On the Verge of a Boom

Aug 10, 2017

By Maria Finn • From Summer 2017 American Soybean Magazine

The role of animal agriculture in the soybean economy is not a small one, and it’s safe to say that there are few soybean farmers in the United States—if any—who don’t intimately understand the supply chain that carries their soybeans to crushing facilities and then in the form of soybean meal to pork, poultry, dairy and other livestock operations around the world. That demand, which constituted 28.2 million tons of soybean meal in the 2014-15 marketing year according to the United Soybean Board (USB), is only poised to grow, as demand for meat protein increases both domestically and internationally.

It is within that livestock sector, however, that a small but growing segment presents some of the most significant growth potential. Not in the hog finishing operations in Iowa, or in the poultry houses in Delaware, but in tanks and lagoons and offshore pens where finfish consume an increasing quantity of soybean meal-based feed. While aquaculture is still a fledgling market in the United States, it has comprised a critical end use for American soy throughout Latin America and Southeast Asia for years.

According to the National Oceanic and Atmospheric Administration (NOAA), more than 90 percent of seafood consumed in the U.S. is imported. Photo credit: NOAA Fisheries

Growing demand

The World Bank, Food and Agriculture Organization of the United Nations (FAO) and the International Food Policy Research Institute (IFPRI) estimate that by 2030, two-thirds of all seafood consumed globally will come from aquaculture. The vast majority will be grown and consumed in markets throughout Asia, with tilapia, carp and catfish seeing the fastest growth.

According to FAO, 41 million tons of fish and shrimp per year will be needed to maintain current levels of seafood consumption, a growth that represents serious demand potential for U.S. soybean meal. FAO contends that the added production to meet current consumption levels could result in demand for an additional 13.5 million metric tons of meal, assuming optimal utilization levels. “Today, around 18.5 million metric tons [of soybean meal] are estimated to go into global aquafeeds, almost 6 million metric tons of which come from U.S. farmers,” said Colby Sutter, marketing director for the U.S. Soybean Export Council (USSEC).

Sutter added that USSEC data show the biggest growth areas for aquaculture production to be markets throughout Latin and Central America, Southeast Asia, and even the Middle East and Sub-Saharan Africa. Though that fish is likely to show back up in grocery stores in the U.S., given the staggering trade deficit here at home when it comes to the seafood Americans consume.

According to the National Oceanic and Atmospheric Administration (NOAA), more than 90 percent of seafood consumed in the U.S. is imported.

As groups like USSEC work to capture the booming aquaculture segment overseas, the American Soybean Association (ASA), the Soy Aquaculture Alliance, the Coalition for U.S. Seafood Production and others work to foster a domestic aquaculture industry in an effort to chip away at a seemingly insurmountable seafood trade deficit. Michael Rubino, director of NOAA Fisheries Office of Aquaculture believes that much can be gained by increasing aquaculture opportunities in the United States.

“By importing so much of our seafood, we are also missing out on the benefits of local production and on domestic job creation; especially in rural communities such as coastal fishing towns and agricultural regions that produce aquaculture feed ingredients like fish processing trimmings, grains and algae,” Rubino said.

The young Trump Administration has also taken notice of aquaculture’s potential. During the Senate confirmation hearing of Commerce Secretary Wilbur Ross in January, the nominee unexpectedly addressed commercial fishing.

“Given the enormity of our coastlines, given the enormity of our freshwater, I would like to try to figure out how we can become much more self- sufficient in fishing and perhaps even a net exporter of fishing,” Ross said.

The most significant barrier to the foundation of the domestic aquaculture industry is the permitting process, which requires new offshore finfish operations to obtain permits from three separate federal agencies. Photo Credit: NOAA Fisheries


Red tape

The most significant barrier to the foundation of the domestic industry is the permitting process. Currently for new offshore finfish operations, permits are required from three separate federal agencies as part of the laws they administer: the U.S. Army Corps of Engineers by authority of the Rivers and Harbors Act; the National Oceanic and Atmospheric Administration, which administers the Magnuson Stevens Fishery Conservation and Management Act; and the Environmental Protection Agency, which oversees areas under the jurisdiction of the Clean Water Act. In addition to the permitting process, new operations must undergo a series of consultations and reviews to evaluate how their work may impact the resources, properties and fish and wildlife species protected by the Endangered Species Act; the Essential Fish Habitat provision of the Magnuson Stevens Act; the National Historic Preservation Act; the Fish and Wildlife Coordination Act; and the National Marine Sanctuary Resources Act. And states may require even more.

“It’s a long to-do list,” said Bev Paul, ASA’s Washington representative focused on aquaculture issues. “And for many looking to get into the industry, working through so many hoops when the domestic demand is still in its early stages is a very serious roadblock.”

In early 2016, the Obama Administration sought to increase interest and investment in Gulf aquaculture with approval of the Gulf Fisheries Management Plan, which was a component of the administration’s larger National

Ocean Policy. As part of the plan, NOAA opened the permitting process to offshore fish farms in federal waters in the Gulf of Mexico, where popular culinary finfish like red drum, cobia, and almaco jack present an enticing prospective catch. But as expected, a legal challenge was immediately filed by aquaculture opponents. As a result, no permit applications have been submitted and undoubtedly won’t be until the lawsuit is resolved.

In addition to the Gulf, NOAA is also in the process of evaluating a similar program in the Pacific Islands Region. According to a NOAA report, the program is currently a preliminary proposed federal action, which means that the agency is at this stage evaluating the potential for sustainable aquaculture and assessing economic and environmental impact.

Local expertise

Because the industry is still in its early stages, many would-be fish farmers find themselves searching for a simple place to answer questions

either on granular details or even on more general aspects of aquaculture. Enter the Sea Grant program. Sea Grant is a federally-funded series of state-based programs available to the coastal United States as well as states bordering the Great Lakes. The goal of the Sea Grant program is to provide problem-solving facilitation on issues like sea level rise, sustainable fishing, and aquaculture development.

“The grants help young scientists work with communities up and down the coasts on policy and management,” said Jim Eckman, who runs the Sea Grant’s California program based at the Scripps Institute at the University of California, San Diego. Eckman explained that in his state, while much of the offshore aquaculture development is in bi-valves like oysters and clams that don’t require feed, his program also works on inland fish farm developments. “Sturgeon are wild in the ocean and rivers here,” he said. “But they’re also farmed inland, so we’ve had teams that have worked on this.”

Budget challenges threaten the academic and resource development of the field, however, and proposed cuts to NOAA may halt progress in domestic aquaculture. In the most recent budget, the White House proposed cutting aquaculture research and development by the National Marine Fisheries Service by $3 million—or one-third—as well as entirely eliminating the Sea Grant program. Paul said that ASA is on record as supporting the Sea Grant program, which also serves as the knowledge base for aquaculture issues in the majority of congressional offices in Washington.

“Unless your staffer happens to be from a coastal fishing community, aquaculture is uncharted territory for so many offices on Capitol Hill,” Paul said. “Sea Grant has a disproportionately successful impact for those coastal and Great Lakes states in terms of the resource it provides.”

“To meet global protein needs, we may have to triple aquaculture production this century.”

– Any Novogratz, Managing Director of Aqua Spark

Do fish like soy?

But growing the domestic industry with expertise and investment and resources doesn’t benefit soybean farmers if the fish raised won’t eat soybeans. So that begs the question, do fish like cobia, salmon, trout, sea bass and red drum—all naturally carnivorous—actually like soybeans? The answer lies in the soybean as a source of both proteins and omega-3 fatty acids. Successfully switching diets is a matter of finding the right nutrients, not simply replacing one protein source with another. Many studies have been done, including by USSEC, USDA and others, to see if alternative sources of protein and omega-3s can be used to feed carnivorous fish. USDA specifically has researched alternative fish feed rations for the past decade, including insects, trim from processed fish and algae. Most promising for soybeans is a study from the Global Aquaculture Alliance that showed that carnivorous fish like cobia performed as well on high soy diets as they did on a diet of 64 percent fishmeal. Those within the industry consider a soy-based—or vegetarian— feed to be more sustainable, and more cost effective, and trials are ongoing to see if other carnivorous fish can thrive similarly to cobia on a vegetarian diet.

The most significant barrier to the foundation of the domestic aquaculture industry is the permitting process, which requires new offshore finfish operations to obtain permits from three separate federal agencies. Photo Credit: NOAA Fisheries


Riding the foodie wave

If there is an issue with getting the aquaculture movement off the ground on the production side, that difficulty is not mirrored at the opposite end

of the spectrum. Both retailers and chefs are looking to capture the momentum of the food transparency movement in which consumers seek additional information on their food. As a result, chefs are integrating domestically-produced fish into their menus and product offerings at an increasing rate.

“The key to aquaculture’s success as a source of significant demand for soybean meal lies in scale, and that means offshore finfish operations,” Paul said. “But the key to domestic aquaculture in general is positive consumer perception, and that means cutting-edge chefs and food tastemakers.”

And companies are taking notice. LoveTheWild was founded in 2014 by two Boulder, Colo.-based entrepreneurs, Jacqueline Claudia and Christy Brouker. They sold both wild and farmed sustainable seafood in dinner size frozen portions with gourmet sauces, including barramundi in mango, sriracha chutney and catfish with Cajun crème among others. The artisanal company was big on values and short on capital—a conundrum for food startups hoping to scale. Then Dutch- based Aqua-Spark signed on with a $2.5 million series-A investment, but with the caveat that LoveTheWild shift to all sustainably farmed fish and drop the wild fish and only use farmed. At that point, actor Leonardo DiCaprio signed on as an investor and advisor to the company, which gave both the company and the larger aquaculture movement some glamour.

Amy Novogratz, managing director of Aqua-Spark, believes that we are in just the beginning of a worldwide shift to more farmed fish. “To meet global protein needs, we may have to triple aquaculture production this century,” she said. “As well, we urgently need to reduce aquaculture’s footprint as the sector grows. We invested in LoveTheWild for many reasons—at the top of the list is their potential to educate consumers and raise the bar for more sustainable aquaculture.”

Passmore Ranch, near Sacramento, is an inland operation that raises sturgeon. Owner Michael Passmore grew up in North Texas, his grandfather a cattleman. He left that life—or so he thought—when he joined the Marines. He then repaired cars and boats, until he landed a job in Dallas doing background checks. In 1991, this field took him to a similar job in Elk Grove, Calif., near Sacramento. The nearby community of Sloughhouse, with its big sky and open grasslands reminded him of North Texas, and so he bought 40 acres, without much of a plan for them. About the time he was getting ready to enroll in law school, he met his neighbor Ken Beer, a freshwater fish farmer who showed him the ropes. “My grandfather told me to look around and see what the fella who was doing well did, and then do that,” Passmore said. “I am lucky to have a terrific mentor in my neighbor Ken Beer, founder of The Fishery.

Also, I like water and don’t mind hard work. It was a natural fit for me.”

The original plan was that Passmore would be a lawyer and gentleman fish farmer. But instead of one fish pond, he installed seven ponds and an array of tanks, and stocked them with white sturgeon, catfish, bass and carp. He sold the fish at farmer’s markets, but was barely breaking even, until he met Chef Randall Selland, one of the forefathers of the Farm-to-Fork movement in Sacramento. Through Chef Selland, he began meeting chefs in Sacramento, then in Napa, and finally, his fish became popular in San Francisco and then to Chef Rick Moonen in Las Vegas. Now, Passmore Ranch delivers both the fish they raise, as well as the fish other farmers raise, too. He’s expanded to serving salmon, steelhead, rainbow trout, catfish, sturgeon and even makes caviar now as well. In order to maximize their constantly irrigated levies, Passmore Ranch raises lamb and goat, as well as specialty vegetables. And, Passmore uses soybeans along with a percentage of fishmeal in his feed rations. “For my fish, it remains to be seen if we will deploy a completely vegetarian feed or not,” he said. “I am open to it, but I like to take small steps in dietary changes.”

While the long-term growth of the aquaculture sector in the U.S. and abroad will consist of small steps like Passmore’s, streamlining the permitting process is the key to finally bringing commercial-scale projects to the U.S. Like the larger offshore finfish operations in the Gulf and Pacific Islands, and existing markets like the ones in Latin America and Southeast Asia, it can be said for certain that even today, the market for U.S. soybean meal is expanding far beyond pigs and chickens.