Improving the (Off) bottom line: Identifying means to increase profits for commercial off-bottom oyster farmers

Abstract

The goal of this study is to immediately improve business decision making and increase opportunities to obtain loans and investment for current and potential off-bottom oyster farmers in the northern Gulf of Mexico. We propose to accomplish this with an innovative high school student-run commercial oyster farm in Alabama (Bonus Point Oyster Company) to field test the effect of three different culture methods and decisions on profitability by generating method-specific data to improve the assumptions in the model of Parker et al. (2015). Our specific objectives to be accomplished by January 2020 are:

1. To test and compare the effect upon profit per oyster and ten-year internal rate of return of: a. Two different culture methods to control biofouling (daily intertidal exposure versus weekly desiccation for 24 hours) when raising oysters in Australian adjustable long-line systems; b. Two different tumbling and grading schedules (monthly versus quarterly); and c. Use of diploid or triploid oyster seed.
2. To provide high quality, quantitative data to adapt and improve current business practices and models for current and potential commercial oyster farmers in the northern Gulf of Mexico.
3. To field test and demonstrate new technologies available to commercial oyster farmers in a working farm setting.
4. To educate and train at least four local high school students and one graduate student and prepare them to succeed in commercial oyster farming or related field.

The results of this research will be immediately used to improve the assumptions in the business model developed for off-bottom oyster farming using Australian adjustable long-line systems in the northern Gulf of Mexico. Additionally, we expect to prepare and train individuals for success in the oyster farming workforce. 

Objectives

The goal of this study is to immediately improve business decision making and increase opportunities to obtain loans and investment for current and potential off-bottom oyster farmers in the northern Gulf of Mexico, to increase the sustainability of these operations. Furthermore, the results could immediately affect decision-making of oyster farmers. Additionally, we expect to prepare and train individuals for success in the oyster farming workforce. Our specific objectives to be accomplished by January 2020 are:

1. To test and compare the effect upon profit per oyster and ten-year internal rate of return of:
   a. Two different culture methods to control bio-fouling (daily intertidal exposure versus weekly desiccation for 24 hours) when raising oysters in Australian adjustable long-line systems; 
   b. Two different tumbling and grading schedules (monthly versus quarterly); and 
   c. Use of diploid or triploid oyster seed.
2. To provide high quality, quantitative data to adapt and improve current business practices and models for current and potential commercial oyster farmers in the northern Gulf of Mexico.
3. To field test and demonstrate new technologies available to commercial oyster farmers in a working farm setting.
4. To educate and train at least four local high school students and one graduate student and prepare them to succeed in commercial oyster farming or related field.

Methodology

We propose to test three different culture methods and practices at one time on a high school student-run commercial oyster farm with an explicit focus on determining the effects of these decisions on the profitability of a commercial oyster farm. Here we propose to track all costs and wholesale prices so that we can analyze these different culture methods/decisions explicitly in terms of effect on profitability. To get a complete accounting of capital costs, operating costs, wholesale prices and total sales, we propose to install a working commercial farm in collaboration with Julian Stewart, the aquaculture teacher for Alma Bryant High School, or ABHS, (Irvington, Alabama) at a new, fully permitted oyster farming park in Grand Bay, Alabama, the Grand Bay Oyster Park.

We propose to compare 1) two different desiccation regimes to control bio-fouling, 2) two different tumbling and grading schedules, and 3) diploid and triploid oysters in terms of effect on profit per oyster and the ten-year internal rate of return. To compare these different methods, the one-acre farm, equipped with Australian long-line gear, will be arranged so that eight runs (each 100 m long with 200 baskets, with a capacity for 120,000 oysters at final grow-out stocking densities) of baskets are randomly assigned to one of two tested fouling control treatments (set at an intertidal height designed to have the oysters and gear out of the water for ~60% of the day or set sub-tidally with weekly 24-hour desiccation). Half of each of these runs will be assigned to monthly mechanical tumbling and grading, while the other half will be assigned to quarterly tumbling and grading. Finally, within each run, one line will be stocked with diploids while the other line will be stocked with triploids.

Rationale

Off-bottom oyster farming, focused on the premium, half shell market by raising oysters off the bottom in baskets or bags, is relatively new on the Gulf Coast, with a boom in interest, investment and production. In Alabama, there are currently fifteen commercial oyster farms which harvested at least 2.8 million oysters in 2016 with a wholesale value of $1.96 million and provided at least 20 full-time jobs and an additional 10 part-time jobs.

Additionally, there are new farms in Louisiana and Florida and Mississippi is in the process of seeking permits for an oyster farming area. Despite very strong market demand for these farm-raised oysters with average wholesale prices of 45 cents per oyster in Alabama in 2016, this new industry faces a number of challenges, including permitting hurdles, seed supply shortages, and water quality issues. While each of these challenges needs to be addressed, the solutions for these are being pursued through other channels.

We propose that the most pressing issue that can be addressed through applied research is identifying means of improving profitability of these new and potential businesses, to position them for near and long-term sustainability. For this industry to be viable, there need to be clear and realistic paths to profitability, both to attract and retain individuals to the business but also to obtain investment capital.