Tilapia
South Florida live
Tilapia Producers
Burst on the Scene
For U.S. tilapia producers, there is one big question regarding
the live tilapia market in this country.
By Mike Picchietti*
T
his important question is:
Will history repeat itself as
dramatically as it did in the
1980s when U.S. fillet producers lost their businesses to lower
tech, lower cost producers from Central and South America? Once again
there is a “north vs. south” competitive dynamic taking place in eastern
U.S. live tilapia markets. Although
many of the so-called southern producers (in Florida) may speak Span-
ish, their farms and the farmers are
in the U.S.A. The U.S. live market is
witnessing an explosion of outdoor,
lower tech tilapia production taking
place on new South Florida farms.
Within the last two years, at least
10 to 12 new farms have come on
line in South Florida with an annual
estimated production of 4 to 5 million pounds (lb.). This is “new” lbs.
per year, and it is targeting northern
markets. This market is estimated
Aeration is a critical component of the production strategy. Photo courtesy of Aquascapers.
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at 7 to 8 million lbs., principally in
New York City and Toronto where
the Asian consumer lives. This market and supply has been steady for
at least the last 5 years. It has been
supplied by 10 to 12 indoor farms up
north, ranging from 250,000 lbs. to 3
million lbs. / year.
This new production from Florida
represents a 50% increase in supply
within in a very short period. Unless
new markets are developed, there
will be an impact in the current market. One large northern recirculating
aquaculture systems (RAS) facility
(million lbs. /year producer)—MinnAqua in Minnesota—has already left
the business. Likewise several small
farms have also thrown in the towel
in South Florida as well, with more to
follow. Like most markets experiencing an oversupply, all are feeling the
impact and for some it is “the beginning of the end.” It’s clear that 2014
will be a pivotal year in the live tilapia
market; only those with staying power will survive when the music stops.
Without significant new market development, perhaps within Latin
consumer markets, the current Asian
American market demand cannot
support these supply developments.
The phenomenon taking place in
South Florida is somewhat bizarre
from the standpoint of the speed with
which it has taken place and the number of farms involved. Also of interest is how these independent farms
Photo courtesy of Saul Ruiz Martinez www.aquatanks.com.mx
simply “burst on the scene.” Before
any market knowledge, production
and/or management experience was
developed, these investors took the
plunge into tilapia farming. One producer explained it was something like
a “Cuban style ‘keeping up with the
Joneses’ effect.” As one group would
put in 20 tanks, the next had to put in
40 and so on.
There is a design model consistent
to these farms based on the early pioneers, but operational management
has variations in the expected learning curve. There are two clusters of
farms, one in the Clewiston area and
the other in Homestead. The Clewiston farms are above and in-ground
high density polyethylene (HDPE)
lined, rectangle units of various sizes
from 20,000 to 150,000 gallon size.
Whereas the Homestead farms are
above ground, HDPE and/or galvanized round tanks of 20,000 to
30,000 gallon size.
One would think that the South
Florida farms would have a comparative advantage with the sub-tropical
climate being closer to the natural
environment of tilapia. Besides climate, South Florida allows for outdoor facilities and potentially lower
entrance or facility costs. I believe
this “entrance fee” or facility cost to
be the most significant aspect influencing and explaining the rush into
Florida tilapia farming. It is important to understand this factor in any
comparison between the traditional
RAS Northern farms and Florida
farms. I have estimated facility costs
in these operations to be as low as
USD$1.50/lb. of fish production per
year. Thus a 250,000 lb. per year farm
would cost USD$375,000. I believe
these lower entrance fees are responsible for the relatively large number
of entrepreneurs jumping into this
business so quickly. Operational costs
(feed, labor, power, freight) have yet
to be determined.
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Tilapia
New production from
Florida represents a 50%
increase in supply within
in a very short period; unless
new markets are developed,
there will be an impact
in the current market.
In the north, producers have a
higher entrance fee, i.e. more expensive facility costs. First, they are
indoors, requiring metal buildings
to survive the snow loads and cold
temps for this tropical fish. The higher indoor building costs forces more
intensive production requirements to
support a fish biomass load at harvest
of 0.5 to 0.8 lbs. of fish per gallon.
Second, tighter wastewater treatment
regulations up north require highercost water treatment infrastructure
and equipment. These two aspects
create an escalating domino impact
on facility costs.
Traditional RAS require expensive
fiberglass or cement tanks, intensive
filtration, solids removal (drum filters), plastic media (fluidized beds or
trickling filters) with costly substrate
to remove toxic ammonia (kaldese,
biodeck, beads), pure oxygen gas
storage, use and saturation equipment, CO2 strippers, pumps for one
to two water exchanges / hr., automated feeding equipment, fossil fuel
heating and waste water treatment
infrastructure for discharge management. These infrastructure costs,
based on personal communications,
result in facility costs ranging from
USD$4 - 6/lb. of fish production per
year. Thus a relatively small farm of
250,000 lb. per year can have an entrance fee cost north of USD$1 million before operational costs come
into play.
The producers in South Florida, at
least for the time being, are able to
A common method of tank construction in the Florida tilapia industry. Photo courtesy of Aquascapers.
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avoid many of these expensive and intensive infrastructure and equipment
costs. The climate, water resources
and current permit requirements allow them to avoid buildings over
their tanks and reduce waste water
treatment equipment costs. Accordingly, many of the Florida farms are
spread out over several acres of land.
So, lower costing tanks using plastic
lined ponds (0.20/feet2), hog wire
supported HPDE tanks (USD$0.10/
gallon) or galvanized walls are being
used. Using more land space outdoors
allows for reduced densities (0.10 to
0.25 lb. /gallon at harvest weight).
This outdoor land space also
should reduce filtration or water
treatment facility costs. Until recently, waste water treatment was being
managed in large ponds, lined or not,
and rock pits for waste water to be
removed from the facility by seeping
back into the top layers of the aquifer’s water table and/or sprayed over
crops. Some Florida farms (in the
Homestead area) flush at least 100%
per day of new water. A farm in the
Clewiston area told me they don’t
flush at all, using probiotic bacteria
and aeration to manage waste within
the ponds. The issue of water reuse
is now front and center in the more
professional, better financed farms.
To remain sustainable, the larger
more professional farms are now
incorporating recirculation, biofloc,
probiotic bacteria, green water management, filtration technology and
hybrid combinations of all of these
techniques. The trend is toward more
recirculation and less new water,
so new entrance fee costs will rise.
The resource that set the stage for
these farms to even exist (at least in
Homestead area) is the massive water
availability and current low cost for
use of the Biscayne aquifer. The Biscayne aquifer is shallow (beginning
at 4 feet) and made from highly permeable limestone, allowing for fluid
water movement. It spans over 4,000
square miles including Broward, Miami – Dade, Monroe and Palm Beach
Counties. Due to the rapid rise of all
Photo courtesy of Saul Ruiz Martinez www.aquatanks.com.mx
these new farms the Florida Division
of Aquaculture (DACS) has tightened
permit requirements and has recently
mandated lined holding or resupply
ponds, which forces more water to be
recirculated to the grow tanks. These
so-called “wastewater aspects” will
have a significant impact on the sustainability of these Florida farms and
their long term market impacts
I do not see any decisive advantage in operational cost parameters
for either region. Because of the wide
variety of operational management
regimes it is impossible to fully analyze these costs today. There are pluses and minuses for both regions, as I
will continue to point out in this article. Some Florida farms are selling at
a price (farm gate) of USD$1.85 - 2/
lb. and delivering into northern markets below USD$2.45/lb. Whether or
not this is a result of lower operating
costs, market buy-in strategy, panic
selling or unclear accounting of inexperienced operators is yet to be determined. While northern (indoor RAS)
producers who have more experience
Climate, water resources and current permit requirements in South
Florida allow producers to avoid buildings over their tanks and reduce
waste water treatment equipment costs.
analyzing their costs tell me they have
production costs between USD$1.50
- 1.85/lb. farm gate, freight costs to
major markets up north are less.
Farm size economies impact facility and operational costs for both
sides; northern farms range from
250,000 lbs. / year to 3 million while
Florida’s range from 100,000 lbs. to
1.5 million lbs. at this time. Cheaper
entrance fees (facility costs) cannot be
the sole reason for lower final selling
price advantages. At the end of the
day, operational costs will come into
play. The more established northern
farms to some degree own their facilities outright by now. They also
have a significant advantage over the
Florida farms, not the least of which
is experience in delivering quality
product. It takes time and losses to
learn the tricks of the trade. The old
saying is “you have to kill a lot of fish
to learn how to grow (and sell) a lot
of fish.” The learning curve has its
price! But the Florida producers are
learning quickly and the battle lines
are being drawn for 2014.
Northern, high tech, indoor RAS
should have a labor advantage over
lower tech extensive systems, at least
as far as numbers of employees. One
northern producer recently told me
that due to attributes of his RAS
technology, he is growing 400,000
lbs. per year with only 2.5 employees!
The Florida farms use mostly family
or lower cost agricultural labor since
the area has a large amount of immigrants working in sugar cane or nurs» 69
Tilapia
ery industries, or harvesting America’s vegetables. These employees are
cheaper per hour but the farms seem
to use more employees than indoor
RAS farms to manage the less automated space, lower densities and more
expansive layouts in Florida farms.
The northern farms have a big advantage in delivered fish freight, being closer to the markets by at least
half the distance. Theoretically they
should have cheaper delivery costs—
not to mention the impact of hauling time (stress) on the quality of the
animals arriving in the market. However, some of the outdoor farms in
the south have reduced delivery costs
and control quality by purchasing
their own delivery trucks. In addition
they also wisely save on feed, doing
a “back haul” of feed from northern
mills. Thus, I would estimate that feed
is a similar cost for both northern and
southern farms (without FCR impact
analysis).
As for electric power, Georgia,
North Carolina and West Virginia
have some of the cheapest power
costs in the nation—fifth and eighth
lowest, at USD$0.06 - $0.075 per
kWh. While Florida is one of the
highest in the nation at USD$0.11
– 0.12/kwh i.e., 16% higher than
the national average and 50 to 60%
higher than the states mentioned.
One producer in Homestead told me
in his region the kWh rate is as high
as USD$0.18! Some northern RAS
farms (personal communication)
use 1 HP / 5,000 lbs. production /
year (85 HP /400,000 lbs./yr.) but
Overhead shade cloths moderate solar intensity and discourage avian predators. Photo courtesy of Aquascapers.
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they also need to buy pure oxygen
to support their densities, adding O2
costs of approximately USD$0.10/
lb. of harvested fish.
In outdoor Florida farms, blower
aeration is the driving power that
supports a biomass of 0.10 to 0.25/
lbs. of harvested crop per gallon of
tank capacity. They use 1 HP of air
blower capacity per 20,000 gallon
tank, supporting a harvest of 0.25
lbs. /gallon or 5,000 lbs. at harvest.
Plus a 3 HP well pump, delivering
330 gpm at 5 ft. head over 8 tanks of
20,000 gallons/tank to flush water
100% daily. On a kWh basis northern farms have an advantage in lower
kWh unit costs but again, Florida’s
outdoor and more extensive space
eliminates the pure oxygen cost for
fish produced.
There is high variation in energy
costs in Florida farms, considering
some farms can flush or dump waste
water and others have to clean it up
and recirculate it back, i.e. biofloc
and green water systems. Bottom
line, this cost parameter (kwh/kg
fish produced) will vary from farm
to farm based on the impact of water use and reuse, discharge permitting issues, land size, densities, management technique and ultimately
production technology. This is the
area where the promises of RAS will
be challenged and the future of in-
South Florida’s farms use
cheaper labor but seem to
use more employees than
indoor RAS farms to manage
the less automated space.
Also, northern farms should
have an advantage in
delivered fish freight.
dustrial low water use versus natural resource based systems will be
forthcoming.
Over the last 20 years (since 1992)
my company, Aquasafra, Inc., has been
a participant of this live industry as
the premier tilapia hatchery supplying northern and now southern tilapia farms with hardy, white hybrid
tilapia fingerlings. From a fingerling
or genetic standpoint in these comparisons, the production data should
be equal between north and south,
at least relative to genetics impact of
these cost comparisons.
This article is a preliminary “FYI”
or “heads up!” for the developments
taking place in the North American
live market. A better, more intensive
analysis will occur over time as the
farms in Florida learn to marry their
natural resource systems with intensive technology to find the most
sustainable system. One thing is
clear, based on the business culture
in South Florida: the farmed tilapia
opportunity in this region seems to
be appealing to the hands-on entrepreneurial style of Latin immigrants
freed from the dictatorial socialist
repression.
Most of these new Americans are
not going to work as yuppie executives for IBM - they have to create
their own small and medium businesses. Most new immigrant fish
farmers are used to working in small
businesses and farms (horticulture,
nurseries, etc.). Now they are in a
land of opportunity where they can
use their own language, practice their
own culture and be close to their
families. The lower entrance fee of
outdoor tilapia culture in the U.S.
is attractive and it is impacting the
live tilapia supply in northern markets. The older established indoor
farms in the north have experience
and quality on their side. The cost
comparisons are not yet completely
clear, so the battle may be about who
wants to work for less. Stay tuned!
Please feel free to contact me:
[email protected]
Mike Picchietti discovered tilapia farming while
serving as a Peace Corps in Ghana and went on to
become co-founder and President of Regal Springs
Trading. With 33 years of experience, he is the owner
of Aquasafra, Inc., America’s oldest and largest
tilapia hatchery.
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