PROFITABLE COD FARMING REQUIRES HIGH SALES PRICES
Photo: Silje Kristoffersen/Nofima
It can cost between NOK 40 and 43 per kilogram of round weight to farm a cod until it is ready for slaughter. Is it possible for cod farming to be profitable with such production costs?
“A profitable industry requires either high prices for wild cod, or that cod farming actors are able to differentiate farmed cod from wild cod, so that one can justify production costs in terms of market price”, says Morten Heide, market researcher at Nofima.
He has led the work on the recent report, which highlights the potential of farmed cod – quality, market perception and economy. Eleven Nofima scientists with different professional backgrounds have compiled the report.
A brief summary: There are no major issues in terms of quality, and the market seems to welcome farmed cod. Economically important parameters such as slaughter weight, mortality rates and sexual maturation have been significantly improved through initiatives such as the breeding programme, and better knowledge among the fish farmers about raising the fish.
“Profitable production requires that one achieves sales prices that outweigh the costs”, Morten Heide states.
Five generations of farmed cod have been produced at the Aquaculture Research Station in Tromsø. The sixth-generation is being raised at the Centre for Marine Aquaculture, which Nofima runs on behalf of the Ministry of Trade, Industry and Fisheries. Over the course of five or six generations of breeding, the cod has become a type of tame ‘livestock’, which thrive, grow well, and no longer escape. Fifth-generation cod have better characteristics in terms of survival, growth and behaviour than has been the case for previous generations of farmed cod.
“Biologically speaking, farmed cod are therefore ready for commercial operations”, says Øyvind Hansen. He is head of the cod breeding programme at Nofima.
There is very few available economic studies related to cod farming. Since there are few commercial actors currently engaged in cod farming, there are no statistics on production costs. Therefore, the scientists had to resort to a bioeconomic model of a production cycle to calculate these costs. The model is based on several conditions with varying degrees of uncertainty.
“We calculate the sum of fixed and variable costs during the production period in order to estimate the average costs per kilogram of cod produced. The largest variable costs are associated with feed, slaughter and packing costs. We have estimated average production costs to be NOK 40-43 per kilogram of round weight, and this includes slaughter, packing and capital commitment costs”, says scientist Ekaterina Nikitina.
She points out that profitable production obviously requires a sales price of the fish and its by-products that exceed production costs.
Better conditions than ten years ago
Although the scientists are currently uncertain about the profitability of cod farming, they see significantly better conditions now than when cod farming in Norway came to a complete standstill eight to ten years ago.
The previous generation of farmed cod achieved an average weight of 3.85 kilograms in 22-23 months. Ten years ago, only a very small percentage of the farmed cod achieved this weight.
“Less feed is required than before, which reduces the largest cost item in cod farming, and there is better knowledge about light regimes which means that one avoids the negative effect of sexual maturation. This reduces the costs for the cod farmer’s”, says Ekaterina Nikitina
The development has also given cod farmers better conditions for the stable production of fish over two kilograms. This weight class achieves the best market prices.
The mortality rate of farmed cod also appears to have decreased, which improves the economic side of things. Nofima’s most recent production had a mortality rate of approximately 14 percent, which was significantly higher 10 years ago.
In general, knowledge about all aspects of production has improved. The positive development contributes to a decline in all unit costs for the farmers.
“It improves the basis for efficient and profitable commercial cod farming”, says Ekaterina Nikitina.
Facts about the study and model conditions
- The farmed cod were mostly between 3.0 and 5.0 kilograms in round weight, with an average weight of 3.85 kilograms.
- Production losses in the form of mortalities were at 14 percent
- Yields from round fish to gutted fish without heads were 63 percent, and approximately 75 percent of the fish were in the 2-4 kilogram weight class.
- 24 kilograms of feed were used per kilogram of cod produced
- The stock fish were 117 grams when transferred to the sea and grew to 3.85 kilograms in 22-23 months