Australia’s aquaculture industry is scaling up

Australian aquaculture is on the cusp of becoming a major force, with Tasmanian oyster farmer Tom Gray among those riding the farmed-seafood rollercoaster.

THE summer’s day is searingly hot outside but under the vast shadecloth-covered sheds in the coastal town of Indented Head on Melbourne’s Port Phillip Bay, all is dim, still and serene.

There, in long concrete tanks flushed by cool seawater, are thousands of brilliant sea-green abalone the size of small saucers, quietly nudging their way through the shallows in their pearly shells.

In a few days’ time, these specially bred Australian Jade Tiger farmed abalone will be winging their way, alive and fresh, to the high-end hotels and restaurants of Hong Kong and Singapore.

It’s a journey that is becoming increasingly common for the high-quality fresh seafood being grown by Australia’s flourishing $1.5 billion aquaculture – or farmed seafood – industry.

Whether it is tiger prawns grown in coastal ponds near Cardwell in Tropical North Queensland, Atlantic salmon fattened in the big circular pens in Tasmania’s wild Storm Bay or juicy oysters from the clear waters of South Australia’s Coffin Bay, Australia’s farmed aquaculture industry is enjoying a resurgence.

After a slow-burn start, aquaculture has become one of Australia’s fastest-growing primary industry sectors. Production has increased steadily at 5 per cent annually since 2014, with national farmed seafood production valued at a record $1.57 billion in 2020-21. Nearly half of all seafood produced in Australia is now farmed rather than “wild-caught”, a big jump from 29 per cent in 2000.

The Australian Government’s ABARES forecasts aquaculture production will exceed $1.91 billion by 2025, easily meeting the $2 billion-by-2027 target set in the 2017 National Aquaculture Strategy blueprint, with future growth rates of 7 per cent and higher tipped.

“Things are looking good; I’ve been involved in this industry for 30 years and there is a real sense of optimism and reinvigoration,” says Wayne Hutchinson, aquaculture portfolio manager with the Fisheries Research and Development Corporation.

“It’s a diverse sector with many parts and most have had their ups and downs. But we are at the point now (in Australia) where there is a critical mass of knowledge, experience and expertise; many of the farms and companies already in production are now looking to grow significantly, it’s become a more profitable industry and I’m seeing proposals for new projects – especially seaweed farming – almost every month.”

Australian aquaculture covers a myriad of seafood and fish farming operations. There are the large-scale salmon farmers of Tasmania led by the two corporate giants of the aquaculture sector, Tassal and Huon Aquaculture – both Australian-owned and listed on the Australian Securities Exchange – and private company Petuna Aquaculture, recently wholly acquired by NZ’s SeaLord.

Together, these three Tasmanian salmon farmers will sell salmon (and ocean trout) products valued at $937 million in 2020-21, accounting for a massive 60 per cent of all Australia’s aquaculture output. Salmon exports this year, although still COVID-affected, will exceed a record $140 million.

But following fast behind salmon are the other three big shellfish farming industries of prawns ($100 million-plus annual production), oysters ($101 million) and farmed abalone (estimated $60 million).

Barramundi farming is an increasing new focus for investment with production surpassing $54 million in 2018, as is kingfish farming pioneered in Australia by Cleans Seas Seafood.

A surprise quiet achiever is the thriving native Murray cod farming business Murray cod Australia near inland Griffith, NSW. Now valued on the ASX as a $113 million business, it is a company started by local cotton farmers determined to turn the iconic native Australian river fish into a delicacy demanded by gourmands around the globe.

Then there are the smaller ventures dotted across Australia’s regions, where some of the most exciting aquaculture developments are occurring. Think of the mussel farms at Portarlington in Port Phillip Bay, beche-de-mer (sea cucumber) farming near Fraser Island, tropical rock lobsters being grown at Townsville, and fledgling sea sponge farms off Cape York.

In Tasmania, oyster growers such as Oyster Province at Taranna are experimenting with farming the native flat “angasi” oysters, while on South Goulburn Island in the Northern Territory, native blacklip Warruwi oysters are being farmed by its traditional owners, the Yagbani people.

“This is developing the north; we are taking part,” says Yagbani Aboriginal Corporation chairman Bunug Galaminda, proud his community has established the first commercial oyster farm in Northern Australia, using their native food. “It’s good for our guys, jobs and business. Money for the community.”

Helping the sector grow, besides the greater diversity of species being farmed, is the increased profitability of aquaculture farming.

Last year IBISWorld identified the current average profit margin of Australia’s 1030 aquaculture businesses at a healthy 7.9 per cent. “Industry revenue is forecast to increase at a faster pace over the next five years, with rising disposable incomes and increasing health consciousness anticipated to support strong demand for farmed local seafood,” IBIS predicted.

Tasmanian oyster farmer Tom Gray has experienced the rollercoaster that has been Australia’s aquaculture industry first-hand, despite his plump oysters from Fulham lease 170. Oyster lovers in the know order their favourite oysters by their lease number.

In 2013 his family’s Fulham farm near Dunalley was hit by devastating bushfires, in 2014-15 his oyster stock had to be replaced to ensure resistance to the fatal Pacific oyster mortality syndrome that had wiped out many other farmers, and last year the coronavirus pandemic slashed wholesale oyster prices by 30 per cent and killed sales for three months.

“We’re a family business in a bit of a boutique industry so we are not looking for massive expansion,” says Gray, tending the 70,000 dozen oysters he sells annually on his intertidal leases. “Instead we have diversified into other areas; we are opening a seafood restaurant soon for tourists and leasing some of our offshore farm to the Sea Forest seaweed company.

“The only thing that has saved us is that profitability and prices have been growing; we used to only get $7 a dozen (wholesale) but in the past three years it has been at least $10 a dozen and up to $11-$12 farmgate depending on size; at $9 a dozen we become profitable so it all makes a difference.”

A recent Fisheries Research and Development Corporation Nielsen survey found one in three Australian consumers eats seafood at least weekly. Fillets of fresh farmed Tasmanian salmon have become a food basket staple, matched by prawns and oysters as special treats.

Yet, while Australian-farmed or caught fresh seafood is preferred by consumers, 66 per cent of domestic demand is actually supplied by imports. They include frozen and tinned products such as vannamei prawns from Thailand, frozen barramundi fillets from Vietnam, hoki fish fingers from New Zealand, salmon from Norway and canned tuna from Indonesia.

It infuriates key industry figures, such as Huon Aquaculture part-owner and company director Frances Bender, that the Aussie consumer often has no idea that the takeaway fish and chips or grilled salmon in a restaurant they are eating is imported seafood.

She is pushing for better labelling and government requirements to declare where seafood had its origins, including in all restaurants and retail shops.

Bender, who founded Huon Aquaculture 35 years ago in Tasmania with her husband, Peter, hopes this would wake consumers up to the realisation that they have no idea of the food safety standards, sustainability or environmental conditions under which the imported seafood was grown.

“Two-thirds of all seafood eaten in this country is imported, and it is very hard for local aquaculture producers who are required to meet Australia’s strict regulatory standards to compete with cheap imports, ” Bender says.

“Australian consumers are spoilt and don’t realise how lucky they are in their access to local sustainably grown fresh quality seafood until the day when it is no longer there.”

At Humpty Doo, near Darwin, Australia’s biggest barramundi producer, Bob Richards, agrees wholeheartedly. His $30 million family-owned business is Australia’s biggest grower of farmed barramundi, producing 4000 tonnes a year for the domestic market, including Woolworths.

He grows up to three million barramundi fish sustainably and to tough water-quality and environmental standards in 200 hectares of earthen ponds on a tidal estuary, as close to wild barramundi habitat as possible.

Plans are in place to more than double production by 2025, as long as he can out-compete cheap barramundi grown in South-East Asia and flown frozen to Australia.

“There’s the biosecurity threat that imports pose, and it doesn’t taste anything as good as ours because (imported barramundi) is often grown in poor quality dirty water which puts consumers off,” Richards says.

“It’s frustrating that barramundi is an aboriginal word (the fish species is called Asian sea bass elsewhere); I’d like to see the right to use the name barramundi kept to only fish grown or caught within Australia – like camembert and champagne produced in France – but apparently we can’t claim it back now.”

In the easily spooked corporate investment world, aquaculture has started to shed or outgrow its reputation for being a high-risk investment field.

While it has had more than its fair share of exposure to disease outbreaks, mass fish escapes, algal blooms, technology failures, poor greenfield site selection and shonky operators, aquaculture is beginning to be seen, like agriculture, as possessing excellent long-term growth prospects as world demand for high quality food and protein explodes.

Aquaculture consultant Rob Bell, a former managing director of ASX-listed Seafarms Group, which owns Crystal Bay prawn farms in North Queensland, has sensed a turning of the tide as he watches serious investor attention and money finally shifting to aquaculture companies.

“We are seeing a new group of investors interested in aquaculture and the number of listed companies on the ASX with farmed seafood production in Australia and New Zealand has just gone from eight to 12 in the past two years,” Bell says. “There is a lot of action in private unlisted companies too.

“It’s an interesting position; like the broader thematic of agribusiness, the aquaculture sector is crying out for capital and needs big institutional investors like the global pension and super funds to tip their toes in.

“But they won’t look at investments of a scale of less than $400-500 million and in aquaculture that’s not there, so what we are seeing is the start of aggregation in an industry that has long been dominated by small family-owned businesses.”

Leading the new investor pack is Fortescue mining tycoon Andrew “Twiggy” Forrest. The iron ore and cattle king, who also has a PhD in marine science, has just added a new aquaculture arm, Leeuwin Coast, to his export-orientated beef, dairy and horticultural company, Harvest Road.

Forrest has already heavily invested in CSIRO’s FutureFeed spin-off, which owns the global licence for the farming of native Australian red seaweed, asparagopsis, to be turned into a livestock feed ingredient that can slash harmful greenhouse gas emissions from cattle by more than 80 per cent.

Now, through a series of business purchases and new investments in oyster and mussel farms, Forrest’s Leeuwin Coast aims to produce 1.5 million dozen oysters annually by 2023 on farms and leases near Perth and Albany. There are also plans to expand into fin-fishing farming near Carnarvon.

Forrest’s sea-farming plunge coincides with a flood of new aquaculture projects using innovative sea species being floated across the nation, with seaweed ventures the flavour of the month.

Just north of Townsville, newcomer Ornatas has started the world’s first hatchery and commercial farm producing tropical rock lobster, often known as painted crayfish, at its Toomulla Beach facility, as well as producing more than 30 tonnes of farmed Moreton Bay bugs annually.

A flurry of interest in seaweed farming is underway partly because of the potential for Australia’s 1000 native seaweed species to absorb harmful greenhouse gases and be eligible for carbon credits when farmed offshore, and also for its untapped prospects as animal and human food, and in nutraceutical health, skin and medicinal products.

A recent blueprint for the emerging seaweed industry by AgriFutures predicted the current $3 million Australian seaweed industry – mainly from the wild harvesting of kelp on King Island in Bass Strait – could be worth $100 million by 2025 and an astounding $1.5 billion by 2050.

In Tasmania, small private newcomer Sea Forest has taken over the vast marine farm leases and onshore facility previously owned by Spring Bay Mussels at Triabunna, becoming the first company in the world to commercially grow asparagopsis feed supplement for cattle and dairy producers.

In South Australia, US company CH4 Global is also investigating red seaweed production for livestock feed at trail sites on the Yorke Peninsula, Kangaroo Island and Port Lincoln, while salmon giant Tassal is looking at growing threatened Tasmanian giant kelp on long lines near its salmon farming cages, both to use any excess nitrogen in waterways and potentially for human consumption.

Trials for the growing of Tasmanian kombu, which can be used to make the traditional drink kombucha, are also underway.

As Bell points out, operational scale has long been a weak point for the success of new aquaculture investments.

But industry consolidation is slowly turning a vast number of small family-run businesses into serious enterprises with economies of scale, significant production volumes and greater market opportunities.

In the abalone world, $30 million privately owned Yumbah Aquaculture has since 2009 slowly put together a portfolio of five abalone farms in South Australia, Tasmania and Victoria to become the biggest farmer of abalone in the southern hemisphere.

Yumbah now grows 70 per cent of Australia’s farmed abalone, has attracted investment from key shareholders such as medical imaging Pro Medicus owner Anthony Hall, Jonathan Lillie of Fox & Lillie wool-broking fame, US-based corporate helicopter businessman David Calvert Jones and pearl diver Richard Baillieu, and supplies Costco in the US with frozen Australian abalone. Plans for a $60 million farm at Portland to double Australian farmed abalone production – as well as a potential ASX listing for Yumbah – remain on the table, despite a knock back for the project late last year in Victoria’s appeals tribunal.

The other major player in farmed abalone, Jade Tiger, with its three farms in Victoria and Tasmania producing 350 tonnes of distinctive green-and-tiger striped abalone a year, was bought in 2014 by the Craig Mostyn Group. CMG is a privately owned agribusiness company, WA’s largest pork producer and processor, the largest exporter of wild caught southern rock lobster from Tasmania and now a major abalone exporter flying live abalone to Hong Kong for as much as $80 a kilogram. Expansion plans for its abalone arm are in the wings.

An explosion of investment by Australia’s farmed prawn industry by existing aquaculture players is also well underway.

With many small prawn farmers in southern Queensland left broke and devastated after the outbreak of imported white spot disease in 2016, the market for high quality farmed Australian prawns of a different class and price to cheap vannamei imports has been left wide open.

Two years ago, salmon producer Tassal plunged headlong into filling the gap, buying the $85 million Gregory River prawn farm near Proserpine, as well as other prawn farms in Yamba NSW and Mission Beach.

It also plans to spend another $172 million to build a greenfield tiger prawn farm on Exmoor cattle station north of Mackay, proposing more than 1000 hectares of prawn ponds to become the largest land-based aquaculture farm in Australia. Tassal’s rationale is that the farmed prawn industry was ripe for the picking and that it had established customers and markets where it could co-sell high quality prawns with its salmon.

On a company level, Tassal keenly needed to spread its corporate risk from being a business solely reliant on farming salmon in Tasmania’s open water – which is unlikely to offer vast expansion given environmental and regulatory restrictions and community dissatisfaction – to other seafood species and locations.

It has watched in disbelief, as has Huon Aquaculture, as the $1.6 billion open net or caged salmon farming industry in Canada’s Discovery Islands, in British Columbia, was banned from June next year, because of fears raised by its First People that farmed salmon were contaminating native salmon stock.

By last Christmas, Tassal had harvested $18 million of its first Tropic Co branded prawns and will produce 2460 tonnes this financial year from its Proserpine farm. Its strategy is to be producing a massive 20,000 tonnes of prawns – more than four times the current Queensland prawn production – from both Proserpine and Exmoor station by 2030.

On the WA-NT border, listed SeaFarms Group continues to forge ahead with its $2 billion Sea Dragon black tiger prawn project to build an unprecedented 10,000 hectares of prawn ponds on the coastal flats of remote Legune Station, now linked by a government-funded sealed road to Kununurra.

Consolidation is also occurring fast in the fragmented oyster industry. In February 2018, Angel Oysters listed on the ASX, combining the operations of several Coffin Bay oyster producers into a $23 million company, proclaimed itself the largest producer of Pacific oysters in Australia and set the production target of 20 million oysters a year by 2023.

But Tasmanian farmer James Calvert has invested in an even bigger aggregation play. He mopped up seven oyster farms ruined by POMS across Tasmania in the past three years to form the Tasmanian Oyster Company (previously Shellfish Culture), with plans to buy more.

With annual production capacity of 1.5 million dozen oysters, the TOC already commands 40 per cent of Tasmanian oyster production, supplies the major supermarket chains and is the largest vertically integrated oyster business in Australia.

Agribusiness guru David Williams – who was instrumental in buying Tassal from receivership in 2003 and turning around the business – says the biggest problem in Australian aquaculture remains its fragmentation, with too many $5-$20 million businesses and not enough serious expansion.

“I could argue that not much has happened in the past decade; that apart from a few interesting developments such as Twiggy getting in there, there has been stagnation and missed opportunities caused by a lack of capital,” Williams says. “The Holy Grail for the industry – the great white hope, if you like – is that Australian consumers really need another farmed Australian fish, a white-fleshed fish, that they can put every week in their shopping baskets, other than salmon.”