Land based farming of salmon: economic analysis
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The aim of this report is to investigate the economics of land based aquaculture of salmon and to compare the competitiveness of land based production to the conventional, sea based production model. Two land based scenarios are analysed: full-cycle grow out of harvestable salmon on land and “post smolt”, the production of larger smolts on land before release of the fish for grow-out in sea. In the first part of the report, background information on the salmon aquaculture industry is presented. This shows that production challenges and biological issues exist in traditional farming of salmon and there is increasing search for alternative ways of salmon production. The study then analyses two such alternatives, using the methodologies NPV, IRR and analysis of cost of production. Using local and national data, the study is designed to investigate and compare farm-gate cost of production in a Norwegian context, aiming to build an understanding about the price firms will need to fetch over time to stay profitable. The results indicate that full cycle land based salmon farmers in Norway still might rely on a higher price than sea based farmers do. In terms of using land based technology in combination with sea based grow-out, the study found that it is challenging to estimate the net effect of investment in post smolt for a company as a whole. While some indications are given about the potential effect on cost of production, uncertainty remains about the benefits of post smolt – such as the magnitude of relief of lice related issues and costs. Still, the analysis could shed light on some interesting points with respect to production planning using larger smolts, and hopes to make a contribution to the academic discussion in this respect.