Tilapia is the second-most farmed food fish species in the world and China’s role as its leading producer makes it the ideal place to make an impact, according to the Netherlands-based Sustainable Trade Initiative IDH. Dedicated to reducing disease, pollution, and feed wastage in aquaculture, IDH has been running a program in China’s Hainan Province to improve tilapia farmers’ incomes and make the sector more attractive to investors and insurers.
IDH Program Officer at IDH Lisa van Wageningen spoke to SeafoodSource about how the organization transfers knowledge, skill, and technology to farmers struggling with low margins and stricter environmental rules. Van Wageningen also spoke about IDH’s partnership with Chinese non-governmental organization China Blue, as well as the Seafood Sustainability Partnership.
SeafoodSource: Has the Chinese government’s stricter approach to environmental enforcement – which has seen many aquaculture facilities closed in wetlands – created an impetus for projects like yours?
Van Wageningen: Sustainable changes happen often in orchestrated actions of companies and governments. So, yes, implementation of environmental laws helps to create a business case for companies and producers to become more sustainable.
One of the angles of sustainability is more efficient use of natural resources, which in the case of aquaculture is mainly driven around solving the main issues at production level of the aquaculture industry. Simply said, too many fish are dying because of diseases and feed not being used as efficiently as it could.
SeafoodSource: Do you think your project will help insurance companies to be more comfortable extending coverage to aquaculture?
Van Wageningen: Insurance premiums are lower when the risk is predictably lower. In order to predict risks, you need to have data. In our project, we help farmers to better track data. Additionally, we build mechanisms to mitigate production risks. We believe that when farm data is analyzed, farmers can better understand their farm management and become more efficient farmers.
Currently, farmers [in Hainan] seldomly analyze their farm records. Does a certain fingerling perform better than another? How does the feed perform in their ponds? And what is the relation between a rising temperature and a certain fish disease?
In our project we help farmers to better track data and help them to analyze the data so that they can mitigate their production risks. Additionally, if farmers collect more data, insurance companies can better differentiate potential customers. We will pilot an insurance scheme in Hainan for the tilapia industry as part of the project, as to bring insurers and the aquaculture industry closer together.
SeafoodSource: How exactly does this insurance pilot work?
Van Wageningen: The farmers that are part of the technology pilot will also take part in the insurance pilot. Tilapia farmers, in general, do not have access to insurance or other financial products, as the aquaculture industry is generally considered too risky. There have been government insurance schemes, however, we are trying to engage private insurance, which is more difficult to structure. Therefore, piloting insurance in tilapia is innovative in itself. We are currently designing the insurance pilot, and will most likely structure the insurance around two risks that farmers face: shifting feed prices, and disasters that result in high yield losses.
SeafoodSource: How big a problem is the lack of insurance for aquaculture in Hainan and what does it mean for farmers’ livelihoods?
Van Wageningen: Insurance is important for the livelihood of the farmer. The majority of the 1,500 farmers in Hainan are small-scale farmers, but there are also some large-scale farms. A typical farm is seven hectares and is operated by a couple depending on fish for their livelihood.
The farmers currently face all the risks themselves. Diseases are common, prices of feed and the farmgate fluctuate, and the typhoon season in Hainan does not help. Our project aims to reduce those risks so that farmers can become insurable.
SeafoodSource: What are the typical profit margins for tilapia farmers in Hainan and how much can your project improve these margins?
Van Wageningen: This is hard to answer because the farmgate price and feed cost changes all the time. The margin has been very thin since 2015. Our program aims to make farmers more efficient [so that] farmers spend less costs on feed and their yields increase. As a farmer, you cannot influence prices, but you can influence your inputs and increase your output.
SeafoodSource: Given it's a low-margin industry, can tilapia farmers afford to implement technology solutions to increase efficiency?
Van Wageningen: Most technologies are expensive if they are bought up-front. We learned that other payment models reach farmers with limited resources. Technologies are packed with other services for an upfront fee – potentially with insurance – or a rental or pay-per-use model are offered. The companies that are successful in technology in aquaculture have a subscription-based payment system. Farmers generally become more efficient when using technology, making them better customers. Chinese technology companies are invited to use and explore different payment models that can make very reliable customers. There is a large market for technology companies in China, if different models are considered.
SeafoodSource: Can you detail what kind of technologies and services might be bundled together and what kind of charges would be typical?
Van Wageningen: We learned from companies in other geographies and other crops, that different payment models reach farmers with limited resources. In some cases, a service on water-quality measurement is packed with insurance. When the farmers purchase insurance, they are also eligible to receive advice on farm and health management. In other cases, the enterprises charge an up-front payment fee from a partner organization – such as a processor or a hatchery – that wishes to offer the technology solution to their associated farmers.
Easy payment options such as rental or pay-per-use are also offered by few enterprises providing hardware solution to the farmers. For instance, a company allows smallholder farmers to rent Internet of Things-enabled auto-feeders for a cost of about USD 22.00 [EUR 19.55] a month, while the selling price of the unit is around 20 times as high. Another enterprise sells mapping and pesticide spraying drones to its direct customers – machinery dealers, large farmers, and other service providers. The cost of each spraying drone is around USD 13,000 [EUR 11,800]. These intermediaries charge a pay-per-use service fee from the farmers, every time the service is delivered. The farmers pay the service fee to the partner either in cash or kind.
SeafoodSource: How big an issue is skills? Are tilapia farmers typically able to access training and ongoing up-skilling to improve their operations?
Van Wageningen: We learned from other experiences that skills are essential for adopting technology. It is most important that farmers have access to field agents that can train the farmer on how to use technology. Field agents should accommodate at least three to four days of visits in the first months of adoption. What differentiates successful technology companies from failures are services; It is not about selling technology, it is providing farmers advice and helping them to become more efficient. Tools need to be as simple as possible and technology companies need to understand the reality of the farmer. As farmers are different from one another, trainings need to be adjusted per farmer. We have experience in differentiating farmers according to their needs and capacities in other commodities, and we cordially invite technology companies that want to work with us on improving their services.
SeafoodSource: Can your efficiency project be replicated in other species in China, such as eel or shrimp?
Van Wageningen: We conduct similar projects in Southeast Asia, [including with] pangasius in Vietnam, and shrimp in Thailand, Vietnam, and Indonesia. We started in tilapia in China given the value of tilapia for food security, and the sustainability of the species. We learned a lot of lessons which can be used for replicating the model. If there are private sector companies that are interested in becoming more sustainable, they are welcome to reach out.
SeafoodSource: What are the key lessons you learned from the project?
Van Wageningen: To name but a few, we learned that technology companies need to spend considerable time in the field to understand the exact requirements of the target customers; that when hardware solutions are involved, rental models and pay-per-use are seen to have higher uptake then up-front payments. And [we learned] that field agents should be selected based on the locations where they would need to operate. Locals can prove to be really efficient as they understand contexts and gain trust easily.
Photo courtesy of Lisa van Wageningen/IDH