Aquaculture Research, 2002, 33, 1265 1272 Economic analysis of a pilot commercial production for spotted babylon, Babylonia areolata (Link 1807), of marketable sizes using a flow-through culture system in Thailand N Chaitanawisuti1, S Kritsanapuntu2 & Y Natsukari3 Aquatic Resources Research Institute, Chulalongkorn University, Bangkok, Thailand Department of Bioproducts, Prince of Songkla University, Suratani, Thailand Department of Fisheries, Nagasaki University, 14, Bunkyo Machi, Japan Correspondence: N Chaitanawisuti, Aquatic Resources Research Institute, Chulalongkorn University, Bangkok, Thailand 10330 E-mail: cnilnaj@chula.ac.th Abstract This article examines the economic considerations involved in the production of spotted babylon (Baby lonia areolata) in Thailand A financial analysis of the construction and operating costs of a pilot com mercial production of spotted babylon of marketable sizes is provided, based upon proven practical tech niques and production data for a flow through growout system The investment required for a spot ted babylon growout hatchery producing 990 kg per year is estimated to be US$4528.8 The annual cost of operating such a hatchery is estimated to be US $4624.1 The cost of producing 990 kg of market able size spotted bablyon with a survival rate of 95% is estimated to be US$4.91 per kg of snails produced Cash flow analysis showed that a constant selling price of US$5.8 kg-1 results in positive cash flow by year The proposed enterprise is marginally feas ible if cost can be considerably reduced by targeting production and integrating hatchery and growout operations Keywords: Babylonia areolata, economic analysis, flow through, growing out, seawater system, spotted babylon Introduction Recently, there has been considerable interest in the commercial culture of spotted babylon, Babylonia © 2002 Blackwell Science Ltd areolata (Link), in Thailand This interest is the result of a growing demand and an expanding domestic market for seafood, along with a catastrophic de cline in natural spotted babylon populations in the Gulf of Thailand There is no published information on the economics of spotted babylon aquaculture in Thailand A lack of economic data can be an import ant constraint to the successful development of spotted babylon aquaculture A financial investment analysis linking biological, production, cost and market price variables can be used to make decisions about culture methods and the type and feasibility of any commercial operation An accurate economic assessment of spotted babylon culture is necessary if producers are to make informed decisions regarding the potential of this enterprise The analysis pro vided here describes the relationships between yield (growth and survival), market price, fixed and variable costs, and profitability indicators From 1998 to 2000, Chulalongkorn University ducted a collaborative research and development project with the National Research Council of Thailand (NRCT) to develop the land based aqua culture systems for large scale seedling production and growout operations for spotted babylon, Baby lonia areolata, in Thailand, with a view to then transferring the methods and techniques to hatch ery based operations in Thailand (Chaitanawisuti & Kritsanapuntu 2002) This study is the first attempt to present economic considerations based on the results of a pilot scale (ten growout ponds) culture 1265 A pilot commercial production for spotted babylon N Chaitanawisuti et al Aquaculture Research, 2002, 33, 1265 1272 operation for spotted babylon, B areolata, of market able sizes in a flow through culture system Table Parameters used for economic analysis of grow out operation of spotted babylon B areolata, using a flow through culture system Materials and methods Parameter Value Farm size total farm area (m2) Pond size (m) Total pond area (m2) 300 3.0 x 4.5 x 0.5 135 Stocking data Average initial weight of juvenile (g) Stocking density (no m-2) Stocking density (no per pond) 0.30 400 5, 500 Harvest data Duration of growout (days) Pond preparation (days) Average number of crops per year per pond Average final weight (g) Survival (%) Feed conversion ratio Average yield per pond (kg) Average yield per crop (kg) Total annual farm yield (kg) 180 9.0 95 1.8 49.5 495 980.4 Sale price (US$ kg-1) 4.5 5.8 Pilot-scale growout trial A pilot commercial growout trial was conducted at a mollusc hatchery at Sichang Marine Science Research and Training Station, Chulalongkorn University, Thailand Juveniles were grown to marketable size using the culture methods described by Chaitanawisuti and Kritsanapuntu (1997, 1998, 1999a, b) A total of 55 000 hatchery reared juvenile B areolata (average body weight 0.30 g) were held in 10 3.0 x 4.5 x 0.5 m (width x length x height) rectangular canvas ponds at a density of 400 snails m-2 (5500 per pond) The culture ponds were supplied with flow through ambient natural seawater at a rate of 150 L h-1 for 24 h, and water depth in the rearing ponds was 30 cm The pond bottom was covered with coarse sand as a substra tum The juveniles were fed with fresh meat of carangid fish, Selaroides leptolepis, to satiation once daily Thirty per cent of individual snails were sampled for growth measurements at 30 day inter vals and growout duration was 180 days per cycle On day 180, the individual final weight and feed conversion ratio averaged 9.0 ± 0.8 g and 1.8 ± 0.4 respectively The final survival rate was 95% Based on continuous and year round produc tion, all 10 growout pond facilities were stocked by month and first harvest began by month Five days was allowed for pond clean up and restocking Each pond was harvested twice during a year cycle Based on growth data from the pilot study, 95% of the snails reached market size by day 180, at an average weight of 9.0 g The average yield was 49.5 ± 12.3 kg per pond (495 kg per cycle), and total annual yield was 990 kg (Chaitanawisuti & Kritsanapuntu 2002) Table summarizes the pro duction and harvest data used for the economic analysis Duration of growout and average weight at harvest are based on the results of the pilot study Financial analysis A financial analysis was conducted of 10 growout pond facilities, based on investment costs and pro duction and marketing data from the pilot scale trials The analysis was used to determine and 1266 analyse critical relationships between stocking dens ity, harvest size, survival, and pond management factors that affect yield; capital and operating costs; and market price The components of the economic analysis include the following Capital costs Facilities and equipment costs and economic life of the proposed 10 growout pond facility for spotted babylon production are presented in Table The production system consists of 25 13.0 x 4.5 x 0.5 m canvas ponds arranged in a x array, with common walls to reduce construction costs The growout ponds are supplied with flow through am bient natural seawater for 24 h from a seawater intake system The seawater intake consists of a 50 mm diameter PVC pipe manifold horizontally into the sea Seawater is delivered to each pond through 50 mm PVC main pipes and inch diameter PVC distribution pipes The seawater system is powered by one a hp water pump Sea water flow rate to the ponds is adjusted to provide an exchange rate of 3.5 t day-1, and drainage of each pond is accomplished by a standpipe 40 mm in diameter The ponds are not aerated Thus, for the economic analysis, it was assumed that snails can © 2002 Blackwell Science Ltd, Aquaculture Research, 33, 1265 1272 Aquaculture Research, 2002, 33, 1265 1272 A pilot commercial production for spotted babylon N Chaitanawisuti et al grow in full strength seawater, which can be pumped from the shore adjacent to the growout facility High growth and survival of spotted babylon from juvenile to marketable size in flow through seawater is well documented (Chaitanawisuti & Kritsanapuntu 1999) Feed is stored in one 1.5 m3 freezer Building requirements include a 300 m2 shed for a juvenile growout area and for sorting harvested snails The shed is enclosed with a sheet zinc roof and has a concrete floor Interest rates for capital cost are based on bank loan rates for 2000 (3.5% per year) for this type of business enterprise and calculated on an average investment basis Fixed costs Annual depreciation is estimated from the expected useful life of each asset, and all equipment and facilities are assumed to have no residual value at the end of their useful life The hatchery building and all the growout ponds are assumed to have a useful life of 10 years because of the saltwater envir onment Housing and the seawater pump have been assigned a useful life of years The life expectancy of equipment ranges from to years Salaries (general manager, production manager and ac countant/secretary) and overheads (insurance, property taxes, licence fees and permits) are not estimated Land is assumed to be leased from the land authority at a rate of 36 000 baht per year Interest rates for equipment, pond construction and water supply are based on bank loan rates for 2000 (3.5% per year) for this type of business enterprise and calculated on an average investment basis Variable costs The variable costs for a 10 pond operation are pre sented in Table Spotted babylon juveniles (aver age body weight 0.30 g) would be purchased from a commercial hatchery at 0.8 1.0 baht per juvenile Juveniles would be fed fresh meat of carangid fish once daily to satiation at a cost of 15 baht per kg and feed conversion ratio of 1.8 Annual repair and maintenance is estimated at 3% for building, pond construction and operating equipment costs Electri city would be purchased at a cost of 1.3 baht per kWh Labour requirements include one full time labourer at a rate of 5000 Baht per month Oper ation equipment (vehicle, fuel, storage containers, farm shop equipment, etc.) is not estimated Chemicals costs include analytical reagents and hyperchlorite powder Miscellaneous costs include © 2002 Blackwell Science Ltd, Aquaculture Research, 33, 1265 1272 telephone, fresh water, materials and supplies Inter est charges for operating capital are based on bank loan rates for 2000 (3.5% per year) for this type of business enterprise and calculated on an average investment basis Return analysis Net return and return on investment for hatchery production were computed at an average final sur vivals of 95% and a selling price of spotted babylon of marketable sizes ranging from US$4.5 to 5.8 per kg Gross return was calculated for each level of final weight (range 7.0 10.5 g) and for selling price Net return was calculated as gross return minus produc tion cost Return to capital and management was computed for each level of final weight and each selling price by subtracting annual operating cost from gross returns Subsequently, return on invest ment was estimated by dividing returns to capital and management by initial capital investment (Fuller, Kelly & Smith 1992) Cash flow An annual production budget was developed from the variable and fixed costs, and cash flow budgets were developed to examine profitability in relation to the timing of expenditures and earning Net cash flow was determined by projecting estimated rev enues and costs over a 10 year period because an aquaculture enterprise would not be an attractive investment opportunity if it was not profitable within this period The cash flow analyses were performed at constant prices The initial capital in vestment was charged in the first year, and costs in subsequent years included annual variable and fixed costs, and replacement costs of depreciation items Construction and snail acquisition occur in the first year, and variable costs were adjusted to account for no sales during the first months of operation (Rubino 1992; Head, �erbi & Watanabe 1996) Results Initial investment requirement for construction of the growout hatchery was US$4528.8 (Table 2) Construction of the building and construction of the growout ponds were the largest cost compon ents, representing 50.78% and 20.30% of the total investment cost respectively These two components of the hatchery represented 71.08% of total invest ment requirements The laboratory equipment and 1267 A pilot commercial production for spotted babylon N Chaitanawisuti et al highest variable costs, accounting for, respectively, 29.85% and 27.37% of the total annual costs Elec tricity and feed were next most expensive operating cost items, representing 11.93% and 10.44% of total annual cost The cost associated with produ cing spotted babylon marketable sizes is expressed as US$ per kg Costs per kg at selected final weight are presented in Table The cost of producing 990 kg marketable sizes in this hatchery design was esti mated at US$4.66 per kg Production under condi tions of 95% survival, final weight of 9.0 g and selling price of US$5.8 per kg showed the best results in this study Gross return at these levels was US$5747.2 (Table 6) and net return for pro duction was US$1128.2 (Table 7) Returns on capital and management, and returns on invest ment were US$1803.2 and US$0.39 respectively (Tables and 9) Cash flow budgets were developed to examine profitability in relation to the timing of expenditures and earning (Table 10) These condi tions, at a constant selling price of US$5.8 per kg, would result in a positive cash flow by year The proposed enterprise would be marginally feasible if costs could be considerably reduced by targeting production and by vertically integrating hatchery and growout operations water supply were the second most expensive items in equipping the hatchery, representing 15.24% and 10.14% of the total investment respectively Details of investment costs, annual depreciation, economic life and annual interest charges for a 10 13.0 x 4.5 x 0.7 m growout pond facility are presented in Table Annual ownership costs were estimated to be US$676.60, with annual operating costs esti mated at US$3947.5 Total annual cost for the marketable size production of spotted babylon cul ture was US$4624.1 (Table 4) Annual ownership and operating costs accounted for 14.61% and 85.39% of the total annual cost respectively The two major ownership cost items were depreciation at 12.62% and interest on investment at 1.99% of total annual cost The hired labour and initial pur chase of the spotted babylon juveniles were the Table Initial investment requirements of 10 growout ponds for spotted babylon B areolata marketable sizes in flow through culture system Cost (US$) Item Per cent of total cost Buildings (roof and concrete floor of 300 m2) Pond construction (10 3.0 x 4.5 x 0.5 m canvas ponds) Laboratory equipment (freezer, water quality devices and lab equipment) Water supply and drainage (seawater pump of 2.7 kW and pipe, valves and couplings) Aeration (air blower of kW and airline) 2298.9 50.78 919.5 20.30 689.7 15.24 459.8 10.14 160.9 3.54 Total cost 4525.8 Aquaculture Research, 2002, 33, 1265 1272 Discussion The feasibility of producing B areolata of marketable sizes in a pilot commercial growout operation was examined Although returns are small, production with 95% survival and selling price of US$5.8 per kg is economically feasible under the assumptions employed This study presented a positive net return, and positive levels of return and a payback period of less than 10 years are often used as 100 Table Estimated depreciation, interest charges, and repairs and maintenance of 10 growout ponds for B areolata marketable sizes in flow through culture system Item Cost (US$) Buildings Pond construction Laboratory equipment Water supply and drainage Aeration 2298.9 919.5 689.7 458.9 160.9 10 10 5 229.9 91.9 137.9 91.9 32.2 80.5 3.2 4.8 3.2 1.1 Total cost per year 4528.8 583.8 92.8 135.8 1268 Economic life (years) Annual depreciation (US$) Annual interest charges (US$) Annual repair and maintenance (US$) 68.9 27.6 20.7 13.8 4.8 © 2002 Blackwell Science Ltd, Aquaculture Research, 33, 1265 1272 Aquaculture Research, 2002, 33, 1265 1272 A pilot commercial production for spotted babylon N Chaitanawisuti et al Table Annual enterprise budgets for a ten pond aquaculture facility for spotted babylon, B areolata A stocking density of 400 per m2 and a wholesale price of 5.8 US$ per kg are assumed Item Value Variable costs (US$) Repair and maintenance Hired labours Feed Juvenile purchase Electricity Interest on operating capital 135.8 1379.3 482.8 1264.4 551.7 133.5 Total variable costs (US$) 3947.5 Fixed costs (US$) Depreciation Interest of investment capital Total fixed costs (US$) Total annual costs (US$) 583.8 92.8 676.6 4624.1 Per cent variable Per cent of total cost 3.42 34.96 12.21 32.06 13.97 3.38 2.92 29.85 10.44 27.37 11.93 2.88 100 85.39 86.37 13.63 12.62 1.99 100 14.61 100 Table Estimated total annual cost for production of spotted babylon at selected final weights and 95% survival rate Final weight (g) Number of snails per kg Production (kg) Total annual cost (US$) Cost per kg (US$) 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 142 133 125 117 111 105 100 95 774.6 827.0 880.0 940.2 990.9 1047.6 1100.0 1157.9 4619 4619 4619 4619 4619 4619 4619 4619 5.96 5.59 5.25 4.91 4.66 4.41 4.19 3.99 Table Gross return* for production of spotted babylon marketable sizes at selected final weight, 95% of survival rate and selling prices Selling price (US$ per kg) Final weight (g) Production (kg) 4.5 5.1 5.5 5.8 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 774.6 827.0 880.0 940.2 990.9 1047.6 1100.0 1157.9 3485.7 3721.2 3960.0 4230.9 4459.1 4714.2 4950.0 5210.6 3950.5 4217.7 4488.0 4795.0 5053.6 5342.8 5610.0 5905.3 4260.3 4548.5 4840.0 5171.1 5449.9 5761.8 6050.0 6368.5 4492.7 4796.6 5104.0 5453.2 5747.2 6076.1 6380.0 6715.8 *Gross return was computed for each level of final weight ranging from 7.0 to 10.5 g and selling price (US$4.5 5.8) © 2002 Blackwell Science Ltd, Aquaculture Research, 33, 1265 1272 1269 A pilot commercial production for spotted babylon N Chaitanawisuti et al Aquaculture Research, 2002, 33, 1265 1272 Table Net return* for production of spotted babylon marketable sizes at selected final weights, 95% of survival rate and selling prices Selling price (US$ per kg) Final weight (g) Production (kg) 4.5 5.1 5.5 5.8 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 774.6 827.0 880.0 940.2 990.9 1047.6 1100.0 1157.9 -1133.3 -897.8 -65.9 -388.1 -159.9 95.2 331.0 591.6 - 668.5 -401.3 -13.1 176.0 434.6 723.8 991.0 1286.3 -358.7 -70.5 22.1 552.1 830.9 1142.8 1431.0 1749.5 -126.3 117.6 48.5 834.2 1128.2 1457.1 1761.0 2096.8 *Net return was calculated from the gross return minus the total production cost (US$4624.1) Table Return on capital and management* for production of spotted babylon marketable sizes at selected final weights, 95% of survival rate and selling prices Selling price (US$ per kg) Final weight (g) Production (kg) 4.5 5.1 5.5 5.8 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 774.6 827.0 880.0 940.2 990.9 1047.6 1100.0 1157.9 -458.3 -222.8 16.0 286.9 515.1 770.2 1006.0 1266.6 6.6 273.7 544.0 851.0 1109.6 1398.8 1666.0 1961.3 316.3 604.5 896.0 1227.1 1502.9 1817.8 2106.0 2424.5 548.7 852.6 1160.0 1509.2 1803.2 2132.1 2436.0 2771.8 *Return to capital and management was computed for each level of final weight ranging from 7.0 to 10.5 g and each selling price by subtracting annual operating cost (US$3947.5) from gross returns Table Return on investment* for production of spotted babylon marketable sizes at selected final weights, 95% of survival rate and selling prices Selling price (US$ per kg) Final weight (g) Production (kg) 4.5 5.1 5.5 5.8 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 774.6 827.0 880.0 940.2 990.9 1047.6 1100.0 1157.9 -0.10 -0.50 0.003 0.06 0.11 0.17 0.22 0.28 0.001 0.60 0.12 0.19 0.25 0.30 0.37 0.43 0.07 0.13 0.19 0.27 0.33 0.40 0.46 0.53 0.12 0.19 0.26 0.33 0.39 0.47 0.54 0.61 *Return on investment was estimated by dividing returns to capital and management by initial capital investment (US$4528.8) 1270 © 2002 Blackwell Science Ltd, Aquaculture Research, 33, 1265 1272 Aquaculture Research, 2002, 33, 1265 1272 A pilot commercial production for spotted babylon N Chaitanawisuti et al Table 10 Ten year cash flow of a pilot commercial production for spotted babylon, B areolata, marketable sizes using ten growout ponds in a flow through culture system Annual production of 990 kg and selling price of US$5.8 kg-1 Year Variable cost (US$) Fixed cost (US$) Investment (US$) Total annual cost (US$) Receipt (US$) Net return (US$) Cumulative (US$) Year Year Year Year Year Year Year Year Year Year 10 3947.5 3947.5 3947.5 3947.5 3947.5 3947.5 3947.5 3947.5 3947.5 3947.5 676.6 676.6 676.6 676.6 676.6 676.6 676.6 676.6 676.6 676.6 4528.8 0 0 0 0 9152.9 4624.1 4624.1 4624.1 4624.1 4624.1 4624.1 4624.1 4624.1 4624.1 5747.2 5747.2 5747.2 5747.2 5747.2 5747.2 5747.2 5747.2 5747.2 5747.2 -3405.7 1123.1 1123.1 1123.1 1123.1 1123.1 1123.1 1123.1 1123.1 1123.1 -3405.7 -2282.6 -1159.5 36.4 1159.5 2282.6 3405.7 4528.8 5651.9 6775.0 business investment criteria The relative attractive ness of an investment should also include an evalu ation of markets and realistic sale, site selection, technology and management requirements In Thai land, live spotted babylon fetched selling prices ranging from US$9.2 to 13.8 per kg at seafood restaurants and US$5.5 6.5 per kg at farm outlets The basic conditions in this study (juvenile price of US$0.02 per juvenile, production feed price of US$0.3 per kg, stocking density of 400 m-2 and selling price of US$5.8 per kg) resulted in a net return and a return on investment of US$1128.2 and US$0.39 respectively This indicates that the proposed 10 growout pond operation is economic ally feasible under these conditions Decreasing the culture period to months and decreasing the juvenile prices to US$0.01 per juvenile improves the economic feasability Aeration and/or water ex change are necessary for flow through culture systems and have been accounted for in the present economic analysis Profitability can be improved by targeting production and market prices and areas With regard to production, profitability indices were most sensitive to changes in average final weights and survival In general, snails are rendered unmar ketable by stunting and deformity characteristics which are presumably genetically based, and which are related to lowered growth rates (i.e final average weights) and survival To summarize, the results of an economic analysis of a proposed 10 pond production system for spotted babylon, based on pilot production data, suggest that the enterprise would be commercially feasible at current selling prices at a final body weight of 9.0 g, marginally feasible at 8.0 g and uneconomical © 2002 Blackwell Science Ltd, Aquaculture Research, 33, 1265 1272 at g Costs can be considerably reduced by re ducing the culture period, improving growth and survival and using locally hatchery and growout operations Vertical integration of a hatchery oper ation with the growout phase can substantially im prove economic feasibility This economic analysis is intended as a guide and must be modified to reflect individual situations Acknowledgments We would like to thank the National Research Council of Thailand (NRCT) for its support of the project Thanks also go to Professor Piamsak Menasveta & Associated Dr Somkiat Piyatiratitivor akul for their advice and guidance Lastly, we would like to thank Mr Soonthorn Thepmoon, Miss Siriwan Kathinmai, Mr Mongkol Maklit & Mr Sailom Tantulvawit for their assistance during the hatchery work References Chaitanawisuti N & Kritsanapuntu A (1997) Effects of stocking density and substrate presence on growth and survival of juvenile spotted babylon, Babylonia areolata Link, 1807 (Neogastropoda: Buccinidae) Journal of Shell fish Research 16, 429 433 Chaitanawisuti N & Kritsanapuntu A (1998) Growth and survival of hatchery reared juvenile spotted babylon, Babylonia areolata Link, 1807 (Neogastropoda: Buccini dae) in four nursery culture systems Journal of Shellfish Research 17, 85 88 Chaitanawisuti N & Kritsanapuntu A (1999a) Growth and production of hatchery reared juvenile spotted 1271 A pilot commercial production for spotted babylon N Chaitanawisuti et al babylon, Babylonia areolata Link 1807, cultured to mar ketable sizes in intensive flow through and semi closed recirculating water system Aquaculture Research 31, 415 419 Chaitanawisuti N & Kritsanapuntu A (1999b) Experi mental culture of hatchery reared juvenile spotted baby lon, Babylonia areolata Link 1807, (Neogastropoda: Buccinidae) in Thailand Asian Fisheries Science 12, 77 82 Chaitanawisuti N & Kritsanapuntu S (2002) Research and Development on Production of a New Candidate Marine Gastropod, Spotted Babylon (Babylonia Areolata) for Con servation and Rehabilitation of the Economic Marine Re sources in Thailand (in Thai) National Research Council 1272 Aquaculture Research, 2002, 33, 1265 1272 of Thailand, Ministry of Science and Environment, Bangkok, Thailand Fuller M.J., Kelly R.A & Smith A.P (1992) Economic analysis of commercial production of freshwater prawn, Macrobrachium rosenbergii postlarvae using a re circulating clearwater culture system Journal of Shellfish Research 11, 75 80 Head W.D., �erbi A & Watanabe W.O (1996) Economic evaluation of commercialscale, saltwater pond produc tion of Florida tilapia in Puerto Rico Journal of the World Aquaculture Society 27, 275 289 Rubino M.C (1992) Economics of red claw (Cherax quad ricarinatus) aquaculture Journal of Shellfish Research 11, 157 162 © 2002 Blackwell Science Ltd, Aquaculture Research, 33, 1265 1272 ... duction and harvest data used for the economic analysis Duration of growout and average weight at harvest are based on the results of the pilot study Financial analysis A financial analysis was conducted... return and a payback period of less than 10 years are often used as 100 Table Estimated depreciation, interest charges, and repairs and maintenance of 10 growout ponds for B areolata marketable... 1265 1272 A pilot commercial production for spotted babylon N Chaitanawisuti et al Table 10 Ten year cash flow of a pilot commercial production for spotted babylon, B areolata, marketable sizes