This appendix considers the key features of the New Zealand aquaculture industry and their implications for developing the risk context, risk analysis and risk assessment. It considers the industry’s history, present and future, and the effects of the salient internal and external factors.
The New Zealand aquaculture industry began in the mid-1960s with marine farming of oysters and then mussels, typically by small, innovative operations. It quickly established a domestic market and began making inroads into export markets in the 1970s. As aquaculture techniques and value chains became more sophisticated in the 1980s, small owner-operator farms became less common and aquaculture/seafood-related companies expanded and consolidated. Production efficiency, control of stock and cost reduction dominated industry thinking as export markets expanded.
During the 1990s global competition in seafood products intensified, driving further consolidation of the industry in an attempt to achieve increased production and marketing efficiencies. With the introduction of the Resource Management Act in 1991, the expanding industry began to focus on sustainable production, acknowledging its associated environmental and social issues. The aquaculture industry was also threatened by biotoxin events, which gave rise to both water and food quality monitoring programmes. With pressures on the market for oysters and mussels, the sector began to diversify and the 1980s and 1990s saw the establishment and growth of the salmon industry.
New Zealand’s aquaculture sector has grown steadily since the late 1980s at an average annual rate of 11.7% by volume over the 20 years up to 2005. Despite this expansion, the sector retains considerable potential for profitable growth.
New Zealand’s aquaculture industry today has three mature sectors - mussels, oysters and salmon - and a range of other sectors at varying stages of development. Constraints to growth are the key challenges. Broadly speaking, the industry is meeting these challenges through attempts to access new water space and by generating greater value from the existing water space. The former can be achieved by working in partnership with government, councils and the public, while the latter can be achieved by focusing on innovation in production, processing and marketing.
Structure of the industry
New Zealand’s coastal waters are host to approximately 1,200 marine farms.19 The total water space occupied is around 5,800 hectares (an industry estimate), including some freshwater farms and spat-catching areas. This space represents approximately 0.2% of New Zealand’s coastline out to 12 nautical miles and is similar in total area to one average-sized high country farm. The total space allocated to aquaculture in the coastal marine area is more than 13,000 hectares, with much space yet to be consented or developed.
According to the 2006 Census the aquaculture industry employs 1,086 people. This figure refers to those directly involved in marine farming, and the number involved in downstream processing and supporting activities is likely to be closer to 2,500, which is the figure provided by the New Zealand Aquaculture Council. The industry delivers a range of employment opportunities, from specialised technical and research positions to low-skilled opportunities in predominantly rural areas around New Zealand.
Aquaculture is currently undertaken in the following major locations spread across New Zealand (see Figure A1).
Source: Courtesy New Zealand Marine Farmers Association
There are well-established aquaculture regions in the top of the South Island and the top of the North Island, with a long history of business operation and growth, along with established aquaculture regions with smaller concentrations of operations (e.g. Canterbury and Southland). A number of regions have emerging aquaculture sectors that have the potential to be dynamic contributors to regional economic growth or that are exploring options (e.g. Bay of Plenty, Gisborne and Hawke’s Bay). There are also regions that are unlikely to support aquaculture in the near future due to their characteristic coastal marine conditions (e.g. the North Island’s west coast).
The majority of aquaculture activity is undertaken by corporate concerns, including wild fishery companies that have diversified into aquaculture. A range of farm operating models are used, including operating their own farms, share farming arrangements, and providing farm management for absentee farm owners. Corporate participants have expanded production by buying out or partnering smaller farmers. Here, seamless transfer of farm ownership has been preferred to deliver value from stock transferred with sale and/or to best maintain equipment in the water. Buyouts have historically occurred as companies have sought to diversify operations over a range of sites as a risk management measure.
Larger and corporate participants go to considerable lengths to monitor their farm sites, and some have adopted environmental management systems such as ISO 14000 and/or have achieved organic certification for their production and processing. Corporate operations favour vertical integration, and achieve efficiencies from large processing sites. The number of owner-operators continues to dwindle as operating efficiency throughout the value chain becomes increasingly important to viability, particularly in mussel and oyster production.
The growth of the New Zealand aquaculture industry has resulted in the development of a range of supporting capabilities. Crown Research Institutes, universities and private sector researchers undertake Research & Development for aquaculture production and processing technologies and the sustainability of aquaculture in coastal marine environments. Ongoing R&D focuses on increasing productivity and product value and studying aquaculture activities in their environmental context.
Industry training is supported directly by the Seafood Industry Training Organisation, and tertiary institutions around the country offer marine science degrees with an aquaculture flavour. A new aquaculture research and education facility at the Mahurangi Technical Institute in Warkworth was opened recently. Aquaculture has also attracted supporting commercial interests, including engineering firms developing aquaculture structures and equipment and the long-established presence of a major international marine and aquaculture insurer in Nelson.
There is a substantial history of sector organisation at the species and regional level in New Zealand aquaculture dating back to the 1970s. Established groups include the New Zealand Mussel Industry Council, New Zealand Oyster Farmers Association, New Zealand Marine Farmers Association and Coromandel Marine Farmers Association. Industry participants report strongly aligned incentives and steadily improving co-operation throughout the industry, culminating in the recent development of a sector-wide strategy and industry body, Aquaculture New Zealand.
Ongoing initiatives in specific sub-sectors include marketing, advocacy and environmental and biosecurity codes of practice for production, some of which are implemented in conjunction with government agencies. Environmental codes of practice for mussel and oyster farmers have recently been reviewed, and a salmon farming code is in development. These will continue to be governed by species groups because they are species-specific, although it is worth noting that some best practice components can be transferred to other species sectors as they develop. Regional groups are also working on regional issues, such as implementing food safety programmes, developing responses to biosecurity threats, and even undertaking beach clean-ups near aquaculture areas or setting up toll-free numbers for reporting marine farm debris.
Three main species are prominent in New Zealand aquaculture: the Greenshell™ mussel (Perna canaliculus), the king salmon (Oncorhynchus tshawytscha), and the Pacific oyster (Crassostrea gigas). Table A1 presents industry estimates of farming activity in these species.
Table A1: Marine farming activity in New Zealand
|Species||Number of farms||Hectares of water space utilised||Tonnes harvested|
Source: Courtesy New Zealand Marine Farmers Association, 2007
Notes: Salmon statistics include both marine and freshwater farms. This table does not reflect diversification into new species and new products.
Greenshell(TM) mussels were New Zealand’s most exported species by value in 2006.The New Zealand mussel industry is predominantly situated in Marlborough (around 75%) and Coromandel (around 20%), with farms in a number of other sites spread around the country. The GreenshellTM mussel is a New Zealand native, and New Zealand is the only country supporting commercial GreenshellTM aquaculture and an export industry. Due to New Zealand’s high water quality, farmed mussels do not require depuration, unlike the blue and brown mussels that dominate international production. New Zealand marine farmers predominantly culture mussels using long-line systems in sheltered coastal waters.
Pacific oysters took over from the native rock oysters in oyster farms due to their faster growth rate and higher yield. The Pacific oyster is likely to have come to New Zealand in ship ballast water. Oysters are farmed predominantly in Northland and the Firth of Thames, although there is a small industry in Marlborough. Oysters can be grown in two systems, sub-tidal and inter-tidal. The New Zealand industry is predominantly inter-tidal, resulting in slower growth but cleaner, stronger oysters. Some farmers integrate the systems, accessing fast sub-tidal growth while retaining the benefits of inter-tidal culture. Water quality is a significant issue for oyster farmers. New Zealand’s clean water makes it possible for oysters to be eaten raw, which is a significant marketing advantage over international competitors.
King salmon, the predominant finfish species farmed in New Zealand, is a premium salmon comprising only 8% of salmon farmed worldwide. It is an introduced species, and the lack of endemic pests and diseases has helped New Zealand avoid some of the disease and resulting environmental events that have occurred in salmon farming areas elsewhere in the world. New Zealand is therefore the only source of salmon that is not routinely treated with therapeutants. The larger salmon farming operations produce in sea-cages in Marlborough, Stewart Island and Banks Peninsula. Sites with deep, cool water and sufficient current flow are favoured, providing adequate flushing to prevent build-up of sedimentation on the sea-bed and reducing water quality impacts.
Other species are being developed in scale, most notably paua and kingfish. The paua industry began in the 1980s and includes production of meat and paua pearls, predominantly from land-based operations located adjacent to the coast. The industry is yet to achieve a significant scale. A kingfish aquaculture research programme began in 2000 at NIWA together with industry collaborators. The programme has achieved transfer of fingerlings to farms around New Zealand and continues to refine production techniques.
A range of new species is currently in, or proposed for, research and commercialisation. These include rock lobster, kina, sea cucumbers, eels, sea sponge, seaweeds, groper and other finfish.
Market trends and drivers
A strong and sustainable market for seafood products is expected into the foreseeable future. Global demand is rising rapidly, with volumes expected to continue to follow - if not exceed - the trend that has seen global seafood consumption double since the mid-1970s. Market growth will be driven by world population increases and a growing preference for seafood as a healthy protein option, rich in vitamins and fatty acids. Consumer demand is likely to put pressure on global supply, boosting seafood prices. With wild fisheries’ production static because of declining stocks, global aquaculture is poised to capitalise on a massive growth opportunity.
Aquaculture’s sustainability also makes it attractive to sophisticated markets: lower impacts on wild stocks and efficiencies over capture fishery (specifically lower fossil fuel usage, which reduces both costs and the industry’s “carbon footprint”) are significant market advantages. Traceability of primary products is becoming increasingly desirable in sophisticated markets, and aquaculture is well positioned to deliver complete traceability of seafood products.
The ability of New Zealand’s aquaculture sector to deliver consistent, high-quality product will help ensure ongoing marine farm viability over the next several decades. New Zealand aquaculture participants are particularly aware of sustainability market drivers, and they noted the potential to attract a premium for environmentally friendly products with a ‘sustainability mark’, underpinned by transparent and broadly applicable production criteria.
Investment and profitability
Marine farms represent significant investment in structures and stock. Industry participants have provided estimates for investment in structures on a per hectare basis. While these have been quoted for species, it is likely that other species will use culture technology (racks, long lines and sea cages) that will not be dissimilar in cost to those used for oysters, mussels and finfish, respectively.
Table A2: Marine farming structure investment
Investment in structures per hectare
Range reflects use of sticks or bags
Three to four long lines per hectare
Sea cage culture
Major investment in sea cages
Source: Estimates from Risk Assessment Workshop, 13 July 2007
The recent market for water space has seen prices of up to $200,000 paid per hectare. A conservative intrinsic value of marine space has been estimated as $30,000 per hectare. High site value has made farm sale an attractive exit strategy for less committed marine farmers.
Stock values can vary significantly, depending on maturity, productivity and market price. Estimates of values per hectare at harvest include $50,000 for oysters, $60,000 for mussels and up to $4 million for salmon. Importantly, the productivity of aquaculture per hectare is significant in comparison to other primary industries.
Table A3: Marine farming average revenues
|Species||Revenue per annum per hectare|
Source: Courtesy New Zealand Marine Farmers Association, 2007
The high productivity is to some extent offset by the significant initial capital costs and operating costs of marine farming. However, marine farming has been profitable for many and has attracted significant investment in the development, commercialisation and expansion of species and sites during its 40-year history in New Zealand.
A number of external factors can and have affected marine farming profitability. International competition has periodically driven down the international price of seafood sharply. This has been noted in section 2.1 as a driver for increasing production and marketing efficiencies in the shellfish sectors throughout New Zealand’s marine farming history. The international salmon glut of the early 1990s was another driver of production efficiencies and adding value post harvest.
With the New Zealand dollar as high as US$0.79 during the time of writing, aquaculture ventures are seeing export revenues eroded. This, too, is driving investment towards higher added value from existing space, and to better establishing points of difference for New Zealand seafood products in international markets. It has also driven further development of the domestic market for aquaculture products. While many businesses have adapted, there has been further attrition of smaller operators.
Biosecurity threats to production and market acceptability have also affected profitability in the past. Pests, diseases and biotoxins can deliver a range of impacts, from small productivity losses to massive stock mortality. The New Zealand aquaculture industry has not been hit by a particularly severe biological event in its history, and has developed effective collaborative programmes to minimise the impacts of previous and ongoing biosecurity risks.
Protection of farm sites from pollution from land-based activities is an ongoing challenge to profitability, particularly for farmers operating near coastal property developments. Due to the proximity of oyster farms to coastal developments, pollution incidents are likely to be a more significant threat to this sector than to culture further from the shore. Where pollution events occur, such as at the Waikare Inlet, Northland, in 2001, water quality around the farms does not meet sanitation requirements and the site is classified as restricted, with considerable limits placed on harvesting. It is difficult for farmers to manage the risk of pollution because it lies outside their farm management systems.
Despite a history of fluctuating profitability and current pressures, industry players have few concerns about the ongoing viability of their operations, and there is widespread confidence in the industry’s ability to withstand future external pressures. With industry concentration continuing, the typical aquaculture venture is well resourced and resilient.
There is only limited anecdotal evidence of the failure of individual operators due to lack of profitability. Typically, these situations have been resolved by larger farmers partnering or buying out the struggling farmer.
The profitability and viability of aquaculture are likely to increase as industry focuses move away from commodity sales to increasing added value. Although it is likely that many New Zealand marine farms can still wring further efficiency from their operations, the preferred approach is to develop high-value products to meet demand in robust markets that are less subject to external pressures. Stakeholders note a major role for R&D throughout the value chain in maintaining and increasing the profitability of aquaculture in New Zealand.
The sector- and nation-wide strategic aim of the aquaculture industry is enshrined in The New Zealand Aquaculture Strategy. This document was commissioned by the New Zealand Aquaculture Council in 2005 and the strategy’s development was driven by industry. The project was completed with support and assistance from the New Zealand Seafood Industry Council and the Ministry of Economic Development.
The goal of the strategy is that by 2025 the New Zealand aquaculture sector will have sales of $1 billion per annum. The strategy takes into account the following guiding principles.
- the strategy is market-driven, industry-led, commercially viable and sector-wide
- it requires the collective action of industry participants
- growth will be driven by innovations in existing and new space, species, products and markets
- growth will take place within an environmentally sustainable framework
- the strategy will be implemented through a partnership between industry and government, communities, iwi, regions, and research/education/training providers.
A 10-point plan encapsulates the objectives of the industry. The plan will:
- establish a new national sector organisation
- strengthen the partnership with government
- strengthen other stakeholder partnerships
- secure and promote investment in aquaculture
- improve public understanding and support for aquaculture
- promote success in aquaculture
- develop the market for New Zealand aquaculture products
- maximise opportunities for innovation
- promote the environmental sustainability and integrity of aquaculture
- invest in training, education and workforce promotion.
A number of these objectives emphasise partnerships with regulators and improving public and market perceptions to enable aquaculture industry growth. Critical to achieving this is a risk management environment in which risks are accurately represented, and in which all aquaculture stakeholders have confidence.
The adoption of the aquaculture sector strategy quickly led to the establishment of Aquaculture New Zealand Ltd, the new national sector organisation identified in the strategy. Aquaculture New Zealand will co-ordinate the implementation of the strategy in co-operation with stakeholders and establish a monitoring and evaluation process to measure the impact of the strategy.
The establishment of Aquaculture New Zealand and its implementation of the sector strategy should have a positive impact on aquaculture risk management. The environmental codes of practice mentioned in section A1 will come under Aquaculture New Zealand branding, and will be harmonised to achieve efficiencies and transferability of higher-level, less species-specific components. Aquaculture New Zealand is well positioned to further facilitate filling knowledge gaps in councils regarding the effects of aquaculture, and to facilitate broad uptake of research or the latest thinking into aquaculture risk management. Effective risk management is important to achieving the conditions in which aquaculture can grow.
In Our Blue Horizon – The Government’s Commitment to Aquaculture, the Government provided not just a response to the Aquaculture Sector Strategy, but a commitment to facilitating the sector’s 10-point plan in areas where the Government has leverage.
The five key objectives are to:
- build the confidence to invest
- improve public support
- promote Maori success
- capitalise on research and innovation
- increase market revenues.
Within each of these objectives the Government has identified a number of initiatives, which form the Government’s commitment in the short term. Better understanding of aquaculture risks and risk management options contributes to several of these initiatives, most directly to:
- building confidence to invest – planning support: support tools are being developed to encourage good practice and reduce the costs associated with aquaculture development, and these tools will help regional councils and industry with planning and management
- improving public support – filling the information gap: government and industry will work together to ensure regional decision-makers and the public have accurate, timely and independent information about the benefits and effects of aquaculture.
Our Blue Horizon is signed and supported by six ministers – Environment, Conservation, Maori Affairs, Industry and Regional Development, Fisheries, and Local Government. The engagement is being led by the Ministry of Fisheries. An implementation team of managers and advisors is undertaking work on the initiatives, with a Chief Executives’ Group and Ministers’ Group focusing on the objectives at a higher level.
19 Ministry for the Environment 2005. Aquaculture Reform: An Overview. Ministry for the Environment: Wellington.