Selected economics research needs of the Gulf and South Atlantic shrimp industry--a workshop

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ELECTED ECONOMICS RESEARCH NEEDS

OF THE GULF AND SOUTH ATLAWIC

SSHIMP INDUSTRY-A WORKSHOP
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SELECTED ECONOMICS RESEARCH NEEDS OF THE
GULF AND SOUTH ATLANTIC SHRIMP INDUSTRY-

A WORKSHOP

Summary of a workshop held
September 12-13, 1985
Madeira Beach, Florida

By

Charles Adams

Florida Sea Grant Extension Program
University of Florida
Gainesville, FL 32611

Project No. SGEP-8
Grant No. NA85AA-D-SG059

Technical Papers are duplicated in limited quantities for specialized
audiences requiring rapid access to information. They are published with
limited editing and without formal review by the Florida Sea Grant College
Program. Content is the sole responsibility of the author. This paper was
developed by the Florida Sea Grant College Program with support frma NOAA
Office of Sea Grant, U.S. Department of Cocmerce, grant number
NA85AA-D-SG059. It was published by the Sea Grant Extension Program which
functions as a component of the Florida Cooperative Extension Service, John
T. Woeste, Dean, in conducting Cooperative Extension work in Agriculture,
Hame Econcmics, and marine Sciences, State of Florida, U.S. Department of
Commerce, and Boards of County Carmissioners, cooperating. Printed and
distributed in furtherance of the Acts of Congress of May 8 and June 14,
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TECHNICAL PAPER NO. 42
November 1985

N -

I

TABLE OF CONTENTS

PAGE

I. INTRODUCTION....................................................... 1

II. SUMMARY STATEMENTS AND RESEARCH RECOMMENDATIONS

SESSION I: Economic Modeling of the Domestic Shrimp Industry..... 4

SESSION II: Seafood Analogs/Surimi and the Domestic
Shrimp Industry...................................... 6

SESSION III: Shrimp Mariculture/Imports and the Domestic
Shrimp Industry............................... ... 8

III. SESSION GROUP LEADER AND RESPONDENT STATEMENTS

SESSION I: Economic Modeling of the Domestic Shrimp Industry..... 10

Statement of Modeling, Wade L. Griffin.......................... 11

Shrimp Industry Modeling: Response, J.E. Easley, Jr. ......... 15

SESSION II: Seafood Analogs/Surimi and the Domestic
Shrimp Industry...................................... 16

Economics of Surimi Foods, John Vondruska....................... 17

Research Considerations and Methodological Problems,
Ken Roberts.................................................... 19

Research Priorities for Southeast Fisheries Economists,
John Vondruska.................................................. 22

SESSION III: Shrimp Mariculture/Imports and the Domestic
Shrimp Industry.................................... 24

Shrimp Mariculture and Imports: Effects on U.S. Markets and
Research Needs,
Fred J. Prochaska............... 25

IV. PARTICIPANT REMARKS

Shrimp Modeling Work, J.E. Easley, Jr. ........................ 32

Shrimp Industry Workshop Southeast Fisheries Center, Miami, Fl.,
Dr. James Waters and John
Poffenberger.......................... 33

Summary of Current Economic Research Related to Marine Shrimp,
Ray Rhodes..................................................... 34

Status of Economic Research at the Center for Wetland Resources,
Sea Grant Development, Louisiana State University, Ken Roberts.. 35

Fred Lyda, Georgia Sea Grant Program............................ 37

Past, Current and Anticipated Activities, Douglas Lipton........ 38

Statement of Interest for Selected Research Needs of the Gulf and
South Atlantic Shrimp Fishery A Workshop, Paul J. Hooker....... 39

NMFS Southeast Region Fishery Development Analysis Branch
Economics Program, Richard Raulerson............................ 42

Shrimp Modeling Work, Wade L. Griffin........................... 46

Statement of Interest and Involvement, Charles M. Adams and Fred
J. Prochaska............ ............................. ................. 48

V. CONCLUSIONS........................................................ 51

VI. LIST OF PARTICIPANTS............................................... 53

INTRODUCTION

The domestic shrimp industry is the most important commercial fishery

in the U.S. in terms of dockside value. The value of raw and processed

shrimp product has recently reached record levels. In addition, the

industry continues to grow in total volume and value of product moved

through the overall market system. Domestic consumption of shrimp,

coinciding with supplies, has reached unsurpassed volume during the

1980's. With production from domestic stocks having apparently reached

a peak and the level of consumption increasing, supplies of imported

product have become increasingly important in satisfying demand. However,

the volume of imported product is also constrained by peaking worldwide

production from wild stocks. Thus, cultured shrimp are becoming more

important as an import source. The volume of imported shrimp moving

into the U.S. market has reached record levels in the past two years,

with cultured shrimp representing an increasing percentage of that import

volume. As consumer demand for seafood products in general increases,

which is indicated by a steadily increasing per capital consumption of

seafood, the marketability of newly developed analog seafood products

is likely to increase. These analog products may serve as substitutes

to certain shellfish, such as shrimp.

These recent trends and changes in the domestic shrimp industry

have not only enhanced on-going research efforts, but also have signaled

new high priority areas of inquiry where regionally cooperative research

efforts can be directed toward efficient management of the industry.

Given that the majority of domestic shrimp production and processing

occurs in the Southeast, research on the industry has historically

centered at institutions located within that region. A recommendation

which emerged from a January 1985 Sea Grant/National Marine Fisheries

Service retreat was to conduct a workshop attended by Sea Grant, NMFS,

State, and Industry economists from the Southeast region for the purpose

of identifying the major research needs concerning several issues of

growing importance to the domestic shrimp industry. This workshop would

represent a continuing effort by Sea Grant to provide a forum for

establishing regionally cooperative efforts in marine economics research.

The retreat committee on Research Coordination and Data/Information

Exchange identified three pertinent issues for the workshop. These

were:

(1) The impact of the development of foreign-shrimp mariculture

on the various sectors (production, processing, wholesaling, etc.)

of the domestic shrimp industry,

(2) The impact of future development of seafood-based analogs

and Surimi on the domestic shrimp industry, and

(3) The status of and problems associated with the development

and improvement of econometric and bio-economic modeling efforts

concerning the domestic shrimp industry.

The workshop addressing the above issues was sponsored by Florida

Sea Grant and the NMFS Southeast Regional Office during September 1985

at Madeira Beach, FL. The majority of institutions involved in shrimp

industry economic research within the Southeastern region were

represented. Brief statements of past, current, and anticipated

involvement in research efforts concerning the three topics of interest

were solicited from each institution in attendance. These were followed

by discussion sessions concerning each of the major issues, with the

goal being to recognize areas of concern and establish priorities relative

to on-going and potential research efforts. The workshop also represented

an opportunity for marine economists from the Southeast region to discuss

planned and on-going research efforts. It is the purpose of this paper

to document the proceedings of that workshop and to prevent

recommendations for future research.

SUMMARY STATEMENTS AND RESEARCH RECOMMENDATIONS

SESSION I: Economic Modeling of the Domestic Shrimp Industry

A statement of the issues and concerns regarding economic modeling

of the domestic shrimp industry was presented by the group leader Wade

Griffin, Texas A & M University and respondent remarks were given by

Jim Easley, North Carolina State University. The presentations and

the discussion that followed generated strong support for the continuation

of research involving applied modeling of the shrimp industry.

Models are simply an abstract representation of a "real world"

process. As such, models most often apply to a specific sector or

component of the industry of interest, rather than the entire complex

network of interrelated subsets which comprise the overall industry.

In addition, these models may be oriented specifically toward economic

(quantity demanded, prices at given market levels, import supply, firm

entry/exit, etc.) or biological (stock size, recruitment, yield, etc.)

aspects of the industry, or some combination thereof (i.e. bio-economic

simulation models). Obviously the form and scope of an applied model

is directly related to the problem being addressed.

Mathematical models are particularly useful in quantitatively

describing how sensitive a given element of the industry is to change

in related factors. This change can be due to "normal" fluctuation

in the industry or due to a dramatic structural or policy shift. This

information is in turn useful in assessing anticipated industry impacts

in a "what if" fashion. Many models developed for the domestic shrimp

industry have found application in this sense, such as in the assessment

of alternative policy measures. However, such models must be timely.

Models designed for recurring application must be updated as data become

available. The cost of such maintenance should be realized.

The group was in general consensus on the importance of model

development and refinement in providing an extremely useful tool for

application in policy analysis and efficient management of the industry.

The modeling discussion evolved such that specific modeling problems

associated with a given topic area (SURIMI/analogs or imports) were

reintroducedd during the respective topic discussion session. However,

several generic guidelines, issues, and concerns regarding modeling

of the shrimp industry were emphasized. These are given below.

(1) An inventory of existing models should be taken. This accounting
should address what models have recently been developed for the various
industry segments and how successful these efforts have been in answering
management and development questions.

(2) Gaps in the explanatory power of existing models should be identified
and assessed for relative importance to management decisions. When
feasible, these gaps should be filled. As data become available, existing
models should be refined to include more appropriate and timely parameter
estimates, functional form, etc.

(3) The extent by which the development of needed models and the
refinement of existing models are constrained by data needs should be
assessed. These data requirements should be communicated to data
managers.

(4) Models should be constructed to address long-run, in addition to
short-run, phenomena inherent in the specific component of the industry
being described.

(5) One option for economists to be able to answer a wide variety of
management and development questions is to foster the development and
maintenance of a large mathematical model, such as a simulation model,
that would embody as many components of the domestic shrimp industry
as is feasible. This model would be supported by a body of research
designed to produce parameter estimates that the larger model requires
to function. The supportive research would be conducted with the use
of smaller individual econometric or linear programming (LP) models.
Such a model could possibly be contained on the data processing facilities
of NMFS for utilization by a regional Fisheries Center or laboratory.
An alternative approach to the development of such a large single model
would be to ensure, when possible, that individual research efforts
produce models which can be linked (i.e. parameters or output from one
model can be utilized by another model to address a problem within the
corresponding industry sector).

SESSION II: Seafood Analogs/Surimi and the
Domestic Shrimp Industry

The workshop session on Surimi-based foods included a brief overview

of recent trends in the U.S. and Japanese markets, an enumeration of

possible research -topics and methodological problems, and a discussion

of research priorities for southeastern U.S. fisheries economists.

Ken Roberts, Louisiana State University, served as group leader, while

John Vondruska, National Maine Fisheries Service, served as respondent.

A number of guidelines, issues, and concerns related to research

addressing Surimi products and their potential impact on the domestic

shrimp industry were raised during the discussion session. Some of

these are listed below.

The potential impact to the shrimp market from the introduction
of Surimi based products may be overestimated.

Major impacts may in fact be felt within the crab market, in
particular the salad pack (king, tanner, and dungeness crab
meats). If the Surimi products serve as a close substitute
to white flake meat, there could be considerable impact to the
blue crab market.

Research into the issue of substitutability in the shrimp market
is currently data bound. Research may need to be directed to
the crab industry first.

The use of "blended" product may serve to reduce the potential
impact on the shrimp market (product may not be recognized by
consumers as a substitute).

Given the expected increase in shrimp supplies in the future,
what will be the partial price effect of increased levels of
Surimi products on the shrimp market? Will anticipated downward
pressures on the shrimp prices have an effect on the rate and
success of Surimi product introduction?

* What is the relationship between shrimp prices and availability
of finfish supplies for Surimi use? Do dockside shrimp prices
serve as a barrier to expanding finfish supply availability?

* Consumer survey analyses should be done (when data are available)
to identify how Surimi fits into the total seafood market.
What are the market weaknesses?

* What are the viable alternative product forms?

* What are the dynamics and trends of the Japanese market? How
would that market compete with U.S. for available supplies?

* Data in general needs to be assessed i.e., available finfish
stocks, surimi supplies, prices at various market levels and
product forms, acceptability, substitutability, market channels,
etc. Research is presently constrained by overall lack of data.

SESSION III: Shrimp Mariculture/Imports and the
Domestic Shrimp Industry

This session provided discussion on the potential impacts to the

domestic shrimp industry through imports of maricultured shrimp products.

Research needs were discussed. Fred Prochaska, University of Florida,

served as group leader. Schedule conflicts resulted in the lack of

planned specific respondent participation.

The resulting discussion emphasized a number of research concerns.

Some of these research oriented topics have been expressed earlier

in the -context of modeling, but were reiterated here due to their

specific relevance to maricultured shrimp imports. Two major areas

of concern were associated with domestic versus import quality and the

seasonal/size class imports on the domestic market. A listing of some

major guidelines, issues, and concerns discussed in the the session

follow:

(1) Establish standard quality guidelines for domestic wild caught
and imported maricultured shrimp, particularly for maricultured shrimp
imported in boxed form.

(2) Examine the relative quality of domestic wild caught versus imported
maricultured shrimp and address the economic consequences of improving
domestic quality (i.e. access the price differential between domestic
shrimp and Ecuadorian whites).

(3) Would quality/image improvements have a positive impact on the
economic viability of domestic shrimp mariculture?

(4) What are the impacts on the domestic market due to the size
distribution of imported maricultured shrimp?

(5) How will existing or increased levels of maricultured shrimp imports
effect the seasonal nature of domestic prices on a size class basis?

(6) What impact will increased levels of imported maricultured shrimp
in specific size classes have on the effectiveness of domestic management
policies, such as seasonal closures, which target specific size classes?
What are the economic implications and how can these relationships be
built into existing and future models of the domestic shrimp industry?

(7) Communicate to data managers that timely and consistent data on
a size class basis are vital to addressing the impacts to the domestic
shrimp industry from increased levels of imported maricultured shrimp.

The participants also expressed an interest in discussing further

the possibility of a regional project to address the questions raised

regarding the potential impact to the domestic shrimp industry from

changes in levels of maricultured shrimp imports. A regional approach

seems to be justified given the commonality of the relative importance

of shrimp harvesting and processing in Southeastern States and the

similarity in potential impacts.

SESSION GROUP LEADER AND RESPONDENT
STATEMENTS

SESSION I: Economic Modeling of the Domestic Shrimp Industry

The following remarks are those given by the group leader and

respondent. These remarks contain more detailed comments on issues

and concerns regarding modeling efforts which concern the domestic shrimp

industry.

-10-

Statement of Modeling

Wade L. Griffin
Texas A & M University

The Magnuson Fishery Conservation and Management Act provided for

management of the shrimp resource in the Gulf of Mexico from the

territorial sea to a point 200 miles from shore. Responsibility for

developing a shrimp management plan for the Gulf of Mexico rests with

the Gulf of Mexico Fishery Management Council.

The Council's primary challenge is to develop policies and

regulations that attain the greatest overall benefit to the nation with

particular reference to food production and recreational opportunities

on the basis of the maximum sustainable yield as modified by relevant

economic, social or ecological factors. In turn, economists are

challenged to provide insights into cost and benefits of alternative

policies and regulations for the shrimp fishery. The shrimp resource

is utilized by several user groups. Responses to policies, and,

therefore, the effects of policies, will most likely differ among the

groups involved. Consequently, to be able to choose wisely among

alternative policy options requires that economists anticipate how

policies affect different groups involved in the fishery as well as

to anticipate the potential aggregate effect of policies on the fishery

as a whole. Evaluating policies also means that economists have to

recognize and attempt to avoid unexpected effects and cost. Examples

of unexpected results can be seen in agriculture as well as commercial

fisheries. Most recently the Federal Government instituted a Payment

In Kind (PIK) program to help reduce production of some agriculture

commodities. Response by farmers was that production was cut by one-

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third. Supporting dealers (chemical, equipment, etc.) sold one-third

less product and as a result many supporting dealers went out of business.

In the Gulf of Mexico region, every state regulates the shrimp

fishery within their territorial sea and the Gulf Council regulates

the Fishery Conservation Zone (FCZ). States have a variety of gear

restrictions, seasonal closures, and pound and size limitations. To

date, the Gulf Council has instituted regulations for Florida and Texas

in the FCZ waters. In Florida, they have a shrimp sanctuary where fishing

is prohibited and in Texas they close the entire FCZ for 45 to 60 days.

All regulations have been based generally on biological reasoning,

that is, increasing pounds necessarily implies increasing value. For

example, the FCZ closures were instituted to protect the shrimp when

they are small and growing rapidly. When the shrimp are harvested it

is expected that total pounds will have increased. Value will have

increased because more pounds are landed and shrimp are larger and command

a higher price per pound.

In evaluating the Texas closure, the NMFS takes sample trawls in

the shrimping grounds when the. area is closed. They then simulate what

catch would have been that year if there had been no closures. They

subtract the simulated pounds from the actual pounds caught and if it

is positive, they conclude that the closure achieved its purpose. Using

a price predicting model, they calculate the value for the simulated

pounds and subtract that from the actual value. In this way they predict

if the value increased because of the closure. They have done this

analysis each year of the closure.

The problem with this type of analysis is that it only looks to

see if total pounds and value increased in the short run. It does not

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consider how this added pounds and value are distributed nor what the

long run consequence of this type of policy might be. In terms of

distribution there has been unexpected influx of vessels from other

states fishing in Texas waters when the season first opens up because

the catch per unit effort is usually high. This has caused considerable

congestion of vessels and pulse fishing in July and August off Texas.

Also, for this short period of time demand for shore facilities often

exceeds their availability. In terms of the long run, economist know

that anytime rents are generated in an open-access common property

resource through some sort of policy then it attracts more boats into

an already over capitalized fishery.

It would appear then that there is significant reason for modeling

the shrimp fishery by economist to evaluate policies and regulations

proposed by the states and the Gulf Council. It would be nice if we

could conduct experiments to find out the results of a given policy

before it is implemented. However, in most cases that is impossible.

We can, however, represent the system by a model that imitates the

behavior of the system. Then, we merely reproduce or simulate under

test situations the likely outcome for the actual system. The model

then becomes a tool for addressing "what if" questions on systems we

cannot control in a laboratory setting.

These types of simulation models can be solved deterministically

or stochastically. Deterministic models ignore the risk and uncertainty

inherent in the system being modeled. They provide a single answer

to such "what if" questions. They provide a one-for-one mapping of

input assumptions into the output vector for each output variable.

Stochastic models account for at least one of the uncertain or risky

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components in the system being modeled. The model does not provide

a single answer to a question or set of initial conditions. Rather,

the model provides a probability distribution of results for each set

of initial conditions.

This type of modeling and policy analysis allows one to estimate

the performance of a system without disrupting or destroying the system.

It allows the evaluation -of proposed changes in the system without

disrupting the present system. When policies are instituted in fisheries

it generally takes a long time span over which to fully determine their

affect. This type of modeling allows the system to be evaluated over

a long -time span to account for the full affect of alternative policies.

To develop a fully integrated simulation model requires an

interdisciplinary effort on the part of biologists and economists.

As fishery economists, we would think that we can effectively relate

to complex policy issues. Yet, even in commercial agriculture where

there has been extensive research, model building and policy analysis,

agricultural economists are left with substantial uncertainties about

the likely effect of many government policies and regulations. Fishery

economists have a ways to go to catch up with them and we need to start

catching up. We need models that can address "what if" questions about

a resource and we need to work with other disciplines in developing

these models.

-14-

Shrimp Industry Modeling: Response

J. E. Easley, Jr.
North Carolina State University

I reinforce Wade's comments regarding modeling. It is useful work,

and as models and data improve, will likely become even more useful.

Asking "what if" questions of management and policy alternatives is

probably much less costly than trial-and-error methods in a fishery.

Given that these latter methods do tend to be costly and disruptive

(especially if they turn out to be the wrong move), there is usually

strong opposition to testing new strategies. Modeling offers a productive

alternative.

I would like to suggest some points for us to consider during this

meeting. Some may be helpful in future modeling efforts; some may not

be. These points are:

1. What are the effects of the size distribution of imports on
domestic prices? Are these effects seasonal, i.e., do they
differ through the course of the domestic harvesting season?

2. If there are relative size price effects, is there potential
for "fine tuning" management to minimize these effects on the
domestic fishery? To answer this question, a dynamic model
with size classes incorporated (both for catch and prices)
would likely be necessary.

3. Would better estimates of substitution in consumption of
different size classes improve our models? If we attempt to
manage for changing the size composition of the catch, what
is the effect on relative prices (by sizes)?

4. Data suggests that imports have had significant effects on
relative prices (by size class). If growth in future imports
come increasingly from cultured shrimp, one might expect the
size distribution of cultured shrimp to change as producers
look at prices by size class. Surely there is substitution
in production, and growers--perhaps after some initial "shaking
out"--will look at prices as well as costs to determine optimal
harvest size. We might want, at some point in the future,
to include in our models a feedback mechanism to shrimp growers,
and their expected response.

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SESSION II: Seafood Analogs/Surimi and the Domestic
Shrimp Industry

Additional points of consideration regarding the impact of

surimi-based foods on the domestic shrimp industry are contained in

the group leader and respondent remarks. These more detailed research

oriented comments follow a market overview of Surimi-based foods.

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Economics of Surimi Foods

John Vondruska
National Marine Fisheries Service

Market Overview*

The U.S. market for surimi-based seafoods rose to 70 million pounds

in 1984, with imitation crab accounting for most of that total. This

contrasts with a smaller, relatively stable market of 5-6 million pounds

of mostly ethnic surimi-based foods in 1975-80. While imitation crab

was apparently intended to emulate king or snow crab, supplies exceeded

the total U.S. supply for all natural crab in 1985 on a tonnage basis.

Smaller amounts of shrimp, scallop, lobster and other seafood analogs

are sold, and the functional properties of surimi suggest to food

scientists much wider use by the food processing industry in stand-alone

(non-analog) products and as an ingredient. Actual use will depend

on several factors, and the future size, growth and impact of U.S.

supplies of surimi-based foods are a matter of mugh speculation.

Large growth in U.S. markets for surimi-based foods implies a

significant amount of fisheries development, if growth is to be

accomodated at current real prices. One optimistic estimate suggests

a U.S. market of 1.0 billion pounds of surimi-based foods in 1990 (or

roughly 0.5 billion pounds of surimi from 2.5 billion pounds of landed

fish, assuming a 20 percent yield). Supply constraints, rising costs

and prices of fish, competition from other products, and other factors

may mean a much smaller market in 1990.

Depending on future changes in Japanese supply and demand, Japan

could play a major role in the expansion of U.S. supplies of surimi-based

*Based largely on a paper by John Vondruska, "Market Trends and Outlook
for Surimi-based Foods," for the International Symposium on Engineered
Seafoods, Seattle, Washington, November 19-21, 1985.

-17-

foods. Japan is the major producer, consumer and exporter of surimi-based

foods. While imitation shellfish and other products are likely to be

important in the expansion of U.S. and other markets, total Japanese

exports of all surimi-based foods accounted for only 3.6 percent of

output in 1984, and exports of surimi accounted for a lesser fraction

of surimi. On the other hand, a U.S. market of 1.0 billion pounds would

represent roughly half of today's Japanese output. After declining,

Japanese domestic consumption appears to be recovering, even growing,

suggesting that Japanese processors may perceive export markets more

as a vehicle for increasing output rather than as a vehicle for offsetting

declining domestic demand. Since stocks of Alaskan pollock within

U.S. waters are being harvested at essentially the maximum rate,

Americanization of harvesting and processing is not likely to increase

world supplies of surimi, and Americanization could even decrease world

supplies of surimi if the output mix contains, for example more fillets

and less surimi.

Alaskan pollock is the dominant fish used to make surimi, but

some 150 other species worldwide may have the necessary functional protein

properties, and the southeastern United States has some large resources

of finfish that may prove to be economical sources of surimi. Yields

and costs are critical. Large scale evaluation of producing menhaden

surimi is planned to begin in 1986. The southeast also has important,

established fisheries for shrimp and crabs, and markets whose markets

and prices could be affected by competition from surimi-based foods.

Yet, new viable commercial fisheries could provide employment

opportunities for human and capital resources now facing financial and

economic difficulties in other southeast fisheries.

-18-

Research Considerations and Methodological Problems

Ken Roberts
Louisiana State University

The rising consumption of seafood' over the past two years marked

a reversal of a static market situation during the previous seven years.

During this period shrimp consumption increased five consecutive years.

Thus, within an expanding seafood market the subject of our interest

at this meeting is performing well. Performances of shrimp products

in the market cannot be attributed only to recent declining wholesale

prices as the period includes high prices also.

The massive increase in shrimp supply forecast by numerous

non-business based individuals, if fulfilled, will keep pressure on

prices. Given an annual one percent increase in U.S. population through

1990, the prospective supply increase will face a market requiring rising

per capital consumption to maintain prices. This is the antithesis of

the recent well-known west coast crab situation. Over the most recent

three years king crab landings have declined yet prices fell. This

once premium imaged seafood demonstrated rising ex-vessel and wholesale

prices under falling production in the preceding three year period.

The concern has been expressed that analog crab products substituted

for king and snow crab in wholesale markets sufficiently well to

permanently affect price-volume relationships. Is this actually the

case or have analogs created a new slot in the seafood product array

with attributes only peripherally to existing product offerings? Research

on the interaction of crab analogs with existing markets offers the

only prospect for empirical work at this time. Before journeying into

the analog shrimp field, the fundamentals of what has occurred is

the necessary first step.

-19-

There are numerous matters which require insight from experienced

seafood trade people and researchers in order to improve the prospect

of better identifying the role and impact of analogs from the consumer

through to fisheries management. A few thoughts are presented in outline

form below as a means fostering discussion.

1. With U.S. seafood consumption at 3 billion pounds, how can
analogs increase to .5 1 billion pounds in the next four
years? How are such figures derived? Do the procedures and
forecasters merit all the attention?

2. Identifying substitute relationships in demand equations for
various species has yielded few instances of success on a
statistical basis. With data of relatively recent vintage
on analogs limited to crab, can this procedure yield much
insight? Have our previous approaches been insufficient?

3. How should researchers proceed to determine whether analogs
are simply moving into an expanded market for seafood, actually
substituting for the mimicked species, or as likely some of
both?

4. Will cross elasticities emerge? That is, will crab analog
success lessen interest in certain species or preparations
of shrimp?

5. Analogs were originally viewed as being blended in some
proportion with natural supplies, i.e. an extender of some
nature. While this is evident from the various surimi/crab
content products, blending can also occur at the point of sale.
For example, analogs are frequently included with other seafoods
in salads, sandwiches, au gratins, etc. This avoids the
"imitation" image when the product stands alone.

6. Will labeling as imitation affect retail sales? How will
blending affect markets?

7. Is the raw material available for a .5 1 billion increase?
If yes, then will such a near term demand allow raw material
costs to remain low? Are the available species capable of
yielding analogs of similar quality to the initial offerings.

8. There are as many as four grades of surimi with which to make
the over 600 analogs available in Japan. What quantities are
likely to be available in various grades? What are the yields
and prices associated with each?

-20-

9. What are the basic forces in the shrimp market nationally and
internationally which will impact the rate of analog introduction
and success?

10. Can growth of shrimp analogs change fisheries policy in regard
to shrimp in the U.S.?

-21-

Research Priorities for Southeast Fisheries Economists

John Vondruska
National Marine Fisheries Service

In the view of economists attending the workshop, there are several

possible areas of economics and marketing research that could be pursued

within the framework of southeastern regional interests, but other work,

such as in relation to shrimp imports and the management of several

southeastern fisheries should receive more emphasis. Three areas of

work were suggested: market and consumer survey analysis, cooperative

work with food scientists, and supply-demand analysis.

Survey analysis: Data on surimi-based seafoods will be obtained

in a planned national food consumption survey, but the 1977-78 Nationwide

Food Consumption Survey (USDA) and the 1981 National Seafood Consumption

Survey (NMFS) provide much data that has not been analyzed. Hu provided

a comparative analysis of these and two other surveys, along with a

set of cleaned data tapes.* Several southeast economists have also

analyzed consumer survey data.

Cooperative work with food scientists: Three major technological

breakthroughs in seafood processing have taken place in the past two

decades: mechanical meat-bone separation, stabilization of processed

minced fish for good frozen storage shelflife, and fabrication processes

taking advantage of the gelforming ability of fish flesh. Because of

these breakthroughs, a multi-discipline "International Symposium on

Engineered Seafoods, Including Surimi" is being held in Seattle, November

19-25, 1985, and the results should provide a guide to further work

by southeast economists in cooperation with food scientists. Possible

*Teh-wei Hu. Analysis of seafood consumption in the U.S.: 1970, 1974,
1978, and 1981. Unpublished report for S-K cooperative agreement (no.
NA82AA-H-0053), September 30, 1985. Dr. Hu is Professor of Economics,
Institute for Policy Research and Evaluation, The Pennsylvania State
University, University Park, PA. 16802 (phone: 814-865-4451).

-22-

cooperative work include production economics, feasibility analysis,

consumer panel evaluations, market testing, and least-cost ingredient

selection for formulated products.

Supply-demand analysis: Available data may limit what can be done

in this area. Most analyses so far have been based largely on Japanese

data to represent both the Japanese and U.S. markets, and those analyses

have been descriptive, but it is possible that further effort to assemble

available data could provide the basis for some reasonably rigorous

econometric modeling. One suggested area of work is to model the effects

of crab analogs on natural crab markets and then see if any lessons

can be used in a hypothetical situation involving shrimp analogs and

natural shrimp. It was agreed during the workshop that the appropriate

shrimp product to be concerned about is a frozen, breaded analog for

the fast-food market. Concern was also expressed about potential effects

of imitation products on the market for blue crab, which is processed

largely into crab meat.

-23-

SESSION III: Shrimp Mariculture/Imports and the Domestic
Shrimp Industry

The following remarks by the group for this session discusses some

of the points listed previously regarding this topic but in more detailed

fashion. There are no respondent remarks for this session.

-24-

Shrimp Mariculture and Imports:
Effects on U.S. Markets and Research Needs

Fred J. Prochaska
University of Florida

Situation and Trends

A record 610 million pounds (heads off) of shrimp were available

for U.S. consumption in 1984. Between 1965 and 1978 imports and

U.S. domestic landings both increased with imports generally accounting

for a little over 50 percent of the total supply. Since that period

U.S. production declined from a peak in 1977 to levels produced during

the mid 1960's (primarily due to a decline in Pacific landings) while

imports increased from a little over 250 million pounds (heads off)

to 422 million pounds in 1984. During the 1983-84 period imports

averaged 71 percent of total U.S. shrimp supplies.

Continuous and standarized statistics are not available to

segregate total shrimp imports into those produced by mariculture

and those from worldwide wild harvest. One estimate is that 15 percent

of U.S. 1983 imports (63 million pounds heads off) were farm raised.

However, other estimates put world mariculture output at only 74

million pounds in 1983. Realistic long term projections place 1990

shrimp mariculture at between 400 and 525 million pounds (heads off).

One certainty is that we are not certain as to the current and future

volume of farm or mariculture raised shrimp nor are we certain about

the share that will be imported into the U.S. With respect to total

world shrimp production, research results and general opinion is

that most or all future increases in world shrimp supplies will come

from mariculture.

-25-

Effects of Shrimp Mariculture and Imports

Analyses of the effects of shrimp mariculture imports have been

indirect at best. Furthermore, analytical models of total shrimp

imports have been incomplete in several dimensions. Principal

inadequacies are (1) until recently most estimates were based on

single equation demand models which cannot separate supply and demand

changes, and (2) limited recent simultaneous supply and demand models

have been restricted to aggregate shrimp imports or to one narrowly

defined size class due to data limitations.

One simultaneous import supply and demand model developed at

the University of Florida was used to analyze effects of imports

in general and mariculture imports indirectly. Price elasticity

of demand was found to be negative and highly inelastic while real

income had a positive and highly elastic effect on imports.

Substitutes for imports (domestic landings and inventories) have

negative impacts on U.S. import demand. On the supply side, an

increase in price, exchange rate (foreign currency per U.S. dollar)

and world production all increase foreign shrimp offered to U.S.

buyers while increased shrimp demand from foreign buyers decreases

supply offered U.S. importers. A combination of these factors will

ultimately determine the effects of shrimp mariculture on U.S. markets

and the domestic shrimp industry.

U.S. shrimp prices should continue to increase due to increased

incomes, higher domestic costs of production and no significant growth

in U.S. production. All of these factors will continue to increase

import demand. Higher prices resulting from increased U.S. demand

-26-

will cause the quantity supplied to increase, ceteris paribus. Given

these expectations, the exact price and quantity imported will then

depend largely on world production, exchange rates and demand by

foreign buyers in final equilibrium. Increased world production

is estimated to increase import supply to the U.S. in final equilibrium

by 3.5 percent for each 10 percent increase in world production.

It is difficult to predict demand by foreign buyers. Japan is the

main competition for U.S. shrimp buyers. Recent trends in the Japanese

economy suggest growth in Japan's shrimp imports. A decline in the

exchange rate is expected for the next few years. These latter factors

will tend to offset some of the potential increase in imports from

increased world production which is expected to come from expanded

shrimp mariculture.

NMFS preliminary estimates suggest that if world mariculture

production increases 450 million pounds by 1990, U.S. real shrimp

prices would increase from $2.10 per pound in 1983 to $2.36 in 1990

(assuming one-third of the increased production is imported). Without

the increase in imports, real prices were projected to be $2.83.

This represents a decrease in real prices of $0.47 due to the increased

imports over current levels. Predictions made with the import supply

and demand models discussed above are that nominal import prices

would be approximately $5.75 in 1990 without increased world production

and approximately $4.75 with an extreme increase in world production

equal to 750 million pounds. With both sets of predictions, 1990

prices will exceed prices of the 1980's due to the projected large

increase in demand compared to projected supply increases. Without

the increase in world production prices would be higher in both cases.

-27-

These aggregate predictions, however, may be quite different

for given size classes of shrimp. It appears the most popular size

shrimp targeted in South American mariculture is in the 31-40 count

range. This should result in greater downward price pressures for

these size classes. There will'also be some impact on smaller shrimp

prices since total control over production and a lack of sizing in

the current mariculture production practices result in some production

of small shrimp. Prices of U.S. shrimp larger than 30 count, however,

should increase, assuming the current composition of aggregate demand

doesn't change. Recent price trends for given sizes of shrimp are

starting to bear out these expectations. Also, recent research has

shown prices for smaller shrimp (31-40) are more sensitive to imports

than are larger shrimp (21-25) prices.

Market, Industry and Research Implications

Imports will increase with increased production through shrimp

mariculture. Import and domestic prices will continue to increase

although at lower levels than without increased world supply. Those

directly affected logically will request solutions to problems

encountered. Many of the consequences of import related problems

can be lessened through research. However, before listing these

it should be noted that the increased supply is beneficial to the

consumer in that prices will be lower than without the increase.

Overall shrimp quality will also increase due to production controls,

rapid movement of shrimp from ponds to processing facilities, and

increased competition.

-28-

Tariffs and quotas have repeatedly been requested as a means

to curb imports. More than sufficient research has been conducted

on the topic. The inelastic import demand would cause considerable

price increases with little reduction in import quantity as a result

of tariffs. Quotas are necessary if significant reductions in imports

are to be achieved. Further research shows that short run price

increases are likely to encourage further entry into the already

over capitalized U.S. shrimping industry. The problem of low economic

returns to shrimping operations would likely worsen in the long run.

Considerable attention will have to be devoted to quality control

in handling domestic production in order to remain competitive with

imported high quality mariculture products. A further source of

competition to the domestic marketing and processing sector will

occur through vertical integration on the part of foreign mariculture

firms. Sufficient volumes of high quality shrimp produced on a

continuous basis will give these newly developed firms an entry into

the market. Seasonability of imports will become less noticeable.

U.S. shrimp mariculture is generally not competitive with shrimp

from the wild harvest or from foreign mariculture production. Downward

pressure on domestic shrimp prices will further discourage development

of domestic mariculture. To succeed, attention will have to be given

to cost reductions in U.S. operations and/or a special product image

will have to be developed to command higher prices.

The anticipated increase in imported shrimp in the middle size

categories offers some interesting implications for management.

First, season and/or area closures, such as the Texas closure, may

be necessary to take full advantage of expected price increases for

-29-

large shrimp relative to price changes for smaller shrimp. The harvest

of small shrimp by inshore bay boats would be impacted less than

harvest in the middle size classes. The profitability of such

operations may, however, be in serious jeopardy with even nominal

downward pressures on prices. A consideration related to size of

shrimp imported that may qualify these conclusions is availability

of P.L.'s for stocking ponds. Shortages will result in less densely

stocked ponds which may encourage production of larger shrimp.

A further concern to the inshore fishery by 1990 will likely

be competition from the recreational sector for shrimping rights.

If considerable allocations are given to the recreational .sector,

expanded imports may only replace the loss in commercial landings.

It is safe to conclude that extensive economic research has

been conducted on the shrimp industry. Principal research needs

remaining are analyses of individual shrimp product markets (by form

and size), economics related to improved quality,, restrictions on

size of shrimp harvested and limited entry. Improvements in quality

and timeliness of data are necessary to accomplish these research

efforts. All or most research on the shrimp industry should be done

on a regional basis with formal coordination among researchers.

-30-

PARTICIPANT REMARKS

Each institution represented at the workshop was asked to deliver

a brief presentation outlining past, current, and anticipated interest

or activity in the three major topics of discussion. These statements

were solicited to provide an overview of research efforts which exist

in the Southeast region with respect to the shrimp industry.

In addition to remarks specifically concerning shrimp industry

oriented research efforts, additional comments were presented concerning

two topics of discussion. These were:

(1) Dr. Lee Anderson's (IPA -NMFS) suggestions for strengthening the
economic component at the Washington Office, Centers and Regional Offices
of the National Marine Fisheries Service. Dr. Anderson paraphrased
his working paper entitled "A Review of Economics and Economists in
the NMFS". In response to these comments, the current level of Sea
Grant/NMFS economic coordination and cooperation was supported by the
workshop participants. There was general support for Dr. Anderson's
notion of a core group of economists at the Washington NMFS Office and
the Centers/Regional Offices, but the Regional Directors should have
some influence on work conducted by those core groups of economists.
It was suggested that NMFS should have an economist who possesses a
direct link with the highest level possible in the Washington office
- possibly the AA. Also, a "critical mass" of economists is likely
needed in each Center and Region, but the group should be tailored to
the specific needs of the area. The group also agreed in principle
to the need to reduce the current amount of "brush fire" work done by
economists and become involved in more long-term studies. Finally,
the group agreed that the interaction between economists and
statisticians/data management group be enhanced such that each may
better serve the needs of the other.*

(2) Update on Sea Grant access to NMFS data. The NMFS has recently
initiated efforts to increase the availability of certain raw data to
Regional Councils and other research clientele (i.e. Sea Grant
economists). Currently, the Florida Sea Grant Program is being utilized
on a test basis to establish the feasibility of accessing NMFS data
on a more timely basis via direct access of the Burroughs 6800 data
files in Miami. These efforts were supported by the group. In addition,
much interest was expressed regarding the accessibility status of the
DB-Fish data file.

*These remarks paraphrase a NMFS Southeast Regional Office internal
memo on the subject of the workshop response to Dr. Lee Anderson's
comments.

-31-

SHRIMP MODELING WORK

J. E. EASLEY, JR.
NORTH CAROLINA STATE UNIVERSITY

Recent work in the Department of Economics and Business at North

Carolina State University has emphasized the development of a dynamic

model to assist with management decisions. The model has been applied

to bay scallops, the New River shrimp fishery, and the Pamlico Sound

shrimp fishery.

The management decision of perhaps most importance is when to open

a season. Hence, the control model has been developed to generate the

optimal season. Components of the general model are:

1) Objective function specified as present value of net income
2) Demand function
3) Production function
4) Cost function
5) Discounting function
6) Control vector specified with an on-off switch
7) Equation of motion (incorporate biological function)

-32-

Shrimp Industry Workshop

Southeast Fisheries Center, Miami, Florida

Dr. James Waters, Industry Economist, Beaufort, N.C.

John Poffenberger, Industry Economist, Miami, FL

Recent research includes; (1) an analyses of the impacts of the

Texas Closure regulation, which was prepared for the Gulf of Mexico

Fishery Management Council and (2) a report on cost and revenue data

collected from (offshore) shrimp fishermen in the Gulf of Mexico and

South Atlantic areas. Forthcoming research is a descriptive report

on the shrimp processing industry.

During the next fiscal year, the Southeast Fisheries Center has

two projects planned that relate directly to the topics for this workshop.

At the request of the Gulf Council, the Center will conduct a survey

of "inshore" shrimp fishermen at one location in Louisiana and one

location in Texas. The objectives of this survey are to collect data

on (1) the relative importance of (inshore) shrimp fishing as the primary

versus a secondary source of income and (2) the cost, and thus net revenue

(income) of inshore shrimp fishing. The other research project will

be an effort to improve the data currently being collected on shrimp

imports. The Bureau of Census provides data on monthly imports of shrimp

to the National Marine Fisheries Service. These data are aggregates

and do not provide any detail on the quantity of imports by size category.

Detailed data (by size) is provided to Customs, by the importing

companies, however, these data are not recorded nor automated by Customs

personnel. Our efforts, therefore will be to record and automate shrimp

imports by size categories.

-33-

SUMMARY OF CURRENT ECONOMIC RESEARCH RELATED TO MARINE SHRIMP

Ray Rhodes
Division of Marine Resources
South Carolina Wildlife & Marine Resources Department
Charleston, South Carolina

Title/Topic: Estimation of Recreational Shrimping in South Carolina

Principal Investigator: David Liao

Completion Date: Summer, 1987

Summary: Using a mail survey and in-person interviews, the economic
impacts of recreational shrimpers' expenditures on the S.C.
economy and the total recreational shrimp harvest will be
estimated.

Title/Topic: Economic Analysis of Shrimp Farming Development Models
for South Carolina Coastal Impoundments.

Principal Investigators: David Liao and Paul Sandifer

Completion Date: Winter, 1985

Summary: Development of enterprise budgets and economic indicators
for large and small shrimp aquaculture in coastal impound-
ments.

Title/Topic: Financial Feasibility Analysis of Highland Shrimp Farming

Principal Investigators: Raymond J. Rhodes, Jack Whetstone and Paul
Sandifer

Completion Date: August, 1986

Summary: Development of a deterministic microcomputer
using production strategies predicated on
of Penaeus setiferus and P. vannamei in earthen

financial model
the monoculture
leeves.

Title/Topic: Economic Performance of South Carolina Shrimp Trawlers
in 1982.

Principal Investigator: David Liao

Completion Date: Winter, 1986

Summary: An analysis of South Carolina shrimp trawler costs and return
data collected in a National Marine Fisheries Services survey.

-34-

Status of Economic Research
at the Center for Wetland Resources, Sea Grant Development
Louisiana State University

Ken Roberts
Louisiana State University

At Louisiana State University, the Department of Sea Grant Development

at The Center for Wetland Resources has recently completed an investigation

entitled "Econometric Analysis of the Markets for Shrimp in the United

States." A monthly three-stage least squares model was constructed of

the U.S. Shrimp Market. This model included the following equations:

exvessel and wholesale prices, imports, landings, cold storage holdings,

and apparent consumption of shrimp, and Gulf shrimping trips. The project

was centered on the structural aspects of the industry through analysis

of elasticities and multipliers. Three recent changes in the market

were of special interest: the volatile nature of short-term interest

rates; the strength of the dollar against other currencies; and the impact

of aquacultured shrimp. The lack of specific data on aquacultured shrimp

was a problem in the analysis of the changes caused by this source of

production and of imports in general.

At the conclusion of this project, some preliminary short-term

forecasts of prices were made using both the econometric model and an

ARIMA time series model. A continuation of this forecasting work has

been planned. This will involve further work on the econometric model.

As such, future impacts of imports in general and of aquacultured imports

will play an important role. Data on the production of pond raised shrimp

would be of great use in this type of modeling. The relationship between

exchange rates and the imports of shrimp will also be investigated further.

One problem with using a monthly model to forecast prices is the timely

availability of data.

-35-

The other shrimp project which is about to be completed is "Market

Structure of the Louisiana Shrimp Processing Industry, Emphasizing Small

Shrimp", which centered on the structure conduct performance linkages

in the shrimp market. Marketing channels for Louisiana shrimp were

investigated along with employment, labeling, product forms, sources

of supply, and concentration ratios. Special attention was paid to small

(greater than 50 count to the pound, headless basis) shrimp since a trend

to smaller shrimp in the Gulf has been documented and since the large

amount of landings of small shrimp differenciates Louisiana from other

Gulf States. Results were compared to Florida's industry (Alvarez, et.

al, 1976) and the raw data was provided to the National Marine Fisheries

Service for use in their Gulf-wide shrimp marketing study.

-36-

FRED LYDA
GEORGIA SEA GRANT PROGRAM

The Georgia Sea Grant Program does not currently have anyone working

in the three previously defined primary topic areas.* We have one

Master's candidate (Agricultural Economics) who is initiating a research

project to look at the effects, if any, that the creation of a shrimping

co-operative has had on ex-vessel prices. It is doubtful that this

effort will more than touch on the import problem.

Most Georgia shrimp producers and packers feel that domestic shrimp

prices have been dramatically affected by pond raised imports. At least

one Georgia processor feels that the imported pond raised shrimp have

had a leveling effect on domestic prices and that the eventual solution

to low domestic prices is to limit the number of vessels thereby

increasing volume. Fishermen and packers are anxious. They have worked

with average to well below average quantities for the past six years

and have seen prices decline steadily for the past three years.

The Georgia Program would participate in any meaningful way to

help provide factual information (with respect to the future) to all

domestic shrimp fishermen. We currently are advising all our constituents

in the harvesting and packing sectors to improve and maintain quality

to the end users. In addition, we are encouraging packers who do not

have freezers to look at the feasibility of installing or utilizing,

on a rental basis, existing freezers to maximize price.

*Shrimp Industry Modeling; Shrimp Mariculture/Imports; and Seafood Analogs
and Surimi

-37-

Past, Current and Anticipated Activities

Douglas Lipton
Special Assistant for Bioeconomics, Office of
Data and Information Management, F/S2, National Marine
Fisheries Service, Washington, D.C.

The NMFS Washington Office has no current or planned research

directly related to shrimp. However, we will be conducting a national

economics workshop on October 16-17 in Rockport, Massachusetts. The

two workshop topics are: 1) analyzing fisheries trade issues and 2)

alternative management strategies. Both topics are relevant to the

shrimp industry, and we encourage your attendance both for the input

you can provide and guidance you may receive.

Approximately one year ago the NMFS Washington Office of Policy

and Planning did conduct a study to estimate the impact of shrimp

mariculture on U.S. markets. The study employed an econometric model

which forecasted shrimp prices under various scenarios of import levels.

The study also discusses hthe impact of surimi production.

-38-

STATEMENT OF INTEREST

for

Selected Research Needs of the Gulf and South
Atlantic Shrimp Fishery A Workshop

September 12-13, 1985
Holiday Inn
Madeira Beach, Florida

by

Paul J. Hooker, Ph.D.
Economist
Gulf of Mexico Fishery Management Council
Lincoln Center Suite 881
5410 West Kennedy Boulevard
Tampa, Florida 33609

My general interests in this workshop are two-fold. I am interested

in the economic research results that are or will be available for use

in evaluating the economic impacts of management measures on the shrimp

fishery. I am also interested in the use of modeling simulation

modeling in particular as a tool for accomplishing those evaluations.

The Gulf Council identified a number of "shrimp research needs" to its

Scientific and Statistical Committee during a recent meeting. An edited

version of the economic research needs is:

1. Determine the impacts of setting seasons/sanctuaries for fishing
and the consequent dislocation of portions of the commercial
fleet; e.g., the "Texas closure" and the Tortugas sanctuary.
This should address the economic impact of "in-shore/off-shore"
closures not only in terms of value of shrimp but also in terms
of employment and returns to labor and capital by demographic
classes.

2. Determine the economic impact of imports on U.S. industry.

3. Determine costs and earnings for vessels and boats, including
opportunity costs, tax shelter benefits and imputed nonpecuniary
income.

4. Estimate maximum economic yield.

-39-

5. Estimate employment levels and returns to labor.

6. Estimate the economic effects of discarding undersized shrimp.

7. Determine the effects of unrestricted entry.

8. Increase understanding of industrial organization, market
structure and behavioral relationships among economic units.

Some of these items have been addressed rather well, such as the recent

International Trade Commission study on imports. Some are so broad

as to be difficult to address in their present form, such as items 7.

and 8. Some are "sleepers", such as item 4. Once you start defining

"economic yield." Information certainly exists on all the items. One

of my tasks with the Gulf Council is to help refine the economic research

needs to reflect the information that exists and to state the needs

as tasks that are neither Gargantuan nor trivial.

My second interest is in simulation modeling as a tool for synthesizing

available information on a fishery system and providing a framework

for tracking the many dynamic behavioral relationships involved something

that most of us can do in our heads (or with non-computer extensions)

only for simple if not trivial systems.

I hear rumors about economists who have become disenchanted with

"modeling" and read comments that largere scale, long term modeling

of fisheries has, unfortunately, not yet proven to be very useful for

making management decisions." I am curious as to why, and suspect that

the usual communications gremlins are at work. I find it hard to accept

that there are economists so ingenuous as to be unable to get results,

given a sufficiently long time to work on a thing. If a scientist -

an economist in particular becomes disenchanted because his results

are not accepted by fishery managers or industry, then he is not made

-40-

of very stern stuff. I am not personally aware of any large-scale,

long-term simulation modeling of fishery economic systems for the purpose

of assisting managers to make decisions. I am willing to learn and

look forward to this workshop to provide an opportunity.

-41-

NMFS Southeast Region
Fishery Development Analysis Branch Economics Program

Richard Raulerson
National Marine Fisheries Service

The goal of the program is to provide timely economics information

to the fishing industry and to government agencies to help guide

investment or program decisions. The result will be better industry

investment decisions leading to a more profitable industry and better

government program decisions leading to better use of taxpayer dollars.

Most of the economics effort will be directed to the fisheries development

area, but some resources will be available for selected fishery management

and habitat concerns.

The economics program has set several objectives to reach the goal

of timely economics information:

1. To assemble and organize all available commercial fisheries
data so that the data can be easily used by the industry, the
economics program, Sea Grant, academic institutions, NMFS,
and others.

2. To provide industry and government with situation and outlook
information which describes the current state of the fishing
industry and provides useful forecasts of industry trends and
economic health.

3. To provide industry studies for the fishing industry which
describe the economic feasibility of new fisheries, new
developments or potentials in fisheries from harvesting to
marketing.

4. To provide information to government program managers which
will be used in development, management or habitat decisions.

5. To coordinate economics program activities with Sea Grant
economists and NMFS economists to make use of knowledge gained
by others while avoiding duplication of effort.

-42-

Each objective has associated projects, methodologies and outputs.

As a general rule, projects will result in written outputs, usually

reports, in less than a year from the start date and will use methods

which do not require large efforts to develop or use. Some projects,

e.g., situation and outlook reports, will be continued from year to

year, but will always have several associated outputs during a given

year. No project will be terminated due to lack of data, i.e., some

output will always be obtained based on available data.

-43-

Summary of Southeast Region Economics Program Outputs

Data Objective

Most of the data assembled for situation and outlook reports and
for industry studies will be displayed in those reports. Historical
data may occasionally be reproduced and published in special data reports.

Situation and Outlook Objective

Publication dates for quarterly situation and outlook reports:

Report Annual 1st Qtr 2nd Qtr 3rd Qtr

Finfish 2/1 5/1 8/1 11/1
Shellfish 2/10 5/10 8/10 11/10
Shrimp 2/20 5/20 8/20 11/20

All quarterly reports will.be published in the New Orleans Market
News Report.

Other situation and outlook reports will be longer and will be
published as needed. These reports will include longer supporting tables
and graphics. Brief summaries may be published in the NMFS Fishery
Market News Report, New Orleans, as appropriate. Some may be more widely
reviewed and submitted for publication, e.g. in Marine Fisheries Review,
others may support oral presentations to industry meetings and be
available for SERO distribution to selected individuals and in response
to specific requests..

Industry Studies Objective

Report Title Publication Date

Economics of Yellowfin Tuna Fishery October 1985
Potential of Southeast Butterfish Fishery September 1985
Economics of Gulf Menhaden Surimi FY 1986
Evaluation of Potential Candidate Species
for Surimi Production FY 1986
Potential of Gulf Squid Fishery FY 1986

Government Program Objective

Fisheries management documents will be reviewed by the economics
staff on request. Other government program analyses will be conducted
on a time-permitting basis as the occasion warrants.

Economics Coordination Objective

A meeting with Sea Grant economists in the southeast will be
conducted during FY 85. Sea Grant manuscripts and economics proposals
for national Sea Grant funding will be reviewed on a demand basis.
The office will serve as a major reviewer for manuscripts submitted
for the Marine Fisheries Review. Time will be made available to review
all manuscripts and proposals submitted for review.

-44-

Staff Responsibility for Program Objectives (lead person listed first)

o Program Leader Richard Raulerson
o Data John Vondruska, Jeffrey Cunningham and Richard Raulerson
o Situation and Outlook John Vondruska and Richard Raulerson
o Industry Studies Jeffrey Cunningham and Richard Raulerson
o Government Programs Richard Raulerson
o Economics Coordination Richard Raulerson, John Vondruska and
Jeffrey Cunningham

-45-

SHRIMP MODELING WORK

Wade L. Griffin
Texas A & M University

Significant modeling work has been carried on in the Department

of Agricultural Economics at Texas A & M University. A firm level

simulation model (FLEETSIM) was developed to analyze growth and survival

of a typical fishing fleet on the Texas Gulf Coast. The model simulates

the annual activities of an individual's fleet: harvesting, financial,

cash receipts, vessel replacement and depreciation, cash flow, income

taxes, balance sheet and growth. A typical fleet is replicated 50 times

over a ten year planning horizon. Random values for each vessel's

landings and prices in each of the 10 -years are generated from empirical

probability density functions for these variables. In trying to use

the model for policy analysis, it was discovered that we needed some

mechanism to change landings of the individual vessel based on changes

in the over all fishery. We are now beginning to develop a macro model

to link to the micro model that causes this change in landings over

time.

The General Bioeconomic Fisheries Simulation Model (GBFSM) will

be used to analyze the impact of the Texas closure on the Gulf shrimp

industry. The GBFSM is currently being modified to allow days fished

and vessel numbers to be determined within the model based on economic

conditions imposed by any policy. Stochastic values for critical

biological variables may be drawn from pre-specified distributions which

conform to existing information by the use of random generators available

in GBFSM. By repeating the process of drawing values from the

distribution for each critical variable and calculating landings, the

-46-

closure can be accessed under all possible future environmental

conditions. Probability distributions before and after the closure

can be compared for significant differences.

An optimization model for decision makers in the shrimp industry

is being constructed. The model includes an objective function and

equations of motions which consist of biological and economic parts.

The biological part is a system of stochastic difference equations which

describe the shrimp dynamics patterns in the Gulf of Mexico.

Particular attention is given to updating the shrimp biomass estimate

in any point of time. The economic variables' values will be provided

by vector autoregression (VAR). The final part includes an economic

analysis of the models' results for suggested policy.

An import model was developed to estimate the impact of shrimp

imports on the U.S. shrimp industry. Regression analysis was used to

estimate supply and demand equations. These equations were then

formulated into a simulation model that could address such questions

as import restrictions and tariffs.

-47-

STATEMENT OF INTEREST AND INVOLVEMENT

Charles M. Adams and Fred J. Prochaska

Assistant Professor/Extension Marine Economist,
Florida Sea Grant, Cocperative Extension Service
and Professor, respectively, Food and Resource
Economics Dept., Institute of Food and Agricultural
Sciences, Univ. of Florida, Gainesville, Florida

The Food and Resource Economics Department and the Florida Sea

Grant Program at the University of Florida have been and are currently

involved in several individual research efforts oriented toward addressing

economic problems which exist in the domestic shrimp industry. These

efforts are likely to continue with additional funding of the current

Sea Grant economics project at the University of Florida.

A number of reports and publications concerning the domestic shrimp

industry have emerged from this on-going research effort. The most

recent pertinent research includes...

(1) An M.S. thesis entitled "World Shrimp Production and Implications

for the United States Import Market" was completed which provided an

economic overview of world shrimp production and the implications for

the U.S. shrimp market. Trends in world shrimp production from wild

stocks by country were documented. In addition, current and anticipated

development in shrimp mariculture production was assessed. The domestic

impact of implementing restrictive trade policies by the U.S. was modeled

and analyzed in terms of exvessel prices, fleet size, scale of processing

operations, and consumer demand.

(2) A Ph.D. dissertation is in progress which will describe the

structure, conduct, and performance of the shrimp processing industry

in the Southeast region. This study will utilize data collected by

-48-

the National Marine Fisheries Service Southeast Center in -Miami. The

research will focus on the movement of processing firms in and out of

the industry. In addition, the movement of individual firms in and

out of the market for specific product forms of shrimp is to be addressed.

Market channels for shrimp products in the Southeast region will also

be examined.

(3) An econometric model was developed which further described the

impact on the domestic shrimp market of implementing restrictive trade

policies such as tariffs and quotas by the U.S. A simultaneous model

was estimated which consisted of expressions representing import demand,

import supply, exchange rates, and a market clearing equilibrium. In

addition, an exvessel price model and a. fleet entry-exit model were

estimated to further complete the analysis. The models were flexible

enough to be used to address the issue of increased levels of imported

mariculture product. The models in general were used to address the

incidence of implementing tariffs and quotas as a means of controlling

future imports of shrimp products, a large portion of which is expected

to be composed of mariculture product. A major finding was that although

tariffs would reduce imports, the increase in exvessel prices received

by domestic producers would be nominal while price increases faced by

U.S. importers would be substantial. Quotas would be necessary for

sizeable reductions in imports.

(4) A Ph.D. dissertation was recently completed which was entitled

"The Price Dynamics of the U.S. Shrimp Market". This study examined

the causal direction of price movement between market levels in the

domestic market on a monthly and quarterly basis. The major determinants

of exvessel, wholesale, and retail price for two distinct size classes

-49-

of raw-headless shrimp were identified. Expressions for margins between

market levels were developed. Price movements between market levels

appear to be recursive on a monthly basis but simultaneous on a quarterly

basis. Changes in factors which determine market prices have a larger

impact on smaller rather than larger size classes of shrimp. The model

developed can be used to assess the price impacts of expanded trade

or the implementation of restrictive trade or domestic closure policies

on market level and size class bases.

Research concerning the domestic shrimp industry is complemented

by additional research regarding the Florida oyster industry, aquacultural

development, small-scale commercial fishing industries, development

of the raw tuna industry in Florida, and others.

-50-

CONCLUSIONS AND IMMEDIATE RESEARCH RECOMMENDATIONS

The workshop succeeded in providing a listing of research needs

for each of the major discussion topics. To this end, the workshop

generated an assessment of the views and concerns of the participating

marine economists regarding issues-recognized to be of regional importance

in the Gulf and South Atlantic shrimp industry.

The participants recommended the continued support of the development

and refinement of empirical mathematical models which describe economic

relationships existing in the domestic shrimp industry on a local and

regional basis. An issue expressed to be of immediate concern was to

take an inventory of existing models that have been recently developed

for the various segments of the domestic shrimp industry and identify

how successfully these models have addressed management and development

questions. The participants also supported the need for initiating

research regarding the potential impact that seafood-based analog products

may have on the domestic shrimp industry. The majority of the impact

which may arise from substitution was suggested to be presently associated

with the crabmeat market. However, the lack of current data by which

to address many basic research questions was stressed as an overriding

concern. The workshop participants expressed the immediate need to

begin developing the data base necessary to address future research

questions that may develop. Problematic issues suggested to be less

constrained by data and to be of more basic and immediate concern were

(1) to examine the impact that surimi products have already had on the

crabmeat market and (2) identify the domestic and international market

forces that may have an effect on the availability and acceptance of

seafood-based analogs in general. Finally, participants provided

-51-

guidelines regarding research on the impact which arise from current

and increased levels of imported maricultured shrimp products. Any

future increases in the level of shrimp imports will most likely come

from increased supplies of maricultured shrimp products. A major area

of inquiry concerns the potential impacts on a size class basis. However,

the current lack of data which delineates imported maricultured product

in general and on a size class basis places severe restrictions on

the number and scope of research questions which can be addressed.

Emphasis was placed on the immediate need to correct these data

restrictions.

The shrimp industry is the most valuable component at dockside

of the commercial fishing industry in the nation and, more specifically,

the Gulf and South Atlantic region. Therefore, the potential for

developing regionally cooperative research efforts regarding the workshop

topics was discussed. Such an approach may be particularly timely given

recent National Sea Grant Office support toward the notion of establishing

the framework for a regional multi-institutional Sea Grant research

program, which could be coordinated with NMFS and the industry. The

development of a regional research proposal with participants each taking

responsibility for certain objectives was found to be a viable option.

The possibility of having a follow-up meeting to discuss a regional

approach and establish firm research priorities was suggested.

-52-

PARTICIPANTS

AFFILIATION AND ADDRESS

NAME

WADE L. GRIFFIN

KEN ROBERTS

PERRY PAWLYK

WALTER R. KEITHLY

Dept. of Agricultural Economics
Texas A & M University
College Station, Texas 77843
(409) 845-4291

Knapp Hall
Center for Wetland Resources
Louisiana State University
Baton Rouge, Louisiana 70803
(504) 388-2145

Knapp Hall
Center for Wetland Resources
Louisiana State University
Baton Rouge, Louisiana 70803
(504) 388-2145

Center for Wetland Resources
Louisiana State University
Baton Rouge, Louisiana 70803
(504) 388-2439

Food and Resource Economics Dept.
1170 McCarty Hall
University of Florida
Gainesville, Florida 32611
(904) 392-5054

Food and Resource Economics Dept.
1170 McCarty Hall
University of Florida
Gainesville, Florida 32611
(904) 392-5054

209 Barre Hall
Dept. of Agri. Econ. & Rural Sociology
Clemson University
Clemson, S.C. 29631
(803) 656-3374

FRED PROCHASKA

CHUCK ADAMS

ROBERT POMEROY

-53-

Room 34, Ecology Bldg.
University of Georgia
Athens, Georgia 30602
(404) 542-7671

J.E. EASLEY, JR.

JEFF CUNNINGHAM

JON VONDRUSKA

Dept. of Economics and Business
North Carolina State University
Raleigh, North Carolina 27695-8110
(919) 737-2885

National Marine Fisheries Service
9450 Koger Blvd.
St. Petersburg, Florida
(813) 893-3830

National Marine Fisheries Service
9450 Koger Blvd.
St. Petersburg, Florida 33702
(813) 893-3830

National Marine Fisheries Service
Fisheries Development + Analysis Branch
9450 Koger Blvd.
St. Petersburg, Florida 33702
(813) 893-3830

National Marine Fisheries Service
NOAA U.S. Dept. of Commerce
Washington, D.C. 20235
(202) 624-7261

RICHARD RAULERSON

DOUG LIPTON

LEE ANDERSON

College of Marine Sciences
University of Delaware
Newark, Delaware 19711
(302) 645-4252

-54-

FRED LYDA

JOHN POFFENBERGER

RAY RHODES

National Marine Fisheries Service
Southeast Fisheries Center
75 Virginia Beach Drive
Miami, Florida 33149
(405) 361-4261

South Carolina Marine Resource Center
P.O. Box 12559
Charleston, South Carolina 29412
(803) 795-6350

Gulf of Mexico Fishery Management Council
The Lincoln Center, Suite 881
5401 West Kennedy Blvd.
Tampa, Florida 33069
(813) 228-2815

P.J. HOOKER

JIM WATERS

NMFS, Beaufort Lab
Pivers Island
P.O. Box 570
Beaufort, North Carolina
(919) 728-4595

JACK GREENFIELD

DON SWEAT

Assistant Regional Director
Fisheries Development Division, NMFS
Duval Bldg.
9450 Koger Blvd.
St. Petersburg, Florida 33702
(813) 893-3271

Marine Extension Agent
12175 125th Street, North
Largo, Florida 33544
(813) 586-5477

-55-

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