Hook, line, not sinking

Industry revenue is forecast to increase by 3.4% per annum on average over the five years to 2009-10, to be worth $909.8 million, although revenue growth was dampened by falling prices.

Aquaculture seafood prices decreased due to a higher Australian dollar over most of the period, increased competition in Australia from cheap imported seafood, increased competition in the world market from other aquaculture producers and in some cases, increases in the production of seafood.

IBISWorld estimates that in 2009-10 industry revenue will decrease by 1.3% year-on-year. The industry will be negatively affected by a decrease in demand from export markets and domestically due to a slowdown in world and Australian economic growth, which will dampen prices. The industry should benefit though from a sharp depreciation in the Australian dollar, which will act to boost returns in Australian dollars.

IBISWorld forecasts that in the five years to 2014-15, revenue from aquaculture production will increase at an average annual rate of 2.2% to $1.01 billion. Growth in the industry is expected to come largely from increases in production, but also through some price increases. Domestic and international demand prospects for aquaculture products are favourable.

The global demand for seafood is expected to rise at a rate of about 2% per year over the next five years, based on studies undertaken by the UN Food and Agriculture Organisation (FAO) and International Food Policy Research Institute (IFPRI).

The scope for expanding fisheries’ production from natural resources is declining due to depletion, creating a significant opportunity for aquaculture to meet demand. Studies by the FAO and IFPRI forecast marginal real per annum growth in fish prices, depending on the species, over the coming five to 10 years. Species that are expected to grow strongly are Tasmanian salmon, yellowtail kingfish, barramundi and southern bluefin tuna. Other fish whose production is expected to grow are mulloway and cobia.

Domestic and international demand prospects for aquaculture products are favourable in the long-term. The global demand for seafood is expected to rise over the next five years according to the UN Food and Agriculture Organisation (FAO) and International Food Policy Research Institute (IFPRI), due to population growth and economic development, mainly in developing countries. Within developed countries, there has also been a change in tastes in favour of protein derived from low fat sources, including fish.

IBISWorld forecasts the industry will return to growth in 2010-11 but at a marginal 0.4% as the global economy stabilises but remains constrained. Notably, economic growth in developed countries including the United States, Japan and Europe will remain poor in 2010 with stronger growth returning in 2011. The scope for expanding fisheries’ production from natural resources however, is declining due to depletion. This excess demand is a significant growth opportunity for aquaculture.

Key success factors:

• Access to the necessary amount of land/type of property: A suitable site with appropriate water conditions is crucial to growing fish and seafood. Site requirements vary depending on the type of production and legislative requirements.
• Ability to control total supply on market: Ability to control the volume of production coming on to the market and have the foresight to take aquaculture expansion into account and its effect on production volumes and prices is beneficial.
• Access to the latest available and most efficient technology and techniques: Access to production technology and an ability to adapt these to local conditions will improve output efficiency and industry know-how.
• Economies of scale: Economies of scale and integration of the production with value adding activities will enable the producer to spread its costs over a wider range of production. This will ultimately lead to higher returns.
• Ability to effectively manage risk: Environmental and financial risk is very real for an aquaculture producer. It ranges from disease to pollution to falling prices.
• Must have licence: State governments allocate licences to those operators who have proven systems for rearing fish in farms.
• Use of production techniques that add value to base product(s): The higher the quality of the fish, the higher its value when sold downstream.

Barriers to entry

Securing the necessary licences, quota and permits for cultivation is the main barrier to entry into pearling, oyster and Atlantic salmon production. Since licensing varies markedly between states, regions and enterprise types, it can present a significant barrier to entry for someone hoping to invest in a new production facility.

Robert Bryant is the general manager of business information firm IBISWorld.