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USA, sleeping giant of aquaculture, begins to stir as new farms crop up.

USA, Sleeping Giant of Aquaculture, Begins to Stir as New Farms Crop Up

Expect substitute marine species and a bumper harvest of farm-raised fish to claim larger shares of seafood markets in the near future. Shortages of traditional wild varieties leaves little alternative, Floyd Smiley told delegates attending the Food Marketing Institute-sponsored Seafood Merchandising Conference in Tampa, Florida.

Now president of Aqua Group, the four-decade-plus veteran of the North American food industry has observed many changes over the years. He recalled that while serving as CEO of National Sea Products in the early 1980s, a "substitute species" was considered anything that didn't grow in Canadian waters.

At that time the conventional wisdom was that nothing was going to depose cod, pollock, flounder and sole from their dominant positions on seafood menus. It seemed inconceivable that such long-preferred species would be in inroaded by strange-sounding names like king klip, oreo dory and orange roughy.

Even more farfetched was the idea that serious competition would emerge from regional species of cultured catfish produced in Mississippi delta ponds, trout from Idaho, Louisiana crawfish, or pen-raised salmon from Norway or Chile.

"Well, the day of reckoning is here," declared Smiley. "It has become increasingly apparent to all of us that supplies of marine seafood are finite and that there is every likelihood that the impact of overfishing and pollution will gradually reduce the world's ocean harvest."

Based in Clearwater, Fla., Smiley's Aqua Group is actively involved in developing the production and marketing of catfish and tilapia. But he points out that virtually any species can be farm-raised - from walleye pike to yellow perch. The challenge, of course, lies in building commercial markets to accomodate output.

Catfish is by far the most successful cultured species in the United States. With production centered in southern states, more than 327-million pounds valued at $229-million was produced in 1986. This is over three times the 98-million pound volume of cultured crawfish, which ranks second at $56-million. Pacific salmon rates third at 74-million pounds/$52 million, followed by trout at 51-million pounds/$49-million.

More than two-thirds of U.S. catfish production comes from Mississippi, where pond harvests average 4,000 to 5,000 pounds per acre. Overall output has increased an average of 16% per year from 1986-88, with future growth expected to be in the area of 20% per annum.

Although tonnage is keeping pace with rising demand, returns to farmers have taken a tumble. A bitter price war has resulted in bargains for buyers. "It was started originally by one or two of the largest processors as a way to attempt to deny market access to newcomers," explained Smiley. "It degenerated in a very predictable fashion into a fight for brand share among the industry's three top processors."

While price cutting is causing much concern in the industry, it does not seem to be impeding new investment. Large processors are not going to succeed in driving out most small entrepreneurs, according to Smiley. Those who do fall by the wayside will be quickly replaced by others who know opportunity when they see it, he predicted.

Meanwhile, the U.S. cultured crawfish scene remains largely limited to Louisiana and Texas, with scattered activity in Florida and along the East Coast. "This market remains as ill defined as it was several years ago," said Smiley.

He cited a high degree of processor fragmentation as a major roadblock to progress. "It is my belief that a sizeable piece of production will ultimately wind up in the hands of a single, well-financed organization."

Interest in tilapia (which until just a few years ago was almost unheard of in the U.S., where those who did know the imported species called it St. Peter's fish) underscores the fact that fresh investment in aquaculture is streaming into new territory. It's not just farms for catfish, trout, salmon and shrimp that are attracting capital.

Look at J.R. Simplot, for example, a company that did $1.2 billion in sales last year. The Caldwell, Idaho-headquartered frozen French fry giant, already involved in producing trout, has decided to try its luck at raising tilapia.

The word is that potato skins make pretty good feed for the fish, and of course Simplot has plenty of that commodity in supply. The company is reportedly looking for a first year harvest in the 3,000-ton range.

Other major food outfits getting involved in fish farming include Campbell, ConAgra and Geo. A. Hormel. And the list of small entrepreneurs in the fields is lengthening.

In addition to tilapia, the National Fisheries Institute (NFI) has high hopes for the growth of farmed crops such as striped and hybrid striped bass, redfish, sturgeon and abalone. It is enthusiastic about a project in northern Minnesota in which salmon is being cultivated in abandoned iron quarries. And in the Southwest desert it notes that bass is being raised in a solarpowered environment.

Certainly by world standards the fledging American industry has a long way to go. Asian production alone accounts for over 80% of the roughly 10 million metric tons of marine culture produced globally. And there is almost no cultured shrimp - a commodity that commands 40 - of total seafood dollar sales - coming out of U.S. farms. Thus far unfavorable weather, high real estate prices and costly labor rates have made profitability elusive for most.

Nonetheless, Smiley is optimistic that every form of aquaculture has a bright future in the U.S. Forecasting that farm-raised species will represent 25% of all seafood production by the year 2010, he reasons that domestic output must rise if over-reliance on imports is to be scaled back.

Indeed, the growth of aquaculture is outpacing all other types of farming in America, according to the NFI. In 1988 nearly 8% of all seafood eaten in the country was said to have been cultivated domestically. Fish farms provided 11% of the nation's total production, some of which was exported.

In a paper entitled Approaching 2001: The Seafood Industry in the 21st Century, NFI forecasts: "The advent of aquaculture will improve the overall distribution of seafood as producers meet market needs for fish to be delivered more frequently to more remote parts of the country. With farmed fish growers can specify when to harvest, thus providing buyers with more precise sizes and product forms."

Noting that by the turn of the century American consumption of seafood will be somewhere in the range of 23 pounds per capita, the president of Aqua Group calculated as follows: "That means that there is going to be demand for eight more pounds per person, assuming there will be 250-million of us. So, multiply the population times eight and you see that 2-billion more pounds will be needed. Much of that increase is going to have to come from domestic aquaculture."

He continued: "While still in its infancy, there is a very high level of investor interest in U.S. aquaculture right now. Almost no species in the world is immune to the long-term advances of this technology. For buyers, it will mean a steady supply of pollution-free species as well as the advantage of securing six-month to year-long pricing contracts... Properly developed, aquaculture will become another poultry industry - but with smaller volume."

Offering a more sober view of the North American aquaculture movement was Peter Redmayne, president of Sea Fare Exhibitions. Among the observations he made were:

* Regulatory pressures continue against fish-farming in Washington State;

* Depressed salmon prices have prompted a number of British Columbia farms to go into receivership;

* The expansion of trout culturing has been slowed by requirements for heavy water usage.

Redmayne said that the boom in farm-raised salmon - an estimated 220,000 tons were produced internationally last year - is partially responsible for the dive in prices. "People are selling it at less than cost. But this won't last forever, as some are eventually going to go out of business."

The trade show organizer urged retailers to seize the moment to convert customers into users of cultured products: "The prices you are seeing now are about as attractive as they are going to get."
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Title Annotation:QFFI's Global Seafood Magazine
Publication:Quick Frozen Foods International
Date:Jan 1, 1990
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