Week 4: How to Start a Kelp Farm: Guided Course & Community
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Join this discussion if you are part of the How to Start a Kelp Farm Guided Course and Community. (To learn with us, register here.)
After reviewing the Ocean Farm Basic Financial Model, we’d love to know how your business planning is going:- What do you anticipate being your largest startup costs?
- When is your projected break even point?
Feel free to share any other thoughts about this week’s course. (See the full course program.)
Be in touch!
-Lindsay
@lindsay_olsen
I am sorry that I could not make today's live chat but I just watch the rerun and I might have a suggestion for your start-up and some yearly investment costs. As was said, everyone so far has used their own money for seed money.
The US commodities market is still located in Chicago but there is no more screaming from the pit, everythint is done electronicly. The good part about that is that a co-op no longer has to hire traders to sell their commodities, even small companies can set that up. The commodities market (sugar kelp) is like the futures market and was designed to help farmers bear the cost of production. Let's say you expect to harvest 100K lbs. of kelp with an expected value at $1.00/lb average for a total of $100,000 in sales. A futures/commodities company will buy some of your future crop for a discount price of 75%. This means that if they hold it to harvest, you will sell some given amount at $0.75. The idea is that you need a loan against your future harvest but instead of interest, you offer a discount. How much do you need to live until harvest and cover your sowing costs.
Lets say your co-op needs $40,000 which at $0.75 would be 55K lb of kelp. The rest of your harvest, would sell for the expected price plus or minus. Sticking with expectations, 45K lbs of kelp at $1.00 would sell for $45,000 and that is your profit for the year. The $41,250 from the commodities sell covers your expenses with a few bucks to spare. Land farmers have done this forever. Just get someone to find a reasonable commodities broker and get them to establish a market for algae.
Of course I can't say for sure that this will work as the brokers have their own criteria such as the amount of product. They deal in tons, not thousands of pounds of a crop. Your co-op might need to get a little larger first, I wouldn't know about that, you would have to do some research into the commodities companies. I hope this helps some, but good luck all the same.