Economics of fish farming in Saudi Arabia: Analysis of costs of tilapia production

Abstract

Because Saudi Arabia is a substantial importer of fish and its capture fishery is operating beyond maximum sustainable limits, it has a special interest in developing fish farming. It has been encouraging tilapia production. This study examines the costs of tilapia farming in the Central Region of Saudi Arabia using cross sectional data from 23 intensive fish farms. It provides information about the relative importance of different cost items such as variable costs and feed costs in total costs. Also, cost functions are estimated by ordinary least squares and a cubic cost function is found to provide the best fit to the available data. Minimum average cost of production occurs for 201 tonnes of tilapia per year per farm and profit is maximised for a production of 300 tonnes annually per farm. All farms operate at less than profit‐maximising scale and most operate at less than minimum efficient scale. The reasons could be low quality fry, low levels of management expertise in culturing tilapia and the secondary nature of tilapia farming. Lack of water is likely to limit future expansion of tilapia farming in Saudi Arabia.