Hobby Farming with Aquaponics

canberra1

Following on from our recent post on the hidden cost of aquaponics (Aquaponics for Profit), I want to take that same hypothetical aquaponic system and see how we might improve its chances of success.  We are not taking into account markets and capacity for the farmer to sell their product.  We will look as some of the basics of the system to see where improvements may be made.

Reduce Capital Investment Cost

The first and very prominent issue is the capital investment of such a small farm.  In terms of scale, the economy of small systems makes them very susceptible to high capital cost in comparison to their capacity to produce.  In other words, the square meter cost to production return or cost to benefit are quite high, so scale of economy negatively impacts the small farm business outcome.  This high cost will be reflected in the increase of the break even sale price of the produce.  Often the capital investment in small farms is not recovered over their life span, though it does give you some capacity to reduce your taxation exposure in the first 3 to 5 years

Cash Savings

We all know cash is king, and when it comes to start up boutique hobby farms cash is very important.  The high capital cost often means putting at risk substantial cash savings with the intention of generating a higher return than you might get in a long term investment cash account.  For example you might have some cash squirrelled away for later in life and it is earning you an comfortable 6%pa with next to no risk.  It will take some serious consideration before taking that money out and invest it in a very high risk venture like farming (aquaponics or otherwise).  As with any investment the returns should reflect the level of risk, eg high risk you should expect high returns.

Partnerships

Perhaps, there is opportunity to partner with family or friends in the venture, however that can also be fraught with risk and sometimes does not end well.  You also need to keep in mind that now you have to sustain more than one income and usually an income that is not directly reflected on the farms input (labor), so it can increase your risk substantially through cash flow reduction.  This is not to say it is bad, but choose wisely with whom you might partner with and set the expectations well before any finances are exchange.

Borrowing Capital

If those cash funds are not available to you, borrowing the money is the next option which incurs substantial interest rates which put your operational cash flow at serious risk.  In AU obtaining 50K or 100K to get you going from a bank is going to be near impossible and as I mentioned earlier, the banks will charge a high interest rate appropriate to the risk, if you manage to convince them you are the right person to bet on.

Grow as You Go

Another option often used with success, if capital funds are not readily available  is to build and expand as funds from other sources, such as your day job becoem available.  Effectively it starts as a hobby with a larger plan to possibly replace your day job income with that of the hobby farm.  This can be a stiff lifestyle choice but one that many opt for.  Provided your system design allows you to easily and inexpensively increase your production as your market grows, you stand a fairly high chance of success.

This expansion process is very important because when you start out, chances are you will not have much in the way of market penetration, so it makes perfect sense to grow what you can afford to as you identify what your market wants from you and expand in line with demand.  I can not stress enough that production must be driven by demand not the other way around.  Grow as much as you can sell.

Failed-Aquaponic-Farm 019While I got a little side tracked, the point I make is a critical factor in determining your success as a farmer.  Reducing capital cost does not mean butcher your design by using gear that it is not designed for and doing a lot of ad hoc modifications.   Start with proven system designs and culture techniques, keeping in mind the cutting edge is the bleeding edge and as a small grower you can not afford to dally too much with experimental ideas.  Invest in the right gear for the job and it will serve you well.  The last thing you want to be doing is repairing or reconfiguring your set up.

 

How can we improve on the previous scenario?

We have talked about reducing capital investment is critical without compromising on the gear used.  Another critical consideration is getting the most out of every square meter of the large capital costs plays a vital role in reducing your investment.  That is what farming is about aquaculture or horticulture.

Take for example our 2200 plant holes in a 450m2 double poly tunnel.  Click on the concept drawing at the top of this post to get a better look.  That is a substantial modification to the original design.  You now have 4500 plant holes and 22,000 litres of aquaculture in the same poly tunnel.  This set up will take just as long to run and manage but it is much more productive and much lower capital, which answers two of the critical factors for success, lowering capital cost and increasing production.

Now we product 700 kg of fish and 54,000 plants.  At the rates we used in the previous post, you might see a turnover like $10,500 for the fish and $81,000 for the plants with a potential turnover of $91,500 per year.  You will work close to the same hours but we will add an extra full day because of the volume of plants.  The fish will take the same time to care for.

Let’s take a quick look at how this has helped our bottom line.

  • Poly tunnel – $15,000 (because we found a great deal on the poly tunnels)
  • Fish shed – $0.  We have removed the need for the shed saving $15,000
  • Aquaculture system – $20,000. The cost has not changed but we have engaged people like us to design and supply it which reduces the cost – really…
  • Hydroponic system – $15,000. The price has increased using commercial NFT and increase in production
  • We have not included development applications and fees for construction.
  • Total – $50,000

Operational overheads

  • Cost of fish production at $8/kg – $5,600pa
  • Cost of plant production at $0.15/plant – $8100pa
  • The big killer if you borrow over 10 years at farm interest rates – $7,920pa
  • We have not included vehicle costs (fuel, insurance, rego etc)
  • We will not include licensing, permits and audits or stock and equipment insurance (often 4% of capital or turnover) either

Now we have a cost which is almost exactly the same as the original design at $21,620.  That leaves $69,880 in your hand.  It is important to note we hav not included all of the other costs associated with a farm of this type.  We will include those in a later post.

Now you are working 2 hours a day for 4 days and 12 hours a day for the other 3 at a bare minimum and if you are really efficient at time management.  About 44 hours per week.  We are not going to work out an hourly rate, because you will not be at maximum production until after the first 12 months and you will need that $22,000+ to see you through the next year.

What we will do is pay for those other hidden costs (35k) 50% and reinvest in the business the first year (35K) 50%, to be sure we can survive the second year.  Unfortunately no pay for you today.  At the end of the second year, once you have balanced the books and paid the ferryman, you will be able to assess how much income the business can provide you with and how much you are willing to survive on.  This may mean a lifestyle change or as I said previously, maintain a second income (perhaps your partner) until you can stand on your own feet.

You can effectively cut the size of the farm in half and add on your expansion in the second year (double in size), which will give you some time to build your markets and increase your knowledge.  Also relying on the fish waste to run the farm, the fish will not support (in terms of nutrient production) the entire farm.  You are best to get the fish in to the end biomass you expect then add on more NFT tables as the nutrient increases.  This will still require constant input of your own cash, so plan for that.

Your expectation of a hobby farm providing you with adequate income is a very important part of the decision making process.  Keeping in mind, this is a risky and hard business to be in and it is 24/7/365.  It is very difficult to summarise all of the details in a single page, so the prices and details are only an estimation or a guide.

While writing articles such as this one, may turn people away for getting into hobby farming with aquaponics, it is more important to my business success and the expansion of the industry (not to mention your success), those who are keen to get their hands wet, do so with their eyes open.

We will endeavour to write up more detailed information on the costs at a later day.  Keep an eye out for that.

Regards
Paul

 

Following on from our recent post on the hidden cost of aquaponics (Aquaponics for Profit), I want to take that same hypothetical aquaponic system and see how we might improve its chances of success.  We are not taking into account markets and capacity for the farmer to sell their product.  We will look as some of the basics of the system to see where improvements may be made.

Reduce Capital Investment Cost

The first and very prominent issue is the capital investment of such a small farm.  In terms of scale, the economy of small systems makes them very susceptible to high capital cost in comparison to their capacity to produce.  In other words, the square meter cost to production return or cost to benefit are quite high, so scale of economy negatively impacts the small farm business outcome.  This high cost will be reflected in the increase of the break even sale price of the produce.  Often the capital investment in small farms is not recovered over their life span, though it does give you some capacity to reduce your taxation exposure in the first 3 to 5 years

Cash Savings

We all know cash is king, and when it comes to start up boutique hobby farms cash is very important.  The high capital cost often means putting at risk substantial cash savings with the intention of generating a higher return than you might get in a long term investment cash account.  For example you might have some cash squirrelled away for later in life and it is earning you an comfortable 6%pa with next to no risk.  It will take some serious consideration before taking that money out and invest it in a very high risk venture like farming (aquaponics or otherwise).  As with any investment the returns should reflect the level of risk, eg high risk you should expect high returns.

Partnerships

Perhaps, there is opportunity to partner with family or friends in the venture, however that can also be fraught with risk and sometimes does not end well.  You also need to keep in mind that now you have to sustain more than one income and usually an income that is not directly reflected on the farms input (labor), so it can increase your risk substantially through cash flow reduction.  This is not to say it is bad, but choose wisely with whom you might partner with and set the expectations well before any finances are exchange.

Borrowing Capital

If those cash funds are not available to you, borrowing the money is the next option which incurs substantial interest rates which put your operational cash flow at serious risk.  In AU obtaining 50K or 100K to get you going from a bank is going to be near impossible and as I mentioned earlier, the banks will charge a high interest rate appropriate to the risk, if you manage to convince them you are the right person to bet on.

Grow as You Go

Another option often used with success, if capital funds are not readily available  is to build and expand as funds from other sources, such as your day job becoem available.  Effectively it starts as a hobby with a larger plan to possibly replace your day job income with that of the hobby farm.  This can be a stiff lifestyle choice but one that many opt for.  Provided your system design allows you to easily and inexpensively increase your production as your market grows, you stand a fairly high chance of success.

This expansion process is very important because when you start out, chances are you will not have much in the way of market penetration, so it makes perfect sense to grow what you can afford to as you identify what your market wants from you and expand in line with demand.  I can not stress enough that production must be driven by demand not the other way around.  Grow as much as you can sell.

Failed-Aquaponic-Farm 019While I got a little side tracked, the point I make is a critical factor in determining your success as a farmer.  Reducing capital cost does not mean butcher your design by using gear that it is not designed for and doing a lot of ad hoc modifications.   Start with proven system designs and culture techniques, keeping in mind the cutting edge is the bleeding edge and as a small grower you can not afford to dally too much with experimental ideas.  Invest in the right gear for the job and it will serve you well.  The last thing you want to be doing is repairing or reconfiguring your set up.

 

How can we improve on the previous scenario?

We have talked about reducing capital investment is critical without compromising on the gear used.  Another critical consideration is getting the most out of every square meter of the large capital costs plays a vital role in reducing your investment.  That is what farming is about aquaculture or horticulture.

Take for example our 2200 plant holes in a 450m2 double poly tunnel.  Click on the concept drawing at the top of this post to get a better look.  That is a substantial modification to the original design.  You now have 4500 plant holes and 22,000 litres of aquaculture in the same poly tunnel.  This set up will take just as long to run and manage but it is much more productive and much lower capital, which answers two of the critical factors for success, lowering capital cost and increasing production.

Now we product 700 kg of fish and 54,000 plants.  At the rates we used in the previous post, you might see a turnover like $10,500 for the fish and $81,000 for the plants with a potential turnover of $91,500 per year.  You will work close to the same hours but we will add an extra full day because of the volume of plants.  The fish will take the same time to care for.

Let’s take a quick look at how this has helped our bottom line.

  • Poly tunnel – $15,000 (because we found a great deal on the poly tunnels)
  • Fish shed – $0.  We have removed the need for the shed saving $15,000
  • Aquaculture system – $20,000. The cost has not changed but we have engaged people like us to design and supply it which reduces the cost – really…
  • Hydroponic system – $15,000. The price has increased using commercial NFT and increase in production
  • We have not included development applications and fees for construction.
  • Total – $50,000

Operational overheads

  • Cost of fish production at $8/kg – $5,600pa
  • Cost of plant production at $0.15/plant – $8100pa
  • The big killer if you borrow over 10 years at farm interest rates – $7,920pa
  • We have not included vehicle costs (fuel, insurance, rego etc)
  • We will not include licensing, permits and audits or stock and equipment insurance (often 4% of capital or turnover) either

Now we have a cost which is almost exactly the same as the original design at $21,620.  That leaves $69,880 in your hand.  It is important to note we hav not included all of the other costs associated with a farm of this type.  We will include those in a later post.

Now you are working 2 hours a day for 4 days and 12 hours a day for the other 3 at a bare minimum and if you are really efficient at time management.  About 44 hours per week.  We are not going to work out an hourly rate, because you will not be at maximum production until after the first 12 months and you will need that $22,000+ to see you through the next year.

What we will do is pay for those other hidden costs (35k) 50% and reinvest in the business the first year (35K) 50%, to be sure we can survive the second year.  Unfortunately no pay for you today.  At the end of the second year, once you have balanced the books and paid the ferryman, you will be able to assess how much income the business can provide you with and how much you are willing to survive on.  This may mean a lifestyle change or as I said previously, maintain a second income (perhaps your partner) until you can stand on your own feet.

You can effectively cut the size of the farm in half and add on your expansion in the second year (double in size), which will give you some time to build your markets and increase your knowledge.  Also relying on the fish waste to run the farm, the fish will not support (in terms of nutrient production) the entire farm.  You are best to get the fish in to the end biomass you expect then add on more NFT tables as the nutrient increases.  This will still require constant input of your own cash, so plan for that.

Your expectation of a hobby farm providing you with adequate income is a very important part of the decision making process.  Keeping in mind, this is a risky and hard business to be in and it is 24/7/365.  It is very difficult to summarise all of the details in a single page, so the prices and details are only an estimation or a guide.

While writing articles such as this one, may turn people away for getting into hobby farming with aquaponics, it is more important to my business success and the expansion of the industry (not to mention your success), those who are keen to get their hands wet, do so with their eyes open.

We will endeavour to write up more detailed information on the costs at a later day.  Keep an eye out for that.

Regards
Paul

 

About the author

Paul Van der Werf

Paul is the Operations Manager for a 4400m2 integrated aquaculture pilot project in the United Arab Emirates desert he designed and built. This is a commercial aquaponics pilot to evaluate integrated farming in arid climates.

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8 Comments on “Hobby Farming with Aquaponics

  1. Pingback: Aquaponics for Profit – The Real Cost | Earthan Group Pty Ltd

  2. Pingback: Aquaponics for Profit – Back to Reality | Earthan Group Pty Ltd

  3. Tim from Michigan USA

    I vote for the grow as you go method, and to mix methods through the year using outdoor planting in the summer and indoor planting in the winter, to reduce power consumption bills. Watering the garden from the fish waste and refilling from the well is akin to a flow through system in my opinion.

    Reply
  4. Keith

    Excellent Excellent Excellent and on less than a 1/2 acre of land. This can be done very close to or in a city.

    The ideas are endless

    Thanks Paul!

    Reply
  5. I have been very excited over the last year reading up on what I thought was my next project. I am very time poor and find traditional gardening methods are not only hit and miss to some respect but time consuming to say the least. I am married with 4 kids and live in the south east of Melbourne and was considerering getting into hydroponics not only to do as a new exciting thing to do but also to save some money on fish n veg. I also thought about it on a bigger scale later on in life but now after reading this and the previous post am questioning everything I thought I knew and believed.
    I know the truth hurts sometimes but geez Paul, I don’t even know if I should even attempt a small system or not. Some confidence about now wouldn’t go a stray

    Reply
    1. Hi Jamie,

      Got to have a bit of grounding when surrounded with so much hype. Managing a small system will be relatively easy but managing a fussy and very fickle, niche market will take a great deal of work. I will suggest you try and see what your local food outlets want and see if that gives you some encouragement. If you can drum up some enthusiasm from the local foodies (basically a feasibility study) you can then sit down and work the numbers up. If you are hard on your costs and write off along with low sale prices, you may have a go ahead decision.

      I would love to be encouraging, however I would prefer people try this with a very level head and if the numbers work in your area, go for it. If it does not, walk away. Yes aquaponics can grow some fantastic crops but it comes with a level of discipline in aquaculture, hydroponics and business that without support can be a difficult family business if you are starting with none of those skills.

      Let’s see if I can drum up some encouragement in my next post.

      Regards
      Paul

      Reply
  6. Yiannis

    …adding all the other costs assosiated ,would make this a total carnage!!I trully believe its a team project,with every teamate adding different value, because it has so many parameters and needs more than one who really cares about it..So one for the fish,one for the crop and one for the marketing should do the job..Now some people are lucky enough to have the money and good timing to hire the allinone guy Paul :P,i dont feel that lucky,so its either i somehow magically become Paul or the farm should be of a size that can make money for 3!!!So what i m basically saying is that in my opinion it would be wiser for people interested in such a project to communicate threw the aquaponic society and come together as partneers instead of competitors where and when this is possible,creating one bigger and better, instead of many flirting with bankruptcy farms…Thank you Paul for another easy to read , honest and realistic article..AAA+++

    Reply
  7. While some are not happy to hear this information, here is another post I did which is right from the mouth of the farmer. This is a hobby small scale hydroponic farm without the additional cost of the fish and capital of the fish.

    http://www.earthangroup.com.au/aquaponics-for-profit-back-to-reality/

    Even at that size he was working full time as well as getting up at 4am to run deliveries and working late into the evening seeding and working on the farm, 7 days a week. After 5 years making $60k he gave it up because it was just running him and his family into the ground. That is the reality of farming with any method, it is risky and very time consuming.

    For the used car salesmen promoting aquaponics as the be all and end all, easy farming and great income and returns from $50K the reality is much different and promoting is such a way shows their have either never farmed at a commercial scale, never built a successful commercial scale aquaponic, hydroponic or aquaculture farm in their life. In fact I would go so far to say they have never farmed commercially by any means. They want to sell you the dream and leave the holding the empty bag while they spend your money.

    There are plenty of these shysters about and some of them prominent simply because they take advantage of people not really knowing what it really takes to run a business like this. I would name one in particular, but I won’t give him any air time on my site.

    Reply

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