Spring / Summer 1999 Table
Risky Business of Offshore Marine Aquaculture
by Tracey Crago, WHOI Sea Grant
mussels are growing well at the offshore aquaculture test site
in Rhode Island Sound. It will take approximately 12-18 months
for the mussels to reach market size.
Before lending money to start-up businesses,
lending institutions require borrowers to submit a business plan.
A sound business plan considers-and accounts for-risks
involved with a particular business venture. Imagine trying to develop
a business plan for an offshore marine aquaculture operation, where
many of the risks involved are unknown.
That is precisely what policy analysts
Porter Hoagland, Hauke Kite-Powell, Di Jin and their colleagues
at the Woods Hole Oceanographic Institution (WHOI) Marine Policy
Center are attempting to do. By applying financial business planning
techniques with risk assessment techniques, they hope to better
understand the viability of prospective offshore marine aquaculture
operations in New England. Initially, they are developing bioeconomic
feasibility models for grow-out operations of blue mussels and sea
scallops, with plans for finfish (summer flounder, cod, and haddock)
in the works.
With WHOI Sea Grant support, and recent funding from the National
Marine Fisheries Service (NMFS) SaltonstallKennedy Program,
the investigators are looking at the feasibility of offshore aquaculture
from two major angles: operations and markets.
"The operations of different types
of farms include costs and details associated with running the farms,"
explains Hoagland, a research associate. "Some people call
this the economics of aquaculture, but it is really
just a method of business accounting."
"While the economics of nearshore
operations have been well studied," explains Hoagland, "its
really only within the last five to 10 years that entrepreneurs
have begun to look at operating aquaculture facilities in offshore
"With nearshore operations, other
users are the biggest problem," says Hoagland, referring to
the conflicts that can erupt between fishers, shellfishers, homeowners,
recreational users, and others. "In an offshore situation,
you are moving away from those conflicts, but there are others to
consider: higher transportation costs to and from a site, biological
uncertainties about spawning and grow-out, and interactions with
fishing boats and gear."
To develop the models, researchers
consider, individually, everything that could go wrong-and
the likelihood that it would-and quantify that likelihood by
assigning a numerical value or range of values. These values are
factored into a model to determine loss. The model will be used
to estimate the economic feasibility of one operation at one location
and determine the minimum efficient scale of operations. In other
words, at what level of production can the venture be considered
"We have a good feeling for the
major categories of risk," he says, "but we will be able
to develop better quantitative estimates of risk once entrepreneurs
get out there and start doing it." Right now, the group has
access to two scenarios from which they can gather data. One is
an offshore facility growing blue mussels in Rhode Island Sound;
the other is an experimental sea scallop farm located off Marthas
Obtaining the necessary permits for
the site took several months and substantial effort. "There
really arent any rules yet specific to offshore
aquaculture," explains Hoagland. As such, the authority for
permitting is now divided between several agencies: Army Corps of
Engineers, National Marine Fisheries Service (NMFS), New England
Fisheries Management Council, Environmental Protection Agency (EPA),
and the U.S. Coast Guard.
From a market perspective-the
other main component of this study-issues affecting supply
and demand become critical. The market for blue mussels varies widely
by country. The European market for blue mussels is roughly $1 billion
per year. And, while the U.S. market is growing, its value is only
between $10 million and $11 million. Timing plays a key role: the
peak market, and therefore optimal harvest time, is July through
Though some risk factors still need
to be worked into the model, preliminary data suggest that an offshore
blue mussel aquaculture operation would become profitable if the
market could yield $.54 per pound. To put this figure in perspective,
Canadian cultured blue mussels now bring in approximately $.92 per
pound. In terms of the scale of the operation, Hoagland believes
that an ideal scenario would require "one boat for one year,
operating to fullest capacity, with 300 long lines." He acknowledges
that "a smaller scale operation would probably be feasible
if the boat was rented or if boat time was purchased on a day-to-day
basis," given the significant costs associated with owning
and maintaining a boat.
While blue mussels require the longline
array for growout, sea scallops can be seeded directly on the seafloor.
Cages, the alternative method for sea scallop growout, have a lower
risk of loss, but a higher cost. This higher cost, says Hoagland,
"greatly outweighs the lower probability of mortality in the
cages." Under baseline assumptions-one being a loss of
50 percent-Hoagland and his colleagues concluded that "the
only profitable alternative is seabed seeding."
experimental blue mussel aquaculture operation in Rhode Island
Sound consists of a 200-foot longline from which blue mussel
"socks" (mesh netting filled with small "seed'
mussels) are suspended.
Like most species, the market for sea
scallops varies by season. Historically, December prices are highest
for sea scallops, in part due to lower supply and higher demand
around the holidays. This poses an inventory challenge for growers.
Essentially, the sea scallops would have to be "held"
fresh-that is, not harvested-until the price is optimal.
Using the experimental project as a
test for their model, Hoagland reports that an offshore operation
yielding 100,000 pounds of scallops per cycle could be "marginally
profitable at loss rates as high as 50 percent with a $4 per pound
market price." If the market price was $6 per pound, he says,
the operation could tolerate losses of nearly 70 percent and still
be profitable. On average, New Bedford sea scallop prices fall within
"The trick [to offshore aquaculture],"
says Hoagland, "is getting a handle on the risks involved,
including those associated with the regulatory environment. Other
states, like Connecticut and Maine, are more streamlined. However,"
he adds, "there is a lot of interest in just what a system
to deal with offshore access might look like." Hoagland and
his colleagues hope that may be just the motivation necessary to
get things moving.