Economics of Pompano Production in RAS

Title slide for Economics of Pompano Production in RAS presentation by Amy Zwemer

Economics of Pompano Production in RAS

Presentation by Amy Zwemer

Pompano RAS = Profits?

Pompano RAS = Profits?

Slide describing the example scenario for a boutique-sized pompano farm

Every situation is different…

Today's Example:

Boutique sized farm (small – niche market)

Market – Direct to Restaurants and Consumers

Parameters – HB Commercial RAS Demonstration results

Reminder results of studies conducted at Harbor Branch.

Reminder:

We are providing the results of studies conducted at Harbor Branch.

Table showing study methods and system parameters for pompano production

Study Methods

System: Low-Head RAS
Water Temperature: 27-30c
Dissolved Oxygen: 110 +/- 10%
Alkalinity: 200-250 mg/l
Light / Dark: 18h:6h
Salinity - egg to 5.5g: > 28.0 ppt
Salinity - 5.5g to 75g: 12.0 +/- .05 ppt
Salinity - 75g to 680g: 8.0 +/- .05 ppt
Table showing the four production stages from egg to market size

Production Stages

1 Larval Egg to 0.1g
2 Juvenile 0.1g to 5.5g
3 Initial Growout 5.5g to 75g
4 Final Growout 75g to 680g (1 ½ lbs)
Lets do the numbers...

Lets do the numbers…

Table showing study results for stages 1-3 with production metrics

Study Results – Completed Stages

Unit Stage 1 Stage 2 Stage 3 Total
Initial Weight g 0 0.10 5.50
Harvest Weight g 0.10 5.50 75
Production Cycle Days 23 30 86 139
Stocking Density kg/m3 1 10 45
FCR 2.90 1.42 2.14
Survival Rate 28% 59% 95% 15.7%
Salinity ppt > 28 > 28 12
Table showing incomplete Stage 4 results from a prior USDA study

Stage 4 - Incomplete

Final Growout – Results from prior USDA study

Unit Stage 4 Total
Initial Weight g 75
Harvest Weight g 680
Production Cycle Days 240 379
Stocking Density kg/m3 45
FCR 3.74
Survival Rate 63% 9.9%
Salinity ppt 8
List of feed types used in each production stage

Feed Types

Stage 1 – Otohime™ (A – B2)

Stage 2 – Otohime™ (C1 – S2) and Feed - 45% Protein

Stage 3 & 4 – Feed - 45% Protein

List of baseline assumptions for the economic model

Baseline Assumptions:

Use Harbor Branch demonstration tank systems

Monthly Production – 8,000 lbs whole fish (one 25 ft tank at 45 kg/M3 density)

11 HP consumed each hour

1.5 % System water loss per day

List of cost assumptions including feed, eggs, salaries, and labor

Cost Assumptions

Feed Cost – $32 for 50 lb bag for 45% protein (actual price, not bought in bulk)

Egg Cost - $350 per 10,000

Manager Annual Salary - $60,000

Transfer / Harvest labor - 60 hours at $8 an Hour

Full time farm staff - 2 at $10 an Hour

Table showing direct variable costs per pound broken down by stage and cost category

Direct Variable Cost per lb

Stage 1 Stage 2 Stage 3 Stage 4 Total
Eggs 629.667 - - - 0.236
Feed 35.000 3.009 1.264 1.975 2.250
Oxygen - 0.065 0.089 0.139 0.156
Water 0.333 0.009 0.001 0.002 0.002
Electric 181.333 6.574 1.452 0.709 1.120
Harvest Labor 0.114 0.040 0.060
Total Variable 3.824
List of overhead cost assumptions including salary and maintenance

Overhead Assumptions

Overhead items included in the economic analysis
Manager's Salary
Hourly staff (non harvest)
System Maintenance (estimated at 1% of equipment costs)

List of overhead costs not included in the analysis with an image

Overhead costs NOT included

Chemicals
Computers / Printers
Phone System
Copier
Office Furniture
Marketing expenses
Website / Social Media
Legal / Accounting
Insurance
Vehicles

Revenue assumptions showing $7.00 per pound wholesale price

Revenue Assumptions

Price per lb whole fish – $7.00

This is not a reasonable wholesale price, this assumes that a premium price is obtained by direct marketing

Table showing boutique financial results without capital costs

Boutique Financial Results without Capital Costs

Annual
Sales 672,000
Less: Variable Costs
Eggs 22,668
Feed 215,976
Oxygen 14,964
Water 180
Electric 107,520
Harvest Labor 5,760
367,068
Gross Margin 304,932
Overhead
Manager 60,000
Staff 41,600
System Maintenance (1% Equip) 12,425
Total Overhead 114,025
Operating Income 190,907
Annual Production in lbs 96,000
Table showing tanks and system equipment costs by production stage

Tanks and System Equipment Costs

Stage 1: 2 4'8" x 2' 2,500
Stage 2: 5 4'10" x 3' 9,000
Stage 3: 6 10' x 3'6" 444,600
Stage 4: 8 25' x 6' 786,400

Approximate Cost $1,242,500

Can Produce – 96,000 lbs per year (whole fish) Approximate Square Feet Needed - 20,200

Tables showing equipment loan assumptions and payments

Equipment Capital Costs are Added…

Loan Assumptions:
% Financing 75%
Interest Rate 6%
Equipment Term Years 10
Loan
Principle 931,875
1st Year Interest 54,004
Annual P&I Pymts 124,149
Table showing boutique financial results including equipment costs

Boutique Financial Results with Equipment Costs

Annual P& L
Sales 672,000
Less:
Total Variable Costs 367,068
Gross Margin 304,932
Overhead Total Overhead 114,025
Operating Income 190,907
Non-Operating Expenses
Interest Expense-Equip 54,004
Depreciation-Equip 124,250
Total Non-Operating Expenses 178,254
Net Income 12,653
Annual Production in lbs 96,000
Information about warehouse property assumptions for the farm location

Location, Location, Location…

Assumption – an existing warehouse will be purchased for our Boutique Farm

Pricing based on properties available in this area (older property on the low end of the price scale)

21,000 sf Warehouse on .7 Acres

Purchase price: $368,000

Tables showing real estate loan assumptions and payments

Real Estate Costs are Added…

Loan Assumptions:
% Financing 75%
Interest Rate 5%
Real Estate Term Years 20
Loan
Principle 275,943
1st Year Interest 13,610
Annual P&I Pymt 21,853
Table showing complete boutique financial results including all costs

Boutique Financial Results

Annual P& L
Sales 672,000
Less:
Total Variable Costs 367,068
Gross Margin 304,932
Overhead Total Overhead 114,025
Operating Income 190,907
Non-Operating Expenses
Interest Expense-Equip 54,004
Depreciation-Equip 124,250
Interest Expense-Bldg 13,610
Depreciation-Bldg 18,151
Total Non-Operating Expenses 210,015
Net Income (19,108)
Annual Production in lbs 96,000
Table showing cash flow analysis from first harvest

But CASH is King…

Cash Flow - Annual from first Harvest
Operating Income/Loss 190,907
Less:
Principle and Interest - Equip 124,149
Remaining Cash 66,758
Principle and Interest - Bldg 21,853
Remaining Cash 44,905
Table showing startup cash requirements including down payments and working capital

Start up Cash…

Down Payment
Equipment 310,625
Real Property 91,981
402,606
Working Capital
13 Months 315,000
Total 717,606
Conclusions slide about small scale pompano production viability

Conclusions – Small Scale

Producing Pompano Commercially in RAS has potential in a niche market if the sales price can be kept at $7 or above

Could broaden offerings to customers, if you currently have a direct market customer base for other species

Conclusions slide about large scale pompano production challenges

Conclusions – Large Scale

Profitability on a large scale with wholesale prices at $5.25 would be difficult without significant savings in feed and equipment costs as well as improvements in survival rates and FCRs

We will look at some models which will demonstrate the challenges that remain for a large commercial venture using the results presented today

Final slide Data Modeling Using Excel

Data Modeling Using Excel

Final slide

End of presentation.
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