Even though you’ve probably never heard of Marine Harvest, you’ve very likely tasted its products. Based in Norway, Marine Harvest (“MH”) is an aquaculture (aka fish farming) company that commands 30% of the global salmon and trout market, the largest share in the world.[ii] Recently, company management has begun to address the pressing issues that climate change poses to its business.
In its most recent 20-F filing with the SEC, MH cites “rising ocean temperatures and ocean acidification” as “the two main threats” that climate change poses to its ongoing business operations.[iii] Additionally, the company faces external threats from price fluctuations in the raw materials of fish feed, which currently accounts for nearly half of COGS.[iv],[v] This risk must be mitigated to ensure consistent future production and avoid future price increases that will be passed to the end consumer. As a New Yorker, I already pay $15 for lox and bagels… I’m not sure I’m willing to pay much more.
Why is this important? – global perspective
It’s important to note that climate change will likely necessitate a shift in the proteins humans consume. This is evidenced by the feed conversion ratios above. As you can see, the feed conversion ratio of farmed salmon is vastly superior to that of alternative protein sources. Currently, water covers 70% of the Earth’s surface, but only 2% of our calories are derived from the water.[vii] It’s likely that our society will shift to a more heavily fish-based diet in the future, and MH’s issues are therefore imperative to solve.
Marine Harvest’s plan – is it enough?
In response to climate threats, MH has implemented a campaign titled the “Blue Revolution.” Under this plan, MH will invest in R&D to improve fish genetics and harvest efficiency. The company also will invest in state-of-the-art fish feed production facilities.[viii]
But this is hardly a “revolution,” and I don’t believe it will be enough to counteract the increasingly deleterious effects of climate change on our oceans. MH needs to take the movement further by ending dependence on the ocean, the climate, and traditional feed sources altogether.
What I would do – the part you’ve been waiting for!
Invest in climate-agnostic farming techniques:
Although there are a few alternative methods, aquaponics is, in my opinion, the best option. Aquaponics combines fish and produce farming. Nutrients generated by broken-down fish waste are consumed by plants, and the resulting clean water circulates back to the fish. Aquaponics uses 90% less water than traditional farming and requires zero artificial fertilizers or chemical pesticides. From a business perspective, the technology is especially enticing due to its extensive use of low-cost materials, such as PVC piping and plastic drums. With aquaponics, MH could grow duckweed and other high-protein plant materials to supplement the salmon and trout feed–all while using fish waste as fertilizer! Additionally, the isolated fish tanks would ameliorate the serious issues of disease and bacteria outbreaks.[ix]
For now, aquaponics would coexist with MH’s existing ocean operations. The alternate sources of production would diversify the company’s processes and hedge the effects of unpredictable weather and other variables that would otherwise destroy a year’s harvest.
Invest in more efficient protein sources:
As mentioned earlier, the price of fish meal fluctuates wildly as the changing climate affects crop yields. I propose that MH begin to cultivate black soldier fly larvae (“BSFL”) to feed its hungry fish. BSFL will eat nearly anything and are among the most efficient protein-producers on the planet. In fact, a 2005 study out of the University of Georgia and NC State University definitively concluded that BSFL who ate pig manure vastly increased nutrient concentrations and showed extreme promise as animal feed, “particularly for aquaculture.”[x]
To be honest, they were pretty flavorless (a little salty) and not something I think will be on restaurant menus any time soon. But I do think BSFL will be what our food eats.
Concluding thoughts – MH’s issues aren’t unique
Aquaculture is just one industry among many that climate change will adversely affect. And while Marine Harvest is making an industry-leading push to prepare for what’s coming, I’m still not sure it will be enough to weather the storm.
[i] Yahoo! Finance, “Marine Harvest ASA (MHG.OL)”, https://finance.yahoo.com/quote/MHG.OL/history?p=MHG.OL, accessed November 2016.
[ii] Marine Harvest ASA, December 31, 2014 Integrated Annual Report, page 34, http://www.marineharvest.com/investor/annual-reports/, accessed November 2016.
[iii] Marine Harvest ASA, December 31, 2015 Form 20-F, page 38, http://www.marineharvest.com/investor/annual-reports/, accessed November 2016.
[iv] Marine Harvest ASA, December 31, 2015 Integrated Annual Report, page 42, http://www.marineharvest.com/investor/annual-reports/, accessed November 2016.
[v] Marine Harvest ASA, December 31, 2015 Integrated Annual Report, page 24, http://www.marineharvest.com/investor/annual-reports/, accessed November 2016.
[vi] Peak Prosperity, “Can You Feed Your Family With Aquaponics?”, https://www.peakprosperity.com/forum/can-you-feed-your-family-aquaponics/42669, accessed November 2016.
[vii] Marine Harvest ASA, “Marine Harvest Leading the Blue Revolution,” http://www.marineharvest.com/planet/the-blue-revolution/, accessed November 2016.
[viii] Marine Harvest ASA, “Marine Harvest Leading the Blue Revolution,” http://www.marineharvest.com/planet/the-blue-revolution/, accessed November 2016.
[ix] Marine Harvest ASA, December 31, 2015 Integrated Annual Report, page 26, http://www.marineharvest.com/investor/annual-reports/, accessed November 2016.
[x] Entomology Today, “Black Soldier Flies as Recyclers of Waste and Possible Livestock Feed,” https://entomologytoday.org/2015/05/26/black-soldier-flies-as-recyclers-of-waste-and-possible-livestock-feed/, accessed November 2016.