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2/13/2012
1
Aquaculture Global Outlook and Sustainability
Travis Larkin
Seafood ExchangeRaleigh, NC
2/13/2012
2
Global Aquaculture Alliance
• Communications– Global Aquaculture Advocatemagazine– Website (www.gaalliance.org)– Electronic newsletter– Advocacy – Networking
• Certification Standards– Proactively manage issues
• Global Outlook for Aquaculture Leadership (GOAL) – Discuss production, markets, issues
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3
Building on the Insightsof GOAL 2011
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4
Global Economy
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5
The Square Root Recovery or Double‐Dip Recession? January 2003 – July 2011
Source: TIGER Database, The Brookings Institutions
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6
6
Euro Fiscal and Sovereign Crisis: From Greece to Italy
• Potential consequences: – Credit crunch and
contraction of trade credit in the Eurozone
– Temporary demand contraction as unemployment continues to rise (9% in the Eurozone)
– Increased demand elasticity to price of seafood
– Currency risks in case of Greece disorderly default and exit from EU
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7
World Economic Output Over 50 Years, 1984‐2034 (2005 PPP dollars)
Source: Homi Kharas, The Emerging Middle Class in Developing Countries, OECD 2010.
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8
The world’s economic centre of gravity, 1980–2007 (black) and extrapolated (in red), at 3‐year intervals.
Source: Danny Quah, “The global economy's shifting centre of gravity”, LSE 2010
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9
The middle class is the primary seafood consumer
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10
Growing Economic Power, Growing Middle Class:By 2030: 66% of The World’s Middle Class Will Live in Asia Pacific
Source: Homi Kharas, The Emerging Middle Class in Developing Countries, OECD 2010
Numbers (millions) and Share (percent) of the Global Middle Class
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11
India and China Drive Growthin the Global Middle Class
Source: The Emerging Middle Class in Developing Countries, OECD 2010.
China
India
EU
US
Japan
Other Asia
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12
The Proportion of Animal Protein in the Diet Increases with Income per Capita
Source: H.H. Jensen / Marine Pollution Bulletin 53 (2006)
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13
The Boom in Chinese Seafood Consumption
• Domestic demand for seafood in China has increased from 7kg consumption per person in 1985 to about 25kg in 2005.
• The same source estimates that China will double its per‐capita spending on seafood products between 2008 and 2020 (in Yuan terms) .
Source: K.B. Lindkvist et al. / Marine Policy 32 (2008)
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However, The Share of Fish Protein in Total Animal Protein Does not Necessarily Increase With Income: Culture and Natural Resources Endowment Matter
Source: H.H. Jensen / Marine Pollution Bulletin 53 (2006)
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Source: Cowen and FAO
0%
25%
50%
75%
100%
USA EUJa
pan
Canad
a
Brazil
Russia Ind
iaChin
aMex
icoBan
glade
shInd
ones
iaPak
istan
Nigeria
Fish (% of calorie/capita) Pork Chicken Beef Goat
Protein Choice
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18
Implications for Fisheries and Aquaculture
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Capture fisheries have reached their limits…
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20
Aquaculture needs to produce around 4% (or 2.4 million tons) more marine proteins each year to satisfy demand
Historically, more than 7% has been achieved (but from a lower base volume)
50% of the industry responsible for 100% of the growth in demand
Global Seafood production and forecast 1950 ‐ 2020
Wild catch supply cannot increase
• Source: Rabobank, Food and Agriculture Organization of the United• Nations, 2011
0
20
40
60
80
100
120
140
160
180
195019551960196519701975198019851990199520002005201020152020
Mill
ion
to
nn
es
Wild catch Aquaculture
Forecast
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21
Capture Fisheries • Option 1: Regulated open access has failed:
– An estimated $50 billion is lost annually as a result of poor governance in fisheries (“Sunken Billions,” World Bank, 2009).
• Option 2: Rights‐based systems generate sustainable wealth. – NOT necessarily more fish, but lower cost, higher quality, and higher net revenue.
– Catch shares, days at sea, fishing quotas, territorial use rights, formalizing tradition rights
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Who Grows the Fish?
Source: Hall, S. Blue Frontiers (2011), WorldFish Centre
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World Bank Fish to 2030 Project• Cooperation with International Food Policy Research Institute (IFPRI – Siwa Msangi), University of Arkansas, (Madan Dey) and FAO
• Builds upon the 2003 project “Fish to 2020” –but takes a much closer look at aquaculture and its potential for future growth to meet demand
• Starts from a new modeling framework
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Total Seafood Production: 1970‐2009 (FAO 2010) , 2010‐30 forecast VERY PRELIMINARY!!!
020406080
100120140160180200
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
2024
2027
2030
Mill
ion
MT
Capture
Total
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Aquaculture Share
2010
• Approx. 39% of total harvest• Approx. 50% of fish for
human consumption• Aquaculture growth 2000‐
2010 – 79% in 10 yrs• Growth in total supply 2000‐
2010 – 17% in 10 yrs
2030 (VERY PRELIMINARY!!)
• Around 50% of total harvest• Around 60% of fish for
human consumption• Aquaculture growth 2010‐
2030 – about 75‐85% in 20 yrs
• Growth in total supply 2010‐2030 – about 25‐35% in 20 yrs
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Where Will the Growth in Production Come from?
VERY PRELIMINARY!!!
More than 20% increase from 2010 to 2030 (WILD & AQUA):SE Asia (Thailand, Vietnam, Malaysia etc)China South Asia (India, Bangladesh etc) Latin AmericaNorth America
Less than 20% increase from 2010 to 2030 (WILD & AQUA):Other Asia (Japan etc)EuropeAfrica
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What species groups will provide the growth?VERY PRELIMINARY!!!
More than 50% increase from 2010 to 2030 (WILD & AQUA):
Freshwater fish (Tilapia, Pangasius, Catfish etc) – Accounts for most of the new production
SalmonShrimp
Less than 20% increase from 2010 to 2030:Everything else
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Where Will the Growth in Consumption Be?VERY PRELIMINARY!!!
More than 20% increase from 2010 to 2030 (WILD & AQUA):China ‐ will dominate much of the seafood marketSE Asia (Thailand, Vietnam, Malaysia etc)South Asia (India, Bangladesh etc) Latin AmericaAfrica
Less than 20% increase from 2010 to 2030 (WILD & AQUA):EuropeN. AmericaOther Asia (Japan etc)
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What about Prices 2010 to 2030?VERY PRELIMINARY!!!
Likely Real (after accounting for inflation) Price Increases:Fishmeal and Fish Oil
Likely Marginal or No Real Price Increases:Species dominated by wild caught fish – tuna, lobster, crabs, pelagics and demerals. Also aquaculture‐dominated shrimp
Likely Real Price Declines:Freshwater fish and salmon
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Challenges Impeding Aquaculture Growth
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The “Big Five” Challenges• Environmental Impact
• Disease Management
• Feed Supply
• Funding
• Market Acceptance
31
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The Challenges
Environmental Impact
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Learning from Lessons of the Past
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The 7 billionth person has joined us!
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Social Trends• 50 years ago – half as many people
• Less wealthy, ate fewer calories and less meat
• Required less water for food production
• Took 1/3 of water from rivers we do today
• Lower environmental pressure
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What are the environmental limits?
• Space/Sites• Feed/Marine Resources• Environmental Carrying Capacity• Disease/Parasite Control• Biodiversity/Habitat impacts• Climate Change• Freshwater
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Raising shrimp with less resources
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GOAL 2011 SurveyWorld Shrimp Aquaculture (including M. rosenbergii)
by Species: 1991 ‐ 2013
0.0
0.6
1.2
1.8
2.4
3.0
3.6
4.2
4.8
Million MT
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
P. vannamei P. monodon M. rosenbergii Other
Sources: FAO (2011) & GOAL (2011).
45%
59%
67%63% 71%Percentages indicate the
share of P. vannamei.
1991-2009 data: FISHSTAT (2011).
2010-2013 data: GOAL estimates.
16%
72%
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Growth Rate ImprovementKey to cost reduction:
FCR, Time to Harvest, Survival
0
5
10
15
20
25
30
2004
2005
2006
2007
2008
2009
2010
Days of Culture
Grams
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Chicken
Beef Cattle
SwineSalmon
Tilapia
Shrimp
100
150
200
250
300
350
400
194019
4519
5019
5519
6019
6519
7019
7519
8019
8519
9019
9520
0020
0520
10
Perc
ent o
f 194
0Genetics
Relative Genetic Gain in Growth Rate
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5
10
15
20
25
30
1985 1990 1995 2000 2005 2010 2015
MJ/
kg
Pond Energy Cost
0
0.5
1
1.5
2
2.5
3
1985 1990 1995 2000 2005 2010 2015FI
:FO
Rat
io
Fish In: Fish Out
Genetics Is The Driver For More Efficient Production
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The ChallengesDisease Management
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Disease History in Shrimp FarmingYear Countries Disease
1982 Ecuador BP1988 Taiwan YHV1992 China WSSV1994 Ecuador, Mexico TSV1999 Latin America WSSV2002 Thailand, Indonesia MSGV20042006
BrazilIndonesia
IMNV
2006 Belize, Mexico, PvNv2010 China, Vietnam EMS
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DiseaseSpecific Pathogen Free (SPF) White Shrimp
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Production of Ocean‐farmed Salmon & Trout
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Harvest of Salmon & Trout2007 – 2011E ‐ Per Region
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The road to the crisisDiseases and indicators of poor environmental managementwere evident:
High concentration of sites, absence of zone managmentprogram, poor sanitary control and lack of biosecurity measures.
Gradual decline of Productive Ratios 2004 ‐ 2007
This trend reached its maximum point when Caligus bloomed (at the end of 2006) and ISA started in Atlantic salmon (in July 2007)
THE CRISIS
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Facts at the beginning of the ISA crisis in Chile
THE CRISIS
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49
ISA virus Movementof goods and materials can transmitdiseaseagents.
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Lessons Learned From ISA Virus Outbreak in Chile
• Proactively self‐regulate…generating best practices
• Environmental zone management• Farm fallow periods• Biosecurity along the entire value chain• Environmental/epidemiological monitoring are essential tools
• Embracing regulations including proportional penalties for noncompliance
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Chilean Salmon Production Rebounding
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Market GrowthWho’s eating the extra salmon ?
Q3-2011 – Overall growth Atlantic + 20 % (+70 000 tonnes)
EU: + 13 % (+ 23 000 tonnes)US: + 23 % (+ 14 300 ” ” )Russia: + 31 % (+ 7 400 ” ” )Japan: + 45 % (+ 3 300 ” ” )China/HK: + 16 % (+ 1 800 ” ” )Other Asia: + 22 % (+ 2 800 ” ” )Brazil: + 80 % (+ 5 500 ” ” )Other Latin Am. + 60 % (+ 1 800 ” ” )All others: + 20 % (+ 9 500 ” ” )
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The Challenges
Feed Supply
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Scientific American -- Nov 2011 – “Can We Feed The World & Sustain The Planet?
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Genetic improvements and fertilizer intensification drive supply expansion ‐‐ not acreage increases (Indexed to 1975)
90100110120130140150160170180190200
1975 1980 1985 1990 1995 2000 2005 2010
Production
Yield
Area
55
KEY DRIVER OF PRODUCTION GROWTH:YIELD INCREASE
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GLOBAL FOOD PRODUCTION VS. PRICE(production of grain, rice, major oilseeds, PO, FSHM vs. corn/soybean/wheat futures price index)
‐30‐20‐100
10203040506070
1975 1980 1985 1990 1995 2000 2005 2010
percentage change in production
percentage change in price
56
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Aquaculture Feeds Rely on Limited Supply of Fishmeal and Oil
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The Value Chain
58
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59
Conversion rate 10 : 1per trophic level
Fish oil dependency app 2,5 : 1(current feed)
Aquaculture is more efficient than the alternatives
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A more efficient use of scarce resources
60
Fishmeal Fish oil
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Human consumption competes for fish oil
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Vegetable Proteins
• Demonstration of new soy products –Schillinger high protein and ultra‐lowoligosaccharide soybean meal
New Soybean Varietiesfor Aquaculture
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The Challenges
Funding
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Aquaculture can have high profitability
• EBITDA margin across animal protein listed peer groups, average 2005‐2010
Certain segments of the aquaculture industry can have high profitability
Contributing factors include:
• high barriers to entry
• new technology• positive demand function
• large asset base
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
salmonfarmers
bass/breamfarmers
wild catch poultry seafoodporcessing
processedmeat
red meat
Source: Rabobank, 2011
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Aquaculture is often ‘asset heavy’“Asset heavy” is not a negative characteristic –just part of the business model.
The sector requires proportionally higher capital investments and needs high long‐term profitability to attract the necessary capital.
Based on average EBITDA and asset turnover, 2005‐2010
Source: Rabobank, 2011
10%
15%
20%25%
Processed meat
Red meat
PoultrySeafood processing
Salmon farmer
Wild catch
Bass/bream farmer
3%
5%
7%
9%
11%
13%
15%
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
EBIT m
argin
Asset turnover
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Source: Historic Atlantic Salmon prices in USA. US$/Lb; Fresh fillet Trim C 2‐3; Urner Barry
Salmon price range
Aquaculture has volatile markets
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Aquaculture is not highly consolidated
The largest protein producers have revenues above $10 billion per year.
Except for some salmon and shrimp producers, most aquaculture producers have revenues below $100 million.
0
5000
10000
15000
20000
25000
30000
35000
million USD
Seafood companies
• Leading protein producers, yearly sales (2010)
Source: Rabobank, 2011
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Aquaculture
Wild Catch
Venture capital
Equity funds
Private equity
Animal protein
Seafood processing
Investments in the aquaculture sector will come from a diverse group of investors
Each investor type has different goals and requirements.
The aquaculture sector (and their banks) have the task of profiling themselves and educating potential investors about the opportunities in this industry.
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Leading pelagic and white fish harvesters are key investors in the aquaculture sector
• Some consolidated groups in the wild catch sector have ample access to capital.• Profitability has been high for the market leaders.• Regulation, consolidation and fixed TACs limit growth options in the wild catch sector.
• Synergies between wild catch and aquaculture: – Marketing, storage and distribution parts of the value chain are the same.– Small pelagic harvesters have an opportunity to vertically integrate into the aquaculture value chain.
Mature wild catch sectors will continue to invest in aquaculture
Source: Rabobank, 2011
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Examples of wild catch producers’ investments into aquaculture
Investor Wild catch sector Investment Location Pescanova Whitefish Shrimp aquaculture Central
America Salmon aquaculture Chile Turbot aquaculture Portugal Tilapia aquaculture Brazil
Sanford Whitefish and pelagics Salmon aquaculture New Zealand Mussel aquaculture New Zealand
Pacific Andes Whitefish Salmon aquaculture Australia Austevoll Seafood Small pelagics Salmon aquaculture NorwayCamanchaca Small pelagics Salmon aquaculture ChileSociedad Pesquera Coloso Whitefish and pelagics Salmon aquaculture Chile Blumar Small pelagics and
whitefish Salmon aquaculture Chile Mussel aquaculture Chile
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• Investment likely to originate from salmon producers and possibly larger shrimp producers.• Ample access to capital• Some 14 or 15 publically listed companies, many located in developed countries,
where capital is typically more readily available• High profitability and cash flow generation in the salmon sector• High professionalism; no backyard or artisanal salmon farmers• High knowledge and technological sophistication
Mature aquaculture industries will invest in less mature, more fragmented sectors
Investor Sector Investment Location AquaChile Salmon farming Tilapia aquaculture Costa Rica
Cooke Aquaculture Salmon farming Sea bass and sea bream aquaculture
Spain
Marine Harvest Salmon farming Halibut aquaculture Norway
Cermaq Salmon farming and salmon feed Pangasius feed Vietnam
Multiexport Foods Salmon farming Mussel aquaculture Chile
Examples of salmon producers investments into other aquaculture
Source: Rabobank, 2011
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The Challenges
Market Acceptance
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Is Certification a Solution?
• In 2003, the Economist Magazine stated in their special report on “The Promise of a Blue Revolution”: “An internationally recognized certification scheme is urgently needed to alert consumers to the sustainability (or otherwise) of the farmed fish they are eating…only then will it be clear how green is the blue revolution”
73
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Market‐Driven Certification Programs
Are Growing • Cocoa• Coffee• Ferns and cut flowers• Fruits• Tea• Lumber• Palm oil• Seafood
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Seafood Programs• Organizations with recommendation lists for consumers: – Greenpeace– Marine Conservation
Society UK (MCS)– Monterey Bay Aquarium
(MBA)– NOAA Fisheries Fish Watch– Sustainable Fisheries
Partnership (SFP)– World Wide Fund for
Nature (WWF)
• Standard‐setting, certification and eco‐labeling schemes: – Friend of the Sea (FOS)– Marine Ecolabel Japan (MEL‐
Japan) – Marine Stewardship Council
(MSC)– Global Aquaculture Alliance (GAA)– Global GAP– Naturland– Soil Association; RSPCA UK, etc.,
etc.
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What Drives Certification?
• The Market!• Consolidation has led to development of larger and more powerful buyers who are compelled to protect their brands and exert their corporate responsibility.
• Certification is a mechanism for major buyers to influence production practices throughout the supply chain.
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Aquaculture Certification Programs
• According to Intrafish, there are 3 main programs:– Best Aquaculture Practices (BAP) using GAA standards
– GlobalGAP– Aquaculture Stewardship Council using WWF Dialogues
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Attributes of Standards Development
• Multi‐stakeholder • Consensus‐based• Transparent and inclusive• Achievable• Science‐based• Continuously improved• International guidelines: FAO, ISO, GFSI…
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Best Aquaculture Practices (BAP) Standards Development
• Standards Oversight Committee – 4 NGOs, 4 Industry, 4 Academic/Policy
• Technical committees • Public comment period• Continual revisions• Committed to compliance
– FAO Guidelines for Aquaculture Certification– Global Food Safety Initiative
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BAP Key Issues
Community Property Rights and Regulatory ComplianceCommunity RelationsWorker Safety and Employee Relations
Environment Sediment and Water QualityFishmeal and Fish Oil ConservationControl of Escapes and Use of GMOsPredator and Wildlife InteractionsStorage and Disposal of Farm Supplies
Animal Welfare Health and WelfareBiosecurity and Disease Management
Food Safety Control of Residues and ContaminantsHarvest and Transport
Traceability Record‐Keeping Requirement
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BAP Addresses Full Production ChainFeed Hatchery Farm Processing
Environmental
Social Food Safety Traceability
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Standards development and certification are separate processes
Standards Oversight Committee
GAATechnical
Committees
International Accreditation
Forum
Accreditation Body
Certification Body
(ISO 65)Applicant
Oversees standards development
Standards Process
Certification Process
Approves Accredits Certifies compliance
Best Aquaculture Practices StandardsDevelops
standards
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AD DelhaizeAldiAldi U.K.AsdaBaker'sBloomBottom Dollar FoodBusch GardensByerly'sChannel Processing Co. Inc.City MarketsCOOPCumbrian Seafoods Ltd.Darden RestaurantsDelhaizeDelhaize CityDillonsDisneyEastern Fish Co.Empress International, Ltd.Expack Seafood, Inc.Export Packers Company Ltd.FoodlandFood LionFoodvestFry'sGiant Food SupermarketsGiant EagleGorton's Seafood
H & N Foods InternationalHai Yang International, Inc.Hannaford Bros.Harris TeeterHarveys SupermarketsH‐E‐BHighLiner Foods USA Inc.HilanderIGA (Canada)IGA Extra (Canada)JayC Food StoresKroger Co.LundsLyons Seafoods, Ltd.Maloney Seafood Corp.Market BasketMazzetta Company, LLCMeridian ProductsMorrisonsNational Fish & Seafood Inc.Odyssey Enterprises, Inc.OFI Markesa InternationalOre‐Cal Corp.Orion Seafood International, Inc.Owen'sPacific Supreme Co.PanaPesca USA Corp.Pay Less Super Markets
Price ChopperPriceRiteRaley'sRalphsRed MarketSam's ClubSchnucksScott's Food & PharmacySeaPak Shrimp Co.Sea Port Products Corp.Shop 'n GoShopRiteSlade Gorton & Co. Inc.Smith'sSobeysSodexoStop & ShopSweetbay SupermarketTargetTopco Associates, LLCU.S. FoodserviceWakefern Food Corp.WalmartWalmart CanadaWegmans Food Markets, Inc.Winn‐Dixie Stores, Inc.
BAPMarket
Endorsers
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0
100
200
300
400
500
600
700
800
900
1,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
MT (tho
usan
ds)
BAP Certified Volume
salmonPangasiuscatfishtilapiashrimp
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Certified Facilities Can Use BAP Mark on Retail Packaging
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Conclusions
86
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… We have a great opportunity…
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The Aquaculture Opportunity• Aquaculture market is massive
– Rising new middle class in Asia is driving demand.– Aquaculture represents ~$80‐100 billion market today and will continue to grow at 5‐10% annually.
• Innovation will be essential– Disease management, genetic improvement, etc.
• Shift to sustainable aquaculture is inevitable– Major shift is just beginning: Commitment to sustainable food production will be a reality over the next five years.
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Words to consider… from anthropologist Margaret Mead.
“Never doubt that a small group of thoughtful, committed citizens can change the world; indeed it is the only thing that ever has.”
89
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Source: http://2.0viajes.com
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