallon 1,096 301 301 301 301 301 301 301 301 301 301 301 301 3,617 Fuel, diesel $3.95 $/gallon 1,460 481 481 481 481 481 481 481 481 481 481 481 481 5,767 Electricity $0.08 $/kwh 1,359 3,370 3,044 3,370 3,261 3,370 3,261 3,370 3,370 3,261 3,370 3,261 3,370 39,677 Water, fresh - Initial 80 RW fill $0.14 $/1,000 gal 1,489 208 208 - Evaporation replacement $0.14 $/1,000 gal 8,412,155 100 90 100 97 100 97 100 100 97 100 97 100 1,178Chemicals Salt, Red Sea Salt $650 bag (2220 lb/bag) 90 58,500 58,500 Sodium bicarbonate $0.165 $/lb 54,000 743 743 743 743 743 743 743 743 743 743 743 743 8,910 Mineral additive to water $10,000 $/year/GH 1 10,000 10,000 Liquid oxygen - Liquid oxygen tank rental $1,500 11K-gal tank/mo 1 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000 - Liquid oxygen supply $0.40 100 ft.3 vol/RW/d 147.84 1,833 1,656 1,833 1,774 1,833 1,774 1,833 1,833 1,774 1,833 1,774 1,833 21,585Sludge removal $15.00 $/gallon 45 168 168 168 168 168 168 168 168 168 168 168 168 2,017Telephone expense $200.00 $/month 12.00 200 200 200 200 200 200 200 200 200 200 200 200 2,400Insurance 0.21% %/investment $ 991,997 2,067 2,067Property tax $9.48 $/acre 7 63 63Scheduled debt payments: Long-term Principal 921,603 103,286 103,286 Interest 8.00% percent 317,498 73,728 73,728Intermediate-term Principal /1 70,395 7,889 7,889 Interest 8.00% percent 24,251 5,632 5,632TOTAL CASH OUTFLOW 138,467 62,650 63,163 62,992 63,163 62,992 250,177 63,163 62,992 63,163 62,992 63,163 1,019,077

Cash Flow for 10 Years OUTPUT from the Economic Model

Financial and Economic Spreadsheets 1. Net Present Value

Calculation of payback period, rate of return, net present value and internal rate of return

Graphical output of annual cash flows using average monthly shrimp price plus and minus 1 standard deviation

2. Sensitivity Analyses Net returns, total receipts and total cost with respect to:

Changes in survival and growth rate

Cost of production and IRR with respect to: Changes in PL stocking density and growth rate

3. Enterprise Budget

Ten year calculation of payback period, net present value and internal rate of return HI-35, 324pl/m3, 4.7 g to 27.22g, 1.59 FCR, 77 days Item 0 1 2 3 4 5 6 7 8 9 10 Gross receipts 0 937,496 1,176,127 1,172,674 1,172,603 945,138 1,176,127 1,404,291 938,837 1,171,356 1,040,700 Total costs 0 1,249,941 1,242,665 959,423 959,423 959,423 959,423 959,423 768,888 768,888 768,888 Investor dividend 0 0 0 0 0 0 0 0 0 0 0 Taxable income 0 -312,445 -66,537 213,251 213,180 -14,285 216,704 444,868 169,949 402,469 271,812 Income taxes 0 0 0 0 0 0 0 0 0 0 0 Net income 0 -312,445 -66,537 213,251 213,180 -14,285 216,704 444,868 169,949 402,469 271,812 Depreciation 0 126,610 126,610 126,610 126,610 126,610 126,610 126,610 126,610 126,610 126,610 Net income + depreciation 0 -185,835 60,072 339,860 339,789 112,325 343,314 571,478 296,559 529,078 398,422 Initial Investment and Replacement costs 0 0 0 0 0 0 510,717 0 61,479 0 50,297

Net cash flow -

991,997 -185,835 60,072 339,860 339,789 112,325 -167,403 571,478 235,080 529,078 348,125 average price 3.27 Average Pay back period yr 4.55 Discount rate % 10.00% Net present value $ 102,641 Internal rate of return % 11.72%

-$1,000,000-$750,000-$500,000-$250,000

$0$250,000$500,000$750,000

$1,000,000

0 1 2 3 4 5 6 7 8 9 10

Year

10-year Annual Net Cash Flow.

OUTPUT from the Economic Model

Enterprise budget (receipts, variable costs, fixed costs, net returns to land) and breakeven prices for a super-intensive shrimp production system consisting of one greenhouse (with 8 growout RWs and 2 nursery RWs) based on average of 10-yr Cash Flow. HI-35, 324pl/m3, 4.7 g to 27.22g, 1.59 FCR, 77 days

Unit Quantity Price or Value or Percent Value/CostCost / unit Cost of Costs per lb

1. Gross ReceiptsFarm-gate Shrimp value, whole, heads-on lb 338,044 3.27 $1,104,215 $3.272. Variable CostsFeed Grow-out ton 222 $1,748 $388,717 46.6% $1.15 Nursery ton 23 $1,098 $25,465 3.1% $0.08Labor, nursery and growout Farm management annual 1 $140,875 $140,875 16.9% $0.42 Hired labor, hourly hour 1 $62,818 $62,818 7.5% $0.19Hatchery supplies crop 9 $962 $8,179 1.0% $0.02Post larvae, PL12 $/1,000 3,444 $8.00 $27,650 3.3% $0.08Utilities Fuel, gasoline $/gallon 1,096 $3.30 $3,617 0.4% $0.01 Fuel, diesel $/gallon 1,460 $3.95 $5,767 0.7% $0.02 Electricity $/kwh 1,359 $0.08 $39,677 4.8% $0.12 Water, fresh - Initial RW filling $/ m3 water 1,489 $0.14 $208 0.0% $0.00 - Evaporation replinishment gal / all GHs / day 23,047 $3.23 $1,178 0.1% $0.00Chemicals Salt, Red Sea Salt bag (2220 lb/bag) 90 $650 $5,850 0.7% $0.02 Sodium bicarbonate 2450lb (pallet) 54,000 $0 $8,910 1.1% $0.03 Mineral additive to water $/year $10,000 1.2% $0.03 Liquid oxygen - Liquid oxygen tank rental 6K-gal tank/mo 1 $1,500 $18,000 2.2% $0.05 - Liquid oxygen supply 100 ft.3 vol/RW/d 147.8 $0.40 $21,585 2.6% $0.06Sludge removal $/gallon 45 $15.00 $2,017 0.2% $0.01Telephone expense $/month 12 $200.00 $2,400 0.3% $0.01Interest on Operating Capital dollar $772,911 8.00% $61,833 7.4% $0.18 TOTAL VARIABLE COSTS $834,744 100.0% $2.47

3. Income Above Variable Cost $269,471 $0.80

4. Fixed CostLand charge (not included) dollar 0 8.00% $0 0.0% $0.00Facility depreciation dollar $114,531 58.5% $0.34Machinery depreciation dollar $12,079 6.2% $0.04Repair & maintenance annual $31,831 16.3% $0.09Interest on RW & GH Construction dollar $32,452 16.6% $0.10Interest on Equip./Mach. Purchases dollar $2,816 1.4% $0.01Insurance on Facilities & Equipment %/investment $ $991,997 0.21% $2,067 1.1% $0.01Property tax $/acre 6.60 $9.48 $63 0.0% $0.00 TOTAL FIXED COSTS $195,838 100.0% $0.58

$235,0066. Total of All Specified Expenses $1,068,200 $1,030,583 $3.05

7. Net Returns Above All Specified Expenses /1 $73,632 $0.22

Enterprise Budget

OUTPUT from the Economic Model

Total Total Econ. Average Annual Annual Annual AnnualItem cost cost life investment depreciation interest Repairs & Repairs &

Per GH Per Farm Maintenance Maintenance($) ($) (yr) ($) ($) ($) (%) ($)

A. Capital costsGreenhouse components - Structure $55,429 $55,429 15 $27,715 $3,695 $2,217 1.67% $924 - Covering $18,307 $18,307 5 $9,153 $3,661 $732 5.00% $915 - Interior autmated aluminized shade system $50,297 $50,297 9 - Heat system $3,743 $3,743 7 $1,871 $535 $150 3.57% $134 - Cooling systems $20,300 $20,300 7 $10,150 $2,900 $812 3.57% $725 - Controls $2,436 $2,436 7 $1,218 $348 $97 3.57% $87 - Concrete for installation $14,747 $14,747 20 $7,374 $737 $590 1.25% $184 - Pre-paid freight $9,153 $9,153 20 $4,577 $458 $366 1.25% $114 - Installation cost $93,548 $93,548 20 $46,774 $4,677 $3,742 1.25% $1,169Greenhouse Electrical System - Materials $5,476 $5,476 5 $2,738 $1,095 $219 5.00% $274 - Labor $14,309 $14,309 20 $7,154 $572 1.25% $179Raceway Construction - Materials $139,790 $139,790 5 $69,895 $27,958 $5,592 5.00% $6,989 - Labor $40,545 $40,545 20 $20,273 $2,027 $1,622 1.25% $507 - Equipment $4,165 $4,165 5 $2,083 $833 $167 5.00% $208Catwalk system $0 $0 5 $0 5.00% $0Mechanical & Lab Building - Materials $72,715 $72,715 5 $36,357 $14,543 $2,909 5.00% $3,636 - Labor $32,045 $32,045 20 $16,023 $1,602 $1,282 1.25% $401 - Equipment $6,981 $6,981 5 $3,491 $1,396 $279 5.00% $349Raceway Heating System - Labor $12,205 $12,205 20 $6,102 $610 $488 1.25% $153 - Equipment $72,312 $72,312 5 $36,156 $14,462 $2,892 5.00% $3,616Major Water Treatment and Control Equipment - Labor $18,859 $18,859 20 $9,430 $943 $754 1.25% $236 - Equipment $92,592 $92,592 5 $46,296 $18,518 $3,704 5.00% $4,630Raceway Drains and Harvest Pipes - Materials $8,348 $8,348 5 $4,174 $1,670 $334 5.00% $417 - Labor $4,001 $4,001 20 $2,001 $200 $160 1.25% $50Water Return Piping System - Materials $19,037 $19,037 5 $9,519 $3,807 $761 5.00% $952 - Labor $7,638 $7,638 20 $3,819 $382 $306 1.25% $95Air Supply Piping System and RW Aeration - Materials $10,723 $10,723 5 $5,362 $2,145 $429 5.00% $536 - Labor $3,274 $3,274 20 $1,637 $164 $131 1.25% $41Feed Delivery System - Materials $50,000 $50,000 - Labor $10,000 $10,000Hatchery evaluation lab & building $2,050 $2,050 5 $1,025 $410 $82 5.00% $103Effluent storage and evaporation ponds $0 $0 5 $0 $0 $0 5.00% $0Construction Estimate, fencing, paving, stone & a $22,826 $22,826 5 $11,413 $4,565 $913 5.00% $1,141Concrete pads and installation for O2 tanks $3,750 $3,750 20 $1,875 $188 $150 1.25% $47 SUBTOTAL $921,603 $921,603 $405,653 $114,531 $32,452 1.25% $28,812

B. Equipment/machinery costsHatchery Equipment $3,395 $3,395 5 $1,697 $679 $136 5.00% $170 Stand-by generator $17,000 $17,000 5 $8,500 $3,400 $680 5.00% $850 Office equipment $10,000 $10,000 5 $5,000 $2,000 $400 5.00% $500 All terrain vehicle (golf cart w/ bed) $5,000 $5,000 5 $2,500 $1,000 $200 5.00% $250 Large tractor $35,000 $35,000 7 $17,500 $5,000 $1,400 3.57% $1,250 Small tractor $0 $0 7 $0 $0 $0 3.57% $0 SUBTOTAL $70,395 $70,395 $35,197 $12,079 $2,816 $3,020

TOTAL $991,997 $991,997 $440,850 $126,610 $35,268 $31,831

Investment Requirements (entered by user)

Model Assumptions Assume production cycles can be geared up to run

smoothly in back-to-back runs over the long term

PL10’s are available year-round and are not an obstacle

Shrimp selling price is known

No one has a crystal ball that works all the time!

Biological changes require Researcher and manager knowledge and judgment to best comprehend associated changes that will occur

Economic Analyses Critical Factors that Affect Profitability

Change in NPV and IRR with 20% Improvement in Critical Production Factors

Grow-out Components Change

Change from Base NPV $mil. IRR %

1. GO survival +20% 10.48 13.7

2. Shrimp price +20% 9.57 12.5

3. GO stocking density +20% 6.16 8.1

4. Initial investment -20% 2.24 6.8

5. GO growth rate +20% 2.23 6.4

6. Nursery & GO feed -20% 2.37 3.1

7. Source of financing 20/80-0/100 1.79 2.4

8. Nursery survival +20% 1.12 1.5

9. PL cost -20% 1.01 1.2 Compared to Base Scenario: $10.8 million and 25.3% IRR

Research for the Future Improving technologies are:

Increasing growth and production rates Improving feeds for these systems Genetic selection - higher yields over time Reducing variable and fixed costs

Financial analyses are focusing research Improves competitiveness

Marketing opportunities

Economic Analysis of Super-intensive Recirculating Shrimp Production Systems

Economic Analysis of Two Feeds in Biofloc-Dominated Super-Intensive Shrimp Production

Systems for the Pacific White Shrimp, 2012

Terry Hanson, Andre Braga, Vita Magalhaes, Timothy C. Morris, Bob Advent and Tzachi M. Samocha

Aquaculture 2013 Nashville, TN February 25, 2013

Auburn University Department of Fisheries and Allied Aquacultures

Earlier Study Findings • Many factors affect the COP and financial viability • Some are more controllable than others

More controllable • Location choice & its impact on investment, inputs & costs • Increasing stocking density and juvenile size • Reducing crop duration => more crops per year • Nursery and growout survival • FCR • Water usage

Less controllable • Growout and juvenile feed cost • Year round supply of PLs • Shrimp selling price

Economic Analysis Performed a 10-year cash flow analysis to estimate:

Cost of production, Net returns to land, Net present value, Internal rate of return, and Payback period

Prices/Costs used in analysis Shrimp sales price: averaged $7.20/kg ($3.27/lb) Grow-out feed: Zeigler Brothers Semi-Intensive (SI-35): $0.99/kg = $ 990/MT or $0.452/lb = $

904/ton Hyper-Intensive (HI-35): $1.75/kg = $1,750/MT or $0.795/lb =

$1,590/ton Juveniles production cost: $20.00/1,000 Interest rate for loans: 8%

Initial investment = $991,997

Economic Analysis Study results extrapolated to: One greenhouse system (GH) Each GH consists of eight 500 m3/m2 grow-out

tanks and two 500 m3/m2 nursery tanks

Budget results are based on production figures

RW Stocking Stock Harvest Days Growth SGR Sur Yield FCR Water Use Sal

(Juv/m3) (g) (g) (g/wk) (g/d) (%) (Kg/m3) L/1 kg (ppt) 1 500 1.9 22.16 81 1.75 0.25 87.6 9.66 1.39 169.0 18 2 500 1.9 23.63 82 1.86 0.27 81.5 9.59 1.44 160.8 18 3 500 1.9 23.36 82 1.83 0.26 80.7 9.40 1.45 149.0 18 4 500 1.9 23.79 83 1.85 0.26 79.3 9.39 1.45 161.0 18 5 500 1.4 25.12 85 1.95 0.28 78.9 9.87 1.44 148.2 30

Av. 23.61 83 1.85 0.26 81.6 9.58 1.43 157.6 SD 0.94 0.06 0.01 0.3 0.18 0.02 7.9

Trial A 2011 Study Results

“Fast” Growth Line with HI-35

Economic Analysis Study 1

Two diets (Zeigler Brothers); three replicates Semi-Intensive (SI-35) 35% protein: $ 0.99/kg or $

0.452/lb Hyper-Intensive (HI-35) 35% protein: $ 1.75/kg or $

0.795/lb

Each treatment conducted in three 40 m3 (68.5 m2) RWs

Juveniles from a cross between Taura resistant and fast-growth genetic lines developed by Shrimp Improvement Systems (Islamorada FL)

No water exchange

Two Diet Study: HI-35 v SI-35 Cross between Taura resistant and fast-growth genetic line

RW Stocking (Juv/m3) (g)

Harvest Size (g) Days Growth

(g/wk) Sur (%)

Yield (Kg/m3) FCR

Water Use

(L/kg) HI-35, 40 m3 RW

1 500 2.66 22.26 67 2.02 87.20 9.70 1.24 23.2 3 500 2.66 22.29 67 2.02 87.85 9.79 1.25 17.9 5 500 2.66 22.45 67 2.04 86.76 9.74 1.26 28.3

Average 500 2.66 22.33 67 2.03 87.27 9.74 1.25 23.1

SI-35, 40 m3 RW 2 500 2.66 19.06 67 1.69 93.04 8.87 1.4 21.1 4 500 2.66 20.81 67 1.87 84.78 8.82 1.41 25.5 6 500 2.66 19.49 67 1.73 86.71 8.45 1.48 22.7

Average 500 2.66 19.79 67 1.76 88.18 8.71 1.43 23.1

Economic Analysis

Study 2

Only HI-35 diet

Conducted in two 100 m3 (100 m2) RWs using same strain; no water exchange

Study 2 - HI-35 Diet Conducted in Two 100 m3 (100 m2) RWs Using Same Strain; No Water Exchange

RW Stocking Harvest

Size (g) Days Growth (g/wk)

Yield (Kg/m3) FCR

Water Use

(L/kg) (Juv/m3 ) (g) HI-35, 100 m2 RW

B1 500 3.6 22.76 63 2.13 9.2 1.43 38.59 B2 500 3.6 22.67 63 2.12 8.86 1.53 44.00

Average 500 3.6 22.72 63 2.13 9.03 1.48 41.30

Comparison of Production Results From 2011 to 2012

Treatment 2011 A HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) 81.6 87.3 88.2 79.5

Growth rate (g/wk) 1.85 2.03 1.76 2.13

Stocking size (g) 1.8 2.7 2.7 3.6

Harvest size (g) 23.6 22.3 19.8 22.7

FCR 1.43 1.25 1.43 1.48

Crop length (days) 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

Comparison of Production Results From 2011 to 2012

Treatment 2011 A HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) 1.85 2.03 1.76 2.13

Stocking size (g) 1.8 2.7 2.7 3.6

Harvest size (g) 23.6 22.3 19.8 22.7

FCR 1.43 1.25 1.43 1.48

Crop length (days) 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) 1.8 2.7 2.7 3.6

Harvest size (g) 23.6 22.3 19.8 22.7

FCR 1.43 1.25 1.43 1.48

Crop length (days) 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) 23.6 22.3 19.8 22.7

FCR 1.43 1.25 1.43 1.48

Crop length (days) 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) -5.5%, -16.1%, -3.8% 23.6 22.3 19.8 22.7

FCR 1.43 1.25 1.43 1.48

Crop length (days) 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) -5.5%, -16.1%, -3.8% 23.6 22.3 19.8 22.7

FCR -12.6%, 0%, +3.5% 1.43 1.25 1.43 1.48

Crop length (days) 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) -5.5%, -16.1%, -3.8% 23.6 22.3 19.8 22.7

FCR -12.6%, 0%, +3.5% 1.43 1.25 1.43 1.48

Crop length (days)-19.3%, -19.3%, -24.1% 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) -5.5%, -16.1%, -3.8% 23.6 22.3 19.8 22.7

FCR -12.6%, 0%, +3.5% 1.43 1.25 1.43 1.48

Crop length (days) 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

4.4 crops /yr

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) -5.5%, -16.1%, -3.8% 23.6 22.3 19.8 22.7

FCR -12.6%, 0%, +3.5% 1.43 1.25 1.43 1.48

Crop length (days)-19.3% 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

4.4 crops /yr

5.5 crops /yr +25%

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) -5.5%, -16.1%, -3.8% 23.6 22.3 19.8 22.7

FCR -12.6%, 0%, +3.5% 1.43 1.25 1.43 1.48

Crop length (days)-19.3%, -19.3% 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

4.4 crops /yr

5.5 crops /yr +25%

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) -5.5%, -16.1%, -3.8% 23.6 22.3 19.8 22.7

FCR -12.6%, 0%, +3.5% 1.43 1.25 1.43 1.48

Crop length (days)-19.3%, -19.3%, -24.1% 83 67 67 63

Production (kg/m3) 9.58 9.74 8.71 9.03

4.4 crops /yr

5.8 crops /yr +32%

Comparison of Production Results From 2011 to 2012

Treatment 2011 A

HI-35 40m3

SI-35 40m3

HI-35 100m3

Stocking density (Juvenile/m3) 500 500 500 500

Survival rate (%) +7.0%, +8.1%, -2.6% 81.6 87.3 88.2 79.5

Growth rate (g/wk) +9.7%, -4.9%, +15.1% 1.85 2.03 1.76 2.13

Stocking size (g) +50%, +50%, +100% 1.8 2.7 2.7 3.6

Harvest size (g) -5.5%, -16.1%, -3.8% 23.6 22.3 19.8 22.7

FCR -12.6%, 0%, +3.5% 1.43 1.25 1.43 1.48

Crop length (days)-19.3%, -19.3%, -24.1% 83 67 67 63

Production (kg/m3) +1.7%, -9.1%, -5.7% 9.58 9.74 8.71 9.03

Economic Analysis Performed a 10-year cash flow analysis to estimate:

Cost of production, Net returns to land, Net present value, Internal rate of return, and Payback period

Prices/Costs used in analysis Shrimp sales price: averaged $7.20/kg ($3.27/lb) Grow-out feed: Zeigler Brothers Semi-Intensive (SI-35): $0.99/kg = $ 990/MT or $0.452/lb = $

904/ton Hyper-Intensive (HI-35): $1.75/kg = $1,750/MT or $0.795/lb =

$1,590/ton Juveniles production cost: $20.00/1,000 Interest rate for loans: 8%

Initial investment = $991,997

Economic Analysis Study results extrapolated to: One greenhouse system (GH) Each GH consists of eight 500 m3/m2 grow-out

tanks and two 500 m3/m2 nursery tanks

Budget results are based on production figures

Summary of Production and Sales for Super-intensive Recirculating Shrimp Production Systems 2011 Compared to 2012 Trials Metric Units

2011 HI-35 40m3

SI-35 40m3

HI-35 100m3

Production, kg/crop 38,320 38,960 34,840 36,120 Crops per year 4.4 5.5 5.5 5.8 Production, kg/year 168,608 214,280 191,620 209,496 Production MT/year 169 214 192 209 Selling price, $/kg 7.20 7.20 7.20 7.20 Total Sales per year, $ 1,213,978 1,542,816 1,379,664 1,508,371

Summary of Enterprise Budgets for Super-intensive Recirculating Shrimp Production Systems 2011 Compared to 2012 Trials

$/kg 2011

HI-35 40m3

SI-35 40m3

HI-35 100m3

Gross Receipts 7.20 7.20 7.20 7.20 Variable Costs 5.38 4.06 4.54 4.31 Income Above Variable Cost 1.82 3.14 2.66 2.89 Fixed Cost 0.59 0.47 0.53 0.48 Total of All Specified Expenses 5.97 4.53 5.07 4.79 Net Returns Above All Costs 1.23 2.67 2.13 2.41 Payback period, years 2.9 1.4 1.9 1.6 Net present value ($ mil.) 1.0 2.9 2.0 2.6 Internal Rate of Return (%) 15 27 20 30

Conclusions Many factors affect the COP and financial

viability

Can be feasible under certain biological and economic conditions

Combination of small changes in many grow-out components can lead to profitability

Opportunities for the Future Tough times due to increasing input costs

GO feed price: $800 to $1,744; +118%

Improved technology continues to: Increase growth rate Improve FCR Increase survival Increase yield

Can technological improvements decrease COP to

overcome increases in input (feed) costs? Without tech advances net return would be negative

Opportunities for the Future

Items needing attention 1. Year-round PL supply 2. Research must show back-to-back-to-back… production

is possible

Financial analyses are focusing research to sharpen competitiveness

Thank you! Questions?