Small-Scale Catfish Production: Introduction

University of Arkansas, United States Department of Agriculture and County Governments Cooperating

Nathan Stone
Extension Fisheries Specialist

Catfish production has grown readily in the past ten years and has proven to be a profitable enterprise for many farmers.  However, the high capital investment and operating capital requirements of commercial catfish production have prevented may small-scale farmers from participating in this enterprise.

Small-scale catfish production is a lower-cost option that can provide an income opportunity for individuals willing to market their fish directly to consumers.  There are a number of important considerations before beginning small-scale catfish production and direct marketing.  This fact sheet explains differences between large and small catfish operations and the importance of direct marketing to the success of small fish farms.

Large vs Small Farms

Large catfish farms are expensive to build and operate.  Arkansas Cooperative Extension Service budgets show that pond construction, equipment and operating expenses average $5,000 per acre before the first fish is harvested.  Experts on catfish culture believe that for a catfish farm to be successful, based on sales to processors, a minimum of 80 to 100 acres of ponds is required.  This means that $400,000 to $500,000 in investment capital is needed to start a commercial catfish farm.    Since lenders typically require at least 65% owner equity for catfish loans, financing may be available for less than half of the total initial capital cost.

Like many agricultural crops, there are economies of scale in commercial catfish production.  Larger farms are able to produce fish at a lower price per pound than smaller farms.  For example, large farms can buy catfish feed in bulk by the truckload while smaller producers, in order to have fresh feed, must purchase bagged feed which costs 10 percent to 20 percent more.  Intensive catfish production on a part-time basis is risky because the farmer cannot watch the ponds on a regular basis, day and night.  If an aerator fails, fish may die in a matter of minutes.  Large farms have night-time oxygen crews that monitor ponds regularly.  Small-scale producers generally get lower yields since they stock and feed at lower rates to reduce the risk of water quality problems.

Cost of Production

Large fish farms typically sell most of their production to fish processing plants.  Most farmers own shares in these plants that entitle them to sell certain quantities.  Profit margins per pound are low, but the large quantity of fish sold allows a farm to operate profitably.  Larger producers also save a portion of their earnings to allow them to survive periods of low catfish prices when fish production is not profitable.

Figure 1 shows the average price/lb paid by processors over the past 14 years.  The dotted line indicates a break-even price of $0.65/lb, representing the cost of producing catfish on a small-scale.  The solid line shows a typical breakeven price for a large farm.  It is obvious that, in may years, potential profits are slim to none especially for a small farm.

Based on these numbers, the average profit over the 14-year period would be $0.019/lb.  For a farmer with a five-acre pond producing 4,000 lb/acre/year (assuming no oxygen or disease problems), even a $0.02/lb profit means a return to labor and management of only $400/year.  This would provide a wage of less than 160 hours a year doing the work of feeding and watching the fish.  A small operation simply cannot survive by selling to a processor.

Advantages of Direct Sales

Does all this mean that there is no place for a small-scale catfish producer?  Not at all.  It means that a small scale producer must look to other markets to sell his or her fish rather than selling only to a processor.  The key is that profits are made by selling the fish, not by raising them.  The distribution of processed fish through food brokers and supermarkets adds a mark-up to the price of fish , so the consumer pays far more for the fish than the processing plant receives.  Bypassing these middle-men avoids such markups, allows direct sales of fish to the consumer to be profitable, and provides the consumer with a less expensive product, especially if the consumer will dress their own fish.  Selling directly to the public is a way to add value to the fish produced.  However, it also means that the fish producer must assume all of the work an risks involved in marketing.

Another factor in favor of direct sales is the freshness of the product.   Fish are notorious for spoilage, and consumers are wary of products on ice or frozen.  A third factor is that the fish fry is a social institution in Arkansas and many southern states.  Families, churches, businesses, social organizations and political organizations all hold fish fries.  A local producer can supply the desired fish.

In the early days of the catfish industry, direct retail sales of live catfish were common and were critical to the success of a number of new operations.   As the industry grew, farms expanded in acreage and moved to selling the fish to processors and live haulers, where 10,000-20,000 pound truckloads of fish  could be sold at one time.  This has resulted in a large and unmet demand for live farm-raised fish.  Live catfish sold directly to the consumer can bring $1.00 to $1.35/lb, with an additional $0.35-0.45/lb for cleaning fish.  Returns are far higher than what can be obtained from sales to a processor.

Fish markets selling wild-caught fish have traditionally supplied the bulk of the market for fresh fish.  However, concerns about contaminants  in wild fish have been heightened by the discovery of unacceptably high levels of mercury in fish from several Arkansas rivers.  Farm-raised fish provide an alternative source of high quality fresh fish for local communities.

Marketing

Marketing catfish on a small-scale is not for everyone.  It is not a way to get wealthy.  It may be best to start as a part-time business as a means to supplement other income.  Information on how to raise catfish is readily available from the Cooperative Extension Service.  Commercial catfish production practices can be adapted to small-scale operations.  However, a successful small-scale operation is possible only when the producer works to develop a market and sells fish directly to consumers.

Before starting a catfish farm, get all the information you can on marketing and know where you will sell your fish.  The Cooperative Extension Service publication Small-Scale Marketing of Aquaculture Products (FSA 9034) details important considerations in direct  marketing.  Information on fee fishing (pay lake) opportunities is provided in Fact Sheet 9054 Fee Fishing - An Additional source of Income.

Direct marketing of fish requires time, money, hard work and people skills, but it provides a way for the small-scale producer to make money in the catfish business.

Acknowledge is given to DAVID J. CLINE, Extension fisheries specialist; LARRY W. DORMAN, Extension fisheries specialist; DR. CAROLE R. ENGLE, aquaculture/fisheries coordinator; and DR HENRY ENGLISH, project director, UAPB-FmHA Small Farm Project, University of Arkansas at Pine Bluff; MICHAEL D HAMILTON, district program leader - SE, Cooperative Extension Service, University of Arkansas, Little Rock; and ROBERT A RODE, research specialist/pond manager, Arkansas Agricultural Experiment Station, University of Arkansas at Pine Bluff, for assistance with this fact sheet.

DR. NATHAN STONE is Extension fisheries specialist,
University of Arkansas Cooperative Extension Service,
University of Arkansas at Pine Bluff.

Issued in furtherance of Extension work, Act of September 29, 1977, in cooperation with the U.S.D.A., Dr. Mazo Price, Director, Cooperative Extension Program, University of Arkansas at Pine Bluff.  The Arkansas Cooperative Extension Program offers its programs to all eligible persons regardless of race, color, national origin, sex, age or disability, and is an Equal Opportunity Employer.