Rising feed prices have cut the Mid-South’s aquaculture profits to the quick. Repercussions are already being felt and more are coming.
“In Arkansas, I believe there’s about 5,000 acres going out of catfish production,” says Ted McNulty, director of the aquaculture division at the Arkansas Department of Agriculture. “Another 5,000 to 7,000 could be lost, if things don’t change in the next three or four months.”
In 2007, Arkansas had approximately 30,000 acres of catfish. “So, we’re talking about losing a big chunk of our acreage. The majority of Arkansas’ catfish production is in the southeast in Ashley and Chicot counties. That area is being hurt by these developments.”
McNulty says the catfish industry is a 6-to-1 economic multiplier compared to a typical row crop multiplier around 2.7. “Losing catfish acreage has a much larger economic impact on the local economies. Things like well-drilling, paddle-wheel aerators, tractors, feed mills, and processing plants are being impacted.”
With a 1,000-acre pond operation in Ashley County near the Louisiana border, catfish producer and processor Wayne Branton says, “This has been a tough industry for a while. I’ve been in this business for 17 years and this is the lowest we’ve been.”
Branton points to “growing pains” such as marketing and quick expansion as early hurdles that had to be overcome. More recently, U.S. producers have been under tremendous pressure from imported fish from China and Vietnam.
“Our government let us down by not inspecting imported fish like they should have,” says Branton, who also serves as president of the Arkansas Catfish Farmer Association. “When they did start inspecting them, lo and behold, illegal antibiotics and the like were in them. The imports’ quality” weren’t up to U.S. standards.
Regardless, the influx of imported fish depressed prices.
“The dangers of the imported fish kind of threw the industry into turmoil. Consumers were confused. They didn’t just stop buying imported fish — they weren’t buying U.S. catfish either. After a lot of advertising — ‘U.S. farm-raised catfish’ — consumers again began trusting our product and its safety.”
Then, the U.S. government got involved with providing incentives for the production of ethanol. That meant swapping a food source for an energy source.
When that happened, the commodity markets — soybeans, wheat, corn — “went wild,” says Branton. “And those are the ingredients in catfish feed.
“We’re now in a predicament. Input costs have just about doubled. This time last year, I was paying $214 per ton of feed. Right now, we’re paying $395 per ton. Our operation uses about 3,500 tons of feed annually.”
With a $200 per ton increase in feed costs, Branton is spending some $700,000 more for feed this year. Combine that with the rising cost of fuel and it’s easy to see why catfish producers are struggling.
“We’re doing what we can to cut costs. We’re delaying repairs, pond work, all kinds of things in an effort to wait for better prices or feed prices to drop. Maybe a little of each will happen.”
However, “right now, you can book grains at a good price for next year delivery. It doesn’t look like there will be a quick break on the feed side.”
As the sale of fish feed drops, Arkansas feed mills are also taking a hit. “January through May figures show feed for the industry is down 26 percent,” says McNulty. “Broken down into states, Arkansas was down 50 percent from a year earlier, Mississippi was down 22 percent, Alabama was down 17 percent, and Louisiana was down 32 percent.”
Currently, feed costs represent over half the cost of raising a catfish.
Across the Mid-South, catfish ponds are being switched to row-crop production, mostly soybeans. For those that go with a grain crop, how easy would it be to switch back to catfish?
“It takes us about 18 months to two years to raise a catfish to food-size,” says Branton. “Because of the staggered size of the fish in an operation, it takes a little while to get out of the business.
“Once the fish are out, you have to drain the pond. It takes a while for the pond to dry out. If you’re hoping it’ll dry out over the winter, good luck. Winter rains make that difficult.”
To get back in catfish and have a marketable crop — “provided you leave the levees alone” — would take a minimum of two years.
“So once a producer gets out of the catfish business, it would be tough to get back in. The length of time it takes to get some cash flow from a start-up is prohibitive for many farmers.
“There are a bunch of folks with major pond rebuilding projects — say, from wind erosion — that are choosing to drain them and leaving them alone. We’re one of those. We’re using drained ponds for dirt to patch levees around the farm.”
Other operations are “just raising fish to food-size and then they’ll get out.”
Branton’s catfish operation has 14 employees. There is also an on-farm processing plant.
“We gut fish, icepack them and send them out to the Los Angeles area. Those mostly go to Hispanic and Asian markets there. Because of all its environmental laws, California won’t let live fish to enter the state. The next best thing — at least with regards to freshness — is what we’re doing.”
The processing plant has 25 employees. “So, in our small town with 700 people, we’re providing employment for around 40 folks. To lose any catfish acreage would be devastating for our little area.”
If a producer can stay in business through the coming pond closings, prices should come back, says Branton. “That’s simply because there will be less supply while, I believe, demand should remain strong. That should push the price higher.
“We can stay in this business for another year. More than that is shaky. If we’re facing the same scenario next year — a $700,000 increase in feed costs — we’ll be forced to look at serious alternatives.”
For some reason, “we’re having a problem achieving a price for fish that we need. If the price would rise to about $1.15 per pound, we could survive.”
But processors and buyers claim they can’t pass such a price increase on to their customers.
“It seems chicken and other commodities have been able to do it. But, for some reason, the catfish industry hasn’t.”
While the catfish industry is being forced to shrink and consolidate, “in the long run it should be a healthier industry,” says McNulty. “Farmers will be (better) organized and may spur a bargaining association so they get a fair price for their fish.”