Some of the most widely used pricing models for aquaculture feed are outdated and inefficient. If we start thinking about feed cost instead of feed prices, our industry will move efficiently into the future, writes OddGeir Oddsen, C.E.O. of aquaculture feed supplier ProChaete.
Price versus cost
In the global aquaculture feed market, a significant percentage of buyers only consider the price when deciding what feed to buy. And the price is an inaccurate indicator of how good the feed is, not only in terms of nutritional quality, but also in terms of how good it is for business. More specifically, a product’s price does not tell us what the product is worth, just what it costs.
This means that it is up to each buyer to define the worth of the feed she or he is buying. Does the price of the feed reflect the health, weight and survival rates of my animals? And so the feed price itself becomes an inaccurate indicator of the feed’s value.
Feed cost, on the other hand, is the total cost related to the feed of getting a certain animal to a certain stage in its life cycle. Let us say, for instance, that you are running a shrimp farm that covers the shrimps’ whole life cycles. Getting each shrimp to a certain weight more quickly is obviously good for business, because it raises the overall capacity of the farm. Thus switching to a higher quality feed will lower feed cost, provided that the extra money you spend does not exceed what you earn by raising the farm’s capacity.
So why are we looking at the price tag?
Now, some of the more advanced areas of the aquaculture industry – salmon farming is one example – have regarded calculating feed cost as a smart way of doing business for many years. The shrimp farming industry seems to be lagging a little behind. Why is that?
Some will argue it has to do with simplicity: Dealing solely with price is less complicated. It may also, at least in some parts of the world, have something to do with tradition: This is the way it’s always been done. Why change a winning recipe?
There are also the aquaculture businesses that only constitute small parts of the value chain. If your responsibility is to get your shrimp to PL12 before selling them to another facility that pays by number of shrimp, it doesn’t matter if each PL12 shrimp is larger healthier, stronger, or responds better to stress. You don’t get paid more if the mortality rate goes down or even if your shrimps are twice the size as that of your competitors, so why waste money on high quality feed? And if your buyer doesn’t see the value in buying exceptional PL12 shrimp from your facility, there really is no value in buying a more nutritional shrimp feed. But can there be?
And why is all this so important?
At ProChaete, our mission is to find better, more sustainable ways of producing protein in order to feed the world’s growing population. Soon we’ll be more than nine billion people on this planet, and feeding all of us will require brains, effort, and science. And it requires consistent small steps in the right direction. Producing nutrient-dense aquaculture feed sustainably will in turn produce larger, healthier shrimp faster. Higher performing feed with higher protein retention makes the industry less wasteful. And when the shrimp farmer who used to sell his shrimps at PL12 is able to sell them at PL10 because they’re that much bigger, he will start seeing the value of calculating the feed cost. And as soon as efficient shrimp farming is recognised as being good for business, the world will see an industry that’s running cleaner, and producing better food.
Changing the pricing scheme in the aquaculture feed business not only has the ability to change our industry. It has the potential to change the way we feed the world.
Sea Farms Nutrition Ltd