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UBC Theses and Dissertations

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UBC Theses and Dissertations

Feasibility of salmon farming as a small business in British Columbia Fralick, James Edward 1978

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FEASIBILITY OF SALMON FARMING AS A SMALL BUSINESS IN BRITISH COLUMBIA by JAMES EDWARD FRALICK B.Sc. Simon Fraser University. 1969 M.S. Western Washington University. 1971 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN BUSINESS ADMINISTRATION in THE FACULTY OF GRADUATE STUDIES COMMERCE AND BUSINESS ADMINISTRATION We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA May, 1978 © James Edward F r a l i c k . 1978 In present ing t h i s thes is in p a r t i a l fu l f i lment of the requirements for an advanced degree at the Univers i ty of B r i t i s h Columbia, I agree that the L ibrary sha l l make it f ree l y ava i lab le for reference and study. I fur ther agree that permission for extensive copying of th is thesis for scho la r l y purposes may be granted by the Head of my Department or by h is representat ives . It is understood that copying or pub l i ca t ion of th is thes is for f i n a n c i a l gain sha l l not be allowed without my wr i t ten permission. Department of Commerce a n d B u s i n e s s A d m i n i s t r a t i o n The Univers i ty of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V5T 1W5 Date May 18 , 1978 ABSTRACT The hypothesis was t h a t salmon farming can be the b a s i s f o r the establishment of a v i a b l e s m a l l business i n B r i t i s h Columbia. The c o n s t r a i n t s on the establishment of a salmon farm imposed by government r e g u l a t i o n s , the a v a i l a b i l i t y of funds, and the market f o r pan-size salmon were presented and d i s c u s s e d . The p e r t i n e n t b i o l o g i c a l knowledge a s s o c i a -ted with the r e a r i n g of c a p t i v e salmon was summarized. A simple p r o d u c t i o n model designed to produce approximately one-half m i l l i o n marketable, pan-size salmon w i t h i n 15 months was d e r i v e d from p u b l i s h e d accounts of s t u d i e s at experimen-t a l f i s h farms. A h y p o t h e t i c a l salmon farm was d e s c r i b e d i n d e t a i l i n c l u d i n g estimates of the c a p i t a l and o p e r a t i n g c o s t s ass-o c i a t e d with the farming and p r o c e s s i n g a c t i v i t i e s . The r e q u i r e d i n f o r m a t i o n was obtained through i n t e r v i e w s with knowledgeable members of the i n d u s t r y . The estimated revenues and expenses a t t r i b u t e d t o the h y p o t h e t i c a l farm were analysed u s i n g pro forma f i n a n -c i a l statements to a s c e r t a i n the f i n a n c i a l p o s i t i o n and the net cash flow which may be expected. The p r o f i t a b i l i t y o f the farm was analysed by a p p l y i n g net present value and i n -t e r n a l r a t e of r e t u r n c r i t e r i a to the net cash flow. S e n s i t i v i t y a n a l y s i s of the e f f e c t of changes to i i i the product mix. market p r i c e , l a b o u r r a t e , feed p r i c e , tax r a t e , and s t o c k i n g d e n s i t y upon the p r o f i t a b i l i t y of the farm was conducted. Estimates of the c r i t i c a l v alues of the above parameters which would allow the farm to be a f e a s i b l e investment o p p o r t u n i t y were d e r i v e d . The c o n c l u s i o n i s t h a t pan-size salmon farming can be a f e a s i b l e s m a l l business i n B r i t i s h Columbia. iv TABLE OF CONTENTS Page CHAPTER I INTRODUCTION 1 P u r p o s e o f t h e s t u d y 2 H y p o t h e s i s 2 Data c o l l e c t i o n and p r e s e n t a t i o n 3 D e f i n i t i o n o f c o m m e r c i a l a q u a c u l t u r e 3 Why an i n t e r e s t i n a q u a c u l t u r e 4 Why salmon f a r m i n g 5 Salmon s p e c i e s a v a i l a b l e i n B r i t i s h C o l u m b i a 6 C h i n o o k salmon 8 Chum salmon 8 P i n k salmon 8 Sockeye salmon 8 Coho salmon 9 What i s r e q u i r e d f o r a f i s h farm 9 F o o t n o t e s 11 CHAPTER I I INSTITUTIONAL CONSTRAINTS 12; F e d e r a l r e g u l a t i o n s 13 A q u a c u l t u r e p e r m i t 13 N a v i g a t i o n c o m p l i a n c e 17 P r o v i n c i a l r e g u l a t i o n s 18 C o m m e r c i a l f i s h farm l i c e n c e 18 Water l i c e n c e 20 P o l l u t i o n c o n t r o l 21 F o r e s h o r e l e a s e 21 G e n e r a l r e g u l a t i o n s 23 B u s i n e s s l i c e n c e 23 Taxes and d u t i e s 24 D i s c u s s i o n 26 F o o t n o t e s 27 CHAPTER I I I FINANCIAL CONSTRAINTS 28 S o u r c e s o f f i n a n c i n g 29 F e d e r a l programs 29 F e d e r a l b u s i n e s s d e v e l o p m e n t bank (FBDB) 29 S m a l l b u s i n e s s l o a n s a c t (SBLA) 30 E n t e r p r i s e d e v e l o p m e n t program (EDP) 30 P r o v i n c i a l programs 31 C h a r t e r e d banks 31 P r i v a t e i n v e s t o r s 32 F o o t n o t e s 34 V Page CHAPTER IV MARKETING CONSTRAINTS 35 S u b s t i t u t i o n o f salmon and t r o u t 36 P r o d u c t c h a r a c t e r i s t i c s 37 S e a s o n a l i t y 38 C o m p e t i t i v e p r o d u c e r s 38 P r i c e 39 Q u a n t i t y 40 D i s c u s s i o n ^1 F o o t n o t e s 45 CHAPTER V BIOLOGICAL CONSTRAINTS ON PRODUCTION 46 B i o l o g i c a l c o n s t r a i n t s 47 F r e s h w a t e r phase 47 Oxygen ^7 T e m p e r a t u r e 48 Hydrogen i o n *+8 Gases 48 M e t a l s ^9 S a l i n i t y ^9 Volume o f w a t e r 50 S a l t w a t e r phase 51 D i s e a s e 52 D i s e a s e s o f eggs 53 D i s e a s e s o f a l e v i n s 53 D i s e a s e s o f f r y 54 D i s e a s e s o f a d v a n c e d s t a g e s o f growth 54 G e n e r a l 55 F o o t n o t e s 57 CHAPTER VI PRODUCTION 59 C h o i c e o f s p e c i e s &u C h o i c e o f f a c i l i t i e s 63 H a t c h e r y f a c i l i t i e s 6 l* Heath t r a y s v s . g r a v e l i n c u b a t o r s 69 F r e s h w a t e r r e a r i n g f a c i l i t i e s 72 Growth enhancement 73 Emergency f r e s h w a t e r s y s t e m 75 S a l t w a t e r r e a r i n g f a c i l i t i e s 77 S t o c k i n g d e n s i t y 8 0 D i s e a s e c o n t r o l 8 ^ D i a g n o s t i c s e r v i c e 8 ^ D i e t 8 3 F o o t n o t e s 8 8 CHAPTER V I I PRODUCTION CYCLE AND MODEL 9 1 P r o d u c t i o n c y c l e P r o d u c t i o n model 92 96 v i Page S c a l e o f p l a n t 96 F o o t n o t e s 99 CHAPTER V I I I ESTIMATED COST OF THE MODEL SALMON FARM 100 C a p i t a l c o s t s 101 S i t e s e l e c t i o n 101 A d m i n i s t r a t i o n and c o n s t r u c t i o n 103 Fees 105 Water s u p p l y 105 Water p i p e 106 H e a t i n g u n i t s 106 Egg i n c u b a t o r s 108 F i b r e g l a s s t a n k s 109 P i l e s 110 Net-pens 111 F l o a t s 112 T r a n s p o r t a t i o n 112 F e e d e r s , t r a n s p o r t e r , g r a d e r , and s c a l e 113 M i s c e l l a n e o u s equipment 113 O p e r a t i n g c o s t s 113 Land 115 L a b o u r 115 Feed 116 T r a n s p o r t o f f e e d 116 H e a t i n g f u e l 117 U t i l i t i e s 117 F u e l f o r t r a n s p o r t a t i o n 117 D i s e a s e c o n t r o l M a i n t e n a n c e I n s u r a n c e Fees Egg s t o c k F o o t n o t e s CHAPTER IX PROCESSING P r o c e s s i n g C o s t o f p r o c e s s i n g D r e s s i n g O v e r h e a d P a c k a g i n g - f r e s h P a c k a g i n g - f r o z e n T r a n s p o r t a t i o n F r e e z i n g S t o r a g e Summary F o o t n o t e s 118 118 118 118 119 120 121 12 2 123 124 124 126 126 127 129 129 129 132 V l l Page CHAPTER X FINANCIAL ANALYSIS 133 Cost of product and product mix 134 Income statement-preparation 137 Method of evaluation 113 Hurdle rate 113 Net cash flow 146 Capital structure alternatives 117 Choice of c a p i t a l structure 150 Financial position 151 Summary 156 Footnotes 159 CHAPTER XI SENSITIVITY ANALYSIS 160 S e n s i t i v i t y analysis 161 Product mix 161 Market price 162 Labour cost 165 Feed price 167 Taxes 167 Stocking density 169 Discussion 175 CHAPTER XII SUMMARY AND RECOMMENDATIONS 178 Summary 179 Conclusion and r i s k 185 Recommendations 189 BIBLIOGRAPHY 192 APPENDICES 197 LIST OF TABLES T a b l e I O b j e c t i v e s f o r t h e D i s c h a r g e o f E f f l u e n t s from a F i s h H a t c h e r y t o M a r i n e and F r e s h Waters I I T o t a l P a n - s i z e S a l m o n i d Food Market S a l e s In B r i t i s h C o l u m b i a D u r i n g 1976 I I I The P r e d i c t e d Food Market S a l e s o f P a n - s i z e Sa-l m o n i d s i n B r i t i s h C o l u m b i a from 1977 t o 1987 IV The C o m p o s i t i o n o f t h e Oregon M o i s t P e l l e t Feed V The C o m p o s i t i o n o f t h e EWOS Feeds by t h e P e r -c e n t a g e o f t h e F i n i s h e d Weight VI The T e n t a t i v e P r o d u c t i o n S c h e d u l e f o r t h e Mod-e l Farm U s i n g Methods f o r A c c e l e r a t e d Growth V I I E s t i m a t e s o f M o r t a l i t y . Growth, W e i g h t . C o n v e r -s i o n R a t i o , and Feed R e q u i r e m e n t f o r t h e Model Farm V I I I The E s t i m a t e d C a p i t a l C o s t o f t h e Model Salmon Farm IX The E s t i m a t e d O p e r a t i n g C o s t o f t h e Model Salmon Farm X The E s t i m a t e d C o s t t o P r o c e s s t h e P r o d u c t i o n from t h e Model Salmon Farm XI The E s t i m a t e d P r o f i t M a r g i n and C o s t p e r D r e s -sed K i l o g r a m o f F r e s h and F r o z e n P r o d u c t X I I The C o s t o f Goods S o l d and C o s t o f I n v e n t o r y f o r t h e Model Farm P r o d u c i n g , F r e s h , F r o z e n , and Mixed P r o d u c t X I I I O p e r a t i n g and A d m i n i s t r a t i v e E x p e n s e s f o r t h e Model Farm XIV Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm P r o d u c i n g 25% F r e s h and 75% F r o -zen P r o d u c t I n c l u d i n g S t o r a g e C h a r g e s and A l l E q u i t y F i n a n c i n g v i i i Page 22 42 43 85 86 95 97 102 114 130 135 138 139 144 ix T a b l e XV M o n t h l y Cash D i s b u r s e m e n t s f o r t h e Model Farm i n Y e a r 1 Page 148 XVI M o n t h l y Cash D i s b u r s e m e n t s f o r t h e Model Farm i n Y e a r s 2-10 149 XVII Net Cash Flow f o r t h e Model Farm U s i n g A l t e r -n a t i v e C a p i t a l S t r u c t u r e s I n c l u d i n g NPV and IRR 152 X V I I I Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t 27% Tax Rate 153 XIX B a l a n c e Sheet f o r t h e Model Farm i n Y e a r s Z e r o t o Ten XX S t a t e m e n t o f Changes i n F i n a n c i a l P o s i t i o n -Cash B a s i s f o r t h e Model Farm i n Y e a r s Z e r o t o Ten XXI Changes i n C a p i t a l and O p e r a t i n g C o s t s a t V a r i o u s S t o c k i n g D e n s i t i e s 154 157 173 X LIST OF FIGURES F i g u r e Page 1 The N a t u r a l L i f e C y c l e o f Coho Salmon 7 2 P h o t o g r a p h o f a H e a t h t r a y Egg I n c u b a t o r 66 3 P h o t o g r a p h o f a 50000 Egg G r a v e l I n c u b a t o r 67 4 P h o t o g r a p h o f a 500000 Egg G r a v e l I n c u b a t o r 68 5 P h o t o g r a p h o f a F i b r e g l a s s R e a r i n g Tank 74 6 P h o t o g r a p h o f a P r i v a t e " Net-pen System 78 7 P h o t o g r a p h o f a Government Net-pen System 79 8 The R e l a t i o n s h i p Between t h e P r o d u c t Mix and t h e IRR 163 9 The R e l a t i o n s h i p Between t h e Market P r i c e and t h e IRR 164 10 The R e l a t i o n s h i p Between t h e L a b o u r C o s t and t h e IRR 166 11 The R e l a t i o n s h i p Between t h e Feed P r i c e and t h e IRR 168 12 The R e l a t i o n s h i p Between t h e Tax Rate and t h e IRR 170 13 The R e l a t i o n s h i p Between t h e S t o c k i n g D e n s i t y and t h e IRR 174 ACKNOWLEDGEMENT I wish to express my most sincere appreciation to a l l those individuals who provided encouragement and assistance throughout the t h e s i s . In p a r t i c u l a r . I want to thank those persons of private and public i n s t i t u t i o n s who answered my many questions in such a patient and help f u l manner. Without t h e i r kind assistance the thesis would not have been possible. I would also l i k e to express my deepest appreciation to Dr. J.W.C. Tomlinson. Dr. N.J. Wilimovski, and Dr. P. Nemetz for reading the thesis and off e r i n g t h e i r valuable opinions and comments. And. f i n a l l y I would l i k e to thank my friends and parents for t h e i r support and encouragement when i t was so dearly needed. 1 CHAPTER I_ INTRODUCTION 2 P u r p o s e o f t h e s t u d y T h e r e has been an i n c r e a s i n g i n t e r e s t by p r i v a t e en-t r e p r e n e u r s and p u b l i c a g e n c i e s i n t h e d e v e l o p m e n t o f m a r i n e c o a s t a l f i s h e r i e s . T h e r e have been no f e w e r t h a n s i x a t t e m p t s t o c u l t i v a t e P a c i f i c salmon by t h e s e i n d i v i d u a l s o f which a t l e a s t one has c e a s e d t o o p e r a t e i n B r i t i s h C o l u m b i a due t o f i n a n c i a l d i f f i c u l t i e s w h i l e t h e o t h e r s r e c e i v e f i n a n c i a l s u p p o r t , a l l o r i n p a r t , from l a r g e r c o r p o r a t i o n s o r g o v e r n -ment s o u r c e s . The p r e s e n t s t u d y i s d e s i g n e d t o d e t e r m i n e t h e f e a s i b i l i t y and e f f e c t o f p r i c e and p r o d u c t i o n c h a n ges on t h e e c o n o m i c v i a b i l i t y o f a salmon farm t h a t i s a n o n - r e -p o r t i n g c o r p o r a t i o n and n o t a s u b s i d i a r y o f a l a r g e r f i r m . The method w i l l be t o 1) d e s c r i b e t h e i n s t i t u t i o n a l , f i n a n c i a l , m a r k e t , and b i o l o g i c a l c o n s t r a i n t s r e l a t e d t o p r o d -u c t i o n a t a salmon f a r m ; 2) d e s i g n a model salmon farm i n c l u d -i n g a d e t a i l o f t h e c o s t s ; 3) d e t e r m i n e t h e o p e r a t i n g c o s t o f t h e model f a r m ; H) a s c e r t a i n t h e c o s t o f p r o c e s s i n g f o r t h e farm p r o d u c t s : and 5) c o n s t r u c t p r o forma f i n a n c i a l s t a t e m e n t s and c o n d u c t p r o f i t a b i l i t y a n a l y s e s f o r t h e model f a r m when s e l -e c t e d p r i c e and p r o d u c t i o n v a r i a b l e s a r e a l t e r e d . H y p o t h e s i s The h y p o t h e s i s t o be t e s t e d i n t h e s t u d y i s t h a t s a l -mon a q u a c u l t u r e u t i l i z i n g c o m p l e t e l y c a p t i v e salmon s t o c k can be u s e d as t h e b a s i s t o e s t a b l i s h a v i a b l e s m a l l b u s i n e s s i n B r i t i s h C o l u m b i a . 3 Data c o l l e c t i o n and p r e s e n t a t i o n A l l o f t h e i n f o r m a t i o n u s e d i n t h e t e x t was o b t a i n e d from r e c e n t p u b l i c a t i o n s o r t h r o u g h p e r s o n a l i n t e r v i e w s w i t h k n o w l e d g e a b l e i n d i v i d u a l s i n t h e i n d u s t r y . The p u b l i s h e d i n f o r m a t i o n i s c i t e d e x p l i c i t l y . However, p r i c e q u o t a t i o n s p r o v i d e d by v a r i o u s f i r m s o r i n d i v i d u a l s a r e n o t c i t e d . I t was n o t t h o u g h t t o be p r o p e r t o c i t e t h e s o u r c e s i n t h e s e i n s t a n c e s i n c a s e t h e p e r s o n were p l a c e d i n a c o m p r o m i s i n g p o s i t i o n i n t h e e v e n t o f p u b l i c a t i o n . The i n f o r m a t i o n i s a c c u r a t e and a r e c o r d o f t h e s o u r c e s o f a l l i n f o r m a t i o n p r e s e n t e d i n t h e t h e s i s has been k e p t by t h e a u t h o r . The measurements g i v e n i n t h e t e x t a r e i n m e t r i c u n i t s t o c o n f o r m w i t h t h e p r e s e n t C a n a d i a n s t a n d a r d s . B e c a u se t h i s s y s t e m may c a u s e d i f f i c u l t y f o r some r e a d e r s . a l i s t o f c o n v e r s i o n s t o c u s t o m a r y u n i t s i s p r o v i d e d i n a p p e n d i x A. D e f i n i t i o n o f c o m m e r c i a l a q u a c u l t u r e C o m m e r c i a l a q u a c u l t u r e i s d e f i n e d by M i l n e ^ a s , "a means t o promote o r improve t h e g r o w t h , and hence p r o d u c t i o n up t o m a r k e t a b l e s i z e , o f f r e s h w a t e r , b r a c k i s h w a t e r , and m a r i n e f i s h and s h e l l f i s h f o r c o m m e r c i a l use by p r o t e c t i o n and n u r t u r e on a r e a s l e a s e d o r owned." The e x t e n t o f c o n t r o l by t h e a q u a c u l t u r i s t o v e r t h e c u l t -u r e d o r g a n i s m may v a r y c o n s i d e r a b l y b e i n g l i m i t e d t o o n l y a p o r t i o n o r t o a l l o f t h e o r g a n i s m ' s l i f e c y c l e and u t i l i z i n g a n a t u r a l , s e m i - n a t u r a l , o r a r t i f i c i a l e n v i r o n m e n t . The p r e -s e n t s t u d y w i l l i n v o l v e an a q u a c u l t u r e s y s t e m where salmon 1+ w i l l be m a i n t a i n e d i n permanent c a p t i v i t y u n t i l t h e t i m e o f h a r v e s t w h i c h w i l l encompass a p p r o x i m a t e l y o n e - h a l f o f t h e o r g a n i s m ' s n a t u r a l l i f e c y c l e . A s e m i - n a t u r a l e c o s y s t e m w i l l be u s e d . The c u l t u r e d a n i m a l s w i l l be r e s t r a i n e d f r o m e n t e r -i n g t h e ..natural e n v i r o n m e n t by a r t i f i c i a l b a r r i e r s ( n e t s ) and t h e s o u r c e o f n u t r i t i o n w i l l be p r e d o m i n a n t l y a r t i f i c i a l , b u t a n a t u r a l s o u r c e o f w a t e r w i l l be employed as t h e c u l t u r e medium. v  Why an i n t e r e s t i n a q u a c u l t u r e ? A q u a c u l t u r e has e x i s t e d s i n c e e a r l y t i m e s t h r o u g h o u t much o f t h e w o r l d , p a r t i c u l a r l y i n A s i a where t h e c u l t u r e o f 2 m i l l e t and m i l k f i s h has been r e c o r d e d f o r o v e r 1000 y e a r s More r e c e n t l y t h e r a p i d i n c r e a s e i n human p o p u l a t i o n has n e c e s s i t a t e d t h e e x p a n s i o n o f e s t a b l i s h e d f o o d r e s o u r c e s as w e l l as t h e i n i t i a t i o n o f new o n e s . S i n c e a g r i c u l t u r e i s p h y s i c a l l y l i m i t e d by t h e a v a i l a b i l i t y o f a r a b l e l a n d and t r a d i t i o n a l f i s h e r i e s have been d e v e l o p e d t h r o u g h o u t t h e w o r l d , a r e l a t i v e l y u n e x p l o i t e d method o f f o o d r e s o u r c e p r o c u r e m e n t i s a q u a c u l t u r e o f f r e s h w a t e r and m a r i n e f o o d r e s o u r c e s . However, w o r l d d e v e l o p m e n t o f a q u a c u l t u r e i s i n c r e a s i n g . F o r example, t h e w o r l d p r o d u c t i o n o f m a t e r i a l s from a q u a c u l t u r e d o u b l e d t o o v e r 5 m i l l i o n m e t r i c t o n s p e r annum between 1971 and 1976. L o o k i n g t o t h e f u t u r e t h e Food and A g r i c u l t u r e O r g a n i z a t i o n has p r o j e c t e d t h a t HO m i l l i o n m e t r i c t o n s p e r annum o f f i s h and s h e l l f i s h w i l l be r e q u i r e d by t h e y e a r 2000 from a q u a c u l t u r e o p e r a t i o n s i n o r d e r t o 5 3 s u s t a i n t h e e x p e c t e d human p o p u l a t i o n . A l t h o u g h a q u a c u l -t u r e has been p r a c t i s e d i n Canada f o r many y e a r s , n o t a b l y t h e o y s t e r i n d u s t r y w h i c h was e s t a b l i s h e d c i r c a 1900. few m a j o r 5 i n d u s t r i e s have been d e v e l o p e d o t h e r t h a n n a t u r a l f i s h e r i e s The F i s h e r i e s and M a r i n e S e r v i c e has r e c e n t l y p r o p o s e d a f i v e y e a r program t o e n c o u r a g e t h e d e v e l o p m e n t o f a q u a c u l t u r e i n Canada by p r o v i d i n g a s t r o n g t e c h n i c a l and ec o n o m i c i n f o r m a -t i o n b a s e . A p p r o x i m a t e l y , s i x t e e n m i l l i o n d o l l a r s i s t o be a l l o c a t e d f o r t h i s p u r p o s e o v e r t h e n e x t f i v e y e a r s ^ . The p r i n c i p a l r e a s o n s f o r government i n t e r e s t i n a q u a c u l t u r e a p p e a r t o be t o p r o v i d e a d d i t i o n a l f o o d and m a t e r i a l goods and t o i n i t i a t e new ec o n o m i c o p p o r t u n i t i e s . Why salmon f a r m i n g ? A q u a c u l t u r e t e c h n i q u e s s u c h as h a t c h e r i e s have been u s e d t o enhance n a t u r a l salmon p o p u l a t i o n s i n Canada s i n c e 1857 7 and i n B r i t i s h C o l u m b i a s i n c e 1884 . However, a q u a c u l t u r e o f m a r i n e s a l m o n i d s n o t a s s o c i a t e d w i t h t h e t r a d i t i o n a l f i s h e r y has o n l y been i n t r o d u c e d d u r i n g t h e l a s t d e c a d e . The f i r s t r e c o r d e d m a r i n e f i s h f a r m b e i n g s t a r t e d i n Nova S c o t i a i n 1970 8 The P a c i f i c salmon s p e c i e s ( O n c o r h y n c h u s s p p . ) a p p e a l t o a q u a c u l t u r i s t s b e c a u s e many a s p e c t s o f t h e i r b i o l o g y have been s t u d i e d f o r a l m o s t a c e n t u r y , p r o v i d i n g a s o l i d b ase o f knowledge w h i c h i s u n a v a i l a b l e f o r most o t h e r f i s h s p e c i e s . Because t h e s e salmon a r e i n d i g e n o u s t o B r i t i s h C o l u m b i a , b r e e d i n g s t o c k and eggs a r e r e a d i l y a v a i l a b l e and s u i t a b l e e n v i r o n m e n t a l 6 p a r a m e t e r s p r e v a i l t h r o u g h o u t most o f t h e p r o v i n c e . In a d -d i t i o n , salmon i s a w e l l known commodity t o consumers i n B r i t -i s h C o l u m b i a and a b r o a d w i t h e s t a b l i s h e d m a r k e t i n g c h a n n e l s and p r a c t i c e s , t h e r e b y r e m o v i n g t h e o b s t a c l e o f consumer aware-n e s s o r a c c e p t a n c e t h a t c an be an e x p e n s i v e c h a r a c t e r i s t i c a s s o c i a t e d w i t h unknown p r o d u c t s . Salmon p e n - c u l t u r e may p r o v i d e p e o p l e w i t h an o p p o r t u n i t y f o r i n v e s t m e n t o r a hobby. But i t may a l s o have s p e c i a l a p p e a l f o r two g r o u p s o f p e o p l e . One gro u p i s t h e f i s h e r m e n who have been d i s p l a c e d f r o m t h e t r a d i t i o n a l c o m m e r c i a l f i s h e r y o f B r i t i s h C o l u m b i a by t h e l i m i t e d e n t r y r e g u l a t i o n s w h i c h have been i n e f f e c t s i n c e 1969. The o t h e r group i s t h e n a t i v e peo-p l e s o f c o a s t a l r e g i o n s o f B r i t i s h C o l u m b i a who have e x p l o i t e d t h e o c e a n r e s o u r c e s as t h e i r t r a d i t i o n a l s o u r c e o f l i v e l i h o o d . B o t h o f t h e s e g r o u p s c o u l d use salmon f a r m i n g as an a l t e r n a -t i v e t o i n v o l v e m e n t i n t h e t r a d i t i o n a l c o m m e r c i a l f i s h e r y o r as a means o f e c o n o m i c d e v e l o p m e n t . T h e r e f o r e , a s o c i o c u l t -u r a l . as w e l l a s , a s o c i o e c o n o m i c b a s i s e x i s t s f o r t h e d e v e l -opment o f salmon a q u a c u l t u r e i n B r i t i s h C o l u m b i a . Salmon s p e c i e s a v a i l a b l e i n B r i t i s h C o l u m b i a F i v e s p e c i e s o f salmon a r e i n d i g e n o u s t o t h e w a t e r s o f B r i t i s h C o l u m b i a . They a r e t h e c h i n o o k o r s p r i n g ( O n c o r h y n -chus t s i i h a w y t s c h a ) T t h e chum ( 0_. k e t a ) . t h e p i n k ( 0_. g o r b u s c h a ) . t h e s o c k e y e (0_. n e r k a ) , and t h e coho salmon ( 0 . k i s u t c h ) • An i d e a l i z e d r e p r e s e n t a t i o n o f t h e salmon l i f e - h i s t o r y i s p r e -s e n t e d i n f i g u r e 1. The f o l l o w i n g b r i e f d e s c r i p t i o n o f t h e F i g u r e 1 The N a t u r a l L i f e C y c l e o f Coho Salmon. egg phase i n t h e g r a v e l O c t . - J a n . a d u l t s spawn i n f r e s h w a t e r S e p t . - O c t . a d u l t s m i g r a t e t o f r e s h w a t e r Aug.-Oct. a l e v i n phase i n t h e g r a v e l J a n . - A p r i l f r y emerge from t h e g r a v e l A p r i l - J u n e f i s h mature i n t h e o c e a n 1 t o 2 y e a r s j u v e n i l e f i s h i n f r e s h w a t e r 1 t o 2 y e a r s s m o l t s m i g r a t e t o t h e ocean J u n e - J u l y S o u r c e : Salmon R a n c h e r ' s M a n u a l , M c N e i l and B a i l e y . 1975. p. 16 . 8 P a c i f i c salmon s p e c i e s was obtained from i n f o r m a t i o n l e a f l e t s d i s t r i b u t e d by the F i s h e r i e s and Marine S e r v i c e , Department of the Environment. Chinook salmon The chinook salmon i s the l a r g e s t of the f i v e s p e c i e s o f t e n a t t a i n i n g a weight of 9 to 14 kilograms and o c c a s i o n a l l y over 25 k i l o g r a m s . This salmon spawns during the autumn and w i n t e r , u s u a l l y i n l a r g e r i v e r s . The f r y emerge i n the s p r i n g and e i t h e r migrate to s a l t w a t e r a f t e r approximately 3 months of l i f e i n the r i v e r or remain i n freshwater u n t i l the f o l l o w -ing s p r i n g before m i g r a t i o n . Maturation occurs i n the t h i r d g to f i f t h years Chum salmon The chum salmon have an average weight of 3.6 kilograms although f i s h up to 8 kilograms are not uncommon. The f r y emerge i n the s p r i n g and immediately migrate to s a l t w a t e r where they remain f o r 3 to 5 years before a t t a i n i n g m a t u r i t y 10 • Pink salmon The pink salmon i s the most numerous and the s m a l l e s t of the f i v e s p e c i e s having an average weight of l e s s than 2 k i l o -grams. They spawn from August to November. The f r y emerge from the g r a v e l i n the s p r i n g and immediately migrate to the ocean where they remain f o r 15 to 18 months before r e t u r n i n g 11 to spawn Sockeye salmon The sockeye salmon t y p i c a l l y weigh s l i g h t l y more than 9 2 k i l o g r a m s . The eggs a r e l a i d d u r i n g t h e w i n t e r . The f r y emerge i n May o r June and e n t e r a l a k e f o r one o r more y e a r s b e f o r e m i g r a t i n g t o t h e s e a where t h e y r e m a i n u n t i l t h e y a r e 12 4 t o 5 y e a r s o f age Coho salmon The coho salmon spawn i n t h e l a t e autumn, t h e eggs h a t c h i n t h e s p r i n g , and t h e f r y r e m a i n i n t h e s t r e a m u n t i l t h e s e c o n d s p r i n g when t h e s m o l t s e n t e r t h e s e a . The coho g e n e r a l -l y r e t u r n t o spawn a f t e r two y e a r s i n s a l t w a t e r . The a p p r o x -13 i m ate s i z e o f r e t u r n i n g coho i s 6 k i l o g r a m s What i s r e q u i r e d f o r a_ f i s h farm? The a c c o u n t s o f a q u a c u l t u r i s t s t o d a t e s u g g e s t t h a t s a l -mon f a r m i n g i s a h i g h r i s k v e n t u r e due t o t h e many unknown a s p e c t s o f t h i s t y p e o f f a r m i n g . The r e a r i n g f a c i l i t i e s need t o p r o v i d e w a t e r from b o t h f r e s h w a t e r and s a l t w a t e r s o u r c e s t o accommodate t h e c a p t i v e l i f e h i s t o r y o f t h e s a l m o n . S u f f i c i e n t n a t u r a l f o o d r e s o u r c e s w i l l n o t be a v a i l a b l e t o t h e ' d o m e s t i c ' salmon b e c a u s e o f t h e h i g h s t o c k i n g d e n s i t i e s n e c e s s a r y t o m a i n t a i n a c c e p t a b l e u n i t c o s t s f o r e n c l o s u r e s . T h e r e f o r e , t h e p r i n c i p a l s o u r c e o f n u t r i t i o n w i l l be c o m m e r c i a l l y p r e p a r e d a r t i f i c i a l d i e t s . C a p t i v e salmon a r e s u s c e p t i b l e t o c o n t a g -i o u s d i s e a s e s c a p a b l e o f i n f e c t i n g a c o m p l e t e p r o d u c t i o n c y c l e and n a t u r a l p o p u l a t i o n s i n t h e v i c i n i t y . Methods o f d i s e a s e c o n t r o l and p r e v e n t i v e i n n o c u l a t i o n a r e a v a i l a b l e and must be employed by t h e s u c c e s s f u l f i s h f a r m e r . The p r o d u c t i o n c y c l e o f t h e t y p i c a l f i s h f a rm u s i n g h e a t f o r a c c e l e r a t e d growth 10 w i l l b e g i n w i t h p u r c h a s e d eggs i n November and end w i t h pan-s i z e d (200 t o 340 gram) salmon a p p r o x i m a t e l y f o u r t e e n months l a t e r . F a c i l i t i e s must be e s t a b l i s h e d t o accommodate t h e salmon d u r i n g t h i s p e r i o d . 11 FOOTNOTES 1. M i l n e ; P.H., 1976. E n g i n e e r i n g and t h e e c o n o m i c s o f a q u a c u l t u r e . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h B o a r d o f Canada 33:888-898. p.889. 2. MacCrimmon; H.R., J . E . S t e w a r t , and J.R. B r e t t , 1974. A q u a c u l t u r e i n Canada. F i s h e r i e s R e s e a r c h B o a r d o f Cana-da B u l l e t i n 188, pp. 84, p.59. 3. M i l n e ; P.H.. 1976. op. c i t . p. 888. 4. Q u a l e ; D.B. and D.W. S m i t h . 1976. A Guide t o O y s t e r F a r m i n g . M a r i n e R e s o u r c e s B r a n c h . Department o f Rec-r e a t i o n and T r a v e l I n d u s t r y , pp. 54, p. 16. 5. Anonymous; 1977. F i s h e r i e s and A q u a t i c S c i e n c e s i n Can-ad a : An O v e r v i e w . F i s h e r i e s R e s e a r c h B o a r d o f Canada R e p o r t s , 15:1-53, p. 31. 6. I b i d . , p . 32. 7. B a r d a c h ; J . E . , J.H. R y t h e r . and W.O. M c L a r n e y , 1972. A q u a c u l t u r e : The F a r m i n g and Husbandry o f F r e s h w a t e r and M a r i n e O r g a n i s m s . W i l e y - I n t e r s c i e n c e : New Y o r k , pp. 868, p.470. 8. MacCrimmon; H.R. e t a l . , 1974. op. c i t . p. 55. 9. C h i n o o k ( S p r i n g )Salmon. F i s h e r i e s F a c t S h e e t No. 8. E n v i r o n m e n t Canada, F i s h e r i e s and M a r i n e S e r v i c e . 10. Chum Salmon. F i s h e r i e s F a c t S h e e t No. 9. E n v i r o n m e n t C a nada. F i s h e r i e s and M a r i n e S e r v i c e . 11. P i n k Salmon. F i s h e r i e s F a c t S h eet No. 11. E n v i r o n m e n t C a nada. F i s h e r i e s and M a r i n e S e r v i c e . 12. S o c k e y e Salmon. F i s h e r i e s F a c t S h eet No. 12. E n v i r o n m e n t Canada, F i s h e r i e s and M a r i n e S e r v i c e . 13. Coho Salmon. F i s h e r i e s F a c t S h eet No. 10. E n v i r o n m e n t C a nada. F i s h e r i e s and M a r i n e S e r v i c e . 12 CHAPTER I I INSTITUTIONAL CONSTRAINTS 13 The f e d e r a l and p r o v i n c i a l g o vernments have d e v e l o p e d r e g u l a t i o n s t o c o n t r o l f i s h f a r m i n g o p e r a t i o n s i n B r i t i s h C o l u m b i a . F e d e r a l r e g u l a t i o n s  A q u a c u l t u r e p e r m i t An A q u a c u l t u r e P e r m i t i s r e q u i r e d t o c u l t u r e salmon o r t r o u t i n m a r i n e l o c a t i o n s o r f o r t h e c u l t u r e o f salmon i n f r e s h -w a t e r i n B r i t i s h C o l u m b i a . The p e r m i t i s o b t a i n e d f r o m t h e F i s h e r i e s and M a r i n e S e r v i c e , Department o f t h e E n v i r o n m e n t . S e l e c t e d h i g h l i g h t s o f t h e t e r m s and c o n d i t i o n s o f t h e p e r m i t a r e g i v e n b e l o w : 1) a C o m m e r c i a l F i s h Farm L i c e n c e must be o b t a i n e d from t h e p r o v i n c e o f B r i t i s h C o l u m b i a , M i n i s t r y o f R e c r e a t i o n and Con-s e r v a t i o n ; 2) t h e p e r m i t h o l d e r must a p p l y t o t h e F i s h e r i e s S e r v i c e f o r a l l s almon eggs r e q u i r e d . The F i s h e r i e s S e r v i c e may d e c l a r e a s p e c i f i c number o f eggs as s u r p l u s w h i c h may be p u r c h a s e d a t r e a s o n a b l e c o s t d u r i n g t h e O c t o b e r t h r o u g h J a n u a r y p e r i o d i n r e s p o n s e t o r e q u e s t s r e c e i v e d b e f o r e t h e p r e v i o u s September; 3) n e i t h e r l i v e salmon n o r eggs can be t r a n s p o r t e d f r o m t h e p e r m i t l o c a t i o n : 1) salmon may n o t be d e l i b e r a t e l y r e l e a s e d f r o m t h e s i t e and a f u l l w r i t t e n a c c o u n t o f any i n a d v e r t e n t r e l e a s e must be p r o v i d e d t o t h e F i s h e r i e s and M a r i n e S e r v i c e : 5) t h e c u l t u r e d salmon must be m a r k e t e d d i r e c t l y w i t h a s p e c -i f i e d s a l e s i n v o i c e : 14 6) t h e F i s h e r i e s and M a r i n e S e r v i c e must be g r a n t e d a c c e s s f o r i n s p e c t i o n o f a l l c u l t u r e f a c i l i t i e s and r e c o r d s ; 7) w r i t t e n s e m i - a n n u a l r e p o r t s o f o p e r a t i o n s must be p r o v i d e d t o t h e F i s h e r i e s and M a r i n e S e r v i c e i n J a n u a r y and J u l y ; 8) m a j o r o p e r a t i n g c h a n g es must be a p p r o v e d by t h e F i s h e r i e s and M a r i n e S e r v i c e ; 9) s e r i o u s d i s e a s e p r o b l e m s must be r e p o r t e d i m m e d i a t e l y t o t h e F i s h e r i e s and M a r i n e S e r v i c e who r e s e r v e t h e r i g h t t o o r d e r t h e d e s t r u c t i o n o f any i n f e c t e d s t o c k and s t e r i l i z a t i o n o f t h e c u l t u r e f a c i l i t i e s ; 10) t h e p e r m i t must be renewed a n n u a l l y , e x p i r i n g e a c h December 31 and i s n o n - t r a n s f e r a b l e ; An a p p l i c a t i o n f o r t h e above p e r m i t must be a c c o m p a n i e d by a p r o p o s a l f o r o p e r a t i o n s and an o u t l i n e o f t h e a q u a c u l t -u r i s t ' s q u a l i f i c a t i o n s . An o f f i c e r o f t h e F i s h e r i e s and M a r i n e S e r v i c e w i l l a s s e s s t h e p r o b a b i l i t y o f s u c c e s s o f t h e p r o p o s e d o p e r a t i o n b e f o r e g r a n t i n g t h e p e r m i t . T h i s p r o c e d u r e i s t o e n s u r e t h a t a d e q u a t e f a c i l i t i e s w i l l be a v a i l a b l e t o s a t i s f y t h e b i o l o g i c a l c o n s t r a i n t s on p r o d u c t i o n ( d e s c r i b e d i n t h e f o l l o w i n g c h a p t e r ) and t h a t t h e a p p l i c a n t o r h i s s t a f f has s u f f i c i e n t knowledge a n d / o r e x p e r i e n c e t o p r o v i d e competent management o f t h e f i s h f a r m . The a p p l i c a t i o n p r o c e d u r e i s d e s i g n e d t o p r o t e c t t h e p r o s p e c t i v e a q u a c u l t u r i s t . a c t i v e a q u a c u l t u r i s t s , and t h e salmon f i s h e r y . The p r o s p e c t i v e a q u a c u l t u r i s t i s p r o t e c t e d i n t h e e v a l u a t i o n p r o c e s s b e c a u s e a c r i t i c a l a n a l y s i s o f h i s 15 p r o p o s a l by an experienced o f f i c i a l may prevent him from i n -v e s t i n g funds to b u i l d a farm which has v i r t u a l l y no chance of success because i t has an inadequate water supply or other d e f i c i e n c y . Conversely, acceptance by the o f f i c i a l may add c r e d i b i l i t y to the p r o p o s a l and i n s t i l l confidence i n the a q u a c u l t u r i s t by p r o s p e c t i v e i n v e s t o r s . A c t i v e a q u a c u l t u r i s t s b e n e f i t from the procedure i f i t i s i n s t r u m e n t a l i n reducing the p r o b a b i l i t y of f a i l u r e of the salmon farm. A low i n c i d e n c e of f a i l u r e i n the i n d u s t r y w i l l c r e a t e the impression to c r e d i t o r s and i n v e s t o r s that s a l -mon farming i s a s t a b l e r a t h e r than a high r i s k business with the r e s u l t t h a t r e s t r i c t i o n s on c r e d i t and i n t e r e s t r a t e s w i l l be reduced. Such r e d u c t i o n s w i l l a i d the f i n a n c i a l v i a b i l i t y of the i n d i v i d u a l business i n the i n d u s t r y . The i n c i d e n c e of disease at a farm capable of i n f e c t i n g both c a p t i v e and n a t u r a l salmon p o p u l a t i o n s i n c r e a s e s with poor f i s h husbandry. Therefore., the salmon f i s h e r y , i n c l u d i n g a q u a c u l t u r e , should b e n e f i t by r e s t r i c t i o n of inadequate or incompetent f i s h husbandry. The terms and c o n d i t i o n s of the permit allow d e t a i l e d m o n itoring and r e g u l a t i o n of the i n d u s t r y by the F i s h e r i e s and Marine S e r v i c e which enhance the b e n e f i t s d e s c r i b e d e a r l -i e r . However, the r e s t r i c t i o n s on egg procurement f o r c e the a q u a c u l t u r i s t to be t o t a l l y dependent upon the F i s h e r i e s and Marine S e r v i c e with r e s p e c t to i n i t i a l p r o d u c t i o n . Although he must provide a minimum of two to three months l e a d time on 16 his order there i s no guarantee that he w i l l receive either the quantities nor the species he requests because the needs of aquaculturists are secondary to those of the Fisheries and Marine Service. In addition, the stock may be derived from distant rather than l o c a l streams which may not be as well adapted to the environment surrounding the f i s h farm. The annual renewal and non-transferability of the permit creates uncertainty concerning the long term v i a b i l i t y of a farm which requires a minimum of fourteen months to complete a production cycle. And, a farmer wishing to s e l l his farm must not only l-o_c^-t*?raw#'uriiti"a^r.,;'fdv the . farm but ^  also one who i s acceptable to the Fisheries and Marine Service. These terms and conditions governing the procurement of stock, permit renewal, and transfer of permits increase the uncertainty of establishing a stable industry, with the r e s u l t that the perceived r i s k of the loss of c a p i t a l con-tributed to the salmon farming industry increases. Although these regulations aid government control of the industry and provide certain i n d i r e c t benefits to the aquaculturist. they are l i k e l y to hinder the f i n a n c i a l v i a b i l i t y of the f i s h farming industry at least in the short run. One B r i t i s h Columbia f i s h farmer who recently ceased production blamed his lack of success upon the r e s t r i c t i v e nature of government regulations 1 . It i s only f a i r to state in addition that members of the Fisheries and Marine Service 17 d i s p u t e t h e a q u a c u l t u r i s t ' s c l a i m s p u t f o r e w a r d i n t h e above a r t i c l e . N a v i g a t i o n c o m p l i a n c e A p p r o v a l must be o b t a i n e d f r o m t h e M i n i s t e r o f T r a n s p o r t b e f o r e r a f t s o r p i l e s c an be c o n s t r u c t e d i n n a v i g a b l e w a t e r s . A p p l i c a t i o n f o r an e x e m p t i o n u n d e r s e c t i o n 5 ( 2 ) o f t h e N a v i g -a b l e Waters P r o t e c t i o n A c t may be made i f t h e work does n o t s u b s t a n t i a l l y i n t e r f e r e w i t h n a v i g a t i o n . A l e t t e r w i t h t e n c o p i e s o f a p l a n i n d i c a t i n g t h e e x t e n t o f t h e work and t h e s i t e must be s e n t t o t h e M i n i s t r y o f T r a n s p o r t . R a f t s o f a d e s i g n p r e s e n t l y u s e d by B r i t i s h C o l u m b i a f i s h f a r m e r s ( s e e f i g u r e 6) s h o u l d q u a l i f y f o r t h e e x e m p t i o n . The n o r m a l a p p l i c a t i o n p r o c e d u r e r e q u i r e s t h e f o l l o w i n g s t e p s : 1) a d e s c r i p t i o n o f t h e s i t e o f t h e p r o p o s e d work t o be dep-o s i t e d w i t h t h e A i d s t o N a v i g a t i o n D i v i s i o n o f t h e M i n i s t r y o f T r a n s p o r t and a d u p l i c a t e i n t h e o f f i c e o f t h e R e g i s t r a r o f Deeds f o r t h e d i s t r i c t , c o u n t y o r p r o v i n c e i n w h i c h t h e work i s p r o p o s e d t o be c o n s t r u c t e d 2) a p l a n o f t h e p r o p o s e d work t o be d e p o s i t e d i n t h e same manner as t h e d e s c r i p t i o n o f t h e s i t e 3) one month n o t i c e o f t h e d e p o s i t w i t h t h e A i d s t o N a v i g a -t i o n D i v i s i o n o f t h e M i n i s t r y o f T r a n s p o r t o f t h e d e s c r i p t i o n o f t h e s i t e and p l a n o f work, and o f t h e a p p l i c a t i o n f o r app-r o v a l , roust be g i v e n by a d v e r t i s i n g i n two newspapers p u b l i -s hed i n o r n e a r t h e l o c a l i t y i n which t h e work i s t o be 18 2 c o n s t r u c t e d and i n t h e Canada G a z e t t e An a p p r o v a l by t h e M i n i s t e r o f t h e s u b m i t t e d m a t e r i a l i s o n l y an a u t h o r i z a t i o n t o i n t e r f e r e w i t h t h e p u b l i c r i g h t o f n a v i g a t i o n t o t h e e x t e n t o f t h e p r o p o s a l b u t does n o t s u p e r -cede o t h e r j u r i s d i c t i o n s . F o r example, i t i s n o t an a p p r o v a l o f c o n s t r u c t i o n n o r an a u t h o r i z a t i o n i n r e s p e c t o f any s t a t u t e , r e g u l a t i o n o r b y l a w , f e d e r a l , p r o v i n c i a l , o r m u n i c i p a l w h i c h may r e q u i r e some o t h e r f o r m . o f a u t h o r i z a t i o n . No f e e i s l e v -i e d u n l e s s a p p r o v a l t o commence c o n s t r u c t i o n b e f o r e c o m p l i a n c e w i t h t h e r e g u l a t i o n s i s s o u g h t , o r a p p r o v a l i s s o u g h t a f t e r c o n s t r u c t i o n has commenced. The f e e s p e r t a i n i n g t o t h e s e two e x c e p t i o n s a r e $500 and $1000, r e s p e c t i v e l y . P r o v i n c i a l r e g u l a t i o n s  C o m m e r c i a l f i s h f a r m l i c e n c e The r e g u l a t i o n s o f t h e p r o v i n c e o f B r i t i s h C o l u m b i a a r e p r o v i d e d i n t h e document, 'The O p e r a t i o n o f P r i v a t e F i s h Ponds and C o m m e r c i a l F i s h Farms i n B r i t i s h C o l u m b i a ' p r e p a r e d by t h e F i s h e r i e s Management D i v i s i o n o f t h e F i s h and W i l d l i f e B r a n c h , J u l y , 1977, pp. 8-18. A p p l i c a t i o n f o r a C o m m e r c i a l F i s h Farm L i c e n c e must be made t o t h e R e g i o n a l O f f i c e o f t h e F i s h and W i l d l i f e B r a n c h . A b i o l o g i s t o f t h e B r a n c h w i l l be a s s i g n e d t o i n s p e c t t h e p r o p o s e d s i t e and p r o v i d e a recommen-d a t i o n t o V i c t o r i a . The a p p l i c a t i o n w i l l t h e n be g r a n t e d o r r e j e c t e d . S e l e c t e d c o n d i t i o n s o f t h e C o m m e r c i a l F i s h Farm L i c e n c e a r e : 19 1) l i c e n c e s e x p i r e March 31 and a p p l i c a t i o n f o r r e n e w a l must have been made p r i o r t o t h i s d a t e ; 2) t h e f a r m e r may n o t s t o c k p u b l i c w a t e r s n o r i m p o r t f i s h o r eggs w i t h o u t a s p e c i a l p e r m i t ; 3) t h e l i c e n s e e must be i n p o s s e s s i o n o f a v a l i d Water L i c e n c e f o r t h e w a t e r u s e d i n t h e o p e r a t i o n o f t h e c o m m e r c i a l f i s h f a r m . T h i s r e g u l a t i o n does n o t a p p l y i f t h e l i c e n s e e i s u s i n g w a t e r from a c i t y o r m u n i c i p a l s u p p l y , o r f r o m a w e l l o r s p r i n g : 4) t h e l i c e n c e i s n o t t r a n s f e r a b l e and t h e r e f o r e c a n n o t be s o l d w i t h t h e b u s i n e s s : i n a d d i t i o n , t h e l i c e n c e i s v o i d i f a p e r s o n o t h e r t h a n t h e l i c e n c e e assumes c o n t r o l o f t h e f a r m ; 5) w r i t t e n s e m i - a n n u a l r e p o r t s on o p e r a t i o n s must be p r o v i d e d t o t h e F i s h and W i l d l i f e B r a n c h ; 6) a c c e s s must be p r o v i d e d t o a u t h o r i z e d employees o f t h e F i s h and W i l d l i f e B r a n c h ; 7) t h e l i c e n c e i s o n l y v a l i d f o r t h e s t a t e d s p e c i f i c l o c a t i o n ; 8) f i s h and eggs may o n l y be o b t a i n e d from a p p r o v e d s o u r c e s ; 9) an i n v o i c e must c o v e r e a c h s a l e ; 10) t h e l i c e n s e e must p r o v i d e p r o p h y l a c t i c t r e a t m e n t t o c u l t u r -ed f i s h o r eggs i f i t i s deemed n e c e s s a r y by t h e F i s h and W i l d l i f e B r a n c h : 11) an i n f r a c t i o n o f t h e c o n d i t i o n s i s s u f f i c i e n t c a u s e f o r c a n c e l l a t i o n o f t h e l i c e n c e ; 12) no f i s h eggs o r f i s h may be p u r c h a s e d by t h e l i c e n s e e t e n (10) d a y s a f t e r w r i t t e n n o t i c e o f c a n c e l l a t i o n o f t h e p e r m i t . A l l f i s h eggs o r f i s h must be d i s p o s e d o f w i t h i n s i x t y days ; 20 of w r i t t e n n o t i c e of c a n c e l l a t i o n of the l i c e n c e . There appears t o be c o n s i d e r a b l e c o n s i s t e n c y between the Aquaculture Permit r e g u l a t i o n s and those of the Commercial F i s h Farm L i c e n c e . Consequently the d e r i v e d b e n e f i t s and d i s b e n e f i t s o f the above r e g u l a t i o n s are s i m i l a r to those d i s c u s s e d e a r l i e r i n the s e c t i o n 'Aquaculture permit'. Water l i c e n c e A Water Licence must be obtained from the Comptroller of Water Rights i f s u r f a c e water i s to be used f o r the f i s h farm. The l i c e n c e belongs to the owner of the land on which the l i c e n c e a u t h o r i z e s the water to be used. T h e r e f o r e , the l i c -ence i s t r a n s f e r a b l e t o the new owner i f the l a n d i s s o l d . The r i g h t t o use one water source may be given t o s e v e r a l l i c e n s e e s who have ranked p r i o r i t y to the water. That i s . when a l i c e n c e i s is s u e d i t i s provided with a ' p r i o r i t y date'. I f the source of water becomes i n s u f f i c i e n t to honour the t o t a l a l l o t m e n t of water s p e c i f i e d on the Water L i c e n c e s f o r the p a r t i c u l a r source, the l i c e n c e with the e a r l i e s t p r i o r i t y date i s honoured f i r s t . Each s u c c e s s i v e l i c e n c e i s honoured a l l or i n p a r t u n t i l the a v a i l a b l e water has been a l l o c a t e d . The remaining permits w i l l not be honoured u n t i l s u f f i c i e n t a d d i t -i o n a l water becomes a v a i l a b l e . These r e g u l a t i o n s p e r t a i n t o many uses of s u r f a c e water, not only f i s h farming. T h i s system of a l l o c a t i n g the su r f a c e water res o u r c e s may be a p o s i t i v e or negative aspect f o r the f i s h farmer. I f he 21 has t h e f i r s t p r i o r i t y r i g h t t o t h e w a t e r t h e n he w i l l be i n a r e a s o n a b l y s e c u r e p o s i t i o n b a r r i n g any m a j o r change i n t h e 3 c h a r a c t e r i s t i c s o f t h e w a t e r s o u r c e . B u t . i f fee has low p r i o r i t y on a . h e a v i l y u s e d s t r e a m h i s f a r m may be f o r c e d i n t o a p r e c a r -i o u s p o s i t i o n d u r i n g d r o u g h t s o r o t h e r i n t e r r u p t i o n s o f t h e w a t e r s u p p l y . However, t h e l i c e n c i n g s y s t e m does p r o v i d e t h e f i s h f a r m -e r w i t h f o r m a l p r o t e c t i o n and r i g h t t o a w a t e r s o u r c e when t h e a p p r o p r i a t e l i c e n c e i s i n e f f e c t s u b j e c t t o t h e p r i o r i t i e s i n a l l o c a t i o n d e s c r i b e d a b o v e , and w i l l a l l o w him t o t r a n s f e r t h o s e r i g h t s t o a s u c c e s s o r i f he s e l l s t h e f a r m . P o l l u t i o n c o n t r o l The f i s h f a r m e r must a p p l y f o r a p e r m i t t o d i s c h a r g e w a t e r from h i s f a c i l i t i e s . T h i s may be a c c o m p l i s h e d t h r o u g h s u b m i s -s i o n o f an a p p l i c a t i o n t o t h e P o l l u t i o n C o n t r o l B r a n c h o f t h e B r i t i s h C o l u m b i a g overnment. A p l a n must be p r o v i d e d i n a d d -i t i o n t o t h e a p p l i c a t i o n f o r m s i n d i c a t i n g t h e l o c a t i o n and l a y o u t o f t h e f a c i l i t y i n c l u d i n g t h e p o i n t ( s ) o f d i s c h a r g e . A l e g a l d e s c r i p t i o n o f t h e s i t e must a l s o accompany t h e a b o v e . The g u i d e l i n e s f o r t h e c h a r a c t e r i s t i c s o f e f f l u e n t s from a f i s h h a t c h e r y a r e p r e s e n t e d i n t a b l e I . The e f f l u e n t must be m o n i t o r e d e a c h month and r e p o r t s s e n t t o t h e P o l l u t i o n Con-t r o l B r a n c h as s p e c i f i e d on t h e p e r m i t . F o r e s h o r e l e a s e A f o r e s h o r e l e a s e must be o b t a i n e d from t h e Land Manage-ment B r a n c h b e f o r e t h e f l o a t - p e n f a c i l i t i e s c an be i n s t a l l e d . 22 T a b l e I O b j e c t i v e s f o r t h e D i s c h a r g e o f E f f l u e n t s f r o m a F i s h H a t c h -e r y t o M a r i n e and F r e s h W a t e r s . P a r a m e t e r Q u a n t i t y M o n i t o r b i o c h e m i c a l oxygen demand s u s p e n d e d s o l i d s ammonia n i t r o g e n n i t r a t e n i t r o g e n t o t a l p h o s p h a t e p h o s p h o r o u s pH r a n g e 0.40g/100g f i s h / d a y m o n t h l y 0.40g/100g f i s h / d a y m o n t h l y 0.04g o f N/lOOg f i s h / d a y m o n t h l y 0.12g o f N/lOOg f i s h / d a y m o n t h l y 0.020g o f P/lOOg f i s h / d a y m o n t h l y 6.5 t o 8.5 m o n t h l y Note: a l l p a r a m e t e r q u a n t i t i e s a r e f o r i n c r e m e n t a l i n c r e a s e s above t h e i n t a k e w a t e r q u a n t i t i e s . S o u r c e : P o l l u t i o n C o n t r o l O b j e c t i v e s f o r F o o d - p r o c e s s i n g . A g r i c u l t u r a l l y O r i e n t a t e d , and O t h e r M i s c e l l a n e o u s Indus-t r i e s o f B r i t i s h C o l u m b i a . Department o f L a n d s , F o r e s t s and Water R e s o u r c e s , V i c t o r i a . B.C.. 1975, p. 31. 23 I f t h e u p l a n d i s p r i v a t e l y owned, c o n s e n t i s r e q u i r e d f r o m t h e owner and a l s o t h e mortgage h o l d e r i f a mortgage i s i n e f f e c t . I f t h e u p l a n d i s crown p r o p e r t y , a p p l i c a t i o n f o r p e r m i s s i o n t o o b t a i n a f o r e s h o r e l e a s e i s made t h r o u g h t h e Land Commiss-i o n e r s O f f i c e . I f t h e l a n d i s u n s u r v e y e d , t h e l e a s e a p p l i c a n t must pay s u r v e y i n g c h a r g e s which a r e l i k e l y t o r a n g e from $500 t o $2000. The c h a r g e l e v i e d by t h e p r o v i n c i a l government f o r a f o r e s h o r e l e a s e v a r i e s w i t h t h e l o c a t i o n b u t an a p p r o x i m a t e c o s t f o r a l o c a t i o n i n t h e S t r a i t o f G e o r g i a on t h e m a i n l a n d s i d e would be $.054 t o $.108 p e r s q u a r e m eter p e r annum. T h e r e i s a minimum c h a r g e o f $100.00 p e r l e a s e . P r i v a t e owners o f f o r e s h o r e p r o p e r t y have commonly c h a r g e d $3.00 p e r m e ter o r more t o l o g g i n g companies who have r e s t r i c t e d t h e i r r i p a r i a n r i g h t s w i t h l o g booms. The c o s t w i l l a l s o v a r y d e p e n d i n g upon t h e a g e n t who has j u r i s d i c t i o n o v e r t h e f o r e s h o r e p r o p e r t y . F o r e xample, a l e a s e l o t m e e t i n g t h e needs o f a f i s h f a r m e r b u t w i t h i n t h e j u r i s d i c t i o n o f t h e N a t i o n a l H a r b o u r s B o a r d c o s t i n e x c e s s o f $1000.00 i n 1977. T h e r e f o r e , t h e c o s t o f a f o r e s h o r e l e a s e i s h i g h l y v a r i -a b l e and depends l a r g e l y upon t h e a g e n t who has l e g a l c o n t r o l o f t h e f o r e s h o r e p r o p e r t y . G e n e r a l r e g u l a t i o n s  B u s i n e s s l i c e n c e A p p r o p r i a t e b u s i n e s s l i c e n c e s must be o b t a i n e d f r o m t h e P r o v i n c i a l and M u n i c i p a l g o v e r n m e n t s i n t h e same manner as any o t h e r b u s i n e s s . A b o o k l e t . ' E s t a b l i s h i n g a B u s i n e s s i n 24 B r i t i s h C o l u m b i a * has been p r e p a r e d by t h e Department o f E c o n -omic D e v e l o p m e n t , F e b r u a r y 1976, pp.31 wh i c h summarizes t h e government l e g i s l a t i o n and r e g u l a t i o n s f o r e s t a b l i s h i n g a b u s -i n e s s i n B r i t i s h C o l u m b i a . I n f o r m a t i o n r e g a r d i n g t h e e s t a b -l i s h m e n t o f a c o r p o r a t i o n i s a l s o c o n t a i n e d i n t h e b o o k l e t , a l t h o u g h i n c o r p o r a t i o n i s n o t r e q u i r e d f o r f i s h f a r m i n g i n B r i t i s h C o l u m b i a . Taxes and d u t i e s The t a x e s and d u t i e s l e v i e d by t h e F e d e r a l government on i m p o r t e d e quipment a r e v a r i a b l e d e p e n d i n g upon t h e m a t e r i a l and use o f t h e p r o d u c t . F o r example, f i b r e g l a s s m a t e r i a l s have a s a l e s t a x o f 12% and d u t y o f 17.5%; f e e d would have a d u t y o f 5% but no t a x ; and n y l o n n e t s would have 25% d u t y p l u s : $ . 3 3 p e r k i l o g r a m and 12% t a x . A member o f t h e Revenue Can-ada . E x c i s e B r a n c h i n . . . B u r n a b y . B r i t i s h C o l u m b i a s t a t e d t h a t most f i s h f a r m e r s would be g i v e n t h e same t a x e x e m p t i o n s as f a r m e r s i n a g r i c u l t u r e and a member o f t h e Canada Customs V a n c o u v e r , B r i t i s h C o l u m b i a s u g g e s t e d t h a t e x e m p t i o n s f r o m d u t i e s m i g h t be o b t a i n e d i f a p p l i c a t i o n were made t o Ottawa. A r e p r e s e n t a t i v e o f t h e Consumer T a x a t i o n B r a n c h o f B r i t -i s h C o l u m b i a s t a t e d t h a t no t a x would be l e v i e d on m a t e r i a l s w h i c h a r e p a r t o f t h e end p r o d u c t s u c h as f e e d , a l t h o u g h a 5% s a l e s t a x would a p p l y t o e q u i p m e n t . However, he s u g g e s t e d t h a t r e i m b u r s e m e n t o r e x e m t i o n from t h e t a x i n s p e c i f i c c a s e s may be a l l o w e d upon a p p l i c a t i o n t o V i c t o r i a . D i s c u s s i o n o f t h e above t a x e s and d u t i e s w i t h f i s h f a r m -25 e r s and d i s t r i b u t o r s o f f i s h f a r m equipment v e r i f i e d t h a t ex-e m p t i o n s a r e p e r m i t t e d f o r many i t e m s e i t h e r b e f o r e o r a f t e r t h e s a i d a p p l i c a t i o n s b u t n o t a l l t h e n e c e s s a r y i t e m s a r e i n c l u d e d and an a p p l i c a t i o n i s r e q u i r e d i n many c a s e s which may r e q u i r e s i x months o r more b e f o r e a r u l i n g i s o b t a i n e d . U n c e r t a i n t y c o n c e r n i n g t h e a p p l i c a t i o n o f f e d e r a l and p r o v i n c i a l t a x e s and d u t i e s t o t h e p u r c h a s e o f goods f o r t h e f i s h f a r m i s n o t c o n d u c i v e t o e f f i c i e n t b u s i n e s s management. F o r e x a m p l e , t h e f a r m e r may n o t be a b l e t o a s c e r t a i n t h e l e a s t e x p e n s i v e s o u r c e o f equipment between a d o m e s t i c and f o r e i g n s u p p l i e r b e c a u s e he w i l l n o t know i f t h e i m p o r t d u t i e s and t a x e s w i l l a p p l y t o t h e i t e m o r n o t . A d d i t i o n a l l y , even i f t h e gamble i s t a k e n t h a t t h e r u l i n g w i l l be f a v o u r a b l e and an e x e m p t i o n i s a c h i e v e d , t h e f u n d s w h i c h were p a i d i n i t i a l l y w i l l have been u n a v a i l a b l e t o t h e b u s i n e s s f o r h a l f a y e a r o r more. T h i s a s p e c t i s o f p a r t i c u l a r i m p o r t a n c e b e c a u s e t h e m a i n t e n a n c e o f s u f f i c i e n t c a s h a s s e t s d u r i n g t h e e a r l y w o r k i n g p e r i o d i s a c r i t i c a l i s s u e f o r most s m a l l b u s i n e s s e s and i s o f t e n i n s t r u m e n t a l i n d e t e r m i n i n g , i t s s u c c e s s o r f a i l u r e . The s i t u a t i o n e x i s t s l a r g e l y b e c a u s e o f a b u r e a u c r a c y w h i c h i s r e a c t i v e r a t h e r t h a n p r o a c t i v e . Each a p p l i c a t i o n f o r a r u l i n g on an i t e m r e d u c e s t h e b a r r i e r so t h a t as t h e i n d u s t r y grows s t a n d a r d o p e r a t i n g p r o c e d u r e s w i l l be e s t a b l i s h -ed t o d e a l w i t h s p e c i f i c i t e m s . The s y s t e m i s s e l e c t i v e l y d i s a d v a n t a g e o u s t o t h e f i s h f a r m e r as o p p o s e d t o t h e c o n c e s s -i o n s p r o v i d e d t o t h e c o m m e r c i a l f i s h e r m a n who f o r a f e d e r a l 26 l i c e n c e fee of $100.00 ( f o r a boat under 10 meters i n l e n g t h ) i s exempt from both the f e d e r a l taxes and d u t i e s and the p r o v i n c i a l taxes r e l a t e d to h i s boat and equipment. D i s c u s s i o n A l l of these i n s t i t u t i o n a l c o n s t r a i n t s are d e t e r r e n t s to the p r o s p e c t i v e f i s h farmer due to the amount of inform-a t i o n r e q u i r e d to apply f o r and r e c e i v e the necessary permits and l i c e n c e s , p l u s the time r e q u i r e d to r e c e i v e a r e p l y which may take almost one year. In a d d i t i o n , there i s the f r u s t -r a t i o n of a p p l y i n g to s e v e r a l departments and l e v e l s of gov-ernment, some of which r e q u i r e the p r i o r approval of one government agency before another agency w i l l act on the a p p l i c a t i o n . In d i s c u s s i o n with members of the i n d u s t r y , i t became apparent that the n a v i g a t i o n compliance, water l i c e n c e , p o l l u t i o n c o n t r o l permit, and the f o r e s h o r e l e a s e were a nuisance because of the time r e q u i r e d f o r a p p r o v a l . However, the aquaculture permit and the commercial f i s h farm l i c e n c e r e g u l a t i o n s were co n s i d e r e d to be the most i n s t r u -mental i n the c u r t a i l m e n t of f i s h farm o p e r a t i o n s , p a r t i c u -l a r l y with r e s p e c t t o the r e s t r i c t i o n s on the p r i v a t e pro-curement of egg st o c k . 27 FOOTNOTES 1. G r i s t : K. , 1976 . Egmont F i s h Farm F o r c e d t o C l o s e . S u n s h i n e C o a s t News, August 31, 1976, p. 4. 2. N a v i g a b l e Waters P r o t e c t i o n A c t Memorandum o f I n s t r u c -t i o n s . R e v i s e d 1, O c t o b e r 1971, pp. 6-7. 3. They Moved t h e R i v e r T r o u t Farmer C l a i m s . The P r o v i n c e . December 22. 1977. CHAPTER I I I FINANCIAL CONSTRAINTS 29 S o u r c e s o f f i n a n c i n g The p r i n c i p a l s o u r c e s o f f u n d i n g a r e from t h e f e d e r a l programs f o r s m a l l b u s i n e s s e s , s i m i l a r p r o v i n c i a l p r o g r a m s , t h e c h a r t e r e d b a n k s , and p r i v a t e i n v e s t o r s . T h e r e a r e no p rograms s p e c i f i c a l l y d e s i g n e d f o r t h e salmon o r t r o u t a q u a c u l t u r i s t . F e d e r a l programs A number o f f e d e r a l programs have been e s t a b l i s h e d t o a i d s m a l l b u s i n e s s e n t r e p r e n e u r s t o o b t a i n f u n d s a t r e a s -o n a b l e i n t e r e s t r a t e s . F e d e r a l b u s i n e s s d e v e l o p m e n t bank (FBDB) The FBDB has many c o n v e n i e n t l y l o c a t e d o f f i c e s i n B r i t i s h C o l u m b i a a l l o w i n g r e a d y a c c e s s t o p r o s p e c t i v e b o r -r o w e r s . F i n a n c i a l a s s i s t a n c e i s a v a i l a b l e t o most t y p e s o f b u s i n e s s e s i n c l u d i n g a q u a c u l t u r e . The p r i n c i p a l cond--. i t i o n s t o o b t a i n a l o a n a r e t h a t s u f f i c i e n t e q u i t y be p r o -v i d e d by t h e e n t r e p r e n e u r s u c h t h a t t h e r e i s a r e a s o n a b l e e x p e c t a t i o n t h a t he w i l l o f f e r an o n g o i n g commitment t o t h e e n t e r p r i s e . The p r o c u r e d f u n d s may be a p p l i e d t o t h e a c q u i s i t i o n o f c a p i t a l a s s e t s o r u s e d t o i n c r e a s e t h e work-i n g c a p i t a l . E q u i t y as w e l l as d e b t f i n a n c i n g i s a v a i l a b l e . E q u i t y f i n a n c i n g i s most commonly us e d t o f i n a n c e h i g h e r r i s k b u s i n e s s e s . Av . ' t y p i c a l s i t u a t i o n would be f o r t h e FBDB t o p u r c h a s e a m i n o r i t y i n t e r e s t i n t h e farm i n i t i a l l y and t h e n r e s e l l t h o s e s h a r e s a t a l a t e r d a t e t o t h e p r i v a t e owners a t an a g r e e d p r i c e above t h e i n i t i a l p u r c h a s e p r i c e . 30 Loans a r e n o r m a l l y r e t i r e d w i t h i n t e n y e a r s o f r e c -e i v i n g t h e l o a n by m o n t h l y payments o f t h e p r i n c i p a l and i n t e r e s t . However, a l t e r n a t i v e t e r m s may be n e g o t i a t e d . The p r e s e n t r a t e o f i n t e r e s t on de b t i s e l e v e n p e r c e n t p e r annum. The r e t u r n on e q u i t y f i n a n c i n g i s c o n s i d e r a b -l y h i g h e r t h a n t h e i n t e r e s t r a t e f o r d e b t . I t i s u s u a l l y e s t a b l i s h e d on an i n d i v i d u a l b a s i s i n r e l a t i o n t o t h e p e r c e i v e d r i s k o f t h e p r o p o s e d p r o j e c t r a t h e r t h a n b e i n g f i x e d ^ . S m a l l b u s i n e s s l o a n s a c t (SBLA) I n d i v i d u a l d e b t l i m i t s u n d e r t h e SBLA a r e s e t a t s e v -e n t y - f i v e t h o u s a n d d o l l a r s w i t h repayment w i t h i n t e n y e a r s . The l o a n s a r e made by t h e c o m m e r c i a l banks and o t h e r p r i -v a t e l e n d i n g i n s t i t u t i o n s b u t t h e government g u a r a n t e e s t h e s e l o a n s t o remove much o f t h e e l e m e n t o f r i s k , t h e r e -by e n c o u r a g i n g t h e s e i n s t i t u t i o n s t o p r o v i d e l o a n s t o s m a l l b u s i n e s s e s w h i c h would n o r m a l l y be r e j e c t e d due t o t h e i r p e r c e i v e d r i s k . These l o a n s a r e a v a i l a b l e f o r t h e p u r c h a s e o f c a p i t a l a s s e t s o n l y . The a n n u a l i n t e r e s t r a t e i s t h e p r i m e l e n d i n g r a t e p l u s one p e r c e n t . E n t e r p r i s e d e v e l o p m e n t program (EDP) T h i s program i s o p e r a t e d by t h e Department o f I n d u s -t r y , T r a d e , and Commerce e f f e c t i v e A p r i l 1. 1977. I t i s d i r e c t e d t o w a r d t h e f i n a n c i n g o f s p e c i f i c p r o j e c t s f o r m a n u f a c t u r e r s and p r o c e s s o r s . I t i s u n l i k e l y t h a t a qua-c u l t u r e would be c o n s i d e r e d t o be m a n u f a c t u r i n g and p r o -31 c e s s i n g by t h i s a g e n c y . T h e r e f o r e , i t i s a p o s s i b l e b u t i m p r o b a b l e s o u r c e o f f i n a n c i n g f o r t h e f i s h f a r m e r . P r o v i n c i a l programs The most l i k e l y s o u r c e o f p r o v i n c i a l f u n d s i s t h r o u g h t h e A g r i c u l t u r a l C r e d i t A c t . A l t h o u g h f u n d s a r e n o t p r e -s e n t l y a v a i l a b l e t o a q u a c u l t u r i s t s t h e M i n i s t e r s o f A g r i -c u l t u r e and R e c r e a t i o n and C o n s e r v a t i o n o f t h e government o f B r i t i s h C o l u m b i a made a j o i n t s t a t e m e n t t h a t t h e A c t 2 would be amended t o i n c l u d e f i s h f a r m e r s . The A c t i s i n t e n d e d t o a i d f a r m e r s by p r o v i d i n g g u a r a n t e e d l o a n s t h a t may be o b t a i n e d t h r o u g h c h a r t e r e d banks and c r e d i t u n i o n s . In some c a s e s p a r t i a l r e i m b u r s e m e n t o f t h e i n t e r e s t i s a l l o w e d . The n o r m a l i n t e r e s t r a t e i s t h e p r i m e c o m m e r c i a l l e n d i n g r a t e o f t h e c h a r t e r e d banks p l u s one p e r c e n t . The l o a n s may be u s e d f o r c a p i t a l o r w o r k i n g c a p i t a l ex-p e n d i t u r e s . The maximum l o a n l i m i t and t h e repayment s c h -e d u l e a r e n e g o t i a b l e . The t y p e o f e n t e r p r i s e and i t s p r o j e c t e d c a p a b i l i t y t o s e r v i c e t h e d e b t a r e t h e p r i m e d e t e r m i n a n t s o f a c c e p t a b i l i t y . C h a r t e r e d banks The c h a r t e r e d banks do n o t have s p e c i a l l o a n programs f o r f i s h f a r m e r s a l t h o u g h t h e y do a d m i n i s t e r some o f t h e government g u a r a n t e e d l o a n s . The R o y a l Bank has e s t a b l i s h -ed t h e I n d e p e n d e n t F i s h e r m a n ' s P l a n t o a i d t h e t r a d i t i o n a l f i s h e r m a n . T h i s p l a n p r o v i d e s c a p i t a l l o a n s o f up t o $200000 w i t h t e n y e a r repayment w h i l e o p e r a t i n g l o a n s have a one 32 3 y e a r t e r m b a s e d on t h e a n t i c i p a t e d c a s h f l o w . S e v e r a l bank managers s u g g e s t e d t h a t i f a f i s h f a r m e r c o u l d p r o v e t h e s t a b i l i t y o f t h e b u s i n e s s , s i m i l a r programs would p r o -b a b l y be made a v a i l a b l e by t h e b a n k s . By s t a b i l i t y t h e y meant f i v e y e a r s o f r e l i a b l e and p r o f i t a b l e o p e r a t i o n . The c h a r t e r e d banks a r e a p o t e n t i a l s o u r c e o f f u n d s f o r t h e e s t a b l i s h e d f i s h f a r m e r b u t n o t f o r t h e new e n t r a n t t o t h e i n d u s t r y e x c e p t f o r t h e government g u a r a n t e e d l o a n s d i s c u s s e d a b o v e . P r i v a t e i n v e s t o r s The above d i s c u s s i o n l e a d s t o t h e c o n c l u s i o n t h a t t h e p r i n c i p a l s o u r c e o f c a p i t a l f o r f i s h f a r m i n g w i l l have t o be p r o v i d e d by p r i v a t e i n d i v i d u a l s . Even i f t h e l o a n s d i s -c u s s e d above a r e made a v a i l a b l e , t h e r e g u l a t i o n s p e r t a i n i n g t o t h e i r d i s b u r s e m e n t r e q u i r e t h a t an amount o f e q u i t y a l r e a d y be i n v e s t e d i n t h e f i r m . S m a l l b u s i n e s s e s may r e q u i r e from 50 t o 80 p e r c e n t o f t h e i r f u n d s i n t h e form o f e q u i t y . In g e n e r a l , t h e g r e a t e r t h e p e r c e i v e d r i s k o f t h e v e n t u r e , t h e g r e a t e r t h e r e l i a n c e upon e q u i t y as op p o s e d t o de b t c a p i t a l . T h e r e f o r e , v e n t u r e c a p i t a l i s a p r i m e r e q u i s i t e t o f i n a n c e t h e a v e r a g e f i s h f a r m i n B r i t -i s h C o l u m b i a . The c o s t t o form a p u b l i c c o r p o r a t i o n i n Canada has been e s t i m a t e d a t a p p r o x i m a t e l y $100000 and i s n o t c o n s i d -e r e d t o be a v i a b l e a l t e r n a t i v e u n l e s s t h e d e s i r e d c a p i t a l i s g r e a t e r t h e n f i v e m i l l i o n d o l l a r s . In view o f t h i s 33 c o s t , i t i s v e r y u n l i k e l y t h a t a s m a l l f i s h f a r m i n g b u s i n -e s s would seek f i n a n c i n g by t h i s means. The a v e r a g e f i s h f a r m i n B r i t i s h C o l u m b i a w i l l p r o b a b l y be a p r i v a t e c o r p o r a t i o n w i t h a few i n v e s t o r s and w i l l o b t a i n some a d d i t i o n a l f u n d i n g t h r o u g h one o f t h e government a i d p r o -grams . 34 FOOTNOTES 1. L i n s t e a d ; E . , 1978. C o n s u l t a n t f o r t h e F e d e r a l B u s i n e s s Development Bank, N o r t h V a n c o u v e r , B.C., P e r s o n a l commun-i c a t i o n . 2. F i s h F a r m e r s t o Get A i d . V a n c o u v e r Sun, March 11, 1978. 3. Anonymous; 1976. R o y a l Bank I n t r o d u c e s F i s h e r m e n ' s Loan P l a n . C a n a d i a n F i s h e r m a n 6 2 ( 2 ) :4. 4. Marchand; L. , 1977. S m a l l B u s i n e s s i n Canada: P e r s p e c -t i v e s . M i n i s t e r o f S t a t e S m a l l B u s i n e s s , Government o f Canada, pp. 31, p. 20. 5. I b i d . . p. 23 . CHAPTER IV MARKETING CONSTRAINTS 36 Substitution of salmon and trout Knowledge concerning the market for pan-size salmon in B r i t i s h Columbia i s l i m i t e d . One major reason being that only small quantities of these salmon have been av-ai l a b l e to the market and even then on a sporadic basis. On the other hand, pan-size trout have been available to consumers in B r i t i s h Columbia for many years. This con-sistency in the a v a i l a b i l i t y of trout has allowed the establishment of d i s t r i b u t i o n channels and knowledge conc-erning consumer tastes and preferences. Because of the paucity of information about pan-size salmon, the descrip-tion and analysis of the market parameters for salmon w i l l be based on the exis t i n g information about the marketing of trout in B r i t i s h Columbia. The underlying assumption i s that pan-size salmon and trout are substitute products in the market place. Although the difference in appearance between the two products i s re a d i l y discernible to the connoisseur of seafoods, the average person i s not l i k e l y to discriminate between the two products on t h i s basis. Discussion of the s u b s t i t u t a b i l i t y of salmon and trout with f i s h farmers usually resulted in t h e i r acknowledgement that the two products were substi-tutes, but each person f e l t that his product was superior due to some aspect of the colour, taste, or odour. Although i t i s true that the flesh of trout i s white 37 w h i l e t h e f l e s h o f f a r m e d salmon can be c o l o u r e d p i n k u s i n g f e e d s c o n t a i n i n g c a r o t e n o i d s , t h e f l e s h c o l o u r o f b o t h p r o -d u c t s i s u s u a l l y w h i t e once i t has been c o o k e d ^ . A r e -c e n t s t u d y employed t r a i n e d and u n t r a i n e d t e s t p a n e l s t o 2 e v a l u a t e t h e d i f f e r e n c e s between t h e s e p r o d u c t s . The t r a i n e d p a n e l i n d i c a t e d h i g h l y s i g n i f i c a n t d i f f e r e n c e s when r e f e r e n c e c l u e s were p r o v i d e d t o them b u t t h e u n t r a i n e d consumer p a n e l d i d n o t i n d i c a t e any s i g n i f i c a n t p r e f e r e n c e f o r e i t h e r o f t h e p r o d u c t s . A s e p a r a t e a n a l y s i s o f t h e e f f e c t o f s u b s t i t u t i o n between r a i n b o w t r o u t and p a n - s i z e salmon on m a r k e t demand a l s o i n d i c a t e d t h a t t h e two p r o -3 d u c t s were a c c e p t a b l e s u b s t i t u t e s . In v i e w o f t h e above s t u d i e s and t h e i r r e s u l t s , i t would a p p e a r t h a t t h e assum-p t i o n o f d i r e c t s u b s t i t u t a b i l i t y i s v a l i d f o r t h e p u r p o s e s o f t h e p r e s e n t s t u d y . P r o d u c t c h a r a c t e r i s t i c s P a n - s i z e s a l m o n i d s a r e m a r k e t e d a l m o s t e x c l u s i v e l y t o r e s t a u r a n t s and s u p e r m a r k e t s o r s m a l l f i s h s h o p s . The s p e c i a l t y s e a f o o d segment o f t h e m arket has been t h e t r a d -i t i o n a l t a r g e t f o r t h e s e p r o d u c t s . F i s h e r y c a u g h t s a l m o n , o f c o u r s e , make a s i g n i f i c a n t c o n t r i b u t i o n t o t h e t o t a l s p e c i a l t y s e a f o o d s a l e s i n B r i t i s h C o l u m b i a . They a r e u s -u a l l y a v a i l a b l e as salmon s t e a k s o r f i l l e t s i n t h e f r e s h , f r o z e n o r smoked f o r m s . Farm r a i s e d s a l m o n i d s a r e d i f -f e r e n t i a t e d f r o m t h e f i s h e r y salmon t h r o u g h t h e d e v e l o p -ment o f a d i s t i n c t market image. The image i s t h a t o f a 38 s p e c i a l t y seafood of a u n i t c o n s i s t e n c y . T h i s i s accomp-l i s h e d by d r e s s i n g the f i s h with the head and t a i l on. The g i l l s and v i s c e r a are removed to i n c r e a s e the s h e l f -l i f e and to make the product ready f o r immediate use by the consumer. F i s h e r y salmon products are excluded from t h i s image because the s m a l l e s t salmon caught i n t h i s i n d -u s t r y weigh approximately two k i l o g r a m s . Whereas, the present i n d i c a t i o n by l o c a l f i s h w holesalers and r e t a i l e r s i s t h a t the most a c c e p t a b l e pan-size product i s 227 to 255 grams dressed or approximately .311 kilograms round weight. A l l pan-size salmonids are a v a i l a b l e to the consumer i n the l i v e , f r e s h , p r e v i o u s l y f r o z e n , or f r o z e n form. S e a s o n a l i t y Seasonal demand f o r pan-size products i n c r e a s e s i n the r e s t a u r a n t trade d u r i n g the major t o u r i s t season (the sum-mer months) but most wholesalers thought that t h i s f l u c t u -a t i o n was minor i n r e l a t i o n to the t o t a l monthly s a l e s . The w h o l e s a l e r s c o n s i d e r e d demand to be most a f f e c t e d by the p r i c e and s i z e of the product. Competitive producers The farming of pan-size salmon and t r o u t i s not un-ique to B r i t i s h Columbia. Many farms e x i s t throughout North America. Europe, and A s i a . The p r i n c i p a l sources of imp-o r t s t o B.C. are Japan and the United S t a t e s . The major American producers are l o c a t e d i n Idaho, Washington, and 39 O regon. P r i c e The p r i c e s p r e a d between f r e s h and f r o z e n s a l m o n i d p r o d u c t s a t t h e w h o l e s a l e l e v e l i s a p p r o x i m a t e l y $.22 t o $.33 p e r k i l o g r a m . L o c a l t r o u t p r o d u c e r s have been s e l -l i n g f r e s h f i s h t o l o c a l w h o l e s a l e r s a t $3.74 t o $3.85 p e r k i l o g r a m d r e s s e d w e i g h t . F r o z e n t r o u t i m p o r t e d from J a p a n has been p u r c h a s e d by l o c a l w h o l e s a l e r s a t a p p r o x -i m a t e l y $3.52 p e r k i l o g r a m . However, an e x e c u t i v e a t one s m a l l w h o l e s a l e f i s h company s t a t e d t h a t a r e c e n t , s m a l l s h i p m e n t o f f r o z e n t r o u t from J a p a n had c o s t $4.95 p e r k i l o g r a m . A g e n e r a l c o n s e n s u s o f o p i n i o n among t h e f a r m e r s and w h o l e s a l e r s was t h a t t h e B r i t i s h C o l u m b i a p r o d u c e d p a n - s i z e t r o u t and salmon can o n l y be m a r k e t e d as f r e s h p r o d u c t s . They t h o u g h t t h e f r o z e n p r o d u c t s from J a p a n were p r i c e d t o o low t o a l l o w t h e B.C. p r o d u c e r s t o compete s u c c e s s -f u l l y . N o r m a l l y , 15% i s added t o w h o l e s a l e p u r c h a s e p r i c e s b e f o r e r e s a l e t o t h e r e t a i l o u t l e t . The r e t a i l p r i c e does n o t have a wide s p r e a d among t h e v a r i o u s s u p e r m a r k e t s o r f i s h s h o p s . A : b r i e f s u r v e y o f f o u r r e t a i l o u t l e t s i n V a n c o u v e r , v a r y i n g i n s i z e from a s m a l l f i s h shop t o l a r g e s u p e r m a r k e t s , was c o n d u c t e d d u r i n g March o f 1977 and 1978 ( s e e a p p e n d i x B ) . The mean r e t a i l market p r i c e s i n 1977 and 1978 were $5.11/kg and $5.77/kg, r e s p e c t i v e l y . The 40 d i f f e r e n c e i n p r i c e between the two c o n s e c u t i v e years rep-r e s e n t s a 13% i n c r e a s e . The share of the r e t a i l p r i c e obtained by the farmer and the w h o l e s a l e r / r e t a i l e r d i d not appear to change. The average wholesale p r i c e s were approx-imately $3.08 and $3.63 per kilogram f o r 1977 and 1978. r e s p e c t i v e l y . T h e r e f o r e , the p o r t i o n of the r e t a i l p r i c e which was r e c e i v e d by the farmer was 60% i n 1977 and 63% i n 1978. The wholesale d i s t r i b u t i o n normally r e c e i v e s about 15% of the r e t a i l p r i c e l e a v i n g approximately 25% of the r e t a i l p r i c e f o r the r e t a i l e r . The r e t a i l p r i c e i n r e s t a u -r a n t s was not analysed because the p r i c e was thought to f l u c -t uate a c c o r d i n g to the r e s t a u r a n t image and the condiments of the chef r a t h e r than to the product c h a r a c t e r i s t i c s . In c l o s i n g , there i s no reason to assume t h a t the wholesale p r i c e of pan-size salmon or t r o u t w i l l change d i s -p r o p o r t i o n a t e l y to the other f a c t o r s a f f e c t e d by g e n e r a l i n f l a t i o n . T h e r e f o r e , the r e l a t i o n s h i p between the p r i c e s and c o s t s i n the salmonid farming i n d u s t r y may be assumed to be c o n s t a n t . Quant i t y An i n d i c a t i o n of the t o t a l q u a n t i t y of farm f i s h de-manded by the B.C. consumers i s a p r e r e q u i s i t e to an a n a l -y s i s of the f e a s i b i l i t y of salmon farming i n the p r o v i n c e . U n f o r t u n a t e l y , l i t t l e i n f o r m a t i o n i s a v a i l a b l e as a b a s i s f o r p r e d i c t i o n s . 41 The q u a n t i t y o f t r o u t p r o d u c e d i n B r i t i s h C o l u m b i a and t h e q u a n t i t y o f t r o u t and p a n - s i z e salmon i m p o r t e d i n t o t h e p r o v i n c e d u r i n g 1976 a r e p r e s e n t e d i n t a b l e I I . I n -f o r m a t i o n c o n c e r n i n g t h e q u a n t i t y o f p a n - s i z e salmon p r o d u c -ed i n B.C. d u r i n g 1976 and made a v a i l a b l e t o t h e f o o d f i s h m arket was n o t a v a i l a b l e from t h e F i s h e r i e s and M a r i n e S e r -v i c e . However, t h e q u a n t i t y i s c o n s i d e r e d t o be m i n i m a l as a l l t h e f i s h a v a i l a b l e would have been p r o d u c e d by p i l o t p r o j e c t s . F o r e x a m p l e . 2760 k i l o g r a m s were p r o d u c e d by t h e E x p e r i m e n t a l F i s h f a r m a t Nanaimo. B.C. A New York b a s e d market r e s e a r c h f i r m r e c e n t l y r e l e a s e d a r e p o r t i n w h i c h i t e s t i m a t e d t h a t t h e combined p a n - s i z e t r o u t and s a l m o n s a l e s i n t h e U.S. would i n c r e a r s e a t an ann-5 u a l r a t e o f a p p r o x i m a t e l y 8% p e r annum u n t i l 1985 . G i v e n t h i s r a t e o f i n c r e a s e as b e i n g r e p r e s e n t a t i v e o f B.C. m a r k e t s a l s o and t h a t t h e t o t a l 1976 f o o d s a l e s i n B.C. were 147260 k i l o g r a m s o f p a n - s i z e salmon and t r o u t , t h e p r o j e c t e d e s t i m a t e s f o r 1977 t o 1987 would be as shown i n t a b l e I I I . No e x p o r t s o f p a n - s i z e s a l m o n i d s were r e p o r t e d f r o m B.C. d u r i n g 1976 . D i s c u s s i o n The a s s u m p t i o n s f o r m e d f r o m t h e above d i s c u s s i o n a r e as f o l l o w s . The p a n - s i z e t r o u t and salmon p r o d u c t s a r e d i r e c t l y c o m p e t i t i v e i n t h e s p e c i a l t y s e a f o o d t r a d e , a t l e a s t w i t h r e s p e c t t o t h e c o n c e r n s o f t h e p r e s e n t s t u d y . The p r i c e o f b o t h p r o d u c t s i s a f f e c t e d by t h e p r i c e and a v a i l a b i l i t y o f f i s h e r y c a u g h t salmon and t o an even 42 T a b l e I I T o t a l P a n - s i z e S a l m o n i d Food Market S a l e s In B r i t i s h C o l u m b i a D u r i n g 1976. S o u r c e o f t h e P r o d u c t J a p a n * U n i t e d S t a t e s * B.C. T r o u t G r o w e r s * * E x p e r i m e n t a l Farm. Nanaimo*** O t h e r * * * * T o t a l Q u a n t i t y ( k g ) 61091 37227 41182 2760 :5 00 0 147260 S o u r c e s : * E x t e r n a l T r a d e R e p o r t 1976: T h r o u g h B r i t i s h C o l u m b i a Customs P o r t s , Government o f t h e P r o v i n c e o f B r i t i s h C o l u m b i a , M i n i s t r y o f Economic D e v e l o p -ment, 1976, p. 44. * * P r o v i d e d by t h e F i s h and W i l d l i f e B r a n c h , V i c t o r i a . B.C., 1978. *&*The 1975 Crop o f Salmon R e a r e d on t h e P a c i f i c B i o -l o g i c a l S t a t i o n E x p e r i m e n t a l F i s h f a r m . T e c h n i c a l Re-p o r t No. 665, 1976, p. 11. * * * * T h i s i s a s u b j e c t i v e e s t i m a t e by t h e a u t h o r b a s e d on d i s c u s s i o n w i t h r e p r e s e n t a t i v e s o f t h e i n d u s t r y . T a b l e I I I The P r e d i c t e d Food Market S a l e s o f P a n - s i z e S a l m o n i d s i n B r i t i s h C o l u m b i a from 1977 t o 1987. Y e a r Food Market S a l e s ( k g ) 1976 147260 a c t u a l 1977 159041 p r e d i c t i o n 1978 171764 ti 1979 185505 II 1980 200346 II 1981 216373 II 1982 233683 II 1983 252378 II 1984 272568 II 1985 294373 II 1986 317923 it 1987 343357 •t 44 g r e a t e r degree by imported pan-size products. The pre-sent wholesale p r i c e of f r e s h and f r o z e n pan-size salmonids i s taken as $3.74 and $3.52 per kilo g r a m , r e s p e c t i v e l y . The q u a n t i t y of farm grown salmonids s o l d to the food s a l e s market i n B.C. i s expected to i n c r e a s e at approxima-t e l y 8% per annum. Because i t i s g e n e r a l l y accepted by the i n d u s t r y that B.C. farm r a i s e d salmonids cannot comp-ete with the f r o z e n f o r e i g n p r o d u c t s , the B.C. farmers w i l l only be expected t o f u l f i l l t h e i r present market share of approximately o n e - t h i r d of the t o t a l food s a l e s . How-ever, i f B.C. farmers can produce f r o z e n product at a com-p e t i t i v e p r i c e , they may be able to exclude the f o r e i g n pro-ducts from the B.C. market. F a c t o r s f a v o u r i n g the B r i t i s h Columbia products would be the p r o x i m i t y of the p r o d u c t i o n and market l o c a t i o n s which would l e s s e n the cost of t r a n s -p o r t a t i o n , remove the u n c e r t a i n t i e s imposed by] l e n g t h y t r a n s p o r t a t i o n r o u t e s , and i n c r e a s e the o p p o r t u n i t y f o r com-munication between the producer and the r e t a i l e r . On the other hand, the same f a c t o r s would favour the f o r e i g n pro-ducts o u t s i d e B.C., p a r t i c u l a r l y , i n view of the p e r c e i v e d s t r o n g c o m p e t i t i v e p o s i t i o n of the f o r e i g n products. The Japanese and to a l e s s e r extent the American products may become l e s s p r i c e c o m p e t i t i v e with the B.C. products due to the recent p o s i t i o n of the Canadian d o l l a r . 45 FOOTNOTES 1. Kennedy; W.A., C T . Shoop, and W. G r i f f i o e n , 1975 . P r e -l i m i n a r y E x p e r i m e n t s i n R e a r i n g P a c i f i c Salmon (1973 p a r r ) i n Pens i n t h e Sea. F i s h e r i e s and M a r i n e S e r v i c e T e c h n i -c a l R e p o r t 541. pp. 17. p. 7. 2. O s t r a n d e r ; J . , C. M a r t i n s e n , J . L i s t o n , and J . M c C u l l -ough. 1976. S e n s o r y T e s t i n g o f P e n - r e a r e d Salmon and T r o u t . J o u r n a l o f Food S c i e n c e 41:386-390. 3. Q u e i r o l o ; L . E . , 1977. S u b s t i t u t i o n a l R e l a t i o n s h i p B e t -ween Rainbow T r o u t and P a n s i z e Salmon: A Market Demand A n a l y s i s . M a s t e r o f S c i e n c e T h e s i s , Oregon S t a t e U n i v -e r s i t y , pp. 84. 4. Anonymous; 1976. E x t e r n a l T r a d e R e p o r t 1976. T r a d e T h r o u g h B r i t i s h C o l u m b i a Customs P o r t s . P r o v i n c e o f B r i t i s h C o l u m b i a . M i n i s t r y o f Economic D e v e l o p m e n t , pp. 159, p. 44. 5. Anonymous; 1977. F a r m - R a i s e d F i s h 6 S h e l l f i s h P r o d u c t i o n t o T r i p l e by 1985 Says Market S t u d y . Q u i c k F r o z e n Foods 4 0 ( 3 ) : 4 4 - 4 7 , p. 45. 6. Anonymous; 1976. op. c i t . CHAPTER V BIOLOGICAL CONSTRAINTS ON PRODUCTION 47 B i o l o g i c a l constraints The production c a p a b i l i t y of the f i s h farm w i l l be con-strained by the b i o l o g i c a l requirements of the salmon. A summary of these constraints i s provided below. Freshwater phase The freshwater phase of the aquaculture project i s prim-a r i l y associated with the egg laying, hatching, and fry rear-ing stages. The c h a r a c t e r i s t i c s of the hatchery and rearing pond water supply are of paramount importance because the water i s the medium of exchange for the metabolic processes, carrying nutrients to the organism and removing the waste products of metabolism. Spe c i f i c c h a r a c t e r i s t i c s of the hatchery water supply are discussed below. Oxygen The biomass of salmon embryos and alevins that may be supported by an incubator system i s largely dependent upon the dissolved oxygen content of the water. Oxygen consump-tion i s a factor of the water temperature and the stage of development of the f i s h . Increases in either of these para-meters increases the metabolic a c t i v i t y of the organism re-su l t i n g in greater oxygen consumption. The minimum dissolved oxygen content for hatchery water i s thought to be 8 ppm for eggs and alevins and 5 to 6 ppm for development of the fry These requirements may change s l i g h t l y depending upon the l o c a l conditions. Salmon, once developed to the fry stage. 48 r e q u i r e more oxygen p e r u n i t w e i g h t when t h e y a r e s m a l l t h a n l a r g e . F o r example, one k i l o g r a m o f f r y need more oxygen and 3 t h u s a g r e a t e r volume o f w a t e r t h a n one k i l o g r a m o f g r o w e r s T e m p e r a t u r e Mature salmon p r e f e r t o spawn a t t e m p e r a t u r e s between 7 and 13 C. The r e l e a s e d eggs s h o u l d n o t be s u b j e c t e d t o t e m p e r a t u r e s below 5 C f o r a t l e a s t 10 days a f t e r f e r t i l i z a -t i o n . P r o p e r l y p r e c o n d i t i o n e d salmon embryos and a l e v i n s can t o l e r a t e t e m p e r a t u r e s t o 0 C. The u p p e r t e m p e r a t u r e l i m i t f o r f r y i s a p p r o x i m a t e l y 21 C . A l t h o u g h t h e maximum r a t e o f g rowth and f o o d c o n v e r s i o n i s a c h i e v e d between 10 and 15 C ^ . S m a l l changes i n t e m p e r a t u r e can a f f e c t growth c o n s i -d e r a b l y as d e m o n s t r a t e d by one s t u d y i n w h i c h f i n g e r l i n g C h i n -ook salmon were s u b j e c t e d t o a 0.5 C t e m p e r a t u r e i n c r e a s e . T h i s s m a l l change i n t e m p e r a t u r e r e s u l t e d i n a 7% i n c r e a s e 6 i n t h e m o n t h l y growth r a t e . T e m p e r a t u r e s above 20 C a r e c r i t i c a l b e c a u s e t h e c o n c e n t r a t i o n o f d i s s o l v e d oxygen becomes l i m i t i n g ^ . Hydrogen i o n The h y d r o g e n i o n c o n c e n t r a t i o n o r pH o f t h e h a t c h e r y Q w a t e r s u p p l y s h o u l d be between 6 and 8 on t h e pH s c a l e The pH i s i m p o r t a n t b e c a u s e i t i n f l u e n c e s t h e e f f e c t o f s u b s t a n -c e s s u c h as m e t a l s , a l k a l i s , a c i d s , and g a s e s d i s s o l v e d i n t h e w a t e r u s e d t o c u l t u r e t h e s a l m o n . Gases D i s s o l v e d oxygen has a l r e a d y been d i s c u s s e d . O t h e r d i -49 s s o l v e d gases of c r i t i c a l importance are carbon d i o x i d e , amm-o n i a , hydrogen s u l f i d e , and n i t r o g e n . The c r i t i c a l concent-r a t i o n s of each i s : carbon d i o x i d e . 5 mg per l i t e r ; u n i o n i z e d ammonia, .002 mg per l i t e r ; hydrogen s u l f i d e . 0.5 mg per l i t e r ; 9 and n i t r o g e n i f s u p e r s a t u r a t e d i n the water . Metals Small q u a n t i t i e s of d i s s o l v e d metals such as z i n c , alum-inum, copper, and l e a d can be l e t h a l to hatchery r e a r e d s a l -monids. The z i n c used to g a l v a n i z e pipe may enter the hatch-ery water supply even when contact with the water i s of short d u r a t i o n ^ . T h e r e f o r e , g a l v a n i z e d m a t e r i a l should be a v o i d -ed f o r c o n s t r u c t i o n of the water system. Aluminum has been a common m a t e r i a l used to c o n s t r u c t troughs and other hatchery equipment. However, the a q u a c u l t u r i s t should seek engineer-ing a s s i s t a n c e to a c q u i r e an aluminum a l l o y t h a t i s compat-i b l e with the water supply he i s u s i n g ^ . Caution should 12 be e x c e r c i s e d when using copper or l e a d products . Even s m a l l copper washers can be the cause of f i s h m o r t a l i t i e s . S a l i n i t y Salmon embryos can develop p r o p e r l y i n water with a s a l -i n i t y of near 0 0/00 to 11 0/00. Pink and chum embryos can t o l e r a t e o c c a s i o n a l contact with water of 15 to 30 0/00 13 s a l i n i t y although prolongued c o n t a c t may r e s u l t i n death Once the f r y have adju s t e d to t h e i r r e a r i n g f a c i l i t i e s and begun to feed w e l l they may be subjected to a mixture of 14 10:1 f r e s h to s a l t water 50 Volume o f w a t e r A s u f f i c i e n t volume o f w a t e r must be a v a i l a b l e t o p r o -v i d e t h e n e c e s s a r y n u t r i e n t s f o r a n a b o l i s m , as w e l l as t o remove t h e u n n e c e s s a r y p r o d u c t s o f c a t a b o l i s m . Eggs c o n t a i n a v e r y s m a l l amount o f m e t a b o l i c a l l y a c t i v e m a t e r i a l and r e -q u i r e o n l y s u f f i c i e n t w a t e r f l o w t o m a i n t a i n o x y g e n a t e d w a t e r a t t h e s u r f a c e o f t h e egg and t o remove t h e m e t a b o l i c w a s t e s . The r e q u i r e d f l o w r a t e f o r salmon i n h a t c h e r y s y s t e m s may be c a l c u l a t e d u s i n g s t a n d a r d f o r m u l a e . H a s k e l l d e v e l o p e d a form-u l a f o r d e t e r m i n i n g t h e c a r r y i n g c a p a c i t y o f t r o u t c u l t u r e f a c i l i t i e s b a s e d on t h e a s s u m p t i o n t h a t c a r r y i n g c a p a c i t y was b a s e d on oxygen c o n s u m p t i o n and t h e a c c u m u l a t i o n o f m e t a b o l i c p r o d u c t s b o t h o f w h i c h were p r o p o r t i o n a l t o t h e q u a n t i t y o f f o o d p r o v i d e d t o t h e f i s h ^ . W i l l o u g h b y r e v i s e d t h e above f o r m u l a t o p r e d i c t f l o w r a t e s f o r a l l r e a r i n g f a c i l i t i e s 1 6 . The f o r m u l a i s p r e s e n t e d below i n m e t r i c f o r m : f l o w r a t e = f e e d i n g r a t e C ( 0 - 0 . ) a b where f l o w r a t e = f l o w r a t e o f i n c o m i n g w a t e r i n l i t e r s p e r m i n u t e f e e d i n g r a t e = k i l o g r a m s o f f e e d p e r 24 h o u r p e r i o d C = a c o n s t a n t ; m e t r i c t o n s o f w a t e r p a s s e d a t one l i t e r p e r m i n u t e f o r one 24 h o u r p e r i o d d i v i d e d by t h e grams o f oxygen r e q u i r e d t o m e t a b o l i z e 2640 c a l o r i e s (one k i l o g r a m ) o f f e e d ; e s t i m a t e d a t 220 grams 51 0 = oxygen c o n t e n t o f i n c u r r e n t w a t e r i n ppm 3. 0^ = oxygen c o n t e n t o f e x c u r r e n t w a t e r i n ppm E l l i o t t p r o v i d e d a s e t o f f o r m u l a e t o d e t e r m i n e t h e oxy-gen r e q u i r e m e n t s o f c h i n o o k salmon b a s e d on e x p e r i m e n t a l gro-17 wth s t u d i e s . T h i s method r e q u i r e s knowledge p e r t a i n i n g t o t h e f i s h w e i g h t and t h e w a t e r t e m p e r a t u r e . C o n s t a n t s f o r t h e v a r i o u s w e i g h t c l a s s e s h a v i n g been p r e d e t e r m i n e d . Form-u l a e f o r t h r e e w e i g h t c l a s s e s a r e p r o v i d e d below: Y. o c = 0.0242 T - 0.7718 Y g = 0.1917 T - 0.5877 Y = 0.1508 T - 0.4642 where Y ^ n j = The mean w e i g h t i n grams o f i n d i v i d u a l f i s h i n t h e w e i g h t c l a s s T = t h e t e m p e r a t u r e i n d e g r e e s F a r e n h e i t Once Y ( n ) has been c a l c u l a t e d t h e f o l l o w i n g f o r m u l a i s u s e d t o d e t e r m i n e W. t h e w e i g h t o f f i s h o f n s i z e w h i c h 3.78 l i t e r s o f i n f l o w i n g w a t e r w i l l s u p p o r t u n d e r optimum c o n d i t -i o n s f o r g r o w t h : W = 0 - 0, a b Y ( n ) where 0 = t h e oxygen c o n t e n t o f i n c u r r e n t w a t e r i n ppm cl 0^ = t h e oxygen c o n t e n t o f e x c u r r e n t w a t e r i n ppm S a l t w a t e r phase The q u a l i t y o f t h e s a l t w a t e r s u p p l y s h o u l d be s i m i l a r 52 to t h a t d e s c r i b e d f o r the hatchery. However, one exception i s t h a t the s a l i n i t y should be between 28 and 32 0/00 f o r opt-imum r e s u l t s . Because s a l t w a t e r p e n - r e a r i n g has had a much s h o r t e r h i s t o r y than freshwater o p e r a t i o n s , the amount of l i t e r a t u r e a v a i l a b l e i s s m a l l and l a r g e l y e x p e r i m e n t a l . Disease Disease i s a constant t h r e a t to the economic v i a b i l i t y of the aquaculture o p e r a t i o n . Each f i s h from the egg to mar-ket s i z e i s a u n i t of p r o d u c t i o n to which l a b o u r , m a t e r i a l , and space must be a l l o c a t e d throughout the p r o d u c t i o n process r e s u l t i n g i n a cumulative cost of the product. However, reven-" ue i s not r e a l i z e d t o the f i r m u n t i l that u n i t has been mar-keted and the funds r e c e i v e d . T h e r e f o r e , any organism ( u n i t ) succumbing to d i s e a s e and thereby rendered unmarketable t h r -ough death or unjury does not c o n t r i b u t e to the revenue of the f i r m but does c o n t r i b u t e to the expenses charged a g a i n s t r e v -enue. I t i s obvious t h a t a r e d u c t i o n i n l o s s e s to d i s e a s e w i l l r e s u l t i n a r e d u c t i o n i n the f a c i l i t i e s and labour f o r a d e s i r e d p r o d u c t i o n output and to the cost of the t o t a l mar-ket a b l e product. A l s o , i n the case of salmon, new u n i t s of p r o d u c t i o n are only a v a i l a b l e d u r i n g a l i m i t e d p e r i o d each year. Thus, once these u n i t s are l o s t they w i l l not be rep-l a c e a b l e u n t i l the f o l l o w i n g spawning season and a complete p r o d u c t i o n c y c l e w i l l have been l o s t . T h i s s e c t i o n d e a l s b r i e f l y with some of the more common d i s e a s e s l i k e l y t o be encountered i n salmonid aquaculture o p e r a t i o n s . 53 D i s e a s e s o f eggs Fungus. Fungus i n f e c t i o n s a r e common p a r t i c u l a r l y i f i n f e r t i l e eggs a r e a l l o w e d t o r e m a i n i n t h e c u l t u r e medium, a l t h o u g h r e g u l a r d i s i n f e c t i o n w i t h f o r m a l i n o r m a l a c h i t e g r e -en w i l l i n h i b i t i n f e c t i o n by f u n g i . M a l f o r m a t i o n . O t h e r d i s o r d e r s commonly e n c o u n t e r e d a r e t h e o c c u r r e n c e o f w h i t e and c o a g u l a t e d y o l k w h i c h i s t h o u g h t t o be due t o d i s s o l v e d z i n c and c o p p e r i n t h e w a t e r s u p p l y , and t h e c l u m p i n g o f eggs i n t o s t i c k y b a l l s i s u s u a l l y a t t r i b -18 u t e d t o h i g h ammonia c o n c e n t r a t i o n s i n t h e h a t c h e r y w a t e r D i s e a s e s o f a l e v i n s M a l f o r m a t i o n . Y o l k - s a c m a l f o r m a t i o n s have been a t t r i b -u t e d t o m y x o - b a c t e r i a a l t h o u g h t h e p a t h o g e n i c a g e n t s have n o t been w e l l d e s c r i b e d . Expanded o r d u m b b e l l s h a p e d y o l k - s a c s a r e c h a r a c t e r i s t i c m a n i f e s t a t i o n s o f t h e s e i n f e c t i o n s r e s u l t -i n g i n t h e l o s s o f n o r m a l swimming a b i l i t i e s by t h e a l e v i n . These d i s e a s e s may be p r e v e n t e d o r a l l e v i a t e d by i n c r e a s i n g 19 t h e f l o w r a t e o f t h e w a t e r i n t h e i n c u b a t o r o r by u s i n g 20 a r u g o s e s u b s t r a t e and e x c l u d i n g l i g h t from t h e i n c u b a t o r P r o t o z o a n p a r a s i t e s . C o s t i a i s c a u s e d by t h e f l a g e l l a t e C o s t i a n e c a t r i x w h i c h l o d g e s u n d e r t h e s k i n o f t h e body and 21 g i l l s f o r m i n g a l i g h t g r e y - b l u e f i l m . I t may be t r e a t e d 22 w i t h a s o l u t i o n o f 1 p a r t f o r m a l i n t o 6000 p a r t s w a t e r T r i c h o d i n a a p p e a r s as a l i g h t b l u e s l i m e on t h e body s u r f a c e and i s t r e a t e d by e x p o s u r e o f t h e i n f e c t e d a r e a t o s a l t w a t e r . E m b o l i s m . Gas b u b b l e d i s e a s e a p p e a r s as b u b b l e s u n d e r 54 t h e s k i n o r b e h i n d t h e e y e s . I t i s c a u s e d by s u p e r s a t u r a -2 3 t i o n o f g a s e s i n t h e h a t c h e r y w a t e r D i s e a s e s o f f r y V i r a l d i s e a s e s . I n f e c t i o u s p a n c r e a t i c n e c r o s i s (IPN) t y p i c a l l y o c c u r s w i t h i n two months o f t h e commencement o f f e e d i n g c a u s i n g t h e f r y t o l o s e e q u i l i b r i u m and e v e n t u a l l y d i e . The d i s e a s e i s v e r y i n f e c t i o u s w i t h no r e a d y and r e l -i a b l e t r e a t m e n t a v a i l a b l e t o t h e f i s h f a r m e r . Equipment t h a t has come i n t o c o n t a c t w i t h t h e d i s e a s e s h o u l d be d i s i n f e c t e d w i t h i o d o p h o r compound. I n f e c t i o u s h a e m a t o p o i e t i c n e c r o s i s (IHN) i s a v i r a l d i s e a s e c h a r a c t e r i z e d by p a l e g i l l s , s w o l l -en s t o m a c h s , and f a e c e s p r o t r u d i n g f r o m t h e v e n t . No a c c e p -t a b l e t r e a t m e n t i s a v a i l a b l e t o t h e f i s h f a r m e r t o p r o t e c t 24 h i s s t o c k f r o m t h e s e d i s e a s e s P a r a s i t e s . C o s t i a as d e s c r i b e d above f o r a l e v i n s i s a common d i s e a s e a s s o c i a t e d w i t h f r y r e a r i n g when t e m p e r a t u r e s and s t o c k i n g d e n s i t i e s a r e h i g h . D i s e a s e s o f a d v a n c e d s t a g e s o f growth B a c t e r i a . The p r i n c i p a l d i s e a s e s o f a d v a n c e d growth s t a g e s o f salmon w h i c h were e n c o u n t e r e d by t h e E x p e r i m e n t a l F i s h Farm a t t h e P a c i f i c B i o l o g i c a l S t a t i o n , Nanaimo were f u r u n c u l o s i s , v i b r i o s i s ( V i b r i o a n g u i l l a r u m and an u n i d e n t i f -i e d V i b r i o s p . ) , and k i d n e y d i s e a s e . F u r u n c u l o s i s i s c a u s e d by Aeromonas s a l m o n i c i d a and i s c h a r a c t e r i z e d by r e d l e s i o n s w h i c h b u r s t r e l e a s i n g i n f e c t i o u s b a c t e r i a . C o n t r o l and p r e -v e n t i o n o f f u r u n c u l o s i s may be e f f e c t e d by t r e a t m e n t w i t h 55 2 5 s u l p h a m e r i z i n e and o x y t e t r a c y c l i n e . V i b r i o s i s i s a t t r i -b u t e d t o i n f e c t i o n by V i b r i o a n g u i l l a r u m which d i s r u p t s t h e f u n c t i o n i n g o f t h e s p l e e n and k i d n e y s i n t h e e a r l y s t a g e s o f i n f e c t i o n b ut may r e s e m b l e f u r u n c u l o s i s a f t e r a p r o l o n g u e d p e r i o d o f i n f e c t i o n . T r e a t m e n t i s r e a d i l y e f f e c t e d w i t h a n t i -2 6 b i o t i c s . K i d n e y d i s e a s e r e s u l t s from i n f e c t i o n by C o r y n -e b a c t e r i a l i n f e c t i o n w h i c h p r o d u c e s ' g r a n u l o m a t o u s ' l e s i o n s on t h e k i d n e y s . The e f f e c t s o f t h e d i s e a s e become most a p p a r * e n t when t h e s m o l t s a r e t r a n s f e r r e d from f r e s h t o s a l t w a t e r . I t i s a t t h i s t i m e t h a t t h e f i s h a p p e a r u n a b l e t o cope w i t h t h e new s t r e s s o f t h e s a l i n i t y change and d i e . A l t h o u g h imm-u n i z a t i o n i s p o s s i b l e , t r e a t m e n t o f c h r o n i c i n f e c t i o n s i s n o t c o n s i d e r e d t o be a u s e f u l a l t e r n a t i v e f o r t h e f i s h f a r m e r . Many o t h e r d i s e a s e s a r e p o t e n t i a l d a n g e r s t o c u l t u r e d salmon a l t h o u g h t h e i r o c c u r r e n c e i s l e s s f r e q u e n t t h a n t h e d i s e a s e s d e s c r i b e d a b o v e . F u r t h e r i n f o r m a t i o n may be o b t a i n -ed by c o n s u l t i n g a t e x t s u c h a s , 'Handbook o f T r o u t and S a l -27 mon D i s e a s e s ' . C o n t r o l o f d i s e a s e i s e x t r e m e l y i m p o r t a n t t o t h e f i s h f a r m e r i n o r d e r t o p r o d u c e a q u a l i t y p r o d u c t f o r t o p r e v e n u e r e a l i z a t i o n and t o m a i n t a i n low u n i t c o s t s , b o t h o f wl&ich l e a d t o a h i g h e r p r o f i t m a r g i n . G e n e r a l • 2 8 Two r e c e n t p u b l i c a t i o n s , 'Salmon R a n c h e r ' s M a n u a l ' , 29 and ' T r o u t and Salmon C u l t u r e * a r e e x c e l l e n t s o u r c e mat-e r i a l s d e s c r i b i n g t h e b i o l o g i c a l a s p e c t s o f salmon h a t c h e r y o p e r a t i o n s . These a r t i c l e s s h o u l d be c o n s u l t e d i f more 56 s p e c i f i c i n f o r m a t i o n i s r e q u i r e d b e c a u s e t h e i n f o r m a t i o n p r e -s e n t e d above was c h o s e n t o i l l u s t r a t e t h e c o n s t r a i n t s t h a t a r e e n c o u n t e r e d i n d e s i g n i n g and o p e r a t i n g a f i s h f a r m . 57 FOOTNOTES 1. H a l v e r ; J . E . , 1972. F i s h N u t r i t i o n . Academic P r e s s : New Y o r k , London, pp. 713, p. 379. 2. M c N e i l ; W.J. and J . E . B a i l e y , 1975. Salmon R a n c h e r ' s M a n u a l . N o r t h w e s t F i s h e r i e s C e n t e r , Auke Bay F i s h e r i e s L a b o r a t o r y P r o c e s s e d R e p o r t . J u l y 1975, pp. 95. p. 22. 3. E l l i o t t ; J.W., 1969. The Oxygen R e q u i r e m e n t s o f C h i n o o k Salmon. The P r o g r e s s i v e F i s h - C u l t u r i s t 3 1 ( 2 ) : 6 7 - 7 3 . 4. M c N e i l ; W.J. and J . E . B a i l e y , 1975. op. c i t . , pp. 22-23. 5. B r e t t ; J.R., 1952. T e m p e r a t u r e T o l e r a n c e i n Young P a c i f i c S almon. Genus O n c o r h y n c h u s . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h B o a r d o f Canada 9:265-323, p. 305. 6. H a l v e r ; J . E . , 1972. op. c i t . . p. 377. 7. R o b e r t s ; R . J . and C . J . S h e p h e r d . 1974. Handbook o f T r o u t and Salmon D i s e a s e s . F i s h i n g News ( B o o k s ) L t d : London, pp. 168. p. 34. 8. M c N e i l ; W.J. and J . E . B a i l e y . 1975. op. c i t . , p. 23. 9. I b i d . . p. 24. 10. L e i t r i t z ; E. and R.C. L e w i s , 1976. T r o u t and Salmon C u l t u r e . S t a t e o f C a l i f o r n i a Department o f F i s h and Game, F i s h B u l l e t i n 164, pp. 197, p. 14. 11. I b i d . . p. 78. 12. S p o t t e ; S.H., 1970. F i s h and I n v e r t e b r a t e C u l t u r e . W i l e y - I n t e r s c i e n c e : New Y o r k , pp. 145. p. 92. 13. M c N e i l ; W.J. and J . E . B a i l e y , 1975. op. c i t . , p. 52. 14. S o l m i e ; A., 1977. A q u a c u l t u r i s t a t t h e E x p e r i m e n t a l F i s h Farm a t Nanaimo, B.C. P e r s o n a l c o m m u n i c a t i o n . 15. H a s k e l : D . C . 1955 . Weight Of F i s h Per C u b i c F o o t Of Water In H a t c h e r y T r o u g h s And Ponds. The P r o g r e s s i v e F i s h - C u l t u r i s t 17(3 ):117-118 . •16. W i l l o u g h b y : H., 1968. A Method F o r C a l c u l a t i n g C a r r y -i n g C a p a c i t i e s Of H a t c h e r y T r o u g h s And Ponds. The P r o g r e s s i v e F i s h - C u l t u r i s t 30( 3 ) : 173-174 . 58 FOOTNOTES 17. E l l i o t t ; J.W., 1969. op. c i t . , p. 71. 18. R o b e r t s ; R . J . and C . J . S h e p h e r d , 1974. op. c i t . . p. 82. 19. I b i d . , p. 84. 20. Edami; H., 1973. Y o l k - s a c M a l f o r m a t i o n i n P a c i f i c Salmon i n R e l a t i o n t o S u b s t r a t e , T e m p e r a t u r e , and Water V e l o c i t y . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h B o a r d o f Canada 30:1249-1250 . 21. Huet; M., 1970. T e x t b o o k o f F i s h C u l t u r e . F i s h i n g News Books L t d . : London, pp. 436, p. 375. 22. M c N e i l ; W.J. and J . E . B a i l e y , 1975. op. c i t . , p. 59. 23. R u c k e r ; R. and P. Kangas, 1974. E f f e c t o f N i t r o g e n Sup-e r s a t u r a t e d Water on Coho and C h i n o o k Salmon. The P r o g -r e s s i v e F i s h C u l t u r i s t 36:152-156. 24. R o b e r t s ; R . J . and C . J . S h e p h e r d , 1974. op. c i t . , p. 89. 25. I b i d . , p. 101. 26. I b i d . , p. 117. 27. I b i d . 28. M c N e i l ; W.J. and J . E . B a i l e y , 1975. op. c i t . 29. L e i t r i t z ; E. and R.C. L e w i s . 1976. op. c i t . CHAPTER VI PRODUCTION 60 C h o i c e o f s p e c i e s A l t h o u g h f i v e s p e c i e s o f P a c i f i c salmon a r e i n d i g e n o u s t o t h e n o r t h e a s t P a c i f i c o c e a n , e a c h i s n o t e q u a l l y s u i t a b l e t o t h e r e q u i r e m e n t s o f t h e a q u a c u l t u r i s t . The a q u a c u l t u r i s t r e q u i r e s an o r g a n i s m t h a t i s f i r s t o f a l l r e a d i l y a v a i l a b l e t o h i s p r o d u c t i o n p r o c e s s . S e c o n d , t h e s p e c i e s must have a low m o r t a l i t y s u c h t h a t f e e d and r e a r i n g f a c i l i t i e s expend-ed on o r g a n i s m s w h i c h w i l l n o t become a m a r k e t a b l e p r o d u c t a r e l i m i t e d . T h r e e common c a u s e s o f m o r t a l i t y a r e d i s e a s e s o f t h e v i b r i o o r f u r u n c u l o s i s t y p e , p r e d a t i o n by s h a r k s , b i r d s and r o d e n t s , and c a n n i b a l i s m o f t h e c u l t u r e d s a l m o n . T h i r d , t h e growth r a t e s h o u l d be r a p i d and u n i f o r m . The f a s t e r t h e growth r a t e t h e s o o n e r t h e f i s h w i l l r e a c h m a r k e t a b l e s i z e and be h a r v e s t e d . An e a r l y h a r v e s t w i l l r e d u c e t h e r i s k o f t h e i n a d v e r t e n t l o s s o f p r o d u c t t h r o u g h m o r t a l i t y , and w i l l r e d u c e t h e q u a n t i t y o f l a b o u r expended on r e a r i n g . F o u r t h , t h e o r g a n i s m must p r o v i d e a low c o n v e r s i o n r a t i o o f f o o d t o f l e s h w e i g h t . F e e d c o s t s a r e p r o p o r t i o n a l t o t h e c o n v e r s i o n r a t i o . T h e r e f o r e , a low c o n v e r s i o n r a t i o w i l l r e s u l t i n low f e e d c o s t s 1 . The f i v e s p e c i e s o f salmon i n d i g e n o u s t o B r i t i s h C o l u m b i a a r e r e a d i l y a v a i l a b l e t o p r o v i d e f e r t i l i z e d eggs (new p r o d -u c t i o n u n i t s ) i n t h e f a l l o f e a c h y e a r . However, t h e a v a i l -a b i l i t y o f eggs t o t h e a q u a c u l t u r i s t i s r e g u l a t e d n o t o n l y by b i o l o g i c a l p r o c e s s e s b u t a l s o by government r e g u l a t i o n s . The a q u a c u l t u r i s t must o b t a i n h i s egg s t o c k from t h e F i s h e r i e s 61 and M a r i n e S e r v i c e . T h i s a g e n c y w i l l p r o v i d e eggs o f a s p e c -i f i e d s p e c i e s once t h e a g e n c y r e q u i r e m e n t f o r eggs has been met. The p r o b l e m f o r t h e a q u a c u l t u r i s t i s t h a t t h e eggs o f some s p e c i e s may be u n a v a i l a b l e o r i n l i m i t e d s u p p l y . F o r example, s u p p l i e s o f c h i n o o k eggs have been l i m i t e d r e c e n t l y b e c a u s e t h e government ag e n c y has been d i r e c t i n g t h e a v a i l a b l e eggs t o t h e enhancement o f n a t u r a l f i s h s t o c k s r a t h e r t h a n t o p r i v a t e a q u a c u l t u r i s t s . I f t h e r e g u l a t i o n s p r o h i b i t i n g t h e p r i v a t e a q u a c u l t u r i s t f r o m c o l l e c t i n g h i s own salmon egg s t o c k were r e l a x e d , an a d e q u a t e s u p p l y o f s t o c k f r o m any o f t h e f i v e s p e c i e s would be a v a i l a b l e f o r f i s h f a r m i n g . How-e v e r , a s e n i o r F i s h e r i e s o f f i c i a l s t a t e d t h a t he b e l i e v e s t h e needs o f t h e p r i v a t e a q u a c u l t u r i s t can be met by t h e F i s h e r -i e s and M a r i n e S e r v i c e i f t h e r e q u e s t e d l e a d t i m e f o r p r o c u r e -2 ment i s g i v e n t o t h e a g e n c y . T h e r e f o r e , t h e c h o i c e o f s a l -mon s t o c k i n B r t i t i s h C o l u m b i a s h o u l d be i n d e p e n d e n t o f c r i t -e r i a r e g a r d i n g s u p p l y . The m o r t a l i t y r a t e o f t h e v a r i o u s s p e c i e s when r e a r e d i n c a p t i v i t y v a r i e s c o n s i d e r a b l y . A p r e l i m i n a r y r e p o r t c o n c -e r n i n g c o m m e r c i a l salmon f a r m i n g i n W a s h i n g t o n S t a t e e v a l u a t -ed coho and c h i n o o k salmon as h a v i n g a good r e s i s t a n c e t o d i s -3 e a s e whereas chum and p i n k salmon were r a t e d as p o o r No e v a l u a t i o n was p r o v i d e d f o r s o c k e y e . A more r e c e n t s t u d y i n B r i t i s h C o l u m b i a s u g g e s t e d t h a t t h e m o r t a l i t y o f s o c k e y e i n pen c u l t u r e was t o o h i g h f o r t h a t s p e c i e s t o be u s e d f o r 4 c o m m e r c i a l f i s h f a r m i n g . Coho and c h i n o o k ,_on t h e o t h e r 62 hand, were t h o u g h t t o be i d e a l f a r m s t o c k . T h e r e was a d i f f -e r e n c e o f l e s s t h a n one p e r c e n t i n t h e s u r v i v a l o f t h e two s p e c i e s t o h a r v e s t a b l e s i z e . I t would a p p e a r t h a t coho and C h i n o o k salmon a r e t h e p r i m e c h o i c e s f o r f a r m i n g w i t h r e s p e c t t o m o r t a l i t y . A r a p i d and u n i f o r m growth r a t e , a l t h o u g h p e r h a p s n o t as i m p o r t a n t as m o r t a l i t y , i s an i m p o r t a n t c r i t e r i o n f o r t h e f i s h f a r m e r . R a p i d growth r e d u c e s r i s k and l a b o u r e x p e n d i t u r e s as s t a t e d e a r l i e r . U n i f o r m growth i s i m p o r t a n t when a p a r t -i c u l a r p r o d u c t s i z e i s r e q u i r e d f o r m a r k e t i n g b e c a u s e i f a l l t h e f i s h grow a t an e q u i v a l e n t r a t e t o t h e same s i z e t h e n a c o m p l e t e p r o d u c t i o n c y c l e can be h a r v e s t e d a t o n c e . More i m p o r t a n t l y a l l t h e f i s h w i t h i n one n e t - p e n can be h a r v e s t e d s i m u l t a n e o u s l y . B u t , when growth i s n o t u n i f o r m t h e f i s h must be g r a d e d o v e r a p e r i o d o f weeks t o o b t a i n u n i f o r m i t y . A l s o , i f t h e s p e c i e s i s p r o n e t o c a n n i b a l i s m , d i s p a r i t i e s i n t h e s i z e o f i n d i v i d u a l f i s h r e s u l t i n g from t h e d i f f e r e n c e i n growth r a t e w i l l n e c e s s i t a t e f r e q u e n t g r a d i n g t o p r e v e n t l o s s e s . T h i s g r a d i n g p r o c e d u r e r e q u i r e s a d d i t i o n a l l a b o u r h o u r s and t h e i n c r e a s e d h a n d l i n g d u r i n g t h e g r a d i n g p r o c e s s i n c r e a s e s s t r e s s w h i c h r e s u l t s i n a h i g h e r m o r t a l i t y o f t h e c u l t i v a t e d f i s h . C h i n o o k salmon have a more u n i f o r m growth r a t e t h a n c o h o . however, coho salmon a r e b e l i e v e d t o be more r e s i s t a n t t o s t r e s s t h a n c h i n o o k salmon t h e r e b y a l l e v i a t i n g one o f t h e 5 drawbacks o f g r a d i n g . The growth o f coho may be s l i g h t l y 63 more r a p i d than chinook but chinook are thought to continue to grow w e l l to a weight of s e v e r a l kilograms whereas the growth r a t e of coho drops o f f when the f i s h a t t a i n approxim-a t e l y one kilogram ^ . A comparison of the c o n v e r s i o n r a t i o s among the s p e c i e s of salmon has not been a v a i l a b l e . This i s probably due to the f a c t t h at c o n v e r s i o n r a t i o s are dependent upon the f e e d i n g r e g -ime and the p h y s i o l o g i c a l age of the f i s h . S t a n d a r d i z a t i o n of these two f a c t o r s may not be f e a s i b l e p r e s e n t l y . In a d d i t i o n , the emphasis of government r e s e a r c h appears to have been on i n c r e a s i n g the growth r a t e of the v a r i o u s s p e c i e s r a t h e r than c o n v e r s i o n e f f i c i e n c y of the feed. However, the g e n e r a l con-census of o p i n i o n by people i n the f i e l d i s that the convert s i o n r a t i o s are approximately the same f o r a l l f i v e s p e c i e s . Choice of f a c i l i t i e s There are many types and s t y l e s of hatchery and r e a r i n g f a c i l i t i e s a v a i l a b l e f o r the f i s h a q u a c u l t u r i s t to equip the f i s h farm. The equipment ranges from simple home-built models to e l a b o r a t e models produced by the many manufacturers of aquaculture equipment. A l i s t of manufacturers and a guide to the a v a i l a b l e equipment i s provided i n the 'Aquaculture 7 Industry's 1977 Buyer's Guide' . The proposed f i s h farm d e s c r i b e d on the f o l l o w i n g pages i s an attempt to combine the components necessary to e s t a b l i s h a salmon farm i n B r i t i s h Columbia based upon the requirements of the area and the a v a i l -a b i l i t y of equipment. The i n f o r m a t i o n was obtained from know-64 l e d g e a b l e p e o p l e i n t h e P a c i f i c n o r t h w e s t who a r e o r have been i n v o l v e d i n t h e salmon f a r m i n g i n d u s t r y as e i t h e r g o v e r n -ment r e s e a r c h e r s o r c o m m e r c i a l v e n t u r e r s . The f a c i l i t i e s and methods were c h o s e n t o p r o v i d e a sy s t e m w h i c h would en-a b l e a h i g h p r o b a b i l i t y o f s u c c e s s a t a minimum c o s t , however, t h e r e a r e many p o s s i b i l i t i e s and t h e f o l l o w i n g s y n t h e s i s i s n o t t o be c o n s t r u e d as t h e s o l e c h o i c e . H a t c h e r y f a c i l i t i e s The h a t c h e r y f a c i l i t y o f t h e p r i v a t e salmon a q u a c u l t u r i s t i n B r i t i s h C o l u m b i a w i l l n o t r e q u i r e equipment f o r t h e p r o c u r e -ment, m a i n t e n a n c e , o r s t r i p p i n g o f b r o o d s t o c k . F e d e r a l f i s h -e r y r e g u l a t i o n s p r o h i b i t t h e p r i v a t e a q u a c u l t u r i s t from ob-t a i n i n g salmon eggs o r f r y from any s o u r c e o t h e r t h a n t h e F i s h e r i e s and M a r i n e S e r v i c e o f t h e Department o f t h e . E n v i r -onment. The eggs may i n f a c t be p r o v i d e d by h a t c h e r i e s o u t s i d e B r i t i s h C o l u m b i a , f o r example W a s h i n g t o n S t a t e h a t c h e r i e s , b u t o n l y w i t h t h e a u s p i c e s o f t h e F i s h e r i e s and M a r i n e S e r v i c e . The eggs made a v a i l a b l e by t h i s government ag e n c y may be g r e e n , r e c e n t l y f e r t i l i z e d , o r e y e d , i n which d e v e l o p m e n t o f t h e embryo has p r o g r e s s e d t o t h e s t a g e where t h e eye i s r e a d i l y d i s c e r n i b l e . T h e r e f o r e , t h e p r i v a t e h a t c h e r y s y s t e m w i l l b e g i n w i t h egg i n c u b a t i o n n o t spawning o f t h e b r o o d s t o c k . The two most commonly u s e d and s u c c e s s f u l egg i n c u b a t i o n s y s t -ems a r e t h e v e r t i c a l t r a y ( H e a t h t r a y ) and g r a v e l o r box i n c u b a t o r . V e r t i c a l t r a y i n c u b a t o r s a r e us e d i n government h a t c h -65 e r i e s where c o m p l e t e c o n t r o l i s d e s i r e d . The Heath i n c u b a t o r has a w a t e r t r a y and an egg c o n t a i n e r t r a y w i t h c o v e r . The w a t e r t r a y i s 54 cm w i d e . 62.9 cm l o n g , and 8.6 cm deep and i s c o n s t r u c t e d o f f i b r e g l a s s . I t i s d e s i g n e d t o f o r c e t h e w a t e r up from t h e bottom o f t h e egg t r a y a t a r a t e o f 11.4 t o 37.9 l i t e r s p e r m i n u t e and o u t t h e t o p i n t o an o v e r f l o w w h i c h d r a i n s i n t o t h e f o l l o w i n g t r a y o r c o n t a i n e r . The egg c o n t a i n e r t r a y i s 34.9 cm w i d e . 40.6 cm l o n g , and 5.1 cm deep. I t i s c o n s t r u c t e d o f f i b r e g l a s s and s t a i n l e s s s t e e l and r e s t s i n s i d e t h e w a t e r t r a y . The t o p and b o t t o m p a n e l s a r e i n l a i d w i t h f i b r e g l a s s s c r e e n t o h o l d t h e eggs i n a p o s i t i o n so t h a t t h e c u r r e n t can f l o w between them from t h e b o t t o m t o t h e t o p o f t h e g t r a y . The t r a y s a r e u s u a l l y h e l d by a c a b i n e t i n s e t s o f 8 o r 16 t r a y s so t h e w a t e r can f l o w i n s e r i e s t h r o u g h o u t t h e s e t . A H e a t h t r a y i s shown i n f i g u r e 2. The g r a v e l i n c u b a t o r i s most o f t e n u s e d i n w i l d a r e a s where l i t t l e c o n t r o l i s t o be e x e r c i s e d d u r i n g t h e i n c u b a t i o n p r o c e s s . N o r m a l l y t h e i n c u b a t o r i s p l a c e d i n o r n e a r t o a n a t u r a l s t r e a m bed and t h e n f i l l e d w i t h l a y e r s o f g r a v e l and e g g s . P h o t o g r a p h s o f two g r a v e l i n c u b a t o r s a r e shown i n f i g -u r e s 3 and 4. The g r a v e l i n c u b a t o r u s u a l l y has e i t h e r a s q u a r e o r r e c -t a n g u l a r box c o n f i g u r a t i o n . The w a t e r e n t e r s t h r o u g h t h e b o t -tom p a n e l o f t h e box p a s s i n g upward t h r o u g h a s c r e e n between t h e g r a v e l l a y e r s and o u t t h r o u g h an o v e r f l o w p i p e i n t o a s c r e e n t r a p b e f o r e d i s c h a r g e . The i n c o m i n g w a t e r i s d i f f u s e d Figure 2 Photograph of a Heath Tray Egg Incubator F i g u r e 3 P h o t o g r a p h o f a 50000 Egg G r a v e l I n c u b a t o r . F i g u r e 4 P h o t o g r a p h o f a 500000 Egg G r a v e l I n c u b a t o r . 69 t o p r o d u c e a u n i f o r m f l o w t h r o u g h t h e box by c o v e r i n g t h e b o t -tom b a f f l e w i t h a 7.5 t o 10 cm l a y e r o f g r a v e l 3 t o 10 mm i n d i a m e t e r . The d i a m e t e r o f t h e g r a v e l used t o i n c u b a t e t h e eggs may v a r y from 2 cm t o 4 cm. However, i t i s i m p o r t a n t t h a t t h i s medium be o f smooth g r a i n r o c k o r c r u s h e d g r a v e l t h a t has been g r a d e d t o one s i z e . T h i s g r a d i n g keeps t h e v o i d s p a -c e s between t h e i n d i v i d u a l p i e c e s o f g r a v e l a t a maximum p e r -m i t t i n g l e s s r e s t r i c t e d w a t e r f l o w t h a n when u n g r a d e d g r a v e l i s u s e d . The i n c u b a t o r i s f i l l e d by s p r e a d i n g eggs o v e r t h e s u r f a c e o f t h e g r a v e l a t i n t e r v a l s - ; o f 4 cm on t h e v e r t i c a l a x i s 9 10 The p r o p o r t i o n s o f t h e i n c u b a t o r a r e n o t c o n s i d e r e d t o be c r i t i c a l a l t h o u g h i t i s b e l i e v e d t h a t b e t t e r w a t e r f l o w i s o b t a i n e d w i t h l o n g n a r r o w b o x e s . The F i s h e r i e s and M a r i n e S e r v i c e u s e s t h e f o l l o w i n g s t o -c k i n g d e n s i t i e s f o r t h e enhancement program a t B l a n e y C r e e k . B.C. S m a l l , one s e c t i o n boxes c o n t a i n i n g .382 c u b i c m e t e r s o f g r a v e l a r e s t o c k e d w i t h 50000 e g g s , w h e r e a s , l o n g n a r r o w boxes o f t h r e e s e c t i o n d e s i g n c o n t a i n i n g 3.82 c u b i c m e t e r s o f g r a v e l a r e s t o c k e d w i t h up t o o n e - h a l f m i l l i o n eggs J' 1 . Heath t r a y s v s . g r a v e l i n c u b a t o r s The Heath t r a y a l l o w s t h e a q u a c u l t u r i s t t o v i e w t h e b a t c h e s o f eggs and a l e v i n s d i r e c t l y t h r o u g h o u t t h e h a t c h e r y p r o c e s s . T h i s i s i m p o r t a n t p a r t i c u l a r l y i n c a s e some o f t h e eggs have been i m p r o p e r l y f e r t i l i z e d o r become d i s e a s e d . In e i t h e r e v e n t t h e a f f e c t e d eggs c o u l d be s e t a s i d e f o r t r e a t -ment w i t h a m e d i c a n t o r d i s c a r d e d b e f o r e an i n f e c t i o n s p r e a d 70 t o h e a l t h y eggs o r a l e v i n s . In a d d i t i o n , t h e a q u a c u l t u r i s t can v i s u a l l y i n s p e c t t h e s t a g e o f d e v e l o p m e n t and c o n d i t i o n o f t h e s t o c k . With g r a v e l i n c u b a t o r s t h e above p r o c e s s e s a r e n o t p o s s i b l e . Once t h e eggs have been p l a n t e d i n t h e i n -c u b a t o r t h e a q u a c u l t u r i s t must t a k e a ' b l a c k box' a p p r o a c h t o t h e c o n d i t i o n and d e v e l o p m e n t o f t h e s t o c k u n t i l t h e f i r s t a l e v i n s emerge from t h e g r a v e l . Because t h e g r a v e l i n c u b a t o r h o l d s many eggs i n a s e c t i o n , any m e d i c a t i o n must be p r o v i d e d t o t h e c o m p l e t e i n c u b a t o r r a t h e r t h a n t o i s o l a t e d u n i t s as i n t h e c a s e o f Heath t r a y s . The i n a b i l i t y t o v i s u a l l y i n s p e c t t h e egg s t o c k c o u l d p r o v e d i s a s t r o u s t o t h e p r i v a t e f i s h f a r m e r u s i n g a g r a v e l box. F o r example, i f t h e eggs were t o be i n f -e r t i l e a f a r m e r u s i n g Heath t r a y s would know t h i s w i t h i n a s h o r t t i m e a f t e r t h e i n c u b a t i o n p e r i o d began and might p o s -s i b l y be a b l e t o p u r c h a s e new s t o c k i f t h e government would p e r m i t him t o do so or*, a t l e a s t he c o u l d s h u t down h i s o p e r -a t i o n s a v i n g o p e r a t i n g c o s t s . B u t , i f g r a v e l i n c u b a t o r s were u s e d t h e f a r m e r may n o t r e a l i z e t h a t h i s s t o c k were dead un-t i l t h e a l e v i n s f a i l e d t o a p p e a r 3 t o 4 months l a t e r . By t h e n i t may- be t o o l a t e t o o b t a i n a d d i t i o n a l s t o c k o r r e c o u p on o p e r a t i n g c o s t s . The a d v a n t a g e s o f t h e g r a v e l i n c u b a t o r s a r e t h a t b e t t e r q u a l i t y f r y a r e p r o d u c e d and t h e c o s t can be l e s s t h a n f o r a Heath t r a y s y s t e m d e p e n d i n g on how many eggs a r e s t o c k e d p e r i n c u b a t o r and t h e s i z e o f t h e i n c u b a t o r . F r y from g r a v e l i n c u b a t o r s a r e l a r g e r and f e e d more r e a d i l y t h a n Heath t r a y 71 12 s t o c k . B e t t e r f e e d i n g c h a r a c t e r i s t i c s a r e t h o u g h t t o be due t o t h e a b i l i t y o f t h e f r y t o emerge from t h e g r a v e l o f t h e i r own a c c o r d r a t h e r t h a n b e i n g dumped from t h e Heath t r a y a t t h e a q u a c u l t u r i s t 1 s d i s c r e t i o n . The s i z e d i f f e r e n c e i s n o r -m a l l y a t t r i b u t e d t o a phenomenon c a l l e d ' r i g h t i n g r e s p o n s e ' 13 A p p a r e n t l y f r y p r e f e r t o m a i n t a i n a d o r s o - v e n t r a l p o s t -u r e t h a t i s r e a d i l y a c c o m p l i s h e d i n t h e g r a v e l s u b s t r a t e b u t i n a Heath t r a y where t h e s c r e e n and o t h e r eggs o r a l e v i n s a r e t h e o n l y s u b s t r a t e , l a t e r a l s u p p o r t i s l a c k i n g . T h e r e f o r e , t h e a l e v i n s f a l l o n t o t h e i r s i d e s . The f r y c o n t i n u a l l y a t t e m p t t o r i g h t t h e m s e l v e s u s i n g a d d i t i o n a l e n e r g y . Because t h e n u t r i e n t s o u r c e i s l i m i t e d t o t h e y o l k a t t h i s t i m e , t h e Heath t r a y s t o c k must use e n e r g y f o r t h e ' r i g h t i n g r e s p o n s e ' l e a v i n g l e s s e n e r g y t o expend on growth t h a n i s a v a i l a b l e t o f r y i n g r a v e l i n c u b a t o r s . The r e s u l t i s s m a l l e r f r y . However. Mr. S t o n e , t h e c h i e f c u l t u r i s t a t t h e C a p i l a n o F i s h H a t c h e r y , b e l i e v e s t h a t a l t h o u g h t h e Heath t r a y h a t c h e d f r y a r e s m a l l e r t h a n t h o s e d e r i v e d from g r a v e l i n c u b a t o r s , t h e y a r e as w e l l d e v e l o p e d w i t h r e g a r d t o swimming a b i l i t y and a r e as l i k e l y t o be as s u c c e s s f u l as f r y h a t c h e d i n t h e g r a v e l s y s t e m . S u r v i v a l i n b o t h s y s t e m s i s g e n e r a l l y c o n s i d e r e d t o be c o m p a r a b l e a t a p p r o x i m a t e l y 80 t o 90 % i n g r a v e l i n c u b a t o r s 14 15 , and 90 t o 95% f o r Heath t r a y s . On t h e o t h e r h a nd. a r e c e n t r e p o r t f r o m t h e e x p e r i m e n t a l f i s h f a r m a t Nanaimo d e s c r i b e d s u r v i v a l o f 99% f o r g r a v e l i n c u b a t o s , 70% f o r 72 Heath t r a y s , and 82% f o r Heath t r a y f o l l o w e d by g r a v e l i n c u -16 b a t i o n . As a r e s u l t o f d i s c u s s i o n s w i t h t h e above r e s e a r -c h e r s and a r e v i e w o f t h e r e c e n t l i t e r a t u r e , i t i s ray o p i n i o n t h a t t h e s u r v i v a l from eggs and t h e q u a l i t y o f t h e f r y i s l a r g e l y d e p e n d e n t upon t h e e x p e r t i s e o f t h e f i s h c u l t u r i s t w i t h r e s p e c t t o t h e s y s t e m u s e d . T h e r e f o r e , 90% o r b e t t e r s u r v i v a l o f eggs t o f r y and good q u a l i t y f r y may be e x p e c t e d f r o m e i t h e r s y s t e m g i v e n h e a l t h y , p r o p e r l y f e r t i l i z e d eggs and a c u l t u r i s t who i s e x p e r i e n c e d i n t h e use o f t h e p a r t i c -u l a r c u l t u r e s y s t e m . F r e s h w a t e r r e a r i n g f a c i l i t i e s Once t h e f r y have become f r e e - s w i m m i n g t h e y must be t r a n -s f e r r e d t o more s p a c i o u s q u a r t e r s t o f a c i l i t a t e f e e d i n g and swimming a c t i v i t i e s . The oxygen c o n s u m p t i o n o f eggs i s v e r y low but i n c r e a s e s f o r t h e a l e v i n s and i n c r e a s e s a t an even g r e a t e r r a t e f o r t h e f r y . A l e v i n s may be m a i n t a i n e d i n g r a v e l i n c u b a t o r s o r Heath t r a y s i f s t o c k i n g d e n s i t i e s a r e r e d u c e d s u f f i c i e n t l y . However, t h i s would r e q u i r e many more i n c u b -a t o r s o r t r a y s t h a n would be n e c e s s a r y i f o n l y t h e eggs were m a i n t a i n e d i n t h e s e u n i t s u n t i l t h e e a r l y f r y s t a g e and t h e n t r a n s f e r r e d t o b a s k e t s f l o a t e d i n r a c e w a y s o r c i r c u l a r t a n k s . E l a b o r a t e c o n c r e t e raceway s y s t e m s o r Burrows ponds p r o v i d e an e x c e l l e n t s y s t e m f o r f r y r e a r i n g b e c a u s e t h e y have e x c e l l e n t w a t e r c i r c u l a t i o n w h i c h a l l o w s h i g h s t o c k i n g d e n s i t i e s t o be 17 m a i n t a i n e d . C i r c u l a r t a n k s may p r o v i d e c o m p a r a b l e accom-m o d a t i o n i f p r o p e r l y d e s i g n e d and s u f f i c i e n t w a t e r f l o w i s 73 18 p r o v i d e d . Burrows ponds a r e more e x p e n s i v e and c o n s i d e r -ed beyond t h e r a n g e o f t h e p r i v a t e a q u a c u l t u r i s t . F o r example, a Burrows raceway s y s t e m d e s i g n e d t o h o l d 45400 k i l o g r a m s o f f i s h was c o n s t r u c t e d a t an A l a s k a h a t c h e r y a t an e s t i m a t e d 1 Q c o s t o f $602976 A 3 . When i n i t i a l l y s t a r t i n g t h e f r y on f e e d a s m a l l r e a r i n g a r e a w i t h a h i g h s t o c k i n g d e n s i t y i s c o n s i d e r e d d e s i r a b l e t o r e d u c e f e e d w a s t a g e . S m a l l f i b r e g l a s s r a c e w a y s o r boxes f l o a t e d i n c i r c u l a r t a n k s a r e i d e a l f o r t h i s p u r p o s e . The f r y a r e t r a n s f e r r e d t o l a r g e r t a n k s once t h e y a r e f e e d i n g w e l l . A t y p i c a l t a n k s y s t e m i s shown i n f i g u r e 5. The r e -m a i n d e r o f t h e i r f r e s h w a t e r grow-up p e r i o d may be a c c o m p l i s h e d i n t h e s e f a c i l i t i e s , i n c l u d i n g s a l t w a t e r p r e c o n d i t i o n i n g p r i o r t o t r a n s f e r t o t h e f l o a t i n g n e t - p e n s . Coho a r e n o r m a l l y t r a n -s f e r r e d t o pens when t h e y a t t a i n a w e i g h t o f 15 grams, whereas c h i n o o k salmon a r e p l a c e d i n pens a t 5 grams. The f r e s h w a t e r r e a r i n g s t a g e may be c o m p l e t e d i n t h e m a r i n e f a c i l i t y by s u p p l y i n g f r e s h w a t e r t o t h e s u r f a c e o f a n e t - p e n t h a t has been m o d i f i e d t o r e t a i n t h e f r e s h w a t e r i n a f a s h i o n t h a t p r o d u c e s a s a l i n i t y g r a d i e n t v e r t i c a l l y _ * 20,21 t h r o u g h o u t t h e n e t - p e n Growth enhancement The t i m e r e q u i r e d t o r e a r coho t o s u f f i c i e n t s i z e f o r t r a n s f e r t o s a l t w a t e r can be r e d u c e d f r o m 18 months t o 6 months by t h e use o f a c c e l e r a t e d t e m p e r a t u r e s d u r i n g t h e 22 f r e s h w a t e r r e a r i n g phase . A d d i t i o n a l a d v a n t a g e s o f c o n -Figure 5 Photograph of a F i b r e g l a s s Rearing Tank. 74 75 t r o l l e d h e a t i n g and growth a c c e l e r a t i o n a r e a r e d u c t i o n i n t e m p e r a t u r e f l u c t u a t i o n s t h e r e b y e l i m i n a t i n g a s o u r c e o f s t r e s s f o r t h e f i s h , and a r e d u c t i o n i n f a c i l i t i e s and manpower w h i c h would o t h e r w i s e be r e q u i r e d f o r t h e l o n g e r growth p e r i o d . . . B o t h o f t h e s e r e d u c t i o n s w i l l l e a d t o d e c r e a s e d p r o d u c t i o n c o s t s . Emergency f r e s h w a t e r s y s t e m M a i n t a i n i n g a c o n s t a n t f l o w o f f r e s h w a t e r d u r i n g t h e f r e s h w a t e r r e a r i n g phase i s a b s o l u t e l y n e c e s s a r y . A r e d u c -t i o n o r c e s s a t i o n o f t h e f l o w would c a u s e t h e w a t e r c h e m i s t r y t o change due t o t h e m e t a b o l i c a c t i v i t y o f t h e f i s h w i t h t h e r e s u l t t h a t t h e s t o c k may d i e d i r e c t l y o r have t h e i r r e s i s -t a n c e t o d i s e a s e l o w e r e d t o t h e p o i n t t h a t t h e y would succumb i n d i r e c t l y . I t has been s u g g e s t e d t h a t s e c o n d a r y w a t e r s y s t e m s c o u l d p r o v i d e p r o t e c t i o n i n t h e e v e n t o f an emergency i n v o l v -i n g t h e p r i m a r y w a t e r s y s t e m . However, t h i s s u g g e s t i o n has s e v e r a l w e a k n e s s e s . F i r s t , t h e s e c o n d a r y s y s t e m must be c a p a b l e o f p r o v i d i n g a c o m p a r a b l e w a t e r f l o w t o t h e p r i m a r y s y s t e m i n o r d e r t o overcome a m a j o r i n t e r r u p t i o n o f t h e f l o w . T h i s would r e q -u i r e d o u b l e t h e n o r m a l equipment and a p p r o x i m a t e l y t w i c e t h e c o s t o f c o n s t r u c t i o n and m a i n t e n a n c e . I t would be e x p e n s i v e i n s u r a n c e f o r a newly e s t a b l i s h e d s m a l l b u s i n e s s . N e x t , we s h o u l d c o n s i d e r t h e n a t u r e o f i n t e r r u p t i o n s o f t h e w a t e r f l o w . I n t e r r u p t i o n s a r e most l i k e l y t o r e s u l t f r o m e i t h e r a b r e a k i n a d e l i v e r y p i p e o r from an i n a d e q u a t e s u p p l y a t t h e s o u r c e . B r o k e n w a t e r p i p e can be r e p a i r e d q u i c k l y by t r a i n e d p e r s o n -7 6 n e l and c e r t a i n l y f a s t enough to prevent a d r a s t i c change i n the composition of the c u l t u r e water, p a r t i c u l a r l y i f f e e d i n g were suspended and a e r a t o r s were employed during the emergency. Of course immediate d e t e c t i o n of the i n t e r r u p t i o n i s manda-t o r y even i f a double system were used as the secondary system would have to be switched on i n order to be e f f e c t i v e . E l a b -o r a t e , automated d e t e c t i o n and warning systems are l i k e l y to be beyond the budget of the average f i s h farmer. However, adequa-te home-made dev i c e s of simple design are p o s s i b l e a l t e r n a t i v e s . I f there were an inadequate supply of water at the source, then the secondary system would a l s o be a f f e c t e d u n l e s s a secondary source were a v a i l a b l e . T h i s would r e q u i r e e i t h e r two independent s u r f a c e sources or a s u r f a c e source and a w e l l . In most cases i t i s l i k e l y t h a t only one independent source o f water would be a v a i l a b l e . F i n a l l y , the p r o b a b i l i t y of an inadequate source o f water at any time should be smal l i f the f i s h f a r m e r made a c a r e f u l s e l e c t i o n of the source i n i t i a l l y . T h e r e f o r e , given the p r o b a b i l i t y of a flow i n t e r r u p t i o n i s s m a l l and the p r o b a b i l i t y i s l a r g e t h a t a secondary system i s e i t h e r i m p o s s i b l e due to the l o c a t i o n of the farm or that i t would be too expensive to i n s t a l l and m a i n t a i n , i t i s prob-able t h a t a secondary system would not be used by most f i s h farmers. The d i f f i c u l t y o f o b t a i n i n g a s u i t a b l e l o c a t i o n f o r a hatchery i s severe enough without the added c o n d i t i o n of dual water sources. 77 S a l t w a t e r r e a r i n g f a c i l i t i e s V a r i o u s t y p e s o f ponds and impoundments can be u s e d t o r e a r salmon t o m a r k e t a b l e s i z e , however, o n l y f l o a t i n g n e t -pens w i l l be c o n s i d e r e d i n t h i s s t u d y b e c a u s e t h e y a r e r e l a t i v e -l y i n e x p e n s i v e , r e a d i l y c o n s t r u c t e d i n most l o c a t i o n s , and a r e e a s i l y r e l o c a t e d . These a r e c h a r a c t e r i s t i c s n o t r e a d i l y a t t r i b u t e d t o most o t h e r s y s t e m s . The t y p i c a l n e t - p e n i s buoy-ed a t t h e s u r f a c e w i t h f l o a t s and s u r r o u n d e d by a walkway t o a l l o w a c c e s s t o t h e n e t f o r s t o c k i n g , f e e d i n g , and h a r v e s t i n g . P h o t o g r a p h s o f two n e t - p e n f l o a t s y s t e m s a r e p r e s e n t e d i n f i g u r e s 6 and 7. The s i z e o f t h e n e t e n c l o s u r e v a r i e s d e p e n d i n g upon t h e s i z e o f t h e f i s h and t h e l o c a t i o n . L a r g e n e t s were o f t e n u s e d a few y e a r s ago but s m a l l e r n e t s a r e f a v o u r e d p r e -s e n t l y . A p p a r e n t l y , t h e use o f l a r g e n e t s (15.2 m e t e r s s q u a r e by 7.6 m e t e r s deep) r e d u c e d u n i t c o s t s b u t t h e n e t s were d i f -f i c u l t t o manage d u r i n g h a r v e s t i n g , p a r t i c u l a r l y i f c o v e r e d w i t h f o u l i n g o r g a n i s m s . A l s o , many i r r e p l a c e a b l e f i s h were 23 l o s t i f t h e n e t became t o r n . The s t a n d a r d s i z e n e t u s e d by B r i t i s h C o l u m b i a m a r i n e f i s h f a r m e r s i s 6.1 m e t e r s s q u a r e by 4.42 m e t e r s deep w i t h mesh o f 6.4 mm, 12.7 mm, 19.1 mm, and 25.4 mm. Mesh s i z e s a r e measured as t h e d i s t a n c e from k n o t t o k n o t when t h e n e t i s s t r e t c h e d i n one d i r e c t i o n . Double n e t t i n g i s no l o n g e r n e c e s s a r y f o r p r o t e c t i o n from a q u a t i c 24 p r e d a t o r s i f t h e s i d e s o f t h e n e t - p e n a r e h e l d t a u t The p r a c t i c e o f i m m e d i a t e l y r e m o v i n g dead f i s h f r o m t h e pens r e d u c e s t h e number o f p r e d a t o r s a t t r a c t e d t o t h e pens and t h e J F i g u r e 6 P h o t o g r a p h o f a P r i v a t e Net-pen System. 78 Figure 7 Photograph of a Government Net-pen System. 79 80 taut n e t t i n g prevents predators from p i c k i n g f i s h from between f o l d s i n the net. In the past double nets were o f t e n used. U s u a l l y a net with a mesh s i z e capable of r e t a i n i n g the f i s h was placed i n s i d e a l a r g e r net having a wider mesh. T h i s o u t s i d e net served to t r a p f l o a t i n g d e b r i s and exclude some a q u a t i c p r e d a t o r s such as sharks and sea l i o n s . O c c a s i o n a l l y two nets with a mesh s i z e capable of r e t a i n i n g the f i s h were employed such t h a t i n the event of a t e a r i n the i n s i d e net the escaping f i s h would be r e t a i n e d by the second net. Whereas, the f i r s t net system may s t i l l be used where there i s an unusual amount of d e b r i s , the second system has been phased out. The reason being t h a t double nets r e s t r i c t e d the water flow through the pen due to the i n c r e a s e d s u r f a c e area of the net. Decreases i n the wat-er flow reduce the e f f e c t i v e c a r r y i n g c a p a c i t y of the pens r e -s u l t i n g i n lower s t o c k i n g d e n s i t i e s . A l s o , the change to smal-l e r nets of s t r o n g twine and a good r a f t f o r support has g r e a t -l y reduced the l i k e l i h o o d of t e a r i n g the n e t s . S t o c k i n g d e n s i t y The most popular s t o c k i n g d e n s i t y used by government 3 and commercial f i s h farmers has been 16 kg/m . However, s t u d i e s of the e f f e c t of s t o c k i n g d e n s i t y of t r o u t i n f r e s h -water c a g e - c u l t u r e i n d i c a t e t h a t no d e l e t e r e o u s e f f e c t s were 3 2 5 3 26 observed at d e n s i t i e s of 27 kg/m or 45 kg/m . A l s o . the N a t i o n a l Marine F i s h e r i e s S e r v i c e d i d not observe any d i f -f e r ence i n m o r t a l i t y or growth of coho salmon r e a r e d i n s a l t -3 27 water net-pens at d e n s i t i e s of 4.8 to 40 kg/ra . Popula-81 3 t i o n o r s t o c k i n g d e n s i t i e s o f 32 kg/m would seem a c c e p t a b l e f o r f a r m i n g i n B r i t i s h C o l u m b i a j u d g i n g from t h e r e s u l t s o f t h e above s t u d i e s . F i r t h e r s t u d i e s o f t h e e f f e c t o f s t r e s s a t h i g h e r s t o c k i n g d e n s i t i e s may r e s u l t i n a r e e v a l u a t i o n . D i s e a s e c o n t r o l Once a d i s e a s e , p a r t i c u l a r l y a v i r u s , has i n f e c t e d a few f i s h an e p i z o o t i c can o c c u r r e s u l t i n g i n t h e m o r t a l i t y o f o v e r 2 8 90% o f t h e f a r m s t o c k . The g e n e r a l mode o f p r e v e n t i o n by f i s h f a r m e r s has been t o m a i n t a i n e x c e l l e n t f i s h h u s b a n d r y p r a c t i c e s t o enhance t h e f i s h ' s n a t u r a l immunity t o d i s e a s e , and t o p r o v i d e p r o p h y l a c t i c t r e a t m e n t t o t h e eggs and f r y . Eggs may be t r e a t e d w i t h e r y t h r o m y c i n f o r k i d n e y d i s e a s e . m a l a c h i t e g r e e n f o r f u n g u s i n f e c t i o n s , and Wescodyne t o d e s t r o y 2 9 e x t e r n a l p a r a s i t e s Wescodyne i s a l s o t h o u g h t t o d e s t r o y b a c t e r i a , v i r u s e s , m o l d s , and f u n g i when t h e eggs a r e s u b j e c -3 0 t e d t o i m m e r s i o n f o r 10 m i n u t e s i n a 1:300 s o l u t i o n Free-swimming salmon may be immunized a g a i n s t b a c t e r i a l o r v i r a l i n f e c t i o n s t h r o u g h v a c c i n a t i o n by i n t r a p e r i t o n e a l i n j e c t i o n , h y p e r o s m o t i c i n f i l t r a t i o n , o r o r a l v a c c i n a t i o n w i t h t h e f e e d . I n t r a p e r i t o n e a l v a c c i n a t i o n i s e f f e c t e d w i t h a h y p o d e r m i c n e e d l e . T h i s method was o b s e r v e d t o p r o v i d e b e t t e r p r o t e c t i o n f r o m v i b r i o s i s and f u r u n c u l o s i s i n pen-31 r e a r e d coho salmon t h a n h y p e r o s m o t i c i n f i l t r a t i o n . T h i s method has a l s o been shown t o be more e f f e c t i v e t h a n o r a l v a c -3 2 c i n a t i o n i n r e d u c i n g m o r t a l i t y o f coho e x p o s e d t o v i b r i o s i s H y p e r o s m o t i c i n f i l t r a t i o n i s a r a p i d p r o c e s s i n w h i c h 82 many f i s h c a n be immunized s i m u l t a n e o u s l y . The method c o n s i s t s o f i m m e r s i n g t h e f i s h i n a s t r o n g b r i n e ( s o d i u m c h l o r i d e s o l -u t i o n ) w i t h m i n o r a d d i t i v e s f o r 2 m i n u t e s t h e n i m m e d i a t e l y i m m e r s i n g them i n d u l u t e v a c c i n e f o r 3 m i n u t e s . The b r i n e removes body w a t e r from t h e f i s h . When t h e f i s h a r e t h e n p l a c e d i n d i l u t e d v a c c i n e t h e y a b s o r b f l u i d i n c l u d i n g t h e 3 3 v a c c i n e . A l t h o u g h n o t as e f f e c t i v e as i n t r a p e r i t o n e a l i n j e c t i o n , h y p e r o s m o t i c i n f i l t r a t i o n p r o v i d e s an a c c e p t a b l e method f o r p r o d u c t i o n p u r p o s e s b e c a u s e many f i s h c a n be imm-u n i z e d s i m u l t a n e o u s l y w h i l e a f f o r d i n g good p r o t e c t i o n from d i s e a s e . I n t r a p e r i t o n e a l i n j e c t i o n p r o v i d e s b e t t e r p r o t e c -t i o n t h a n h y p e r o s m o t i c i n f i l t r a t i o n but i t r e q u i r e s more t i m e and l a b o u r t o a d m i n i s t e r t o t h e f i s h b e c a u s e t h e f i s h must be immunized i n d i v i d u a l l y and i t r e s u l t s i n h i g h e r m o r t a l i t y when s m a l l f i s h a r e v a c c i n a t e d . O r a l v a c c i n a t i o n has n o t been e f f e c t i v e when a p p l i e d t o 34 p r o d u c t i o n f i s h f a r m s D i a g n o s t i c s e r v i c e A d i a g n o s t i c s e r v i c e t o i d e n t i f y f i s h d i s e a s e s and p r e -s c r i b e methods o f t r e a t m e n t i s a v a i l a b l e t o a q u a c u l t u r i s t s . The s e r v i c e i s a d m i n i s t e r e d t h r o u g h t h e Department o f t h e E n v i r o n m e n t w i t h t h e main c e n t e r l o c a t e d a t t h e M a r i n e B i o -l o g i c a l S t a t i o n , Nanaimo and a c e n t e r s p e c i a l i z i n g i n h i s t o -p a t h o l o g y i s l o c a t e d a t t h e P a c i f i c E n v i r o n m e n t I n s t i t u t e . West V a n c o u v e r . A s e r v i c e i s a l s o p r o v i d e d by t h e P r o v i n c i a l government t o i n s p e c t f r e s h w a t e r f a c i l i t i e s and p r o v i d e 83 a d v i c e c o n c e r n i n g f i s h d i s e a s e p r o b l e m s . I t i s a d m i n i s t e r e d t h r o u g h t h e F i s h and W i l d l i f e B r a n c h . A f e e i s n o t l e v i e d f o r e i t h e r o f t h e s e s e r v i c e s . D i e t C o n t r o l o v e r d i e t i s one o f t h e most i m p o r t a n t r e q u i r e -ments f o r s u c c e s s f u l f i s h r e a r i n g . S e l e c t i o n o f t h e p r o p e r d i e t w i l l p r o v i d e r a p i d g r o w t h , r e s i s t a n c e t o d i s e a s e , and a low c o n v e r s i o n r a t i o . The c o n v e r s i o n r a t i o i s t h e w e i g h t o f f e e d p r o v i d e d t o t h e f i s h d i v i d e d by t h e w e i g h t o f t h e f i s h . A low r a t i o means t h a t t h e f i s h has been a b l e t o c o n v e r t a l a r g e p r o p o r t i o n o f t h e f e e d t o body w e i g h t . T h i s i s i m p o r t -a n t b e c a u s e t h e l e s s f o o d t h a t i s r e q u i r e d t o p r o d u c e a g i v e n w e i g h t o f p r o d u c t t h e g r e a t e r w i l l be t h e p r o f i t m a r g i n , g i v e n t h a t t h e r e i s n o t a p e r c e i v e d d i f f e r e n c e i n t h e q u a l i t y o f t h e f i n a l p r o d u c t . When c o m p a r i n g two f e e d s , t h e f e e d w i t h t h e l o w e r c o n v e r s i o n r a t i o i s n o t n e c e s s a r i l y t h e b e t t e r c h o i c e f o r t h e f i s h f a r m e r . I f b o t h f e e d s can p r o d u c e f i s h o f e q u a l q u a l i t y b u t one has a l o w e r c o n v e r s i o n r a t i o w h i l e t h e o t h e r has a l o w e r c o s t t h e n a t r a d e - o f f i s p o s s i b l e . By m u l t i p l y i n g t h e c o n v e r s i o n r a t i o by t h e r e s p e c t i v e p r i c e o f t h e f e e d i t w i l l be p o s s i b l e t o d e t e r m i n e t h e f e e d w h i c h w i l l p r o d u c e q u a l i t y f i s h a t t h e l o w e s t c o s t . T h i s f e e d s h o u l d be t h e d e c i s i o n maker's c h o i c e i f p r o f i t m a x i m i z a t i o n i s t h e ob-j e c t i v e . The a p p r o p r i a t e e q u a t i o n i s p r o v i d e d below: c o n v e r s i o n p r i c e / u n i t _ c o s t o f f e e d / r a t i o o f f e e d " u n i t o f p r o d u c t i o n 84 Many b r a n d s o f f e e d a r e a v a i l a b l e t o t h e a q u a c u l t u r i s t . H a l v e r has w r i t t e n an e x c e l l e n t t e x t on t h e s u b j e c t o f f i s h 35 n u t r i t i o n . T h i s t e x t s h o u l d be c o n s u l t e d i f d e t a i l e d i n -f o r m a t i o n i s r e q u i r e d . The c h o i c e o f f e e d i s l a r g e l y t h e p r e -f e r e n c e o f t h e a q u a c u l t u r i s t and h i s n e e d s , as more t h a n one f e e d has been d e m o n s t r a t e d t o p r o v i d e a c c e p t a b l e r e s u l t s when 3 6 u s e d t o grow salmon The p r o t e i n r e q u i r e m e n t and amino a c i d b a l a n c e a r e t h e p r i m a r y d e t e r m i n a n t s o f growth i n salmon f o l l o w e d by t h e e s -s e n t i a l f a t t y a c i d s as t h e n e x t most i m p o r t a n t l i m i t i n g f a c t o r o f d i e t f o r g r o w t h . T h e r e a r e t e n amino a c i d s w h i c h a r e c o n s i d -e r e d t o be i n d i s p e n s a b l e i n t h e d i e t o f f i s h and must be p r o -v i d e d i n a p p r o x i m a t e l y e q u a l p r o p o r t i o n s i n o r d e r f o r t h e f i s h 3 7 f l e s h t o be form e d . Water, f a t , and s o l u b l e v i t a m i n s a r e a l s o i m p o r t a n t components. V i t a m i n d e f i c i e n c y d i s e a s e s o f 3 8 salmon have been d e s c r i b e d by H a l v e r The most p o p u l a r o f t h e d i e t s a v a i l a b l e f o r n o r m a l com-m e r c i a l p u r p o s e s a r e t h e A b e r n a t h y d i e t , t h e Oregon M o i s t P e l l e t (OMP), t h e EWOS d i e t , and a d i e t p r o d u c e d by Apex B i o -R e s o u r c e s w h i c h i s t h o u g h t t o be s i m i l a r t o t h e A b e r n a t h y d i e t . The c o m p o s i t i o n o f t h e Oregon M o i s t P e l l e t and EWOS d i e t s a r e p r o v i d e d i n t a b l e s IV arid y ~, r e s p e c t i v e l y . A g r o u p o f f i s h e r i e s r e s e a r c h e r s a t t h e P a c i f i c E n v i r o n -ment I n s t i t u t e have been c o n d u c t i n g e x p e r i m e n t s t o d e t e r m i n e t h e most s u i t a b l e f e e d f o r m u l a t o p r o v i d e maximum growth from d i f f e r e n t s p e c i e s o f s a l m o n . However, t h e s e f e e d s a r e n o t . T a b l e IV The C o m p o s i t i o n o f t h e Oregon M o i s t P e l l e t F e e d . Component P e r c e n t a g e o f t h e T o t a l p r o t e i n 37.0 f a t 12.7 a s h 8.0 c a r b o h y d r a t e 13.2 m o i s t u r e 29.1 v i t a m i n s * 100 .00 *a v i t a m i n mix i s added t o t h e f e e d 86 T a b l e V. The C o m p o s i t i o n o f t h e EWOS Feeds by t h e P e r c e n t a g e o f t h e F i n i s h e d W e i g h t . Component S30 s t a r t e r e x t r a S30 grower e x t r a S32 se a f a r m i n g S33 b r o o d s t o c k c r u d e p r o t e i n 50.0 50.0 45.0 45.0 f a t 17.0 15.0 16 .0 16 .0 ash 9 . 5 10.0 9.0 9.0 w a t e r 9.0 9.0 9.0 9 . 0 f i b r e 2.0 3.0 3.0 3 . 0 c a r b o h y d r a t e 12 .5 13.0 18.0 18.0 100.00 100.00 100.00 100.00 Note: c a r o t e n o i d s a r e added t o t h e S33 b r o o d s t o c k f e e d , w h i l e a l l t h e f e e d s have a v i t a m i n s u p p l e m e n t added. 87 a v a i l a b l e t o the commercial f i s h farmer and t h e r e f o r e have l i t t l e r e l e v a n c e to the present study other than to note t h a t even more d e s i r a b l e feeds may be a v a i l a b l e i n the near f u t u r e . In f a c t a t e s t batch was produced by a Lower Mainland feed manufacturer which would be a v a i l a b l e f o r commercial use at an estimated p r i c e of $.68 per kilogram. T h i s p r i c e i s comparable to that of the other d i e t s . 88 FOOTNOTES 1. Webber; H.H. and P.F. R i o r d a n , 1976. C r i t e r i a F o r C a n d i d -a t e S p e c i e s F o r A q u a c u l t u r e . A q u a c u l t u r e 7 ( 2 ) : 1 0 7 - 1 2 3 . 2. S a n d e r c o c k ; K., 1977. F i s h e r i e s and M a r i n e S e r v i c e , V a n c o u v e r . B.C. P e r s o n a l c o m m u n i c a t i o n . 3. R i c h a r d s ; J.A.. C.VW. Mahnken. and G.K. T a n o n a k a , 1972. E v a l u a t i o n Of The C o m m e r c i a l F e a s i b i l i t y Of Salmon Aqua-c u l t u r e In Puget S o u n d - P r e l i m i n a r y A n a l y s i s . N a t i o n a l O c e a n i c and A t m o s p h e r i c A d m i n i s t r a t i o n . N a t i o n a l M a r i n e F i s h e r i e s S e r v i c e , pp. 35. p. 7. 4. Kennedy; W.A., W. G r i f f i o e n , and A. S o l m i e , 1977 . The 1976 C r o p o f Salmon R e a r e d on t h e P a c i f i c B i o l o g i c a l S t a t i o n E x p e r i m e n t a l F i s h Farm. F i s h e r i e s and M a r i n e S e r v i c e T e c h n i c a l R e p o r t 726, pp. 21. p. 11. 5. R i c h a r d ; J.A. e t a l . , 1977. op. c i t . , p. 7. 6. Kennedy; W.A., e t a l . . 1977. op t c i t . , p. 7. 7. Anonymous; 1977. A q u a c u l t u r e I n d u s t r y ' s 1977 B u y e r ' s G u i d e . The C o m m e r c i a l F i s h Farmer 3 ( l ) : l - 5 6 . 8. Anonymous; 1977. Heath T e c n a C o r p o r a t i o n b r o c h u r e . 9. M c N e i l ; W.J. and J . E . B a i l e y . 1975. Salmon R a n c h e r ' s M a n u a l . N o r t h w e s t F i s h e r i e s C e n t e r , Auke Bay F i s h e r i e s L a b o r a t o r y P r o c e s s e d R e p o r t , J u l y . 1975, pp. 95. p. 34. 10. B a i l e y ; D.. 1977. F i s h e r i e s and M a r i n e S e r v i c e , V a n c o u v e r , B.C. P e r s o n a l c o m m u n i c a t i o n . 11. I b i d . 12. Kennedy; W.A. e t a l . . 1977. op. c i t . , p.5. 13. Bams; R.A.. 1969. A d a p t a t i o n s o f s o c k e y e salmon a s s o c -i a t e d w i t h i n c u b a t i o n i n s t r e a m g r a v e l s . In Symposium on salmon and t r o u t i n s t r e a m s . H.R. M a c M i l l a n L e c t u r e s i n F i s h e r i e s , U n i v e r s i t y o f B r i t i s h C o l u m b i a , pp. 71-87, p. 80. 14. B a i l e y ; D., 1977. op. c i t . 15. S t o n e ; E . , 1977. C a p i l a n o F i s h H a t c h e r y , N o r t h V a n c o u v e r . B.C. P e r s o n a l c o m m u n i c a t i o n . 89 16. Kennedy; W.A. e t a l . , 1977. op. c i t . , p. 5. 17. B urrows; R.E. and H.H. Chenoweth, 1970. The R e c t a n g u l a r C i r c u l a t i n g R e a r i n g Pond. The P r o g r e s s i v e F i s h - C u l t u r i s t 32(2 ):67-80 . 18. Larmoyeux; J.D., R.G. P i p e r , and H.H. Chenoweth, 1973. E v a l u a t i o n Of C i r c u l a r Tanks F o r S a l m o n i d P r o d u c t i o n . The P r o g r e s s i v e F i s h - C u l t u r i s t 3 5 ( 3 ) : 1 2 2 - 1 3 1 . 19. Romey; D., 1975. C r y s t a l Lake F i s h H a t c h e r y M o d i f i c a t i o n . A l a s k a Department o f F i s h and Game R e p o r t , J u n e a u , A l a s k a , p p . 1 0 . 20. Anonymous, 1977. U.S. E x p e r i m e n t With F l o a t i n g Raceways F o r J u v e n i l e Salmon. F i s h F a r m i n g I n t e r n a t i o n a l 4 ( 2 ) : 42-43. 21. H e a r d ; W.R., R.M. M a r t i n , and A.C. W e r t h e i m e r , 1977. E s t u a r i n e And F r e s h w a t e r C u l t u r e Of 1974 Brood Coho S a l -mon In Net Pens And F l o a t i n g Raceways At L i t t l e P o r t W a l t e r , A l a s k a . U.S. Department o f Commerce, NOAA, NMFS, pp . 5 5 . 22. D o n a l d s o n ; L.R. and E.L. B r a n n o n , 1976. The Use o f Warm-w a t e r t o A c c e l e r a t e t h e P r o d u c t i o n o f Coho Salmon. F i s h e r -i e s 1 ( 4 ) : 1 2 - 1 6 . 23. Dennon; G.B.. 1975. A q u a c u l t u r e N e w s l e t t e r 1 5 ( 3 ) : l - 4 . 24. B r e t t ; J.R., 1977. P a c i f i c B i o l o g i c a l S t a t i o n , Nanaimo, B.C. P e r s o n a l c o m m u n i c a t i o n . 25. C o l l i n s ; R.A., 1972. Cage C u l t u r e o f T r o u t i n Warmwater L a k e s . A m e r i c a n F i s h Farmer 3 ( 7 ) : 4 - 7 . 26. K i l a m b i : R.V., J.C. Adams, A.V. Brown, and W.K. W i c k i n z e r , 1977. E f f e c t s o f S t o c k i n g D e n s i t y and Cage S i z e on Growth, Feed C o n v e r s i o n , and P r o d u c t i o n o f Rainbow T r o u t and Chan-n e l C a t f i s h . The P r o g r e s s i v e F i s h C u l t u r i s t 3 9 ( 2 ) : 6 2 - 6 6 . 27. Anonymous, 1975. E f f e c t s o f C r o w d i n g on Salmon S u r v i v a l . F i s h F a r m i n g I n t e r n a t i o n a l 2 ( 2 ) : 1 8 . 28. Amend; D.F., 1976. P r e v e n t i o n and C o n t r o l o f V i r a l D i s -e a s e s o f S a l m o n i d s . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h B o a r d o f Canada 33:1059-1066. 29. S o l m i e ; A., 1977. op. c i t . 90 30. L e i t r i t z ; E. and R.C. L e w i s , 1976. T r o u t and Salmon C u l t u r e . S t a t e o f C a l i f o r n i a , Department o f F i s h and Game, F i s h B u l l e t i n 164, pp. 197. p. 71. 31. A n t i p a ; R. and E.F. Amend. 1977. I m m u n i z a t i o n o f Pac-i f i c Salmon: C o m p a r i s o n o f I n t r a p e r i t o n e a l I n j e c t i o n and H y p e r o s m o t i c I n f i l t r a t i o n o f V i b r i o a n g u i l l a r u m and A e r o -monas s a l m o n i c i d a . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h B o a r d o f Canada 34:203-208. 32. Sawyer; E. and R.G. S t r o u t , 1977. S u r v i v a l and Growth o f V a c c i n a t e d , M e d i c a t e d , and U n t r e a t e d Coho Salmon (On-c o r h y n c h u s k i s u t c h ) E x p o s e d t o V i b r i o a n g u i l l a r u m . A q u a c u l t u r e 10:311-315. 33. Kennedy; W.A., e t a l . . 1977. op. c i t . . p. 3. 34. K l o n t z ; G.W. and D. A n d e r s o n , 1970. O r a l I m m u n i z a t i o n o f S a l m o n i d s : A Review. In S.F. S n i e s z k o A Symposium on D i s e a s e s o f F i s h e s and S h e l l f i s h e s , p. 16-20. 35. H a l v e r ; J . E . , 1972. F i s h N u t r i t i o n . Academic P r e s s : New Y o r k , London, pp. 713. 36. M c Q u a r r i e ; D., 1977. P a c i f i c E n v i r o n m e n t I n s t i t u t e , West V a n c o u v e r , B.C. P e r s o n a l c o m m u n i c a t i o n . 37. H a l v e r ; J . E . , 1976. F o r m u l a t i n g P r a c t i c a l D i e t s f o r F i s h . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h B o a r d o f Canada 3 3 ( 4 ) : 1032-1039. 38. H a l v e r ; J . E . , 1972. op. c i t . . pp. CHAPTER V I I  PRODUCTION CYCLE AND MODEL 92 P r o d u c t i o n c y c l e The b e g i n n i n g o f t h e p r o d u c t i o n c y c l e , r e g a r d l e s s o f w h i c h salmon s p e c i e s i s t o be r e a r e d , i s d e p e n d e n t upon t h e t i m e and p e r i o d o v e r w h i c h n a t u r a l spawning o c c u r s . T h i s i s be-c a u s e good q u a l i t y eggs i n s u f f i c i e n t q u a n t i t i e s f o r f i s h e r y enhancement and c o m m e r c i a l o p e r a t i o n s can o n l y be o b t a i n e d from n a t u r a l b r o o d s t o c k a t t h e p r e s e n t t i m e . I t i s p o s s i b l e t o r e a r salmon t o m a t u r i t y i n c l o s e d o r s e m i - c l o s e d a q u a c u l t -u r e s y s t e m s , however, t h e q u a l i t y o f t h e p r o g e n y from t h e s e b r e e d e r s i s u n c e r t a i n a n d , - t h e r e f o r e , a t t e m p t s t o use t h e s e f i s h as b r o o d s t o c k has been r e l e g a t e d t o e x p e r i m e n t a l s i t u a t i o n s . Not o n l y i s s u f f i c i e n t b i o l o g i c a l i n f o r m a t i o n l a c k i n g w i t h r e s p e c t t o u s i n g c u l t i v a t e d b r o o d s t o c k but a l s o t h e p r e s e n t g o v e r n -ment r e g u l a t i o n s p r o h i b i t t h e use o f a r t i f i c i a l l y p r o d u c e d b r o o d s t o c k f o r c o m m e r c i a l h a t c h e r i e s . T h e r e f o r e , t h e b e g i n -n i n g o f t h e p r o d u c t i o n c y c l e o f a salmon farm c o i n c i d e s w i t h t h e n a t u r a l s p a w n ing p e r i o d o f w i l d s a l m o n , u s u a l l y d u r i n g November. Each p r o d u c t i o n c y c l e c o n s i s t s o f f o u r p h a s e s : 1) egg p r o c u r e m e n t and i n c u b a t i o n ; 2) t h e r e a r i n g o f t h e f r y i n f r e s h -w a t e r ; 3) t h e r e a r i n g o f t h e s m o l t s i n s e a w a t e r ; and 4) t h e h a r v e s t i n g o f t h e m a r k e t a b l e f i s h . An i n d i v i d u a l p r o d u c t i o n c y c l e w i l l encompass a t i m e p e r i o d o f a p p r o x i m a t e l y 14 t o 17 months i f a c c e l e r a t e d growth i s u s e d , but each p r o d u c t i o n c y c l e must b e g i n a t a p p r o x i m a t e l y t h e same t i m e each y e a r due t o t h e l i m i t e d a v a i l a b i l i t y o f egg s t o c k . T h e r e f o r e . 93 t h e c y c l e s o f two c o n s e c u t i v e y e a r s w i l l o v e r l a p . The egg i n c u b a t i o n phase spans a p e r i o d o f a p p r o x i m a t e l y t h r e e months from November t o J a n u a r y . I t i n v o l v e s t h e p r o -curement o f eggs f r o m t h e government f a c i l i t y and p l a c e m e n t o f t h e s e eggs i n t o a h a t c h e r y f a c i l i t y u n t i l a f t e r h a t c h i n g and d e v e l o p m e n t o f t h e a l e v i n s t o swimming f r y . F r e s h w a t e r i s u s e d e x c l u s i v e l y t h r o u g h o u t t h i s p h a s e . The f r y r e a r i n g s t a g e c o v e r s a p e r i o d o f f i v e months, u s -u a l l y f r o m F e b r u a r y t o J u l y . D u r i n g t h i s p e r i o d . , t h e f r y a r e f e d an a r t i f i c i a l d i e t ( o r d i e t s ) b e g i n n i n g w i t h f i n e l y g r o u n d f e e d s c a l l e d s t a r t e r mashes and p r o g r e s s i n g t o l a r g e r d i a m e t e r p e l l e t s as t h e f i s h grow. The f r y may be h o u s e d i n r a c e w a y s a n d / o r c i r c u l a r t a n k s d e p e n d i n g upon t h e method c h o s e n . The w a ter w i l l be c o m p l e t e l y f r e s h a t f i r s t b u t w i l l be b r a c k i s h d u r i n g t h e l a t e r s t a g e s (up t o 10% s a l t w a t e r ) i f t h e f r y a r e p r e h a r d e n e d t o s a l t w a t e r i n t h e r e a r i n g t a n k s b e f o r e t r a n s f e r t o t h e s a l t w a t e r p e n s . The f r y may be a l l o w e d t o a c c l i m a t e n a t u r a l l y t o t h e s a l t w a t e r t r a n s i t i o n by a l l o w i n g a f r e s h w a t e r l e n s t o form a s a l i n i t y g r a d i e n t i n t h e pens u s i n g a c o n t i n -uous f l o w o f f r e s h w a t e r . R e a r i n g t h e s m o l t s t o m a r k e t a b l e s i z e i n s e a w a t e r n e t -pens w i l l n o r m a l l y o c c u r d u r i n g t h e s e v e n months from J u l y t h r o u g h J a n u a r y , a l t h o u g h e x t e n s i o n i n t o F e b r u a r y o r beyond may be d e s i r a b l e a t t h e d i s c r e t i o n o f t h e f i s h c u l t u r i s t . S e a w a t e r w i l l be u s e d e x c l u s i v e l y d u r i n g t h i s p h a s e . The h a r v e s t i n g phase w i l l b e g i n d u r i n g J a n u a r y o f t h e 94 s e c o n d y e a r and w i l l c o n t i n u e u n t i l t h e h a r v e s t i s c o m p l e t e d . H a r v e s t i n g t h e f i s h as soon as t h e y a t t a i n m a r k e t a b l e s i z e i s u s u a l l y a d v a n t a g e o u s b e c a u s e t h e i r growth r a t e d e c r e a s e s and t h e i r c o n v e r s i o n r a t i o d e t e r i o r a t e s a f t e r December when t h e i r a v e r a g e w e i g h t i s more t h a n 200 grams. The added market v a l u e p e r u n i t o f f e e d i s d e c r e a s i n g w h i l e m a i n t e n a n c e c o s t s and t h e r i s k o f l o s s o f t h e f i s h t o a c c i d e n t , p r e d a t i o n , o r d i s e a s e c o n t i n u e . H a r v e s t i n g t h e f i s h a t a h i g h e r w e i g h t may n o t n e c e s s a r i l y r e s u l t i n g r e a t e r p r o f i t s t h a n i f s m a l l e r f i s h were h a r v e s t e d . As m e n t i o n e d e a r l i e r , t h e end o f t h e f i r s t c y c l e w i l l o v e r l a p w i t h t h e b e g i n n i n g o f t h e n e x t p r o d u c t i o n c y c l e . The o n s e t o f t h e o v e r l a p w i l l be d u r i n g November when t h e l a t t e r h a l f o f t h e s m o l t r e a r i n g phase i n n e t - p e n s c o i n c i d e s w i t h t h e b e g i n n i n g o f t h e egg i n c u b a t i o n phase o f c y c l e two. T h i s o v e r -l a p w i l l c o n t i n u e u n t i l t h e end o f t h e h a r v e s t o f t h e f i r s t c y c l e and t h e e a r l y f r y r e a r i n g phase o f t h e s e c o n d c y c l e . The p r o d u c t i o n c y c l e s o u t l i n e d above a r e s i m i l a r t o t h o s e u s e d by t h e N a t i o n a l M a r i n e F i s h e r i e s S e r v i c e *^ and t h e P a c i f i c 2 B i o l o g i c a l S t a t i o n a t Nanaimo, B.C. . An o u t l i n e o f t h e p r o d u c t i o n c y c l e o f a f i s h f a r m i s p r e s e n t e d i n t a b l e VI. The o v e r l a p o f t h e two c o n s e c u t i v e c y c l e s r e q u i r e s man-power t o be d i v i d e d between t h e c y c l e s but does n o t r e q u i r e t h e s i m u l t a n e o u s use o f t h e same r e a r i n g f a c i l i t i e s o r w a t e r s y s t e m s . T a b l e v l The T e n t a t i v e U s i n g Methods P r o d u c t i o n S c h e d u l e f o r f o r A c c e l e r a t e d Growth t h e Model Farm Month . C y c l e System C y c l e System November 1 i n c u b a t o r December 1 i n c u b a t o r J a n u a r y 1 i n c u b a t o r F e b r u a r y 1 s m a l l t a n k s March 1 t a n k s A p r i l 1 t a n k s May 1 t a n k s June 1 t a n k s J u l y 1 n e t - p e n s A u g u st 1 n e t - p e n s September 1 n e t - p e n s O c t o b e r 1 n e t - p e n s November 1 n e t - p e n s 2 i n c u b a t o r December 1 n e t - p e n s 2 i n c u b a t o r J a n u a r y 1 n e t - p e n s 2 i n c u b a t o r F e b r u a r y 1 h a r v e s t 2 s m a l l t a n k s 96 Production model A model of a r e p r e s e n t a t i v e f i s h farm o p e r a t i o n was de-v i s e d by us i n g the r e s u l t s of r e s e a r c h at experimental f i s h farms operated by Canadian and American government age n c i e s . The r a t e of growth of the f i s h and the conver s i o n r a t i o of feed t o f i s h f l e s h through a complete p r o d u c t i o n c y c l e was obtained from a study conducted by the N a t i o n a l Marine F i s h e r -3 i e s S e r v i c e and the m o r t a l i t y r a t e f o r a s i m i l a r p r o d u c t i o n 1+ c y c l e was obtained from a F i s h e r i e s and Marine S e r v i c e Report The i n f o r m a t i o n obtained from the two r e p o r t s provided an acc-u r a t e , q u a n t i t a t i v e estimate of p r o d u c t i o n from what has be-come i n e f f e c t a standard p r o d u c t i o n p r o c e s s . The model p r o v i d -es a reasonable estimate f o r r e a l i s t i c farming c o n d i t i o n s . The estimates of growth, weight, s u r v i v a l , and c o n v e r s i o n r a t i o f o r f i s h r e a r e d on the h y p o t h e t i c a l farm are presented i n t a b l e V I I . The weight of feed r e q u i r e d f o r each of the months of produc-t i o n was obtained u s i n g the f o l l o w i n g formula: mean weight mean change feed feed of f i s h each x i n weight of x co n v e r s i o n = r e q u i r e d month f i s h each month r a t i o each, month Scale of p l a n t The s c a l e of the p l a n t f o r the h y p o t h e t i c a l f i s h farm was based on the assumption t h a t p r o d u c t i o n of approximately 500000 f i s h to marketable s i z e (200 to 350 grams) would be a r e a l i s t i c estimate f o r a p r i v a t e commercial f i s h farm dur-ing i t s f i r s t years o f o p e r a t i o n and t h a t the above p r o d u c t i o n model was v a l i d with r e s p e c t to the proposed f i s h farm. T a b l e V I I E s t i m a t e s o f M o r t a l i t y , Growth, W e i g h t , C o n v e r s i o n R a t i o , and Feed R e q u i r e m e n t f o r t h e Model Farm. Month Number M o r t a l i t y Number Mean Mean T o t a l Mean C o n v e r - Weight o f F i s h D u r i n g o f F i s h Number Weight Weight Change s i o n o f Feed S t a r t o f Month* End o f o f F i s h F i s h at F i s h a t i n R a t i o f o r Month Month f o r End o f End o f Weight Month Month Month Month F i s h Feb. 663721 26549 637172 650447 .00084 535.23 .00026 3.0:1 507.35 Mar. 637172 12743 624429 630801 .00147 917.91 .00063 3.0:1 1192.21 Apr. 624429 12489 611941 618186 .00323 1976.57 .00176 2.0:1 2176.02 May 611941 12239 599702 605822 .00711 4263.88 .00388 1. 5 ; 1 .3525788 June 599702 11994 587708 593705 .01351 7939.94 .00640 1.5;1 .5699.57 J u l y 587708 11754 575954 581831 .02567 14784.74 .01216 1.5;1 10612.60 Aug. 575954 11519 564434 570194 .03953 22312.08 .01386 1.2:1 9483.47 Sep. 564434 11289 553146 558791 .07511 41546.80 .03558 1.2;1 23858.14 O c t . 553146 11063 542082 547614 .14271 79740.26 .06760 1.2:1 44422.45 Nov. 542082 10842 531241 536662 .21121 112203.41 .06850 1.2:1 44113.62 Dec. 531241 10625 520616 525929 .27457 142945.53 .06336 1.5:1 49984.29 J a n . 520616 10412 510204 515410 .30752 156897.93 .03295 2.0:1 33965.52 *4% m o r t a l i t y i s assumed d u r i n g F e b r u a r y and 2% d u r i n g t h e r e m a i n d e r o f t h e c y c l e S o u r c e s : R i c h a r d s ; J.A.. e t a l . 1972. Kennedy; W.A., e t a l . 1977. to 98 The e s t i m a t e s and methods us e d t o d e t e r m i n e t h e t y p e and q u a n t i t y o f equipment and s u p p l i e s n e c e s s a r y t o accommodate t h e above s c a l e o f p r o d u c t i o n a r e p r o v i d e d i n t h e f o l l o w i n g s e c t i o n c o n c e r n i n g c o s t s . 99 FOOTNOTES 1. R i c h a r d s ; J.A., C.V.W. Mahnken , and G.K. T a n o n a k a , 1972 . E v l a u a t i o n Of The C o m m e r c i a l F e a s i b i l i t y Of Salmon Aqua-c u l t u r e In Puget S o u n d - P r e l i m i n a r y A n a l y s i s . N a t i o n a l O c e a n i c and A t m o s p h e r i c A d m i n i s t r a t i o n . N a t i o n a l M a r i n e F i s h e r i e s S e r v i c e , pp. 35. 2. Kennedy; W.A., W. G r i f f i o e n , and A. S o l m i e , 1977. The 1976 Crop o f Salmon R e a r e d on t h e P a c i f i c B i o l o g i c a l S t a t i o n E x p e r i m e n t a l F i s h Farm. F i s h e r i e s and M a r i n e S e r v i c e T e c h n i c a l R e p o r t 726, pp. 21. 3. R i c h a r d s ; J.A., e t a l . , 1972 . op. c i t . , p. 9. H. Kennedy; W.A., e t a l . . 1977. op. c i t . , p. 15. CHAPTER V I I I ESTIMATED COST OF THE MODEL SALMON FARM 101 The c a p i t a l and o p e r a t i n g c o s t s o f a model salmon farm a r e e s t i m a t e d i n t h i s c h a p t e r . The model farm i s d e s i g n e d i n k e e p i n g w i t h t h e c o n s t r a i n t s and p r o d u c t i o n model d i s c u s s e d i n e a r l i e r s e c t i o n s . The r e a s o n f o r c h o o s i n g a p a r t i c u l a r p r o d u c t i o n method i s g i v e n when more t h a n one method i s c o n -s i d e r e d a c c e p t a b l e . The e s t i m a t e o f r e q u i r e d equipment i s 3 b a s e d on a s t o c k i n g d e n s i t y o f 32 kg/m and d e t a i l e d c o s t e s t i m a t e s i n c l u d i n g l a b o u r a r e p r o v i d e d when t h e equipment i s b u i l t on t h e f i s h f a r m r a t h e r t h a n b e i n g p u r c h a s e d d i r e c t -l y f r o m a m a n u f a c t u r e r o r d e a l e r . E s t i m a t e s b a s e d on r e a d -i n g s and d i s c u s s i o n w i t h k n o w l e d g e a b l e and e x p e r i e n c e d i n d i v -i d u a l s a r e us e d where no c o n c i s e c o s t was a v a i l a b l e . C a p i t a l c o s t s A l i s t o f t h e c a p i t a l c o s t s w i t h t h e a m o r t i z a t i o n o r s t r a i g h t l i n e d e p r e c i a t i o n and r e p l a c e m e n t c o s t i s p r o v i d e d i n t a b l e V l j l , I t i s assumed t h a t t h e farm w i l l o p e r a t e f o r t e n y e a r s w i t h no s a l v a g e v a l u e . The t o t a l c a p i t a l c o s t s a r e $139976 . S i t e s e l e c t i o n A s u i t a b l e s i t e must be l o c a t e d . I f a p a r t i c u l a r p i e c e o f p r o p e r t y has a l r e a d y been c h o s e n t h e n no s e a r c h w i l l be r e q u i r e d , i f n o t , t i m e and t r a v e l l i n g e x p e n s e s w i l l be i n c u -r r e d t o l o c a t e t h e s i t e . In e i t h e r o f t h e s e s i t u a t i o n s i t w i l l be n e c e s s a r y t o d e t e r m i n e w h e t h e r t h e s i t e i s a d e q u a t e t o meet t h e r e q u i r e d l e g i s l a t i v e , c o m m e r c i a l , and b i o l o g i c a l c o n s t r a i n t s c o n c e r n i n g a f i s h f a r m . F o r example, knowledge T a b l e V I I I The E s t i m a t e d C a p i t a l C o s t o f t h e Model Salmon Farm. Item I n i t i a l L i f e D e p r e c i a t i o n A d d i t i o r C o s t $ ( Y e a r s ) S t r a i g h t r l i n e C a p i t a l Y e a r 5 I n i t i a l f e e s 190 10 19 _ S i t e s e l e c t i o n 5000 10 500 -Admin. & c o n s t . 34962 10 3496 -Water d i v e r s i o n 2500 10 250 -Water p i p e 7314 10 731 -H e a t i n g u n i t s 10368 5 2074 10368 P l u m b i n g ( h e a t -i n g ) 1350 10 135 -F u e l t a n k s 1428 10 143 -I n c u b a t o r m a t e r i a l s 2055 5 411 2055 p l u m b i n g 345 10 35 -l a b o u r 630 5 126 630 F i b r e g l a s s t a n k s 20271 10 2027 -P i l e s 6000 10 : 600 -F l o a t s m a t e r i a l s 16470 10 1647 -l a b o u r 1155 10 116 -N e t - p e n s 11910 5 2382 11910 T r u c k 7500 5 1500 7500 Boat 650 10 65 -Boat motor 450 5 90 450 F e e d e r s 3997 10 400 -F i s h t r a n s -p o r t e r 346 10 35 -F i s h g r a d e r 260 5 52 260 Weigh, s c a l e 325 10 33 -M i s c e l l a n e o u s 2500 10 250 -M i s c e l l a n e o u s 2000 5 400 2000 T o t a l $139976 $17517* $35173 * r o u n d i n g e r r o r p r e s e n t e q u i v a l e n t t o +$2. 103 of the l o c a l zoning bylaws, p r o x i m i t y to commercial t r a n s p o r t -a t i o n r o u t e s * and the b i o l o g i c a l parameters of the f r e s h and s a l t water r e s o u r c e s at the s i t e . In some cases the geolog-i c a l formations would have to be s t u d i e d , p a r t i c u l a r l y i f a w e l l were used as the source of freshwater. Competent con-s u l t a n t s are l i k e l y to be employed f o r these t a s k s . The c o s t of the s i t e s e l e c t i o n process would be depend-ent upon many v a r i a b l e s and very s i t e s p e c i f i c . Because of the complexity of the unknown v a r i a b l e s i n t h i s s i t u a t i o n the f i g u r e chosen i s an a r b i t r a r y yet seemingly reasonable estimate of $5000 f o r c o n s u l t i n g s e r v i c e s . A d m i n i s t r a t i o n and c o n s t r u c t i o n It w i l l be necessary to a l l o c a t e r e s o u r c e s to the admin-i s t r a t i v e a c t i v i t i e s needed from the manager of the f i s h farm with r e s p e c t to s e l e c t i n g the s i t e , c o o r d i n a t i n g the c o n s u l t -i n g s e r v i c e s , a p p l y i n g f o r the necessary p e r m i t s , purchasing equipment, and s u p e r v i s i n g c o n s t r u c t i o n . C o n s t r u c t i o n workers w i l l be r e q u i r e d to assemble the farm. An estimate of s i x months f u l l - t i m e and s i x months part-time f o r the manager, and s i x months f u l l - t i m e f o r two a s s i s t a n t s i s a l l o c a t e d f o r labour to o b t a i n the necessary permits and complete the con-s t r u c t i o n of the farm. The c o s t s of labour are estimated to be $18000, $14000, and $12000 per annum f o r the manager, f i r s t a s s i s t a n t , and second a s s i s t a n t , r e s p e c t i v e l y . The t o t a l expenses a l l o c a t e d f o r a d m i n i s t r a t i o n and c o n s t r u c t i o n labour c o s t s before product-104 i o n a r e $26500. The c o s t o f c o n s t r u c t i n g t h e f l o a t s and i n -c u b a t o r s i s d e d u c t e d from t h e $26500 and t r a n s f e r r e d t o s e p -a r a t e l a b o u r a c c o u n t s f o r t h e s e two i t e m s . The l a b o u r c o s t i s e s t i m a t e d a t $7.00 p e r hour . The a c t u a l b a l a n c e o f t h e a d m i n i s t r a t i o n and c o n s t r u c t i o n l a b o u r a c c o u n t i s ($26500 - $1785) $24715. O t h e r c o s t s would be i n c u r r e d d u r i n g t h e c o n -s t r u c t i o n phase i n a d d i t i o n t o l a b o u r . These a r e t h e s i t e l e a s e , u t i l i t i e s , t r a n s p o r t a t i o n , p r o p e r t y i n s u r a n c e , and m i s c e l l a n e o u s e x p e n s e s . The s i t e l e a s e and u t i l i t i e s c o s t s would be c o m p a r a b l e t o n o r m a l o p e r a t i o n s c o s t s and a r e c a l c u -l a t e d f o r a s i x month p e r i o d a t $8400 and $600, r e s p e c t i v e l y . A p r o p e r t y i n s u r a n c e c o s t o f $247 i s b a s e d on 3 months r a t h e r t h a n 6 months on t h e a s s u m p t i o n t h a t equipment would be added p r o g r e s s i v e l y d u r i n g t h e c o n s t r u c t i o n p e r i o d . One t h o u s a n d d o l l a r s i s a l l o t t e d t o t h e t r a n s p o r t a t i o n and m i s c e l l a n e o u s a c c o u n t s c o l l e c t i v e l y . The t o t a l c o s t o f a d m i n i s t r a t i o n and c o n s t r u c t i o n b e f o r e commencement o f o p e r a t i o n s i s $34962. T h i s amount i s a m o r t i z e d o v e r t h e l i f e o f t h e f i s h f a r m b e c -c a u s e i t i s p a r t o f t h e s e t - u p c o s t a d d i n g w o r t h t o t h e f a c -i l i t y . * The l a b o u r c o s t p e r hour was c a l c u l a t e d by a d d i n g t h e s a l -a r i e s o f t h e f i r s t and s e c o n d a s s i s t a n t s , d i v i d i n g t h e sum by 104 weeks, t h e n d i v i d i n g t h e d i v i d e n d by 35 h o u r s p e r week, and r o u n d i n g t h e q u o t i e n t t o t h e n e a r e s t whole d o l l a r . 105 F e e s The f e e s a r e s e p a r a t e d i n t o s t a r t - u p and a n n u a l o p e r a t -i n g e x p e n s e s . The f i s h f a r m would l i k e l y be i n c o r p o r a t e d t o a i d i n r a i s i n g f u n d s and t o r e d u c e t h e l i a b i l i t y o f t h e owners, a l t h o u g h i t i s u n l i k e l y t h a t t h e f arm would be a p u b l i c com-pany. I t would more l i k e l y be a p r i v a t e , n o n - r e p o r t i n g company. The s t a r t - u p f e e s f o r s u c h a company would be an i n c o r p o r a t i o n f e e o f $125 and an i n i t i a l r e p o r t f i l i n g f e e o f $20. In a d -d i t i o n t o t h e i n c o r p o r a t i o n f e e s t h e r e i s an a p p l i c a t i o n f e e o f $5 f o r t h e w a t e r r i g h t ' s l i c e n c e and $40 t o a p p l y f o r a c o m m e r c i a l f i s h f a r m l i c e n c e . The t o t a l s t a r t - u p f e e s w i l l be $190. The a n n u a l f e e s a r e d i s c u s s e d l a t e r u nder ' o p e r a t -i n g c o s t s ' . Water s u p p l y The q u a n t i t y o f f r e s h w a t e r r e q u i r e d t o s u s t a i n t h e p r o -d u c t i o n e s t i m a t e s f r o m November t o A p r i l was e s t i m a t e d u s i n g t h e f o r m u l a e d i s c u s s e d on pages 50 and 51. The f r e s h w a t e r r e q u i r e m e n t s o b t a i n e d u s i n g t h e two methods a r e p r e s e n t e d i n a p p e n d i x C. The e s t i m a t e s d e r i v e d u s i n g E l l i o t t ' s f o r m u l a e a r e u s e d f o r a l l f u r t h e r c a l c u l a t i o n s . The s u p p l y o f f r e s h w a t e r may be d e r i v e d f r o m g r o u n d w a t e r u s i n g a w e l l o r by d i v e r s i o n o f a s u r f a c e w a t e r s u p p l y s u c h as a l a k e o r s t r e a m . Use o f a w e l l has t h e a d v a n t a g e s o f n e g a t i n g t h e need f o r a w a t e r p e r m i t and f e e s , p r o v i d i n g g r e a t -e r c o n t r o l o v e r t h e s u p p l y , and n o r m a l l y p r o v i d i n g w a t e r a t a h i g h e r t e m p e r a t u r e t h a n most s u r f a c e w ater s o u r c e s d u r i n g 106 t h e w i n t e r . However, t h e c o s t o f a w e l l i s c o n s i d e r e d t o be much h i g h e r t h a n f o r t h e d i v e r s i o n o f most s u r f a c e w a t e r s o u r -c e s . R e p r e s e n t a t i v e s o f l o c a l w e l l d r i l l i n g f i r m s e s t i m a t e d t h e c o s t t o e s t a b l i s h a w e l l p r o d u c i n g 757 l i t e r s p e r m i n u t e a t f i v e t o f i f t e e n t h o u s a n d d o l l a r s . A w e l l t o p r o v i d e t h e 7571 l i t e r s p e r m i n u t e r e q u i r e d f o r t h e model f a c i l i t y would be c o n s i d e r a b l y g r e a t e r . A s y s t e m t o d i v e r t t h i s volume o f s u r f a c e w a t e r c o u l d be i n s t a l l e d f o r a p p r o x i m a t e l y $2500 i n a s e l e c t l o c a t i o n a l t h o u g h t h e c o s t may be h i g h e r d e p e n d i n g u-Pon t h e c h a r a c t e r i s t i c s o f t h e s i t e . Water p i p e A s t a n d a r d manual ^ was u s e d t o d e t e r m i n e t h e s i z e o f p i p e r e q u i r e d t o s u p p l y f r e s h w a t e r t o t h e i n c u b a t o r s and r e a r i n g t a n k s . A 25.'+ cm d i a m e t e r p i p e would be c a p a b l e o f c a r r y i n g 7571 l i t e r p e r m i n u t e from a head o f a p p r o x i m a t e l y 5 m e t e r s t o t h e t a n k p i p e s y s t e m , a h y p o t h e t i c a l d i s t a n c e o f 34 m e t e r s . T h i s head i s a t t a i n e d by s e l e c t i n g an i n t a k e u p s t r e a m o f t h e t a n k s y s t e m and u s i n g t h e r e s u l t i n g g r a d e between t h e two p o i n t s . A l i s t o f t h e p i p e equipment and t h e a t t e n d a n t c o s t s a r e p r o v i d e d i n a p p e n d i x D. The t o t a l e s t i m a t e d c o s t o f t h e m a t e r i a l s f o r t h e p i p e and a c c e s s o r i e s i s $7313. The p i p e (PVC) has an e x p e c t e d u s e f u l l i f e g r e a t e r t h a n 10 y e a r s . H e a t i n g u n i t s The h e a t i n g u n i t s a r e m o d i f i e d 'home s t y l e ' h o t w a t e r h e a t e r s h a v i n g a h i g h r e c o v e r y r a t e w h i c h i s c r i t i c a l b e c a u s e t h e y a r e r u n a t f u l l c a p a c i t y when i n o p e r a t i o n . Each u n i t 107 has a 125 l i t e r a l l g l a s s s t o r a g e t a n k . A h e a t i n g u n i t c o s t s $384 ( n e t o f q u a n t i t y d i s c o u n t ) and r e q u i r e s $50 o f a d d i t i o n a l p l u m b i n g . F u e l b u r n i n g r a t h e r t h a n e l e c t r i c u n i t s a r e c h o s e n t o i n c r e a s e the autonomy o f t h e farm w i t h r e s p e c t t o o u t s i d e power s o u r c e s . Above ground... g r a v i t y f e e d t a n k s a r e u s e d t o s t o r e t h e #2 f u e l o i l . A 3785 l i t e r s t o r a g e t a n k can be p u r c h a s e d f o r $357. The l i f e e x p e c t a n c y o f t h e h e a t e r s i s 5 t o 6 y e a r s i f u s e d a t peak power from November t o May e a c h y e a r , w h i l e t h e s t o r a g e t a n k s and plumb-i n g have a u s e f u l l i f e o f a t l e a s t 10 y e a r s . The t e m p e r a t u r e o f t h e w a t e r s u p p l y w i l l v a r y d e p e n d i n g upon t h e i n i t i a l s o u r c e . F o r example, w a t e r d e r i v e d from a s p r i n g f e d s t r e a m o r l a k e w i l l be warmer t h a n w a t e r f r o m snow o r g l a c i a l r u n o f f . A warm f r e s h w a t e r s o u r c e w i l l r e d u c e t h e c a p i t a l and o p e r a t i n g e x p e n d i t u r e s f o r h e a t i n g below t h o s e i n c u r r e d w i t h c o o l e r s o u r c e s o f w a t e r . The number o f h e a t i n g u n i t s r e q u i r e d t o s e r v i c e t h e model f a r m i s b a s e d upon t h e a s s u m p t i o n t h a t a warm w a t e r s o u r c e s u c h as t h e C a m p b e l l R i v e r can be u s e d . The a c t u a l number o f h e a t e r s r e q u i r e d i s d e t e r m i n e d as f o l l o w s . One h e a t i n g u n i t i s c a p a b l e o f i n c r e a s i n g t h e t e m p e r a t u r e o f a s t a n d a r d , i n s u l a t e d f i b r e -g l a s s t a n k by 4 t o 6 C when t h e f l o w r a t e t h r o u g h t h e s y s t e m 2 i s a p p r o x i m a t e l y 76 l i t e r s p e r m i n u t e . T h e r e f o r e , assum-i n g a f i g u r e o f 5 C, one u n i t can r a i s e t h e t e m p e r a t u r e 1 C a t a f l o w r a t e o f 380 l i t e r s p e r m i n u t e . The number o f h e a t -i n g u n i t s i s t h e n c a l c u l a t e d u s i n g t h e f o l l o w i n g f o r m u l a : 108 wa t e r f l o w (1pm) t e m p e r a t u r e _ number o f 380 (1pm) e l e v a t i o n (C) ~ h e a t i n g u n i t s The number o f h e a t i n g u n i t s r e q u i r e d p e r month a r e p r o v i d e d i n a p p e n d i x ;E. T w e n t y - s e v e n h e a t i n g u n i t s w i t h p l u m b i n g and f o u r s t o r a g e t a n k s w i l l be r e q u i r e d t o s u p p l y t h e n e c e s s a r y h e a t f o r f r e s h -w a t e r o p e r a t i o n s u n t i l t h e end o f May. F u e l i s o r d e r e d w e e k l y . The t o t a l c o s t i n c l u d i n g one h e a t i n g u n i t w h i c h w i l l be u s e d p r i m a r i l y as a s p a r e i s $10368. Emergency h e a t i n g i s not t h o u g h t t o be n e c e s s a r y b e c a u s e o n l y a p o r t i o n o f t h e h e a t e r s w i l l be u s e d d u r i n g t h e i n c u b -a t i o n p e r i o d l e a v i n g s e v e r a l o t h e r s a v a i l a b l e f o r emergency u s e . And l a t e r , when a l l u n i t s a r e o p e r a t i v e , t h e f a i l u r e o f one u n i t o u t o f t w e n t y - s e v e n i s n o t l i k e l y t o s e r i o u s l y a f f e c t o p e r a t i o n s d u r i n g t h e s h o r t t i m e t h a t would be r e q u i r e d t o e i t h e r r e p a i r o r r e p l a c e t h e u n i t . These u n i t s a r e r e a d i l y r e p l a c e a b l e b e c a u s e t h e y a r e s t a n d a r d u n i t s f o r home h e a t i n g as w e l l as b e i n g a v a i l a b l e from l o c a l r e t a i l e r s . Egg i n c u b a t o r s As d e s c r i b e d e a r l i e r , two t y p e s o f i n c u b a t o r s a r e i n com-mon use f o r salmon i n c u b a t i o n i n B r i t i s h C o l u m b i a . One i s t h e Heath t r a y s y s t e m , t h e o t h e r i s t h e g r a v e l box i n c u b a t o r . A Heath t r a y s y s t e m would c o s t $500 f o r an 8 t r a y u n i t and $995 f o r a 16 t r a y u n i t p l u s $75 f o r a b a l l a s t t a n k and v a l v e . A s y s t e m w i t h an i n c u b a t i o n c a p a c i t y o f 720000 eggs when s t o c k -ed a t 10000 eggs p e r t r a y would r e q u i r e 72 t r a y s f o r a c o s t 109 of $4 855 and a l i f e of 10 y e a r s . G r a v e l i n c u b a t i o n boxes with a c a p a c i t y of 50000 eggs each could be c o n s t r u c t e d at a cost of $202 per u n i t ($137 m a t e r i a l s , $23 plumbing, and $42 l a b o u r ) (see appendix F) with a l i f e of 5 years f o r the box and 10 years f o r the plumbing. I f the s u r v i v a l r a t e of the eggs were approximately 88% then 750000 eggs would be r e q u i r e d to produce 663721 f r y from the boxes i n January. T h i s number of eggs would n e c e s s i t a t e the use of 15 i n c u b a t o r s a t $202 each f o r a t o t a l c o s t of $3030. One i n c u b a t i o n box with a c a p a c i t y to incubate the t o t a l egg supply of the farm could be c o n s t r u c t e d at a much lower cost than the above est i m a t e . However, s u b d i v i s i o n i n t o smal-l e r boxes u s i n g p a r a l l e l water e n t r y pipes p r o v i d e s l e s s r i s k of l o s i n g a l l of the eggs to one d i s e a s e outbreak or a mechanic-a l m a l f u n c t i o n such as a broken water pipe or i n c u b a t i o n box. although the g r a v e l i n c u b a t o r s would c o s t $860 more than the Heath t r a y system over a 10 year p e r i o d , the d i f f e r e n c e does not warrant a d e c i s i o n on the b a s i s of c o s t a l o n e . G r a v e l i n c u b a t -ors are s e l e c t e d f o r the model because they appear to r e q u i r e l e s s e x p e r t i s e to provide success than Heath t r a y s . The t r a d e -o f f between a system which i s more l i k e l y t o allow the newly i n i t i a t e d a q u a c u l t u r i s t to have a s u c c e s s f u l hatchery o p e r a t i o n and the a d d i t i o n a l c o s t i s thought to be a c c e p t a b l e . F i b r e g l a s s tanks F i b r e g l a s s tanks provide a c c e p t a b l e accommodation at a reasonable c o s t . Two s i z e s w i l l be employed i n the freshwater 110 r e a r i n g p r o c e s s . S m a l l t a n k s 1.2 m e t e r s deep and 2.4 m e t e r s 3 d i a m e t e r w i t h a volume o f 5.69 m w i l l be u s e d t o r e a r t h e f r y t o one gram. T h i s t a n k s i z e i s s u i t a b l e f o r o b s e r v i n g . f e e d i n g , and g r a d i n g s m a l l f i s h . L a r g e t a n k s .9 m e t e r s deep 3 and 6.1 m e t e r s d i a m e t e r w i t h a c a p a c i t y o f 26.7 m p r o v i d e more swimming s p a c e f o r l a r g e f i s h and l o w e r t h e u n i t c o s t by volume o f w a t e r b e c a u s e t h e y a r e p r o p o r t i o n a t e l y l e s s e x p e n s i v e t h a n t h e s m a l l t a n k s . The number o f t a n k s r e q u i r e d f o r t h e f r e s h w a t e r phase i s e s t i m a t e d i n a p p e n d i x G f o r e a c h month o f o p e r a t i o n . The m o n t h l y t a n k r e q u i r e m e n t s a r e e s t i m a t e d by f i r s t d e t e r m i n i n g t h e volume o f t a n k s p a c e t h a t i s r e q u i r e d . T h i s i s a c c o m p l i s h e d by d i v i d i n g t h e w e i g h t o f t h e f i s h on hand a t t h e end o f e a c h month by t h e a p p r o p r i a t e s t o c k i n g d e n s i t y . The d e r i v e d volume i s t h e n d i v i d e d by t h e volume o f t h e t a n k s . Two c o n s t r a i n t s were added t o t h e d e c i s i o n p r o c e s s . One was t h a t o n l y s m a l l t a n k s c o u l d be u s e d d u r i n g t h e f i r s t month o f r e a r i n g as e x p l a i n e d e a r l i e r . The o t h e r was t h a t t h e s e l e c -t i o n between u s i n g l a r g e o r s m a l l t a n k s be done s u c h t h a t t h e f a r m would have the l e a s t number o f t a n k s p o s s i b l e g i v e n t h e above c o n s t r a i n t s . T h r e e s m a l l and n i n e l a r g e t a n k s w i l l be u s e d f o r a t o t a l c o s t o f [ ( 3 x $1186) + (9 x $ 1 857)] o r $20271. S t a n d p i p e s and f i t t i n g s a r e i n c l u d e d i n t h i s c o s t . P i l e s Wood p i l e s have been s e l e c t e d t o a n c h o r t h e f l o a t s as t h e y p r o v i d e a base f o r a t t a c h m e n t o f t h e f l o a t s t h a t i s I l l c o n s i s t e n t w i t h t h e p r o p o s e d dock f a c i l i t i e s , and have a l i f e e x p e c t a n c y o f a t l e a s t 10 y e a r s ; A V a n c o u v e r b a s e d p i l e d r i v -i n g f i r m p r o v i d e d t h e f o l l o w i n g e s t i m a t e t o p l a c e n i n e p i l e s a t a l o c a t i o n o u t s i d e t h e V a n c o u v e r h a r b o u r a r e a b u t no f u r t h e r t h a n t h e S e c h e l t P e n i n s u l a . I t was n e c e s s a r y t o c h o o s e a hy-p o t h e t i c a l l o c a t i o n b e c a u s e t r a n s p o r t a t i o n c o s t s f o r t h e crew and equipment c o n s t i t u t e a l a r g e p r o p o r t i o n o f t h e i n s t a l l a t i o n c o s t when o n l y a few p i l e s a r e t o be d r i v e n . I t was assumed t h a t 16.8 m p i l e s d r i v e n t o 6 m p e n e t r a t i o n o f t h e s u b s t r a t e would be s u f f i c i e n t . The c o s t would be $2000 t o tow t h e equipment t o and from, t h e s i t e , $1900 f o r t h e crew i n c l u d i n g t r a n s p o r t a t i o n and o u t o f town r a t e s , and $2100 f o r n i n e 16.8 m p i l e s a t $13.94 t o $14.76 p e r m e t e r . The t o t a l c o s t i s a p p r o x i m a t e l y $6000. Net-pens The n e t - p e n s a r e 6 m x 6 m x 4 . 4 m w i t h a volume o f 158 3 m i f l o w e r e d 4.3 m b e n e a t h t h e r a f t w a t e r i n t e r f a c e . Two mesh s i z e s a r e u s e d f o r salmon o f 15 grams w e i g h t o r l a r g e r , one o f 19 mm mesh a t $335 p e r n e t and t h e o t h e r o f 25.4 mm mesh a t $300 p e r n e t . The number o f n e t s and f l o a t s r e q u i r e d t o accommodate p r o d u c t i o n f o r e a c h month i s shown i n a p p e n d i x H. The s m a l l e r mesh n e t s a r e t o be u s e d d u r i n g J u l y and A u g u s t . The e s t i m a t e i s d e t e r m i n e d by d i v i d i n g t h e t o t a l w e i g h t o f f i s h c o n t a i n e d p e r month by t h e p r o d u c t o f t h e s t o c k i n g den-s i t y t i m e s t h e n e t volume. S e v e r a l s p a r e n e t s a r e r e q u i r e d as r e p l a c e m e n t s i n t h e e v e n t o f damage and as s u b s t i t u t e s 112 when n e t s a r e b e i n g d e f o u l e d . The t o t a l number o f n e t s r e -q u i r e d i s s i x 19 mm mesh and t h i r t y - t h r e e 25.4 mm mesh f o r a t o t a l c o s t o f $11910. The l i f e e x p e c t a n c y o f t h e n e t s i s 5 y e a r s . D i s c a r d e d g i l l n e t s a r e u s e d as c o v e r n e t s f o r p r o t e c t i o n from p r e d a t o r y b i r d s and t o t r a p f l o a t i n g d e b r i s i f n e c e s s a r y . F l o a t s The n e t f l o a t s w i l l be 6 m wide by 12 m l o n g w i t h a 0.6 m wide walkway a b o u t t h e p e r i m e t e r . ' The s u p e r s t r u c t u r e i s o f c e d a r b o a r d s and i s buoyed by 12 s t y r o f o a m b u o y s . A l i s t o f t h e e q uipment and a t t e n d a n t c o s t s t o c o n s t r u c t a f l o a t i s p r e s e n t e d i n a p p e n d i x I. A s t o r a g e f l o a t may be c o n s t r u c t e d 2 f r o m o n e - h a l f o f a n e t - f l o a t t o p r o v i d e a 6 m deck s e c t i o n . The c o s t o f t h i s m o d i f i c a t i o n i s i n c l u d e d i n a p p e n d i x G. The m a t e r i a l c o s t o f t h e f l o a t s i s (16 x $965.39) o r $15446 p l u s $1024 f o r m o d i f i c a t i o n s t o c o n s t r u c t a s t o r a g e f l o a t . The t o t a l c o s t i s $17625. The f l o a t s have a l i f e e x p e c t a n c y o f 10 y e a r s . T r a n s p o r t a t i o n A t h r e e - q u a r t e r t o n p i c k - u p t r u c k s h o u l d be s u f f i c i e n t t o t r a n s p o r t most o f t h e equipment and f o r g e n e r a l d u t i e s . A l a r g e r v e h i c l e may be r e n t e d f o r t r a n s p o r t i n g l a r g e q u a n t i t -i e s o f f e e d o r heavy e q u i p m e n t . A new. g o o d - q u a l i t y t r u c k can be p u r c h a s e d f o r $7500 and s h o u l d p r o v i d e 5 y e a r s o f s e r v i c e w i t h - n o s a l v a g e v a l u e . A s m a l l b o a t w i t h an o u t b o a r d motor can p r o v i d e a d e q u a t e 113 s e r v i c e a r o u n d t h e n e t s i f a dock i s a t t a c h e d t o t h e f l o a t s t r u c t u r e . A p u r c h a s e c o s t o f $1100 w i t h 10 y e a r s s e r v i c e f o r t h e b o a t and f i v e y e a r s f o r t h e motor w i t h no s a l v a g e v a l u e i s a r e a s o n a b l e e s t i m a t e . The c o s t o f a motor would be a b o u t $450. F e e d e r s . t r a n s p o r t e r . g r a d e r . and s c a l e The a u t o m a t i c f e e d e r s , f i s h t r a n s p o r t e r , f i s h g r a d e r , and weigh s c a l e can be r e a d i l y p u r c h a s e d from l o c a l d e a l e r s . L a r g e c a p a c i t y e l e c t r i c f e e d e r s c o s t $116.70 each and an a u t o -m a t i c t r i g g e r i n g s y s t e m f o r t h e c o m p l e t e s e t o f f e e d e r s i s $379.50. The t o t a l c o s t f o r 31 f e e d e r s p l u s one a u t o m a t i c s y s t e m i s $3997. A l i v e f i s h t r a n s p o r t e r o f 946 l i t e r c a p a c i t y w i l l c o s t $346, a f i s h g r a d e r w i t h f i v e s c r e e n s , $260, and a weigh s c a l e o f 454 kg c a p a c i t y . $325. The l i f e o f t h e f i s h g r a d e r i s a b o u t 5 y e a r s w h i l e t h e r e m a i n i n g e q uipment s h o u l d p r o v i d e s e r v i c e f o r 10 y e a r s . M i s c e l l a n e o u s equipment F o r t y - f i v e h u n d r e d d o l l a r s i s s e t a s i d e i n i t i a l l y and a n o t h e r $2000 a t t h e end o f t h e f i f t h y e a r f o r m i s c e l l a n e o u s equipment s u c h as t o o l s , g r a v e l t o l e v e l t h e t a n k s , and v a r -i o u s o t h e r s m a l l i t e m s n o t i n c l u d e d a b o v e . Of t h e above amounts, $1000 i s s e t a s i d e f o r t o o l s o v e r $100 i n v a l u e w h i l e t h e r e m a i n i n g i t e m s a r e v a l u e d a t l e s s t h a n $100 e a c h . O p e r a t i n g c o s t s The a n n u a l o p e r a t i n g c o s t s a r e t a b u l a t e d i n t a b l e IX. T a b l e IX The E s t i m a t e d O p e r a t i n g C o s t o f t h e Model Salmon Farm. Item Y e a r 1 Y e a r ' s 2 A n n u a l f e e s 170 195 L e a s e - l a n d 14400 14400 L a b o u r 44000 48000 Feed 72868 165638 H e a t i n g f u e l 2 0546 20546 F u e l - t r a n s p o r t a t i o n 1500 1500 U t i l i t i e s 1200 1200 D i s e a s e c o n t r o l 5877 5877 Eggs 7500 7500 I n s u r a n c e - p r o p e r t y 998 998 I n s u r a n c e - t r u c k 325 325 M a i n t e n a n c e 4991 4991 T o t a l $176405 $275761 115 Land A r e v i e w o f l o c a l newspaper ads c o n c e r n i n g w a t e r f r o n t p r o p e r t y a l o n g t h e S t r a i t o f G e o r g i a n o r t h o f V a n c o u v e r has g i v e n an i n d i c a t i o n t h a t s u i t a b l e l a n d would be a v a i l a b l e f o r a p p r o x i m a t e l y $.0000. The a c t u a l p u r c h a s e c o s t o f l a n d i s l i k e l y t o be e x t r e m e l y v a r i a b l e b e c a u s e more l a n d may have t o be p u r c h a s e d t h a n i s n e c e s s a r y i f t h e owner i s n o t w i l l i n g t o s e l l t h e e x a c t amount t h a t i s r e q u i r e d . A l s o , some p r o s -p e c t i v e f i s h f a r m e r s may w i s h t o use a p o r t i o n o f l a n d t h e y a l r e a d y own. B e c a u s e o f t h i s v a r i a b i l i t y and i t s p o t e n t i a l e f f e c t upon t h e f i n a n c i a l s t a t e m e n t s , I have d e c i d e d t o assume t h a t a s u i t a b l e l a n d s i t e can be l e a s e d f o r t e n y e a r s . In a d d i t i o n , i t i s assumed t h a t t h e s i t e has a s t r e a m o f s u i t a b l e c a p a c i t y f o r f r e s h w a t e r r e a r i n g , t h a t a w h a r f , s m a l l house and sheds a r e a l s o a v a i l a b l e . A l e a s e r a t e o f $1200 p e r month i s u s e d t o r e p r e s e n t an a c c e p t a b l e o p p o r t u n i t y c o s t t o t h e f a r m e r who owns t h e s i t e and a r e a s o n a b l e c o s t f o r t h e f a r m e r who does n o t . I t w i l l n o t be n e c e s s a r y t o e s t i m a t e a d i s p o s a l v a l u e f o r t h e l a n d i f l e a s i n g i s u s e d . L a b o u r I t i s assumed t h a t t h r e e f u l l - t i m e employees can p r o v i d e t h e n e c e s s a r y l a b o u r t o o p e r a t e t h e f i s h f a r m p r o v i d i n g t h a t no new c o n s t r u c t i o n were u n d e r t a k e n and t h a t a u t o m a t i c d e v i c -es . a r e employed ..for f e e d i n g . A s e a s o n a l employee would be added d u r i n g t h e f o u r months from November t o F e b r u a r y b e g i n -n i n g i n t h e s e c o n d y e a r o f o p e r a t i o n . T h i s i s t h e t i m e when 116 t h e p r o d u c t i o n c y c l e s o v e r l a p . The s a l a r i e s o f t h e employees a r e as f o l l o w s : manager, $18000; f i r s t a s s i s t a n t , $14000; s e c o n d a s s i s t a n t . $12000; and s e a s o n a l a s s i s t a n t . $4,000 p e r annum. The t o t a l l a b o u r c o s t f o r one y e a r ' s o p e r a t i o n a t t h e s e r a t e s would be $44000 i n t h e f i r s t y e a r and $48000 f o r s u c -c e e d i n g y e a r s . Feed EWOS f e e d s , s u p p l i e d by an A b b o t s f o r d B.C. b a s e d manufac-t u r e r , w i l l be u s e d . The EWOS f e e d was c h o s e n b e c a u s e i t p r o -v i d e s e x c e l l e n t g r o w t h , i s r e a d i l y a v a i l a b l e f r o m a l o c a l man-u f a c t u r e r , and does n o t r e q u i r e s p e c i a l s t o r a g e c o n d i t i o n s . The l a t t e r two f e a t u r e s make s t o r a g e c o s t s n e g l i g i b l e . EWOS S30 ' e x t r a ' w i l l be f e d from F e b r u a r y t o t h e end o f J u n e , S32 'sea f a r m i n g ' f r o m J u l y t h r o u g h December, and S33 'brood s t o c k ' u n t i l t h e h a r v e s t . The u n i t c o s t o f ea c h f e e d i s $.908/kg f o r S30, $.690/kg f o r S32, and $.820/kg f o r S33. The w e i g h t o f f e e d r e q u i r e d f o r e a c h m o n t h l y p e r i o d i s p r o v i d e d i n t a b l e VII. The m o n t h l y c o s t o f f e e d i s c a l c u l a t e d by m u l t i p l y i n g t h e w e i g h t i n t a b l e VH by t h e p r i c e o f t h e r e s p e c t i v e f e e d . The m o n t h l y f e e d c o s t u s i n g EWOS f e e d s i s g i v e n i n a p p e n d i x J . The a n n u a l f e e d c o s t w i l l be $72868 f o r t h e f i r s t y e a r and $165638 f o r t h e s e c o n d y e a r i f t h e h a r v e s t i s c o m p l e t e d a t t h e end o f J a n u a r y . T r a n s p o r t o f f e e d The a p p r o x i m a t e c o s t t o t r a n s p o r t t h e f e e d f r o m t h e s u p -p l i e r t o t h e farm i s $.02 p e r k i l o g r a m . At t h i s r a t e , t h e 117 t r a n s p o r t a t i o n c o s t w i l l be $2030 and $4591 f o r t h e f i r s t and s u c c e s s i v e y e a r s o f o p e r a t i o n , r e s p e c t i v e l y . H e a t i n g f u e l The h e a t i n g u n i t s u s e d t o m a i n t a i n above ambient w a t e r t e m p e r a t u r e s i n t h e i n c u b a t o r s and t h e r e a r i n g t a n k s r e q u i r e #2 f u e l o i l . E ach u n i t u s e s f u e l a t t h e r a t e o f 68 l i t e r s p e r day w i t h a f u e l c o s t o f $.117 p e r l i t e r . The c o s t o f h e a t -i n g f u e l p e r month i s o b t a i n e d by t h e f o l l o w i n g f o r m u l a : number o f f u e l / d a y s t h e u n i t t h e t o t a l h e a t i n g x u n i t x i n t h e x c o s t = c o s t o f u n i t s /day month o f f u e l f u e l / month The m o n t h l y e x p e n d i t u r e s f o r h e a t i n g f u e l a r e p r o v i d e d i n a p p e n d i x K« The t o t a l c o s t o f h e a t i n g f u e l f r o m November t o May i s $20546. U t i l i t i e s The c o s t o f e l e c t r i c i t y f o r l i g h t i n g , t o o l s , and a u t o -m a t i c f e e d e r s and f o r t h e c o s t o f a t e l e p h o n e i s e s t i m a t e d a t $100 p e r month. T h i s amount would be enough t o s u p p l y one t e l e p h o n e ($9.90) and a p p r o x i m a t e l y 2000 k i l o w a t t h o u r s o f e l e c t r i c i t y a t $.0425 p e r k i l o w a t t hour p l u s , a $2.55 s e r v i c e c h a r g e . The a n n u a l c o s t o f u t i l i t i e s i s $1200. F u e l f o r t r a n s p o r t a t i o n F u e l c o s t s f o r t h e t r u c k and b o a t a r e e s t i m a t e d a t $125 p e r month. T h i s amount would be s u f f i c i e n t t o a l l o w 1000 m i l e s o f t r a v e l f o r t h e t r u c k and c o n s i d e r a b l e use o f t h e b o a t . The t o t a l f u e l e xpense f o r t h e y e a r would be $15 00. 118 D i s e a s e c o n t r o l D i s e a s e c o n t r o l programs a t c o m m e r c i a l f i s h f arms a r e u s u a l l y d e s i g n e d t o i n n o c u l a t e t h e f i s h j u s t p r i o r t o t r a n s -f e r r i n g t h e f r y t o s a l t w a t e r . A r e c e n t r e p o r t e s t i m a t e d t h e c o s t o f i n j e c t i n g v a c c i n e s i n t o coho salmon was $3050 t o $3250 3 p e r m i l l i o n f i s h o r $.003 p e r f i s h . A l o c a l f i s h f a r m e r e s t i m a t e d t h e c o s t o f h y p e r o s m o t i c i n n o c u l a t i o n a t $.010 p e r f i s h . A ssuming t h a t h y p e r o s m o t i c i n n o c u l a t i o n i s u s e d and t h a t 587708 f i s h a r e t r a n s f e r r e d t o s a l t w a t e r a t t h e b e g i n n i n g o f J u l y ( s e e t a b l e VII), t h e c o s t o f d i s e a s e c o n t r o l would be $5877. No f u r t h e r t r e a t m e n t w i l l be c o n s i d e r e d . , M a i n t e n a n c e The m a i n t e n a n c e c o s t s a r e e s t i m a t e d a t 5% o f t h e i n i t i a l c a p i t a l c o s t e s t i m a t e p e r annum l e s s t h e s t a r t - u p f e e s , s i t e s e l e c t i o n , a d m i n i s t r a t i o n , and c o n s t r u c t i o n c o s t s . The a n n u a l m a i n t e n a n c e e x p e n s e w i l l be $4991. I n s u r a n c e The p r o p e r t y i n s u r a n c e e xpense i s c a l c u l a t e d as 1% o f t h e i n i t i a l c a p i t a l a s s e t s p e r annum as f o r t h e m a i n t e n a n c e expense a b o v e . T h i s i s t h e r a t e u s e d by E a s l e y i n h i s a n a l -y s i s o f t r o u t p r o d u c t i o n f a c i l i t i e s . The p r o p e r t y i n s u r a n c e e x pense p e r annum w i l l be $998 but i t w i l l be p a i d a t m o n t h l y i n t e r v a l s . I n s u r a n c e f o r o p e r a t i o n o f t h e t r u c k w i l l be ap-p r o x i m a t e l y $325 p e r annum. Fees The a n n u a l f e e s c o n s i s t o f : $10 t o f i l e t h e a n n u a l r e p o r t 119 o f t h e company; a b u s i n e s s l i c e n c e c o s t i n g $25 ( f o r t h e c i t y o f V a n c o u v e r ) w h i c h i s r e q u i r e d f o r t h e s a l e o f t h e f a rm p r o d -u c t s ; a w a t e r r i g h t l i c e n c e f e e o f $50 ( a p p r o x i m a t e as t h e f e e v a r i e s w i t h t h e s p e c i f i c s i t u a t i o n ) ; a c o m m e r c i a l f i s h f a r m l i c e n c e f e e o f $10; and a f o r e s h o r e l e a s e f e e o f $100 w h i c h was d e s c r i b e d e a r l i e r i n t h e s e c t i o n c o n c e r n i n g t h e i n s t i t u t i o n a l c o n s t r a i n t s . The t o t a l a n n u a l f e e e xpense i s $195 . Egg s t o c k A l t h o u g h t h e r e i s a h i g h p r o b a b i l i t y t h a t t h e p r i c e o f egg s t o c k f r o m t h e F i s h e r i e s and M a r i n e S e r v i c e w i l l r i s e , t h e p r e s e n t p r i c e i s $10 p e r 1000 eggs ^ . 120 FOOTNOTES 1. Anonymous; 1967. Mark's S t a n d a r d Handbook f o r M e c h a n i c a l E n g i n e e r s . M c G r a w - H i l l Book Company: T o r o n t o , pp. u n l i s t e d . 2. Goodbrand: D.. 1977. P r i v a t e salmon a q u a c u l t u r i s t . P e r s o n a l c o m m u n i c a t i o n . 3. Mahnken; C.V.W., 1975. S t a t u s R e p o r t : C o m m e r c i a l Salmon C u l t u r e i n Puget Sound. The C o m m e r c i a l F i s h Farmer 2 ( 1 ) : 8-11. 4. E a s l e y ; J . E . , 1976. C o s t s And R e t u r n s Of A l t e r n a t i v e M o u n t a i n T r o u t P r o d u c t i o n F a c i l i t i e s . E c o n o m i c s I n f o r m -a t i o n R e p o r t , N o r t h C a r o l i n a S t a t e U n i v e r s i t y . No. 46, pp. 29. 5. S i n c l a i r ; D., 1978. F i s h e r i e s and M a r i n e S e r v i c e , V a n c o u v e r , B.C.. P e r s o n a l c o m m u n i c a t i o n . CHAPTER IX PROCESSING 122 P r o c e s s i n g The a c c e p t a n c e o f f i s h e r y p r o d u c t s by consumers i s a f f e c t e d by t h e p e r c e i v e d q u a l i t y o f t h e p r o d u c t and t h e c o m p a t i b i l i t y o f t h e p r o d u c t w i t h t h e m a r k e t i n g image. T h r e e t y p e s o f damage wh i c h a f f e c t t h e q u a l i t y o f f i s h p r o d u c t s a r e t h e d i g e s t i o n o f t h e f l e s h by n a t u r a l e n z y -mes, o x i d a t i o n o f t h e f a t t y t i s s u e s , and b a c t e r i a l i n f e s t -a t i o n s . P r o p e r p r o c e s s i n g can f o r e s t a l l t h e o n s e t o f t h e s e forms o f damage. The q u a l i t y and s h e l f - l i f e o f b o t h f r e s h and f r o z e n salmon;- i s i n c r e a s e d i f i t i s g u t t e d and b l e d soon a f t e r 2 d e a t h . An a d d i t i o n a l b e n e f i t o f d r e s s i n g i s t h a t t h e p r o d u c t i s r e a d y f o r immediate use by t h e consumer. T h i s i s i m p o r t a n t f a c t o r i n modern f o o d m a r k e t s . F r e s h f i s h s h o u l d be s t o r e d a t t e m p e r a t u r e s between 1 and 3 d e g r e e s c e l s i u s whereas f r o z e n f i s h s h o u l d be m a i n t a i n e d below 0 c e l s i u s . I t i s i m p o r t a n t t o e n s u r e a s t a b l e t e m p e r a t u r e f o r t h e froz-^ en p r o d u c t b e c a u s e f l u c t u a t i n g t e m p e r a t u r e s c a u s e s o f t e n i n g o f t h e t i s s u e due t o r e c r y s t a l l i z a t i o n o f m o i s t u r e i n t h e 3 t i s s u e s w h i c h d i s r u p t s t h e c e l l s t r u c t u r e The c l e a n i n g p r o c e s s ( e v i c e r a t i o n and g i l l i n g ) may be a c c o m p l i s h e d by hand o r by m a c h i n e . M a c h i n e s have n o t been u s e d i n B r i t i s h C o l u m b i a t o d a t e . However, a mach-i n e has been m a n u f a c t u r e d t h a t i s c a p a b l e o f c l e a n i n g 30 t o 40 p a n - s i z e f i s h p e r m i n u t e w i t h two l a b o u r e r s i n a t -H t e n d a n c e . The c o s t o f t h e d e v i c e i n c l u d i n g i n s t a l l a -123 t i o n c o u l d be $60000? a l t h o u g h n e i t h e r t h e p u r c h a s e p r i c e n o r t h e o p e r a t i n g c o s t s a r e a v a i l a b l e . T h e r e i s a l s o some c o n c e r n t h a t m e c h a n i c a l c l e a n i n g may n o t be as s e l e c t i v e as hand p r o c e s s i n g w i t h t h e r e s u l t t h a t some f i n s and f l e s h may be i n a d v e r t e n t l y removed. T h i s would i n c r e a s e t h e waste from p r o c e s s i n g and may a d v e r s e l y a f f e c t consumer a c c e p t a n c e o f t h e s e p r o d u c t s . F u r t h e r c o n s i d e r a t i o n o f m e c h a n i z a t i o n c o u l d p r o v e t o be v a l u a b l e as i t would r e d u c e t h e manpower r e q u i r e m e n t s f o r p r o c e s s i n g s u b s t a n t i a l l y . However, b e c -ause t h e r e i s a p a u c i t y o f i n f o r m a t i o n c o n c e r n i n g t h e a u t o -mated p r o c e s s i t w i l l n o t be c o n s i d e r e d f u r t h e r f o r f e a r o f d r a w i n g m i s l e a d i n g c o n c l u s i o n s a b o u t t h e s u b s t i t u t i o n o f l a b o u r and m a c h i n e r y . A l s o , i t i s more l i k e l y t h a t gov-ernment a i d would be a v a i l a b l e t o i n d u s t r i e s w h i c h c r e a t e employment r a t h e r t h a n r e d u c e i t t h r o u g h a u t o m a t i o n . Hand c l e a n i n g i s t h e o n l y method p r e s e n t l y u s e d i n B r i t i s h C o l u m b i a . T h i s method p r o d u c e s an e x c e l l e n t p r o -d u c t when a c c o m p l i s h e d by s k i l l e d l a b o u r e r s . F i s h i n t h e 200 t o 400 gram r a n g e can be p r o c e s s e d a t t h e r a t e o f 75 t o 90 f i s h p e r hour p e r p e r s o n . The w e i g h t l o s s f r o m r o u n d t o d r e s s e d ( p r o c e s s e d ) p r o d u c t i s 15 t o 18 p e r c e n t . The head and t a i l a r e n o t removed ^ . C o s t o f p r o c e s s i n g The c o s t t o p r o c e s s t h e q u a n t i t y o f f i s h e x p e c t e d t o be p r o d u c e d by t h e model farm i s c a l c u l a t e d i n t h i s s e c t i o n . E s t i m a t e s a r e p r o v i d e d f o r b o t h f r e s h and f r o z e n p r o d u c t s . 124 A l l o f the f o l l o w i n g i n f o r m a t i o n was obtained d u r i n g 1978 e i t h e r by telephone c o n v e r s a t i o n s or p e r s o n a l i n t e r v i e w s with experienced persons i n the f i s h p r o c e s s i n g i n d u s t r y . Dressing The c o s t o f labour to gut, g i l l , and package the s a l -mon i s dependent upon the p r i c e of labour and the r a t e at which the process may be accomplished. The p r i c e of l a b -our i s v a r i a b l e being approximately f i v e d o l l a r s per hour f o r non-union labour and up to e i g h t or e i g h t and one-half d o l l a r s per hour f o r union workers. Pan-sized salmon can be dressed by s k i l l e d labour at the r a t e of 75 to 90 p i e c e s per hour. A d r e s s i n g r a t e of 75 p i e c e s per hour i s assumed to allow f o r a 15 minute c o f f e e break per h a l f day. The cost to dress the stock on hand at the end of January, given t h a t 510204 f i s h are a v a i l a b l e , i s 510204 d i v i d e d by 75 (the r a t e / h o u r ) times $7.00 ( p r i c e of l a b o u r ) e q u a l -l i n g $47619. Overhead The p r o c e s s i n g w i l l be undertaken at a f a c i l i t y which i s separate from the farm but i n the same v i c i n i t y . There are two main reasons f o r making t h i s choice r a t h e r than p r o c e s s i n g the f i s h at the farm. The f i r s t i s t hat a p r o c e s s i n g f a c i l i t y i n t e g r a l t o the farm would r e q u i r e ad-d i t i o n a l c a p i t a l o u t l a y but would not l i k e l y be o p e r a t i o n a l f o r more than a short p e r i o d each year. A l s o , a d d i t i o n a l permits and c e r t i f i c a t i o n would be r e q u i r e d to operate a food p r o c e s s i n g f a c i l i t y . The second reason i n v o l v e s the 125 p r o b l e m s and c o s t a s s o c i a t e d w i t h t h e h i r i n g o f s k i l l e d l a b o u r e r s f o r a s h o r t p e r i o d . F o r e x ample, t h e man h o u r s r e q u i r e d t o p r o c e s s t h e s t a t e d q u a n t i t y o f f i s h a t t h e s t a t e d r a t e would be (510204/75) o r 6803 h o u r s e q u a l t o 907 l a b o u r - d a y s a s s u m i n g a s e v e n and o n e - h a l f h o u r work d a y . A l t h o u g h t h e a s s u m p t i o n f o r t h e d e r i v a t i o n o f t h e c o s t f o r t h e model f a r m was t h a t t h e h a r v e s t would be c o n d u c t e d on t h e l a s t day o f J a n u a r y and t h a t t h e f i s h would a l l be 307 grams, i t i s i m p o s s i b l e t o a c c o m p l i s h t h i s i n r e a l w o r l d t e r m s . Coho salmon d i s p l a y a d e g r e e o f i n t r a s p e c i f i c a g -g r e s s i o n w h i c h i n c o n j u n c t i o n w i t h a n a t u r a l t e n d e n c y f o r v a r i a b l e growth r a t e among i n d i v i d u a l s r e s u l t s i n a v a r -i a t i o n i n t h e t i m i n g o f members o f t h e p o p u l a t i o n a t t a i n -i n g t h e h a r v e s t a b l e s i z e . I t i s assumed t h a t t h e d i s t r i b u -t i o n o f f i s h a t t a i n i n g a m a r k e t a b l e s i z e i s c o n s t a n t f o r a p p r o x i m a t e l y one month on e i t h e r s i d e o f t h e o r i g i n a l l y assumed h a r v e s t d a t e . e . g . a p e r i o d o f 45 work d a y s . I t i s e v i d e n t t h a t (907 l a b o u r - d a y s / 4 5 d a y s ) o r 20.16 l a b o u r e r s would be r e q u i r e d . I t seems i n t u i t i v e l y o b v i o u s t h a t an e s t a b l i s h e d p r o -c e s s o r c o u l d p r o v i d e t h i s l a b o u r r e q u i r e m e n t more r e a d i l y f r o m an e s t a b l i s h e d p o o l o f e m p l o y e e s , even i f t h e y a r e s e a s o n a l , t h a n t h e p r i v a t e a q u a c u l t u r i s t whose p r i n c i p a l c o n c e r n i s f i s h p r o d u c t i o n . P r o c e s s i n g o f t h e f a r m p r o -d u c t s w i l l be c o n d u c t e d d u r i n g J a n u a r y and F e b r u a r y , w h i c h i s u s u a l l y a s l a c k p e r i o d f o r most f o o d p r o c e s -126 s o r s . In view of t h i s , i t may be p o s s i b l e f o r the farmer to n e g o t i a t e reduced overhead r a t e s from the processor who wishes to reduce the amount of s l a c k or i d l e time at h i s p l a n t . I t i s assumed t h a t an independent p r o c e s s o r w i l l ch-arge an overhead fee at the r a t e of $.25 per dressed k i l o -gram of product. C o n s i d e r i n g a l o s s of 18% of the rounH product d u r i n g t r a n s f o r m a t i o n to the dressed s t a t e , the t o t a l c ost of overhead would be (156898 kg x $.25/kg x .82) or $31264. Packaging-fresh The f r e s h product i s packaged with the i n t e n t i o n t hat i t i s t o be marketed to the p r i v a t e consumer i n r e t a i l out-l e t s such as supermarkets. A p l a s t i c t r a y with see through wrapping i s used to conform with contemporary r e t a i l p rac-t i c e s . A 20.3 x 12.7 x 2.2 centimeter t r a y can be purchas-ed at a p r i c e of $14 per thousand and v i t a f i l m wrap to cover the t r a y would cost approximately $.01 to $.02 per t r a y . The cost of m a t e r i a l s to package the f r e s h f i s h i s estimated at $.03 per complete t r a y . Each t r a y w i l l con-t a i n two f i s h . The t o t a l c ost i s ($.03 x 510204/2) or $7653 . Packaging-frozen Product i n the f r o z e n form i s normally d i s t r i b u t e d to i n s t i t u t i o n s or to r e t a i l e r s and then repackaged by the r e t a i l e r before d i s p l a y . I n s u l a t e d c a r t o n s having a 1 2 7 c a p a c i t y of 2.27 kg of f r o z e n f i s h are the most popular f o r the f r o z e n product. Each c o n t a i n e r c o s t s approximat-e l y $.075. T h e r e f o r e , the t o t a l c ost o f packaging mater-i a l f o r the f r o z e n product i s (128656 kg/2.272 kg x $.075) or $4246. T r a n s p o r t a t i o n I t w i l l be necessary to t r a n s p o r t the round product from the farm to the p r o c e s s i n g p l a n t and the dressed pro-duct from the p r o c e s s o r to the wholesaler or storage f a c i l -i t y i f i t i s s e p a r a t e . R e f r i g e r a t i o n should be used i n order to preserve the q u a l i t y of both the f r e s h and f r o z e n products. Fresh f i s h whether i n the round or dressed are u s u a l l y packed i n t o t e s (wood or p l a s t i c boxes) l a y e r e d with i c e when the t r a v e l l i n g time i s s h o r t . T h i s i s l i k e l y to be the s i t u a t i o n when s h i f t i n g f i s h from the farm to the p r o c e s s i n g f a c i l i t y . When there i s e x t e n s i v e t r a v e l l i n g time, beyond one or two hours, i t would be wise to use a more r e l a i a b l e and s t a b l e source of r e f r i g e r a t i o n . A t r -uck with a r e f r i g e r a t i o n u n i t would be i d e a l f o r t h i s pur-pose. Although a s p e c i f i c s i t e was not e s t a b l i s h e d f o r the f i s h farm, i t has been assumed that the t r a v e l l i n g time from the p r o c e s s i n g f a c i l i t y t o the d i s t r i b u t i o n c e n t e r w i l l be g r e a t e r than f o u r hours but l e s s than ten hours. T h i s w i l l a llow t r a n s p o r t from c o a s t a l areas as f a r north as the S e c h e l t P e n i n s u l a to d i s t r i b u t i o n c e n t e r s i n Van-couver . 128 Without knowing the s p e c i f i c l o c a t i o n s of the v a r i o u s f a c i l i t i e s i t i s not p o s s i b l e t o provide p r e c i s e c o s t s f o r t r a n s p o r t a t i o n . However, a co s t can be estimated based on t r a n s p o r t a t i o n r a t e s i n B r i t i s h Columbia. Totes should be a v a i l a b l e from the l o c a l processor and a f l a t bed t r u c k from some l o c a l source. R e f r i g e r a t -ed v e h i c l e s t r a v e l r e g u l a r l y t o the c o a s t a l communities to d e l i v e r v a r i o u s food products. I t i s q u i t e p o s s i b l e t h a t the dressed f r e s h or f r o z e n f i s h c o u l d r e p l a c e these pro-ducts on the r e t u r n t r i p t o Vancouver. Perhaps reduced r a t e s c o u l d be n e g o t i a t e d r e f l e c t i n g more e f f i c i e n t use of the v e h i c l e s by the t r u c k i n g f i r m when used t o t r a n s p o r t goods i n both d i r e c t i o n s . The c o s t estimate used i n the a n a l y s i s i s $.05 per dressed k i l o g r a m . T h i s appears to be a reasonable estim-ate given t h a t a Vancouver f i r m w i l l supply round product t r a n s p o r t a t i o n u s i n g t o t e s and a f l a t - b e d t r u c k f o r a d i s -tance of 40 k i l o m e t e r s i n c l u d i n g two hours f o r l o a d i n g and unloading at a r a t e of $.0066 per kilogram. Reefer s e r -v i c e from P o r t l a n d to Vancouver f o r q u a n t i t i e s of 2500 kg per pick-up i s a v a i l a b l e from a Vancouver f i r m on a r e g u l a r b a s i s f o r approximately $.044 per kil o g r a m . T h e r e f o r e , the t o t a l c o s t to t r a n s p o r t the f i s h from the farm t o the pr o c e s s o r and then t o the d i s t r i b u t i o n c e n t e r i s (128656 kg x $.050) or $6433. 129 F r e e z i n g The c o s t t o f r e e z e t h e f i s h u s i n g a b l a s t f r e e z e r would be $.154 p e r d r e s s e d k i l o g r a m . The t o t a l f r e e z i n g c o s t i s (128656 kg x $.154) o r $ 19813. S t o r a g e S t o r a g e f o r t h e f r e s h p r o d u c t need n o t be s u p p l i e d by t h e f a r m e r / p r o c e s s o r as i t would be s h i p p e d d a i l y t o t h e w h o l e s a l e r f o r d i s t r i b u t i o n . F r o z e n p r o d u c t , on t h e o t h e r h and, would be s t o r e d f o r s e v e r a l months t o smooth out t h e f l o w o f p r o d u c t t o t h e market v i a t h e w h o l e s a l e r . S t o r a g e o f f r o z e n p r o d u c t i s s e p a r a t e d i n t o two c h a r g e s . One c h a r -ge i s f o r what i s known as ' i n and o u t ' . T h i s c o s t i n c l u d -es a f e e f o r h a n d l i n g t h e p r o d u c t g o i n g i n t o and o u t o f t h e s t o r a g e f a c i l i t y p l u s one month s t o r a g e . The o t h e r c h a r g e i s t h e o n g o i n g s t o r a g e c h a r g e beyond one month. Normal c h a r g e s f o r t h e s e a c t i v i t i e s i n t h e V a n c o u v e r a r e a a r e $.044 p e r kg ' i n and o u t ' c h a r g e s and $.011 p e r kg f o r m o n t h l y s t o r a g e . The t o t a l c o s t t o s t o r e a l l o f t h e d r e s s e d p r o d u c t f o r an a v e r a g e p e r i o d o f t h r e e months would be [ ( 1 2 8 6 5 6 kg x $.044) = (128656 kg x 2 x $.011)] o r $8491. Summary The c o s t s t o p r o c e s s t h e c o m p l e t e a n n u a l f a r m h a r v e s t as f r e s h p r o d u c t w i t h o u t s t o r a g e , f r o z e n p r o d u c t w i t h o u t s t o r a g e , and f r o z e n p r o d u c t w i t h s t o r a g e a r e p r e s e n t e d i n t a b l e X . These e s t i m a t e s assume t h a t 510204 p a n - s i z e d 130 T a b l e X The E s t i m a t e d C o s t t o P r o c e s s t h e P r o d u c t i o n f r o m t h e Model Salmon Farm. P r o c e s s i n g Item P r o c e s s i n g Method F r e s h F r o z e n S t o r a g e F r o z e n : + S t o r a g e Mixed 1: 3 D i r e c t l a b o u r 47619 47619 47619 47619 Ove r h e a d 32164 32164 32164 32164 M a t e r i a l s Pkg. 7653 4246 4246 5098 T r a n s p o r t a t i o n 6433 6433 6433 6433 F r e e z i n g - 19813 19813 14860 In £ Out - - 5661 4246 S t o r a g e (2 Mo. ) — - 2830 2122 T o t a l c o s t $93869 $110275 $118766 $112542 131 coho salmon a r e h a r v e s t e d and t h a t t h e d r e s s e d w e i g h t i s 82% o f t h e r o u n d w e i g h t p r o v i d i n g 128656 k i l o g r a m s o f d r e s -s e d p r o d u c t f o r s a l e . 132 FOOTNOTES 1. Kreuzer; R., 1965. The Technology of F i s h U t i l i z a t i o n . F i s h i n g News (Books) L t d . : London, pp. 280. 2. Browning; R.J., 1974. F i s h e r i e s of the North P a c i f i c . A laska Northwest P u b l i s h i n g Company: A l a s k a , pp. 408. p. 252. 3. G i l l i e s ; M.T., 1971. Seafood P r o c e s s i n g . Noyes Data C o r p o r a t i o n : New J e r s e y , pp. 206. 4. Ravnstrup t r o u t p r o c e s s i n g machine brochure. 5. Goodbrand; D.. 1977. A B r i t i s h Columbia salmon farmer. Personal communication. 6. Lehman; H., 1977. A B r i t i s h Columbia t r o u t farmer. Pe r s o n a l communication. CHAPTER X FINANCIAL ANALYSIS 134 Cost of product and product mix The p r e v i o u s d i s c u s s i o n of the marketing c o n s t r a i n t s and p r o c e s s i n g methods i n chapters IV and IX. r e s p e c t i v e l y , l e d to the c o n c l u s i o n that only f r e s h and/or f r o z e n products would be marketed. The product mix, the q u a n t i t y of f r e s h and/ or f r o z e n product, that i s to be marketed by the farm must be e s t a b l i s h e d before c o n t i n u i n g with the f i n a n c i a l a n a l y s i s . Two important elements a f f e c t i n g the choice of the pro-duct mix are the p h y s i c a l c h a r a c t e r i s t i c s and the p r o f i t mar-gi n a s s o c i a t e d with each product type. For example, the s h e l f -l i f e of f r e s h f i s h i s i n the order of ten days while f r o z e n f i s h are marketable a f t e r being s t o r e d f o r a year or more. T h e r e f o r e , f r e s h product i s a v i a b l e a l t e r n a t i v e only i f the time from the harvest to the consumer i s s h o r t . The f r o z e n product i s a c c e p t a b l e f o r turnover p e r i o d s of at l e a s t one year. The p r o f i t margin and c o s t per kilogram of f r e s h and f r o z e n product are provided i n t a b l e XI. The estimates are based on the assumed p r i c e s , p r o d u c t i o n , c o s t s , and p r o c e s s i n g c o s t s e s t a b l i s h e d f o r the f r e s h and f r o z e n products i n the pre-ceding c h a p t e r s . I t i s obvious from the f i g u r e s presented i n t a b l e XI t h a t the most p r o f i t a b l e product mix f o r the salmon farmer i s 100% f r e s h and 0% f r o z e n product.,- because the p r o f i t margin i s $.7308/kg f o r f r e s h f i s h compared to $.3833 f o r f r o z e n product. The d i f f e r e n c e i s due to the higher market p r i c e and lower p r o c e s s i n g c o s t s f o r the f r e s h f i s h product. 135 T a b l e XI The E s t i m a t e d P r o f i t M a r g i n and C o s t p e r D r e s s e d K i l o g r a m o f F r e s h and F r o z e n P r o d u c t . Item Revenue F r e s h P r o d u c t ( $ / k g ) 3 . 7400 F r o z e n P r o d u c t ( $ / k g ) 3.5200 E x p e n s e s I n v e n t o r y eggs m e d i c a t i o n f e e d f e e d t r a n s p o r t h e a t i n g f u e l l a b o u r - r e a r i n g s u b - t o t a l Admin. 6 O p e r a t . l e a s e - p r o p e r t y amort i z a t i o n d e p r e c i a t i o n g e n e r a l t r a n s p o r t m a i n t e n a n c e l a b o u r - g e n e r a l t r u c k i n s u r a n c e p r o p e r t y i n s u r . f e e s - a n n u a l m a n a g e r - s a l a r y u t i l i t i e s s u b - t o t a l P r o c e s s i n g l a b o u r - d i r e c t o v e r h e a d m a t e r i a l s - p k g . t r a n s p o r t a t i o n f r e e z i n g s u b - t o t a l S t o r a g e i n £ out s t o r a g e s u b - t o t a l T o t a l P r o f i t m a r g i n w i t h o u t s t o r a g e w i t h s t o r a g e .0583 .0457 1.2874 .0357 .1597 . 2099 1.7967 .1119 .0312 .1049 .0177 .0388 .0933 .0025 .0078 .0015 .0700 .0093 .4829 . 3701 .2500 .0595 .0500 .7296 3.0092 7308 .0583 . 0457 1.2874 .0357 .1597 .2099 1.7967 .1119 .0312 .1049 .0177 . 0388 .0933 . 0025 .0078 . 0015 .0700 .0093 .4829 . 3701 .2500 .0330 .0500 .1540 .8571 .0440 .0220 .0660 3.1367 . 3833 . 3173 136 However, the p e r i o d d u r i n g which the f r e s h product can be mar-keted i s c o n s t r a i n e d by i t s s h e l f - l i f e and the h a r v e s t i n g per-i o d . In chapter VII i t was assumed th<at the h a r v e s t i n g per-io d would be one day. T h i s assumption was r e l a x e d i n chapter IX and a more r e a l i s t i c h a r v e s t i n g p e r i o d of approximately nine weeks was s e t . A f t e r adding the s h e l f - l i f e , the t o t a l p e r i o d d u r i n g which s a l e s of f r e s h product can be accomplished i s approximately eleven weeks. I f the s a l e of pan-size product were r e l a t i v e l y constant throughout the year, t h i s eleven week p e r i o d would r e p r e s e n t the s a l e of 21% of the p r o d u c t i o n from the model farm. However, the working assumption f o r the purpos-es of the f i n a n c i a l a n a l y s i s i s that 25% of the product w i l l be marketed f r e s h and the remaining 75% w i l l be f r o z e n . The i n c r e -ase i n s a l e s of f r e s h f i s h i s a reasonable assumption given that these f i s h w i l l be a v a i l a b l e at a time when f r e s h salmon from the t r a d i t i o n a l f i s h e r y are u n a v a i l a b l e . Conversely, the s a l e of f r o z e n product may be s l i g h t l y depressed d u r i n g the summer and s p r i n g months due to the a v a i l a b i l i t y of f r e s h salmon from t r a d i t i o n a l s o u r c e s . D i s c u s s i o n of the q u e s t i o n of s e a s o n a l i t y of p a n - s ize products with Vancouver. B.C. wholesalers d i d not d i s c l o s e a f i r m o p i n i o n as to the e f f e c t of the a v a i l a b i l i t y of f i s h from t r a d i t i o n a l sources on the s a l e of farm f i s h . Some people thought there was an e f f e c t while others d i d not. In g e n e r a l the assumption has s u f f i c i e n t i n t u i t i v e merit to accept i t f o r the purposes of the study. An a l t e r n a t i v e course of a c t i o n would be to lengthen the p e r i o d f o r the har-137 v e s t t o e l e v e n weeks i n s t e a d o f n i n e weeks. However, t h i s m a n i p u l a t i o n may s t r e t c h t h e l i m i t s o f t h e e a r l i e r assump-t i o n s c o n c e r n i n g t h e p r o d u c t i o n m o d e l . Income s t a t e m e n t - p r e p a r a t i o n The n e t s a l e s a r e b a s e d on a p r i c e t o t h e w h o l e s a l e r o f $3.74/kg f r e s h and $3.52/kg f o r f r o z e n p r o d u c t c o m p l e t e l y p a c k a g e d and d e l i v e r e d t o t h e d i s t r i b u t i o n c e n t e r . No d e f a u l t s o r r e t u r n s a r e e x p e c t e d a g a i n s t g r o s s s a l e s . T h e r e f o r e , g r o s s s a l e s e q u a l n e t s a l e s . The a n n u a l i n v e n t o r y c o s t and c o s t o f goods s o l d a r e i t e m -i z e d i n t a b l e X I I . These c o s t e s t i m a t e s were d e s c r i b e d i n c h a p t e r s V I I I and IX. The d i f f e r e n c e i n t h e t o t a l c o s t o f i n v e n t o r y between y e a r one and s u c c e e d i n g y e a r s i s due t o t h e a d d i t i o n a l f e e d , f e e d t r a n s p o r t , p r o c e s s i n g , and l a b o u r r e q u i r e d t o b r i n g t h e f i s h t o m a r k e t a b l e c o n d i t i o n . The o p e r a t i n g and a d m i n i s t r a t i v e e x p e n s e s a r e p r o v i d e d i n t a b l e X I I I . The a m o r t i z a t i o n and d e p r e c i a t i o n c h a r g e s a r e a l l o c a t e d o v e r a t e n y e a r p e r i o d by t h e s t r a i g h t - l i n e method. T h i s p r a c t i c e c o n f o r m s w i t h t h e g e n e r a l l y a c c e p t e d a c c o u n t i n g p r i n c i p l e o f m a t c h i n g c a p i t a l i z a t i o n c o s t s w i t h r e v e n u e s . The income t a x r e p o r t e d on t h e income s t a t e m e n t i s t h e a c t u a l income t a x expense f o r t h e y e a r . An a l t e r n a t i v e meth-od would have been t o e n t e r an e q u a l amount each y e a r b a s e d on t h e a c c o u n t i n g income. A d e f e r r e d l i a b i l i t y a c c o u n t would t h e n be u s e d on t h e b a l a n c e s h e e t t o i n d i c a t e t h e d i f f e r e n c e T a b l e X I I The C o s t o f Goods S o l d and C o s t o f I n v e n t o r y f o r t h e Model Farm P r o d u c i n g F r e s h , F r o z e n , and Mixed P r o d u c t A l l P r o d u c t s F r o z e n P r o d u c t F r e s h P r o d u c t Mixed P r o d u c t Y ear 1 Y e a r s T e r m i n a l Y e a r s T e r m i n a l Y e a r s T e r m i n a l 2-10 + Y e a r 10 2-10 + Y e a r 10 2-10 + Y e a r 10 C o s t o f Goods S o l d B e g i n n i n g i n v e n t o r y Add: new i n v e n t o r y Goods a v a i l a b l e L e s s : e n d i n g i n v e n -t o r y C o s t o f goods s o l d 131821 131821 131821 131821 131821 309263 309263 441084 441084 131821 0 131821 131821 292857 292857 424678 424678 131821 0 131821 131821 311530 311530 443351 443351 131821 0 309263 441084 2 9 2 8 5 7 4 2 4 6 7 8 311530 443351 C o s t o f I n v e n t o r y Eggs 7500 7500 7500 7500 M e d i c a t i o n 5877 5877 5877 5877 Feed 72868 165638 165638 165638 Feed t r a n s p o r t 2030 4591 4591 4591 H e a t i n g f u e l 20546 20546 20546 20546 L a b o u r - r e a r i n g 23000 27000 27000 27000 P a c k a g i n g 0 4246 7653 5098 F r e e z i n g 0 19813 0 14860 T r a n s p o r t 0 6433 6433 6433 In £ out s t o r a g e 0 ft 0 4246 S t o r a g e 0 A 0 2122 L a b o u r - p r o c e s s i n g 0 47619 47619 47619 T o t a l 131821 309263 292857 311530 CO oo 139 T a b l e X I I I O p e r a t i n g and A d m i n i s t r a t i v e E x p e n s e s f o r t h e Model Farm E x p e n s e : Y e a r 2-10 L e a s e - p r o p e r t y 14H00 A m o r t i z a t i o n 4015 D e p r e c i a t i o n 13500 U t i l i t i e s 1200 G e n e r a l t r a n s p o r t a t i o n 1500 M a i n t e n a n c e 4991 L a b o u r - g e n e r a l 12000 T r u c k i n s u r a n c e 325 P r o p e r t y i n s u r a n c e 998 F e e s - a n n u a l 170 P r o c e s s i n g o v e r h e a d 0 M a n a g e r - s a l a r y 9000 14400 4015* 13500* = 1200 1500 4991 12000 325 998 195 32164 9000 T o t a l e x p e n s e s 62099 94288**' * i n y e a r 10 t h e a m o r t i z a t i o n c h a r g e i s $4017 ** i n y e a r 10 t h e d e p r e c i a t i o n c h a r g e i s $13497 * * * i n y e a r 10 t h e t o t a l e x p e n s e s a r e $94287 140 between the a c t u a l and accounting income tax expenses. The method of d i s c l o s u r e chosen i n the a n a l y s i s presents a more r e a l i s t i c view of the f i n a n c i a l p o s i t i o n of the farm. The p e r t i n e n t r e g u l a t i o n s and method used to c a l c u l a t e the income taxes payable are d i s c u s s e d below. D e p r e c i a t i o n charges are r e p l a c e d by a system of c a p i t a l c o s t allowances (CCA) f o r tax c a l c u l a t i o n purposes 1 . The system r e l e g a t e s a s s e t s t o s p e c i f i e d c l a s s e s of p r o p e r t y . Each c l a s s has a f i x e d , maximum annual r a t e of c l a i m or deduc-t i o n . CCA i s based on the d e c l i n i n g balance o f the asse t c l a s s and a l l p r o p e r t y w i t h i n a c l a s s i s t r e a t e d as a group or u n i t r a t h e r than i n d i v i d u a l l y . However, i t i s not necessary to take the maximum r a t e o f de d u c t i o n . In f a c t , no deduction need be taken i n a year at a l l . In t h i s study maximum allowances were taken f o r a l l c l a s s e s o f a s s e t s i n each year. The a s s e t s p e r t a i n i n g t o the model farm are grouped by c l a s s and assign e d the s p e c i f i e d CCA r a t e i n appendix L. New a s s e t s purchased i n a year are added to the r e s p e c t i v e c l a s s i n accordance with the purchase v a l u e . T h i s i s true r e g a r d l e s s of the time dur-in g the t a x a t i o n year when the asse t was purchased. The CCA stream f o r c l a s s 8 (machinery and equipment) has be-en c a l c u l a t e d i n accordance with the r e g u l a t i o n s governing the f e d -2 e r a l tax deduction f o r the Investment Tax C r e d i t (ITC) . The ITC a l l o w s a deduction of 5% of the purchase c o s t of s p e c i f i e d new equipment from the f e d e r a l income taxes payable. F i s h farm-i n g i s e l i g i b l e f o r the deduction because of i t s i n c l u s i o n 141 i n t h e d e s i g n a t e d a c t i v i t i e s o f f a r m i n g and f i s h i n g . However, i n v i e w o f t h e r e g u l a t i o n s , o n l y m a c h i n e r y and equipment i n c l a s s 8 a r e c o n s i d e r e d t o be e l i g i b l e f o r t h e ITC d e d u c t i o n . The f a r m s i t e s e l e c t i o n and s e t - u p c o s t s a r e n o t e l i g i b l e . The t a x d e d u c t i o n i s a p p l i e d e i t h e r i n t h e y e a r o f p u r c h a s e o r i n t h e f i v e f o l l o w i n g y e a r s . I f t h e t a x c r e d i t i s t o be t a k e n i n a p a r t i c u l a r y e a r , t h e c a p i t a l c o s t a l l o w a n c e a p p l i e d t o t h e f e d e r a l t a x e s must be r e d u c e d by t h e amount o f t h e t a x c r e d i t b e f o r e t h e CCA i s c a l c u l a t e d f o r t h a t y e a r . C o n s e q u e n t l y , t h e CCA a p p l i e d t o t h e a s s e t c l a s s w i l l be r e d u c e d by t h a t amount i n s u c c e s s i v e y e a r s as w e l l . With r e s p e c t t o t h e model f a r m , t h e t a x c r e d i t i s t a k e n i n t h e f i r s t y e a r t h a t t h e f u l l t a x c r e d i t c o u l d be d e d u c t e d from t h e f e d e r a l t a x e s p a y a b l e . No t a x c r e d i t i s assumed f o r t h e new equipment p u r c h a s e d i n y e a r f i v e o f o p e r a t i o n s b e c a u s e t h i s p u r c h a s e d a t e i s beyond t h e e l i g i b l e d a t e o f p u r c h a s e t o c l a i m t h e I T C . I t i s p o s s i -b l e t h a t t h i s d a t e may be e x t e n d e d t o i n c l u d e t h e t i m e o f t h e s e a c q u i s i t i o n s , b u t i t would be presumptuous t o make t h a t a s s -u m p t i o n now. The t o t a l c a p i t a l c o s t a l l o w a n c e d e d u c t i o n s from p r o v i n -c i a l and f e d e r a l t a x e s f o r each y e a r o f f a r m o p e r a t i o n s a r e p r o v i d e d i n a p p e n d i x M. The s m a l l b u s i n e s s d e d u c t i o n (SBD) i s d e s i g n e d t o o f f e r a r e d u c e d f e d e r a l and p r o v i n c i a l t a x r a t e t o C a n a d i a n - c o n t r o l -l e d p r i v a t e c o r p o r a t i o n s h a v i n g an a n n u a l a c t i v e b u s i n e s s i n -3 come o f l e s s t h a n $150000 . A c o r p o r a t i o n w i l l c e a s e t o be 142 e l i g i b l e f o r t h e SBD i f i t s c u m u l a t i v e t a x a b l e e a r n i n g s e x c e e d $750000. However, i f t a x a b l e d i v i d e n d s a r e p a i d by t h e c o r p -o r a t i o n , 4/3 o f t h e t a x a b l e d i v i d e n d p a i d i n a y e a r i s d e d u c t e d from t h e c u m u l a t i v e t o t a l . I t i s t h e r e f o r e p o s s i b l e f o r an e l i g i b l e c o r p o r a t i o n t o m a i n t a i n i t s e l i g i b i l i t y o v e r l o n g p e r i o d s . The e f f e c t o f t h e SBD i n B r i t i s h C o l u m b i a i s t o r e -duce t h e e f f e c t i v e t a x r a t e t o 27% ( 1 2 % f o r p r o v i n c i a l t a x and 15% f o r f e d e r a l t a x ) . I f f i s h f a r m i n g c o u l d q u a l i f y as ' m a n u f a c t u r i n g and p r o -c e s s i n g ' p e r t h e d e f i n i t i o n o f t h e Tax A c t , t h e f e d e r a l t a x would be r e d u c e d by an a d d i t i o n a l 5% and s p e c i f i e d m a c h i n e r y and e q uipment u s e d d u r i n g t h e m a n u f a c t u r i n g and p r o c e s s i n g a c t i v i t i e s c o u l d be f u l l y w r i t t e n o f f (CCA) a g a i n s t income t a x o v e r a two y e a r p e r i o d . However, t h e d e f i n i t i o n o f 'farm-i n g ' f o r income t a x p u r p o s e s i s n o t c o n s i d e r e d t o be a manu-f a c t u r i n g and p r o c e s s i n g a c t i v i t y t o w h i c h t h e i n c e n t i v e s would a p p l y 4 *^ . In v i e w o f t h e above d i s c u s s i o n , t h e model farm w i l l be t a x e d a t t h e e f f e c t i v e SBD r a t e o f 27%. The f e d e r a l and p r o v i n c i a l t a x e s a r e c a l c u l a t e d s e p a r a t e l y due t o t h e e f f e c t o f t h e ITC on t h e CCA p e r t a i n i n g t o t h e f e d e r a l t a x c a l c u l a t i o n . N o n - c a p i t a l l o s s e s a r e t a k e n i n t h e y e a r f o l l o w i n g t h e o c c u r r e n c e o f t h e l o s s and as l a r g e a p o r t i o n o f t h e l o s s as p o s s i b l e i s t a k e n i n t h a t y e a r A t e r m i n a l l o s s o c c u r s i f t h e t a x p a y e r d i s p o s e s o f a l l p r o p e r t y o f a p r e s c r i b e d a s s e t c l a s s and t h e amount r e a l i z e d 143 i s l e s s t h a n t h e u n d e p r e c i a t e d c a p i t a l c o s t o f t h e p r o p e r t y . The b a l a n c e o f t h e u n d e p r e c i a t e d c a p i t a l c o s t may be d e d u c t e d 7 from income f o r t h e y e a r . T h i s p r o c e d u r e i s a p p l i e d i n y e a r t e n t o d e t e r m i n e t h e t e r m i n a l v a l u e o f t h e f a r m . A p r o - f o r m a income s t a t e m e n t f o r t h e f a rm u s i n g a l l e q u i t y f i n a n c i n g and no r e i n v e s t m e n t o f i d l e c a s h i s p r o v i d e d i n t a b l e XIV. Method o f e v a l u a t i o n The i n t e r n a l r a t e o f r e t u r n and n e t p r e s e n t v a l u e meth-ods a r e u s e d as t o o l s t o e v a l u a t e t h e p r o f i t a b i l i t y o f t h e f a r m u n d e r v a r i o u s c a p i t a l s t r u c t u r e a l t e r n a t i v e s The i n t e r n a l r a t e o f r e t u r n (IRR) i s t h e d i s c o u n t r a t e t h a t e q u a t e s t h e p r e s e n t v a l u e o f t h e n e t c a s h i n f l o w s t o t h e n e t c a s h o u t f l o w s o v e r t h e l i f e o f t h e p r o j e c t . I f t h e d e r i v -ed d i s c o u n t r a t e i s e q u a l t o . o r g r e a t e r t h a n , t h e i n v e s t o r s r e q u i r e d r a t e o f r e t u r n , t h e p r o j e c t s h o u l d be a c c e p t e d . When u s i n g t h e n e t p r e s e n t v a l u e (NPV) method t h e n e t c a s h f l o w s a r e d i s c o u n t e d a t t h e d i s c o u n t r a t e e q u a l t o t h e i n v e s t o r s r e -q u i r e d r a t e o f r e t u r n . I f t h e sum o f t h e d i s c o u n t e d c a s h f l o w s i s e q u a l t o , o r g r e a t e r t h a n , z e r o , t h e p r o j e c t s h o u l d be a c -c e p t e d . The NPV method i s g e n e r a l l y c o n s i d e r e d t o be s u p e r i o r t o t h e IRR method. The b a s i s f o r t h i s c h o i c e , i s t h a t N P V u s e s a r e i n v e s t m e n t r a t e e q u a l t o t h e d i s c o u n t r a t e w h i c h i s t h e o r e t i c a l l y more a c c e p t a b l e t h a n u s i n g t h e IRR as t h e r e -9 i n v e s t m e n t r a t e as i n t h e c a s e o f IRR H u r d l e r a t e The ' h u r d l e r a t e ' ; o r r e q u i r e d r a t e o f r e t u r n w h i c h must T a b l e XIV Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm P r o d u c i n g 25% F r e s h and 75% F r o z e n P r o d u c t I n c l u d i n g S t o r a g e Charges and A l l E q u i t y F i n a n c i n g Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 Mixed P r o d u c t Y ear 1 2 3 1 5 6 7 8 9 10 Net s a l e s C o s t o f goods s o l d 0 0 159915 311530 159915 311530 159915 311530 159915 311530 159915 311530 159915 311530 159915 311530 159915 311530 159915 311530 G r o s s m a r g i n 0 118115 118115 118115 118115 118115 118115 118115 118115 118115 T o t a l e x p e n s e s .62099 91288 91288 91288 91288 91288 91288 91288 91288 91287 E a r n i n g s Income t a x (62099) 0 51127 0 51127 6695 51127 15961 51127 I11288 51127 15556 51127 16331 51127 16937 51127 17112 51127 17785 Net income (62099) 51127 17132 38166 39839 38571 37796 37190 36715 36313 Add amort & dep P u r c h a s e s 17515 17515 17515 17515 17515 (35173) 17515 17515 17515 17515 17511 T e r m i n a l g a i n 183125 Working c a p i t a l (131821)(238926 )  Net c a s h f l o w ( 1 7 6 1 0 5 K 1 6 7 2 8 1 ) 61917 55681 22181 56086 55311 51705 51230 175908 Note: The c a s h f l o w i n y e a r z e r o i s (139976) 145 be a t t a i n e d by t h e p r o j e c t f o r a c c e p t a n c e by t h e i n v e s t o r i s i d e n t i c a l r e g a r d l e s s o f w hether IRR o r NPV i s u s e d as t h e e v a l u a t i o n method. In g e n e r a l , t h e r e q u i r e d h u r d l e r a t e i s e q u a l t o t h e i n v e s t o r s c o s t o f c a p i t a l . However, t h e p r o s -p e c t i v e i n v e s t o r s f o r t h e salmon farm a r e anonymous and t h e r e -f o r e t h e i r c o s t o f c a p i t a l c a n n o t be a s c e r t a i n e d d i r e c t l y . An a l t e r n a t i v e a p p r o a c h would be t o e s t i m a t e t h e r e q u i r e d r a t e o f r e t u r n u s i n g some i n d i c a t o r i n t h e m a r k e t . An o b v i o u s c a n d i d a t e would be t h e i n t e r e s t r a t e t h a t l e n d i n g i n s t i t u t -i o n s r e q u i r e on l o a n s t o t h e f i s h f a r m e r . The l e n d o r s p e r -c e p t i o n o f t h e r i s k i n e s s o f t h e l o a n i s i n c o r p o r a t e d i n t h e i n t e r e s t r a t e . B u t , t h e i n t e r e s t r a t e w i l l n o t be s u f f i c i e n t -l y r e f l e c t i v e o f t h e r i s k a s s o c i a t e d w i t h t h e e q u i t y l e n d o r . T h i s i s b e c a u s e a l l o f t h e s o u r c e s o f d e b t d e s c r i b e d i n t h e e a r l i e r s e c t i o n c o n c e r n i n g t h e s o u r c e s o f f i n a n c i n g r e q u i r e d some t y p e o f s e c u r i t y i n t h e f o r m o f p r e i n v e s t e d e q u i t y c a p -i t a l . A l s o , government l e n d i n g r a t e s c o n t a i n a s o c i o - e c o n o m i c e l e m e n t w h i c h r e s u l t s i n a l o w e r i n t e r e s t r a t e t o a i d t h e e s t a b l i s h m e n t o f new b u s i n e s s . T h e r e f o r e , t h e i n v e s t o r sup-p l y i n g e q u i t y c a p i t a l w i l l r e q u i r e a r a t e o f r e t u r n h i g h e r t h a n t h e i n t e r e s t r a t e on d e b t . The FBDB w i l l l e n d t o t h e f i s h f a r m e r a t 11% p e r annum. I f an a d d i t i o n a l 4% i s added t o r e f l e c t t h e h i g h e r r i s k o f t h e i n v e s t m e n t , a r e t u r n on i n v e s t m e n t o f 15% would be t h e h u r d l e r a t e . I f t h e s t r e a m o f n e t c a s h f l o w s p e r t i n e n t t o t h e p r o j e c t has been a d j u s t e d t o r e f l e c t t h e a n t i c i p a t e d i n f l a t i o n o v e r 146 t h e l i f e o f t h e p r o j e c t , t h e 15% d i s c o u n t r a t e would be t h e a p p r o p r i a t e h u r d l e r a t e . B u t , t h e c a s h f l o w s were n o t a d j u s t -ed f o r i n f l a t i o n . They were e s t i m a t e d u s i n g l a t e 1977 and e a r l y 1978 p r i c e s . A p p l i c a t i o n o f t h e 15% h u r d l e r a t e t o t h e n e t c a s h f l o w s f o r t h e model f a r m would have t h e e f f e c t o f s e t -t i n g an u n d u l y h a r s h a c c e p t a n c e c r i t e r i o n . A more r e a -s o n a b l e d i s c o u n t r a t e may be o b t a i n e d by r e m o v i n g t h e i n f l a -t i o n a r y p o r t i o n from t h e i n t e r e s t r a t e t o o b t a i n t h e r e a l i n t e r e s t r a t e . However, t h i s p o r t i o n o f t h e n o m i n a l r a t e i s n o t known f o r c e r t a i n b e c a u s e t h e n o m i n a l r a t e o f i n t e r -e s t may n o t c o n t a i n t h e f u l l r a t e o f i n f l a t i o n ^ . A h u r d l e r a t e o f 10% was s u b j e c t i v e l y c h o s e n as t h e a c -c e p t a b l e c r i t e r i o n . A more q u a n t i t a t i v e a p p r o a c h was n o t em-p l o y e d b e c a u s e o f t h e a p p a r e n t u n c e r t a i n t y d e s c r i b e d a b o v e . Net c a s h f l o w The n e t c a s h f l o w f o r y e a r s one t o t e n o f t h e o p e r a t i o n o f t h e f i s h f a r m i s c a l c u l a t e d a t t h e b o t t o m o f t h e income s t a t e m e n t p r e s e n t e d i n t a b l e XIV. The n e t c a s h f l o w s a r e ob-t a i n e d by t h e f o l l o w i n g m a n i p u l a t i o n s o f t h e a n n u a l n e t i n c o -me; 1) add back t h e n o n - c a s h e x p e n s e s f o r a m o r t i z a t i o n and d e p r e c i a t i o n ; 2) d e d u c t p u r c h a s e s o f equipment f o r t h e y e a r ; 3) add t h e t e r m i n a l g a i n from t h e l i q u i d a t i o n o f t h e f arm a t t h e end o f y e a r t e n : and 4) r e f l e c t t h e w o r k i n g c a p i t a l change d u r i n g t h e y e a r . The t e r m i n a l g a i n from t h e l i q u i d a t i o n o f t h e f a r m i n y e a r t e n I s e q u a l t o t h e r e v e n u e r e c e i v e d from t h e s a l e o f t h e f i s h s t o c k on hand. No g a i n i s e x p e c t e d from 147 t h e s a l e o f t h e f a r m equipment as t h e s a l v a g e v a l u e was e s -t i m a t e d a t z e r o d o l l a r s i n i t a l l y . The s t o c k has an e s t i m a t e d 12 market v a l u e o f $.35 p e r f i s h . The t o t a l v a l u e o f t h e f i s h s t o c k i s ($.35 x 542082 f i s h ) o r $189729. The c o s t o f goods s o l d i s $131821 l e a v i n g a t a x a b l e g a i n o f $57908. The n e t t e r m i n a l g a i n i s e q u a l t o $189729 l e s s t h e a p p r o p r i a t e t a x e s on t h e t a x a b l e g a i n of'"'$57908 . C a p i t a l s t r u c t u r e a l t e r n a t i v e s The m o n t h l y d i s b u r s e m e n t o f c a s h t o o p e r a t e t h e farm i s p r o v i d e d i n t a b l e XV f o r y e a r one and i n t a b l e XVI f o r y e a r s two t o t e n . Revenue from o p e r a t i o n s i s r e c e i v e d o n l y d u r i n g F e b r u a r y o f e a c h y e a r . T h e r e f o r e , i n y e a r two and s u c c e e d i n g y e a r s s u f f i c i e n t c a s h must be a v a i l a b l e t o meet t h e c a s h ob-l i g a t i o n s f o r d i s b u r s e m e n t s d u r i n g November, December, and J a n u a r y . T h i s r e p r e s e n t s a c a s h r e q u i r e m e n t g r e a t e r t h a n $200000. The c a s h w i l l be o b t a i n e d as e i t h e r d e b t o r e q u i t y c a p i t a l . I f t h e w o r k i n g c a p i t a l i s b o r r o w e d , an i n t e r e s t e xpense w i l l be i n c u r r e d f o r t h e t h r e e months. Assuming an a n n u a l i n t e r e s t r a t e o f 12% ( c o m p a r a b l e t o t h e 11% r a t e o f t h e FBDB). t h e e f f e c t i v e q u a r t e r l y r a t e would be 3%. The e f f e c t o f t h e d e b t on t h e a n n u a l n e t c a s h f l o w i s e q u a l t o t h e i n t e r e s t e xpense on t h e d e b t l e s s t h e t a x s h i e l d p r o v i d e d by t h e i n -t e r e s t e x p e n s e . A l t e r n a t i v e l y , i f t h e w o r k i n g c a p i t a l i s s u p p l i e d t h r o u g h e q u i t y f i n a n c i n g , t h e c a s h s h o u l d n o t be a l l o w e d t o r e m a i n T a b l e XV M o n t h l y Cash D i s b u r s e m e n t s f o r t h e Model Farm i n Year 1 Month Nov. Dec. J a n . Feb. Mar. Apr. May J u n . J u l . Aug. Sep. O c t . Item Fees 150 0 0 0 10 0 0 0 0 0 0 0 L e a s e 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 L a b o u r 3667 3666 3667 3666 3667 3666 3667 3666 3667 3667 3667 3667 T r a n s . f u e l 125 125 125 125 125 125 125 125 125 125 125 125 . i n s . 0 0 0 325 0 0 0 0 0 0 0 0 U t i l i t i e s 100 100 100 100 100 100 100 100 100 100 100 100 D i s e a s e C. 0 0 0 0 0 0 0 5877 0 0 0 0 Eggs 7500 0 0 0 0 0 0 0 0 0 0 0 I n s u r a n c e p r o p e r t y 83 83 83 83 83 83 83 83 83 83 84 84 M a i n t e n a n c e 416 416 416 416 416 416 416 416 416 416 416 415 H e a t i n g f u e l 0 1383 2223 2722 4816 4 709 4693 0 0 0 0 0 Feed 0 0 0 461 1082 1976 3201 5175 7322 6543 16460 30648 Feed t r a n s . 0 0 0 10 24 44 71 114 212 190 477 888 T o t a l 13241 6973 7814 9108 11523 12319 13556 16756 13125 12324 22529 37137 C u m u l a t i v e t o t a l $176405 T a b l e XVI M o n t h l y Cash D i s b u r s e m e n t s f o r t h e Model Farm i n Y e a r s 2-10 Month Nov. Dec . J a n . Feb. Mar. Apr. May J u n . J u l . Aug . Sep. O c t . Item Fees 175 0 0 0 10 0 0 0 0 0 0 0 L e a s e 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 L a b o u r 4667 4666 4667 4666 3667 3666 3667 3666 3667 3667 3667 3667 T r a n s . f u e l 125 125 125 125 125 125 125 125 125 125 125 125 i n s . 0 0 0 325 0 0 0 0 0 0 0 0 U t i l i t i e s 100 100 100 100 100 100 100 100 100 100 100 100 D i s e a s e C. 0 0 0 0 0 0 0 5877 0 0 0 0 Eggs 7500 0 0 0 0 0 0 0 0 0 0 0 I n s u r a n c e p r o p e r t y 83 83 83 83 83 83 83 83 83 83 84 84 M a i n t e n a n c e 416 416 416 416 416 416 416 416 416 416 416 415 H e a t i n g f u e l 0 1383 2223 2722 4816 4709 4693 0 0 0 0 0 Feed 30435 34485 27850 461 1082 1976 3201 5175 7322 6543 16460 30648 Feed t r a n s . 882 1000 679 10 24 44 71 114 212 190 477 888 Equipment * P r o c e s s i n g •7* A Taxes f it i: •'; T o t a l 45583 43458 37343 10108 11523 12319 13556 16756 13125 12324 22529 37137 C u m u l a t i v e t o t a l $275761 * $35173 i n y e a r 5 o n l y ** see t a b l e X * * * s e e r e s p e c t i v e income s t a t e m e n t ,_, -P 150 id l e for the nine months when i t i s not required for operat-ions. Some form of investment such as a bank term deposit would be suitable. The interest on t h i s type of investment would be about 7 or 8%. Although a higher return may be de-si r e d , the farmer must invest the i d l e cash in as l i q u i d form as possible in order to be certain of meeting his cash obligations during the f i r s t 3 months of the following year. Higher interest rates could be obtained but the r i s k of the cash being unavailable when i t was required would probably be higher than the farmer should accept. Assuming that the annual interest on the bank term deposit were 7%. the ef-fecti v e rate for the 9 month period of investment would be 5 1/1%. The eff e c t of the investment on the annual net cash flow would be to increase the annual revenue of the farm by an amount equal to the interest revenue less the income taxes pertaining to that revenue. The working c a p i t a l required to cover cash disbursements over the 3 month period in question i s $238926. If debt i s used, the annual interest expense w i l l be $7168 with a tax shield of $1935, and the equity provided in year two would be reduced by $238926. A l t e r n a t i v e l y , the equity option would re s u l t in an interest revenue of $12511 less the accompany-ing tax of $3387. Choice of c a p i t a l structure The respective annual net cash flows for the a l l equity without investment, equity with investment at 7%. and equity 151 w i t h d e b t a t 12% a l t e r n a t i v e s a r e p r e s e n t e d i n t a b l e X V I I . The r e s u l t s o f t h e NPV and IRR a n a l y s e s a r e i n c l u d e d i n t h e t a -b l e . The f i s h farm would be an a c c e p t a b l e i n v e s t m e n t p r o j e c t u s i n g t h e e q u i t y p l u s d e b t a l t e r n a t i v e but not t h e e q u i t y w i t h r e i n v e s t m e n t a l t e r n a t i v e . T h e r e f o r e , t h e more p r o f i t a b l e a l t e r n a t i v e would be t o borrow t h e r e q u i r e d w o r k i n g c a p i t a l f o r t h r e e months each y e a r a t t h e i n t e r e s t r a t e o f 12% r a t h e r t h a n u s -i n g e q u i t y c a p i t a l t o f i n a n c e t h e w o r k i n g c a p i t a l r e q u i r e m e n t s . F i n a n c i a l pos i t i o n The most p r o f i t a b l e a l t e r n a t i v e s f o r t h e model farm w i t h -i n t h e f o r e g o i n g c o n s t r a i n t s a r e t o p r o d u c e a r a t i o o f 1:3 f r e s h t o f r o z e n p r o d u c t and t o use d e b t t o f i n a n c e $238926 o f t h e r e q u i r e d w o r k i n g c a p i t a l . The f i n a n c i a l p o s i t i o n o f t h e model farm i s d e t e r m i n e d u s i n g an income s t a t e m e n t , b a l a n c e s h e e t . and s o u r c e s and uses o f f u n d s s t a t e m e n t o f p r o forma c o n f i g u r a t i o n f o r a p e r i o d o f t e n y e a r s o f o p e r a t i o n . The income s t a t e m e n t i s p r e p a r e d i n t h e same manner as was d e s c r i b e d i n t h e p r e v i o u s s e c t i o n but i n c o r p o r a t i n g t h e e f f e c t o f p a r t i a l d e b t f i n a n c i n g ( s e e t a b l e X V I I I ) . The b a l a n c e s h e e t i s p r e s e n t e d i n t a b l e XIX. T h e r e i s n ' t a y e a r end c a s h b a l a n c e b e c a u s e $238926 i s b o r r o w e d on t h e f i r s t day o f t h e f o l l o w i n g month t o c o v e r e x p e n s e s u n t i l r e v -enue i s r e c e i v e d d u r i n g F e b r u a r y . The y e a r end i n v e n t o r y i s s i m p l y t h e e s t i m a t e d v a l u e o f d i r e c t i n p u t s t o t h e f i s h s t o c k .. on hand ( s e e t a b l e X I I ) t h a t has n o t a t t a i n e d a m a r k e t a b l e s i z e . In t h i s c a s e t h e p a r t i a l l y grown s t o c k from t h e c u r -T a b l e XVII Net Cash Flow f o r t h e Model Farm U s i n g A l t e r n a t i v e C a p i t a l S t r u c t u r e s I n c l u d i n g NPV and IRR A l t e r n a t i v e Net Cash Flow Y e a r 8 9 10 A l l e q u i t y (139976) (176405) (167284) 64947 55681 22181 56086 55311 54705 54230 475908 NPV10%*(45954) IRR=8.20% E q u i t y + (139976) (176405) (155721) 70265 64122 30622 64528 63751 63145 62672 484351 r e i n v e s t m e n t NPV10%=(1527 ) at 7% IRR=9.94% E q u i t y + (139976) (176405) 64474 61649 50418 16948 50853 50078 49472 48997 231719 d e b t a t NPV10%=31849 12% IRR=12.01% T a b l e X V I I I Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t 27% Tax Rate Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 Tax Rate o f 27% Y e a r 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 459945 459945 459945 459945 459945 459945 459945 459945 459945 C o s t o f goods s o l d 0 311530 311530 311530 311530 311530 311530 311530 311530 311530 G r o s s m a r g i n 0 148415 148415 148415 148415 148415 148415 148415 148415 148415 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT (62099) 54127 54127 54127 54127 54127 54127 54127 54127 54127 I n t e r e s t e x p e n s e 0 7168 7168 7168 7168 7168 7168 7168 7168 7168 EBT (62099) 46959 46959 46959 46959 46959 46959 46959 46959 46959 Income t a x 0 0 2825 14026 12353 13621 14396 15002 15477 15850 Net income (62099) 46959 44134 32933 34606 33338 32563 31957 31482 3.110 9 Add amort £ dep 17515 17515 17515 17515 17515 17515 17515 17515 17515 17515 P u r c h a s e s (35173) T e r m i n a l g a i n 183125 Working c a p i t a l (131821) Net c a s h f l o w (176405) 64474 61649 50448 16948 50853 50078 49472 48997 231749 Note: The c a s h f l o w i n y e a r z e r o i s (139976) T a b l e XIX B a l a n c e S h e e t f o r the Model Farm i n Y e a r s Z e r o t o Ten. Model Farm Pro Forma B a l a n c e Sheet a t O c t o b e r 31, Y e a r s 0-10 Item Y e a r 0 1 2 3 4 5 6 7 8 9 10 C u r r e n t a s s e t s i n v e n t o r y 0 131821 131821 131821 131821 131821 131821 131821 131821 131821 131821 T o t a l C.A. 0 131821 131821 131821 131821 131821 131821 131821 131821 131821 131821 Long-term a s s e t s i n v e s t m e n t 0 0 17515 35030 52545 69493 87008 104523 122038 139553 157067 p l a n t s i t e ( n e t ) 40152 36137 32122 2 8107 24092 20077 16062 12047 8032 4017 0 equipment ( n e t ) 99824 86324 72824 59324 45824 67497 53997 40497 26997 13497 0 T o t a l L.T.A. 139976 122461 122461 122461 122461 157067 157067 157067 157067 157067 157067 T o t a l a s s e t s 139976 254282 254282 254282 254282 288888 288888 288888 288888 288888 288888 S h a r e h o l d e r ' s e q u i t y c o n t . c a p i t a l 139976 316381' it c a p i t a l o u t s t a n -d i n g 139976 254282 254282 254282 254282 254282 254282 254282 254282 254282 254282 r e t a i n e d e a r n i n g s 0 0 46959 44134 32933 34606 67944 67169 6 6 563 6 6088 6 5 715 d i v i d e n d s 0 0 46959 44134 32933 0 33338 32563 31957 31482 31109 r e t a i n e d e a r n i n g s 0 0 0 0 0 34606 34606 34606 34606 34606 34606 T o t a l s h a r e h o l d e r ' s e q u i t y 139976 254282 254282 254282 254282 288888 288888 288888 288888 288888 288888 * a t t h e end o f y e a r one t h e c o n t r i b u t e d c a p i t a l i s w r i t t e n down by an amount e q u a l t o t h e o p e r a t i n g l o s s o f $62099 u s i n g a r e -o r g a n i z a t i o n a c c o u n t not shown 155 r e n t p r o d u c t i o n c y c l e . The i n v e s t m e n t a c c o u n t i s p r o v i d e d t o i d e n t i f y t h e e s t -i m a t e d f u n d s r e q u i r e d t o r e p l a c e worn equipment and p r o v i d e f o r p o s s i b l e e x p a n s i o n o f t h e farm i n y e a r e l e v e n . T h i s a c -c o u n t i s n o t a b s o l u t e l y n e c e s s a r y b e c a u s e t h e r e q u i r e d c a p i t a l c o u l d be p r o v i d e d by some o t h e r means. Because o f t h i s no i n -v e s t m e n t income was r e c o g n i z e d from t h e s e f u n d s i n t h e income s t a t e m e n t . In r e a l i t y t h e c a s h s h o u l d be r e t u r n e d t o t h e s h a r e -h o l d e r s i f i t c a n n o t ' be r e i n v e s t e d a t a h i g h e r r a t e o f r e t u r n t h a n t h e s h a r e h o l d e r s can o b t a i n t h e m s e l v e s . The p u r p o s e o f t h e a c c o u n t i s p r i n c i p a l l y t o i n d i c a t e t h e p o t e n t i a l c a s h r e -q u i r e m e n t f o r r e p l a c e m e n t o r growth i n t h e f a r m , and t o s a t -i s f y a p o t e n t i a l e q u i t y r e q u i r e m e n t t h a t may be imposed t o o b t a i n t h e a n n u a l w o r k i n g c a p i t a l l o a n . I t i s i n c i d e n t a l t o t h e main i s s u e o f t h e s e c t i o n , w h i c h i s t o d e t e r m i n e t h e r e t u r n from t h e o p e r a t i o n o f t h e f i s h f a r m . The i n c r e a s e i n t h e equipment a c c o u n t i s due t o t h e p u r -c h a s e o f r e p l a c e m e n t equipment w h i l e t h e i n c r e a s e i n s h a r e h o l d e r ' s e q u i t y i s t h e r e s u l t o f n o t p a y i n g a c a s h d i v i d e n d i n t h a t y e a r . The new e q uipment was p u r c h a s e d u s i n g c a s h r e t a i n e d by n o t pay-i n g a c a s h d i v i d e n d and by r e d u c i n g the a n n u a l c o n t r i b u t i o n t o t h e i n v e s t m e n t a c c o u n t . The c o n t r i b u t e d c a p i t a l a c c o u n t was w r i t t e n down u s i n g a r e o r g a n i z a t i o n a c c o u n t a t t h e end o f y e a r one by t h e amount o f t h e n e t o p e r a t i n g l o s s f o r t h e y e a r . T h i s m a n i p u l a t i o n was p e r f o r m e d t o a l l o w c a s h d i v i d e n d s t o be p a i d i n f u t u r e 156 13 y e a r s w i t h o u t f i r s t r e i n s t a t i n g t h e l o s s The s t a t e m e n t o f changes i n f i n a n c i a l p o s i t i o n i s d e r i v -ed from t h e p r e c e d i n g - income s t a t e m e n t and b a l a n c e s h e e t (s e e t a b l e X X ) . D i s c u s s i o n Income s t a t e m e n t . Income i s n o t a v a i l a b l e d u r i n g t h e f i r s t y e a r o f o p e r a t i o n s . The income d e r i v e d from o p e r a t i o n s i n y e a r s two t o t e n e x h i b i t s a g e n e r a l d e c l i n e i n l a t e r y e a r s . T h i s i s due t o t h e d e c l i n e i n t h e CCA and t h e d e p l e t i o n o f t h e d e f e r -r e d l o s s o b t a i n e d i n y e a r one. The i n c r e a s e i n n e t income i n y e a r f i v e i s t h e r e s u l t o f t h e p u r c h a s e o f new a s s e t s c a u s i n g t h e c a p i t a l c o s t a l l o w a n c e d e d u c t i o n t o i n c r e a s e . I f t h e s t a t e -ment p e r i o d were e x t e n d e d beyond y e a r t e n , t h e n e t income would i n c r e a s e a b r u p t l y i n y e a r e l e v e n when new equipment was p u r c h a s -ed due t o t h e a c c o m p a n y i n g r e d u c t i o n i n t h e income t a x e s p a y a b l e and t h e n d e c l i n e s i m i l a r t o t h e t r e n d d u r i n g t h e f i r s t t e n y e a r s . B a l a n c e s h e e t . T h e r e i s n ' t any l o n g - t e r m d e b t and i t i s assumed t h a t a l l r e c e i p t s and d i s b u r s e m e n t s a r e i n c u r r e d immedia-t e l y w i t h t h e t r a n s a c t i o n s . T h e r e f o r e , a c c o u n t s f o r r e c e i v a b -l e s and p a y a b l e s a r e n o t shown. The i n v e n t o r y b a l a n c e i s s t a -b l e f r o m y e a r t o y e a r as would be e x p e c t e d d u r i n g no growth p r o d u c t i o n , a s s u m i n g t h a t a l l t h e m a r k e t a b l e p r o d u c t i s s o l d . The c a s h a c c o u n t i s z e r o a t t h e y e a r end b e c a u s e t h e s h o r t -t e r m l o a n w h i c h i s a v a i l a b l e on t h e f i r s t day o f t h e f o l l o w i n g p e r i o d i s s u f f i c i e n t t o c o v e r d i s b u r s e m e n t s u n t i l F e b r u a r y when t h e r e v e n u e from t h e s a l e o f goods i s r e c e i v e d . T h i s T a b l e XX S t a t e m e n t o f Changes i n F i n a n c i a l P o s i t i o n - C a s h B a s i s f o r t h e Model Farm i n Y e a r s Z e r o t o Ten. Model Farm Pro Forma Statement o f Changes i n F i n a n c i a l P o s i t i o n - C a s h B a s i s Y e a r s 0-10 Item Y e a r 0 1 2 3 4 5 6 7 8 9 10 S o u r c e s o f c a s h .from o p e r a t i o n s r e v e n u e 0 0 459945 459945 459945 459945 459945 459945 459945 459945 459945 e x p e n s e s 0 62099 412986 412986 412986 412986 412986 412986 412986 412986 412986 add ( d e d u c t ad-j u s t m e n t s t o c a s h ) a m o r t i z a t i o n and d e p r e c i a t i o n 0 ( 1 7 5 1 5 ) ( 1 7 5 1 5 ) ( 1 7 5 1 5 ) ( 1 7 5 1 5 ) ( 1 7 5 1 5 ) ( 1 7 5 1 5 ) ( 1 7 5 1 5 ) ( 1 7 5 1 5 ) ( 1 7 5 1 5 ) ( 1 7 5 1 4 ) i n v e n t o r y i n c r -e a s e 0 131821 131821 131821 131821 131821 131821 131821 131821 131821 131821 income t a x 0 0 0 2825 14026 12353 13621 14396 15002 15477 15850 Cash d i s b u r s e d f o r e x p e n d i t u r e s 0 176405 395471 398296 409497 407824 409092 409867 410473 410948 411322 Cash g e n e r a t e d by o p e r a t i o n s 0(176105) 64474 61649 50448 52121 50853 50078 49472 48997 48623 . o t h e r s o u r c e s s a l e o f s t o c k 139976 176405 0 0 0 0 0 0 0 0 0 T o t a l c a s h g a i n 139976 0 64474 61649 50448 52121 50853 50078 49472 48997 48623 Uses o f c a s h i n v e s t m e n t 0 0 17515 17515 17515 16948 17515 17515 17515 17515 17514 d i v i d e n d - c a s h 0 0 46959 44134 32933 0 33338 32563 31957 31482 31109 equipment 139976 0 0 0 0 35173 0 0 0 0 0 T o t a l c a s h u s e d 139976 0 64474 61649 50448 52121 50853 50078 49472 48997 4862 3 Net c a s h change 0 0 0 0 0 0 0 0 0 0 0 158 r e v e n u e i s s u f f i c i e n t t o r e p a y t h e s h o r t - t e r m l o a n and a l l o t h e r c a s h d i s b u r s e m e n t s d u r i n g t h e r e m a i n d e r o f t h e y e a r . S t a t e m e n t o f c h a n ges i n f i n a n c i a l p o s i t i o n . The c a s h r e q u i r e d t o c o n s t r u c t and o p e r a t e t h e farm i n y e a r z e r o and y e a r one i s p r o v i d e d by c o n t r i b u t e d c a p i t a l f r o m t h e s h a r e -h o l d e r s . The e q u i t y i s l i m i t e d t o t h e a b s o l u t e r e q u i r e m e n t f o r e ach o f t h e two y e a r s . The a n n u a l w o r k i n g c a p i t a l i s p r o -v i d e d t h r o u g h a s h o r t - t e r m l o a n w h i c h i s n o t i n d i c a t e d on t h e s t a t e m e n t . The c a s h which i s n e c e s s a r y t o r e p a y t h e l o a n and meet t h e o t h e r c a s h o b l i g a t i o n s f o r t h e y e a r i s d e r i v e d from t h e a n n u a l r e v e n u e i n y e a r two and s u c c e s s i v e y e a r s . E x c e s s c a s h t h a t i s not r e q u i r e d t o s u s t a i n o p e r a t i o n s i s p a i d o u t as c a s h d i v i d e n d s o r i n v e s t e d e x t e r n a l l y . New equipment i s p u r c h a s e d i n y e a r z e r o and a t t h e end o f y e a r f i v e . The y e a r z e r o p u r c h a s e s a r e made u s i n g c o n t r i b u t e d c a p i t a l w h i l e c a s h from o p e r a t i o n s i s u s e d i n y e a r f i v e . 159 FOOTNOTES 1. C a n a d i a n M a s t e r Tax G u i d e 1978, e x t r a e d i t i o n 310, J a n -u a r y , 1978. CCH C a n a d i a n L i m i t e d , pp. 715, p. 184. A d i s c u s s i o n o f t h e C a p i t a l C o s t A l l o w a n c e s y s t e m i s p r o -v i d e d h e r e . 2. I n v e s t m e n t Tax C r e d i t . I n t e r p r e t a t i o n B u l l e t i n 331. Revenue Canada. 3. C o l l e y ; G., 1977. Tax P r i n c i p l e s t o Remember. The Can-a d i a n I n s t i t u t e o f C h a r t e d A c c o u n t a n t s , pp. u n s p e c i f i e d , pp. 15-01 t o 15-17. 4. B a r c l a y ; W.A., 1977. T a x a t i o n and t h e B.C. F a r m e r : A Layman's G u i d e . P r o v i n c e o f B r i t i s h C o l u m b i a , M i n i s t r y o f A g r i c u l t u r e , pp. 81, p. 49. 5. C a n a d i a n M a s t e r Tax Guide 1978. op. c i t . , s e c t i o n 9085, p. 403. 6. I b i d . , s e c t i o n 2485. pp. 142-143. 7. I b i d . , s e c t i o n 4150. pp. 212-213. 8. Van Horne; J . C , C.R. D i p c h a n d , and J.R. Hanrahan, 1977 . F i n a n c i a l Management and P o l i c y . C a n a d i a n 4 t h E d i t i o n . P r e n t i c e - H a l l o f Canada, L t d . : S c a r b o r o u g h . pp. 780, pp. 84-87. F u r t h e r d i s c u s s i o n o f IRR and NPV a r e p r o v i d e d i n t h i s t e x t . 9. L o r i e ; J.H., and L . J . S a v a g e . , 1955 . T h r e e P r o b l e m s i n R a t i o n i n g C a p i t a l . J o u r n a l o f B u s i n e s s 28:229-239. 10. Van H o r n e : J . C . , 1971. A Note on B i a s e s i n C a p i t a l Bud-g e t i n g I n t r o d u c e d by I n f l a t i o n . J o u r n a l o f F i n a n c i a l and Q u a n t i t a t i v e A n a l y s i s 6:653-658. 11. M u n d e l l ; R., 1963. I n f l a t i o n and R e a l I n t e r e s t . J o u r n a l o f P o l i t i c a l Economy 71:280-283. 12. Kennedy; W.A.. C.T. Shoop, W. G r i f f i o e n , and A. S o l m i e , 1 9 7 6 . 9 The 1975 Crop o f Salmon R e a r e d on t h e P a c i f i c B i o l o g i c a l S t a t i o n E x p e r i m e n t a l F i s h f a r m . F i s h e r i e s and M a r i n e S e r v i c e T e c h n i c a l R e p o r t 665, pp. 20. p. 12. 13. M e i g s ; W.B.. C E . J o h n s o n , T.F. K e l l e r , and J.D. B l a z o u s k e , 1966. I n t e r m e d i a t e A c c o u n t i n g . M c G r a w - H i l l : T o r o n t o , pp. 1021. pp. 810-813. CHAPTER XI SENSITIVITY ANALYSIS 161 S e n s i t i v i t y a n a l y s i s The c o s t s and r e t u r n s from i n p u t s t o t h e model farm a r e c o n s i d e r e d t o be t h e b e s t e s t i m a t e s a v a i l a b l e . However, t h e r e i s t h e o n g o i n g p o s s i b i l i t y t h a t changes i n p r i c e s o r f a c t o r s o f p r o d u c t i o n w i l l o c c u r . The e f f e c t o f v a r y i n g t h e d o l l a r v a l u e o f some o f t h e more i m p o r t a n t v a r i a b l e s upon t h e p r o f i t a b i l i t y o f t h e f i s h f a rm o p e r a t i o n w i l l be a n a l y -sed i n t h i s s e c t i o n . Each change i s a c c o m p a n i e d by a r e v i s -ed income s t a t e m e n t and t h e a p p r o p r i a t e a n n u a l n e t c a s h f l o w c a l c u l a t i o n . The s t r e a m o f n e t c a s h f l o w s a r e a n a l y s e d u s i n g t h e IRR and NPV methods d e s c r i b e d i n c h a p t e r X. The r e s p e c -t i v e income s t a t e m e n t s . NPV, and IRR c a l c u l a t i o n s a r e p r o -v i d e d i n a p p e n d i x N f o r each o f t h e a l t e r n a t i v e s u nder d i s -c u s s i o n . A g r a p h i s p r o v i d e d t o show t h e e f f e c t o f c h a n g es i n t h e m a g n i t u d e o f t h e s e l e c t e d p a r a m e t e r upon t h e magni-tu d e o f t h e IRR. The p o i n t on t h e r e s u l t i n g l i n e o r c u r v e c o r r e s p o n d i n g w i t h t h e IRR w h i c h i s s e l e c t e d as t h e h u r d l e r a t e i s t h e minimum v a l u e f o r t h e v a r i e d p a r a m e t e r t h a t w i l l a l l o w a f e a s i b l e i n v e s t m e n t d e c i s i o n c o n c e r n i n g t h e f i s h f a r m . The model f i s h f a r m w h i c h was d e s c r i b e d i n t h e p r e c e d -i n g c h a p t e r s had a NPV 1 Q 9. o f $31849 ( d i s c o u n t r a t e o f 10%) and an IRR o f 12.01% ( s e e t a b l e X V I I I ) . P r o d u c t mix The s u b s t i t u t i o n o f f r e s h f o r f r o z e n p r o d u c t i n t h e p r o -d u c t mix w i l l c a u s e f l u c t u a t i o n s i n t h e g r o s s m a r g i n . T h i s i s due i n p a r t t o t h e h i g h e r w h o l e s a l e p r i c e and l o w e r p r o c -162 e s s i n g cost f o r the f r e s h product. A graph i s c o n s t r u c t e d i n f i g u r e 8 showing the r e l a t i o n s h i p between the IRR and the r a t i o o f f r e s h t o f r o z e n product produced by the model farm. The r e l a t i o n s h i p i s developed using p r o d u c t i o n r a t i o s of 4:0, 1:3, and 0:4. Storage c o s t s were not i n c l u d e d i n the c a l c u l a t i o n s i n order to maintain comparable assumptions among the a l t e r n a t i v e s . The assumptions are t h a t storage c o s t s are not i n c u r r e d by the farmer and t h a t the product can be s o l d immediately upon completion of the p r o c e s s i n g opera-t i o n . The assumption of no storage c o s t s i s c o n s i s t e n t with the c o n s t r a i n t s on the f r e s h product. The short s h e l f - l i f e of the f r e s h f i s h p r ecludes storage beyond two weeks. Regard-l e s s o f the mix o f products a v a i l a b l e f o r s a l e by the farm, a l l 3 a l t e r n a t i v e s would be accep t a b l e with r e s p e c t to the c r i t e r i a o u t l i n e d p r e v i o u s l y (see f i g u r e 8 and appendix N). However, the p r o f i t a b i l i t y would be c o n s i d e r a b l y g r e a t e r i f a l l f r e s h product were produced (NPV 1 Q^=$188726) than i f a l l f r o z e n product were a v a i l a b l e (NPV 1 Q^=$10364). Market p r i c e Although the wholesale p r i c e s of $3.74/kg and $3.52/kg f o r the f r e s h and f r o z e n p r o d u c t s , r e s p e c t i v e l y , are the most l i k e l y to be encountered i n the i n d u s t r y , the p r i c e s do var y . F i g u r e 9 demonstrates the r e l a t i o n s h i p between the IRR and the wholesale p r i c e f o r the f i s h based on the model plus three a l t e r n a t i v e wholesale p r i c e s . I t i s assumed t h a t the p r i c e spread of $.22/kg between the f r e s h 165 and f r o z e n p r o d u c t s w i l l e x i s t r e g a r d l e s s o f t h e a c t u a l w hole-s a l e p r i c e s . The t h r e e a l t e r n a t i v e w h o l e s a l e p r i c e s a r e : 1) a $.44/kg i n c r e a s e : 2) a $.22/kg i n c r e a s e ; and 3) a $.22/kg d e c r e a s e . A d e c l i n e i n t h e w h o l e s a l e p r i c e o f $.07/kg i s c o n s i d e r e d t o be t h e maximum t h a t w i l l a l l o w t h e f e a s i b l e o p e r a t i o n o f t h e model f a r m . T h i s would c o r r e s p o n d t o whole-s a l e p r i c e s o f $3.67/kg f o r f r e s h f i s h and $3.45/kg f o r f r o z e n f i s h . A l t e r n a t i v e l y , t h e p r o f i t a b i l i t y may be v a s t l y i n c r -e a s e d as a r e s u l t o f h i g h e r s a l e s p r i c e s . F o r example, a $.44/kg i n c r e a s e i n t h e s a l e s p r i c e s would p r o v i d e an NPV,.,, o f $248958 compared t o $31849 f o r t h e model d i s c u s s e d e a r -l i e r . L a b o u r c o s t The p r i c e p a i d f o r l a b o u r i n p u t v a r i e s w i d e l y between t h e u n i o n and n o n - u n i o n shops i n t h e f a r m i n g and p r o c e s s i n g i n d u s t -r i e s . A n o n - u n i o n wage r a t e o f $5.00/hr i s n o t uncommon, w h i l e $8.50/hr i s o b t a i n e d by u n i o n i z e d l a b o u r e r s a t t h e m a j o r p r o c e s s i n g p l a n t s . The e f f e c t o f v a r i a t i o n s i n t h e l a b o u r r a t e i s o b t a i n e d by i n c r e a s i n g and d e c r e a s i n g t h e t o t a l l a b o u r c o s t o f t h e far m , i n c l u d i n g p r o c e s s i n g , b y 20 p e r c e n t . The maximum l a b o u r r a t e t h a t w i l l a l l o w t h e farm t o be an a c c e p -t a b l e i n v e s t m e n t o p p o r t u n i t y i s $7.56/hr ( s e e f i g u r e 1 0 ) . The a v e r a g e l a b o u r r a t e assumed f o r t h e model was $7.00/hr. A r e d u c t i o n i n t h e a v e r a g e l a b o u r r a t e by 20% t o $5.60/hr w i l l i n c r e a s e t h e NPV, n C t o f t h e farm t o $112300 from $31849. 167 Feed price Feed prices are not standard among manufacturers and often fluctuate with the price and a v a i l a b i l i t y of raw mater-i a l s used as ingredients in the feed. The average cost of feed per production cycle for the model farm was $.72/kg. The effect of an increase in the feed price of $.ll/kg and decreases of $.ll/kg and $.22/kg on the p r o f i t a b i l i t y of the farm i s shown in appendix N and figure 11. A maximum average feed price of $.75/kg representing an increase of $.03/kg i s estimated by interpolation in the graph of figure 11. Feed represents approximately 60% of the annual operating cost of the model farm. Therefore, changes in the unit price of feed have a major e f f e c t on the magnitude of the net cash flows from the farm. For example, the n p v J L Q % f o r t h e assumed feed costs and reductions of $.11 and $.22/kg are $31849. $144968, and $288318, respectively. Taxes Several tax rates are l i k e l y to be encountered by the operators of f i s h farms in B.C. depending upon the o r i g i n of the p r i n c i p a l owners. If the farm i s operated by a corp-oration that i s unable to claim the small business deductions, a tax rate of 51% w i l l apply to the taxable income. Alternat-i v e l y , f i s h farms operated on Native People lands are not taxed. In t h i s case the tax rate would be 0%. The alterna-t i v e of claiming the proceeds of the farm as personal income by the farmer i s not considered. The effect of these tax 169 rates on the p r o f i t a b i l i t y of the model farm i s demonstrated in appendix N and figure 12. The maximum tax rate under which the f i s h farm could remain a feasible investment i s 40 percent. Stocking density 3 A stocking density of 32 kg/m was used in the model 3 although stocking densities of 16 and 48 kg/m are possible alternatives (see chapter VI). The quantity of f a c i l i t i e s and thus the c a p i t a l costs w i l l increase with decreased stock-ing density because more f a c i l i t i e s are required to maintain the same t o t a l biomass of f i s h stock. Higher stocking den-s i t i e s have the opposite e f f e c t on c a p i t a l costs. Changes in the stocking densities would be r e f l e c t e d by changes in the quantity of fibreglass tanks (see appendix 6)* net f l o a t s , net-pens (see appendix H), feeders and p i l e s . The same r a t i o n a l i s used to estimate the required quantity of the above equipment as was used e a r l i e r for the model farm. However, the actual quantities r e f l e c t the di f f e r e n t biomass maintained in each vessel at each stocking density. The water pipe system requires additional discussion. The quantity and size of the water pipe from the head to the tank system w i l l be unchanged. The diameter of the secondary pipe system w i l l be consistent with the model farm although the quantity w i l l be changed in r e l a t i o n to the num-ber of tanks employed. A change in the pipe diameters w i l l not be considered because the same volume of water w i l l be 171 transported through these pipes at each of the sp e c i f i e d stocking d e n s i t i e s . Also, the diameter of the pipe i s l i k e l y to be greater than necessary because water pipe i s normally available at s p e c i f i e d sizes rather than being custom f i t to a p a r t i c u l a r system. This slack would compensate for the ef f e c t of changes in f r i c t i o n due to the varying lengths of pipe employed for the various stocking d e n s i t i e s . A l t e r -n a t i v e l y , the height of the head could be altered to compen-sate for the e f f e c t of f r i c t i o n . Minor variations in the height of the head would not a l t e r the cost of the system and would be t e c h n i c a l l y f e a s i b l e . The diameter of the pipes and valves which provide water d i r e c t l y to the tanks would be d i f f e r e n t than those used for the model because the volume of water per unit time required for each tank would vary with the stocking density. This i s because the water flow required to sustain cultured salmon changes pro-p o r t i o n a l l y to the biomass cultured in a given vessel. There i s no change i n the cost of the piping from the head to the secondary pipe system. The cost of the secondary pipe system i s estimated by multiplying the cost of the^sys-tem for the model farm by the r a t i o of the number of tanks required for a p a r t i c u l a r stocking density to the number of tanks spe c i f i e d for the model. The same size valves would 3 be used for the 48 kg/m stocking density as for the model farm i f the head were raised s l i g h t l y . This i s because the valves for the model farm are larger than the minimum required 172 at the higher d e n s i t y thereby p r o v i d i n g s u f f i c i e n t capac-i t y without a change to l a r g e r diameter equipment. The d i a -meter of the v a l v e s and tank entrance pipes may be reduced 3 by 2.54 cm at a s t o c k i n g d e n s i t y of 16 kg/m . The egg i n c -ubator system w i l l r e q u i r e v a l v e s and p i p i n g of 7.62 cm r e g a r d l e s s of the s t o c k i n g d e n s i t y used i n the r e a r i n g tanks. The estimated c a p i t a l cost and attendant o p e r a t i n g c o s t s r e s u l t i n g from changes i n the q u a n t i t y of equipment r e q u i r e d at the a l t e r n a t i v e s t o c k i n g d e n s i t i e s i s presented with the p r e d i c t e d equipment requirements i n t a b l e XXI. These estim-ates were determined using the p r i c e s and methods d e s c r i b e d i n chapter V I I I , The e f f e c t of these s t o c k i n g d e n s i t i e s on the farm's p r o f i t a b i l i t y i s presented i n appendix N and i n f i g u r e 14. The r e l a t i o n s h i p between the s t o c k i n g d e n s i t y and the c o r r e s -ponding IRR i s not a l i n e a r r e l a t i o n s h i p throughout the range of the experimental a l t e r n a t i v e s . T h e r e f o r e , the use of i n t e r p o l a t i o n along the curve to estimate the minimum acce p t a b l e s t o c k i n g d e n s i t y which w i l l a llow f i n a n c i a l f e a s -i b i l i t y may be somewhat tenuous. However, while n o t i n g t h i s p o t e n t i a l e r r o r , the minimum s t o c k i n g d e n s i t y i s estimated 3 to be approximately 25 kg/m . The d i f f e r e n c e i n the p r o f i t -3 a b i l i t y between the model farm d e n s i t y of 32 kg/m and a 3 d e n s i t y of 48 kg/m was not l a r g e . The N P V 1 0 % was $53739 3 3 at 48 kg/m compared to $31849 at 32 kg/m . T h i s i s because the d i f f e r e n c e i n the c a p i t a l c o s t between the two a l t e r n a t -173 T a b l e XXI Changes i n C a p i t a l and O p e r a t i n g C o s t s a t V a r i o u s S t o c k i n g D e n s i t i e s . Item S t o c k i n g D e n s i t y 3  16 kg/m 32 kg/m U n i t s C o s t Dep . U n i t s C o s t Dep F i b r e g l a s s t a n k s s m a l l 6 7116 712 2 2372 237 l a r g e 18 33426 334 6 11142 1114 F l o a t s + 1 s t o r a g e f l o a t 34 36262 3626 11.5 12966 1297 N e t - p e n s 19mm 10 3350 670 4 1340 268 2 5mm 68 20400 4080 23 6900 1380 F e e d e r s + 1 t i m e r 68 8315 832 23 3064 306 P i l e s 18 8228 823 6 4515 452 Water p i p e 7715 772 ft 6253 625 M a i n t e n a n c e 7876 4063 P r o p e r t y i n s u r a n c e 1575 813 * The d e t e r m i n a t i o n o f t h e r e q u i r e d w a t e r p i p e was d i s c u s s e d i n t h e t e x t . The r e q u i r e m e n t s f o r t h e model f a r m a r e p r e s e n t e d i n a p p e n d i x D. 175 i v e s i s s m a l l ($76260) and the annual a m o r t i z a t i o n and dep-r e c i a t i o n i s only 6% of the annual o p e r a t i n g c o s t s d u r i n g f u l l p r o d u c t i o n . D i s c u s s i o n The product mix i s c o n s t r a i n e d by the pr o d u c t i o n method th a t has been proposed f o r salmon farming i n B r i t i s h Columbia which assumes that a l l the f i s h are to be harvested during a s h o r t p e r i o d of time each year,(see chapter V I I ) . I f pro-d u c t i o n c o u l d be spread throughout the year without i n c r e a s -ing the cost of p r o d u c t i o n , the farmer would be able to mar-ket a l a r g e r p o r t i o n of h i s f i s h as f r e s h product. T h i s would provide a l a r g e r gross margin r e s u l t i n g i n g r e a t e r p r o f i t s . However, i t i s u n l i k e l y t h a t a l l of the product could be s o l d f r e s h because some r e t a i l o u t l e t s and i n s t i t u t i o n s p r e f e r to handle f r o z e n f i s h p r o d u c t s . Presumably, t h i s i s t o a l l -e v i a t e r e s t r i c t i o n s imposed by the short s h e l f - l i f e of f r e s h f i s h . Higher s a l e s p r i c e s f o r the pan-size products have the e f f e c t of g r e a t l y i n c r e a s i n g farm p r o f i t s . But. because the B r i t i s h Columbia salmon farmer i s faced with c o m p e t i t i v e pro-ducts from f o r e i g n pan-size salmon and t r o u t producers and from the t r a d i t i o n a l f i s h e r y which appear to e s t a b l i s h the wholesale market p r i c e of h i s pro d u c t s , i t i s u n l i k e l y that he w i l l be able to have e f f e c t i v e c o n t r o l over t h i s v a r i a b l e . Labour c o s t s a s s o c i a t e d with the farming aspect of oper-a t i o n s are l i k e l y t o be d i c t a t e d by r e t u r n s from p r o f i t s r a t h e r 176 than, or at least secondarily to. the demands of the labourers. The reason i s that the farm w i l l possibly be a family bus-iness and non-monetary benefits may be active. However, in the long-run a reasonable wage would have to be provided. On the other hand, labour costs associated with the processing operation would not be as accessible to manipulation by the farmer as long as the processing functions were contracted out. Therefore, the farmer may be able to exercise some con-t r o l over labour costs but not to a s u f f i c i e n t degree in most situations to greatly a f f e c t the t o t a l labour cost. Feed price and i t s effect upon operating costs and ev-entually p r o f i t s i s perhaps the most important variable ex-amined. The farmer does have some control over the feed cost through his selection of an appropriate feed from a variety of manufacturers who have a variety of prices. Also, the development of new feeds using low cost ingredients i s an area of active private and public research. The taxes pertaining to the farm w i l l depend largely upon the business structure that i s chosen i n i t i a l l y , i . e . proprietorship, corporation, or Native People project. Each of these p o s s i b i l i t i e s has a vastly d i f f e r e n t tax rate from the others. Although some manipulation of the taxes payable w i l l be possible due to the choice of timing of certain ded-uctions, in general the tax rate should be considered to be fixed in the short-run. 177 The stocking density i s completely within the decision sphere of the farmer. However, the e f f e c t of changes to the stocking density on the p r o f i t a b i l i t y of the farm in r e l a t i o n to the other variables discussed previously i s minor. CHAPTER X I I SUMMARY AND RECOMMENDATIONS 179 Summary Salmon farming i s a t r i e d and somewhat proven business o p p o r t u n i t y i n B r i t i s h Columbia. But. as there are only two p r i v a t e and one government farm i n o p e r a t i o n i n B r i t i s h C o l -umbia at the present time, i t can b a r e l y be c o n s i d e r e d an i n d -u s t r y (see appendix 0). There are many t r o u t farmers (approx-imately 50) but only a few p a r t i c i p a t e i n the food s a l e s market. Approximately 75% o f the s a l e s are from one farmer. Government r e g u l a t i o n s concerning the establishment and o p e r a t i o n of a salmon farm appear to be a d e f i n i t e hurdle which d e t e r s p o t e n t i a l salmon farmers from e n t e r i n g the ' i n -d u s t r y ' . The l i s t o f r e q u i r e d permits i n c l u d e an aquaculture permit, n a v i g a t i o n compliance, commercial f i s h farm l i c e n c e , water r i g h t s permit, p o l l u t i o n c o n t r o l permit, a foreshore l e a r se. plus the g e n e r a l l i c e n c e s and permits that accompany the establishment of any other b u s i n e s s . I t can take up to one f u l l year from the time of the d e c i s i o n to s t a r t a f i s h farm u n t i l the f i n a l permit i s secured. Not only i s c o n s i d e r a b l e time r e q u i r e d to complete the a p p l i c a t i o n and p r o c e s s i n g pha-ses, but the volume of the attendant paper work i s g r e a t . Very few of the a p p l i c a t i o n procedures or r e g u l a t i o n s are designed to expedite a r e q u e s t . Although extremely cumbersome, these i n s t i t u t i o n a l c o n s t r a i n t s do have a l o g i c a l purpose i n most cases that i s d i f f i c u l t to deny. In view' of the small number o f p a r t i c i p a n t s i n the ' i n d u s t r y ' , i t does not seem worthwhile to design a separate intergovernment department 180 t o h a n d l e f i s h f a r m a p p l i c a t i o n s . However, t h e o b v i o u s ' c a t -ch 22' s i t u a t i o n s h o u l d n o t be o v e r l o o k e d i n t h i s r e g a r d . S o u r c e s o f f u n d s f o r f i n a n c i a l d e v e l o p m e n t a r e d e f i n i t e l y l a c k i n g w i t h r e s p e c t t o f i s h f a r m i n g . No s p e c i a l programs a r e a v a i l a b l e t o f i s h f a r m e r s , a l t h o u g h r e c e n t news r e l e a s e s i n d i c a t e t h a t members o f t h e B r i t i s h C o l u m b i a government a t l e a s t r e c o g n i z e t h a t a p r o b l e m does e x i s t . The m a j o r i t y o f t h e f i n a n c i a l r e s o u r c e s must be o b t a i n e d from p r i v a t e s u p -p l i e r s o f r i s k c a p i t a l , a l t h o u g h some may be d e r i v e d from government ( f e d e r a l and p r o v i n c i a l ) programs d e s i g n e d t o en-c o u r a g e t h e d e v e l o p m e n t o f s m a l l b u s i n e s s e s . One s t u m b l i n g b l o c k p r e v e n t i n g t h e a l l o c a t i o n o f some o f t h e s e g r a n t s and l o a n s t o salmon f a r m e r s i s t h a t n e i t h e r government has p r o -v i d e d an a c t i v e d e f i n i t i o n o f f i s h f a r m i n g as has been done f o r t h e f i s h i n g and f a r m i n g i n d u s t r i e s . T h e r e f o r e , some a g e n c i e s a r e u n c e r t a i n as t o t h e s t a t u s o f f i s h f a r m i n g w i t h r e s p e c t t o t h e i r f i n a n c i a l p r o g r a m s . P a n - s i z e salmon compete w i t h t r o u t and o t h e r s e a f o o d s f o r consumer a c c e p t a n c e and d o l l a r s . The f o o d f i s h s a l e s o f p a n - s i z e s a l m o n i d s i n B.C. a r e i n e i t h e r t h e f r e s h o r f r o z e n f o r m . Most o f t h e p r o d u c t i o n from B r i t i s h C o l u m b i a g r o w e r s i s s o l d f r e s h w h i l e f r o z e n i m p o r t s from J a p a n and t h e U n i t e d S t a t e s c o n s t i t u t e most o f t h e r e m a i n i n g t w o - t h i r d s o f t h e m a r k e t . The t o t a l f o o d s a l e s o f t h e s e p r o d u c t s i n B.C. was 147260 k i l o g r a m s d u r i n g 1976. I f B.C. g r o w e r s can be p r i c e and q u a l i t y c o m p e t i t i v e w i t h t h e f o r e i g n p r o d u c e r s , t h e r e 181 i s the p o t e n t i a l t o t r i p l e t h e i r present s a l e s volume by 0 d i s p l a c i n g the imports. Expansion of the t o t a l food s a l e s market i s expected to be slow at the r a t e of approximately 8 percent per annum. However, t h i s p r e d i c t i o n i s based on a U.S. marketing study and should be viewed with d i s c r e t i o n u n t i l s u p p o r t i n g evidence from B.C. marketing r e s e a r c h can s u b s t a n t i a t e the p r o j e c t i o n . A c t u a l l y , very few pan-size salmon have been marketed i n B.C. Sales to date have p r i n c i -p a l l y been t r o u t . There i s evidence, however, to support the hypothesis t h a t t r o u t and salmon at approximately 225 grams are c l o s e s u b s t i t u t e s i n the marketplace. Fresh and f r o z e n t r o u t were p r i c e d at $3.74 and $3.52 per k i l o g r a m , r e s p e c t i v e l y , to the wholesaler d u r i n g l a t e 1977 and e a r l y 1978. The b i o l o g i c a l c o n s t r a i n t s on the p r o d u c t i o n of farm s a l -mon are extremely w e l l researched-and documented f o r the f r e s h -water phase of the salmon l i f e h i s t o r y . But p r o p o r t i o n a t -e l y l i t t l e i n f o r m a t i o n i s a v a i l a b l e concerning the s a l t w a t e r husbandry of salmon. Coho and chinook salmon are the popular s p e c i e s f o r farm-i n g . The coho have been the s u b j e c t of farming f o r a longer p e r i o d than the chinook salmon. As a r e s u l t , much more pra c -t i c a l knowledge i s a v a i l a b l e about husbandry of t h i s s p e c i e s , i n c l u d i n g the development of s p e c i a l i z e d feeds and r e a r i n g t e c h n i q u e s . However, i n t e r e s t i n chinook salmon i s i n c r e a s -ing due to r e c o g n i t i o n of i t s r a p i d and uniform growth r a t e 182 among i n d i v i d u a l s of the same year c l a s s , i t s a b i l i t y t o grow f a s t e r at lower temperatures than coho. and i t s t o l e r a n c e to s a l t w a t e r r e a r i n g at a s m a l l e r s i z e than coho. A l l egg stock must be procured from the F i s h e r i e s and Marine S e r v i c e but i n c u b a t i o n of the eggs at the farm i s us-u a l l y conducted i n Heath t r a y s or g r a v e l i n c u b a t o r s . The f r y are r e a r e d i n c i r c u l a r , f i b r e g l a s s tanks u n t i l they a t t a i n 15 grams. They are then t r a n s f e r r e d from freshwater to s a l t -water. F l o a t i n g pens c o n t a i n the salmon throughout the marine r e a r i n g phase. The most important aspect of the e a r l y r e a r -ing stages i s an u n i n t e r r u p t e d supply of warm, p o l l u t a n t f r e e water. Almost a l l of the n u t r i t i o n r e c e i v e d by the farmed f i s h i s provided i n the form of manufactured, feed p e l l e t s . The p r o d u c t i o n c y c l e of the t y p i c a l salmon farm begins with egg stock i n the f a l l . Harm water i s used to a c c e l e r a t e the salmon's growth so t h a t marketable pan-size salmon (227 grams dressed weight) can be produced i n approximately 15 months. T h i s type of p r o d u c t i o n c y c l e i s the r e s u l t of hat-chery r e a r i n g methods employed i n the enhancement of n a t u r a l salmon s t o c k s . A model salmon farm was designed which would begin p r o d u c t i o n using 750000 eggs i n November and produce 510204 marketable f i s h 15 months l a t e r . The c a p i t a l c o s t of the farm was estimated to be $139976 i n i t i a l l y and $35173 would be r e q u i r e d to r e p l a c e worn equipment at the end of f i v e y e a r s . The expected l i f e of the farm was 10 y e a r s . Annual o p e r a t i n g c o s t s d u r i n g years having f u l l p r o d u c t i o n t o t a l e d 183 $275761. A l l processing of the f i s h i s expected to be contracted out to a l o c a l processing firm. This reduces the f i n a n c i a l and administrative burden on the farmer that would be encoun-tered i f he were to undertake both the farming and the pro-cessing a c t i v i t i e s . The t o t a l cost to process and transport the f i s h to market i s approximately $112542 i f one-quarter of the f i s h were sold fresh and the remainder were frozen and stored for an average period of three months before being sent to a wholesaler. The f i n a n c i a l f e a s i b i l i t y of the model salmon farm i s analysed using pro forma f i n a n c i a l statements, and an eval-uation of the net cash flow i s conducted using i n t e r n a l rate of return and net present value techniques. The model farm was accepted as a feasible f i n a n c i a l investment using a d i s -count rate of 10% on the uninflated cash flows over a ten year period. The in t e r n a l rate of return was 12%. Because the model was designed to simulate the a c t i v i t i e s of an actual small farming business, i t seems reasonable to assume that salmon farming can be the basis of a feasible small business in B r i t i s h Columbia. However, notice must be taken that the t o t a l production from the model farm would be equivalent to 75% of the projected food sales of farm salmon and trout in 1978. Two other important factors were revealed during the analysis. One i s that the cash outflow before the f i r s t 184 revenue i s r e c e i v e d i s approximately $555307. A p a r t i c u l a r l y s t a r t l i n g aspect of t h i s sum i s t h a t n e a r l y one-half ($238926) i s r e q u i r e d d u r i n g the f i r s t three months of a f i s c a l year when f u l l p r o d u c t i o n i s being achieved. Although the cap-i t a l c o s t s are low, the requirement f o r working c a p i t a l i s very h i g h . The other important d i s c o v e r y i s t h a t the f r o z e n product can be produced by B.C. farmers f o r s a l e at the same p r i c e to the wholesaler as the imports while m a i n t a i n i n g a p r o f i t -able b u s i n e s s . T h i s could allow the expansion of the market share t o B r i t i s h Columbia salmonid farmers. S e n s i t i v i t y analyses of s e v e r a l p r i c e s and p r o d u c t i o n v a r i a b l e s i n d i c a t e d t h a t : 1) the model farm i s a v i a b l e investment r e g a r d l e s s of whether f r e s h or f r o z e n product i s marketed: 2) the minimum ac c e p t a b l e wholesale market p r i c e s are $3.67 and $3.45 per kilogram f o r f r e s h and f r o z e n prod-u c t , r e s p e c t i v e l y , at a 1:3 f r e s h to f r o z e n mix; 3) labour c o s t s cannot be allowed to r i s e by more than 8% above the model's assumed r a t e of $7.00 per hour; 4) the average feed p r i c e cannot be g r e a t e r than $.75/kg; 5) the model farm would cease to be a f e a s i b l e investment a l t e r n a t i v e i f the tax r a t e a p p l i e d t o the t a x a b l e income i n c r e a s e d beyond 40%: and 6) 3 s t o c k i n g d e n s i t i e s of l e s s than approximately 25 kg/m would l i k e l y cause the farm to be u n p r o f i t a b l e under the c r i t e r i a used i n t h i s study. 185 C o n c l u s i o n and r i s k The p r i n c i p a l f i n d i n g s of the study are t h a t a v i a b l e s m a l l business can be developed from salmon farming i n B r i t -i s h Columbia and t h a t the p r o d u c t i o n of f r o z e n f i s h f o r s a l e at p r i c e s comparable to f o r e i g n imports i s a f i n a n c i a l l y f e a -s i b l e a l t e r n a t i v e . The model farm can be c o n s i d e r e d a f e a s i b l e business investment u s i n g the assumptions, c o n d i t i o n s , and c r i t e r i a o u t l i n e d i n the preceding pages. However, the main c r i t i -cism o f new p r o j e c t s such as f i s h farming i s the element of r i s k of f a i l u r e a s s o c i a t e d with these ventures. The r i s k may be separated i n t o those aspects a s s o c i a t e d with the i n t e r n a l and e x t e r n a l v a r i a b l e s concerning the farm and i t s o p e r a t i o n . I n t e r n a l f a c t o r s t h a t could b r i n g about the f a i l u r e of the farming o p e r a t i o n are t i l ) management incompetence, 2) l a c k of funds to meet o p e r a t i n g o b l i g a t i o n s , and 3) m o r t a l i t y of the f i s h stock as a r e s u l t of d i s e a s e or the mechanical f a i l u r e of the c u l t u r e equipment. Management incompetence may r e s u l t from the f i s h farm-e r ' s i n a b i l i t y to d e a l with e i t h e r the b i o l o g i c a l or business aspects of f i s h farming. B i o l o g i c a l incompetence i s p a r t -i a l l y prevented by the s c r e e n i n g processes inherent i n the a p p l i c a t i o n procedure f o r the aquaculture permit and commer-c i a l f i s h farm l i c e n c e . F i s h farmers p o s s e s s i n g an inade-quate knowledge of business matters would probably be s e r e -186 ened out by investors through t h e i r r e f u s a l to support pot-e n t i a l farmers with questionable a b i l i t y . Deficiencies in either of these areas could be remedied through courses or by the use of knowledgeable consultants. If funds, p a r t i c u l a r l y cash, were to be limited during the normal operating cycle, the solvency of the farm could be jeopardized. However, sound planning through the use of budgets and the p r i o r arrangement for funds to meet both expected and unexpected contingencies would minimize the l i k e -lihood of f a i l u r e . Mortality of the f i s h stock as a re s u l t of disease or equipment malfunction i s a potential source of f a i l u r e . Some mortality i s to be expected. Because standard procedures for salmon farming have been established by research i n s t i t -utions i t i s possible to assign a p r o b a b i l i t y to the mortality associated with the rearing process under normal operating conditions. This has been done throughout the production model. Therefore, the mortality associated with routine operations has been taken into consideration. The loss of stock due to unexpected occurrences such as broken water pipe or malfunctioning heating units has not been incorpor-ated into the model d i r e c t l y . However, the farm has been designed to minimize the e f f e c t of such occurrences by using multiple heating u n i t s , simple warning devices, multiple incubators with separate water systems, etc. The external factors which could lead to the f a i l u r e of 187 the f i s h farm can be separated i n t o three groups; 1) e n v i r o n -mental. 2) p u b l i c , and 3) government. Environmental f a c t o r s are p r i n c i p a l l y concerned with the water supply. For example, any events that l e a d to changes i n e i t h e r the q u a l i t y of the water supply by c r e a t i n g p o l l u t i o n or the q u a n t i t y of the water as a r e s u l t of droughts or the d i v e r s i o n of water from the primary source. The l e g i s l a -t i o n embodied i n the Water Rights Act and the P o l l u t i o n C o n t r o l Act i s designed to prevent or at l e a s t minimize the occurrence of changes to the water supply. Droughts, of course, are l a r g e l y beyond human c o n t r o l . P u b l i c f a c t o r s are l i k e l y to r e s u l t from c o n f l i c t s of i n t e r e s t between f i s h farmers and the gen e r a l p u b l i c or i n d u s t r y . R e c r e a t i o n and i t s a s s o c i a t e d f a c i l i t i e s have had notable e f f e c t s on a g r i c u l t u r e and s p o r t f i s h i n g . C o n f l i c t s over the use of the freshwater and s a l t w a t e r r e s o u r c e s be-tween the p u b l i c and f i s h farmers i s l i k e l y . Industry c r e a t e s c o n f l i c t with f i s h farming through i t s use of f r e s h and s a l t w a t e r r e s o u r c e s , and i n d i r e c t l y by the c r e a t i o n of chem-i c a l or p h y s i c a l p o l l u t i o n . The degree of c o n f l i c t between the f i s h farmer and these other elements of s o c i e t y w i l l be dependent upon the l o c a t i o n of the farm. By l o c a t i n g the farm i n areas of minimal or acceptable use by the p u b l i c and i n d u s t r y the c o n f l i c t may be minimized. Although f u t u r e encroachments would be p o s s i b l e . A d e c l i n e i n the market f o r the farm products could have 188 disasterous e f f e c t s upon the business. The most l i k e l y causes of a change in the market would be a s h i f t in the consumer demand away from pan-size products to some other products/or a s h i f t to more competitive pan-size products. Advertising may aid the minimization of the f i r s t p o s s i b i l -i t y and t a r i f f s could be used to reduce the effect of import-ed products. However, sudden changes in the demand for f i s h products are uncommon and therefore of low p r o b a b i l i t y . Government regulations a f f e c t i n g the administration and existence of f i s h farms are very instrumental in determining t h e i r success or f a i l u r e . Changes to the regulations con-cerning the procurement of egg stock i s of prime importance while changes to the regulations pertinent to the general operation of the farm could reduce i t s f e a s i b i l i t y . The many other permits and regulations are deterrents to the establishment of a farm but would have a minimal e f f e c t upon i t s success once i t was operating. There i s l i t t l e that the f i s h farmer can do to control the actions of the government agencies. Attempts to use the media have been p a r t i a l l y successful. However, the f i s h farmer w i l l prob-ably be required to assume that the government agencies w i l l act on his best behalf as t h i s sector i s l a r g e l y uncontroll-able by him. P r o b a b i l i t i e s of success or f a i l u r e can be established for regular operations as outlined previously in the model. However, most of the potential factors which could lead to 189 the f a i l u r e of a f i s h farm are not in a form that can be read i l y assigned a pr o b a b i l i t y value. The eff e c t of most of the factors could be minimized by the farmer through care in designing the farm or by the consideration and planning for contingencies. However, f a i l u r e of the farm due to these factors i s s t i l l possible. In the present study the gross effect of these factors was accounted for by increasing the discount rate by 5 percent. This provided a reasonable estimate of the undefinable r i s k associated with f i s h farm-ing in B r i t i s h Columbia using standard procedures for rearing salmon. Recommendations 1. Salmon farming can be a viable and feasible small business in B r i t i s h Columbia and should be developed. However, the size of the industry w i l l depend upon the establishment of new market opportunities. 2. Government agencies should be made aware of the effect of t h e i r regulations and procedures on the prospective f i s h farmer and attempt to expedite applications whenever possible. 3. If government f i n a n c i a l aid i s made available to salmon farmers through special lending programs, provision for work-ing c a p i t a l loans should be stressed. 1 . The establishment of aquaculture reserves through the development of marine resource planning by the government could reduce the c o n f l i c t between aquaculturists and the public and industry. 190 5. Frozen as well as fresh products should be produced by B r i t i s h Columbia salmon growers to allow expansion of the industry and increase farm p r o f i t s . 6. Because the price of pan-size salmon appears to be large-l y dictated by competitive products, farmers should concentrate on the reduction of production, d i s t r i b u t i o n , and f i n a n c i a l charges as a means to increase t h e i r p r o f i t margin. 7. Research into the demand aspect of pan-size salmon should be conducted to i d e n t i f y means to expand the domestic market and enter foreign markets. 8. B i o l o g i c a l research sould be directed away from the rapid growth techniques inherited from salmon enhancement pro-grams. Instead, emphasis should be placed on ways to spread production throughout the f i s c a l year while reducing produc-ti o n costs. Benefits of t h i s approach would be derived from; the a b i l i t y of salmon farmers to par t i c i p a t e in either the fresh or frozen product markets throughout the year; heating costs would be reduced during freshwater rearing i f less accelerated growth were desired; t o t a l f a c i l i t i e s and thus c a p i t a l costs would be decreased because a lower biomass would be husbanded at any one time; less exotic feeds with lower prices could be fed to the slow growth f i s h , thereby reducing the major operating cost encountered in the model; and revenue and expenses would be dispersed over a greater portion of the year a l l e v i a t i n g the need for the large quantity of working c a p i t a l during the f i r s t 3 months of the f i s c a l 191 year. However, these benefits cannot be supported with quan-t i t a t i v e data using the present model. 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F a r m e r : A Layman's G u i d e . P r o v i n c e o f B r i t i s h C o l u m b i a , M i n i s t r y o f A g r i -c u l t u r e . pp. 81. C o l l e y ; G., 1977. Tax P r i n c i p l e s To Remember. The C a n a d i a n I n s t i t u t e o f C h a r t e r e d A c c o u n t a n t s , pp. u n l i s t e d . C o l l i n s ; R.A., 1972. Cage C u l t u r e o f T r o u t i n Warmwater L a k e s . A m e r i c a n F i s h Farmer 3 ( 7 ) : 4 - 7 . Dennon: G.B., 1975. A q u a c u l t u r e N e w s l e t t e r 1 5 ( 3 ) : l - 4 . D o n a l d s o n : L.R. and E.L. B r a n n o n , 1976. The Use o f Warmwater t o A c c e l e r a t e t h e P r o d u c t i o n o f Coho Salmon. F i s h e r i e s 1 ( 4 ) :12-516 . E a s l e y : J . E . , 1976. C o s t s And R e t u r n s Of A l t e r n a t i v e M o u n t a i n T r o u t P r o d u c t i o n F a c i l i t i e s . E c o n o m i c s I n f o r m a t i o n R e p o r t , N o r t h C a r o l i n a S t a t e U n i v e r s i t y , No. 46, pp. 29. E l l i o t t ; J.W.. 1969. The Oxygen R e q u i r e m e n t s Of C h i n o o k Salmon. The P r o g r e s s i v e F i s h - C u l t u r i s t 3 1 ( 2 ) : 6 7 - 7 3 . Emadi; H.. 1973. Y o l k - S a c M a l f o r m a t i o n i n P a c i f i c Salmon i n R e l a t i o n t o S u b s t r a t e , T e m p e r a t u r e , and Water V e l o c i t y . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h B o a r d o f Canada 30: 1249-1250 . G i l l i e s ; M.T.. 1971. S e a f o o d P r o c e s s i n g . Noyes Data C o r p o r -a t i o n : New J e r s e y , pp. 206. H a l v e r ; J . E . . 1971. F i s h N u t r i t i o n . Academic P r e s s : New Y o r k , London , pp. 713 . 194 H a l v e r ; J . E . , 1976. F o r m u l a t i n g P r a c t i c a l D i e t s f o r F i s h . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h B o a r d o f Canada 33 ( 4 ) :1032-1039 . H a s k e l l ; D . C , 1955 . Weight Of F i s h P er C u b i c F o o t Of Water In H a t c h e r y T r o u g h s And Ponds. The P r o g r e s s i v e F i s h -C u l t u r i s t 1 7 ( 3 ) :117-118. He a r d ; W.R.. R.M. M a r t i n , and A.C. W e r t h e i m e r , 1977, E s t u a r i n e And F r e s h w a t e r C u l t u r e Of 1974 Brood Coho Salmon In Net Pens And F l o a t i n g Raceways At L i t t l e P o r t W a l t e r , A l a s k a . U.S. Department o f Commerce, NOAA, NMFS, pp. 55. Huet : M., 1970 . T e x t b o o k Of F i s h C u l t u r e . F i s h i n g News ( B o o k s ) L t d : London, pp. 436. Kennedy; W.A.. C.T. Shoop, and W. G r i f f i o e n , 1975 . P r e l i m i n -a r y E x p e r i m e n t s i n R e a r i n g P a c i f i c Salmon (1973 p a r r ) i n Pens i n t h e Sea. F i s h e r i e s and M a r i n e S e r v i c e T e c h -n i c a l R e p o r t 541, pp. 17. Kennedy; W.A., C.T. Shoop. W. G r i f f i o e n s . and A. S o l m i e . 1976. The 1975 Crop o f Salmon Reared on t h e P a c i f i c B i o l o g i c a l S t a t i o n E x p e r i m e n t a l F i s h f a r m . F i s h e r i e s and M a r i n e S e r -v i c e T e c h n i c a l R e p o r t 665. pp. 20. Kennedy; W.A.. W. G r i f f i o e n , and A. S o l m i e , 1977. The 1976 Crop o f Salmon Reared on t h e P a c i f i c B i o l o g i c a l S t a t -i o n E x p e r i m e n t a l F i s h Farm. F i s h e r i e s and M a r i n e Ser ' - r v i c e T e c h n i c a l R e p o r t 726. pp 21. K i l a m b i ; R.V.. J.C. Adams. A.V. Brown, and W.K. W i c k i z e r . 1977. E f f e c t s o f S t o c k i n g D e n s i t y and Cage S i z e on Growth, Feed C o n v e r s i o n , and P r o d u c t i o n o f Rainbow T r o u t and C h a n n e l C a t f i s h . P r o g r e s s i v e F i s h - C u l t u r i s t 3 9 ( 2 ) : 6 2 - 6 6 . K l o n t z ; G.W. and D. A n d e r s o n . 1970. O r a l i m m u n i z a t i o n o f s a l m o n i d s : a r e v i e w . In A symposium on d i s e a s e s o f f i s h e s and s h e l l f i s h e s , pp. 20. K r e u z e r : R., 1965. The T e c h n o l o g y o f F i s h U t i l i z a t i o n . F i s h i n g News ( B o o k s ) L t d . : London, pp. 280. Larmoyeux; J.D., R.G. P i p e r , and H.H, Chenoweth, 1973. E v a l -u a t i o n Of C i r c u l a r Tanks F o r S a l m o n i d P r o d u c t i o n . The P r o g r e s s i v e F i s h - C u l t u r i s t 35 ( 3 ) : 122-131 . L e i t r i t z ; E. and R.C. L e w i s , 1976. T r o u t and Salmon C u l t u r e . S t a t e o f C a l i f o r n i a . Department o f F i s h and Game, 195 F i s h B u l l e t i n 164. pp. 197. L o r i e : J.H. and L . J . S avage, 1955 . T h r e e P r o b l e m s i n R a t i o n -i n g C a p i t a l . J o u r n a l o f B u s i n e s s 28:229-239. MacCrimmon: H.R., J . E . S t e w a r t , ,and J.R. B r e t t . 1974. Aqua-c u l t u r e i n Canada: The p r a c t i c e and t h e p r o m i s e . F i s h e r ^ i e s R e s e a r c h B o a r d o f Canada B u l l e t i n 188, pp. 84. N c N e i l : W.J. and J . E . B a i l e y . 1975. Salmon R a n c h e r ' s Manual. N o r t h w e s t F i s h e r i e s C e n t e r Auke Bay F i s h e r i e s L a b o r a t o r y P r o c e s s e d R e p o r t , J u l y 1975. pp. 95. Mahnken.' C . V . W . , 1975 . S t a t u s R e p o r t : C o m m e r c i a l Salmon C u l -t u r e i n Puget Sound. The C o m m e r c i a l F i s h Farmer 2 ( 1 ) : 8-11. Marchand; L., 1977. S m a l l B u s i n e s s i n Canada: P e r s p e c t i v e s . M i n i s t e r o f S t a t e S m a l l B u s i n e s s , Government o f Canada, pp . 31. M e i g s : W.B.. C.E. J o h n s o n . T.F. K e l l e r , and J.D. B l a z o u s k e , 1966. I n t e r m e d i a t e A c c o u n t i n g . M c G r a w - H i l l : T o r o n t o , pp. 1021. M i l n e ; P.H.. 1976. E n g i n e e r i n g and t h e e c o n o m i c s o f aqua-c u l t u r e . J o u r n a l o f t h e F i s h e r i e s R e s e a r c h Board o f Canada 33:888-898. M u n d e l l ; R., 1963. I n f l a t i o n and R e a l I n t e r e s t . J o u r n a l o f P o l i t i c a l Economy 71:280-283. O s t r a n d e r ; J . , C. M a r t i n s e n . J . L i s t o n , and J . M c C u l l o u g h . 1976. S e n s o r y T e s t i n g o f P e n - r e a r e d Salmon and T r o u t . J o u r n a l o f Food S c i e n c e 41:386-390. Q u a l e ; D.B. and D.W. S m i t h , 1976. A G u i d e t o O y s t e r F a r m i n g . M a r i n e R e s o u r c e s B r a n c h , Department o f R e c r e a t i o n and T r a v e l I n d u s t r y , pp. 54. Q u e i r o l o ; L . E . . 1977. S u b s t i t u t i o n a l R e l a t i o n s h i p Between Rainbow T r o u t and P a n s i z e Salmon: A Market Demand A n a l -y s i s . M a s t e r o f S c i e n c e T h e s i s . Oregon S t a t e U n i v e r s i t y , pp. 84. R i c h a r d s ; J.A., C.V.W. Mahnken, and G.K. T a n o n a k a , 1972. E v a l u a t i o n Of The C o m m e r c i a l F e a s i b i l i t y Of Salmon A q u a c u l t u r e In Puget S o u n d - P r e l i m i n a r y A n a l y s i s . N a t i o n a l O c e a n i c and A t m o s p h e r i c A d m i n i s t r a t i o n . N a t i o n a l M a r i n e F i s h e r i e s S e r v i c e R e p o r t , pp, 35. 196 R o b e r t s ; R . J . and C . J . S h e p h e r d . 1974. Handbook o f T r o u t and Salmon D i s e a s e s . F i s h i n g News ( B o o k s ) L t d . : London, pp . 168. Romey; D., 1975. C r y s t a l Lake F i s h H a t c h e r y M o d i f i c a t i o n . A l a s k a Department o f F i s h and Game, J u n e a u , pp. 10. R u c k e r ; R. and P. Kangas. 1974. E f f e c t o f N i t r o g e n S u p e r s a -t u r a t e d Water on Coho and C h i n o o k Salmon. The P r o g r e s -s i v e F i s h - C u l t u r i s t 36-152-156. Sawyer; E.S. and R.G. S t r o u t , 1977. S u r v i v a l And Growth Of V a c c i n a t e d , M e d i c a t e d and U n t r e a t e d Coho Salmon ( O n c o r -hynchus k i s u t c h ) E x p o s e d t o V i b r i o a n g u i l l a r u m . Aqua-c u l t u r e 10:311-315. S p o t t e : S.H., 1970. F i s h And I n v e r t e b r a t e C u l t u r e . W i l e y -I n t e r s c i e n c e : New Y o r k , London, pp. 145. Van Horne; J . C . . 1971. A Note on B i a s e s i n C a p i t a l B u d g e t i n g I n t r o d u c e d by I n f l a t i o n . J o u r n a l o f F i n a n c i a l and Quant-i t a t i v e A n a l y s i s 6:653-658. Van Horne; J . C . , C.R. D i p c h a n k , and J.R. Hanrahan , 1977 . F i n a n c i a l Management and P o l i c y . C a n a d i a n 4 t h E d i t i o n , P r e n t i c e - H a l l o f Canada. L t d . : S c a r b o r o u g h , pp. 780. Webber: H.H. and P.F. R i o r d a n . 1976. C r i t e r i a F o r C a n d i d a t e S p e c i e s F o r A q u a c u l t u r e . A q u a c u l t u r e 7( 2 ): 107-123 . W i l l o u g b y ; H.. 1968. A Method F o r C a l c u l a t i n g C a r r y i n g Cap-a c i t i e s Of H a t c h e r y T r o u g h s and Ponds. The P r o g r e s s i v e F i s h - C u l t u r i s t 30( 3 ) : 173-174 . 197 APPENDICES A p p e n d i x A M e t r i c E q u i v a l e n t s and C o n v e r s i o n s L e n g t h 1 m i l l i m e t e r 1 c e n t i m e t e r 1 m eter 0.04 i n c h 0.3937 i n c h 1.0936 y a r d A r e a 1 s q u a r e c e n t i m e t e r 1 s q u a r e meter 1 s q u a r e m eter 0.1550 s q u a r e i n c h 10.7639 s q u a r e f e e t 1.1960 s q u a r e yard Volume 1 c u b i c c e n t i m e t e r 1 c u b i c meter 1 c u b i c meter 1 l i t e r 0.06124 c u b i c i n c h 35.3147 c u b i c f e e t 1.30795 c u b i c y a r d .26417 U.S. g a l l o n Mass 1 gram 1 k i l o g r a m .03527 ounces 2.20462 pounds 199 A p p e n d i x B The R e s u l t s o f a S u r v e y o f t h e R e t a i l P r i c e o f T r o u t a t F o u r R e t a i l O u t l e t s i n V a n c o u v e r i n 1977 and 1978. R e t a i l O u t l e t P r i c e / K i l o g ram 1977 1978 Super V a l u $5 .02 $5 .48 Safeway $5 .26 $5 .59 P o s e i d o n $5 .04 $5 .95 Seven Seas $5 .11 $6 . 06 Mean P r i c e $5 .11 $5 .77 Source: These val u e s were obtained by s u r v e y i n g the f o u r r e t a i l o u t l e t s on March 15 of each year. 200 A p p e n d i x C The E s t i m a t e d Volume o f F r e s h w a t e r R e q u i r e d t o S u s t a i n P r o -d u c t i o n f r o m F e b r u a r y T h r o u g h J u n e . Month Volume o f F r e s h w a t e r R e q u i r e d E s t i m a t e d P r o d u c t i o n E l l i o t t W i l l o u g h b y l i t e r s / m i n u t e l i t e r s / m i n u t e kg F e b r u a r y 606 693 535 March 1238 1469 918 A p r i l 2487 2771 1977 May 4701 4346 4264 June 6450 7026 7940 201 A p p e n d i x D The E s t i m a t e d R e q u i r e m e n t and C o s t o f t h e F r e s h w a t e r P i p e System. Equipment Quant i t y P r i c e C o s t / U n i t ($) 25.4 cm p i p e 60.96 m 22 .97 1400 25.4 cm T.'s 6 elbows 4 o n l y 148.80 595 20 . 3 cm p i p e 91.44 m 14.80 1353 20.3 cm T's S elbows 13 o n l y 45 .00 585 10.2 cm p i p e 10.97 m 5 .41 59 10.2 cm elbows 9 o n l y 6 .19 56 10.2 cm v a l v e s 9 o n l y 279 . 00 2511 7 . 6 cm p i p e 6.10 m 3.84 23 7.6 cm elbows 4 o n l y 3.72 15 7.6 cm v a l v e s 4 o n l y 129.00 516 7113 m i s c e l l a n e o u s s u p p l i e s 200 T o t a l $7313 N o t e : The c o s t g d e t e r m i n a t i o n f o r t h e s t o c k i n g d e n s i t y change f o r t h e 16 kg/m s y s t e m u s e s 7.6 cm p i p e , e l b o w s , and v a l v e s i n p l a c e o f t h e 10.2 cm e q u i p m e n t . 202 A p p e n d i x E E s t i m a t e o f t h e Number o f H e a t i n g U n i t s R e q u i r e d f o r F r e s h -w a t e r R e a r i n g . Month Flow* Ambient Temp.** lpm T C November 424 10 December 424 5 J a n u a r y 424 4 F e b r u a r y 606 4 March 1238 5 A p r i l 2487 9 May 4701 11 June 6450 15 R e a r i n g Change Number Temp. R e q u i r e d o f U n i t s T C T C 10 - 0.0 10 5 5.6 12 8 9.0 13 9 14.4 13 8 26.2 13 4 26.3 13 2 24.8 13 - 0.0 S o u r c e : * e s t i m a t e d e r i v e d a f t e r E l l i o t t , see a p p e n d i x C. ** Water T e m p e r a t u r e s B r i t i s h C o l u m b i a and Yukon T e r r i t o r y , E n v i r o n m e n t Canada, I n l a n d Waters D i r e c t o r a t e , P a c i f i c and Yukon R e g i o n . Water S u r v e y o f Canada, Volumes 1-4, 1977. 203 A p p e n d i x E The E s t i m a t e d C o s t t o C o n s t r u c t One G r a v e l I n c u b a t o r w i t h a C a p a c i t y o f 50000 E g g s . Equipment C o s t ( $ ) Lumber I . 9 cm plywood (6.526 m 2 @ $4.71/m 2) 30.74 5.08 cm x 5.08 cm e . g . lumber 31.7 m @ $.26/m 8.24 5.08 cm x 10.16 cm e.g. lumber 35.36 m @ $.49/m 17.33 5.08 cm x 15.24 cm e . g . lumber 6.10 m @ $.791/m 4.82 Hardware .95 cm d i a . b o l t 20.32 cm l e n g t h 6 o n l y @ $.43 e a c h 2.58 .95 cm d i a . r e a d y r o d 71.44 cm l e n g t h 9 o n l y @ $.89 e a c h 8.01 washers f o r t h e above 30 @ $.016 e a c h .48 n u t s f o r t h e .95 cm b o l t s 42 @ $.045 e a c h 1.89 10.16 cm x 10.16 cm x .79 cm s t e e l p l a t e w i t h a.1.11cm d i a . h o l e 18 @ $1.38 e a c h 24.84 I I . 43 cm n a i l s 2.27 kg @ $.979/kg 2.22 5.08 cm n a i l s 2.27 kg @ $1.021/kg 2.32 P a i n t e x t e r i o r p a i n t 1.89 l i t e r s @ $ 3 . 6 8 5 / l i t e r 6.97 m a r i n e epoxy 1.89 l i t e r s @ $ 6 . 5 5 4 / l i i e r 12.39 s i l i c o n e cement 1 t u b e @ $5.95 e a c h 5.95 G r a v e l 3 3 c r u s h e d 1.9. cm-3.81 cm d i a . .44 m @ 3$15.79/m 6.95 pea s i z e l e s s t h a n .95 cm d i a . .088 m @ $19.53/m 1.72 P l u m b i n g PVC v a l v e and p i p e ( a p p r o x i m a t e l y 2.54 cm d i a . ) 22.55 L a b o u r s i x h o u r s @ $7.00/hour 42.00 T o t a l $202.00 A p p e n d i x 9 The R e q u i r e d Number o f F i b r e g l a s s Tanks f o r F r e s h w a t e r R e a r i n g . Month Weight Tank S t o c k i n g D e n s i t y o f F i s h Volume _ o kg l.MJ 16 kg/M"3 32 kg/M d 48 kg/M F e b r u a r y 535 5 . 69 6 3 2 26 , .70* - — — March 918 5 , .69 6 3 -26 , .70 1 1 1 A p r i l 1977 5 , .69 3 2 -26 , .70 4 2 2 May 4264 5 , .69 5 - 2 . . . . 26 , .70 9 5 3 June 7940 5 , .69 3 2 1 26 .70 18 9 6 * o n l y 5.69 M t a n k s a r e u s e d d u r i n g t h e f i r s t month o f f e e d i n g . A p p e n d i x ,H Number o f Net-pens R e q u i r e d f o r S a l t w a t e r P r o d u c t i o n . Month Weight S t o c k i n g D e n s i t y o f F i s h kg 16 kg/M 32 kg/M 3 48 kg/M 3 J u l y 14785 6 3 2 August 22312 9 5 3 September 41547 17 9 6 O c t o b e r 79740 32 16 11 November 112203 44 22 15 December 142946 56 28 19 J a n u a r y 156898 62 31 21 Note: Each n e t - p e n has a volume o f 158.6 M . 206 A p p e n d i x I The E s t i m a t e d C o s t t o B u i l d One N e t - f l o a t and One S t o r a g e F l o a t . Equipment C o s t ( $ ) Net f l o a t d e c k i n g (2.54 cm x 10.16 cm) 187.15 m @ $.328/m c e d a r s t r i n g e r s (5.08 cm x 20.32 cm) 146.30 m @ $1.97/m hardware s t y r o f o a m buoys 12 @ $30.50 e a c h l a b o u r (10 h o u r s @ $7.00/hour) T o t a l S t o r a g e f l o a t m o d i f i c a t i o n * d e c k i n g (2.54 cm x 10.16 cm) 365.76 m @ $.328/m c e d a r s t r i n g e r s (5.08 cm x 20.32 cm) 146.30 m @ $1.97/m hardware s t y r o f o a m buoys 12 @ $30.50 e a c h l a b o u r (5 h o u r s @ $7.00/hour) 61.40 287 .99 250.00 366.00 70.00 $1035.39 119 .97 287.99 250.00 366.00 35 .00 T o t a l $1058.96 * o n e - h a l f o f one n e t - f l o a t i s r e q u i r e d as t h e b a s e f o r t h i s m o d i f i c a t i o n . A p p e n d i x J The E s t i m a t e d C o s t o f F e e d . Month F e b r u a r y March A p r i l May June J u l y A u g u s t September O c t o b e r November December J a n u a r y Q u a n t i t y ( k g ) 507 .35 1192.21 2176 .02 3525.88 5699.57 10612.60 9483.47 23858.14 44422.45 44113.62 49984.29 33965 .52 Feed P r i c e / k g $ .9079 it ii it ti $ .6899 ii ti it ti ti $ .8199 C o s t / M o n t h ($ ) 460.64 1082.47 1975.69 3201.29 5174.86 7321.84 6542.84 16460.20 30647.94 30434.87 34485.15 27849.69 Cumulat i v e T o t a l ( $) 11894.95 72867.77 $165637.48 208 A p p e n d i x K The E s t i m a t e d C o s t o f H e a t i n g F u e l f o r I n c u b a t i o n and F r e s h -w a t e r R e a r i n g . Month E q u i v a l e n t H e a t i n g U n i t s * F u e l / U n i t /Day (1) Days /Month P r i c e / l / $ F u e l C o s t November 0.0 68.1 30 .117 $ o December 5.6 » 31 ti $1383 J a n u a r y 9.0 31 it $2223 F e b r u a r y 12.2 28 ti $2722 March 19.5 31 II $1816 A p r i l 19.7 » 30 II $1709 May ; 19.0 31 it $1693 June 0 . 0 30 ii $ o T o t a l $20516 ^ d e t e r m i n e d i n t h e same manner as t h e number o f h e a t i n g u n i t s r e q u i r e d f o r r e a r i n g p e r month but u s i n g t h e a v e r a g e m o n t h l y f l o w r e q u i r e m e n t i n s t e a d o f t h e month end r e q u i r e m e n t . A p p e n d i x L L i s t o f A s s e t s and T h e i r C l a s s f o r C a p i t a l C o s t A l l o w a n c e P u r p o s e s A s s e t C l a s s 3 C l a s s 7 5% 15% Year 1 Y e a r 1 Admin £ c o n s t . Water d i v . 6 p i p e S i t e s e l e c t i o n F e es ( i n i t i a l ) H e a t i n g u n i t s F u e l t a n k s I n c u b a t o r s F i b r e g l a s s t a n k s Net-pens A u t o m a t i c f e e d e r s F i s h t r a n s p o r t e r F i s h g r a d e r Weigh s c a l e M i s c e l l a n e o u s e q u i p . O u t b o a r d motor T r u c k Boat 650 F l o a t s 17625 P i l e s 6000 C l a s s 8 C l a s s 10 C l a s s 12 20% 30% 100% Year 1 Year 5 Y e a r 1 Y e a r 5 Y e a r 1 Y e a r 5 34962 9814 5000 190 11718 10368 1428 3030 2685 20271 11910 11910 3997 346 260 260 325 3500 1000 1000 1000 450 450 7500 7500 T o t a l 23625 650 106751 26223 7950 7950 1000 1000 A p p e n d i x M T o t a l C o s t A l l o w a n c e S h i e l d s f o r t h e Model Farm i n Y e a r s 1-10 Year 1 2 3 4 5 6 7 8 9 10 Te r m i n i P r o v i n c i a l t a x 26014 19955 15969 12822 18961 14219 11307 9034 7251 5849 33768 F e d e r a l t a x 2* 26014 19289 15436 12396 18620 13946 11089 8859 7111 5737 33322 3 26014 19955 15303 12290 18534 13878 11035 8815 7077 5710 33208 4 26014 19955 15969 12156 18428 13793 10966 8761 7033 5675 33069 5 26014 19955 15969 12822 18295 13685 10881 8693 6978 5631 32893 6 26014 19955 15969 12822 18295 13553 10775 8607 6910 5576 32677 * t h e y e a r i n which t h e i n v e s t m e n t t a x c r e d i t i s c l a i m e d rO H © A p p e n d i x N R e s u l t s o f t h e S e n s i t i v i t y A n a l y s e s . NPV and IRR P a r a m e t e r Model farm P r o d u c t mix - f r e s h - f r o z e n 1:3 mixed Market p r i c e --$.22/kg -+$.22/kg -+$.44/kg L a b o u r r a t e --20% - + 20% Feed p r i c e -+$.11/kg --$.11/kg --$.22/kg Tax r a t e -0% -51% S t o c k i n g d e n s j t y -16 kg/m 3 -48 kg/m NPV 10% 31849 IRR 12 . 01 188726 10364 56318 21.. 38 10 . 66 13.53 (78269 ) 140539 248598 4 . 91 18 .58 24.72 112300 (50493) 17.06 6 .80 (77106 ) 144968 228318 5 .13 19.13 24 .92 88516 (20890 ) 15 .26 8 .60 (41473) 53739 7 .75 13.59 T a b l e N-I . . , „ „ , „ , . Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm P r o d u c i n g A l l F r e s h P r o d u c t w i t h No S t o r a g e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 F r e s h P r o d u c t - N o S t o r a g e Year 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 481173 481173 481173 481173 481173 481173 481173 481173 481173 C o s t o f goods s o l d 0 292857 292857 292857 292857 292857 292857 292857 292857 292857 G r o s s m a r g i n 0 188316 188316 188316 188316 188316 188316 188316 188316 188316 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT (62099 ) 94028 94028 94028 94028 94028 94028 94028 94028 94028 I n t e r e s t e xpense 0 66 08 6608 6608 6608 6608 6608 6608 6608 6608 EBT (62099 ) 87420 87420 87420 87420 87420 87420 87420 87420 87420 Income t a x 0 2247 20313 24951 23277 24545 25320 25926 26401 26774 Net income (62099 ) 85173 67107 62469 64143 62875 62100 61494 61019 60646 Add amort & dep 17515 17515 17515 17515 17515 17515 17515 17515 17515 .<;17 515 P u r c h a s e s ( 35173 ) T e r m i n a l g a i n 183127 Working c a p i t a l (131821) Net c a s h f l o w (176405) 102688 84622 79984 46485 80390 79615 79009 78534 261288 Note : The c a s h f l o w i n y e a r : z e r o i s (139976) to rO T a b l e N-II Income S t a t e m e n t and Net Cash Flow f o r the Model Farm P r o d u c i n g A l l F r o z e n P r o d u c t w i t h No S t o r a g e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 F r o z e n P r o d u c t - N o S t o r a g e Year 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 452869 452869 452869 452869 452869 452869 452869 452869 452869 C o s t o f goods s o l 0 309263 309263 309263 309263 309263 309263 309263 309263 309263 G r o s s m a r g i n 0 143606 143606 143606 143606 143606 143606 143606 143606 143606 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT (62099 ) 49318 49318 49318 49318 49318 49318 49318 49318 49318 I n t e r e s t expense 0 7886 7886 7886 7886 7886 7886 7886 7886 7886 EBT (62099) 41432 41432 41432 41432 41432 41432 41432 41432 41432 Income t a x 0 0 3071 9224 10876 12140 12914 13518 13991 14363 Net income (62099) 41432 38361 32208 30556 29292 28518 27914 27441 27069 Add amort & dep 17515 17515 17515 17515 17515 17515 17515 17515 17515 17515 P u r c h a s e s (35173) T e r m i n a l g a i n 183106 Working c a p i t a l (131821) Net c a s h f l o w (176405) 58947 55816 49723 12898 46807 46033 45429 44956 227691 Note : The c a s h f l o w i n Vcsr z e r o i s (139976) T a b l e N - I I I Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm P r o d u c i n g 1:3 F r e s h t o F r o z e n P r o d u c t w i t h No S t o r a g e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 Mixed P r o d u c t - N o S t o r a g e Year 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 C o s t o f goods s o l d 0 459945 305162 459945 305162 459945 305162 459945 305162 459945 305162 459945 305162 459945 305162 459945 305162 459945 305162 G r o s s m a r g i n 0 154783 154783 154783 154783 154783 154783 154783 154783 154783 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT I n t e r e s t e xpense (62099 ) 0 60495 7168 60495 7168 60495 7168 60495 7168 60495 7168 60495 7168 60495 7168 60495 7168 60495 7168 EBT Income t a x (62099 ) 0 53327 0 53327 6263 53327 15745 53327 14072 53327 15340 53327 16115 53327 16721 53327 17196 53327 17569 Net income (62099 ) 53327 47064 37582 39255 37987 37212 36606 36131 35758 Add amort £ dep P u r c h a s e s T e r m i n a l g a i n Working c a p i t a l 17515 (131821) 17515 17515 17515 17515 (35173) 17515 17515 17515 17515 17515 183127 Net c a s h f l o w (176405) 70842 64579 55097 21597 55502 54727 54121 53646 236400 Note : The c a s h i f l o w i n y e a r z e r o i s (139976) to T a b l e N-IV Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t $.22/kg D e c r e a s e i n S a l e s P r i c e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 $.22/kg D e c r e a s e i n S a l e s P r i c e Y e ar 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 C o s t o f goods s o l d 0 431641 311530 431641 311530 431641 311530 431641 311530 431641 311530 431641 311530 431641 311530 431641 311530 431641 311530 G r o s s m a r g i n 0 120111 120111 120111 120111 120111 120111 120111 120111 120111 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT I n t e r e s t expense (62099) 0 25823 7168 25823 7168 25823 7168 25823 7168 25823 7168 25823 7168 25823 7168 25823 7168 25823 7168 EBT Income t a x (62099) 0 18566 0 18566 0 18566 0 18566 1721 18566 2697 18566 6793 18566 7390 18566 7859 18566 8228 Net income (62099) 18655 18655 18655 16934 15958 11862 11265 10796 10427 Add amort £ dep P u r c h a s e s T e r m i n a l g a i n W orking c a p i t a l 17515 (131821) 17515 17515 17515 17515 (35173) 17515 17515 17515 17515 17515 183060 Net c a s h f l o w (176405) 36170 36170 36170 (724) 33473 29377 28780 28311 211002 Note: The c a s h f l o w i n y e a r z e r o i s (139976) cn T a b l e N-V Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t $.22/kg I n c r e a s e i n S a l e s P r i c e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 $.22/kg I n c r e a s e i n S a l e s P r i c e Y e ar 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 488249 488249 488249 488249 488249 488249 488249 488249 488249 C o s t o f goods s o l d 0 311530 311530 311530 311530 311530 311530 311530 311530 311530 G r o s s m a r g i n 0 176719 176719 176719 176719 176719 176719 176719 176719 176719 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT (62099 ) 82431 82431 82431 82431 82431 82431 82431 82431 82431 I n t e r e s t e x p e n s e 0 7168 7168 7168 7168 7168 7168 7168 7168 7168 EBT (62099 ) 75263 75263 75263 75263 75263 75263 75263 75263 75263 Income t a x 0 621 17508 21668 19995 21262 22038 22643 23118 23492 Net income (62099) 74642 57755 53595 55268 54001 53225 52620 52145 51771 Add amort 6 dep 17515 17515 17515 17515 17515 17515 17515 17515 17515 17515 P u r c h a s e s (35173) T e r m i n a l g a i n 183125 Working c a p i t a l (131821) Net c a s h f l o w (176405) 92157 75270 71110 37610 71516 70740 71035 69660 252411 Note: The c a s h f l o w i n y e a r z e r o i s (139976) H CD T a b l e N-VI Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t $.44/kg I n c r e a s e i n S a l e s P r i c e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 $. 4-1/kg I n c r e a s e i n S a l e s P r i c e Y e a r 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 516554 516554 516554 516554 516554 516554 516554 516554 516554 C o s t o f goods s o l d 0 311530 311530 311530 311530 311530 311530 311530 311530 311530 G r o s s m a r g i n 0 205024 205024 205024 205024 205024 205024 205024 205024 205024 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT (62099 ) 110736 110736 110736 110736 110736 110736 110736 110736 110736 I n t e r e s t expense 0 7168 7168 7168 7168 7168 7168 7168 7168 7168 EBT (62099) 103568 103568 103568 103568 103568 103568 103568 103568 103568 Income t a x 0 5013 28461 29294 27624 28895 29672 30280 30756 31130 Net income (62099) 98555 75107 74274 75944 74673 73896 73288 72812 72438 Add amort & dep 17515 17515 17515 17515 17515 17515 17515 17515 17515 17515 P u r c h a s e s (35173) T e r m i n a l g a i n 183144 Working c a p i t a l (131821) Net c a s h f l o w (176405) 116070 92622 91789 58286 92188 91411 90803 90327 273097 Note: The c a s h f l o w i n y e a r z e r o i s (139976) T a b l e N-VII Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t 20% L a b o u r C o s t D e c r e a s e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 20% L a b o u r Cos t D e c r e a s e Year 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 C o s t o f poods s o l d 0 459945 296606 459945 296606 459945 296606 459945 296606 459945 296606 459945 296606 459945 296606 459945 296606 459945 296606 G r o s s m a r g i n 0 163339 163339 J 163339.. 163339 163339 163339 163339 163339 163339 E x p e n s e s 57899 90088 90088 90088 90088 90088 90088 90088 90088 90088 EBIT I n t e r e s t e xpense (57899) 0 73251 6798 73251 6798 73251 6798 73251 6798 73251 6798 73251 6798 73251 6798 73251 6798 73251 6798 EBT Income t a x C57899) 0 66453 0 66453 14486 66454 19290 66453 17616 66453 18884 66453 21839 66453 20265 66453 20740 66453 21113 Net income (57899) 66453 51967 47153 48837 47569 44614 46188 45713 45340 Add amort £ dep P u r c h a s e s T e r m i n a l g a i n W o r king c a p i t a l 17515 (127221) 17515 17515 17515 17515 (35173) 17515 17515 17515 17515 17515 183125 Net c a s h f l o w (167605) 83968 69482 64678 31179 65084 62129 63703 63228 244740 Note: The c a s h f l o w i n y e a r z e r o i s (139976) N3 CO T a b l e N - V I I I Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t 20% L a b o u r C o s t I n c r e a s e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 20% L a b o u r C o s t I n c r e a s e Y e a r 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 459945 459945 459945 459945 459945 459945 459945 459945 459945 C o s t o f goods s o l d 0 326454 326454 326454 326454 326454 326454 326454 326454 326454 G r o s s m a r g i n 0 133491 133491 133491 133491 133491 133491 133491 133491 133491 E x p e n s e s 66299 98488 98488 98488 98488 98488 98488 98488 98488 98488 EBIT (66299 ) 35003 35003 35003 35003 35003 35003 35003 35003 35003 I n t e r e s t e xpense 0 7538 7538 7538 7538 7538 7538 7538 7538 7538 EBT (66299) 27465 27465 27465 27465 27465 27465 27465 27465 27465 Income t a x 0 0 0 3077 3795 8385 9156 9757 10227 10598 Net income (.66299 ) 27465 27465 24388 23670 19080 18309 17708 17238 16867 Add amort S dep 17515 17515 17515 17515 17515 17515 17515 17515 17515 17515 P u r c h a s e s (35173) T e r m i n a l g a i n 184319 Working c a p i t a l (136421) Net c a s h f l o w (185205) 44980 44980 41903 6012 36595 35824 35223 34753 218701 Note: The c a s h f l o w i n y e a r z e r o i s (139976) H to T a b l e N-X Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t $.11/kg I n c r e a s e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 $.11/kg I n c r e a s e i n Feed P r i c e Y e a r i n Feed P r i c e Net s a l e s C o s t o f goods s o l d G r o s s m a r g i n E x p e n s e s EBIT I n t e r e s t e xpense EBT Income t a x Net income Add amort 6 dep P u r c h a s e s T e r m i n a l g a i n W o r k i n g c a p i t a l Net c a s h f l o w 1 2 3 4 5 6 7 8 9 10 0 0 459945 336780 459945 336780 459945 336780 459945 336780 459945 336780 459945 336780 459945 336780 459945 336780 459945 336780 0 123165 123165 123165 123165 123165 123165 123165 123165 123165 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 (62099) 0 28877 7925 28877 7925 28877 7925 28877 7925 28877 7925 28877 7925 28877 7925 28877 7925 28877 7925 (62099) 0 20952 0 20952 0 20952 0 20952 4202 20952 3317 20952 7413 20952 8011 20952 8480 20952 8848 (62099) 20952 20952 20952 16750 17635 13539 12941 12472 12104 17515 17515 17515 17515 17515 (35173) 17515 17515 17515 17515 17515 186062 (142983) (187567) 38467 38467 38467 908 35150 31054 Note: The c a s h f l o w i n y e a r z e r o i s (139976) 30456 29987 215681 to ro © T a b l e N-IX Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t $ . l l / k g D e c r e a s e i n Feed P r i c e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 $ . i * / k g D e c r e a s e i n Feed P r i c e Year 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 C o s t o f goods s o l d 0 459945 286280 459945 286280 459945 286280 459945 286280 459945 286280 459945 286280 459945 286280 459945 286280 459945 286280 G r o s s m a r g i n 0 173665 173665 173665 173665 173665 173665 173665 173665 173665 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EB IT I n t e r e s t e xpense (62099) 0 79377 6411 79377 6411 79377 '6411 79377 6411 79377 6411 79377 6411 79377 6411 79377 6411 79377 6411 EBT Income t a x (62099) 0 72966 0 72966 20199 72966 21048 72966 19374 72966 20641 72966 21418 72966 22024 72966 22499 72966 22872 Net income (62099) 72966 61700 51918 53592 52325 51548 50942 50467 50094 Add amort £ dep P u r c h a s e s T e r m i n a l g a i n W o r king c a p i t a l 17515 (120659) 17515 17515 17515 17515 (35173) 17515 17515 17515 17515 17515 180114 Net c a s h f l o w (165243) 90481 79215 69433 35934 69840 69063 68457 67982 247723 Note: The c a s h f l o w i n y e a r z e r o i s (139976) ro T a b l e N-XI Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t $.22/kg D e c r e a s e i n Feed P r i c e Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 $.22/kg D e c r e a s e i n Feed P r i c e Y e ar 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 459945 459945 459945 459945 459945 459945 459945 459945 459945 C o s t o f goods s o l d 0 261031 261031 261031 261031 261031 261031 261031 261031 261031 G r o s s m a r g i n 0 198914 19.8914 198914 198914 198914 198914 198914 198914 198914 E x p e n s e s 62099 94288 94288 94288 94288 94288< 942 88 94288 94288 94288 EBIT (62099 ) 104626 104626 104626 104626 104626 104626 104626 104626 104626 I n t e r e s t e x p e n s e 0 8682 8682 8682 8682 8682 8682 8682 8682 8682 EBT (62099) 95944 95944 95944 95944 95944 95944 95944 95944 95944 Income t a x 0 2955 26402 27235 25566 26836 27614 28221 28697 29071 Net income (62099) 92989 69542 68709 70378 69108 68330 67723 67247 66873 Add amort S dep 17515 17515 17515 17515 17515 17515 17515 17515 17515 17515 P u r c h a s e s (35173) 177117 T e r m i n a l g a i n W o r k i n g c a p i t a l (109498) Net c a s h f l o w (154082) 110504 87057 86224 52720 86623 85845 85238 84762 261505 Note: The c a s h f l o w i n y e a r z e r o i s (139976) K> rO rO T a b l e N-XII Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t 0% Tax Rate Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 Tax Rate Of 0% Y e a r 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 C o s t o f goods s o l d 0 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 G r o s s m a r g i n 0 148415 148415 148415 148415 148415 148415 148415 148415 148415 E x p e n s e s \62099- 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT I n t e r e s t e x p e n s e (62099) 0 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 EBT Income t a x (62099) 0 46959 0 46959 0 46959 0 46959 0 46959 0 46959 0 46959 0 46959 0 46959 0 Net income (62099) 46959 46959 46959 46959 46959 46959 46959 46959 46959 Add amort 6 dep P u r c h a s e s T e r m i n a l g a i n W o r k i n g c a p i t a l 17515 (131821) 17515 17515 17515 17515 (35173) 17515 17515 17515 17515 17515 189729 Net c a s h f l o w (176405) 64474 64474 64474 29301 64474 64474 64474 64474 254203 Note: The c a s h f l o w i n y e a r z e r o i s (139976) ro co T a b l e N - X I I I Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t 51% Tax Rate Model Farm Pro Forma Income S t a t e m e n t Y e a r s 1-10 Tax Rate o f 51% Y e a r 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 C o s t o f goods s o l d 0 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 G r o s s m a r g i n 0 148415 148415 148415 148415 148415 148415 148415 148415 148415 E x p e n s e s 62099 94288 94288 94288 94288 94288 94288 94288 94288 94288 EBIT I n t e r e s t e xpense (62099) 0 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 54127 7168 EBT Income t a x (62099) 0 46959 0 46959 8347 46959 26534 46959 23365 46959 25753 46959 27213 46959 28353 46959 29246 46959 29949 Net income (62099 ) 46959 38612 20425 23594 21206 19746 18606 17713 17010 Add amort S dep P u r c h a s e s T e r m i n a l g a i n W o r k i n g c a p i t a l 17515 (131821) 17515 17515 17515 17515 (35173) 17515 17515 17515 17515 17515 183125 Net c a s h f l o w (176405) 64474 56127 37940 5936 38721 37261 36121 35228 211735 Note: The c a s h f l o w i n y e a r z e r o i s (139976) to to • P T a b l e N-XIV Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t a S t o c k i n g D e n s i t y o f 16 kg/m Model Farm Pro Forma Income S t a t e m e n t YearSj 1-10 S t o c k i n g D e n s i t y o f 16 kg/m Year 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 459945 459945 459945 459945 459945 459945 459945 459945 459945 C o s t o f goods s o l d 0 311530 311530 311530 311530 311530 311530 311530 311530 311530 G r o s s m a r g i n 0 148415 148415 148415 148415 148415 148415 148415 148415 148415 E x p e n s e s ,695 09 101698 101698 101698 101698 101698 101698 101698 101698 101698 EBIT (69509 ) 46717 46717 46717 46717 46717 46717 46717 46717 46717 I n t e r e s t e xpense 0 7194 7194 7194 7194 7194 7194 7194 7194 7194 EBT (69509) 39523 39523 39523 39523 39523 39523 39523 39523 39523 Income t a x 0 0 0 9796 9788 11345 12355 13150 13776 14274 Net income (69509) 39523 39523 29727 29735 28178 27168 26373 25747 25249 Add amort £ dep 21463 21463 21463 21463 21463 21463 21463 21463 21463 21463 P u r c h a s e s (47013) T e r m i n a l g a i n 188325 W o r k i n g c a p i t a l (131821) Net c a s h f l o w (179867) 60986 60986 51190 ,4185 49641 48631 47836 47210 235037 Note: The c a s h f l o w i n y e a r z e r o i s (197671) N> T a b l e N-XV ; Income S t a t e m e n t and Net Cash Flow f o r t h e Model Farm a t a S t o c k i n g D e n s i t y o f 48 kg/m Model Farm Pro Forma Income S t a t e m e n t Y e a r g 1-10 S t o c k i n g D e n s i t y o f 48 kg/m Year 1 2 3 4 5 6 7 8 9 10 Net s a l e s 0 C o s t o f goods s o l d 0 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 459945 311530 G r o s s m a r g i n 0 148445 148445 148445 148445 148445 148445 148445 148445 148445 E x p e n s e s EBIT I n t e r e s t e xpense 58764 90953 90953 90953 90953 90953 90953 90953 90953 90953 (58764) 0 57462 7159 .57462 7159 57462 7159 57462 715 9 57462 7159 57462 7159 57462 7159 57462 7159 57462 7159 EBT Income t a x (58764) 0 50303 0 50303 6206 50303 14728 50303 13184 50303 14356 50303 15500 50303 15599 50303 16023 50303 ' 16356 Net income (58764) 50303 44097 35575 37119 35947 34803 34704 34280 33947 Add amort 6 dep P u r c h a s e s T e r m i n a l g a i n Working c a p i t a l 15293 (131821) 15293 15293 15293 15293 (31503) 15293 15293 15293 15293 15293 181527 Net c a s h f l o w (175292) 65596 59390 50868 20909 51240 50096 49997 49573 230767 Note: The c a s h f l o w i n y e a r z e r o i s (121411) to cn Appendix 0 Name and l o c a t i o n of salmon farms i n B r i t i s h Columbia Name Experimental F i s h Farm Nanaimo Apex B i o -Resources Goodbrand Lo c a t i o n Nanaimo. B.C. Duncan. B.C. Indian Arm, B.C. Approximate Production 50000 smelts 100000+ smolts 150000 smolts 

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