Eco Investor December 2014

Industry Focus

The Food Future is Feed Efficient Aquaculture

Sustainable food has the potential to become as big a share market theme as clean energy and an important part of that is aquaculture, as seafood is the most consumed animal protein in the world. It surpasses other meats including poultry, pork and beef and consumption is expected to continue to surge over the next 10 years.

Rapid demand growth is outstripping supply, says a Rabobank report, Smooth Sailing for Australian Seafood, co-authored by Rabobank senior analyst Gorjan Nikolik, a specialist in the global seafood sector, and Matt Costello, an Australian animal proteins analyst.

Producing more with less is the challenge for future food production, and the aquaculture sector is the most efficient at converting feed to food compared to all other animal protein sectors, said Mr Costello.

While farmed salmon requires 1.2 kilograms of feed to produce one kilogram of protein, and prawn farming requires 1.3 kilograms of feed, an estimated eight kilograms of feed are needed to produce one kilogram of beef.

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Kilograms of feed required to produce a kilogram of protein.

The rise of aquaculture is playing a significant role in driving global growth in seafood consumption due to its ability to sustainably and efficiently convert feed to protein and keep prices affordable.

"With wild-catch seafood production growth remaining close to stagnant over the past 15 years, global seafood production is growing through increased aquaculture," said Mr Costello. "Between 1990 and 2012, wild-catch seafood production increased just eight percent. And with rising environmental and sustainability pressures coming from all participants along the supply chain – including consumers, companies and governments – it is likely there will be no growth in wild-catch production in the future. Assuming that wild-catch remains at current levels, it is estimated that the extra 30 to 40 million tonnes of additional seafood will be required from aquaculture to meet global demand by 2030."

Globally, aquaculture now accounts for over 50 per cent of seafood for human consumption, having surpassed wild-catch in 2012.

But in Australia, seafood production remains dominated by wild-catch, which was 87 per cent of production in 2012. Although small, aquaculture's share is growing.

Australia's advantage to meet the growing demand is at the high-value and premium end of the global market. Although the Australian seafood industry accounts for only a small proportion of world seafood production and trade, it plays an important role globally because of the wide range of premium aquaculture and wild-catch products produced here.

"With one of the strongest reputations globally for producing high-value, world-class, sustainable and environmentally-friendly seafood products, the Australian seafood industry is very well positioned to supply seafood hungry consumers internationally and domestically," Mr Costello said.

Australia's seafood sector is forecast to have a value of $2.5 billion in 2014-15, and consists of a wide range of sectors including rock lobster, southern bluefin tuna and Tasmanian salmon.

However, the production of southern bluefin tuna was heavily criticized in a recent and excellent SBS program What's The Catch? by Matthew Evans. His criticisms are the dangerously low southern bluefin tuna stocks in the wild and the low feed conversion rate that requires 10 kilograms of feed per kilogram produced.

Clean Seas Tuna has farmed southern bluefin tuna but in recent years it has focused on farming Hiramasa Yellowtail Kingfish.

Mr Evans also criticized Atlantic salmon farming for the fecal waste it produces. Although fallowing the water and sea bed can help, plans to double production in Tasmania mean it remains a concern. He praised the industry for its research in reducing and being close to eliminating the fish content of the feed.

For aquaculture, Mr Evans says oysters and blue mussels are most sustainable as they help clean the environment in which they are grown, plus experimental prawn farming in north Queensland as it has no wild fish in the feed. For wild catch, Mr Evans likes mackerel and sees sardines as an under-used but sustainable seafood and would like to see its consumption become mainstream.

Global consumption of seafood is forecast to average just under 20 kilograms a head annually this year. Rising consumption is a world-wide trend and is particularly strong in developing countries, including China. "Currently, most of the Chinese seafood consumption is still based on low-value domestically-raised product. But more significant is the expected growth in demand from Chinese consumers for higher-end seafood products, many of which will need to be imported. This is a key opportunity for export-oriented aquaculture and fisheries, such as in Australia, which can supply premium items," said Mr Costello.

Among listed stocks, Huon Aquaculture exports to Asia, and Clean Seas Tuna is growing its Kingfish markets in Asia, Europe and the US. Commodities Group is planning industrial scale prawn farming for the Asian market, while in recent years Tassal has pulled back from exports to grow the domestic market.

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