The high capital investment and operating capital requirements of commercial catfish production have prevented many small-scale farmers from participating in this enterprise when they receive less than $1.00 per pound. Small-scale catfish production is a lower cost option that can provide an income opportunity for individuals willing to market their fish directly to consumers.
There are a number of important considerations before beginning small-scale catfish production and direct marketing. This section explains differences between large and small catfish operations and the importance of direct marketing to the success of small fish farms.
Large vs Small Farms
Large catfish farms are expensive to build and operate. Cooperative Extension budgets show that pond construction, equipment and operating expenses may average $5,000 per acre before the first fish is harvested.
Experts on catfish culture believe that for a catfish farm to be successful, based on sales to processors, a minimum of 80 to 100 acres of ponds is required. This means that$400,000 to $500,000 investment capital is needed to start this kind of commercial catfish farm. Since lenders typically require at least 65 percent owner equity for catfish loans, financing may be available for less than half of the total initial capital cost.
Like many agricultural crops, there are economies of scale in commercial catfish production. Larger farms are able to produce fish at a lower price per pound than smaller farms. For example, large farms can buy catfish feed in bulk by the truckload while smaller producers, in order to have fresh feed, must purchase bagged feed which costs 10 to 20 percent more.
Intensive catfish production on a part-time basis is risky because the farmer cannot watch the ponds on a regular basis, day and night. If an aerator fails, fish may die in a matter of minutes. Large farms have night time oxygen crews that monitor ponds regularly. Small-scale producers generally get lower yields because they stock and feed at lower rates to reduce the risk of water quality problems.
Cost of Production
Large fish farms typically sell most of their production to fish processing plants. Most farmers own shares in these plants that entitle them to sell certain quantities. Profit margins per pound are low, but the large quantity of fish sold allows a farm to operate profitably. Larger producers also save a portion of their earnings to allow them to survive periods of low catfish prices when fish production is not profitable.
The above chart shows the average price/lb paid by processors over the past 14 years. The dotted line indicates a break-even price of 65¢/lb, representing the cost of producing catfish on a small scale.
The solid line shows a typical break-even price for a large farm. It is obvious that, in many years, potential profits are slim to none especially for a small farm.
Based on these numbers, the average profit over the 14-yearperiod would be 1.9¢/lb. For a farmer with a five-acre pond producing 4,000 lb/acre/year (assuming no oxygen or disease problems), even a 2¢/lb profit means a return to labor and management of only $400/year.
This would provide a wage of less than $2.50/hour because a farmer would easily labor for more than 160 hours a year doing the work of feeding and watching the fish. A small operation simply cannot survive by selling to a large-scale processor. Having part ownership in a small processing plant, however, will add to the profits of the small farmer.
Advantage of Direct Sales
Does all this mean that there is no place for a small-scale producer? Not at all. It means that a smallscale producer must look to other markets to sell his or her fish rather than selling only to a large processor.
The key is that profits are made by selling the fish, not by raising them. The distribution of processed fish through food brokers and supermarkets adds a mark-up to the price of fish, so the consumer pays far more for the fish than the processing plant receives. By passing these middlemen avoids such mark-ups, allows directs sales of fish to the consumer to be profitable, and provides the consumer with a less expensive product, especially if the consumer will dress their own fish.
Another factor in favor of direct sales is the freshness of the product. Fish are notorious for spoilage, and consumers are wary of products on ice or frozen. Families, churches, business, social organization and political organizations all hold fish fries. A local producer can supply the desired fresh fish, or he/she can cater these events, selling the final cooked product to the public.
In the early days of the catfish industry in the deep south, retail sales of live catfish were common and were critical to the success of a number of new operations. As the industry grew, farms expanded in acreage and moved to selling fish to processors and live haulers, where 10,000-20,000 pound truckloads of fish could be sold at one time. This has resulted in a large and unmet demand for live farm-raised fish. Live catfish sold directly to the consumer can bring $1.00 to $1.35/lb, with an additional 35-45¢/lb for cleaning fish. Returns are higher than what can be obtained from sales to a processor.
Fish markets selling wild-caught fish have traditionally supplied the bulk of the market for fresh fish. However, concerns about contaminants in wild fish have been heightened in recent years.
Farm-raised fish provide an alternative source of high quality fresh fish for local communities. Marketing catfish on a small-scale is not for everyone. It is not away to get wealthy. It may be best to start as a part-time businesses a means to supplement other income. Information on how to raise catfish is readily available from the Cooperative Extension System. Commercial catfish production practices can be adapted to small-scale operations.
A successful small-scale operation is possible especially when the producer works to develop a market and sells fish directly to consumers. Before starting a catfish farm, get all the information you can on marketing and know where you will sell your fish. Direct marketing of fish requires time, money, hard work and people skills, but it provides a way for the small scale producer to make money in the catfish business.