Economics of Aquaculture United States

Economics of Aquaculture United States

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Economics of Aquaculture United States

Aquaculture is the fastest growing "agricultural" industry in the United States. In 1990, there were over 100 species cultured; eight species accounted for approximately 70% of total culture, with over 3400 aquaculture operations in the United States. This trend is driven by increased demand for fisheries product and reduced yield from traditional fisheries landings (National Research Council, 1982). Given the increased demand, there is a significant potential for job creation in an expanded aquacultural industry.

The estimated U.S. Total Aquaculture Production (including freshwater) has more than doubled from 139,887 metric tons with a total value of over $260 million in 1983 to an estimated 313,518 metric tons with a total value of over $724 million in 1992. (NMFS Statistics Division) The aquaculture industry supports an infrastructure of hatcheries, feed mills, processing plants, equipment manufacturers, and suppliers of specialty services and products, as well as enhancing the natural fishery with juvenile finfish and shellfish seed and spat.

U.S. annual per capita consumption of fish and shellfish has increased since estimates were first made in 1909. At that time the per capita estimate was 11 lbs., in the 1950 and 60's it was well below 5 lbs., and in 1993 it was 15 lbs. (U.S. Department of Commerce, 1993). Most remarkable was the sharp rise in consumption from 1970 (about 4 lbs.) to 1990 (about 5 lbs.) The domestic seafood industry has identified a goal of increasing domestic seafood consumption to 20 lbs/per capita by the year 2000 although this appears unlikely.

It is estimated that 10% - 14% of the fishery products currently consumed in the United States are aquaculturally derived. Changing consumer preferences combined with the reduction in the wild fishery appear to be the dominant factor in the growth of aquaculture. (FDA, 1990)

Most of the United States' demand for seafood is met by imports. The value of imported fisheries products more than doubled during the 1980's, to $9.6 billion in 1989. This resulted in a significant trade deficit - $4.9 billion for all fisheries products and $3.1 billion for edible fish and shellfish in 1989. Imported fisheries products contribute more to the United States' trade imbalance than any other food or agricultural commodity. After petroleum products, imported seafood contributes more to the United States trade deficit than any other natural resources product.

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(Joint Subcommittee on Aquaculture, 1992)

Despite the trade imbalance, some aquacultured fish products are exported. There has been significant growth in U.S. exports of ornamental fish with exports of $17 million in 1993 and over $10 million in the first half of 1994. (US Department of Agriculture, 1994)

Northeast Region

The Northeast Region, as covered by the Northeastern Regional Aquaculture Center (NRAC), includes the states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland, and West Virginia. NRAC estimates the total 1992 farm gate value of aquacultured products in the northeastern United States to be $146,409,000. Cultured shellfish comprises approximately 53 percent of the 1992 regional farm gate value, with oyster production being the single largest segment of the regional industry accounting for roughly 42 percent of the total. Net pen culture of Atlantic salmon and steelhead trout was the second largest category contributing 29 percent to the regional value. (Northeastern Regional Aquaculture Center, 1993)

The state of Connecticut is the largest aquaculture producing state in the region with estimated farm gate sales of $61.7 million, primarily from oyster sales. Maine is the second largest aquaculture producing state in the region with farm gate sales of $42.9 million, largely from pen-reared salmonid. Pennsylvania is the third largest aquaculture producing state, with farm gate sales totaling $11,926,000, dominated by trout culture. New York is the forth largest aquaculture producer, with $9,637,000 in sales, primarily from the Long Island oyster farms. (NRAC, 1993)

Massachusetts follows as the fifth largest aquaculture producer with $8,020,000 in sales. The dominant species in Massachusetts, in order of economic value are: Northern Quahog, oyster, trout, hybrid striped bass, scallops, baitfish/other fish and tilapia. (NRAC, 1993) Trout, striped bass, baitfish/other fish and tilapia are all grown in inland facilities in Massachusetts.

When comparing the aquaculture industries from state to state, it should be kept in mind that the potential for aquaculture to succeed is dependent on several considerations. While some of these considerations are flexible and can be made more accommodating for aquaculture (laws, regulations, policy, business climate, private and public initiatives) others, (tidal range, exposure, biological parameters, flushing rates, temperature, native species) cannot be easily overcome.

Economic success of aquaculture requires maintenance of a high price in the market to offset basic investments and rearing costs per organism and to assure a good profit margin. Price per organism however, is insufficient to insure economic viability. Maintenance of consistently high sales volume is also required.

Massachusetts

The reported (landing) value of aquacultured shellfish in Massachusetts is difficult to calculate. The Division of Marine Fisheries and municipalities collects annual landing data from aquaculture producers as a part of their reporting requirements under Section 35 of Massachusetts General Law Chapter 130. Precise reporting to DMF is not required of aquaculturists and thus the information received and summarized by DMF reflects only the producers who self-reported. As has been mentioned previously in this report, aquaculturists have also historically underreported their landings for various reasons. Due to both the chronic under-reporting that exists within the industry and the lack of any sophisticated, consistent calculation of true value, shellfish aquaculture is both undervalued and overlooked in Massachusetts.

If the real values were consistently reported, the significance of this industry to Massachusetts would become apparent. Although the shellfish aquaculture industry in Massachusetts is not large when compared to other industries in the state, it is important to consider that the industry is located in small Cape Cod towns which have few other year-round industries. To the municipalities where shellfish culture is practiced, this industry is increasingly desirable for economic development.

Total Estimated Values for Cultured Shellfish; 1986 - 1993
The following estimated values are derived from DMF landing data. For the year 1992 estimated values from the Northeast Region Aquaculture Industry Situation and Outlook Report are also provided for the sake of comparison. NRAC compiled its data via individual grower surveys and is likely to be more realistic, but still not precise. The NRAC figure includes production of inland cultured striped bass, trout, baitfish and tilapia. Comparison of the two estimated values of aquacultured products for 1992 reveals the significant problem Massachusetts has with accurate reporting of aquacultural production.

1986 = $ 2,114,026
1987 = $ 318,584
1988 = $ 620,058
1989 = $ 1,933,145
1990 = $ 906,815
1991 = $ 1,884,017
1992 = (DMF)$ 863,418 (NRAC) $ 4,000,000 (approx. value of quahogs & oysters)
$ 8,020,000 (all aquacultured products)
1993 = $ 1,753,192

An additional 4.5 market multiplier is utilized by NMFS to conservatively account for the additional value of spin-off jobs, support industries and employment-related benefits.

Funding Sources

The common constraint shared by almost all aquaculturists is the lack of dependable funding sources, both for start-up and for operational costs. Most federal funding sources are geared toward traditional agriculture and the programs that include aquaculture generally limit it to finfish and inland endeavors. Most private lending institutions in Massachusetts either do not recognize aquaculture as a commercial venture or recognize the high risk of "crop failure" inherent to aquaculture. This financing vacuum forces most aquaculturists to apply for personal loans to get the venture and operating capital they need.

One of the essential keys to success in any industry is its access to reliable sources of funding. Traditional agriculture has relied upon three sources to provide many of its capital needs: the farm credit system, the Farmers Home Administration, and private lenders. Aquaculturists, particularly shellfish culturists, need the same access and the same opportunities.

Distribution/Marketing

Shrewd marketing is important to the livelihood of any industry, particularly aquaculture. Concurrently, an effective marketing campaign can expand the distribution of aquaculture products outside of the local area. At present, however, local growers are providing product to a limited market which has forced down the unit price. Through aggressive marketing efforts, the market for local aquaculture products could be expanded to other regions of the country, which would increase product output forcing up the unit price. Unfortunately, the industry is not currently capable of funding such a marketing initiative.

Similarly, financial obstacles to aquaculture projects including start-up costs and marketing initiatives, as well as those inherent to the complicated permitting process, exclude all willing participants from entering the aquaculture industry other than large corporations. In order to open the industry up to small scale operations and provide any chance of an alternative to traditional fishing, governments might need to create a framework whereby small scale projects could obtain permits more easily. Additionally, states would need to provide assistance in the form of funding start-up costs and marketing initiatives if such projects are to have a chance of maintaining viability.

Bibliography:

Modern Economics Pp 23 - 39

Micro Economics in the USA Pp 349 - 364, & 398 - 401
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