Aquaculture in Europe has a huge potential for growth as a relatively young industry, say economists Jordi Guillen and Natacha Carvalho.
Global aquaculture production (including aquatic plants) reached 112 million tonnes in 2017, with a first-sale value estimated at €221bn, according to the Food and Agriculture Organization of the United Nations (FAO). Globally, aquaculture has been the fastest growing animal food production sector in recent decades, a growth that is mainly attributed to a high degree of technological innovation. Aquaculture is still a relatively young economic sector in Europe and worldwide, especially when compared to agriculture; and has a large potential for further growth and development.
Production and economy
The aquaculture production process is determined by biological, technical, economic, institutional and environmental factors which are largely under human control. The production increase, however, is far from evenly distributed and most of the growth has been in Asian countries, which currently produce more than 90% of the volume and 75% of the value.
In contrast, aquaculture in Europe represents about 1.2% of the world’s production in volume and about 3% in value. In 2017, EU aquaculture production reached almost 1.4 million tonnes, valued at €4.6bn; and provided one fifth of the EU’s supply of fish and shellfish for human consumption. This is substantially less than the global share, where already for some years now aquaculture surpasses wild capture fisheries as the main source of food. Moreover, EU production has gone from a moderate annual growth rate of 3.4% over the period 1980-2000, to a negative growth rate of -0.2% during the period 2000-2017.
The EU has around 12,500 aquaculture enterprises with about 75,000 employees. Almost 90% of these firms are micro-enterprises, employing less than 10 employees. Production is concentrated in five countries: Spain, France, Italy, the United Kingdom, and Greece, making up about three quarters of all sales from aquaculture in Europe in volume and value.
Aquaculture in the EU can be divided into three main sectors: marine, shellfish and freshwater. The marine (finfish) sector is the most important economically, generating a turnover of €2.7bn in 2016, followed by the shellfish sector with €1.1bn and then the freshwater sector with €1m. In freshwater aquaculture, trout and carp dominate covering 53% and 32% of the total volume produced. Trout production has declined by 22% from 2000 to 2016, while carp production has remained steady, resulting in an overall 18% decline in freshwater production.
In marine finfish production, salmon and trout cover 53% of the total production; while seabass and seabream cover a further 38%. Salmon and trout production increased by 23% and seabass and seabream by 62%, resulting in an overall increase of 38% in the marine finfish production for the 2000-16 period. The shellfish production is more diverse, but the main bulk is covered by blue mussels, Mediterranean mussels and oysters. Combined, mussel production fell by 26% and oysters by 46%, leading to an overall 28% decline in volume over the same period.
Despite the overall decrease in volume, the production value has increased and results from the latest STECF aquaculture report show that the economic performance of the EU aquaculture sector has improved, even if not as much as desired. In 2016, the sector generated a Gross Value Added (GVA) of €1.7bn and an EBIT (Earnings before Interest and Taxes) of €767m.
The general low production and lack of growth have often been attributed to strict environmental regulations and a high bureaucracy burden that does not facilitate economic development. Despite this, the aquaculture sector is identified in the EU’s Blue Growth Strategy as one of the five sectors with high potential for sustainable jobs and growth. In addition to economic development, aquaculture in Europe can also boost food security. Hence, the European Commission, together with the EU Member States, have invested significant funds. Between 2000 and 2015, more than €1.17bn of public money was invested in the sector through the structural funds: FIFG (Financial Instrument for Fisheries Guidance) and EFF (European Fisheries Fund). While €1.725bn, about 20% of the total EMFF (European Maritime and Fisheries Fund) budget, are destined to promoting sustainable aquaculture over the period 2014-20.
Promoting aquaculture in Europe
In 2013, the European Commission published the Strategic Guidelines, identifying four priority areas to boost the EU aquaculture sector:
- Reducing administrative burdens;
- Improving access to space and water;
- Increasing competitiveness; and
- Exploiting competitive advantages due to high quality, health and environmental standards.
In 2014-2015, EU countries developed their Multiannual National Strategic Plans for promoting sustainable aquaculture in Europe, proposing concrete actions to address these strategic priorities and forecast of production growth.
Over the last decade the EU has seen its aquaculture production increase in value and decrease in volume, yet, these overall figures do not fully express the evolution of the sector. Most of the key EU producers increased their value of production. Behind these increases is the 40% increase in seabass, seabream and salmon; as the production of mussels, the main aquaculture production in volume, declined by 15%. There is not a single cause to explain the mussel production decline in the EU. Mussel production is considered to have declined mainly due to the spread of diseases, algal blooms, lack of mussel seed (spat), predation and low earnings. Such causes may have been exacerbated by local conditions such as the small size of the mussel aquaculture enterprises and the impacts of climate change.
Thus, behind the overall production evolution lies a decrease of species with low economic value (e.g. mussels) only partly due to poor economic performance, and an increase of higher valued species (e.g. salmon, seabass and seabream) with a higher degree of control by the farmer in the production cycle (e.g. feeding, medicines, juveniles, broodstock, etc.). This higher degree of control can also lead to the existence of economies of scale.
Business and competition
In fact, the EU aquaculture sector is experiencing an important process of business concentration. In particular, large firms dominate the salmon production, within the EU (primarily Scotland) and outside (Norway and the Faroe Islands); while in the seabream and seabass segment a series of mergers and acquisitions are taking place leading to a concentration of the production in fewer companies. These large companies can benefit from economies of scale by increasing production. This is in great part because they have the ability to develop, adopt and apply new technologies and knowledge when available. Despite producing high quality and expensive species, these companies need to be competitive in prices with their domestic and external competitors in order to survive, and so they aim to constantly reduce production costs. Especially when considering that prices of most farmed species tend to decrease over time.
Still, almost 90% of the EU aquaculture firms are micro-enterprises, mostly small-scale family owned businesses, in coastal and rural areas. These micro-companies are not very relevant in terms of total production and innovation but they are important from a socio-economic perspective in coastal areas where they carry out their activity. Their scale of production is not sufficiently large to compete on price or diversify to a large number of markets or products; hence, differentiation and quality are key aspects to their competitiveness.
Hence, in the last two decades, and partly thanks to the structural funds, the EU aquaculture sector has been able to improve the quality of its production and consumer protection standards. It has also enhanced its sustainability and economic performance but has not been able to boost food security. The EU is still dependent on external trade to satisfy its high demand for fish products.
The future of aquaculture in Europe
We expect that aquaculture in Europe will not be able to increase significantly current production levels in the near future. Given the current competition between economic sectors for coastal and marine areas, as well as the concerns and public opinion on aquaculture sites, we do not expect that maritime spatial planning will provide the sector with a sufficient number of new sites. The possibility to take aquaculture sites offshore with the current technology available is still risky and costly to be profitable. In the short term, recirculating aquaculture systems seem the most feasible strategy to increase production but still face high initial investments (sunk costs) and high operating costs. In any case, any attempt to successfully increase production needs to consider environmental factors, consumer preferences and market demand.
Jordi Guillen & Natacha Carvalho
Water and Ocean Resources Unit
Joint Research Centre (JRC)