Pareto Securities Senior Analyst Henning Lund, who was the keynote speaker at the IntraFish Seafood Investor Forum in NYC last week, broke down the possible cost of each farming method, and the math showed land-based salmon farming is suddenly becoming a very real alternative.
- Ocean farming: $12.30 (€10.90) per kg capacity in 2017 with Capex of $10.30 (€9.20) per kg
- Land-based grow out of big fish: $13 (€11.60)-14 per kg capacity in 2020 with Capex of $11 (€9.80)-12 per kg
- Big smolt farming: $13.70 (€12.20) per kg capacity in 2020 with Capex of $11.70 (€10.40) per kg
- Traditional salmon farming: $14 (€12.50) per kg capacity in 2019 with Capex of $11 (€9.80) per kg
He said the US fresh market is supplied by trucking salmon in from Canada and air freighted salmon from Chile and Europe. However, EU and Chilean producers add $1 ( €0.89) to $1.50 ( €1.30) in air transportation costs to the United States and Asia.
“One key to land-based farming is to have high density,” he said, offering the comparison of an OPEX of about $13 (€11.60) per kg at 10 kg biomass per 3 cubic meters versus an OPEX of about $4 (€3.60) per kg at 80 kg biomass per 3 cubic meters.
"However there are several difficulties to overcome with land-based farming," Lund said. "There is a steep learning curve here." He added the two main factors are management and operational experience.
Another factor is smolt size, which today is about 100 grams, but he predicted that to double by 2020 and possibly reach about 500 grams long term. Moving from 100 to 500-gram smolt is about an 8 percent volume growth, or 5 kg in harvest weight.
"There is a lot of investments and initiatives right now, especially in Norway, to increase that size," he said.