Massachusetts Aquaculture Strategic Plan Chapter IV - Economic Development and Marketing

Aquaculture: Why the Commonwealth of Massachusetts Should Support the Development of Its Aquaculture Industry

Worldwide aquaculture is forecast to be a major growth industry into the 21st century. In response to increasingly constrained global supplies of wild finfish and shellfish and growing consumption of seafood products, aquaculture production has expanded in many regions of the United States and indeed the world. World aquaculture production (including seaweeds, finfish, mollusks and crustaceans) increased 85 percent over a nine year period from 10.4 million metric tons in 1984 to 19.3 million metric tons in 1992, at a value of $32.5 billion (FAO 1995). Indeed, aquaculture accounted for 14 percent of global fish production in 1992, up from 8.3 percent in 1984. In the period 1984-1992, aquaculture production of finfish, mollusks and crustaceans grew at an average annual compound rate of nine percent in volume and 14 percent in value.

Based on population growth projections and a projected continued growth in seafood consumption, global seafood demand is expected to increase over 60 percent in the next 30 years (Parker 1995). Given that harvest from wild fish stocks are approaching or have exceeded maximum sustainable yields, aquaculture production will have to increase approximately 500 percent to meet global seafood demand in the year 2025 (Parker 1995).

In the U.S., due to the decline of native fish stocks and the need to diversify the economic base of many rural coastal and agricultural communities, aquaculture has expanded in many regions of the country. Aquaculture is one of the fastest growing agricultural sectors in the U.S. In fact, U.S. aquaculture production more than doubled from 308 million pounds in 1983 to nearly 716 million pounds in 1993 at a value of $810 million (NMFS 1995). Nationwide, catfish, crawfish, and trout account for the largest share of aquaculture production, followed by baitfish, salmon, and oysters. Other domestically cultured species include mussels, shrimp, abalone, hard and soft shelled clams, ornamental fish, tilapia, sturgeon, hybrid striped bass, aquatic plants and others.

Nationwide, estimated employment and economic activity generated by the domestic aquaculture industry is substantial. According to a USDA funded study now being completed by Dr. Michael Dicks of the Department of Agricultural Economics at Oklahoma State University, estimated U.S. Employment in aquaculture production and processing is over 180,000 jobs including those associated with the transport, storage, processing , manufacturing, distribution and sales of aquaculture products (Dicks et. al., forthcoming). This figure also includes employment associated with purchases of equipment, supplies, feed, seed, labor and financing. This study also estimates that aquaculture contributes approximately $5.6 billion to the U.S. gross domestic product (Dicks et. al., forthcoming). An earlier study by the National Fisheries Education and Research Foundation (1989) found that the U. S. aquaculture industry generated approximately 230,000 full-time equivalent jobs in 1988 with associated direct and indirect economic activities of $6.43 billion (National Fisheries Education and Research Foundation (1989).

While the aquaculture industry continues its strong growth both nationally and internationally, Massachusetts continues to lag behind in the development of its industry. The total estimated 1992 farm gate value of aquacultured products in the northeastern U.S. (West Virginia to Maine) is estimated at $146.4 million dollars (Bush and Anderson 1993). Connecticut leads with a $61.8 million industry in 1992 based mainly on the strength of its oyster industry. Maine is the second largest aquaculture-producing state in the region with a $42.9 million production in 1992, primarily due to its pen-reared salmon industry. In contrast, Massachusetts produced a mere $8 million of aquacultured products in 1992, comprising mainly hard shelled clams, oysters, trout, and hybrid striped bass. This is surprising if one considers the vast, rich, and varied coastline of the Commonwealth.

Much of the sluggishness in the growth of the aquaculture industry in Massachusetts compared to that of other states can be attributed to the myriad of regulatory barriers, a lack of government coordination in the management of aquaculture, and simply a lack of clear vision and policy regarding both marine and freshwater aquaculture. Given the uncertainty surrounding aquaculture regulations, particularly grant leasing policies, and the inherent risks in aquaculture, financing of new aquaculture ventures in Massachusetts has been difficult if not impossible to access.

The Commonwealth's interest in aquaculture development has intensified in the past year, mainly due to the declines of New England's mainstay groundfish stocks and the continuing economic hardship faced by the Massachusetts commercial fishing industry. While aquaculture development can provide some jobs for displaced fishermen and broaden the economic base of many coastal communities, aquaculture is certainly not the solution to the New England fisheries crisis. Nonetheless, aquaculture offers excellent opportunities for community economic development, jobs creation, technology development and seafood production.

Massachusetts is particularly well situated to take advantage of the opportunities in aquaculture, including seafood production as well as technology development. The state has a wealth of diverse marine and freshwater resources well suited to offshore, inshore, and land-based aquaculture. The state is also home to many world class research institutions which specialize in marine and aquatic technology and science and give Massachusetts a unique advantage in this expanding industry. The state also has a concentration of marine technology firms which are poised to profit from the growth of the aquaculture industry worldwide. Massachusetts is also strategically located to service one of the largest seafood markets in the world - the Eastern seaboard of the United States. The state also has an immensely talented and diverse work force and an established seafood processing and distribution network ready to deliver aquaculture products to domestic and world markets.

Clearly the state of Massachusetts must seize the opportunity to foster this growth industry. The state can not continue to sit mired in a sea of regulations and policy inaction which restrict opportunities for economic development and diversification. The Task Force on Aquaculture Economic Development and Marketing believes that Massachusetts stands at a true crossroads. Stand behind and actively promote the development of a strong, diversified and environmentally sensitive aquaculture industry, or miss the boat and watch development dollars and markets go to our neighboring states and other countries.

To encourage vigorous growth and development of the aquaculture industry in Massachusetts there must first be strong leadership and commitment from the Governor of the Commonwealth, affirming that growth of the aquaculture industry is in the best interest of the state and will play a significant role in its economic future.

Furthermore, the state needs to develop a coordinated approach to aquaculture development and regulation. Central to this effort must be the creation of an aquaculture coordinator position to promote aquaculture in the state and coordinate the various state agencies and other entities involved in regulation and support. Currently aquaculture regulation is scattered across a myriad of state agencies and individual towns. The need for coordination is not only clear, it is absolutely critical. Review of the successful aquaculture programs in other states is testimony to the key role of aquaculture coordination.

Equally important to the Governor's leadership and aquaculture coordination is the dire need for regulatory reform. The current aquaculture permitting process is lengthy, costly, and complicated and discourages financial investment. In order for any growth in the industry to take place, overhauling and streamlining of the regulatory process must be the top priority. Until the regulatory process is improved, little industry development is likely. The State should also push for the development of federal policies permitting aquaculture in offshore waters, an area of significant economic opportunity as offshore technologies come on line. Massachusetts has a distinct advantage in the field of offshore aquaculture technology given the concentration of marine science and technology research institutions and firms in the state.

The state must also act to provide this fledgling industry with opportunities for start-up capital, research and development funds, marketing and promotion support, and education and training. These efforts must take an industry-up approach rather than a government-down approach, whereby the state uses industry expertise and experience to help it identify germane areas of applied research that will actively promote the development of the state's aquaculture industry. Likewise, the industry can help guide and develop useful financing programs, appropriate education programs, and effective marketing and promotion efforts.

The state, by working cooperatively with the industry, can have an enormously positive impact on the development of aquaculture in Massachusetts. The passage of comprehensive aquaculture legislation - addressing the concerns raised by the Task Force, including state coordination of aquaculture development and management, access to capital for aquaculture entrepreneurs, dedication of research and development funds, reform of the regulatory environment, creation of education and training programs at the secondary, vocational and university levels, and adequate marketing and promotion support - is the top priority. Aquaculture offers significant opportunities in community economic development, job creation, technology development, and food production. The Commonwealth, through swift and decisive action outlined in the following recommendations, can capitalize upon these opportunities.

Constraints to Growth

Aquaculture Coordination

Obstacles to Financing

A chief force propelling the growth of the aquaculture industry has been the declining supplies of many of our principal wild fish stocks. Other factors have been the demand for year round supplies and consistent quality and appearance. In spite of many industry growth indicators, the finance community has been reluctant to support its development. The reluctance is based on a daunting regulatory environment and a lack of information concerning what factors contribute to a successful aquaculture operation. Consequently, start-up capital is difficult to access, and there has been little investment in technology that would reduce capital equipment costs.

The availability of information for the finance community on technology, market conditions and production costs would allow a more accurate assessment of risk and the securing of financial support for aquaculture development. Economic models for successful aquaculture operations would further contribute to improved perceptions of aquaculture among the finance community.

Lack of Marketing and Promotion Support

Regulatory Barriers to Marketing and Product Development

Aquaculture Technology

Massachusetts marine technology firms, universities and marine research institutions possess world class capabilities, and Massachusetts is indeed poised to capitalize on this in-house source of expertise. These capabilities can be coordinated to focus on technological problems in aquaculture to reduce the investment risks and improve the efficiency of production. State investment in technology research and development will also foster the development of the marine technology industry in Massachusetts, a sector with excellent growth potential to service the expanding aquaculture industry worldwide.

Currently, there are several bills before the Legislature that would authorize significant levels of funding to enhance aquaculture R&D. However, the proposed legislation appears to allocate funds in advance for specific R&D projects. Although identification of general categories of technological problems seems appropriate, a policy of "picking winners" through legislation is not. General research areas must be carefully identified according to state needs, and grants must be awarded on a competitive, peer-reviewed basis.

Aquaculture Education in Massachusetts: Current Situation and Opportunities Education and training are necessary for the growth of aquaculture in Massachusetts. The state must take the initiative in the formation of these programs. Foreign countries and U.S. states leading in aquaculture have implemented comprehensive education programs including university degree programs, vocational training, extension services, and public/private education, research, and development activities. Hawaii, Florida, Maine and other leading states have integrated public university systems with industry directed research, extension services and degree aquaculture programs.

There are presently very few opportunities for aquaculture training and education in Massachusetts. Existing private aquaculturists generally rely on other aquaculturists and limited assistance from UMASS cooperative extension service and regional organizations such as the Northeast Regional Aquaculture Center, Sea Grant, and out of state universities.

Technical education will increase the success rate of start-up aquaculture ventures. Successful start-ups are critical for financial support to the industry. Extension service can provide necessary technical assistance to aquaculture operations, reducing the failure rate of start-ups, increasing production and mitigating losses from disease, predators, and other risk factors.

There are presently no degree granting institutions with aquaculture programs in the state, and there is very limited application of aquaculture education at other levels. Formal education programs combined with industry driven research have proven beneficial to aquaculture development in other states. Aquaculture education programs in secondary schools and vocational-technical schools can easily be integrated into the state's cross curriculum initiative. Biology, chemistry, engineering, business and writing skills are all necessary components to the multi-disciplinary field of aquaculture. Regional training centers specific to aquaculture could provide training to prospective aquaculture teachers.

Public education programs can generate the public support necessary for aquaculture to develop in the state. The public is generally uninformed regarding aquaculture operations and benefits. This lack of knowledge results in a negative attitude and a public perception of aquaculture as detrimental. With home rule in Massachusetts, local communities control coastal aquaculture. Positive public support is needed for expansion of all (inland, coastal & offshore) aquaculture. Public/private aquaculture projects can be very effective in the development of the private and public (enhancement) aquaculture industry in Massachusetts. Private involvement insures cost efficient and industry relative projects. Public involvement ensures public benefit, consistency with other projects, and a broad overview. (i.e., water quality monitoring & remediation, habitat restoration, population stability. Information transfer is critical to the success of all aquaculture.)

Recommendations

The following recommendations represent the economic initiatives necessary to make Massachusetts competitive in the regional, national and international aquaculture market. Recommendations requiring funding have a ($) next to them. Funding levels for each recommendation can be found on Graphic 3. Graphic 3 also indicates the prioritization of the recommendations requiring funding.

34. Recommendation: ($)
The state should establish an Aquaculture Revolving Loan Fund providing up to $25,000 for aquaculture start-up capital and requiring a 50/50 match. If the loan is for bricks and mortar, with no operating expenses, provide an 80/20 match for up to 70 percent of costs.

Justification:
The private finance community looks upon private aquaculture with interested skepticism. State funding of a revolving loan fund could serve to leverage private capital. There is a direct correlation between states with growing aquaculture industries and direct state funded support.

Implementation Approach:
Create lending criteria and an oversight committee or board of directors to advise with expertise from industry, academia, finance and other government entities. Legislative appropriation may be necessary. Note that this fund could be included as part of a comprehensive natural resource financing legislation that is presently being considered.

35. Recommendation:
DFA should expand its existing agriculture marketing and distribution programs to include aquaculture. Specifically, DFA should develop/expand the following programs: work with area restaurants, chefs and supermarkets to showcase Mass. aquaculture products; track information on domestic seafood markets and international trade opportunities (see Appendix C for an excellent example from the Maryland Aquaculture office.); coordinate with the Governor's Seafood Task Force in their development of fishery product promotion; and incorporate Massachusetts aquaculture products into the DFA Fresh Connection promotion program.

Justification:
Many of these programs are already established and would require minimal effort to expand to include aquaculture products.

36. Recommendation: ($)
Provide funding to subsidize participation in the Boston Seafood Show, currently the premier seafood trade show in the U.S.. The Massachusetts seafood industry could have a "Massachusetts Ave." block of booths similar to Maine's successful "Maine Street" promotion of Maine seafood companies. Also provide funding for promotion of MA aquaculture products at local seafood festivals such as those in Gloucester and New Bedford, as well as the Harvest Festival in Cambridge.

Justification:
A display at the Boston Seafood Show would promote not only MA aquaculture products but other MA seafood products and an overall positive image of Massachusetts seafood.

37. Recommendation: ($)
Establish a grants program or incentive program for secondary schools to implement aquaculture curriculum and small scale aquaculture facilities. Emphasize aquaculture in the state's cross curriculum goals for secondary schools.

Justification:
Curriculum is available from other states and can easily be transferred to Massachusetts schools. Small scale, hands-on facilities are vital to the education effort. Freshwater recirculating systems are the most cost efficient for this type of basic training. Vocational schools should be given priority in this program. For those schools unable to establish a hands on program assistance should be provided for some cooperation with local vocational school and/or exposure to other aquaculture operations and regional demonstration centers.

38. Recommendation: ($)
The Commonwealth should sponsor a seminar for the finance community to acquaint them with the various forms of aquaculture possible in Massachusetts. In addition, the aquaculture coordinator should work to inform the public/private finance community about industry developments and successful models in order to encourage lending. The coordinator should also work with local communities to encourage aquaculture as an element of community economic development planning.

Justification:
Many key and interested bankers and investors in the Northeast have been or would like to be involved in investing in or lending to the aquaculture industry, whether inshore, offshore or land-based. One obstacle that the finance community must overcome is a general lack of information about the nature of the aquaculture industry.

Implementation Approach:
Regularly scheduled seminars, distribution of printed materials and video production to focus on economic benefits to state and local communities.

39. Recommendation: ($)
Develop a public relations campaign designed to enlighten citizens about what aquaculture is, how it works and the importance and benefits of the industry. This may involve the development of videos, print material and posters. Point-of-purchase materials should be distributed to retail outlets.

Justification:
There is a need to educate the general public regarding all aspects of aquaculture in order to generate public support for the aquaculture industry and market demand for its products.

40. Recommendation:
Allow finfish growers to sell their products at below the minimum size set by regulations governing the wild fisheries.

Justification:
There are significant markets for these products, particularly in the market for live fish, and proper documentation such as tracking numbers and duplicate invoices should assure the protection of the wild fish stocks.

41. Recommendation:
Consider developing a limited access, quota controlled fishery for elvers (juvenile eels) to provide stock for Massachusetts aquaculture operations. Elvers would be allowed to be harvested and sold only in the state of Massachusetts for aquaculture in Massachusetts only.

Justification:
Techniques for hatching elvers from adult eel eggs is not yet known; hence the aquaculture industry must rely on wild caught elvers for their stock. Currently elvers sell approximately $200-450 per pound in Maine. If aquaculturists held the elvers for growout to adults, assuming normal growout and typical mortality, the value of one pound of elvers grown to adult size would amount to an estimated $30,000.

42. Recommendation:
Allow a limited number of special permits for collection of highly regulated species such as striped bass, white perch, yellow perch, sturgeon, largemouth bass and others for aquaculture broodstock and research.

Justification:
There may be significant opportunities in the aquaculture of many alternative species. However, aquaculturists and other researchers need a limited number of wild fish in order to research the possibilities.

43. Recommendation:
Reassess the current restrictions on the culture of non-native species to Massachusetts. Develop a set of protocols that would allow the culture of non-native species in alternative growing systems. Industry should prioritize species of interest and a risk assessment should be performed on high priority species.

Justification:
There are significant opportunities in the culture of many species that are not native to the state. The state, before closing the door to these opportunities, should at least analyze the risks. If the risks are found to be acceptable, aquaculture of those species should be allowed.

44. Recommendation:
The MA Division of Marine Fisheries should develop a written policy concerning acceptable sources for shellfish seed for aquacultural purposes, including the importation of seed from other states. The protocol of the Atlantic States Marine Fishery Commission regarding interstate shipment of seed should be used as guidance.

Justification:
Currently DMF does not allow the importation of shellfish seed from hatcheries outside of the region, and there is some confusion concerning the certification process a hatchery must follow to become certified by DMF. Since the Massachusetts shellfish aquaculture industry is presently limited by seed availability, this recommendation should result in improved access to hatchery seed sources.

45. Recommendation: ($)
Fund a non-government organization to conduct an annual survey of the Massachusetts aquaculture industry. Information to be gathered in the survey would include annual production and value figures, employment, future expectations, current constraints to the industry, etc.

Justification:
This information is critical to the tracking of industry development, the marketing of products and the documentation of the value of the industry to the state of Massachusetts.

46. Recommendation: ($)
Establish a competitive grant program to foster research and development. Funds should be allocated to aquaculture R&D projects through a peer-reviewed, competitive process and on the basis of Commonwealth and industry needs. Identification of R&D grant criteria will be set by the Aquaculture Advisory Group and funds will be administered by an appropriate state agency.

Justification:
Basic and applied research is needed to identify appropriate species for culture in Massachusetts and to develop efficient and economic technologies. There will be ongoing research needed in these areas as well as areas such as disease prevention, feed efficiency, hatchery techniques, environmental impacts, etc. Few private firms have the expertise or funds to conduct this typically costly research and thus rely upon publicly funded research.

47. Recommendation: ($)
Fund on a competitive basis an industry based and driven research and innovation center such as the newly established Massachusetts Aquaculture Innovation Center (MAIC). Modeled after the successful Maine Aquaculture Innovation Center, the MAIC should be a state assisted, but industry-driven research and development center. (The MAIC is presently an organization with a board of directors. There is no physical "center" at this time.)

Justification:
Organizations such as the MAIC will facilitate and expand cooperative efforts between industry and the research community while acting as an information transfer source. This approach has proven itself to be very responsive to industry needs while maintaining a balanced representation from government, academia and industry.

48. Recommendation:
Earmark existing state programs and funding that can be redirected towards aquaculture training, education, and extension at secondary, vocational, and college levels.

Justification:
There are likely to be several existing state education programs and funding sources which could be directed to include aquaculture training and education. Prior the implementation of this recommendation, consideration must be given to the availability of aquaculture jobs.

49. Recommendation:
Recommend that the Governor appoint a member to the Fish and Wildlife Advisory Board who has experience in the aquaculture field the next time a position on the board is open.

50. Recommendation: ($)
The state should provide aquaculture extension services. Through the state university/college system, establish two extension agents, one specializing in freshwater aquaculture and one in marine aquaculture.

Justification:
Extension agents, using university and regional demonstration center resources, can provide training and assistance to the industry.

51. Recommendation: ($)
Develop a Massachusetts-Grown Seal to be put on packaging to promote MA aquaculture products.

Justification:
A Massachusetts-Grown seal will promote Massachusetts aquaculture products and the Massachusetts seafood image.

52. Recommendation: ($)
Establish an internet bulletin board or homepage which would post MA aquaculture products availability and prices. This could be partially funded by fees to businesses using the service.

Justification:
An internet bulletin board is a potentially efficient and highly effective means of promoting the awareness and availability of Massachusetts aquaculture products to a wide variety of domestic and international buyers.

53. Recommendation
Initiate study of agriculture cooperatives and how they could be applied to aquaculture in MA. Currently there is not a critical mass of businesses nor a marketing logjam to warrant the establishment of a cooperative.

Justification:
As the aquaculture industry expands in the state, the industry may benefit from management, marketing, and other support services that a cooperative can offer at a lower cost than if left to an individual firm.

54. Recommendation: ($)
Develop a buyers guide to MA aquaculture products to be distributed locally, regionally, and nationally.

Justification:
There is a need to attract and educate buyers about MA aquaculture products.

55. Recommendation:
Provide marketing seminars to growers to inform them of alternative marketing options for their products.

Justification:
Growers can capitalize on the unique characteristics of aquaculture products if they are better informed about marketing options.

56. Recommendation ($)
Appropriate funds for aquaculture degree programs at universities and colleges. Massachusetts universities/colleges should develop coordinated programs with each institution specializing in one or two particular areas. The curriculum exists in other university systems both in the U.S. and abroad. Suggested areas of focus include: shellfish, marine finfish, crustaceans, aquatic plants, freshwater finfish, disease and veterinary studies, engineering, and technology. All programs should include business, sales and marketing, and technology. The universities could also act as regional training centers to offer teacher training in aquaculture.

Justification:
Critical to the successful implementation of any aquaculture program is education and training.

57. Recommendation: ($)
Establish a grants program available to community organizations to design and implement public aquaculture education programs.

Justification:
Aquaculture development in Massachusetts requires community level programs. Raising the public's awareness of the benefits of aquaculture is critical to success. Community organizations can tailor specific public education programs to their particular conditions. Model programs include Nantucket where private aquaculture is being developed in conjunction with public fisheries enhancement programs. The program includes water quality monitoring through educational programs for local students and the general public. In Westport, students and other local organizations collect scallop spat for enhancement. Involvement of the local community generates support for aquaculture development.

58. Recommendation: ($)
Establish regional aquaculture information/training demonstration centers which are state/private partnerships and locally operated.

Justification:
These demonstration centers will provide the infrastructure necessary for aquaculture development. The centers should be based upon a commercial level aquaculture operation to provide funding for operations. This will promote relevant training, practical research and development opportunities, and offer facilities to commercial operators for research and development activities. As demonstration centers, these facilities will play the important role of introducing the public to physical aquaculture operations. They will provide training to prospective aquaculturists, teachers, and students.

59. Recommendation: ($)
Establish a grants program to design and implement public/private programs which combine public enhancement and private aquaculture development. For example, on Nantucket, the Nantucket Research and Education Foundation and future private aquaculturists (aquaculturists in training) provide labor and expertise to the town for Nantucket's public enhancement program. In return, the town allows use of areas normally closed to private aquaculture for nursery operations.

Justification:
This cooperation increased benefits to both public and private operations. The private sector is much more efficient at operating aquaculture programs whether for profit or enhancement. The program has also increased water quality monitoring activities for the entire island. This same model can be used for freshwater resources.

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Published: September 1995