As farmers struggle with low selling prices, there are consequences along the supply chain
By Yufan Zhang
The tilapia was introduced from Vietnam to Guangdong Province in 1957. Today, tilapia is the only exotic fish species to exceed 1 million tonnes. In 2018, its annual output reached 1.8 million tonnes, second only to grass carp, carp and crucian carp, which have been cultured in China for thousands of years. According to the China Fisheries Statistical Yearbook released in 2022, China produced 1.66 million tonnes of tilapia in 2021, surpassing slightly the 2020 production of 1.65 million tonnes.
In 2020, tilapia production in Guangdong reached 740,000 tonnes, accounting for 44% of the national total tilapia production. This could be because the tilapia came first to Guangdong and, coupled with suitable climate and convenient transportation, its production could easily reach this leading position in China.
The two towns of Tonghu and Lilin in Huizhou City, Guangdong Province, have always been the core areas of tilapia farming. Here, there are 2,000ha of fishponds, and the tilapia feed market capacity exceeds 40,000 tonnes. My first market research report was on the fisheries industry in these towns a decade ago. Apart from the bumpy road to the fishponds, a lot has changed.
One couple, 20ha
In the gazebo by the fishpond, 60-year-old farmer Luo and I chatted for a long time before seeing the fish. The sun was too strong at two o’clock, and he did not really want to feed the fish at that hour. “It is better to feed the fish later because the water temperature is too high.” He and his wife manage this 20-ha farm.
A 20ha farm is not a small area. If it is just a 2ha shrimp pond, the couple will be busier. This has to do with the fact that tilapia farming has become easier over the years. Tilapia used to be farmed twice a year or even “continuously harvested” following a complex schedule. But now, Huizhou fish farmers follow a single stocking and a single harvesting in a year. Last year, Luo’s unit production reached about 2.2 kg/m3, close to the average productivity level. “We cannot raise any more because we cannot sell them. Now, the booking of fish distributors to come and collect the fish often takes half a month, and then they are only willing to buy 2,000kg of fish. During this period, the biomass increases by another 2,000kg,” Luo added, “Some fish in my ponds are from last year and they are more than 3kg already.”
The difficulty with selling the fish also increases the feed conversion ratios (FCR). Over the past few years, the crude protein (CP) content of tilapia feeds has improved from 29% to 33%. If the fish is produced normally without the difficulty of selling, the feed conversion ratio (FCR) can be 1.1. But after keeping the fish in ponds for more than a year and finally selling the stock in the pond, FCR sometimes reaches 1.3-1.4. At present, tilapia feed costs around CNY6,000/tonne (USD841.98), which means that the feed cost is close to CNY8/kg (USD1.12). Then when labour, electricity, pond rental, fish packing and others are included, the production cost will be around CNY1-2/ kg while the selling price/kg of tilapia is about CNY9/kg (USD1.26).
Fortunately, based on the improvement of larvae quality and farming technology, the success rate of tilapia farming is high, at more than 90%. Streptococcus and enteritis are still chronic diseases, especially in the hot season. Once the water temperature is above 30°C, streptococcus outbreaks cause casualties. Many farmers currently use sulfonamides, the fastest way to control the disease. Although, this means a gradual increase in antibiotic resistance.
“For the fish that I sell to factories, I use more non- antibiotic solutions to treat diseases, such as mannan polysaccharides or plant extracts. However, the price of tilapia is very poor this year, and the price of healthcare farm products like immune stimulators is relatively high. When he knew I was writing an article for publication, Luo added the question, “Tilapia farming is hardly a profitable business. Is there a cheaper, non-antibiotic way to treat Streptococcus infections?”
Feed distributor for 20 years
“Luo is my client and he is right. It is difficult for tilapia farmers to make money right now,” said Huang, who has been a feed distributor for more than 20 years and everyone in the area knows his name. He went on to describe some challenges with selling prices.
Currently, there are two very mature marketing channels for tilapia in the market. The first is to sell to a processing plant. Last year, the processing plant bought 0.5-0.6kg fish at about CNY8.6/kg (USD1.20). Margins for the farmer were small, but it is still possible to be profitable with the right farm management. However, this year, due to reduced factory orders the offer price for fish of the same size dropped to CNY7.2/kg (USD1.01).
These prices barely cover feed costs. Farmers lose money for every kg of tilapia they sell to processing plants. The second channel is local markets and supermarkets. Last year, fish larger than 0.7kg could be sold to the local wet market at around CNY12.6/kg (USD1.76). The market requirement has been raised this year and only 0.75kg fish are collected. At the same time, the fish distributor requires that at least 30% of the tilapia in the pond is more than 1kg. But meanwhile, prices dropped to CNY10.6/kg (USD1.48).
“Distribution is so difficult now. You have to book one or two weeks in advance to sell the fish and the fish distributors are taking advantage of the situation.” Huang was also indignant. “But who else to sell it to? It is almost impossible to profit from selling it to a processor.”
Feed distributors and farmers are in the same boat, and when farmers struggle to make a profit, so do they. The number of tilapia farmers in the Lilin and Tonghu areas has decreased by 20% due to continued low profits. I saw many empty fishponds and houses on my way. But the amount of money lent out by feed distributors is increasing.
“Tilapia farmers are not rich. They borrow more than 90% of their feed costs from me. I do not get paid until they sell the fish,” said Huang. As we talked, a young man came over and bought two bags of feed. Huang added, “The debt lasts one year, and over 70% of them owe me over CNY200,000. Currently, the profit margin for distributing tilapia feed is only about 6-7%. We cannot afford to keep up with the debt. Since the beginning of this year, I have stopped giving feed credits to new clients. If they cannot pay cash, I can live without this business. For us and the farmers, this year will be a year of hardship; if the next year still looks like this, I do not know what to do with this business anymore”.
Feed salesmen and second jobs
In the evening, I had a tilapia hotpot with feed salesman Li, who I have known for several years. It is the least we can do for the tilapia industry. During the dinner, he asked me about other job opportunities. “My sales have dropped by more than 30% this year, but my target is still growing. I have not received any bonus for two or three years. Among my friends who entered the market with me, I am the last person holding on. They have either changed careers or are selling shrimp feed. Only shrimp farming is still profitable.” He wants things to change, but it does seem that the poor profitability of tilapia farming in recent years will not change anytime soon.
Recently, farming freshwater fish such as grass carp and common carp have not been profitable either. So, this is not just a problem for tilapia. Production is too overwhelming, exports are lacking, and domestic demand is not strong. These three factors contribute to the dilemma of many freshwater fish farmers.
Feed mills’ profitability in fish feed production has been greatly affected. The net profit from one tonne of tilapia feed may not exceed CNY50. This is directly reflected in the feed salesman’s wages. The target sales volume for each feed salesman, once from 5,000 tonnes/person/year, has increased to 10,000 tonnes/person/year. However, the strict KPI system makes feed sales fall instead of rising and increases personnel mobility. Some of the salesmen who did well have even started selling fish for farmers. They also help customers connect to fish distributors, to forge better relationships with customers.
Selling animal health products or farm packs is also a way to supplement their income. That is how we met. In addition to his feed business, he has also sold AQUATE, Alltech’s farm pack product for the past few years. This has helped him solve some problems on the farm.
Addressing Streptococcus infections
There are several reasons for frequent tilapia infections. Streptococcus may be the beginning, but in subsequent enteritis, ascites and other secondary symptoms, we often see a variety of pathogenic bacteria infections. Mannan oligosaccharides in Aquate have coagulative and inhibitory effects on various pathogens such as Streptococcus agalactiae and Aeromonas hydrophila.
In an experiment conducted at Kasetsart University, we found that red tilapia treated with AQUATE continuously, in response to challenge stress from Streptococcus and A. hydrophila, has significantly improved the survival rate (Guilherme de Souza Moura et al., 2012). The mechanism behind this also involves the repair of mucosal immune by AQUATE.
A study conducted in China found that feeding ACTIGEN, an important ingredient of Aquate, can repair the gill mucosa and intestinal mucosa of goldfish, and this can even stop the infection of a deadly parasite, Ichthyophthirius multifiliis (Xiaoli Huang et al., 2022). This conclusion has been applied to many companies in China.
The practical application at an eel feed mill showed that the eel gut was significantly thickened, and the number of goblet cells visibly increased due to adding one kg/tonne of Aquate in the feed (Figure 1). Improving the structure of the intestine, as the organ with the largest contact area with the outside environment, will undoubtedly improve the disease resistance of aquatic animals (unpublished data).
A mainstream business
In China’s aquaculture market, there are more than 70 commercial species. As one of the few global species, tilapia has a clearer process and pathway from breeding, growing, processing and marketing than many other species. It is correct to say that Chinese farmers can produce tilapia steadily now and in the foreseeable future.
China’s tilapia industry is a main street business. Everyone knows their responsibility, and they have known it for years. However, the fish distributing problems faced by farmers, the cash-flow security problems faced by feed distributors, and the profitability problems faced by feed mills are all under unprecedented challenges due to some global problems, such as consumption recession and raw material costs. For a mature species and business model like tilapia, a few branches are off the main street to make a clever detour. The box has been there, so firmly, so certain for so long, making it very difficult to think “out of it”. There may be only two options, forward or backwards. One thing is for sure, it cannot continue like this.
The article was published in issue July/August 2024 AQUA Culture Asia Pacific
