Seaweed Cultivation as an Alternative to Traditional Fertilizers. Charlie Gainey, ESG Intern, Bates College.
Early last year, Creative Investment Research (CIR) posted several articles on the opportunities and outlook of the seaweed farming industry. Specifically, CIR found the global seaweed farming industry reached $11.5 billion in production value in 2020. Furthermore, researchers predict a compound annual growth rate (CAGR) of 12% until 2026. While the global fertilizer market is valued much higher ($201.1 billion in 2021) it is projected to grow at a CAGR of only 3.4% between 2022 and 2030.1
Despite its rapid recent growth, the global seaweed farming market has been around for decades. While seaweed and kelp cultivation contributed evenly to total production in 1960, by 2019 cultivation had increased 1,000 times and was 97% of total production.
There are a few key reasons for the incredible growth we’ve seen in seaweed farming. First, the war in Ukraine has provided a unique divestment opportunity. Russia is the world’s largest producer of fertilizer, contributing 23% of the world’s ammonia exports, 14% of urea exports, 10% of processed phosphate exports, and 21% of potash exports.2 The atrocities taking place in Ukraine have forced many to look at what they’re importing from Russia and make changes in the supply chain. Indeed, recent data shows a clear move away from Russian fertilizer: U.S. imports decreased from 169,205 metric tons in May 2022 to 3,237 metric tons in October 2022. The EU went from a low of 107,400 metric tons (having been hit with some of the strictest trade sanctions), to an increase of 321,000 metric tons in September. It should be noted that, while the most recent data shows an increase, EU imports are down from an average 500,000 metric tons per month before the war.
Some of these changes are almost certainly involuntary; Russia has been enforcing trade restrictions for over a year, including on fertilizer. Regardless of the reasons, however, a decrease in Russian-exported fertilizer can be a catalyst to greener alternatives like seaweed.
Another reason for the rise in seaweed cultivation is ease of entry into the market. A prior report from CIR showed a small seaweed farm can be started with just $20,000, a single boat, and 20 acres of water. While not insignificant, the capital needed to start a seaweed farm pales in comparison to that required for a traditional farm, which can cost upwards of $5 million.3 Even if we account for the difference in acreage (1,500 acres for a traditional farm versus 20 for seaweed), the costs for a traditional farm are still more than three times that of seaweed.
Finally, skyrocketing interest in Environmental, Social, and Governance (ESG) investing has led investors to look at seaweed as a viable alternative to traditional fertilizer. Studies have shown that a single square kilometer of seaweed sequesters more than one thousand metric tons of carbon dioxide. This is compared to traditional fertilizers, which not only contribute 1.4% of global carbon emissions annually, but also produce major non-carbon greenhouse gas (GHG) emissions.4
4 https://www.carbonbrief.org/qa-what-does-the-worlds-reliance-on-fertilisers-mean-for-climate-change/