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Leading Chinese RAS jade perch farmer not in profit, casts doubt on Sino Agro’s megafarm
One of China’s leading jade perch firms using recirculated aquaculture systems (RAS) is not making a profit and has cast doubt on jade perch operations at Sino Agro Food's much larger "megafarm".
Xu Xinhong, technical manager at jade perch firm Santai Eco-Fishery, told Undercurrent News it appears the megafarm is having difficulties with jade perch.
“The [jade perch] market is immature, costs are high, and technological problems aren't being solved easily. There are obstacles," Xu said.
"We’re not in profit,” he said.
On Friday (Nov 17) Undercurrent reported Sino Agro's megafarm has had problems farming freshwater shrimp. While these problems are fixed the megafarm is primarily being used to farm fish, such as jade perch, not shrimp.
Sino Agro’s chief scientific officer, Anthony Ostrowski, confirmed during Undercurrent's tour of the megafarm in September jade perch has been farmed since 2015.
Xu said he has visited the megafarm and helped work on technical matters. "I'm very familiar with the megafarm," he said.
Santai Eco-Fishery
After a mini boom there are currently about 100 companies farming jade perch in indoor RAS farms in south and east China, according to Xu. He reckons in Guangdong province 20 companies, both large and small, use RAS to farm the species.
This boom is largely because of the suitability of jade perch, a fish native to Australia, to indoor RAS systems.
Santai -- which farms jade perch at its indoor RAS facility in Dongcheng, Guangzhou, the provincial capital of Guangdong -- was one of the first in China to farm jade perch with RAS, he said. Its facility was built for $10 million in 2012.
Its All Weather Eco-Fishery RAS was built with equipment imported from Malaysia.
With its year-round production from two nurseries, 24 grow-out tanks each 90 meters squared, and two holding tanks, Santai can harvest up to 300t of jade perch every 4½ -6 months, according to Xu.
Product is mostly sold to around 100 hotels and restaurants in the Pearl River Delta region and Hong Kong.
Developing a high-end product
According to Xu, a challenge for firms farming jade perch in RAS is the need to develop a superior, more valuable product, to overcome high production costs.
For instance, jade perch farmed in outdoor ponds in China can fetch as little as CNY 18-20 per kilogram, farmgate, during peaks in supply, according to Shuichan, an industry publication.
Jade perch sashimi.
“[Shuichan's price] is if you don't do anything to add value,” said Xu. “If you have a brand, farm with RAS, you can do sashimi and get 3A recognition. You might be able to get a higher price.”
Santai has pioneered this; it was China’s first company awarded a license to market RAS farmed jade perch sashimi, according to Fish First. It was also one of the first few RAS jade perch firms awarded a license to export to Hong Kong.
According to Xu, the firm can subsequently attain some of the highest prices in the market; it sells live jade perch for up to CNY 140/kg, 6.7 times above Shuichan’s reported farmgate price. It can also secure contracts for its product six months in advance, which helps with production management.
To achieve these things the firm has done a number of things.
For instance, to eliminate an unpalatable, oily taste negatively associated with jade perch in Asian markets, Santai transfers jade perch into tanks with faster water flow-through rates in the last week or so before harvesting. Here, jade perch does “strenuous exercise” and is fed a low-feed diet, reducing fat content, and improving taste.
It also stocks live mussels in tanks to keep PH levels in balance, instead of using chemicals. The firm buys 30t at a time and keeps them in quarantine for six months, before transferring them into the tanks.
It monitors operations carefully; the company receives biannual, unscheduled inspections from licensing authorities, and customers receive certificates of health and antibiotics used.
Meanwhile, workers grade fish every 20 days so that it can farm and harvest at one time fish in specific sizes (Hong Kong customers prefer 450g fish; Chinese customers, 600g fish).
Also, the firm ships its jade perch direct to customers with its own small fleet of trucks, said Xu, which helps to cut out middlemen.
According to Santai’s website, the firm also used to have a sales office in Hong Kong, although this has since been closed.
Xu told Fish First the firm is also constantly looking at how to reduce costs. "After close to five years of operation Santai is still always look at ways to lower costs. More RAS equipment is being manufactured in China because of the increase RAS aquaculture farming. So when we need to upgrade or replace equipment we can look to buy equipment made locally," he said.
By comparison, jade perch produced at the megafarm -- whose first phase of construction is expected to cost $149.6m and second phase $240m -- is being marketed for CNY 40/kg.
This is according to the website of Zhongshan A Power Agriculture Development Co., one of the firm’s behind the megafarm project. Jade perch prices were last updated in July.
A Wechat blog post by Chengshi Lingjuli shows Zhongshan A Power may also be selling some quantities of jade perch sashimi. The post also shows jade perch produced at the megafarm sold at what appears to be a local seafood market.
Zhongshan A Power did not respond to Undercurrent’s requests for clarification about prices for the megafarm’s jade perch.
Sino Agro was not available to answer questions at the time of publishing.
Market challenges
Xu conceded his firm can’t sell large volumes of jade perch at CNY 140/kg.
And spot markets for live jade perch cannot always absorb the volumes it wants to sell.
“Today I might produce 10,000 fish. But perhaps the market only needs 500 live fish,” he said. “This means the rest of the fish needs to stay in the tanks for longer." This adds to costs.
An increase in market competition has driven down prices, too, he said. “Competition is pretty fierce," he said.
Meanwhile, more technical challenges have arisen, due to disease. According to Xu, Santai used to import jade perch broodstock from Australia, and disease outbreaks were rare.
“But in the past few years incidence of disease has increased and mortality rates are somewhat high,” he said.
During the growout phase at Santai, fish which show signs of disease are separated into different tanks where they undergo treatment. Those which don’t recover are destroyed.
Xu said disease has become a “big obstacle for industrial producers”.
Summing up his firm’s experience to Undercurrent, Xu opined: “It is a long road to go down to really make money from jade perch.”
Speaking more broadly about RAS development in China, Xu told Fish First: "Problems encountered in developing RAS systems in China are down to a lack of joined-up thinking between RAS engineers and aquaculturists. In this sector there needs to be much greater synthesis of skills and teams of skilled experts with expertise in a broad range of fields which industrialized aquaculture touches upon, such as biology, farming, automization control systems and machinery. At the moment, in many respects, expertise is concentrated only on resolving single issues."
Megafarm’s other fish
Besides jade perch, Zhongshan A Power is marketing other fish produced at the megafarm on its website, including carp, silver perch, mandarin perch, marble goby and murray cod.
Prices for these fish are as follows: CNY 26/kg for carp; CNY 70/kg for silver perch and mandarin perch; CNY 110/kg for marble goby; and CNY 150/kg for murray cod.
Zhongshan A Power is also marketing vannamei shrimp for CNY 76/kg, as well as macrobrachium rosenbergii for CNY 76/kg, or $11.46/kg. However, neither vannamei nor macrobrachium are listed as available, as is the case with jade perch, silver perch and murray cod.
Only marble goby, mandarin perch, and carp are listed as available, with their respective pages updated between July and August.
According to the site, Zhongshan A Power can supply a maximum of 25t of marble goby, 2.5t of mandarin perch, and 2t of carp to prospective buyers.
https://www.undercurrentnews.com/2017/11/21/leading-chinese-ras-jade-perch-farmer-not-in-profit-casts-doubt-on-sino-agros-megafarm/
Same same, it's the Promissory Notes that used to be converted to stocks as extinguishment of debt back in the days.
Does not make sense to me. They put the Negotiable promissory note there as well, that one belongs to TRW imo.
They have another $14m in Promissory Notes in addition to the loans secured with collateral ($32m) shares that should be payed back asap.
Yes, the loans are not considered defaulted, at least not by SIAF and their lawyers.
I don’t have the SEC document with me now, but I think that the first loan is due this spring, so I guess that will be the first time we will see the outstanding shares decrease unless SIAF start buying back shares before that or repay the loans early.
It’s updated when there is a change. They started with these automated updates this year, before it was only updated with the quarterly reports.
If you insist to know the name of the Chinese partners, you can download the registration (the ones registered in Hong Kong) of each individual company here - https://www.icris.cr.gov.hk/normal.html
but most likely it's their Hong Kong lawyer that is registered as the owner (normal practice).
Most countries has similar registration agencies where you can get information of who owns what.
He actually questioned if there are owners. To question the value of an asset, that is fair imo.
You are looking for an excuse to sell.
They are not selling shares.
Right now it does not look good with all these cheap imports. But long term it's not a sustainable development for China, so I expect that there will be some governmental policy changes to encourage domestic beef production in a not too far distant future.
Many farmers are suffering from these imports right now, not only companies like SIAF.
Thanks. There was discussions some time ago that JHST would be the first one to be spun off with some kind of a merger with a Health Chain. Was thinking that maybe this is the one.
That’s what I thought but I was wrong. Those shares belong to a group of old investors (the Mega Farm?). They are just using the Sino Agro Food Hong Kong temporary.
It's the adress to the company secretary. The owners are former fish farm partners. You can call the Mr. Ching Chong, Mr. Pling Plong and Mr. Ding Dong if it makes you feel better... just kidding, it's all Chinese people or groups of people.
Edit- you can find some of the names in old SEC fillings from the old contracts if you are interested.
I think you are right, but SIAF has loans they are obligated to pay of the coming two years, so don't have to big expectations on the size of dividends.
ks, IFRS (International Financial Reporting Standards) is the accounting standard used in European union and is adopted in most other big economies except USA who uses GAAP for some reason.
Weather the report is based on GAAP or IFRS is completely irrelevant
I think it's all politics. The local government has promised all kind of help, but so far not much has materialized and now they are even requiring rebuildings.
No it does not matter at all. But there seems to be people who even consider to sell because of what is going on up there. They could write the whole business of for all I care, it's the aquaculture who will bring us value.
I see many focusing on the fertilizer and bread grass receivables/inventories. As long as the sell price of the cattle is higher than the unit price, there is no risk imo.
From what I can see, the main reason is that the farmers are still breading the cattle, but SJAP is not buying back the cattle yet because of the low prices. SJAP is giving the farmers credit on the fertilizer and feed and will not get payed until they buy back the cattle. So as long as the cattle don't die, there is not a big credit risk, the cattle is the security. In reality, when SJAP is buying back a cattle for $2000, the farmer might just get $1000, the other $1000 is written of from the credit, so the profit will not be booked on the sale of cattle, it will be on the sell of feed and fertilizer.
I guess that SJAP could buy back all the cattle and stop giving the farmers credit, but that is equal going out business completely.
I remember they announced that they where building an abattoir/farm in Madagascar a few years ago too, but I haven't heard anything about it for years....
No, both where accessible without a subscription on Friday.
Now the article is only for subscribers and it's the most read article - https://www.undercurrentnews.com/2017/11/17/two-years-late-no-shrimp-harvested-yet-at-sino-agros-megafarm/
He did this intentionally, only the title and the first line in the article that is really shitty.
A tip, if you check the source code of the articles you will find the whole article - all of the text.
From what I know, they are not groing any prawns at AF1 any more. But for sure the margins has improved over the years as they learn how to optimize the systems.
One other factor that will be a big challenge at the mega farm is to train enough workers as they build out the farm.
There is no coincidence that they are using AF1 for testing out new species, they have the most experienced workers.
I would belive that the main reason why they are planing to build ODRAS at the mega farm location is that that type of farming is much more alike to traditional open dirt pond farming. This way they get a smother transition for the new crew, they start at he ODRAS and learn the basics of RAS, then they advance to the APRAS indoor tanks.
There will be many many challenges going forward, but once they "get it right", the production will ramp up fast.
Most of the cattle are at the co-operative farmers.
SJAP only has twelve cattle houses, with its smaller buildings housing a minimum of 200 head and larger cattle houses accommodating up to 350 head.
Edit: Noticed RD gave a much better answer already
With the capacity of 1,000MT at AF1, 1000MT at AF2, 800MT at AF3 and just starting up the AF4, they managed to produce 2,464MT prawns and grow out close to 10,000MT other species as well. A large number of these tones might come from outdoor ponds, but the density must be "good" managing to produce these quantities. They for sure are not reaching optimal levels yet, Tony has already confirmed that the biofilters are only running at 60%.
The main problem I have with the article is that the author is trying to “prove” that industrial prawn farming is not possible. But he does not mention that SIAF has been doing it for years already.
Is funny, the article comments that Guolian is building one of the first indoor RAS prawn farm in China. But the article of Triway does not mention that SIAF did build the first indoor RAS (prawn) farm 5 years ago already.
And you should compare the facilities of Guolian with the already finished farms of Triway, not the ones in construction.
http://www.tri-way.hk/aquafarm-1
http://www.tri-way.hk/aquafarm-2
http://www.sinoagrofood.com/sites/default/files/4_2017%E7%9A%84_PF2.pdf
And the pictures on these pages are not the most recent ones.
It's all about how fast they want to build I guess and how fast they can speed up production (if history tells us something it will not speed up fast). The pre-IPO money will definitely speed things up.
I have understod as that the constructor will more or less act like a bank as well if TRW can shoot in the initial cost, but I can have miss understod that part.
No, with $100m they can complete the whole mega farm. They only need to get the the production up to create som cash flow and the whole construction will be self funded.
Belize is not an approved jurisdiction on HKx right now. But I don't think they have any plans to list CA on HKx, that was not my understanding from the meeting in Stockholm. If they wanted to list on on HKx they would have to start another company in Hong Kong or where ever and transfer the assets to that company, but that would take years.
It should be like 22,000m3 of tanks in those three building. If they need to add 5% water a day, that is 1,100m3 of water every day. Now that would have to be a huge osmosis plant. And that is just for the 3 first buildings. There will be like 46 buildings in total, so they basically must build a complete factory to do this economically.
I suppose that the original plan was to build one big water treatment factory for all the farm, that would make most economically and technically sense. But considering the challenges they have faced, they probable have revised that plan now and build plenty of small scale water treatment systems.
If there is a totally 46 buildings with 8,000m3 tanks totally, they would need to add 46*8,000*0.05= 18,400m3 water every day at the farm for the indoor tanks alone, not including the outdoor ponds. In Sweden an average person uses 200l of water every day. So the water consumption represents a water filtration system of a Swedish city with 18400/0,2 = 92000 inhabitants. Or an osmosis plant for a medium sized city in Spain.
Now, all the ponds circulates and filters the water 6 times a day. So the biofilter and pump system will pump 46*8,000*6= 2,208,000m3 of water every day! Or the capacity of the total domestic fresh water pumps system of Sweden in cubic meters
Now are you getting the picture of the size and project yet? And are you surprised that they have faced some setbacks considering the scale of the project?
I think that the key is the phased growout/partial harvest. They basically scoop out prawns during grow out as the density increases to keep it down if you get my drift. So I don't know if the density tells us much.
If start playing with the numbers given on page 15 in this document, you will see that the densities must be much higher.
http://www.sinoagrofood.com/sites/default/files/Ostrowski_SIAF_IntraFishNY_May2016.pdf