Is the catfish business something that could prove to be a wise investment decision? Even if one has a keen interest in producing catfish, could a higher return be earned by investing in some other venture?
To arrive at such a decision, the prospective producer should make an economic evaluation of the proposed investment. The catfish operation should be analyzed separately from the other fanning operations to determine its profitability. If the estimates of yearly costs and returns are promising, the producer should perform a whole-farm analysis to measure the impact of incorporating a catfish operation into the farm business.
The economic feasibility of catfish production should reflect the producer's own situation and resources. Making a realistic evaluation on paper will improve your chances of success once money is committed and will also reduce the possibility of unpleasant surprises.
Before the first fish is harvested, many investment items must be committed for efficient production. Listed below are items which may be required in many catfish operations:
| Land | Tractor |
| Pond construction | Mower |
| Drain pipe and fittings | Oxygen meter |
| Wells | Water testing equipment |
| Water pumps and pipe | Seines |
| Electric power lines | Dip nets |
| Aerators (electric and/or PTO) | Feed wagon/blower |
| Boat and motor | Waders and boots |
| Hauling tanks and agitators | Baskets and buckets |
| Truck | Storage buildings |
| Feed storage bins | Miscellaneous equipment |
Estimating the costs and returns for a particular activity is called developing an enterprise budget. This procedure reflects the economic value of producing a specific output using a given set of inputs by following specific production practices. Profitability can be estimated by subtracting all the costs from the expected revenues.
There are two types of costs to be considered in developing enterprise budgets: variable and fixed. Variable costs are the expenses that vary based on production output, such as feed, fingerlings, etc. Fixed costs are the expenses that do not change, regardless of whether production occurs: expenses such as depreciation, interest on investment, insurance, taxes, etc. As in many other agricultural enterprises, variable costs make up the largest portion of the total costs of catfish production (83%). In an examination of variable costs alone, feed (64%) comprises almost two-thirds of the costs, with fingerlings (15%) coming in a distant second. A further breakdown shows chemicals (6%), electricity (5%), interest (4%), repairs (3%), and other (3%).
Detailed enterprise budget estimates are developed annually for various catfish production systems and are available from your county Extension office. An example budget is shown in Figure 1.
This sample budget was developed for a hypothetical producer who has an existing l0-acre pond. The pond is stocked with 3,500 4-inch fingerlings per acre of pond surface in the spring. Using a feed conversion ratio of 2:1 (pounds of feed per pound of gain), the fish will be custom-harvested in the fall at an average weight of 1 pound. Efficiency factors such as feed conversion, death loss, and disease (chemical) costs are typical of a new operation. As the producer gains experience, efficiency in these areas should improve by 25 percent or more, thereby reducing production costs.
Given the input costs and an expected selling price of 65 cents per pound, the net returns, or profit, per acre will be $688 above variable (cash) costs, or $394 above total costs. Or, from a break-even standpoint, it will take 44 cents per pound to cover variable costs and 53 cents per pound to cover total costs.
It must be remembered that, for this sample budget, the net return estimate is to land, existing pond, and the operator's labor and management. This means that these resources have not been accounted for. If a prospective producer does not have suitable land or a suitable pond, these costs should be added to the estimate and could increase the cost of production by 5 to 10 cents per pound. Likewise, if the producer must hire a manager, this cost will also substantially increase the break-even price.
Each producer will face a different situation when trying to analyze the economic feasibility of catfish production. So, the budget estimates shown here should be used only as a starting point in the planning process.
In addition to budget anal ysis the prospective producer should also develop a cash flow statement. This prediction, or projection, reflects all cash inflows and outflows on a monthly and/or yearly basis. Projections of cash surpluses and shortages can assist the producer in making credit arrangements and in determining his or her ability to repay loans. Whole-farm cash flow projections are helpful if additional money is needed to supplement the catfish operation during the start-up period.
Cash flow projections should be estimated for 2 to 3 years to get a more accurate indication of pay back potential. More information can be found in Extension publications ANR-355 and 355A, "Preparing and Using the Cash Flow Statement."
As with any business, it is important that good managers pay close attention to those factors which affect profits most. Table 1 (below) summarizes the sensitivity of major price and production efficiency factors and their effect on profit potential. For example, for every tenth of a pound that the feed conversion rate can be lowered, the cost of production would decrease by $1.69 for every 100 pounds of catfish produced.
Item |
Unit Change |
Dollars Per Cwt. Sold |
| Pond Construction | $100/ac. |
0.42 |
| Death Loss | 1% |
0.41 |
| Stocking Rate | 500/ac. |
2.57 |
| Feed Conversion | 0.1 Lb. |
1.69 |
| Feed Price | $25/ton |
2.24 |
| Interest Rate | 1 point |
0.44 |
| Fingerlings | 1 cent each |
1.13 |
| * Assumes starting with 4-inch fingerlings and a selling weight of 1 pound. | ||
Catfish production requires a great deal of money. The overall net worth and cash flow of the potential producer should be large enough to withstand both the start-up period and any unforeseen setbacks. An average producer may invest as much as $4,500 to $5,000 per acre before the first fish is harvested: $1,500 in operating costs; $1,500 to $2,000 in machinery and equipment, and $1,000 to $2,000 in pond construction.
Successful catfish producers are both good managers and good merchandisers. While catfish production has been successful for many producers, someone interested in the business would benefit by following this advice:
- Gain knowledge. Gather all the information you can, even before you make your investment.
- Plan. Lay a firm groundwork for financing, production, and marketing before the business begins.
- Start small. Limit your investment of time and money to minimize the risk for yourself and your farm.
- Grow with success.