Dr Thierry Chopin A new economic study demonstrates that an Integrated Multi-Trophic Aquaculture operation is more profitable than salmon monoculture
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n 2007, we published our first economic study (Ridler et al., 2007) comparing two aquaculture practices: salmon monoculture and an Integrated Multi-Trophic Aquaculture (IMTA) operation with salmon, mussels and kelps. We found that an IMTA operation resulted in a higher net present value (NPV) than salmon monoculture, at discount rates of both 5 and 10 percent. Our sensitivity analysis showed that IMTA farms can enhance resiliency and provide superior financial returns in the face of both a sustained market price decrease of 12 percent over 10 years for salmon, and the loss of salmon harvests due to common environmental perturbations. A few other studies in Europe and China also demonstrated higher NPV, as well as improved environmental performance, with IMTA. However, despite these encouraging results, researchers and industry stakeholders continue to note that profitability and economic analyses can be improved and investment uncertainty reduced as more data are accumulated and analyses refined.
Developing a new economic study using a discounted cash-flow analysis
To help address such uncertainty in the IMTA literature, we engaged in a new economic study (Carras et al., 2019) using a discounted cash-flow analysis, incorporating a higher capital contingency requirement for IMTA to simulate the added costs of increased operational complexity, along with updated research and real-world financial data accumulated since 2007. A sensitivity analysis was included in our study to examine the effect on the profitability of a 10 percent price premium on IMTA salmon and mussels, as market studies and consumer preference/attitudinal surveys, conducted in Canada, the USA and Europe, indicated that consumers are willing to pay more for IMTA products. We also examined the impact of losing one harvest of salmon to disease or other natural disturbances over a 10-year period.
In all the scenarios tested, IMTA is more profitable than salmon monoculture
We tested a number of scenarios, assuming discount rates of 5 and 10 percent. In the base-case scenario (no price premium; no loss of salmon
harvest), the IMTA operation has a NPV that is 5.9 and 5.7 percent higher than salmon monoculture. With the inclusion of a 10 percent price premium on IMTA salmon and mussels, the IMTA operation has a NPV that is 26.3 and 27.3 percent higher than salmon monoculture. If a loss of salmon harvest occurs in year six, without price premium, the IMTA operation has a NPV that is 9.5 and 9.4 percent higher than salmon monoculture. If a loss of salmon harvest occurs in year six, and a 10 percent price premium is included, the IMTA operation has a NPV that is 36.5 and 38.6 percent higher than salmon monoculture. If a one-time 10 percent decline in the market price of salmon is sustained over a 10-year period, the IMTA operation has a NPV that is 7.3 and 7.2 percent higher than salmon monoculture. If there is a drop of 2 percent per annum in the market price of salmon, the IMTA operation has a NPV that is 7.4 and 7.2 percent higher than salmon monoculture.
Based on these results, why is the adoption of IMTA relatively slow?
Our results substantively agree with those of Ridler et al. (2007). Canada’s aquaculture industry now has pilot-scale experience with IMTA, and Canadian studies have suggested positive financial results and consumer attitudes toward IMTA. Similar conclusions have been drawn by researchers in Europe and Asia. Altogether, this body of research and experience suggests that the net financial return for a salmon, mussel and kelp IMTA operation can exceed that of salmon monoculture. Why, then, despite this and other recent studies demonstrating the positive financial results of IMTA systems, is their adoption, at a commercial scale, in Canada and other western countries, relatively slow? First, it always takes time for the knowledge acquired in academic studies to be transferred to industry, investors and regulators. The IMTA economic studies only span the last decade. Secondly, it appears that 1) uncertainty related to IMTA’s financial and environmental performance, 2) the present shortterm linear management approach of aquaculture companies versus a long-term circular approach, 3) IMTA’s increased operational complexity, and 4) a non-conducive policy and regulatory framework (at the provincial and federal levels), may be barriers to IMTA adoption at present. An additional consideration is the contribution from salmon production versus that of other species in IMTA. The initial configuration considered in our study would generate a very small value of production for mussels and kelps (6.8% of revenues), compared to an overwhelming value of salmon production (93.2% of revenues). This disproportionately large share of revenues accruing to salmon production can suggest that a potential investor may view the additional revenues from other species under IMTA as not worth the additional operational complexity, capital expenditure and corresponding risk. Should IMTA be implemented at a larger scale, mussel (and other invertebrates) and kelp production could certainly increase and so might their contribution to the total revenue of a company or region. In our view, the future of IMTA is to be implemented within an integrated coastal area management approach, beyond the restrictive limits of existing salmon sites. Furthermore, since salmon production has declined in recent years in New Brunswick, crop diversification could provide economic stability and be an incentive for industry development, making IMTA a more attractive practice in the future.
14 | August 2019 - International Aquafeed