Louisiana Oyster Advisory Committee

Terrebonne Parish Commercial Oyster Hatchery Feasibility Study

July 19, 2012

Presented by:The Louisiana Business & Technology Center

Louisiana State University

Historical Perspective

• The number of hatcheries have expanded due to the decreased natural production of seed in certain areas

• Decades of over fishing, disease and pollution have negatively impacted natural seed production

• Fishermen have resorted to purchasing larvae/seed in many geographic areas

• Louisiana and much of the Gulf states have sustained a thriving Eastern Oyster industry without use of hatcheries

• Louisiana generated 34% of all US oyster production between 1998-2008.

Purpose of the Study

• To establish whether there is sufficient merit (business model) to establish an oyster hatchery in Terrebonne Parish.

• Develop data on the economic conditions and assumptions relevant to the potential commercialization of an oyster hatchery.

• Does a market exist for selling oyster seed in Louisiana and how to brand and establish a Louisiana brand for oysters.

Hatchery Model

• Model created by Louisiana Sea Grant Program’s Grand Isle Oyster Hatchery (Dr. John Supan)– Largest gulf coast oyster hatchery based on larvae rearing capacity– State-of-the-art seawater filtration system– Commercial scale producing 200 million oyster larvae per month

• April - September

– S-o-t-a algae production system– Nursery silos for 1 million seed oysters per season for research– One-half acre grow-out space protected and enclosed– Field laboratory with campus support

Theories for possible oyster hatchery industry in Louisiana

• Effect of BP Oil Spill• Leveraging new fishing techniques• Triploid Oysters

– Summer sales– Branding and marketing of oysters from specific areas

• Development of specialized nursery techniques that can develop “prized” single shell oysters for the half shell market

Start-up Costs(Based on 1 billion larvae production capacity – Grand Isle model)

• Start-up: Equipment, Algae production system, broodstock conditioning system, spawning area, larval rearing system - $116,885

Operational Costs

• Labor: minimum of 3 employees - $122,000

• Other operating expenses: minimal– Utilities, Supplies, Insurance

• Total first year minimum cash outflow: $239,000– Land/Building not included

Demand Forecast

• Market for hatchery oyster seed strong on Eastern Seaboard because of declining natural occurring seed and habitats

• Market data is limited on if Louisiana larvae/seed could be sold in other states and at a marketable costs

• The availability of large supplies of naturally occurring larvae/seed in Louisiana will minimize the willingness of Louisiana oyster fishermen to purchase seed from a hatchery– Unless a better product can be developed that would be disease

resistant, grow year-round and yield higher meat qualities– A brand could be developed to help market the oyster at a higher

price and develop a consumer demand for that “branded” osyter

Revenue Potential of Hatchery(1 billion larvae production capacity – Grand Isle model)

$ 210* $ 158* $ 105*

100% (1B) $ 210,000 $ 158,000 $ 105,000

75% (750M) $ 157,500 $ 118,500 $ 78,750

50% (500M) $ 105,000 $ 79,000 $ 52,500

Maximum revenue of $210,000 would likely not entice private investment for 1 billion capacity hatchery

* Per million larvae – Maryland pricing ($210)

Conclusions• No evidence that demand for oyster larvae exists commercially to

support a hatchery without a subsidy• Louisiana historically has enough available seed from public

grounds to satisfy demand• As full effects of the BP Deepwater Horizon Oil Spill are known, the

need for an oyster hatchery may become a reality to produce larvae that was unaffected by the spill

• Further analysis is needed to determine demand which will include conducting a survey of Louisiana oystermen to get their input on if they would buy larvae/seed and at what price

• Develop the marketing campaign for the Louisiana branded (disease resistant & triploid) with a summer production season to establish a market and price point

Conclusions

• There is more development work to be done in nursery demonstration, alternative culture demonstration and investigating marketing before a market for commercially-produced larvae is created.

• There is limited data available on individual lease production because the industry wants it that way.

Questions ?

• Charles F. D’Agostino, Executive Director of LBTC / LSU Innovation Park

• Jason Boudreaux, Lead Counselor, LBTC/LSBDC

• 8000 GSRI Avenue• Baton Rouge, Louisiana

70820225-578-7555