Seafood trends

blue claw crabThe most recent fisheries report from the National Oceanic and Atmospheric Association (NOAA) gives some interesting insights into seafood trends using the most recent data from 2015 and 2016.

Prices are up slightly. Overall U.S. landings volume of seafood decreased 1.5% from 2015 to 2016 while the value of seafood landed increased 2.1%.

Non-food use –  22% of U.S. landings are used for non-seafood purposes (pet food, fish meal. We presume a significant portion of this is our nearby neighbor Omega Protein that dominates menhaden harvest.

We are growing more valuable seafood – U.S. aquaculture production is only 6% of U.S. seafood volume production, but accounts for 21% of U.S. seafood value production.

Consumption – Per capita seafood consumption in the U.S. is 14.9 lbs., a decrease of 0.6 lbs from 2015. Even though per capita consumption is less than other countries, the U.S. is the 2nd largest consumer of seafood globally, behind China due to our size and affluence.

World production – Most, 85 to 95% of the seafood we eat in the U.S. is imported. However this statistic may be distorted. A significant amount of this seafood is caught in U.S. waters, exported to other countries for processing and then reimported.

Blue claw crab – Hard blue crab landings decreased both in volume and price compared to 2015.  The Middle Atlantic region increased almost 8% in 2016 compared to the prior year but the price decreased 8% over the prior year. (This is why the industry is suffering and why we got involved to te to help).  Total U.S. landings of blue claw crab were 157.5 million pounds valued at $213.8 million—a decrease of almost 1.2 million pounds (1 percent) and $21 million (nearly 9 percent) compared with 2015. Louisiana landed more than 24 percent of the total U.S. landings followed by: Maryland, 22 percent; Virginia, more than 17 percent; and North Carolina, 16 percent. Hard blue crab landings in the South Atlantic, with almost 34.7 million pounds, decreased 15 percent; and the Gulf region, with almost 49.5 million pounds, decreased almost 1 percent. The Middle Atlantic region, with over 73.3 million pounds valued at nearly $114.8 million, had an increase of almost 5.4 million pounds (nearly 8 percent) compared with 2015. The average dockside price per pound of hard blue crabs was $1.36 in 2016 compared with $1.48 in 2015.

Oysters –  Oysters have the highest volume for marine shellfish aquaculture production  (35.2 million pounds, up 5.7%).  Overall, oysters are our 9th most valuable type of seafood at $217 million.  The landing increased 21% in 2016 over the prior year presumably mostly due to the ongoing improvement of the oyster aquaculture industry. Yet relatively little of the industry’s production comes from the Delaware Bay region; we are not mentioned in the report.

New Jersey – Our state ranks second in landings of mackerel, scallops and clams and first in quahog. The state’s seafood processors and dealers employ about 1,600 people, not counting growers and harvesters.

Food security is one of many benefits of dock-to-table seafood operations

All of the crab in a New Jersey supermarket located less than 20 miles from some of the most productive crab harvesting ports in the region is imported from Indonesia. It’s generally considered an inferior food product and more susceptible to food security risks. We can do better!

Dock-to-table seafood ventures help solve a range of problems and a handful of risks for our community. This blog post focuses on only one: FOOD SECURITY.

What happens if any part of our food supply is significantly disrupted? We can only imagine the stress, panic and violence and possible starvation. Weather events, climate change, disease, sabotage as an act of war or terrorism, trade wars, political destabilization that leads to a loss of immigrant work force, loss of electric or fuel for transportation could all cause real hardship to our food supply chain.

Dock-to-table operations help by providing diversification, decentralization and localization to the food supply. Generally the dock-to-table seafood is a higher quality and less susceptible to the risks listed. In addition, the two seafood products that make up most of our local harvest – oysters and crabs – are deemed less susceptible to the risks and might even benefit from the long-term trends in climate change and rising tides.

Investors in dock-to-table seafood operation typically purchase a right to a share of the harvest or at least first refusal of that share in the event of a wholesale operation. Restaurant chains, for example, can control price and supply risk of seafood by contracting with a local dock-to-table cooperative in advance.

We will cover the many other benefits of dock-to-table seafood in other blog posts. Meanwhile, I am pleased to discuss the topic with anyone who may have interest as a career or as an investor.

How can I invest in Delaware Bay fisheries?

There are several ways to invest in aquaculture and fisheries. We used private investors in the past including a locally crowdfunded financing of a watermen under a split-catch arrangement. We are now exploring a wider range of options including recruiting additional private investment.

Potentially one of the easiest ways would be through a crowdfunded securities offering. The Securities and Exchange Commission sets limits on how and how much an investor can invest in crowdfunded offerings. Nantuxent Seafood is not involved in a crowdfunded securities offering but may consider this option in the future.

This blog post is written as part of the ongoing exploration of new sources of funding for growth. This is not an investment offering. The method of financial expansion eventually selected must consider the needs of our customers relative to their financial interest in our seafood. We must also consider the overall reinvestment plan for the marina and the working waterfront community.

The following table provides a few examples of investment limits set by SEC. You will notice that the limits are low for most working class people:

Annual Income

Net Worth

Calculation

12-month Limit

$30,000

$105,000

greater of $2,200 or 5% of $30,000 ($1,500)

$2,200

$150,000

$80,000

greater of $2,200 or 5% of $80,000 ($4,000)

$4,000

$150,000

$107,000

10% of $107,000 ($10,700)

$10,700

$200,000

$900,000

10% of $200,000 ($20,000)

$20,000

$1.2 million

$2 million

10% of $1.2 million ($120,000), subject to cap

$107,000

For more information, see the SEC website.

Money Island NJ aquaculture redevelopment

The Money Island NJ stabilization and redevelopment plan evolves a little each day. The work will likely take place in three stages:

Stage 1 is stabilization. The goal is to get the land cleared of prior debts and provide basic cash to ‘keep the lights on’ and be ready to move forward. The total needed is $20,000. This will be funded by insiders in conjunction with a crowdfunding project. The purpose of using crowdfunding Is to raise awareness and build a customer base in advance of new product offering.

Stage 2 is aquaculture development. The goal is to revitalize the local economy cash flow to ensure sustainability. The cost is approximately $120,000 to repurpose the submerged land. This will be funded through Nantuxent Corporation that will use both traditional and equity crowdfunding methods. Aquaculture and dock-to-table seafood processing businesses are ready to expand as soon as permits are issued.

Stage 3 is multi-use redevelopment with new eco-tourism based housing, transient docking, retail and restaurant. This will cost millions and require an outside investor working in conjunction with the developer. We hope to reach an agreement on an educational/research building here as an anchor facility.

 

Monopolization of agriculture and seafood

Today The Wall Street Journal ran an article talking about the effects of consolidation on the U.S. agricultural industry. Today 75% of all farmland is controlled by the 12% largest farming corporations. The results are clear. Many of us were impacted by Michael Moore’s “Food Inc.”. Small farms can avoid those negative results but the ability of a small farm to reach minimum critical income (the article mentions $50,000 per year) to survive has become more and more difficult.

The same trend affects the seafood industry. Almost everyone recognizes that the monopolization of the harvesting and distribution system is not healthy for the overall economy. Yet it is very difficult for a small operator to reach a minimum level of profitability. In addition, existing firms do all they can to prevent competition from small competitors.

I’ve cited this issue before. Older larger firms do not welcome new startups like those we host. There are plenty of examples of this business tactic in history from fishing and seafood businesses around the country. our harvesters have been told that we’ll never be able to buy some licenses and that existing firms will take deliberate steps to prevent us from expanding, easing growing grounds, etc. One large operator even sent a message through two watermen that he intended to spend money to keep us out of the business. It’s a ridiculous strategy but one that is common in the industry nonetheless.

The untapped market demand for agriculture and fishery  products exceeds any additional production we can collectively add. It will certainly take effort to expand these markets and that is where we need o focus our attention and resources.

Farm-to-table and dock-to-table businesses will be successful if consumers vote their support with their dollars. Investors come aboard with necessary funding when they see the direction of consumer preferences. It’s really that simple. If consumers care where their food comes from, want a personal connection with the producers, demand accountability for safety and environmental responsibility, then small producers have a bright future. It comes down to an effort to spread the word and sell the story of sustainable local food from small producers.

Small farms and fisheries still have a long way to go to reach the average consumer’s attention. The United States Department of Agriculture is already heavily involved in helping to spread the message that diversity in food production is healthy for America’s future. We’ll continue to do our best to continue to spread the message.

Money Island Redevelopment Plan Announced

Today, on the five-year anniversary of superstorm Sandy, Baysave Corporation announces the release of the first public draft of the redevelopment plan for Money Island, New jersey. We wish to thank all those in government and private industry who played a role in bringing us to this point.

Money Island Redevelopment Plan – draft version 10/29/2017

Our plans continue to evolve. Updates will be made periodically. Meanwhile, please direct any questions to Tony Novak.

Climate change impact on Delaware Bay crabs and oysters

A new way to use climate change models developed by NOAA may be used to forecast effects on Delaware Bay fisheries according to a recent news report. The basic conclusion, as I understand it from a range of conversations with researchers and a reading of the available information, is that the changes forecast for our Delaware Bay will make the bay more challenging for oyster growers but potentially more favorable for blue claw crabs.

The Virginia Pilot reports “NOAA said its researchers might apply the same “downscaling” method to predict the potential effects of climate change on other species such as blue crabs and striped bass and other estuaries, including the Delaware Bay.” Other published seafood industry publications have predicted that these same forces of water temperature warming and acidification might actually benefit blue claw crabs.

My own opinion, not necessarily shared by researchers or the oyster industry*, is that resistant strains of oysters will be developed to combat the adverse effects of climate change (vibrio and acidification) but that seafood consumers will eventually insist on seafood (including oysters) that is sterilized through some procedure to kill any potential pathogens prior to consumption. That technology exists today but is not widely used. In the end, these development are more likely to have greater (positive) impact on funding for the scientific community by triggering the need for more research and development than on consumers or the seafood industry.

*Opinions expressed in this blog are my own and do not represent the opinions of any of the commercial or educational firms associated with Nantuxent Corporation.

 

Securities laws and compliance

As a venture capital business, Nantuxent Corporation must be careful to avoid violating federal and state securities laws. There are different ways to accomplish this, including some “safe harbors” available under the law. Federal and state issues must be considered separately. The first key factor is whether investors are solicited for the venture and secondly, whether the investors are considered “qualified investors”.

Federal issues

The first and most obvious method of compliance with SEC laws – and the compliance strategy current used by Nantuxent Corporation – is to not advertise or solicit any offering. That’s why you will find no published information about Nantuxent Corporation investment.

Another method of compliance is to rely on Rule 506 of Regulation D. This rule has two parts. The first part, known as 506(b) does not allow general solicitations or advertisement and is not discussed further here since it offers no advantage over our current strategy. The second part is 506(c) which is being considered by Nantuxent Corporation but is not relied upon yet at the time of this blog post publication. The following comes from the SEC web site.

Under Rule 506(c), a company can broadly solicit and generally advertise the offering, but still be deemed to be undertaking a private offering within Section 4(a)(2) if:

  • The investors in the offering are all accredited investors; and
  • The company has taken reasonable steps to verify that its investors are accredited investors, which could include reviewing documentation, such as W-2s, tax returns, bank and brokerage statements, credit reports and the like.

Purchasers of securities offered pursuant to Rule 506 receive “restricted” securities, meaning that the securities cannot be sold for at least a year without registering them.

Companies relying on the Rule 506 exemption do not have to register their offering of securities with the SEC, but they must file what is known as a “Form D” electronically with the SEC after they first sell their securities. Form D is a brief notice that includes the names and addresses of the company’s promoters, executive officers and directors, and some details about the offering, but contains little other information about the company.  If you are thinking about investing in a Regulation D offering, you should obtain a copy of the company’s Form D available from the EDGAR database.

State issues

Each state has its own securities laws. A business that does not operate, advertise or solicit within a state is not regulated by that state.

New Jersey laws are discussed here.

Announcement of first community-supported seafood project

Today we launched the Philadelphia area’s first (as far as we know) attempt at a community supported dock-to-table seafood venture. The intent is to test the water on this concept that has worked well in other regional markets. If this initial small project is successful in gaining 150 supporters then I’m sure we will see a lot more diverse community supported seafood projects to follow. We have early stage plans to expand it to hand tonged oysters and small-scale fishing. The ability to provide business security for the harvester and processor as well as the ability to deliver a quality product to local consumers at a good price make this a winning formula for the future of a sustainable and secure food system.

It’s taken more than a year to plan this project, recruit the harvesters and processors, assemble the necessary equipment, obtain the required FDA seafood safety certification. We are still working with the local health department to identify and address the appropriate issues.

Kickstarter seems to be the perfect platform for this although I recognize that I need serious help in the multimedia area! The project, just like the crab in this photo, is starting quite small.