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The Feasibility of Crop Insurance for Saltwater Aquaculture Contract Number: D11PX18749

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The Feasibility of Crop Insurance for Saltwater Aquaculture Contract Number: D11PX18749 The feasibility of crop insurance for saltwater aquaculture Contract number: D11PX18749 Draft report prepared for Risk Management Agency, USDA September 2011 Promar International 333 N. Fairfax Street, Suite 202 Alexandria, VA 22314 USA Tel:(703) 739-9090 Fax:(703) 739-9098 The feasibility of crop insurance for saltwater aquaculture Draft report prepared for Risk Management Agency, USDA CONTENTS EXECUTIVE SUMMARY I SECTION 1: THE FEASIBILITY REVIEW 1 1.1 Background 1 1.2 Objectives 1 1.3 Scope of study 1 1.3.1 Species 1 1.3.2 Types of aquaculture production reviewed 1 1.4 Feasibility study approach 2 1.5 The review of documentation in the NRMFPA 4 1.6 Interviews and specialist support 6 SECTION 2: US AQUACULTURE SECTOR CONTEXT 7 2.1 Global aquaculture development 7 2.1.1 Global production 8 2.1.2 US production 11 2.1.3 Consumption 11 2.1.4 Global trade 12 2.1.5 Key factors affecting demand in mature markets 13 2.1.6 Asia dominates sub-tropical and tropical aquaculture production 14 2.2 The future 16 2.2.1 The US competitive position and potential 18 SECTION 3: AQUACULTURE SYSTEMS 25 3.1 Ponds 25 3.2 Cages or net cages 26 3.3 Recirculating systems 27 3.4 Offshore aquaculture 33 3.5 Biosecurity 34 i 3.6 Aquatic animal health products 37 3.7 Causes of death in aquaculture 39 SECTION 4: AQUACULTURE INSURANCE 40 4.1 The previous review of aquaculture insurance 40 4.2 Aquaculture crop insurance – the private insurer’s perspective 41 4.3 RMA insurance plan design issues 43 4.3.1 Insurability and determinability 44 4.3.2 Measurability 48 4.3.3 Inventory measurement 50 4.3.4 Actuarial assessment of data limitations 55 4.3.5 Data availability 55 4.3.6 Rating and pricing 57 4.3.7 Willingness to pay 60 4.4 The availability of other methods of managing risk 61 4.4.1 The status of private aquaculture insurance in the US 61 4.4.2 Federal or state programs 65 SECTION 5: BRIEF PROFILE OF EACH SPECIES 69 5.1 US farming of marine finfish species for food 69 5.2 Atlantic salmon (salmo salar) 71 5.2.1 Status and trends 71 5.2.2 Output (volume and value) 76 5.2.3 Number of producers and regional distribution 77 5.2.4 Concentration of ownership 79 5.2.5 Markets 80 5.2.6 Price data 81 5.2.7 Availability of production history and other data 81 5.2.8 Biology 85 5.2.9 Production system 85 5.2.10 Length of production cycle 89 5.2.11 Key factors affecting success 90 5.2.12 Perils 94 5.2.13 Classification of perils 98 5.2.14 Crop insurance issues 99 5.3 Shrimp (Litopenaeus vannamei) 100 5.3.1 Status and trends 100 5.3.2 Output (volume and value) 101 5.3.3 Number of producers 102 5.3.4 Concentration of ownership 102 5.3.5 Regional distribution of production 103 5.3.6 Markets 103 5.3.7 Price data 108 ii 5.3.8 Availability of production history and other data 108 5.3.9 Biology 109 5.3.10 Production system 109 5.3.11 Length of production cycle 110 5.3.12 Key factors affecting success 111 5.3.13 Perils 111 5.3.14 Classification of perils 112 5.3.15 Crop insurance issues 112 5.4 Red drum (also redfish - Sciaenops ocellatus) 113 5.5 Amberjack (yellowtail or kampachi - Seriola rivoliana) and moi (Polydactylus sexfilis) 114 5.6 Summer flounder (Palalychthis dentatus) and sea bream (Sparus aurata) 115 SECTION 6: FEASIBILITY RECOMMENDATIONS 116 6.1 Criteria for assessing RMA insurance plan feasibility 116 6.1.1 Aquaculture production systems and crop insurance 116 6.1.2 Key crop insurance issues 116 6.2 Summary of conclusions by species 120 6.3 Concluding comments 126 APPENDIX 1. SOURCES OF AQUACULTURE FISH PRICES 128 APPENDIX 2. AQUACULTURE PERMIT CHECKLIST FOR THE STATE OF WASHINGTON 130 APPENDIX 3. BIBLIOGRAPHY 131 List of figures Figure 1: The fish and crustacean production (million MT) ........................................................................................... 8 Figure 2: Development of capture and all aquaculture output (million MT) ............................................................. 8 Figure 3: Development of aquaculture output (million MT) ......................................................................................... 9 Figure 4: Share of aquaculture production, 2008 .......................................................................................................... 10 Figure 5: The development of global production of the species under review ..................................................... 10 Figure 6: Share of world fisheries production destined to exports.......................................................................... 12 Figure 7: World fish trade: Export value ($ billion) ...................................................................................................... 13 Figure 8: Hourly compensation costs of manufacturing employees in selected economies and regions (Index $29.98 =100, 2006) ............................................................................................................................................................... 15 Figure 9: Unit process flow diagram used to rear tilapia in a RAS ........................................................................... 29 Figure 10: Decision tree for identification of insurable diseases ............................................................................... 46 Figure 12: Urner Barry's US Fresh Farmed Salmon Index ($/lb) ............................................................................... 74 Figure 13: US consumption of salmon (lbs/head) .......................................................................................................... 75 Figure 14: US imports of Atlantic salmon, by country, in million dollars ................................................................ 76 Figure 15: Aquaculture leases in Maine ............................................................................................................................ 78 Figure 16: Salmon aquaculture leases in Washington ................................................................................................... 79 iii Figure 17: US farmed shrimp production, in million pounds .................................................................................... 102 Figure 18: US shrimp imports by product form (million pounds, 2008) ............................................................... 103 Figure 19: Shrimp price ($/lb.) by size (end of July 2010) - MX west coast whites ............................................ 104 Figure 20: US Shrimp imports - Volume by form (‘000 pounds, 1995-2008) ...................................................... 105 Figure 21: US shrimp imports by country and volume (thousand pounds) .......................................................... 106 Figure 22: The Urner Barry shrimp price index (composite $/lb) .......................................................................... 106 List of tables Table 1: Finfish and crustacean production, 2008 ............................................................................................................ 7 Table 2: US aquaculture production volume and value, by species in 2005 and 2010 ........................................ 11 Table 3: Approved vaccines for aquatic animal health ................................................................................................. 38 Table 4: Sample count example ......................................................................................................................................... 53 Table 5: Survival rate during grow-out on Texas pond shrimp farms. .................................................................... 56 Table 6: Survival rate on one Florida farm in 2010 ....................................................................................................... 56 Table 7: Estimated production summary for US marine food fish aquaculture, 2010, pounds ......................... 69 Table 8: US marine finfish farming for food by state .................................................................................................... 70 Table 9: Estimate of the average farming costs to grow salmon in 2009 24 ............................................................ 82 Table 10: US unit value of shrimp imports by country($/lb) .................................................................................... 107 Table 11: Individual pond production summary from a Florida farm ..................................................................... 108 iv The feasibility of crop insurance for saltwater aquaculture Executive Summary EXECUTIVE SUMMARY A new industry • While aquaculture has a long history, modern intensive aquaculture is quite recent. Some parts of modern aquaculture are built around species that only recently have been domesticated for farming in more intensive production systems. Moreover, unlike animal agriculture, aquaculture involves a much larger and diverse range of species, each with their own distinct character under domestication. Fragile, sensitive animals • Most species are highly sensitive to unfavorable aquatic environmental conditions. Minor deviations from optimal conditions can result in poor growth, poor health, and high mortality. Biosecurity measures must ensure that potential threats to the health and well-being of aquatic animals are addressed. Threats can be introduced through the water, purchased broodstock, eggs, fry, fingerlings, feed, or visiting vehicles and personnel. A complex aquatic environment • Aquatic environments contain dissolved compounds and various organisms that both promote and constrain aquatic animal
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