THE FINANCIAL VIABILITY OF POLYCULTURE: EVIDENCE BASED ON DATA FOR SALMON- MUSSEL AND SALMON-MACROALGAE PRODUCTION SYSTEMS

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1 THE FINANCIAL VIABILITY OF POLYCULTURE: EVIDENCE BASED ON DATA FOR SALMON- MUSSEL AND SALMON-MACROALGAE PRODUCTION SYSTEMS D.J. Whitmarsh 1 E.J. Cook 2, M. Kelly 2, C. Sanderson 2 1 University of Portsmouth 2 Scottish Association of Marine Science

2 Background Concern over the impact of aquaculture on the marine environment centres on: Pressure on wild fish stocks authorization author without disseminate not worthwhile?do Pollution and habitat degradation These impacts represent an economic cost to society (an externality ), but valuing them in monetary terms is difficult Mitigating pollution: dilution or conversion? Conversion: polyculture may be the first step towards sustainability Integrated salmon-mussel and salmon-macroalgae systems: environmentally promising, but financially

3 Investment appraisal Analysis: evaluating the Net Present Value (NPV) and Internal Rate of Return (IRR) of capital investment in a sea cage facility Polyculture systems: Atlantic salmon (Salmo salar) integrated with two commercially valuable species: Blue mussel Mytilus edulis Red seaweed Palmaria palmata Rationale: Economies of integration can be expected if production is enhanced due to biofiltration. Specifically: Interception of particulate organic matter Uptake of dissolved nutrients Key comparison: NPV and IRR under monoculture and under polyculture

4 o D in at se m is td no e ra ut ho ut ta ou ith w ho riz at io n Mytilus edulis

5 Palmaria palmata

6 Data and assumptions Revenue and costs: based on indicative values for a representative farm located in an area similar to West of Scotland Production: Salmon: Sea cages (12 x 3500m 2 ) producing 600 tonnes p.a. Mussels: Grown using longline system with vertical ropes used to collect natural seed Palmaria: Grown using a spore culture system (Browne, 2001) with seeded ropes Baseline prices: Ex-farm (source: Eurostat New Cronos database and trade data)

7 Schematic diagram of mussel lines 25 cm 10 m Depth Seabed Danline mussel spat rope 100 cm Anchor weight Anchor weights

8 Financial performance: salmon and mussels Indicator NPV ( 000) IRR (%) Baseline values Salmon Zero Production: Salmon = 600 tonnes p.a, Mussels = 77 tonnes p.a. Prices: Salmon = 1829 ( 2652), Mussels = 797 ( 1156) Discount rate: 8% monoculture Exchange rate: 1 = 1.45 Mytilus monoculture Polyculture with enhanced production of: % %

9 Financial performance: salmon and macroalgae Indicator NPV ( 000) IRR (%) Baseline values Salmon Zero 20% Production: Salmon = 600 tonnes p.a, Palmaria = 346 wet-tonnes p.a. Prices: Salmon = 1829 ( 2652), Palmaria = 500 ( 725) wet weight Discount rate: 8% monoculture Exchange rate: 1 = 1.45 Palmaria monoculture Polyculture with enhanced production of: , % 1,

10 Salmon price trend: EU Year Real price ( per tonne)

11 Salmon price trend: UK Y e a r Real price ( per tonne)

12 Salmon-mussel polyculture: sensitivity of NPV to salmon price trend and enhancement NPV ( ) 1,000, , , , , , Mussel productivity enhancement (%) Constant price 1% price fall

13 Salmon-macroalgae polyculture: sensitivity of NPV to salmon price trend and enhancement NPV ( ) 1,600,000 1,400,000 1,200,000 1,000, , , , , , Macroalgae productivity enhancement (%) Constant price 1% p.a. price fall

14 Conclusions and research implications The results demonstrate the commercial potential of integrated salmon-mussel and salmon macroalgae culture systems Enhancement effects translate into measurable financial benefits (i.e. economies of integration) BUT future salmon price trends are critical: a fall of only 1% p.a. may make polyculture unattractive unless enhancement effects are strong Research implications: measuring the magnitude of enhancement effects evaluating not just the financial viability of polyculture but the social benefits from mitigating pollution damage