In 2018, the price of shrimp dropped at the farm gate to the point that some farmers actually lost money on their harvests. For years, shrimp farmers have been able to get away without optimizing their practices because of the historically high prices and globally volatile supply.
As the volatility in the global supply of shrimp seems to be declining, many farmers expect the low prices of shrimp to remain, meaning that they need to make up the lost margins on the other side of the balance sheet – their costs.
In this post we want to outline a few ways in which fish and shrimp farmers can start figuring out where to invest their efforts in cutting costs on the farm and boosting their margins.
#1: Monitor Your Ponds
The first step to cutting costs on your shrimp farm is to start monitoring your ponds far more regularly. This means water quality, feeding rates, feed consumption, health of the animals and growth rates.
The problem we see with many farms is that because monitoring is time intensive and requires higher skilled labor, many farmers do it the bare minimum just to ensure that nothing catastrophic is going wrong – not inspecting what can actually be improved.
Without more data across the ponds in all of these key areas, you can start analyzing where in your farm you can make improvements on your key metrics: FCR, Growth Rates, and Survival on a more detailed level.
#2: Track Data Extensively & Run Small Experiments
With this additional data, it is important for you to put it into a organized, digital data management system. This can be a very robust spreadsheet or aquaculture management software.
You want to be tracking data to the point where you can run those little experiments to see how you can improve your farm. What happens, if you stock a pond with a slightly lower stocking densities? How did this new probiotic work on the farm.
As you know product makers will often give very good sample rates to try their product in your ponds. Without a rigorous data collection and tracking system it can be difficult to actually see the impact of changing this one variable was in your pond.
Tracking closely allows you to see those little changes and start measuring their impact on your key parameters.
#3: Start a Network of Farmers
We don’t see enough farmers doing this. Everyone gets paid the same price for their shrimp, so there is no reason for farmers to not collaborate as much as possible in how to best raise their shrimp.
All farmers have a group of friends they can talk business with. Start getting together regularly and at each event, run what’s called a “Mastermind.” Set the clock for 10 minutes within which a given farmer can ask a question to the group that they are struggling with. For example, “I am having a lot of theft on the farm.” Then the group can respond all concetrated on this one issue, sharing their own experiences and can hopefully come up with a solid set of things to try.
Going a step further is the formalization of such a group into a collective. While more time intensive to manage, collectives can work together to negotiate better prices on feed, PLs, and the other inputs that go into a farm, and can also collectively bargain with purchasers. They are effective ways for smaller producers to band together to get the impacts of a larger one.
#4: Ask your Employees
Your employees, those who are on the front lines of operating your farm on a daily basis, have a unique perspective on how your farm runs. Each of them are specialists in their given role. The more that you can think of them as partners in helping you run your shared business, rather than replaceable cogs in a machine, the more you can tap their own creativity.
A great place to start could be a single meal where everyone in the company works on answering the question: “how can we save money as a farm?” You can use sticky notes, flash cards, slips of paper, anything, to get the wheels started. This way you start training your employees to think like owners and you no longer have one mind thinking about how to conserve resources, but hundreds.
#5: Track the Price of Fishmeal; pay Cash
If you can afford it and you are confident enough in the stability of your own farming system, being open to paying cash for feed, PL’s, etc, rather than buying on credit, can give you great negotiating power.
By being willing to pay cash, especially for feed, you can track the raw prices of ingredients and link your purchasing behavior to them. If fishmeal and soy are going down, you lock in the contract at that price.
While feed companies may make less margin in such a fashion, they can be willing to go for it in exchange for the certainty of being paid. They no longer are sharing the same level of risk with the farmer by selling the feed on credit.
This is a riskier path, but it can add some critical buffer back into your margins.
There are a number of ways you can start cutting costs, but they all begin with you taking the time to truly understand what is going on in your farm. This will cost money and it will not feel immediately like you are cutting costs.
In order to truly cut those costs effectively, you need to first understand where makes sense and where does not. From there you can start tapping the resources right around you – your friends and your employees – and eventually put yourself in a place to be so cash secure that you can negotiate with more leverage with feed companies and hatcheries.