36Priorities and Principles for Investment in Aquaculture Research

Gibson TS, Allan GL, File G, Mullen JD, Scott-Orr H (2005) ‘Priorities and Principles for Investment in Aquaculture Research by NSW Department of Primary Industries’, Economic Research Report No. 36 NSW Department of Primary Industries, Orange.

Executive Summary and Recommendations

Australian Aquaculture Industries – An Overview

Aquaculture is the fastest growing livestock industry in the world. Key factors contributing to this growth include increased human population and income, increased demand for seafood in affluent communities related to health attributes and decreasing wild fish stocks globally. Advances in technology, changing tastes and preferences and changing relative prices have also impacted on the growth of this industry.

Asian countries in particular have responded to this global demand with massive increases in low cost aquaculture production. Exports of their products to Australia have provided major competition for local producers in recent years. Consequently, there must be doubts that Australian investment in some sectors of aquaculture competing in the same markets as imported seafoods will be profitable, threatening the continued growth of the industry.

Australian aquaculture growth has been slower than that in Asia and is concentrated in Tasmania (salmon), South Australia (tuna) and Queensland (prawns and barramundi). In NSW, aquaculture growth has been much less than in other States, and while still significant, it is from a very small base for most species. NSW has also had the additional pressures of increasing coastal urbanisation and recreational use which have placed limits on the growth of some forms of aquaculture.
There is uncertainty about why aquaculture growth in Australia has been slower than earlier predictions indicated. Insufficient or inappropriate capital investment, regulatory restrictions, a general lack of knowledge and skills and a small and highly competitive domestic market have all contributed.

Rationale for Government Involvement in the NSW Aquaculture Industry

While Governments can do little to reverse these general economic and resource limiting issues there are areas in which governments can promote the growth of aquaculture.
Growth in many sectors of NSW aquaculture has been limited by:

• Lack of profitable technologies adapted to NSW conditions and extended to NSW producers.
• The ‘infant’ nature of some aquaculture industries preventing economies of scale being realised for the growout sector and the associated fingerling, feed and processing sectors.
• Lack of understanding about aquaculture by regulators and the community leading to protracted approvals.
• Land use conflicts.
• Competition from imported, low cost seafood

The aquaculture industry in NSW consists of a number of small sectors, many with growth potential. Not surprisingly there is no single recipe for government involvement in these sectors because of the diversity of production, environmental, and regulatory issues they confront. However further R&D and extension programs may ameliorate slow growth by developing and extending new technologies that significantly lower the cost of producing aquaculture products and NSW DPI, through its R&D activities partly funded by industry, has already made significant contributions to the actual and potential growth of these sectors.

Nevertheless, at a time when public funds available for R&D in primary industries are declining, it is sensible to review the rationale for government involvement in aquaculture not only through R&D but more generally. In the course of this review, several potential grounds for increasing or limiting government involvement were identified and gave rise to the following recommendations:

Recommendations

1. Continuation of Government assistance to ‘infant aquaculture industries’ should be regularly reviewed against criteria such as research success, increased industry funding and the continued growth of the sectors involved

2. Beneficiaries of DPI aquaculture R&D should share in the costs of R&D in a more proportionate manner:

a. Industry and recreational fishers should contribute, on average, more than half the costs of R&D where they are the principal beneficiaries.

b. Public funds should be used to leverage industry investment in R&D that delivers both industry and public benefits.

c. Public funds should be used to undertake research delivering benefits to community that would otherwise not be undertaken by industry.

3. Government should continue research into the biology of vulnerable native species such as silver perch and eastern freshwater cod to provide a basis for the protection of these species through regulation and restocking, and into the preservation of environmental assets from pest species (banded grunter in the Clarence) and exploitive fishing (abalone reefs).

4. In developing a Recovery Plan for threatened fisheries species the NSW DPI Division of Agriculture and Fisheries should identify the source of funds for research into the conservation of vulnerable species (eg silver perch, eastern cod) and other environmental issues associated with threatened species (such as the restoration of coastal reefs by restocking with abalone)

5. Government owned specialised hatcheries used in the production of spat or fingerlings of different aquaculture species for commercial, conservation and recreational fish restocking should be run in a manner likely to encourage the growth of a commercial hatchery sector by pricing in a competitively neutral way and by the transfer of technology to the sector.

6. The NSW Government should maintain an aquaculture health research and diagnostic capacity through training DPI laboratory and field veterinary staff to enhance DPI’s capacity to respond to catastrophic disease and pest occurrences threatening commercial aquaculture, native species and food safety

7. NSW DPI should increase its capacity in aquaculture industry development and extension to support aquaculture industry growth and the adoption of new technologies.

8. The approval process for commercial aquaculture developments should be continued to be coordinated on a state wide basis by the State Aquaculture Steering Committee.

Oysters

The state’s largest aquaculture industry, Sydney rock oysters (SRO) is under threat from interstate competition based on faster growing Pacific oysters, coastal urbanisation, estuarine pollution and disease epidemics (particularly the catastrophic QX disease which has devastated SRO production in those estuaries it has infected).

NSW DPI’s oyster breeding research has provided the industry with a capacity to respond to QX disease and to become more competitive through selection programs that have led to increased oyster growth rates. This research has also provided the industry with some capacity to diversify into other species such as flat and Pacific oysters. However the industry will continue to decline unless it undergoes considerable restructuring, improves its marketing strategies, and undertakes practice change from traditional stick culture to hatchery based seed culture.

Pearl oysters on the other hand could develop into a significant industry now that a large development in Port Stephens has been approved.

Recommendations

9. Any commercial production from the NSW DPI oyster hatchery should be fully self-funded (through sale of spat) by July 1, 2008. A Business plan should be developed to help guide this and be based on the NSW DPI Diagnostic and Analytical Laboratories charging model.

10. NSW DPI should continue to invest in oyster R&D with the following provisos:

a. That funding for the routine selection for commercial traits should move to being progressively industry based through FRDC, direct industry investment and an additional levy on the sale of spat

b. That NSW DPI will need to retain a credible capacity to maintain a breeding program to protect the SRO industry from serious endemic and exotic diseases

c. That NSW DPI investment into oyster research be further reviewed in 2010 to ensure industry are contributing at least 50% of the costs

11. NSW DPI should seek industry support for a cost-benefit analysis of practice change from the traditional stick culture to single-seed technology, a change necessary if farmers are to use disease resistant, faster growing oysters.

12. NSW DPI should investigate methods of assisting the oyster industry restructure from a stick culture based industry to single seed technology.

13. NSW DPI should explore ways to better facilitate industry change through improved extension services and industry consultation.

14. Future DPI research into pearl oyster species should be on a commercial basis wherever the research is in the nature of an exclusive service to particular firms.

Abalone

The NSW abalone fishery has been in decline for thirty years and despite the introduction of a quota system in 1989 the abalone population has still not stabilised. Annual catch peaked at about 1,200 tonnes in 1971/1972 and has declined to only 130 tonnes in 2005.

There are land based abalone farms in WA and Victoria and hatcheries in these states but none yet in NSW due to regulatory difficulties of gaining development approval (one venture has been seeking approval for more than five years).

In response to threats to the longevity of the abalone fishery identified above, the former NSW Fisheries undertook a program of research based at leased facilities at Tomaree into the feasibility of using hatchery- produced seed to restock depleted abalone populations. This controlled breeding technology provided a number of important flow-on benefits to the abalone aquaculture industry in southern Australia. In parallel has been a program of research into how best to ‘seed’ reefs with hatchery produced ‘buttons’.

Related to the loss of the fishery is the environmental degradation of the fishery. Many formerly productive areas of reef, typified by dense stands of seaweed and associated complex communities of fish and invertebrates including abalone, have undergone a transition to “barrens”. The seeding technology developed by NSW DPI may prove a practical means of ameliorating this degradation.
At present, in the absence of public and industry funding, all research and extension programs in NSW DPI related to abalone have ceased and the extent to which technologies developed in past research are adopted by industry is most uncertain. An MoU recently completed with the Department of Ageing, Disability and Home Care ensures continued access rights to the Tomaree facility for use in any future research opportunities.

Recommendations

15. Abalone research at the Tomaree hatchery and aquaculture facility should remain suspended, at least until the results of the large experiment to field test abalone enhancement is completed in 2008. Given the likely requests from abalone shareholders for new research if the results are positive, it is recommended that if future research is required then NSW DPI should pursue both public and industry funds for future R&D as a component of abalone enhancement and NSW coastal reef management

16. In order to increase the sustainable catch of abalone in NSW, DPI should consider the policy requirements associated with approvals for abalone stock enhancement including ranching of abalone on existing or artificial reefs and for land based abalone farming.

17. Reef management in NSW should be reviewed by the Division of Agriculture and Fisheries and a whole of reef management strategy should be developed with particular emphasis on abalone, urchins and lobster. DPI may need to seek public funding to maintain a research capacity in this area.

Marine Finfish

Large-scale aquaculture of marine finfish in Australia is currently limited to production of Southern bluefin tuna (South Australia), Atlantic salmon (Tasmania) and barramundi (predominantly Queensland, New South Wales and Northern Territory). Sea-cage production of yellowtail kingfish and mulloway has increased in South Australia.

In general, due to reductions in wild catch and the preference among Australians for marine fish, there is a potentially large market for cultured marine fish in NSW. Provided sufficient venture capital can be attracted and with favourable water temperatures and access to the Sydney markets, the long term expectation is that marine finfish aquaculture production in NSW has the potential to increase to between 2,000-5,000 tonnes per annum within 10 years although strong competition from imports will have some bearing on this.

However at present the NSW marine fish industry remains small and employs few people directly. Production in NSW has stalled with one off-shore seacage operator going into receivership. While commercial interest in reinvesting in seacage culture in NSW has been low, a second seacage operation in Botany Bay has been leased for small scale mulloway and kingfish production. Recent interest by South Australian producers is encouraging. While existing approved sea-cage sites could produce 2,000 to 5,000 tonnes per annum, there are only a limited number of suitable sites for offshore sea-cage culture in NSW, and obtaining approvals for farming activities will be difficult while the current approval process remains.

One of the main reasons why commercial marine fish aquaculture has struggled in NSW has been the failure of the hatchery sector to produce reliable supplies of fingerlings at competitive prices. It is not currently possible for NSW sea-cage grow-out farms to purchase snapper, kingfish or mulloway fingerlings from interstate (SA) hatcheries because of real or perceived concerns with genetic pollution and disease transfer.

NSW DPI has a potential role in using its hatcheries to overcome these ‘infant industry’ problems by providing a secure source of fingerlings to the grow-out sector and simultaneously encouraging the growth of a commercial hatchery sector. Without a reliable supply of fingerlings, new investment in marine finfish aquaculture in sea-cages is unlikely. The model employed in Tasmania for Atlantic salmon and in Queensland for barramundi, where government helped secure fingerling supplies and progressively handed this business to industry, warrants consideration in NSW. Joint venture operations with the industry may also warrant consideration.

Aquaculture of marine fish species in inland saline groundwater is a developing industry with potential for large-scale production. Sixty five thousand ML of saline water is pumped annually in the Murray Darling Basin into evaporation ponds and opportunities exist to use this resource for grow-out of marine species and to offset the costs of the subsurface drainage schemes. Identification of suitable species and development of production methods are still in a research phase at NSW DPI’s Inland Saline Aquaculture Research Centre near Wakool.

Large-scale stocking of marine fish species into estuaries and ocean environments in NSW is not currently government policy due to the lack of knowledge of potential impacts of stocking. However, several NSW DPI research projects to determine the feasibility and to model the impacts of stocking juvenile mulloway have demonstrated excellent potential for stocking into estuaries to enhance recreational fisheries.

Recommendations

18. Research and Development in marine fish aquaculture for aquaculture, stock enhancement and inland saline should continue while current contractual commitments exist.

19. New research into marine fish would require levels of industry funding to average greater than 50%

20. NSW DPI should supply fingerlings on a commercial basis to the marine finfish sector to overcome a significant impediment to the growth of the sector. To encourage the development of a private hatchery sector, DPI would need to price fingerlings at a competitively neutral rate and make its technologies and breeding stock available to private hatcheries as they emerged. DPI should exit from this business when private hatcheries have the capacity to supply the market.

21. Investment by NSW DPI in finfish aquaculture should be again reviewed in 2010 (when current R&D commitments are winding down), against the profitability of the hatchery, the growth in external R&D funding and the growth in the industry (expected to be in the order of 500 tonnes per year for sea-cage production and 150 tonnes from inland saline aquaculture).

22. Production of fingerlings for restocking rivers and oceans should be fully funded by the beneficiaries (recreational and commercial fishers) through license fees and/or government agencies responsible for protecting biodiversity.

23. Industry-funded feed research of benefit to NSW aquaculture farmers, feed manufacturers and the agricultural feed ingredient sector (providing it is largely industry funded) should be continued.

24. There is an urgent need for a coastal and offshore zoning policy, and for a commitment by government to marine aquaculture within appropriately zoned areas.

Inland Finfish

Silver perch has long been recognised as having great potential for aquaculture. It is also a popular fish because of its edible and sporting qualities. Over the last 30 years, there has been a significant decline in distribution and abundance, and it is now a threatened species with the conservation status of “vulnerable”.

Research at the Grafton Aquaculture Centre (GAC) to develop techniques for grow-out to market size has provided a technical basis for development of the silver perch industry. It is now the 3rd largest and most valuable aquaculture industry (behind oysters and prawns), as well as being the largest freshwater industry in NSW.

There is an increasing interest in silver perch amongst irrigation farmers, and the integration of aquaculture and agriculture has the potential to lead to a significant expansion of the industry over the next five to ten years. This is dependant upon future water supply outcomes for irrigation areas in NSW.

Approximately half the annual production of silver perch is sold into the live fish markets to predominantly Asian consumers in Sydney, Melbourne, Brisbane and Canberra. Although this is a limited, niche market, it has continued to grow steadily over the last ten years and will continue to do so.

If production costs could be lowered, silver perch could compete with and replace imports. It is one of the few, if not the only species in Australia with this potential. However, unless production costs are lowered through cheaper fingerlings, accelerated growth rates, improved survival rates, reduced feed costs or a combination of the above, this potential won’t be realised.

Current research work at GAC is aimed at reducing production costs through the use of genetics and breeding to gain significant improvements in growth, production, and disease resistance in farmed silver perch. New technology to produce silver perch in cages is being investigated as a potential new business opportunity for farmers with access to irrigation water (e.g. cotton farmers).

A barrier to industry growth is the restriction on collection of brood stock from the wild because of the low abundance of silver perch and its listing as “vulnerable” under the Threatened Species legislation. Government (NSW DPI) needs to play a role in ensuring that industry has access to genetically heterogenous wild stocks

GAC also undertakes activities associated with the conservation and fisheries projects on the ecology and conservation of the endangered eastern freshwater cod and the distribution and biology of the pest species, banded grunter. For these programs it is likely that the community, rather than industry, captures most of the benefits

As almost all farmers who have entered or are likely to enter this industry are agricultural farmers without any skill base with fish culture, any R&D must be strongly supported by an extension service to facilitate improvements in on-farm practices and the up-take of new technology

At present it is likely that the industry is too small to fully support a credible research program. From this review of the industry it seems probable that a key constraint to the growth of the industry is the high cost of producing silver perch which will make it difficult to gain market share in the processed fish sector against imported products

Recommendations

25. NSW DPI Asset Branch should assume management of the facility operating costs for the Grafton Aquaculture Centre, in recognition that it is a multifunctional DPI facility

26. The genetic improvement program for commercial production of silver perch should be continued and be transferred to industry by 2009.

27. Adoption of results from the silver perch genetic improvement program should be facilitated through the sale of “improved fingerlings” (F1 hybrids from restocking program) to industry on a commercial basis until other commercial hatcheries have access to wild fish populations.

28. Silver perch stockings for conservation purposes should be continued as required by the NSW DPI Threatened Species Unit, subject to the availability of conservation funding.

29. Silver perch R&D should be reviewed in mid 2010 when outcomes of current genetic research are known. If there is no new significant industry or commercial funding available (at least 50% of total R&D investment), significant progress has not been made with lowering production costs and the industry has shown little growth then silver perch R&D at GAC should be terminated (note that the Division of Agriculture & Fisheries and wild fish conservation R&D would need to fully fund any continued conservation operations at GAC).