Risk in aquaculture: farmers’ perceptions and management strategies in Bangladesh

Abstract

This study examines Bangladesh fish farmers’ perception for risk sources, risk management strategies, and the relationship with socio-demographic variables. Data were collected from a sample of 350 farmers in Bangladesh. Exploratory factor analysis of a set of perception measurement items was used to assess farmers’ attitudes towards risk and their risk management strategies. The results reveal that fish-diseases, fish price variability, low quality of feed and fingerlings, flood and credit constraints were perceived as the most important sources of risk. For risk management, supply of good quality feed and fingerlings, diseases prevention, crop insurance, increasing personal savings, and assurance of bank loans were considered as the most important strategies to mitigate risks. Empirical evidence shows that farmers engage in multiple management strategies to reduce production risk.     

ARKANSAS CATFISH FARMERS AND MARKETING CONTRACTS: SOME INSIGHTS INTO MOTIVATIONS

Interest in sales contracts in the catfish industry increased in the late 1990s and early 2000s as a result of increased import pressures and lower product prices. The study uses survey data fitted to a probit model to examine the motivations for contracting sales, and whether farm size is an important determinant of sales contracts usage. The article concludes that Arkansas catfish farmers with large acreages and therefore large volumes of production have a high probability of utilizing contracts to handle their sales but not necessarily with privately-owned independent processors. The farmers are not motivated to engage in sales contracts by reduction in income or price risks. They are motivated by production and management issues, which appear consistent with reductions in transactions costs relating to asset specificity and quality measurement as the reason for contracting.     

THE IMPACT OF PRICE AND YIELD RISK ON THE BIOECONOMICS OF RESERVOIR AQUACULTURE IN NORTHERN VIETNAM

A bioeconomic model of reservoir aquaculture in northern Vietnam is used to investigate the impacts of fish price and yield variability on the level and riskiness of expected net revenue. Net revenue is volatile compared with similar enterprises in other countries, mainly due to high yield variability. This reflects the nascent nature of the industry in Vietnam and the potential for efficiency and productivity improvements. Increasing production intensiveness, as well as reservoir size, was found to increase profits and decrease revenue risk. Among the management parameters studied, expected net revenue was found to be most sensitive to the length of the production cycle and to the harvest rate, while revenue risk was most sensitive to cycle length. Reservoir size was found to affect net revenue less than anticipated. Although common carp monoculture was found to maximize expected profit, the current species mix minimizes risk, thereby suggesting high risk aversion by northern Vietnam's poor farmers.     

Demonstrating the Use of Risk Programming for Aquacultural Farm Management:

A risk programming method that evaluates production plans based on expected income and risk was demonstrated using representative data from Panama. Results illustrate the usefulness of the program in presenting production choices to decision makers and evaluating those choices under changing conditions.
Less experienced or less financially secure farmers may select farm plans that differ quite importantly from those chosen by more experienced or more financially secure farmers. If farm survival is in doubt, more conservative farm plans will generally be adopted. Without consideration of the potential losses, it will often appear that all farmers should pursue the most intensive farm plan within their farming capabilities. However, many farmers will employ less intensive management strategies if the potential for losses associated with more intensive strategies is perceived to be excessive.
The model indicated that management strategies were sensitive to changes in shrimp price and feed cost, but less sensitive to the costs of post larvae or energy. Also, shrimp farm managers should give serious consideration to not producing in the dry season due to relatively high risk and low expected returns. Farmers should be most concerned with quality and availability of post larvae, not price. If hatcheries can address these concerns, the higher price of hatchery post larvae will be justified.     

The Effect of Hybrid Catfish Fingerling Prices on the Relative Profitability of Hybrid Channel Catfish

Previous studies have indicated that the price premium charged for hybrid catfish fingerlings may be a significant factor in the adoption and profitability of hybrid catfish production. An enterprise budgeting simulation analysis was developed to compare costs, risk, and effect of hybrid fingerling costs. Feed, fingerling, and total costs ($/ha and $/kg) were highest for hybrid catfish production, intermediate for NWAC‐103, and lowest for normal channel catfish production. Net returns were highest for hybrid catfish production, but breakeven prices were also highest. Risk analysis showed that downside risk (risk of losing money) was higher for hybrid production for all farm sizes. Risk‐averse farmers would not select hybrid catfish at the mean fingerling values used in the analysis. However, at hybrid fingerling prices less than $0.0081/cm, hybrid catfish production was superior in profitability and breakeven cost of production. Thus, for hybrid catfish production to be preferred economically to normal channel catfish, the price premium for hybrid catfish fingerlings can be no more than 84% ($0.0037/cm) above that of normal channel catfish fingerlings and 57% ($0.0025/cm) above that of NWAC‐103 fingerling prices.     

Assessing price integration and trade policy in the U.S. catfish market

In 2003, the United States adopted anti-dumping tariffs for Vietnamese catfish products entering the country. This study examines how these tariffs have impacted the price relationship between domestically produced and imported catfish products. Cointegration tests confirm a long-run price relationship between domestic and imported catfish, which has persisted despite the anti-dumping tariffs. However, imports are composed of catfish from Vietnam and other countries, with only the former subjected to tariffs. Results from vector error correction models suggest that Vietnamese catfish prices do not significantly influence domestic prices. Conversely, the price of catfish from countries other than Vietnam continues to impact prices received by domestic catfish farmers and processors. The domestic catfish industry is still affected by lower-priced imports from countries other than Vietnam, although some of these may be transshipments that truly originate in Vietnam. This research methodology could be adapted to investigate trade and price interactions among other aquacultured species, which will become increasingly important as global aquaculture expands.     

Economics of Intensively Aerated Catfish Ponds

The US catfish industry is evolving by adopting production‐intensifying practices that enhance productivity. Catfish producers have increased aeration rates over time, and some now use intensive rates of aeration (>9.33 kW/ha). Costs and production performance were monitored at commercial catfish farms using high levels of aeration (11.2–18.7 kW/ha) in Alabama, Arkansas, and Mississippi. A multivariate‐cluster analysis was used to identify four different management clusters of intensively aerated commercial catfish farms based on stocking density, size of fingerlings at stocking, and feed conversion ratios (FCR). Breakeven prices of hybrid catfish raised in intensively aerated pond systems were estimated to range from $1.86/kg to $2.17/kg, with the lowest costs associated with the second greatest level of production intensity. The two medium‐intensity clusters generated sufficiently high revenues for long‐term profitability. However, the least‐intensive and the most‐intensive clusters were economically feasible only when catfish and feed prices were closer to less probable market prices. Feed price, FCR, and yield contributed the most to downside risk. Intensive aeration in catfish ponds, up to the levels analyzed in this study, appears to be economically feasible under the medium‐intensity management strategies identified in this analysis.     

The evolution of farm management,production efficiencies,and current challenges to catfish production in the United States

Abstract

The catfish industry is the most successful aquaculture business in the US. The development and growth of the catfish industry has resulted in complex fish farm businesses that require intensive management. Technological innovations have resulted in increased yields (land use efficiency). However, in more recent years, productivity gains have not kept pace with the rate of increase in input costs. Increasing intensification of catfish production over time has been accompanied by increased use of debt capital that results in higher levels of financial risk. While still a profitable activity, real profit margins have declined as financial risk has increased. New technologies will likely continue to increase productivity over time. Market‐oriented agribusiness approaches to catfish marketing are likely to become the norm. The challenge for the catfish industry is to coordinate adoption of new higher‐cost technologies with demand increasing market development to sustain farm price levels.     

Comparative Economics of US Catfish Production Strategies: Evidence from a Cross‐sectional Survey

Understanding the effects of specific management strategies on yields and economic outcomes on commercial catfish farms could provide useful guidance to catfish farmers on the most profitable sets of production practices. Data from the U.S. Department of Agriculture–National Animal Health Monitoring System (USDA–NAHMS) 2009 survey of production practices on catfish farms in Alabama, Arkansas, Louisiana, and Mississippi were used to identify five clusters of catfish farms that use various stocking densities, channel versus hybrid catfish, different aeration levels, and utilize automated oxygen sensors. The lowest production costs ($1.96/kg) were found in cluster 1 and were followed in order of increasing costs per kilogram of clusters 2 and 4 ($2.16/kg) and cluster 5 ($2.73/kg); the highest cost corresponded to cluster 3 ($2.84/kg). The lowest risk levels corresponded to the clusters with the lowest production costs per kilogram of fish and the highest risk levels to the highest production costs. This analysis demonstrated that different types of management models can achieve similar levels of production costs ($/kg), and it appears that there is not one single economically optimum way to raise catfish. The key to least‐cost production is to balance the use of inputs, their associated costs, and the yield produced to achieve economic efficiency within the farm's overall business and management model.     

Analysis of Catfish Pricing and Market Dynamics: The Role of Imported Catfish

The producer price of catfish is becoming relatively unstable compared to the trend in previous years, necessitating the need for a complete analysis of catfish pricing and market dynamics. An understanding of the price determination mechanisms in the catfish market and the relationships between producer price, domestic processed price, and import price are important because price variability can result in significant financial losses to the domestic catfish industry. This study used a cointegration procedure to examine the long-run relationships between domestic prices of catfish and imported price. Results from unit root and cointegration tests suggest that there is a long-run equilibrium relationship between pairs of these prices. Results from Granger causality tests and error-correction model estimations suggest that the market for domestic frozen fillets plays a significant role in the price determination of imported catfish. A similar relationship is found between producer price and frozen fillet price. Some significant measures that were estimated include a frozen fillet-producer long-run price transmission elasticity of 0.162, a frozen fillet-imported fillet long-run price transmission elasticity of 3.56, and a producer-frozen fillet short-run price transmission elasticity of 0.322. High levels of fillet prices appear to have influenced the level of catfish imports. As long as distributors and restauranteurs do not see a basis for paying a premium for U.S. catfish products, they will continue to purchase the lower-priced imported catfish and consequently imports will continue to increase.     

Risk management for fisheries

Risk management methods provide means to address increasing complexity for successful fisheries management by systematically identifying and coping with risk. The objective of this study is to summarize risk management practices in use in fisheries and to present strategies that are not currently used but may be applicable. Available tools originate from a variety of disciplines and are as diverse as the risks they address, including algorithms to aid in making decisions with multiple stakeholders, reserves to buffer against economic or biological surprises, and insurance instruments to help fishermen cope with economic variability. Techniques are organized in a two‐stage framework. In the first stage, risks are identified and analysed. Strategies presented in this category focus on decision analysis, including multicriteria decision‐making tools, and the related concept of risk assessment. Then in the treatment stage, identified risks can be transferred, avoided, or retained using tools such as the Precautionary Approach, portfolio management, financial contracts to manage price risk and horizontal integration. Published fishery applications are reviewed, and some empirical examples of risks and risk management using US fisheries data are presented.     

ECONOMIC RISK ASSESSMENT OF A SEMI-INTENSIVE SHRIMP FARM IN SINALOA,MEXICO

In Mexico shrimp farming is the most important aquaculture activity. However, its sustainable development has been threatened in recent years by the economic risk associated with low yields caused by outbreaks of viral diseases. A stochastic bioeconomic model was developed to analyze the economics of farm management adjustments as a response to disease risks, using pond-level data from a farm operating in the State of Sinaloa, Mexico, during the period 2001–2005. The data base analyzed included different combinations of stocking density (in the range 6–30 PL/m²) and culture time (from 12 to 31 weeks), which allows for wider application of the simulation results, even at the industry level. Results from this study indicate that operating costs would increase by 33% if the farmer would choose to market product directly. Scenarios with lower stocking densities and intermediate culture times generated the highest probabilities 6–9 PL/m² 16–19 weeks (76%/100%/70%), and 10–14 PL/m² 20–24 weeks (72%/99%) of achieving superior economic performance, as demonstrated by achieving the target reference point of 35% operating profit margin ratio. The study reinforces the value of the current trends in Sinaloa to reduce stocking density as a good management practice to decrease the impact of diseases. This study also provides important additional knowledge on the specific economic results and risks associated with the combination of these two management variables at different levels.     

Price integration in the farmed and wild fish markets in Uganda

This paper looks at price integration in the aquaculture and wild-harvested African catfish market channels in Uganda. The issue of integration between the two market channels is important because African catfish has become an important traded species in Uganda with exports to regional markets rising even faster than production, yet limited research has been undertaken to understand price formation in the supply chain. The analysis draws on monthly price data from January 2006 to August 2013, and applies threshold autoregressive approaches to test for the existence of a long-run relationship and price asymmetry and to determine the time path needed for shocks to be transmitted from one market channel to the other. The results show that, over the studied period prices in both market channels are linked in the long-run, implying that farm-raised catfish forms part of the same market as wild-harvested catfish in the country. The findings have strong implications for aquaculture producers and artisanal fishers as they can serve as a basis for more efficient farm management and marketing decisions.     

The Economic Impact of the Catfish,Ictalurus punctatus,Industry on Chicot County,Arkansas

Abstract

This study analyzed the contribution of the catfish industry to the economy of Chicot County, Arkansas, using an input-output model. The objective was to quantify the economic contribution of the industry in terms of creating new dollars, jobs, and income to the local community. Mail surveys and personal interviews were used to collect data from catfish farmers, processors and other businesses related to the catfish industry. For farmers, the information solicited included production and marketing costs, sales and employment. Out of approximately 85 questionnaires administered to catfish farms, 44 usable questionnaires were obtained for a response rate of 52%. Businesses directly related to the catfish industry provided information on employment and sales and included: processors, seiners and haulers, pond builders, tractor and equipment dealers, and feed bin manufacturers. Other businesses with indirect ties to the catfish industry included: input supply companies, banks, fertilizer and chemical companies, auto shops, electricians, and bookkeeping firms. The survey data were used to modify the IMPLAN database for Chicot County to reflect the 2001 level of catfish production, processing and services available to support the industry. This database was then used to estimate the economic impact of the industry to the county's economy. In 2001, the 85 catfish farmers in the county operated about 7,859 ha (19,500 acres). The farm-gate value of catfish production exceeded $63 million. Employment on catfish farms was approximately 510. In addition, 59 other businesses depended on the catfish industry. Results indicated that total employment created in Chicot County by businesses directly or indirectly involved with the catfish industry was 2,665 jobs. This represented 48% of all employment in Chicot County. Total tax revenue (federal, state, and local taxes) generated from both direct and indirect catfish businesses was $22 million. Combined, the total economic impact of the catfish industry in Chicot County, including direct, indirect and induced effects, was over $384 million. The output multiplier calculated for live catfish production was 6.05. Thus, each $1 of earnings by catfish farms generated $6.05 total economic activity in the Chicot County economy. If current economic difficulties should result in contractions in catfish acreage in Chicot County by 10%, unemployment rates would increase by 2%. This study demonstrates the importance of the catfish industry to the economy of Chicot County.     

Risk screening of non‐native freshwater fishes in Croatia and Slovenia using the Fish Invasiveness Screening Kit

The Fish Invasiveness Screening Kit (FISK) version 2 was used to assess the invasiveness potential of 40 introduced and translocated freshwater fish species to Croatia and Slovenia. Based on a priori classification of invasiveness, receiver operating characteristic analysis of FISK scores from two independent assessors resulted in a statistically significant calibration threshold of 11.75. This indicated that FISK was able to discriminate reliably between non‐native species likely to pose a high risk of being invasive and those likely to pose a medium or low risk of invasiveness. Seven species were categorised as ‘medium risk’ and the other 33 as ‘high risk’, whereas no species was categorised as ‘low risk’. The two highest scoring species were European catfish Silurus glanis and North African catfish Clarias gariepinus. Mean scores for all species classified a priori as invasive were ranked as ‘high risk’ sensu lato and fell into the ‘moderately high risk’ subcategory. FISK proved to be a valid tool for assessing the risks posed by non‐native fishes in Croatia and Slovenia. For this reason, it can be adopted as a reliable tool for the prevention of new translocations or introductions of potentially invasive species in the risk assessment area, as well as to assist in decisions regarding future management (i.e. monitoring, control and eradication) and conservation strategies.     

Off-flavors in pond-grown ictalurid catfish: Causes and management options

Ictalurid catfish grown in ponds often acquire undesirable off-flavors prior to harvest. Off-flavors develop when odorous, lipophilic substances in food or water are absorbed across gut or gill epithelium and concentrated in edible tissues. The most common causes of catfish off-flavors are two nontoxic secondary metabolites of planktonic cyanobacteria: geosmin (causing an earthy off-flavor) and 2-methylisoborneol (causing a musty off-flavor). Off-flavored fish are unacceptable for processing, and harvest must be postponed until the source of the odorous compound disappears and the compound purges from edible fish tissue. Harvest delays caused by episodes of off-flavor increase production time, interrupt cash flow, and increase the risk of fish loss. Catfish farmers consider off-flavor to be one of their most important production-related problems. This paper reviews the causes of off-flavor in catfish, pharmacokinetics of uptake and loss of odorous compounds in catfish, seasonality and prevalence of off-flavors, farm- and industry-level impacts, the ecology of cyanobacteria in catfish ponds, and various strategies for preventing or treating cyanobacterial (and other) off-flavors. A decision-making system based on knowledge gained from research is presented as a guide to effective use of the limited tools available to manage off-flavors.     

VOLUNTARY MANAGEMENT IN THAI SHRIMP FARMING

The implementation of the voluntary adoption of the Code of Conduct (CoC) to promote environmental responsibility and sustainable development of Thai shrimp industry is examined. Farmers' perceived benefits, risks and uncertainties associated with the adoption and their perceived extra fixed cost are found to be the critical conditions to the success of the program. Improvement of farmers' perceptions through increased information and knowledge, development of supportive policies and mechanisms (i.e., a “Group CoC” system, insurance program, a combination of environmental policy approaches) and strengthening farmers organizations, as well as establishing networks among and between the players throughout the market chain are suggested to enhance the adoption and implementation of the scheme.     

Forecasting monthly catfish (Ictalurus punctatus.) pond bank and feed prices

Volatility in catfish pond bank and feed prices lead to profit uncertainty in the catfish industry. Analysis of the factors that affect those prices and development of a forecasting model would provide guidance to catfish farm managers. Error-correction models (ECM) based on cointegrating relationships among variables were specified following development of a single-equation ARIMAX model. Factors identified as those that influence catfish price were: lagged value of catfish, feed and substitute product prices, while those that influenced feed price were: lagged value of feed, corn and soybean prices. ECM estimates implied that fish price adjusts approximately 6% and feed price 22% to the long-run equilibrium in 1?month. The analysis showed that it takes less than 17?months and 5?months to correct for long-run disequilibrium for catfish and feed prices, respectively. The ARIMAX model demonstrated a better fit for both in-sample and out-of-sample forecasting for catfish price and had better out-of-sample predictive ability for feed prices.     

Analyzing Production Feasibility and Market Potential For Florida Aquaculture Catfish Products

A spatiotemporal linear programming model (GAMS) was constructed to simulate the catfish production and marketing system in the U.S. in order to study the economic feasibility of Florida entering the aquaculture catfish industry. Evaluation of base model results and sensitivity analysis were used to identify constraints to the potential expansion of the catfish industry in Florida. Results indicated production and processing costs were more important in determining the locus of production and processing than were processing capacity, storage costs and capacity, and transportation costs. Thus, existing industry geographic concentration is likely to continue, but small new processing plants could develop proximate markets for fresh product.     

Assessment of household risk management strategies for coastal aquaculture: the case of clam farming in Thaibinh Province,Vietnam

Clam farmers have experienced different types of risks that have been further exacerbated by the rapid expansion of clam farming areas, increased growing densities, and increased market difficulties in recent years in the Thaibinh Province of Vietnam. Most farmers have been seriously affected by production risk, market risk, and financial risk, while a number of others have met with success in almost all of their clam-raising cycles. This study applied a differentiating comparative analysis method and multiple discriminant analysis method to discuss the differences in risk management strategies between and among clam farming households and the impacts of those differences on their success/failure rates. In general, the tactics are related to increase in farm size, the application of technical innovations, diversifying livelihood activities, and accessing secure financial sources all provided better conditions for clam growth, diminished losses, and led to speedier recovery from shocks. To support farmers in managing risks, several government interventions are needed: (1) better re-zoning of clam farming areas in parallel with an increase in the farm size of each household, (2) promoting sustainable linkages between the farmers and the formal financial market and output market, and (3) investing more funding into research and extension related to sustainable clam farming practices and to the improvement of farmers’ skills in cooperative works and management.