[From the U.S. Government Printing Office, www.gpo.gov]




                                       78*                                76*                          36'    74o




                                                                                                                                     10

                                                                                                          W-






                                                                             CAPE H
            80




                                                                                                                                  3,
                          PRODU(YTgGfNa EFFE%,m-
                                                                 C
                               ENCLOSED                       R9t                                                                 74'
            39                                                                                               F
                       PROJECTED Fi                              C
                           SOUTH C@LROLI                                &R1--PffE---.*

                                                       WILMING


                                                                         44




                     South   Carolina

                                                                                                                                  3





                                      D-@. Ho


                                  CHARLESTO
                                                                                                               A&041-1


                          SAVAN-N


                     Georgia



                                                                                                           77
                          BRUNSWICK







                          JACK ONVILLE--.-



            380.62
                                  ST. AU6   INE
            6R574
                        ido
         1995
rs
           U


                                                               Mv
                                          DAY    A. 8 E A CINX
                                                                                                                             -Ak.
                                         82*                                  80o                                 78o













                   PRODUCTION EFFECTS OF A GREENHOUSE ENCLOSED NURSERY
                      SYSTEM ON THE PROJECTED FINANCIAL PERFORMANCE
                         OF A SOUTH CAROLINA MARINE SHRIMP FARM


                                            by

                                    Raymond J. Rhodes'
                                      S. Sureshwaran2
                                       Carol Greene2
                                     Craig L. Browdy3
                                                        3
                                  John D. Holloway, Jr.
                                    Tzachi M. Samocha'

                      Economic Analysis and Seafood Marketing Program
                             office of Fisheries Management
                               Division of Marine Resources
                          S.C. Department of Natural Resources
                                  Post Office Box 12559
                                Charleston, SC 29422-2559

                                            and

                       2 Department of Agribusiness and Economics
                             South Carolina State University
                               Campus Post Office Box 7282
                                   Orangeburg, SC 29117


                                            and

                   Waddell Mariculture Research and Development Center
                           Marine Resources Research Institute
                               Division of Marine Resources
                          S.C. Department of Natural Resources
  0                                Post Office Box 809
  .0                                Bluffton, SC 29910

                                            and

                           Texas Agricultural Experiment Station
                                Shrimp Mariculture Project
                                    4301 Waldron Road
                                 Corpus Christi, TX 78418

           This work was partially funded by the U.S. Department of
           Agriculture as administered by the Oceanic Institute/Gulf Coast
 -3)       Research Laboratory Consortium. The views expressed in this report
           do not necessarily reflect those of the U.S. Department of
           Agriculture, Oceanic Institute, S.C. Department of Natural
           Resources, or S.C. State University.     Any commercial product or
           trade name    mentioned herein is not to be construed as an
   C"      endorsement.

                        US Department of Commerce
                        NOAA Coastal Services Center Library
                        2234 South Hobson Avenue
   C-3                  Charleston, SC 29405-2413
   LAJ
   C3











                                          Table of Contents




                                                                                       Page

             List of Tables        . . . . . . . . . . . . . . . . . . . . . .          iii


             List of Figures       . . . . . . . . . . . . . . . . . . . . . .          iii

             Summary     . . . . . . . . . . . . . . . . . . . . . . . . . . .            1

             Introduction       . . . . . . . . . . . . . . . . . . . . . . . .           2


             Methods and Data      . . . . . . . . . . . . . . . . . . . . . . .          3


                   Growout Operation        . . . . . . . . . . . . . . . . . . .         3

                   Nursery System       . . . . . . . . . . . . . . . . . . . . .         4

                         Facility Design and Equipment         . . . . . . . . . . .      4

                         Production Assumptions         . . . . . . . . . . . . . .       5

                         Major Financial and Operating Assumptions            . . . . .   6

                   Alternative Scenarios         . . . . . . .    . . . . . . . . . .     6


             Results     . . . . . . . . . . . . . . . . . . . . . . . . . . .            6


             Discussion    . . . . . . . . . . . . . . . . . . . . . . . . .             11


             Conclusions      . . . . . . . . . . . . . . . . . . . . . . . .            14


             Literature Cited        . . . . . . . . . . . . . . . . . . . . .           17

















             The South Carolina Department of Natural Resources prohibits discrimination on
             the basis of race, color, sex, national origin, handicap or age.   Direct all
             inquires to the Office of Personnel, PO Box 167, Columbia, SC 29202.










                                       LIST OF TABLES



           TABLE                                                              Page

           1.   Summary of Facility and Equipment Costs for a
                Hypothetical 24-ha (water area) Penaeus vannamei Shrimp
                Farm without,a Nursery System in South Carolina, 1994             8

           2.   Projected Annual Income Statement for Operating
                Years Three Through Ten and Discounted Cash Flow
                Analysis for a Hypothetical 24-ha Penaeus vannamei Shrimp
                Farm without a Nursery System in South Carolina       . . . . .   9

           3.   Summary of Additional Facility and Equipment Costs
                for a Greenhouse Enclosed Nursery System on a
                Hypothetical Penaeus vannamei 24-ha Shrimp Farm in
                South Carolina, 1994   . . . . . . . . . . . . .               10

           4.   Projected Annual Income Statement for Operating Years
                Three Through Ten and Discounted Cash Flow Analysis
                for a Hypothetical 24-ha Penaeus vannamei Shrimp Farm
                with a Greenhouse Enclosed Nursery System in South
                Carolina    . . . . . . . . . . . . . . . . . . . . . . .      12

           5.   Discounted Cash Flow Analysis for the Alternative
                Scenarios for a Hypothetical Penaeus vannamei Shrimp
                Farm with and without a nursery system in South
                Carolina  . . . . . . . . . . . . . . . . . . . . . . . .      13






                                      LIST OF FIGURES



           FIGURE,

           1.   Schematic Diagram of Raceway System      . . . . . . . . . .   1S

           2.   Schematic Diagram of Greenhouse Enclosure      . . . . . . .   16










                         SMOMRY                    70*-., shrimp harvested at an
                                                   average size of 17g, and an
                  South Carolina's climate         ex-pond price of $4.95/kg. In
            restricts marine shrimp                another scenario, the effects
            growing to one season of five          of including a greenhouse
            to seven months, which is only         enclosed nursery system are
            long enough to produce one             evaluated. The nursery system
            crop per year. This is                 is assumed to only supply
            considerably less than in the          about 20% of the farm's PL
            Latin American and Southeast           stocking requirements, and the
            Asian countries where two or           remaining 80*1 is directly
            more crops are grown each              stocked. Survival rates are
            year. For South Carolina               assumed to be 80% in the
            shrimp producers to be                 nursery phase and 75*1 in the
            competitive and recover                growout phase for an overall
            capital cost, they must                aggregate survival rate of
            maximize production during             60'1. Larger shrimps (R = 20g)
            this limited growing season.           are produced when a nursery is
                                                   utilized, fetching a price of
                  The utilization of               $5.10/kg. The effects of
            greenhouse enclosed nursery            alternative prices and
            raceways may be a viable               survival rates are examined in
            method of increasing the               four other scenarios.
            growing season in South
            Carolina. Postlarvae (PL) are               The.total initial
            kept in nursery raceways until         investment in facilities and
            they reach the juvenile stage          equipment to begin a P.
            and are then transferred to            vannamei growout shrimp farm
            growout ponds. Experimental            with a greenhouse enclosed
            research in South Carolina and         nursery system is $1.1
            other states indicates that            million. This represents a
            nursery systems can improve            $103,000 increase in
            the production (i.e. total             investment from a facility
            quantity of shrimp harvested           which only contains a growout
            and average harvest size) of           farm. After the second year,
            shrimp farms. Consequently,            when the farm produces at full
            the objective of this analysis         capacity, the projected net
            is to simulate the comparative         cash flow is $397,000. This
            financial performance of a             is a $56,000 per annum
            growout shrimp farm with and           increase compared to the base
            without a nursery system in            case scenario without a
            S-outh Carolina. The                   nursery system.
            hypothetical shrimp farm
            described in this report                    The 10-year projected
            includes 24 ponds, each 1              modified internal rate of
            hectare (ha) in size, located          return (MIRR) before income
            on 31 ha of land near a salt           taxes for the growout farm
            water source. The base                 with the nursery system,
            scenario for growout assumes    a      18.9%, is marginally higher
            stocking density of 80                 than in the base scenario,
            postlarvae(PL)  /M2 , an               17.9% without the nursery.
            aggregate survival rate of             The projected net present












                                              2

            value (NPV) with the nursery         Carolina, with one-fifth of
            system, $384,000, is also            the nation's cultured output,
            higher than the base scenario,       is the second largest farmed
            $259,000. The internal rate          shrimp producing state.
            of return (IRR), NPV and MIRR
            were sensitive to changes in              Commercial cultivation of
            the base case prices and             marine shrimp in earthen ponds
            survival rates. However, in          or impoundments in South
            all scenarios discussed in           Carolina is climatically
            this report, the IRR and MIRR        restricted to producing one
            are higher than the assumed          crop per year, over a five to
            15'1 risk-adjusted cost of           seven month period. This is
            capital.                             considerably less than in the
                                                 Latin American and Southeast
                 Given the marginal              Asian countries where two or
            increase in NPV when partially       more crops are commonly grown
            stocking the growout facility        each year. For shrimp
            with nursery derived shrimp,         producers in temperate regions
            it is questionable whether the       to be profitable, they
            present nursery system is a          generally must cost
            viable financial alternative         effectively maximize
            solely based upon increasing         production during this limited
            aggregate yields and harvest         growing season, perhaps by
            sizes. However, additional           incorporating advanced
            financial analyses are needed        techniques into farming
            focusing on possible nursery         operations. In addition, the
            operation risks, nursery/farm        short window of opportunity
            size economies of scale and          for stocking coupled with
            nursery effects on coping with       limited supplies of healthy
            PL supply risks. Under               postlarvae (PL) have forced
            conditions where PL supplies         commercial growers to stock
            are limited and/or are of            late in the season, reduce
            questionable health or               stocking densities and/or not
            fitness, nursery systems may         stock any or all ponds in a
            be the only practical way for        given season. For example, in
            temperate growers to reduce          1989, several SC farms had to
            risks associated with PL stock       reduce planned stocking
            availability.                        densities and/or not stock all
                                                 their ponds due to an apparent
                     INTRODUCTION                seasonal shortage of quality
                                                 PL (Rhodes et al., 1992).
                 In recent years,   farmed
            sh*rimp production in the                 The utilization of
            United States has increased          greenhouse enclosed nursery
            substantially. In the 1993           raceways may be a viable
            season, the United States            method of expanding the
            produced a record crop of            stocking window while
            farm-raised shrimp,                  increasing the growing season
            approximately 2,500 metric           in South Carolina. PL are
            tons, 25% more than  the             kept in nursery raceways until
            estimated 2,000 tons in 1992         they are transferred to
            (Rosenberry, 1993). South            growout ponds. Advantages of











                                             3

            nursery raceways compared to        operating risks (e.g.
            direct stocking of PL include       equipment failures, etc.).
            better control of predators,
            more accurate production                 Research results on the
            projections, less feed waste        effects of nursery raceway
            (feed is generally the largest      systems are contradictory.
            operating cost of a shrimp          Samocha and Lawrence (1992)
            farm's budget), and increased       concluded that an intensive
            profitability (Samocha et al.,      nursery raceway system
            1993A). In essence, a               generally results in larger
            greenhouse enclosed nursery         shrimp and thus, greater
            facility may provide the            market price and higher
            following three advantages:         revenue. In contrast, Juan et
            (1) The growout season may be       al.(1988) concluded that
            extended, allowing for the          direct stocking of growout
            production of larger shrimps        ponds with PL and producing
            or possibly two crops per           one crop per year in southern
            year. (2) Proper stocking of        Texas is more profitable than
            juveniles following a nursery       using intensive raceway
            phase should increase survival      systems and producing two
            rates and improve consistency       crops per year. The
            in estimating pond biomass          extrapolation of results to
            during the growout phase.           South Carolina is questionable
            This can result in improved         given that Texas producers
            pond and feed management. (3)       generally have a longer
            The nursery could allow             growout season. Consequently,
            producers more flexibility  in      given the advantages and
            stocking schedules by taking        disadvantages of greenhouse
            delivery of PL earlier in the       nursery systems, the objective
            year (e.g. March and/or April)      of this research is to compare
            and "stockpiling" the PL in         the financial viability of a
            their nursery facility.             growout shrimp farm with and
                                                without a nursery system in
                 Yet, there are potential       South Carolina.
            di-sadvantages of implementing
            this type of intensive nursery             METHODS AND DATA
            system. Before water
            temperatures reach 20*C to          Growout Operation
            25'C, sea water temperature
            must be increased by some                Facility design and
            means in the nursery system         equipment, production
            for operation. An-intensive         assumptions and major
            greenhouse system is also more      financial assumptions for the
            expensive to'build than             growout operation are
            regular outdoor nursery ponds       discussed thoroughly in
            and a greater level of worker       Sureshwaran et al. (1994). A
            skill is needed to maintain         brief review is provided
            and operate the system. In          below.
            addition, high stocking
            densities in raceways can                The facility consists of
            increase the probability of         24 ponds [See Figure 1 in
            massive mortalities due to          Sureshwaran et al.(1994)],












                                              4

            each of -1 hectare in size,           individuals, restaurant
            constructed on a 31 hectare           distributors, and wholesalers.
            farm that is leased near a            Prices for the base scenarios
            saltwater source. Specific            are similar to those that
            pathogen free (SPF) P.                prevailed in South Carolina
            vannamei are used in this             during 1993 for the estimated
            study (Wyban et al., 1992,            harvest weights. Post-
            1993). It has been found    that      harvesting losses were set at
            use of SPF P. vannamei has            2% of total harvest.
            increased survival rates, feed
            ef*ficiency, production and                   Nursery System
            profitability for the shrimp
            industry (Carpenter and Brock,        Facility Design And Equipment
            1992, Jaenike et al., 1992).
                                                       The plan and operation of
                 The length of the growout        the nursery system discussed
            cycle is 5.0 months.                  in Samocha and Lawrence(1992)
            Aggregate survival is assumed         provide the basis for the
            as 7501. The risks associated         present design. In general,
            with growing shrimp include           the hypothetical nursery
            nutritional and environmental         system consists of 4 concrete
            factors, such as poor quality         raceway structures each 10
            feed, poor water quality,             feet wide X 108 feet long in
            pollution, and low dissolved          size, constructed on land that,
            oxygen. The risks of growing          is available as part of the
            shrimp are not examined in            growout operation (Figures 1
            this study. In addition, the          and 2). A 2-foot walkway
            study does not account for            separates each raceway.
            natural disasters such as             Raceways are built to
            drought, hurricanes, etc.             alleviate complications of
                                                  drainage at harvest. The
                 A feed conversion rate of        forms are fabricated from
            2..O:l is used. The harvest           fiber mesh concrete. Each
            weight is estimated using a           raceway has a center partition
            density dependent growth model        and a water depth of 4 feet.
            (Sureshwaran et al., 1994). A         The bottom slope is 0.5
            before-tax discount rate of           percent with a 5-foot deep
            15*1 and a planning horizon of        sump at one end. The sump
            10 years is assumed. Initial          aids in the removal of waste
            investment starts in year 0,          from the raceways. A 58 feet
            first year output is 50% of           wide X 144 feet high gutter
            maximum capacity, second year         connected greenhouse is
            output is 75-'. of maximum            constructed to.enclose
            capacity and third year               raceways.
            overall production is at   1000-.
            of capacity.                               An average water exchange
                                                  rate of 30'-. per day is
                 It is assumed that all           employed with a maximum of 50%
            shrimp are produced for normal        per day. To pump the water
            market sales, i.e., no live           into raceways, 4 pumps with
            shrimp sales. These shrimp            flow ratings of 240 gallons
            are sold head-on (whole) to           per minute and 5 horsepower











                                              5

             (hp) motors are used. The           capital, i.e., no loans. The
            pumps allow for oxygen               annual financial   projections
            injection, water circulation,        for this facility are
            and filtration. One sand             generated using a spreadsheet
            filter per raceway is                template prepared by Applied
            required. Each will be               Analysis, Inc. (AAI), (Leung
            equipped with top mounted            and Rowland, 1989). A
            multi-port valves and will           modified internal rate of
            have the capacity of about    20     return (MIRR) formula was
            MI/h for each raceway. The           added to the AAI original
            sand filter is responsible    for    template. MIRR is defined as
            filtering incoming sea water         the interest rate applied to
            as well as the raceway water.        negative project balances that
            It is assumed that three phase       equates the final project
            electrical wiring is used for        balance to zero. When
            pumps. The multi-port valve          compared to the internal rate
            directs water from pump to           of return (IRR), MIRR is a
            sand filter then back to the         better measure of
            raceway or to the sump for           profitability because the MIRR
            drainage. An oxygen injection        assumes that net cash flows
            system is used for aeration          from all investment projects
            when needed. The system              are reinvested at the cost of
            includes a liquid oxygen             capital while the IRR assumes
            storage tank, pressure               that cash flows are reinvested
            regulator, distribution   system     at the project's own IRR
            pipes and valves, oxygen             (Brigham and Gapenski, 1990).
            filters, oxygen flow meters,
            and oxygen diffusers.
                                                 Production Assumptions
                 Equipment required for
            the nursery system are: (1) a             Raceways will be stocked
            hauling trailer for                  at 12,500 PL /M2 in early
            transporting juveniles to            March. All PL are stocked in
            growout ponds'; (2) 20               one day and harvested three
            automatic feeders; (3)               weeks later. The PL in the
            harvesting equipment;    (4)         nursery raceway system are
            alarm system, and (5)   an           assumed to have a survival
            Artemia hatching system.    it       rate of 80'1 and a feed
            is assumed that all personnel        conversion rate of 2.0:1. The
            from the grow-out operation          feeding rates for dry feed
            are employed for nursery             vary from 10'i in the first
            needs. Equipment required for        week, 12.5% in the second week
            the nursery system already           and 15% in the.third week. The
            available in the grow-out farm       PL are fed dry feed from
            are: (1) office trailer; (2)         stocking according to
            trucks; and (3) harvest and          consumption, and feed particle
            lab equipment. The straight-         size is adjusted according to
            line depreciation method is          animal size. Artemia nauplii
            used for the growout and             and frozen adult Artemia are
            nursery facility. It is    also      offered as a supplement to dry
            assumed that this hypothetical       feeds.
            facility is not funded by debt










                 Shrimp reared from PL                 density of 80 PL/mI, the
            that are transferred from the              nursery system supplies
            nursery system intp growout                20'1 of the farm's
            ponds are assumed to have a                stocking requirements,
            higher survival rate of 75%                nursery survival is 800-.
            during the growout phase and'              and growout survival rate
            reach a larger harvest size of             of shrimp from nursery is
            20g, when compared with direct             75*1, harvest price of
            stocking. The nursery system               shrimp from nursery is
            will supply about 20% of the               $5.10/kg for 20g shrimp,
            farm's stocking requirements,              growth, survival and
            and the remaining 80'1 is                  harvest price of direct
            direct stocked.                            stocked.PL are the same
                                                       as scenario SlA.
            Major Financial And Operating
            Assumptions                                Scenario S2A: Growout
                                                       Only - Same as SlA except
                 The major financial and               harvest price decreased
            operating assumptions for the              to $4.70/kg.
            nursery system are the
            following: (1) price of PL                 Scenario S2B: Growout
            including transportation is                with Nursery - Same as
            $10.00 per 1,000; and (2) the              SlB except harvest price
            cost of Artemia, including the             of directly stocked PL is
            hatchery system, is $2,200 for             $4.70/kg and $4.90/kg for
            a 3-week period. other                     shrimp from nursery.
            financial assumptions are
            similar to the growout farm:               Scenario 'S3B: Growout
            (1) a before-tax discount rate             with Nursery - Same as
            set at 15%; (2) planning                   SlB except survival rate
            horizon is 10 years; and (3)               during the nursery phase
            all values are measured in                 is decreased to 65-0..
            1994 dollars.
                                                       Scenario S4B: Growout
                Alternative Scenarios                  with Nursery - Same as
                                                       SlB except     survival
                 The following six                     rate during the nursery
            scenarios are developed to                 phase is increased to
            compare the effects of                     850-o.
            alternative survival rates   and
            ex-pond prices:                            Scenarios SlA and SiB are
                                                  "base case" scenarios for
                 Scenario SlA: Growout            growout without and with a
                 Only - Stocking density          nursery system.
                 of 80 PL /M2 , direct
                 stocking growout survival                    RESULTS
                 rate of 70*-., harvest
                 price of $4.95/kg for 17g             A base case scenario for
                 shrimp.                          the P. vannamei growout
                                                  operation only (Scenario S1A)
                 Scenario S1B: Growout            serves as a reference po  'int
                 with Nursery - Stocking          for evaluating the impacts of











                                                 7

             alternat ive scenarios.                      The ten-year (before
             Scenario SlB is the base case           income taxes) internal rate of
             for a farm with a greenhouse            return (IRR) and net present
             enclosed nursery system. The            value (NPV) were projected.
             scenarios with the growout              The ten-year IRR is 21.50-.
             operation only (S2A) and the            (Table 2), which is greater
             combined growout and nursery            than the discount rate of 15%.
             operation (S2B) evaluate the            NPV in ten years is $259,000.
             impacts of decreases in ex-             The modified internal rate of
             pond prices. Scenarios S3B              return (MIRR) in ten years is
             and S4B consider a 100-o                projected to be 17.9-. (Table
             decrease and increase,                  2).
             respectively, in the nursery
             survival rates.                              The estimated additional
                                                     investment in facilities and
                   The projected initial             equipment necessary to
             investment in facilities and            construct a greenhouse
             equipment is approximately              enclosed nursery system on an
             $998,000 for the 24-ha P.               existing shrimp growout
             vannamei growout shrimp farm            facility is about $103,000
             without a nursery system                (Table 3). The total
             (Table 1). Equipment                    estimated initial investment
             comprises about 49% of this             in facilities and equipment to
             cost. Land clearing and                 construct a growout shrimp
             construction costs account for          farm with a greenhouse
             approximately 480-.. The                enclosed nursery system is
             operating cost in year 1 is             about $1.1 million. The
             $0.38 million. Therefore, the           operating cost in year 1 is
             growout shrimp farm without a           $0.39 million. Therefore, the
             nu'rsery system requires a              growout shrimp farm with a
             total initial investment of             nursery system requires a
             $1.38 million before any                total initial investment of
             revenue from sales is                   nearly $1.5 million before any
             received.                               revenue from sales is
                                                     received.
                  A simple, pro forma
             annual income statement for                  A simple, pro forma
             operating years three through           annual income statement for
             ten was generated for the P.            operating years three through
             vannamei growout shrimp farm            ten was generated for this
             without'a nursery system                shrimp farm with a nursery
             (Table 2). Projected annual             system (Table 4). Projected
             sales are about $1.11 million           annual sales are $1.18 million
             at full capacity, and total             at full capacity, and total
             cash operating cost is $0.77            cash operating cost is $0.78
             million. Feed and PL                    million. Again, feed and PL
             accounted for the largest               accounted for the largest
             percentage of operating cost,           percentage of operating costs,
             33% and 25%, respectively               33-.' and 2601, respectively.
             (Table 2). Energy accounts
             for 10% of the operating cost.











                                             8

           Table 1. Summary o-f facility and equipment costs for a
                      hypothetical 24-ha (water area) Penaeus vannamei shrimp
                      farm without a nursery system in South Carolina, 1994.


           Item                                Cost        Percent'     Useful
                                                                         years


           DEVELOPMENT COST
           Project Report                    $10,000                       20
           Project Manager                    20,000
                      Subtotal               $30,000         3.006


           LAND CLEARING AND FACILITIES2
           Land Clearing, 31ha               $85,250                       20
           Pond Construction                 180,000                       10
           Seawater Pumps, 3                  26,955                       10
           Electrical System                  20,016                       10
           Discharge and Intake System        96,000                       10
           Buildings                          54,000                       20
           Survey, Permits & Design           15,000.        47.896        10
                      Subtotal               $477,221


           EQUIPMENT
           Harvest Equipment                 $15,000                       10
           Feed Storage Bins                  36,000                       10
           Paddlewheels                      240,000                         5
           Trucks/tractors                    62,500                       20
           Feeding System                     40,500                         5
           Power Equipment                    11,000                       10
           Pumps                              82,800                         5
           Other                              15,000
                      Subtotal               $490,300       .49.2-06


           TOTAL COSTS                       $997,521       100.001
           FTotal Cost Per Water Area:        $41,563/ha





           'Percent of total cost.


           2Jt is assumed that the land would be leased.









                                                 9

            Table 2.   Projected annual income statement for operating years three
                       through ten and discounted cash flow analysis for a
                       hypothetical 24-ha Penaeus vannamei shrimp farm without a
                       nursery system in South Carolina.


            Item                                   Value or Cost          Percent'
                                                    (in thousands)


            Projected Annual Sales                    $ 1,108
            (223,910 kilograms at $4.95/kg)

            Projected Annual Ex1penses
            Pos-tlarvae                                   $192                250-.
            Feed                                            252               33
            Energy                                          80                10
            Land lease                                      60                 8
            Labor                                           59                 8
            Salaried Personnel                              83                11
            Contingency                                       8                1
            Other                                           33                 4


            TOTAL OPERATING COST:                         $767               10001


             Operating Cost Per Kg:                      $3.43/kg
            Projected Depreciation:                       $129
            Total Operating Costs with Depreciation:      $897

            Projected Net Income Before Taxes:            $211

            Net Cash Flow
            (Sales Minus Total Operating Cost)          _L:L4 1
             Net Annual Cash Flow Per Kg:                $1.52/kg-


            DISCOUNTED CASH FLOW ANALYSIS:                          10 years

            Net Present Value (dollars 0001s) at 15%:                 $2S9

            Internal Rate of Return:                                 21.53-0o


            Modified Internal Rate of Return:                        17.8606









            'Percent of total cost.










                                              10

          Table 3. Summary of additional facility and equipment costs for a
                    greenhouse enclosed nursery system on a hypothetical Penaeus
                    vannamei 24-ha shrimp farm in South Carolina, 1994.


          Item                              Cost     Percent'    Useful years


          FACILITIES


          Greenhouse                     $41,352                      10
          Raceway Construction            28,000                      is
          Pumping                           8,300                     10
          Other                             4,916      80.3-0.
                    Subtotal             $82,569



          EQUIPMENT


          Liners                         $6,848                       10
          Feeders, 20                     2,000                         5
          Sand Filters, 4                 1,600                       10
          Transfer Trailer                2,500                       10
          Pumps                           4,140                       10
          Other Equipment & Materials     3,140                       10
                    Subtotal             20,228        19.7@;


          [email protected] COSTS:                $102,796      100.01























          'Percentage of total operating cost.









             Energy accounted for 10'i of the          debatable if much of the farm's
             operating cost.       Total annual        staff time is used in the off
             cash outflow is $0.780 million;           season for repair and
             the average operating cost is             maintenance tasks related to
             $3.33/kg     (Table    4).       The      the growout operation.
             weighted, average selling price
             is $4.99/kgl.                                   In the base scenario,
                                                       growout survival was
                  The projected ten-year MIRR          hypothetically projected to be
             is 18. 9*1 (Table 4)      which is        75-. for ponds stocked with
             greater    than   the    before-tax       nursery juveniles as compared
             discount   rate of      15%.     The      to 70@; for direct stocked
             projected NPV in ten years is             ponds.   In addition, the
             $384,000. The IRR in ten years            projected growout harvest size
             is projected to be 23.7'-.. Thus,         of nursery shrimp was 20g
             the inclusion of a greenhouse             compared to 17g for directly
             enclosed nursery system might             stocked PL. These projected
             modestly'       increase         the      increases in harvest size and
             profitability of a 24-ha shrimp           survival rate of the nursery
             farm in South Carolina.                   shrimp from the growout ponds
                                                       resulted in an overall increase
                  The profitability of the             in projected harvest biomass
             systems    was    compared     under      and in total annual revenues
             alternative scenarios (Table 5).          (sales). Potential management
             As    expected,      when      price      advantages (e.g. improved feed
             decreases, the profitability of           management) associated with
             shrimp farming decreases. As in           stocking of juveniles were not
             Scenario S3B, a decrease in the           addressed in this study.
             nursery survival rate to 6501
             w i 1 1   reduce         o v e r a 1 1          Expected production
             profitability below that of the           benefits need to be considered
             non-nursery base scenario, SlA.           relative to additional
             Scenario    S4B    shows  that     an     operating risks associated w    'ith
             increase in the nursery survival          nursery systems. For example,
             rate2   substantially      increases      transferring commercial
             the overall profitability.                quantities of juvenile shrimp
                                                       from raceway tanks to outdoor
                          DISCUSSION                   earthen ponds during warm
                                                       weather may cause significant
                  Relative to the investment           mortality.    There are also
             in - a  growout    facility,     the      significant mortality risks
             inclusion     of    a    greenhouse       associated with the operation
             enclosed nursery system required          of an intensive nursery system.
             a  marginal     increase    in   the      None of these Tisks were
             initial investment in equipment           analyzed in this study.
             and facilities. There were also
             some increases in PL and energy                Economies of scale were
             cost components of operating              not considered, therefore the
             expenses. Labor costs were not            results of this study may be
             increased    in     this    analysis      more beneficial to large scale
             because it was assumed that the           producers than small producers
             same staff would operate both             (e.g. less than 10-ha farms).
             the raceways and the growout              In addition, expanding the
             operation.    This assumption is









                                               12

          Table 4. Projected annual income statement for operating years
                    -three through ten and discounted cash flow analysis for a
                     hypothetical 24-ha Penaeus vannamei shrimp farm with a
                     greenhouse enclosed nursery system in South Carolina.


          Item                                   Value or Cost           Percent'
                                                 (in thousands)


          Projected Annual Sales
          177,000 kilograms at $4.9S/kg                $876
          59,000 kilograms at $5.10/kg                    301

                Total Sales                           $1,177

          Prolected Annual   Exioenses
          Post larvae                                  $202                  2601
          Feed                                           254                 33
          Energy                                          80                 10
          Land lease                                      60                  8
          Labor                                           59                  8
          Salaried Personnel                              83                 11
          Contingency                                       8                 1
          Other                                           33                  4


          TOTAL OPERATING COST:                        $780                10001.

          110perating Cost per Kg.:                    $3.33/kg.

          Projected Depreciation:                      $139
          Total Operating Costs with Depreciation: $919

          Projected Net Income before Taxes:           $258

          Net Cash Flow:                               $397
          (Sales Minus Total Operating Cost):
          IFNet-Znual Cash Flow per Kg.:               $1.68/kg.


          DISCOUNTED CASH FLOW ANALYSIS:                         10 years


          Net Present value (dollars 000's) at 15'1:                $384

          Internal Rate of Return:                                23.650-.


          Modified Internal Rate of Return:                       18.900-.





          Percentage of total operating cost.









                                                  13

            Tal5le 5. Discounted cash flow analysis for the alternative
                        scenarios for a hypothetical Penaeus vannamei shrimp farm
                        with and without a nursery system in South Carolina.


            Scenarios               NPV                   IRR (0-.)       MIRR



            Scenario   SlA          $259,000*             21.53*          17.86*
            Scenario   SlB          $384,000*             23.65*          18.90*

            Scenario   S2A          $ 45,000              16.19           15.39
            Scenario   S2B          $170,000              18.96           16.75

            Scenario   S3B          $258,000              20.91           17.6S

            Scenario   S4B          $511,000              26.30           20.03

               Base scenarios.


                  Scenario SlA: Growout Only        Stocking density of 80 PL    M2,
                  direct stocking growout survival rate of 70%, harvest price of
                  $4.95/kg for 17g shrimp.

                  Scenario SlB: Growout with Nursery - Stocking density of 80
                  PL/M2,  the nursery system supplies 20-06 of the farm's stocking
                  requirements, nursery survival is 80% and growout survival rate
                  of shrimp from nursery is 75-., harvest price of shrimp from
                  nursery is $5.10/kg for 20g shrimp, growth, survival and
                  harvest price of direct stocked PL are the same as scenario
                  SIA.


                  Scenario S2A: Growout Only - Same as SIA except harvest price
                  decreased to $4.70/kg.

                  Scenario S2B: Grow6ut with Nursery - Same as SlB except
                  harvest price of directly stocked PL is $4.70/kg and $4.90/kg.
                  for shrimp from nursery.

                  Scenario S3B: Growout with Nursery - Same as S1B except
                  survival rate during the nursery phase is decreased to 651.

                  Scenario S4B: Growout with Nursery - Same as.SlB except
                  survival rate during the nursery phase is increased to 85%.


            NPV   = Net present value before taxes.

            IRR   = Internal rate of return before taxes.


            MIRR  = Modified internal rate of return before taxes.


            Before-tax discount rate is 15%.










                                             14

          scale of-the nurse.syst-em to          growout shrimp farm without the
          supply.a major portion of              nursery system. Given this
          juveniles.stocked in the               small increase in profitability
          growout ponds was not examined.        when partially stocking a
          Also, various opportunity costs        growout facility with nursery
          were not evaluated (e.g.               derived shrimp, it is
          marketable securities, etc.).          questionable whether an
                                                 enclosed greenhouse nursery
               As previously discussed,          system is a viable financial
          one of the potential advantages        alternative sclel based upon
          of a nursery system is allowing        increasing aggregate yields and
          a producer to stockpile PL,            harvest size.
          before they are needed for
          stocking growout ponds.                     Additional financial
          Moreover, if supplies of PL            analysis on the costs and
          become tighter in the future           benefits of shrimp nursery
          seasons and/or PL health and           techniques for penaeid shrimp
          fitness are not assured,               farms working in locations with
          nursery systems may become the         a limited growing season is
          only practical way for SC              needed. Future analyses should
          producers to reduce these PL           focus on possible nursery
          supply risks. The financial            operation risks, nursery/farm
          "trade-off" between reducing   PL      size considerations' and
          supply risks vs. operating             nursery effects on coping with
          risks of stockpiling PL was not        PL supply risks.
          examined in this analysis.

                    CONCLUSIONS


               The long term viability of
          the South Carolina shrimp
          farming, among other factors,
          depends on the ability of its
          producers to incorporate new
          techniques, particularly those
          wit.h the potential to improve
          production during a limited
          growing season. Some believe
          that greenhouse enclosed
          nursery facilities may offer
          such an opportunity to the
          producers. Consequently, the
          comparative financial
          performance of a growout
          operation with a greenhouse
          enclosed nursery system was
          evaluated in this study. The
          projected, before taxes MIRR
          for a hypothetical P. vannamei
          growout shrimp farm with a
          greenhouse enclosed intensive
          nursery system was 18.9-i;, only
          slightly greater than the
          estimated 17.9-. MIRR for a




      Figure I Schematic Diagram of Raceway System

       Center partition                            Top View                                Manifold



      10,       0


                                                                                                              A
                      AirlitL3                           Air Diffusers
           SWnP                                    Side View

                                   .. .. .......


      5                 4                                              Airlifts                       31611

                                                    Air Diffusers        Z-------


               81                                           1001





     Figure 2 Schematic Diagram of Greenhouse Enclosure




           10,




         51           101         21        10,          41          10,         2'        lot           51





                      F]   E, 0        Li L- IT-0 0 1           D 0  D  Ell. EI       LjI        L



                        :17
         108,






                                      1r

                   LI   L  01 Ljj              2 0 0                                  u       2 -1 L I







          10,










                                                 17


                    LITERATURE CITED                Rhodes, R.J., K. McGovern-
                                                          Hopkins, and C.L. Browdy.
            Brigham, E.F. and L.C.                        1992. Preliminary
                  Gapenski. 1990.                         Financial feasibility
                  Intermediate financial                  analysis of an independent
                  management. The Dryden                  marine shrimp hatchery
                  Press, Orlando, FL.,                    located in South Carolina.
                  923pp.                                  South Carolina Marine
                                                          Resources Center,
            Carpenter,  N. and J.A. Brock.                Technical Report Number
                  1992. Growth and survival               80.
                  of virus infected SPF P.
                  vannamei on a shrimp farm         Rosenberry, B. 1993. (Editor)
                  in Hawaii. Pages 285-294                World Shrimp Farming:
                  In: W. Fulks and K.L. Main              Special Report, Shrimp
                  (Editors).   Diseases of                Farming in the United
                  cultured penaeid shrimp in              States. Aquaculture
                  Asia and the United                     Digest, San Diego, CA,
                  States. Oceanic Institute,              USA.
                  Honolulu, HI, USA.
                                                    Samocha, T.M., and A.L.
            Jaenike, F., K. Gregg, and L.                 Lawerence. 1992. Shrimp
                  Hamper. Shrimp production               Nursery Systems and
                  in Texas using specific                 Management. Pages 87-105,
                  pathogen-free stocks.                   In: J. Wyban, (Editor).
                  Pages 295-302 In: W. Fulks              Proceedings of the Special
                  and K.L. Main (Editors).                Session on Shrimp Farming.
                  Diseases of cultured                    World Aquaculture Society,
                  penaeid shrimp in Asia and              Baton Rouge, LA, USA.
                  the United States.
                  Oceanic Institute                 Samocha, T.M., A.L. Lawrence,
                  Honolulu, HI, USA.                      and W.A. Bray. 1993A.
                                                          Design and operation of an
            Juan, Y., W.L. Griffin,   and                 intensive nursery for
                  A.L. Lawrence. 1988.                    penaeid shrimp. Pages
                  Production costs                        173-210, In: J.P. McVey
                  of juvenile penaeid shrimp              and J.R. Moore, (Editors).
                  in an intensive greenhouse              CRC Handbook of
                  raceway nursery system.                 Mariculture, Vol. I.,
                  Journal of the World                    Crustacean Aquaculture.
                  Aquaculture Society,                    CRC Press, Boca Raton, FL,
                  19:149-160.                             USA.

            Leung, P.S., and  L.W. Rowland.         Samocha, T.M., A.L. Lawrence,
                  1989.  Financial analysis               and J.M. Biedenbach.
                  of shrimp production: An                1993B. The effect of
                  electronic spreadsheet                  vertical netting and water
                  model. Computers and                    circulation pattern on
                  Electronics in Agriculture              growth and survival of
                  3:287-304.                              Penaeus vannamei
                                                          postlarvae in an
                                                          intensive raceway system.
                                                          Journal of Applied
                                                          Aquaculture 2(l)-55-64.











        Sureshwaran, S., C. Greene,
              R.J. Rhodes, C.L. Browdy
              and A.D. Stokes. 1994.
              Financial viability of
              Penaeus setiferus versus
              Penaeus vannamei with
              continuous live harvesting
              and one final harvest
              strategies in South
              Carolina. SC Marine
              Resources Center,
              Technical Report Number
              84.

        Wyban, James A., J.S. Swingle,
              J.N. Sweeney, and G.A.D.
              Pruder. 1993. Specific
              pathogen free Penaeus
              vannamei. Journal of the
              World Aquaculture Society,
              24 (1) :39-45.

        Wyban, James A., J.S. Swingle,
              J.N. Sweeney, and G.D.
              Pruder. 1992. Development
              and commercial performance
              of high health shrimp
              using SPF broodstock
              Penaeus vannamei. Pages
              254-260, In J. Wyban
              (Editor). Proceedings of
              the Special Session on
              Shrimp Farming. World
              Aquaculture Society, Baton
              Rouge, LA, USA.

















        A total of 300 copies of this document was printed at a total cost
        of $276.82. The unit cost was $.992 per copy.








                                           19

           1.  This is calculated by dividing projected total sales,
               $1,177,000, by total harvest, 236,000 kg.

           2.  Data from earlier experimental studies indicate that survival
               rates averaging up to 95-. are possible in the system
               (Samocha et al., 1993A).

           3. For example, could a nursery system improve the comparative
              profitability and reduce businesses risks of a small marine
              shrimp farms (e.g. <12 ha) in South Carolina?




















                                                                                                                                                                            mo z















                                                                                                                                                                                                                                                                                         . . . . . . . . . . .










                                                                                    RUM
                                                         14@

                                                                                           FLOW

                                                                                                                                                                                                                                             Wo
                                                                                                                                             oo@;z



                                                                                                                                                TZ 7''"Fiv

                                                                                                                                                                                                        VT
                                f                                                                                                                                                  @t'. , -

                                                                                                                                                                                                 oor







                 ri
                     Tr
         I Ar                                                                       jr,

                                                                            ool

                                                                                                              *0                                     41F
                                                                                             "O@




                                                                            ..........















                                                                                                                                                                                                                                          3 66 8 00003 846