Pickell, who is in his first year of full-time farming, has helped his father, James, for the past several years. The elder Pickell, James, began farming catfish in 1979 and has 169 acres of ponds – 13 food-fish ponds and two fry ponds. Now he is ready to transition the family operation to his son.
It won’t be easy. Just breaking into the catfish farming business has been a learning experience for the younger Pickell. "There's a lot of work involved, including a lot of paperwork.”
In order to finance the young farmer, Pickell’s banker steered him toward a 90-percent government guaranteed production loan. "It's tough for a young farmer to get financing. You have to jump through a lot of hoops. It took me about three months, from January through March, to go through the process of obtaining an FSA-guaranteed loan," he says.
A three-year government guaranteed production loan through the Farm Service Agency is an annual line of production credit that's renewable each year for three years.
The government guarantees most of the loan, which is written through a lending institution. For example, if a producer declares bankruptcy and is unable to repay his production debt, the government will reimburse the bank 90 percent of the loan. The other 10 percent is written off, or absorbed, by the bank or lending institution.
One community bank president explains it this way, "We often help new producers obtain a 90-percent government-guaranteed production loan if they have some knowledge of the industry but do not have the necessary collateral or capital assets needed to secure a loan under our lending requirements,” he says.
“Then, if everything goes well in those first few years, that producer's business often is successful enough, and has built up enough assets for us to provide them with a line of production credit from our funds."
Pickell plans on expanding his acreage when prices improve. "Prices have to go up if the industry is going to make it. With so many people going out of business, things have to improve. The U.S. catfish industry surely has nowhere to go but up."
Two keys to succeeding in catfish production, says Pickell, are keeping bills to a minimum and not spending money unnecessarily. He’s planning to do both to increase his odds for survival in today’s economic climate.
Unfortunately, Pickell's hope for an improvement in the U.S. catfish market may not come anytime soon, according to economists. Most observers, like Auburn University's Jerry Crews, predict that the 2002-2003 season could be even worse than the previous year for U.S. catfish farmers.
"Efficient producers with reasonable equity may ride the storm. Others will be tested or will go out of business," says Crews.
With forecasters predicting a continuing flat domestic economy and increasing imports, the demand for U.S. catfish from the restaurant and food service sector doesn't appear rosy. Such a scenario translates into decreased "away from home" eating, which provides strong support for catfish/seafood sales. This is critical to the catfish industry because this sector accounts for more than two-thirds of all seafood sales.
One key factor – other than selling price – which directly affects profitability in catfish production, is feed costs, says Crews. "More than 50 percent of cash costs are tied up in feed. Based on 2002-2003 corn and soybean forecasts, feed costs could go up substantially."
Feed prices have been moderate since 1998, encouraging many producers to increase feeding intensity. As lower selling prices, higher feed costs and marketable weights continue to inch up, many producers will re-think their feeding strategies.
Cost of production will be different for each producer, says Crews. "No two situations will be the same. From the road, two operations could appear to be identical. However, one could be highly leveraged while the other could be virtually free of debt.
"This single factor could change a producer's approach to risk management, especially with low prices. One producer might be able to afford to take more risk in terms of stocking density, feeding and aeration, while another producer might need to act more conservatively. Management definitely is a moving target," says the economist.
Some producers, says Crews, are evaluating their management schemes. "It's very difficult to make any transition due to multiple-batching production systems. To be more efficient, producers are looking into 'modular' components and genetically improved stocks." e-mail: [email protected]