Fish Farm Feasibility Study

Topics: Variable cost, Costs, Balance sheet Pages: 20 (6228 words) Published: May 20, 2011
Preparatory Investigation: The Water Resource, Land and and Buildings, Market and Prices

The Entrepeneurs

A young couple in Iceland, Johann and Rosa, have taken over Johann's parents' farm. Traditional husbandry of cattle and sheep for production of meat and dairy products has gone through a rough time so they have been looking for new opportunities in their farming. Johann believes that arctic charr might suit them well. Before making up their mind they inspect their water resources, the features of their land and other factors that might support or rule against their hopes. They also study the basics of fish farming, collect information on what facilities are required, prices of material and equipment they would have to buy and, of course, look into the market situation. At the end of the year they have - aside their regular work on the farm - spent on preparatory inspection and calculations, they now know:

Natural resources

The stream running through their land has waterflow of 120 liters per second. The temperature of the water varies along with the seasons, from 4°C in winter up to 9°C in the summer, average temperature being around 7°C. The source of the stream is by the roots of a mountain in their land, at about 15 meters height above the possible location of the tanks and at 0.75 km distance. The declination is therefore 1:50 meters. The declination of the land is fairly even. In the land there is a small spring of geothermal water, as in many places in Iceland, but at this point they are considering a simple flow through of the stream water.


As they have decided that farming sheep doesn't pay anymore, they consider putting the tanks up under roof as well as facilities for bleeding fish in the quite big sheepcote. The house is a solid concrete building with corrugated iron roof with room, originally built to house 400 sheep. Feed and packaging could be stored there as well.

The Market

They have contacted a wholesale distributor of fish who is prepared to take on their product for sale both to the grocery chains on home market and abroad. The price the distributor is prepared to pay is 5.10 ECU's (FOB) - and they have verified as being the present market price -, has been stable for quite a while and for the time being nothing indicates it will fall in the nearest future. The distributor runs a factory for slaughtering and packaging some 20 km away from Johann's and Rosa's farm, the roads are cleared of snow all the winter because of the milk transport from all the farms to the dairy factory. Now the couple decides to proceed and prepare a business plan for making sure all relevant matters are accounted with.

The company and the business idea

Registered farmers in Iceland are not required to establish a separate company, when starting a fish farm producing up to 20 tons a year. Now Johann and Rosa have a larger produce in mind so they would need to apply for a commercial license for selling their product and have their fish farm registered. They agree with their accountant that a company with limited liability (Ltd) would be a suitable form. The future aquaculturist has to apply for an operating permit for farming fish in the area. A preliminary investigation into whether there are any reasons to fear that their application might be turned down for environmental reasons, is one of the first things our couple needs to do. In Iceland the Environmental and Food Agency of Iceland (Hollustuvernd ríkisins), Nature Conservation Agency (Náttúruvernd ríkisins), Directorate of Freshwater Fisheries (Veiğimálastjóri) and the Veterinary Officer of Fish Diseases (Dıralæknir fisksjúkdóma)) do respectively estimate the effects on the environment, primarily possible contamination of natural water resources and the danger of contaminating natural fish stocks. They will report to the Ministry of Agriculture with their recommendation for or against permission. The official requirements are...
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