1. Meeting the aquaculture challenge; technology development, resource use and the environmnet by Frank Asche University of Stavanger 08.06.05

2. World production of seafood

3. Trade with seafood: Exports from developing countries

4. T he importers are in many ways more interesting in that more the 90% of seafood imports is into the OECD These markets will continue to be the most important because of their ability to pay. And supply these markets will increase as global markets becomes more accessible As wealth increase, also other markets will increase in importance

5. Production shares, farmed fish 1999

6. Although aquaculture is old, a revolution occured in the 1970s New technologies and better feeding has led to an enormous increase in production Increasing control with the production process, and semiintensive and intensive farming is increasing Aquaculure is many places becomming more like any other crop

7. Two potential market structures for new aquaculture species If there is a separate market for the species in question, substantial increase in production will lead to a large decline in price If the species wins market share in a large existing market, so that there are many substitutes, there is no price effect – it is only someone that are outcompeted Trade conflicts

8. Global farmed salmon production and real Norwegian exports price (2003=1) 0 500 1000 1500 2000 81838587899193959799 2001 3 1000 tonn 0 2 4 6 8 10 GBP/kg Quantity Price

9. Global farmed salmon production and real Norwegian exports price (2003=1) 0 500 1000 1500 2000 81838587899193959799 2001 3 1000 tonn 0 2 4 6 8 10 GBP/kg Quantity Price

10. Sea bass

11. Sea bream

12. Fresh tilapia fillets to the US

13. Global farmed salmon production and real Norwegian exports price (2003=1) 0 500 1000 1500 2000 81838587899193959799 2001 3 1000 tonn 0 2 4 6 8 10 GBP/kg Quantity Price

14. Sea bass

15. Real salmon price and Norwegian production cost

16. Productivity growth The main reason for the increased production of salmon is the productivity growth Market growth has further contributed to the industry growth Salmon has this in common with other sucessfull farmed species

17. Productivity Productivity can be decomposed into input factor effects and improved technical efficiency Cost or production functions For salmon about 60% of productivity growth is improved input factors, while about 40% is better farming practices (Tveterås) In addition, there is supply chain innovations Twenty years ago feed made up 25% of salmon farmers cost, and smolt about 20%. Currently feed is 55% and smolt is still 20% For efficient chicken farmers, feed is more then 80% of the production cost Efficient species are basically converters of cheap low quality inputs to more desirable outputs

18. Real salmon price and Norwegian production cost, 1985-2004

19. Cycles In industries where the production process takes time, responsiveness to market shocks are limited This leads to cycles in profitability In the salmon industry, the cycles appear to become longer as the industry grows And it is not surprising that trade conflicts seem to be related to recessions

20. Production shares

21. Uneven market growth in the EU

22. Uneven market growth We do know that the price responsiveness of the demand (and supply) of salmon is higher in the short run In the long-run one can create or lose market segments

23. Aquaculture production will continue to increase Control of production process leads to technological development and productivity increase Cost reductions Breeding Species that does not have production processes with these characteristics, will not succeed as large volume species As with agriculture, control with the production process and productivity improvement is necessary if one are to feed more people. Wild fisheries do not have this potential Cost consideration will leave only a few volume species

24. Primarily three potential interactions between aquaculture and fisheries 1.Market interactions 2.Interaction due to increased demand for feed 3.Local environmental issues

25. Impact of demand changes for a wild species Price Quantity D

26. Impact of demand changes for a wild species Price Quantity D

27. Impact of demand changes for a wild species Price Quantity D

28. Impact of demand changes for a wild species Price Quantity D D’

29. Impact of demand changes for a wild species Price Quantity D D’ D’’

30. Impact of demand changes for a wild species Price Quantity D D’

31. Impact of demand changes for a wild species Price Quantity D

32. Impact of demand changes for a wild species If wild and farmed fish is substitutes, increased supply of farmed fish will reduce the price for and therefore the fishing effort after the wild species. Increase stock size, but short-term effects (Anderson, 1985). Alaska salmon: Effort is down, but hatcheries makes the stock effect unclear And steady supply of farmed fish can both increase and reduce demand for fish, but the main effect is likely to be a reduction in demand.

33. Increased demand for feed Can lead to increased demand for fishmeal and oil, and thereby to increased fishing pressure if:  Management of reduction fisheries are poor, and  The marine inputs in the feed are unique Unfortunately,management of many fish stocks are poor, hence it is market structure that will determine the relationship But poor management is anyway the main culpit

34. Increased demand for feed

35. There is so far little evidence that fishmeal is demanded because of its unique properties, so there are no evidence of the ”fishmeal trap”. This will change if the all buyers purchase the marine inputs because of their uniqueness. Prices will then rise relatively to vegetabile inputs So far, marine inputs are primarily used because they are cheap. Since 1997 the share of fishmeal that is going to aquaculture is not increasing anymore And as it is productivity growth that has been driving aquaculture forward, increased cost of feed will limit the potential increase in demand for marine inputs from aquaculture

36. Increased demand for feed Only species that are primarily fed using vegetabile inputs are commercially sustainable in the long run Most species farmed in developing countries are herbivore in nature Salmon can be fed only on vegatible meals. Using the current commercial feed it takes about 2.5 kg wild fish to produce a kg farmed salmon. This is in contrast to 5 kg ten years ago, and 6-8 for wild fish Will cost force salmon back to a luxury segment again in twenty years?

37. Local environmental issues Impacts on juveniles. Most aquaculture starts by feeding wildcaught juveniles. Can be avoided in intensive systems Internalisation or regulations give a Empirical Kuznets type of relationship Degradation of habitat Mining of locations Use of antibiotics and other pollution Aquaculture is a young industry, and problems must be discovered before they can be solved Good management (and regulations) gives sustainable practices, but this need not be the case

38. Antibotics use in Norwegian salmon farming

39. Local environmental issues Impacts on juveniles. Most aquaculture starts by feeding wildcaught juveniles. Can be avoided in intensive systems Internalisation or regulations give a Empirical Kuznets type of relationship Degradation of habitat Mining of locations Use of antibiotics and other pollution Aquaculture is a young industry, and problems must be discovered before they can be solved Good management (and regulations) gives sustainable practices, but this need not be the case

40. Concluding remarks The lack of control with the production process in wild fisheries limits how much wild fish that can be landed Agriculture shows how much productivity can be increased with control of the production process Although there are also many examples globally of extensive practices Aquaculture is likely to be like any other crop or livestock in the future, because one has the same type of control with the production process It will also face similar environmental challenges

41. Concluding remarks Productivity growth will lead to increased production of farmed fish. There is little doubt that aquaculture partly will meet the challenge to increase the worlds food production substantially Cost consideration will limit the number of species that is farmed in large volumes to a handful

42. Concluding remarks Aquaculture will limit potential price increases and possibly reduce prices for wild fish This will lead to reduced fishing pressure Most farmed species are likely to be primarily fed with vegetabile inputs Still, although the fishmeal trap is not present today, the only way to ensure that increased demand for small fish does not lead to over fishing is management. Cost considerations, will still limit such overfishing and will limit the number of species that is farmed in the future Local environmental issues are a management problem and can be solved