Integration of Hydroponic Tomato and Indoor Recirculating Aquacultural Production Systems: An Economic Analysis Special Report No. 6 July 2008 Alabama Agricultural Experiment Station Auburn University Printed in cooperation with the Alabama Cooperative Extension System (Alabama A&M University and Auburn University). TABLE OF CONTENTS page Introduction ......................................................................................................................................................... 3 Background and Justification .............................................................................................................................. 3 Technical Analysis .............................................................................................................................................. 5 Physical Plan ....................................................................................................................................................... 7 Financial Analysis ............................................................................................................................................... 9 Investment Costs......................................................................................................................................... 9 Catfish and Tomato Production ................................................................................................................ 10 Tilapia and Tomato Production................................................................................................................. 10 Fish Only Production System ................................................................................................................... 12 Environmental and Natural Resource Advantages ........................................................................................... 13 Summary and Conclusion ................................................................................................................................. 14 References ......................................................................................................................................................... 15 LIST OF FIGURES AND TABLES Figure 1. Design of the Tomato and Fish Production System ............................................................................ 6 Table 1. Physical Plan for Channel Catfish Production in the Aquacultural System .......................................... 8 Table 2. Selected Characteristics of the Integrated Tomato and Aquacultural System, Alabama, 2007 ............ 9 Table 3. Annual Operating Costs for Fish Greenhouse in an Integrated Tomato and Aquacultural System. Alabama, 2007 ............................................................................................................................................. 9 Table 4. Annual Operating Costs for Tomato Greenhouse in the Integrated Tomato and Aquacultural System, Alabama, 2007 ....................................................................................................... 10 Table 5. Investment Costs for the Fish Greenhouse in the Integrated Tomato and Aquacultural System, Alabama 2007 ........................................................................................................................................... 11 Table 6. Investment Costs for the Tomato Greenhouse in the Integrated Tomato and Aquacultural System, Alabama, 2007 ........................................................................................................................................... 12 Table 7. Costs and Returns for Integrated Tomato and Aquacultural (Catfish) System, Alabama, 2007 ......... 13 Table 8. Costs and Returns for Integrated Tomato and Aquacultural (Tilapia) System, Alabama, 2007 ......... 13 Table 9. Sensitivity Analysis of Net Returns at Selected Yields and Prices for Catfish and Tomato Production, Alabama, 2007 .......................................................................................................... 14 Table 10. Sensitivity Analysis of Net Returns at Selected Yields and Prices for Tilapia and Tomato Production, Alabama, 2007 .......................................................................................................... 14 Auburn University is an equal opportunity educational institution/employee. Information contained herein is available to all persons without regard to race, color, sex, or national origin. Issued in furtherance of Cooperative Extension work in agriculture and home economics, Acts of May 8 and June 30, 1914, and other related acts, in cooperation with the U.S. Department of Agriculture. The Alabama Cooperative Extension System (Alabama A&M University and Auburn University) offers educational programs, materials, and equal opportunity employment to all people without regard to race, color, national origin, religion, sex, age, veteran status, or disability. http:www.auburn.edu http:www.ag.auburn.edu/aaes Integration of Hydroponic Tomato and Indoor Recirculating Aquacultural Production Systems: An Economic Analysis J. B. Holliman, J. Adrian, and J. A. Chappell INTRODUCTION ike much of agriculture, Alabama’s aquacultural production sector has been under stress for several years. Alabama producers and intermediaries in the system face competition from others in the fish and seafood industry, both domestically and internationally, as well as from producers and handlers of other protein sources. Prices for farm level products have generally been depressed and input costs have been on the rise. Thus, profit margins have become thin to nonexistent. Resource owners are interested in identifying and evaluating viable alternative uses for their productive assets. To cope in this environment and be profitable, Alabama aquacultural producers must organize and operate to maximize efficiency and be innovative in decisions and actions. Existing fish production technologies and approaches, primarily pond culture, may not compete effectively. Increasing yield per unit of water, lowering cost per unit of product, and/or enhancing market access could improve the plight of producers. This study aims to identify and assess the technical and economic feasibility of an alternative production system that integrates hydroponic tomato production with production of channel catfish or tilapia using recirculating water through a closed, controlled environment using separate greenhouses to produce tomatoes and fish throughout the year. L BACKGROUND AND JUSTIFICATION Recirculating aquacultural systems offer fish producers a variety of important advantages over open pond culture. Among these are • a means to maximize production using a limited quantity of water and land, • almost complete environmental control of the system so as to maximize fish growth year round, • potential to locate production facilities near markets, • more convenient and efficient harvesting, and • potential to quickly and effectively control diseases (Helfrich and Libey). These intensive integrated systems are designed to raise relatively large quantities of fish in relatively small volumes of water by treating the water to remove waste byproducts and then reusing it. They also allow the producer to manage fish stocks more efficiently and allow a relatively high degree of environmental control over many parameters such as water temperature, dissolved oxygen, pH, and Holliman is a former Graduate Research Assistant and Adrian is a Professor in the Department of Agricultural Economics and Rural Sociology, Auburn University. Chappell is an Associate Professor in the Department of Fisheries and Allied Aquacultures, Auburn University. 4 INTEGRATION OF HYDROPONIC TOMATO AND AQUACULTURAL PRODUCTION: AN ECONOMIC ANALYSIS many excreted byproducts that are normally undesirable (Rakocy, 1992). In the process of reusing the water, nontoxic nutrients and organic matter accumulate. These metabolic byproducts can be channeled into secondary enterprises that have economic value or in some way benefit or complement the primary production system. Feed is a major expense item for typical aquacultural operations, often accounting for 40 to 60 percent of the total operating expenses. Only 30 to 35 percent of the feed fed and consumed by the fish is utilized for growth. The rest, 65 to 70 percent, is lost to the water column (Brown, 2006). An integrated fish-vegetable greenhouse production system uses the energy lost in the unused feed by taking the effluent produced by catfish or tilapia culture and delivering enriched water to the vegetables from a portion of the culture water. This process allows regular water exchanges from the catfish or tilapia culture tanks; this exchange improves the overall water quality of the system. Also, essential nutrients, which would normally have to be purchased, are provided to the vegetable plants, rather than being discarded from the production site. Plants, such as tomatoes, are an ideal complementary crop in an integrated system because they grow rapidly in response to the high levels of dissolved nutrients that are generated from the microbial breakdown of fish wastes. Since these systems have a small daily water exchange rate, dissolved nutrients accumulate and approach concentrations that are beneficial to hydroponic plants. Nitrogen, in particular, occurs at very high levels in recirculating systems. Fish excrete waste nitrogen directly into the water in the form of ammonia, which can be converted by a biofilter to nitrite and then to nitrate. Ammonia and nitrite are toxic to fish, but nitrate is relatively harmless and is the preferred form of nitrogen used for aquatic plants and vegetables such as tomatoes (Rakocy, 1992). The level of water renewal in the recirculating aquacultural system depends, first, on the biofilter’s efficiency in removing toxic nitrogen-rich waste resulting from fish metabolism and, second, on the amount of water that is lost when removing the accumulated waste products from the biofilters. Removal of the nitrogenous compounds from the water and incorporation of tomatoes into the recirculating system can improve water quality as well as potentially increase catfish and tilapia growth rates. This approach, together with the additional crop output from the integrated system, gives the potential to enhance revenue and hopefully profit when compared to production of aquacultural enterprises alone. Combination of catfish or tilapia production with hydroponic tomatoes in a recirculating raceway system may have other potential economic benefits compared with separate operations in terms of reduced land requirements along with the combined use of structures, equipment, and inputs. This approach includes common pumps, filters, energy and—depending on the type of system utilized— vertical space in greenhouses (Rakocy, 1989) The rapidly growing greenhouse tomato industry has become an important part of the North American fresh tomato industry. Greenhouse tomatoes now represent an estimated 17 percent of the U.S. fresh tomato supply (Calvin and Cook, 2005). Around 37 percent of all fresh tomatoes sold in U.S. retail stores are now grown in greenhouses, compared with negligible amounts in the early 1990s. While greenhouse tomatoes have higher per unit costs of production and generally higher retail prices in the U.S. than field-grown tomatoes, several other characteristics have contributed to the growth in this sector. Since they are protected from the water and other conditions that affect open field-grown tomatoes, greenhouse tomatoes generally have a much more uniform appearance than field-grown tomatoes as well as a fairly steady production volume (Calvin and Cook, 2005). These factors lead to greater consistency in quality, volumes, and pricing, which are issues of particular concern to the retail and food service industries. Producers also capitalize on higher prices in the off season when field-grown tomatoes are not being produced or readily available. Total per capita consumption of fresh tomatoes increased to 19.2 pounds in 2003 from 12.3 pounds in 1981 (USDA, 2006). As of 2004, the U.S. fresh market for tomatoes was valued at $1.3 billion. Im- ALABAMA AGRICULTURAL EXPERIMENT STATION 5 ports comprise a very large portion of the tomato consumption in the U.S. Fresh imports of tomatoes reached $900 million in 2004 with $750 million coming from Mexico, largely in the winter (USDA, 2006). Seasonality is a major factor shaping the North American fresh tomato industry. Consumers increasingly demand a steady, year-round supply of tomato products (Calvin and Cook, 2005). These demands are better satisfied with greenhouse tomato production systems that can produce a fairly steady predictable yield through all four seasons as compared to field-grown tomatoes, which are more seasonal with weather patterns and source of supply. These characteristics result in tomatoes being an excellent complementary enterprise for greenhouse aquacultural systems. Aquaculture is also a growing industry striving to satisfy a growing market for food fish while maintaining profitability. It currently is one of the fastest growing sectors of agriculture in the United States. Catfish and tilapia have been the new aquacultural cash crops since the 1990s (Helfrich and Libey). Growing public demand for healthy, tasty, and affordable food is steadily influencing profitability of the catfish and tilapia production sectors. Decline in wild fish populations as a result of over harvest and water pollution has promoted farming of fish grown in contaminant free, indoor recirculating aquacultural systems (Helfrich and Libey). U.S. farm-raised catfish is the fifth most popular fish consumed in the U.S., behind tuna, pollock, salmon, and cod, respectively. Farm-raised catfish production for food-sized fish reached 608 million pounds liveweight in 2005 (2005 Census of Aquaculture, NASS, p. 27). The farm-raised catfish industry is centered in the southeastern United States, primarily on the lower Mississippi River flood plain. Alabama, Arkansas, Louisiana, and Mississippi account for 95 percent of farm-raised catfish production, with Mississippi growers producing 70 percent of the total (Avery, 2000). As of 2005, there were 25,000 water acres on catfish farms in Alabama with about 215 producers (2005 Census of Aquaculture, NASS, p. 15). Eight Alabama farms used raceway production systems. Alabama producers ranked second to Mississippi in catfish sales in 2005, with more than 142 million pounds liveweight being harvested. Food-size catfish sales in Alabama totaled $93.1 million with an average price of $0.66 per pound. Tilapia are a relatively new fish enterprise in the U.S. California and North Carolina growers were major suppliers of food-size tilapia in 2005, with 4.8 and 2.0 million pounds liveweight, respectively (2005 Census of Aquaculture, NASS, p. 31). Alabama growers supplied 98,000 liveweight pounds of food-size tilapia in 2005. Food-size tilapia sales in Alabama were $128,000 in 2005, with an average price per pound of $1.72. This study includes an assessment of the economic potential of farming channel catfish or tilapia in a system incorporating tomatoes grown hydroponically inside two separate greenhouses. The study analyses both the technical and the economic feasibility of these systems and discusses potential advantages and disadvantages of these types of integrated systems. TECHNICAL ANALYSIS The planned recirculating aquacultural/vegetable crop system represents a new and unique way to produce fish. Instead of the traditional method of growing fish outdoors in open pond culture, recirculating systems produce fish at high densities in indoor tanks and a controlled environment. The proposed recirculating aquacultural system will consist of two separate 88-foot by 12-foot raceways enclosed in a 96-foot by 30-foot greenhouse with 6-foot sides. An adjacent 96-foot by 30-foot greenhouse with 8-foot sides will be used for growing tomatoes using aquacultural effluents as nutrients. This system is to be located on a 10-acre tract with a 1-acre pond plus run-off area. The land is assumed to be owned and compatible to construction of the system. Thus, pond construction costs are included in the analysis while a land cost is not included. Figure 1 displays a diagram of the planned system. 6 INTEGRATION OF HYDROPONIC TOMATO AND AQUACULTURAL PRODUCTION: AN ECONOMIC ANALYSIS Well 22,000 gallon holding tank Well Cooling pad Reservoir Pond 1 acre 100’ FIsh raceways 88’ 88’ 96’ 200,000 BTU corn boiler 12’ 12’ 30’ 25’ Tomato greenhouse Fish effluents to tomatoes FIsh greenhouse Figure 1. Design of the tomato and fish production system. The greenhouse for growing the aquacultural enterprise will consist of two 88-foot long by 12-foot wide by 4-foot deep raceways. There will be four Sweetwater blowers, one single horsepower and three others that are 2.5 horsepower each. These will provide sufficient aeration and water flow for the projected annual yield of 44,000 pounds of channel catfish or 27,600 pounds of tilapia. Tomatoes will be cultivated in five troughs, 90 feet long by 2 feet wide and 1.5 feet deep, within the tomato greenhouse. These ditches will be filled with 100 percent cotton gin compost, which has been shown to increase tomato production (Cole, 2002). The water source will be supplied primarily from two wells, which provide approximately 10 to 15 gallons per minute flow. The well water will be pumped into a 22,000 gallon holding tank 10 feet above the level of the greenhouse tanks to provide water for the fish and emergency water for the tomatoes. Because well water often has low hardness and alkalinity, CaCO3 will be added as needed to the culture water to improve productivity and eliminate wide pH swings associated with low alkalinities (Brown, 2006). Access to city water also will be provided for emergency purposes, but it will not be utilized frequently, other than for washing the inside of the greenhouses when needed. Most city water contains chloramines, which are not volatile. During emergency situations, sodium thiosulfate will be used to neutralize the toxic chlorine in the city water before it is transferred to the fish culture tanks. Water supply for this system was never considered to be a limiting factor for production because of the large volume of water that is constantly available. Design of the system, the stocking rate, and the system of operation were planned with the objective of disease prevention through water quality monitoring, biological control methods, and biofilters incorporated in order to avoid any need for treatments that would be toxic to or accumulate in the plants. The appropriate combination of tomato and fish production was analyzed with the level of crop produc- ALABAMA AGRICULTURAL EXPERIMENT STATION 7 tion dependent on plant nutrients provided by fish production. The feasible level of tomato production was determined and the requirements for hydroponic structures were calculated. Fish production and the following technical requirements of fingerlings, feed, and physical facilities were configured in terms of a physical plan to produce 44,000 pounds of channel catfish or 27,600 pounds of tilapia per year. These levels of production were chosen as likely minimum levels for economic efficiency estimated for a system manager along with hourly laborers. The manager’s and hourly laborers’ duties will be to operate and maintain the production system daily. Additional labor will be required during harvest periods for fish as well as for tomatoes. PHYSICAL PLAN The integrated system plan was based on producing fish at a desired market weight of 1.1 pounds (500 grams) for catfish and 1.0 pound for tilapia (Brown, 2006). Most cultured channel catfish sold for food are harvested at 340 to 680 grams (0.751 pounds) in body weight (Chapman, 2006), which comes to approximately 11,000 pounds per quarter for the system when the fish are cultured under favorable conditions. For tilapia, 6,900 pounds per quarter is the defined yield for the system. These conditions include a desirable water temperature of 73 degrees F for efficient production as well as an indoor environmental temperature between 82 and 87 degrees F, which will be maintained by a 200,000 BTU Grain Burner for heating. Ventilation fans, along with a drip cooling system, will be used to maintain desired temperatures (Chappell, 2006). Producing catfish, tilapia, or any other warm water fish in a nontropical environment introduces problems for the farmer that need to be addressed in order to culture them economically (Brown, 2006). Food availability and good sanitary conditions promote optimum growth as well. Fingerling requirements were based on a mortality rate of 3 percent per quarter. Fingerlings will be purchased at an average weight of 15 grams or 0.5 ounce and the grow-out period is budgeted to be six months for catfish. A 28 to 32 percent protein diet of floating feed ranging in size from 1.0 to 5.0mm will be fed (Brown, 2006) with a feed conversion ratio of 2:1 assumed. Facilities required for this study are based on a stocking rate of 2.5 pounds per cubic foot of system volume (Klinger, 1983). A staggered stocking process allows for a constant supply of market-sized catfish while not oversupplying the local market. The incoming fingerlings will be graded thoroughly for size consistency before stocking into the system. Stocked fish will be separated by dividers in the raceways with the dividers expanding the production area to ensure sufficient tank space as the fish grow (Brown, 2006). Water flow requirements were based on average hourly oxygen consumption of 2.94 grams per pound of feed distributed (Jarboe, 1996) and a minimum dissolved oxygen level of 151 milligrams per gallon (Landau, 1991). Dissolved oxygen will be monitored twice per day with the first measurement starting in early morning and the second coming just before dusk. To ensure water circulation and proper aeration, blowers and a diffuser hose will be utilized with this system. The pH level will be monitored in the morning and just before sunset to minimize large pH swings in the system. Supplemental water also will be added every day, mainly to replace water loss due to tomato watering and evaporation from the large water surface area of the raceways. Ammonia, nitrite, and nitrate levels will be recorded daily. Water hardness, alkalinity, and chlorides will be monitored daily to ensure optimal production conditions. Supplemental nutrients such as fertilizers containing calcium nitrate and potassium nitrite will be mixed and added directly to the tomatoes as needed to maintain maximum production (Brown, 2006). Water flow requirements together with the total system fish volume will be calculated for the maximum fish weight level present at any time during the production cycle. Levels of tomato production and the respective number of plants required were calculated using the ratio of 0.084 square feet of growing area per gallon of fish volume (Sutton and Lewis, 1982). Tomato 8 INTEGRATION OF HYDROPONIC TOMATO AND AQUACULTURAL PRODUCTION: AN ECONOMIC ANALYSIS plant production density was calculated as 0.25 plants per square foot (Harris, 1994). Tomato yield was specified at 20 pounds per plant (Sutton and Lewis, 1982). Water exchanges will take place on a daily basis depending on water quality in the fish tanks and nutrient requirements for the tomatoes (Brown, 2006). Depending on the tomato plant needs, the tomatoes will be watered three to 12 times per day to ensure proper water and nutrient levels. Proper watering will be accomplished by using an automatic siphon from the fish tanks to the plant greenhouse (Brown, 2006). To supply water to the catfish or tilapia raceways, a 3-inch line capable of supplying a minimum of 200 gallons per minute will run from the holding tank. There also will be a 4-inch line originating from the reservoir pond supplying the same flow rate for emergency situations. The well water also will be used in watering the tomatoes and mixing any essential nutrients that the fish effluent water did not provide (Brown, 2006). The fish production plan was based on the purchase of 0.5 ounce fingerlings, which will be grown to market sale weights of 1.1 pounds for catfish or 1 pound for tilapia. For the annual production of 44,000 pounds of channel catfish, 43,000 0.5-ounce (5 gram) fingerlings will be purchased in batches of 10,638 per quarter. A total of 34,558 tilapia fingerlings will be stocked per year to produce 27,600 pounds per year. At the end of the first quarter, there should be 10,319 catfish available due to the 3 percent mortality rate. The average weight of the fish is expected to be 4.5 ounces per fish and the total weight of all the fish should be 2,902 pounds (Table 1). The second quarter allows for continuous growth of the catfish to the market weight of 1.1 pounds. Therefore, the total weight of the fish at the end of the second production cycle should be 10,152 pounds meaning that the maximum level of catfish in the system at any time is 13,054 pounds (10,152 + 2,902), which will occur after a six-month period, the average length of a production cycle for channel catfish. This staggered stocking process allows for a constant supply of market-sized catfish while hopefully not oversupplying the local market (Brown, 2006). The water flow required for the stated amount of production will be 3,000 feet per hectare as produced by the four blowers. Since the catfish were to be stocked at 2.5 pounds per cubic foot of the system’s volume (Klinger, 1983), the total water volume required will be slightly more than 39,000 gallons (Table 2). The hydroponic tomato growing area required was 3,294 square feet (39,000 x 0.084 square feet) and, consequently, 826 (0.25 plants per square foot of hydroponics growing area x 3,294) plants will be needed per cycle. The expected tomato output should be 16,587 pounds per cycle and 33,175 Table 1. Physical Plan for Channel Catfish Production in the Aquacultural System Year 1 Quarter 1 Purchases Number of fish (0.5 oz.) 10,638 Quarter 3 Purchases Number of fish (0.5 oz.) 10,638 Years 2-10 Quarter 1 Purchases Number of fish (0.5 oz.) 10,638 Quarter 3 Purchases Number of fish (0.5 oz.) 10,638 End Stocks Number of fish 10,319 Quarter 2 Purchases Number of fish (0.5 oz.) 10,638 Quarter 4 Purchases Number of fish (0.5 oz.) 10,638 Quarter 2 Purchases Number of fish (0.5 oz.) 10,638 Quarter 4 Purchases Number of fish (0.5 oz.) 10,638 Sales Number of fish (1.1lb) 10,000 Sales Number of fish (1.1lb) 10,000 End Stocks Number of fish 10,319 End Stocks Number of fish 10,319 Total Weight (lb.) (oz.) 4.50 2,902.22 Total Weight (lb.) (oz.) 4.50 10,152.00 End Stocks Sales Total Number Weight Number of (lb.) (oz.) of fish fish (1.1 lb.) 4.50 2,902.22 10,319 10,000 Total Weight (lb.) (oz.) 4.50 10,152.00 End Stocks Sales Total Number Weight Number of (lb.) (oz.) of fish fish(1.1 lb.) 4.50 2,902.22 10,319 10,000 End Stocks Sales Total Number Weight Number of (lb.) (oz.) of fish fish(1.1 lb.) 4.50 2,902.22 10,319 10,000 Sales Number of fish (1.1lb) 10,000 Sales Number of fish (1.1lb) 10,000 End Stocks Number of fish 10,319 End Stocks Number of fish 10,319 Total Weight (lb.) (oz.) 4.50 10,152.00 Total Weight (lb.) (oz.) 4.50 10,152.00 ALABAMA AGRICULTURAL EXPERIMENT STATION 9 pounds per year based on two production cycles per year. The first crop will be transplanted in August and harvested from November to the end of December and a second crop will be transplanted at the first of January and harvested from March through early June (Brown, 2006). A total of 34,558 tilapia will be stocked per year, and the stocking will be segmented into two-month stocking regimes (Brown, 2006). With an estimated total production of 13,800 pounds produced per tank per year, the estimated grow-out time for each individual tilapia cohort is six months to reach 1 pound, which results in a minimum of 27,600 pounds produced per year (Brown, 2006). FINANCIAL ANALYSIS Costs for the equipment required to operationalize the physical plan for the production of the fish along with hydroponic tomatos were determined from information supplied by commercial operations and retailers. Items included two greenhouses, generators, an irrigation system, lumber, aerators, and a Polyurea waterproof liner for the two raceways. Catfish output was budgeted to be marketed at $0.77 per pound while tilapia was priced at $1.80 per pound (USDA, 2006). Due to the seasonality of tomato prices, an average market price from 2000 to 2005 was used to determine the expected return from tomato production. The average market price of tomatoes in 2000 was $1.38 per pound and the average market price in 2005 was $1.61 per pound Table 2. Selected Characteristics of the Integrated (USDA, 2006). Therefore, the tomato price used Tomato and Aquacultural System, Alabama, 2007 in the analysis to determine the expected return Amount Units Item was $1.50 per pound. 0.08 sq. ft./gal. Growing area per gallon of catfish Interest on operating capital was charged at volume 0.25 plants/sq. ft. Tomato plant density 8 percent for six months while investment capital 20.06 lb/plant Tomatoes per plant was charged at 8.5 percent for the year. Investment 0.53 ounces Fingerling weight capital was assumed to be 80 percent borrowed 1.10 lbs Catfish market weight 185.00 days Days for catfish to reach market weight and 20 percent owner provided, Tables 3 and 4. 44,000.00 lbs Expected annual catfish yield Employment taxes were included at defined rates 13,054.22 lbs Maximum level of fish present at any time 3,000.00 cu. ft./h Waterflow for catfish of 6.2 percent for Social Security and 1.45 percent 2.50 lb/cu. ft Catfish stocking rate for Medicare. Property taxes were allocated using 39,060.93 gal Total system water volume required a 10 percent assessment rate at a 0.030 millage 3,294.40 sq. ft. Tomato growing area required 826.89 plants Tomato plants per cycle rate. Land was valued at the USDA average for 16,587.50 lbs Expected tomato output per cycle Alabama of $3,100 per acre. The 10 acres was as2.00 cycles Number of tomato cycles per year sumed to be owned and appropriate for construc33,175.00 lbs Tomato output per year tion of the fish/tomato system. Thus, a land Table 3. Annual Operating Costs for Fish Greenhouse in an Integrated Tooutlay was not included mato and Aquacultural System. Alabama, 2007 Cost Quantity Price/Unit Units Item in the financial analysis 6,450 43,000.00 0.15 per Fingerlings but pond construction 5,200 520.00 10.00 hr Labor (avg10hrs/week) costs were allocated. 2,000 25,000.00 0.08 Kwh Electrical Water (city) Feed Corn (Fuel for heat) Fish Protectants System Manager Maintenance and Repair Insurance Property Taxes Employment Taxes Interest: Annual Operating capital Fixed capital Total Total tons bushel total total total total total total total total 500.00 280.00 3.50 100.00 30,000.00 200.00 500.00 286.00 1,545.00 2,518.06 4,520.94 1.00 10.00 771.00 1.00 0.50 1.00 0.50 1.00 1.00 1.00 1.00 500 2,800 2,699 100 15,000 200 250 286 1,545 2,518 4,521 44,069 Investment Costs The financial requirement for the initial investment to establish a system that produces 44,000 pounds of channel catfish or 27,600 pounds of tila- 10 INTEGRATION OF HYDROPONIC TOMATO AND AQUACULTURAL PRODUCTION: AN ECONOMIC ANALYSIS pia was $70,640 with Table 4. Annual Operating Costs for Tomato Greenhouse in the Integrated an annual depreciation Tomato and Aquacultural System, Alabama, 2007 Cost Quantity Price/Unit Units of $6,456 (Table 5). The Item Seeds/Plants 500 2,000.00 0.25 per Tomato greenhouse and related Labor (15 hrs/week) 7,800 780.00 10.00 hr 2,800 35,000.00 0.08 Kwh machinery and equip- Electricity 2,699 771.00 3.50 bushel Corn (fuel for heat) ment needed to produce Water (city) 500 1.00 500.00 total 55 1.00 55.00 total 33,175 pounds of toma- Fertilizer 250 1.00 250.00 total Chemicals/Plant Protectants toes per year would cost Poly Duct 560 2.00 280.00 roll approximately $43,072 Beneficial insects 810 1.00 810.00 total 1,750 1,400 1.25 per with annual deprecia- Waxed boxes 50 50 1.00 per tion of $3,475 (Table Buckets (5 gal.) 420 6.00 70.00 per Water Sample Analysis 6). Therefore, the total Leaf Tissue Analysis 480 6.00 80.00 per 15,000 0.50 30,000.00 total initial investment outlay System Manager 200 1.00 200.00 total Maintenance and Repair for the system was esti- Insurance 250 0.50 500.00 total 148 1.00 148.00 total mated to be $113,712, Property Taxes 1,744 1.00 1,744.00 total Employment Taxes excluding land, with an 2,449 1.00 2449.05 total Interest: Annual Operating capital annual depreciation at 2,757 1.00 2,756.61 total Fixed capital 41,221 TOTAL $9,930. Catfish and Tomato Production Annual operating costs for the system were $85,290, with $44,069 allocated to the catfish/tilapia production component and $41,221 from the tomato production component, Tables 7 and 8. Adding $9,931 for depreciation produced an annual cost outlay of $95,221. Major annual cost items for the fish greenhouse were manager salary (34 percent), fingerlings (14.6 percent), seasonal labor (11.8 percent), interest on fixed capital (10.3 percent), and feed (6.4 percent), Table 3. Major annual cost allocations for the tomato greenhouse included manager salary (36.4 percent), seasonal labor (18.9 percent), electricity (6.8 percent), and interest on fixed capital (6.7 percent). At expected prices ($0.77 per pound for catfish and $1.50 per pound for tomatoes) and yields, the integrated catfish/tomato system was not profitable, Table 7. A loss of $11,579 was generated. On a component basis, tomatoes covered their costs while catfish did not. Thus, the integrated catfish/tomatoes system does not seem to be economically feasible at expected prices and yields. To analyze the responsiveness of net returns to alternative prices and yields, a sensitivity analysis was conducted, Table 9. Prices were varied by $0.05 from $0.62 to $0.92 for catfish and from $1.35 to $1.65 for tomatoes. Yields were varied at 10 percent and 20 percent of the base levels of 44,000 pounds for catfish and 33,175 pounds for tomatoes. Net returns became positive ($520) at 20 percent yield increases with $0.05 declines in prices from expected levels. Also, at 10 percent yield increases and $0.10 increases in prices from expected levels, net returns were positive at $5,276. Thus, it is clear that fairly large positive market forces or large production efficiency gains are needed to generate feasibility of the system that includes catfish and tomatoes. Tilapia and Tomato Production Total tilapia production was estimated to be a minimum of 27,600 pounds per year with an estimated grow out period of six months to reach the marketable size of 1 pound (Brown, 2006). With two crops of tomatoes produced per year, the estimated total production of tomatoes in the greenhouse system was 33,175 pounds per year. At expected prices ($1.80 per pound for tilapia and $1.50 per pound for tomatoes) and yields, the integrated tilapia/tomato system showed positive annual net returns of $4,222, Table 8. Tilapia and ALABAMA AGRICULTURAL EXPERIMENT STATION 11 tomatoes contributed almost equally to returns. Thus, integration of tilapia production with tomatoes is economically feasible at expected prices and yields. To analyze the responsiveness of net returns to alternative prices and yields, a sensitivity analysis was conducted, Table 10. Prices were varied by $0.05 from $1.65 to $1.95 for tilapia and from $1.35 to $1.65 for tomatoes. Yields were varied at 10 percent and 20 percent of the base levels of 27,600 pounds for tilapia and 33,175 pounds for tomatoes. At $1.95 per pound for tilapia and $1.65 per pound for tomatoes, yields could decline by 10 percent each for tilapia and tomatoes and still maintain positive annual net returns of $2,483. Similarly, if yields of both items increased by 10 percent, prices could decline to $1.65 for tilapia and $1.35 for tomatoes and still maintain positive annual net returns of $4,139. With 20 percent increase in yields for both items and the highest analyzed prices, net returns would be $35,050 annually. Thus, an aquacultural/vegetable system incorporating tilapia and tomatoes shows potential for development. Table 5. Investment Costs for the Fish Greenhouse in the Integrated Tomato and Aquacultural System, Alabama, 2007 Item Unit Price/Unit Quantity Cost Yrs of Life Annual Depreciation 325.00 175.00 138.00 16.50 9.00 28.00 22.50 250.00 27.50 $991.50 33.33 128.00 12.00 6.00 20.00 80.00 2,460.00 100.00 450.00 100.00 $3,389.33 466.67 112.00 18.00 253.33 188.00 120.00 24.00 30.00 250.00 Greenhouse (30’ x 96’ x 6’ side, Atlas Greenhouse System) per Basic Structure per Poly Roof Covering (2 ply) per Ventilation per Shade Cover per Door (3’ x 6’ 8”) per Door (10’ x 10’, roll up) per Freight per Installation per Baseboard (2a’ x 8”, treated with clamps) Subtotal: Fish Greenhouse Raceway System (2 raceways @ 88’ x 12’ x 3 ¼’ each) per Wooden posts (4’ x 4’ x 8’ treated, 100 @ $5 each) per Plywood (5/8” x 4’ x 8’ treated. 48 @ $40 each) per Wooden Caps (2” x 4” x 16”; 18 @ $10 each) per Drain Structures (two 8” x 4’ PVC pipe plus two 8” ells) cu.yd. Walkway (Crushed Limestone) per Tank Dividers per Waterproofing: Polyurea waterproof liner (All Coat, etc.) Aeration per One Sweetwater S41 blower, 1 hp per Three Sweetwater S51 Blowers, 2.5 hp per Aeration Hose + PVC pipe and fittings Subtotal: Raceway system Machinery and Equipment per Corn boiler and accessories per Generator per Garden Hose (100’, heavy duty, adjustable flow nozzle) per Dissolved Oxygen Meter per Dissolved Oxygen Monitoring System per Water Quality Test Kit (Hach Fish farm Kit, FF-1A) Harvesting Dip Net (heavy duty, 22” x 18” x 24” deep, two) per per Baskets, Poyurethene (10.4 gal. 19” x 14” deep. Delta Twins, six) per Scale (Mettler Model XW560MS, 100 lb. capacity, 0.02 resolution)& Platter (Toledo XLS; heavy wash down, stainless AC adapter) per Temperature Controller and DO Probe per Well per Water Tank: 22,000 gallons acre Reservoir Pond: one acre Subtotal: Machinery and Equipment acre Land TOTAL 6,500 3,500 2,760 330 180 560 450 5,000 550 1 1 1 1 1 1 1 1 1 Total 100 40 18 2 4 3 1 1 3 1 Total 1 1 1 1 1 1 2 6 2 6,500.00 3,500.00 2,760.00 330.00 180.00 560.00 450.00 5,000.00 550.00 $19,630.00 500.00 1,920.00 180.00 120.00 100.00 1,200.00 12,300.00 500.00 2,250.00 500.00 $19,570.00 7,000.00 560.00 90.00 760.00 940.00 240.00 120.00 90.00 1,250.00 20 20 20 20 20 20 20 20 20 5 48 10 60 25 400 12,300 500 750 500 15 15 15 20 5 15 5 5 5 5 7,000 560 90 760 940 240 60 15 626 15 5 5 3 5 2 5 3 5 940 1,050 3,200 15,000 3,100 1 1 1 1 Total 8 940.00 1,050.00 3,200.00 15,000.00 $31,240.00 — $70,640.00 5 10 10 — 188.00 105.00 320.00 0.00 $2,075.00 — $6,455.83 12 INTEGRATION OF HYDROPONIC TOMATO AND AQUACULTURAL PRODUCTION: AN ECONOMIC ANALYSIS Fish Only Production System The differences in capital requirements for the production of the same quantity of channel catfish or tilapia without the hydroponic tomato production system required purchase of biofilters. Since this system consists only of fish (with no tomatoes), a biofilter was required with the recirculation capacity of 3,000 feet per hectare; the biofilter was estimated to cost $7,500 and was depreciated over five years with no salvage value. Since the cash value of tomatoes was foregone, the only source of income was the channel catfish or tilapia. If the expected 44,000 pounds of catfish or 27,600 pounds of tilapia were Table 6. Investment Costs for the Tomato Greenhouse in the Integrated Tomato and Aquacultural System, Alabama, 2007 Item Unit Price/Unit Quantity Cost Yrs of Life Annual Depreciation 425.00 312.00 325.00 20.00 37.50 45.00 25.00 300.00 25.00 27.50 $1,542.50 112.00 100.00 1.00 90.40 168.00 40.00 56.00 8.40 9.60 5.00 8.00 18.00 4.29 50.00 100.00 20.00 2.00 20.00 2.00 13.33 4.00 3.33 66.67 140.00 103.33 106.67 10.00 116.67 10.00 160.00 90.00 192.00 105.00 — $1,932.09 $3,474.59 Greenhouse (36’ x 100’ x 8” side, Atlas Greenhouse Systems) per Basic Structure per Poly Roof Covering per Ventilation and Cooling per HAF Fans (4) per Door (10’ x 10’, double sliding) per Shade Cloth per Freight per Installation per Drainage per Baseboard (2” x 8”, treated) Subtotal: Plant Greenhouse Machinery and Equipment per Generator spool Irrigation System per Support Wire for Poly Duct per Posts per Pipe (20’ sections @$210 each, 12) per Tee (one per post @ $50 each, 12) per Caps (two per post @ $35 each, 24) per Eye bolts (stainless. 6” x 3/8” includes washer & nut @ $3 each, two post , 2 per Quikcrete (three bags /post @ $4/bag, 36 bags) spool Support wire for tomatoes per Extension Cord (100’) per Hose (100’. Heavy duty) per Hose Reel per Backpack Sprayer per Respirator per Spray Suit per Pruning Shears per Wheelbarrow per Plant Calipers per Trashcans (50 gallon, 2) per Ladder (6’, aluminum) per Rake per Utility Cart per Meter: EC, pH per Meter: Potassium per Meter: Nitrate per Hydrometer: Wet-Dry Bulb per Recorder: Humidity and Temperature per Thermalarm III total Solar Irrigation Controller per Sensaphone plus 1 Remote Sensor Cotton Gin Compost per Well acres Land Subtotal: Machinery and Equipment TOTAL 8,500 6,250 6,500 100 750 900 500 6,000 500 550 1 1 1 4 1 1 1 1 1 1 8,500.00 6,250.00 6,500.00 400.00 750.00 900.00 500.00 6,000.00 500.00 550.00 $30,850.00 560.00 500.00 10.00 1,356.00 2,520.00 600.00 840.00 72.00 144.00 50.00 40.00 90.00 30.00 100.00 100.00 20.00 30.00 100.00 10.00 40.00 60.00 10.00 200.00 420.00 310.00 320.00 30.00 350.00 50.00 800.00 450.00 960.00 1,050.00 — $12,222.00 $43,072.00 20 20 20 20 20 20 20 20 20 20 560 500 5 113 210 50 35 3 4 10 40 90 30 100 100 20 30 100 10 20 60 10 200 420 310 320 30 350 50 800 450 1,050 3,100 1 1 2 12 12 12 24 24 36 5 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 60 1 2 5 5 10 15 15 15 15 15 15 10 5 5 7 2 1 1 15 5 5 3 15 3 3 3 3 3 3 3 5 5 5 5 10 — ALABAMA AGRICULTURAL EXPERIMENT STATION 13 produced and sold at $0.77 per pound for catfish and $1.80 per pound for tilapia (USDA, 2006), the total cash inflows would be $33,880 for catfish and $49,680 for tilapia. These cash inflows do not cover the annual operating costs and annual depreciation, which amounted to $52,025. This system would be losing roughly $18,145 annually producing only catfish and $2,345 annually producing only tilapia (Table 8). Therefore, producing only catfish or tilapia without integrating hydroponic tomatoes into this type of system is unprofitable. Due to the lack of profitability of producing only tilapia or catfish without the integration of tomatoes, possible changes in the fish only production system were analyzed. Some suggestions to increase the profitability would be to use less expensive equipment or integrate technology into the system, which could possibly reduce labor hours and costs. Integrating the technology may increase initial investment costs, but should decrease the initial annual labor costs substantially. Assuming there is already an established niche market, another option would be to become strictly a fingerling production system to commercial buyers (Goodman and Trimble, 2006). ENVIRONMENTAL AND NATURAL RESOURCE ADVANTAGES This analysis was made from the viewpoint of an individual investor. When one considers the environmental and natural resource factors associated with both production systems analyzed, there are further potential societal benefits from combining fish and tomato cultures into recirculating systems. The effluents discharged into bodies of Table 7. Costs and Returns for Integrated Tomato and Aquacultural (Catwater from the recirculatfish) System, Alabama, 2007 Total # Units Price/Unit Units Item ing system that are not inReturns tegrated with hydroponic 33,880 44,000 0.77 lbs Catfish 49,763 33,175 1.50 lbs Tomatoes plants, such as tomatoes, 83,643 Total do not have an immediate Annual Operating Costs serious pollution effect, 44,069 1.00 44,069 total Catfish 41,221 1.00 41,221 total Tomatoes but the cumulative effect 85,290 Total over time may contribute (1,648) Return Above Operating Costs to problems that would Depreciation 6,456 1.00 6,456 total Catfish conflict with and limit 3,475 1.00 3,475 total Tomatoes other activities using the 9,931 Total ($11,579) same water resource. In Net Return areas that face significant Table 8. Costs and Returns for Integrated Tomato and Aquacultural (Tilapia) pollution problems, this System, Alabama, 2007 may be an important isCost Quantity Price/Unit Units Item sue. Returns Combination of fish 49,680 27,600 1.80 lbs Tilapia 49,763 33,175 1.50 lbs Tomatoes and plant production 99,443 Total within an indoor water Annual Operating Costs recirculating production 44,069 1.00 44,069 total Tilapia 41,221 1.00 41,221 total Tomatoes system reduces the total 85,290 Total water requirement com14,153 Return Above Operating Costs Depreciation pared with outdoor flow6,456 1.00 6,456 total Tilapia through systems and 3,475 1.00 3,475 total Tomatoes plant irrigation systems. 9,931 Total $4,222 Net Return This advantage would 14 INTEGRATION OF HYDROPONIC TOMATO AND AQUACULTURAL PRODUCTION: AN ECONOMIC ANALYSIS be very desirable in areas with limited water supplies. Integrating hydroponic plants such as tomatoes to utilize by-products from fish production also reduces the dependency on artificial fertilizers, which are produced using nonrenewable resources such as natural gas. If the combination of hydroponic tomatoes with fish production improves the economics of recirculation systems, the inherent environmental advantages of such systems will be more widely realized in that there will be reduced effluent discharges into bodies of water, reduced land use compared with conventional aquacultural systems, and greater flexibility in locating such units because of the great reduction in water requirements (Timmons and Losordo, 1997). SUMMARY AND CONCLUSION Incorporating hydroponic tomatoes along with an indoor recirculating tilapia production facility inside two adjacent greenhouses has been shown to be profitable and can be desirable for environmentally and resource use-conscious investors. This system has the potential to provide both financial and environmental benefits in terms of shared resources, reduced labor input hours, reduced effluent discharges into local bodies of water, improved water quality, and lower water use. This system will require an initial capital outlay of almost $114,000, excluding land, plus an annual operating cost of roughly $85,000. At prices of $1.80 per pound for tilapia and $1.50 per pound for tomatoes, annual net return will be modest at $4,222. These price and cost levels will generate an 8.05 years payback period and a simple rate of return of 7.4 percent. At optimistic prices of $1.95 per pound for tilapia and $1.65 per pound for tomatoes, annual net returns will be $13,338. These levels result in a 4.9 years payback period and a 23.4 percent simple rate of return. At expected prices of $0.77 per pound for catfish and $1.50 per pound for tomatoes, the integrated system will generate a negative net annual return of $11,579. Even at substantially higher prices of $0.92 per pound for catTable 9. Sensitivity Analysis of Net Returns at Selected Yields and Prices fish and $1.65 per pound for Catfish and Tomato Production, Alabama, 2007 for tomatoes, the system Yield ——————————————Price ($/lb.)—————————————— will roughly break even Catfish 0.62 0.67 0.72 0.77 0.82 0.87 0.92 Tomato 1.35 1.40 1.45 1.50 1.55 1.60 1.65 at -$2.00 annual net re35,200 -37,568 -34,481 -31,394 -28,307 -25,220 -22,133 -19,046 turn. 26,540 Analysis of the inte39,600 -30,362 -26,889 -23,416 -19,944 -16,471 -12,998 -9,525 29,857 grated system and com44,000 -23,155 -19,296 -15,437 -11,579 -7,720 -3,861 -2 parison to an alternative 33,175 system for catfish and 48,400 -15,948 -11,703 -7,458 -3,214 -1,031 5,276 9,521 36,493 tilapia without the hy52,800 -8,742 -4,111 520 5,150 9,781 14,411 19,042 droponic tomatoes unit 39,810 indicates substantial differences in net returns. Table 10. Sensitivity Analysis of Net Returns at Selected Yields and Prices The indoor recirculating for Tilapia and Tomato Production, Alabama, 2007 Yield ——————————————Price ($/lb.)—————————————— system with only catfish Tilapia 1.65 1.70 1.75 1.80 1.85 1.90 1.95 will have a negative net Tomato 1.35 1.40 1.45 1.50 1.55 1.60 1.65 return of about $18,145 22,080 -22,960 -20,529 -18,098 -15,667 -13,236 -10,805 -8,374 26,540 annually while a similar 24,840 -13,927 -11,192 -8,457 -5,722 -2,987 -252 2,483 system for tilapia will 29,858 lose $2,345 annually. 27,600 -4,895 -1,856 1,183 4,222 7,260 10,299 13,338 33,175 30,360 36,493 33,120 39,810 4,139 13,171 7,481 16,817 10,824 20,464 14,167 24,110 17,509 27,757 20,852 31,403 24,195 35,050 ALABAMA AGRICULTURAL EXPERIMENT STATION 15 REFERENCES Avery, Jimmy L. 2000. A Little History on the Catfish Industry. Freshwater Farms Catfish, Belzoni, Mississippi. Brown, Travis. 2006. Personal Communication. Fisheries and Alllied Aquacultures, Auburn University, Alabama. Calvin, Linda and Roberta Cook. 2005. “North American Greenhouse Tomatoes Emerge as a Major Market Force.” Amber Waves. United State Department of Agriculture, Volume 3, Issue 2. Chapman, Frank A. 2006. Farm Raised Channel Catfish. Department of Fisheries and Aquatic Sciences. Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, Florida. Chappell, Jesse A. and Jerry R. Crews. 2006. 2005 Alabama Aquaculture Factsheet. Agricultural Economics and Rural Sociology, Auburn University, Alabama. Chappell, Jesse A. and Jerry R. Crews. 2006. U.S. Catfish Industry: Situation in 2005 and Outlook for 2006. Agricultural Economics and Rural Sociology, Auburn University, Alabama. Chappell, Jesse A. 2006. Personal Communication. Fisheries and Allied Aquacultures, Auburn University, Alabama. Cole, David M. 2002. “Evaluation of Cotton Gin Compost as a Horticultural Substrate.” A Research Paper Presented at the Southern Nursery Association Researcher’s Conference. Department of Horticulture, Auburn University, Alabama. Goodman, Randell and Bill Trimble. 2006. Personal Interview Discussing Alternative Methods to Increase Profitability of the Fish Only Production System. Fisheries and Allied Aquacultures, Auburn University, Alabama. Harris, D. 1994. Illustrated Guide to Hydroponics. London, New Holland. Helfrich, Louis A. and George Libey. Fish Farming in Recirculating Aquaculture Systems. Department of Fisheries and Wildlife Sciences, Virginia Tech, Virginia. Jarboe, H.H. 1996. “The Water Exchange Rate on Diel Ammonia Production and Oxygen Consumption of Channel Catfish in a Closed Recirculating Raceway System.” Journal of Applied Aquaculture. Volume 6:1-12. Kay, Ronald D. and William M. Edwards. 1999. Farm Management, Fourth Edition. 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Southern Regional Aquaculture Center, Stoneville, Mississippi. Rakocy, James E. 1989. “Vegetable Hydroponics and Fish Culture: A Productive Interface.” World Aquaculture. Volume 20:42-47. Sutton, R.J. and W.M. Lewis. 1982. “Further Observations on a Fish Production System That Incorporates Hydroponically Grown Plants.” Progress in Fish Culture. Volume 44:55-59. 16 INTEGRATION OF HYDROPONIC TOMATO AND AQUACULTURAL PRODUCTION: AN ECONOMIC ANALYSIS Timmons, M. and T. Losordo. 1997. “Developments in Aquaculture and Fisheries Science.” Vol. 27. Aquaculture Water Reuse Systems: Engineering Design and Management. Elsevier, Amsterdam; Oxford. United States Department of Agriculture (USDA). 2006. Aquaculture Outlook: Domestic Aquaculture Competing Worldwide. United States Department of Agriculture (USDA). 2006. Vegetables and Melons Outlook: Fresh Tomato Prices Ease As Supply Recovers.