- Economic Impact of the Catfish Yield Verification Trials
Aloyce R. Kaliba and Carole R. Engle
Yield verification programs are public demonstrations of the
implementation of research-based Extension recommendations on a
commercial-scale. Participating farmers agree to manage a section
of their farm according to extension recommendations. Cooperating
farmers keep records on production inputs and outputs. Extension
personnel monitor various production parameters and make
management recommendations to the producer on a regular basis. The
data are analyzed to determine the economic gains associated with
adopting the extension recommendations. The objective of this
study was to estimate economic returns from the pilot CYVT trial.
Economic benefits of the trial were estimated as economic surplus
accrued to consumers and producers, generated after adopting the
new management recommendations arising from the trial. A variable
factor proportions and a four-commodity model was used to estimate
changes in producers' and consumers' surplus due to increased
quantities of catfish retail products (i.e., whole catfish fish,
catfish fillet, steak, and nuggets). Increased quantities of
catfish retail products are due to a research-induced shift in
supply of live catfish. The sum of accrued net economic surplus by
Arkansas catfish farmers and U.S. consumers minus the CYVT
investment cost was used to generate 11-year (1993-2002) flows of
net economic benefits, and to estimate three economic
profitability measures (i.e., Internal Rate of Return (IRR);
Modified Internal Rate of Returns (MIRR); and Net Present Value (NPV).
On average, the change in economic surplus for catfish producers
in Arkansas was $61 million for the entire 11-year period. The
average gain per year was $11 million. Total consumer's economic
surplus and total net returns were $6 and $67 million,
respectively. On average, catfish consumers gained about $1
million every year, for 1993/02. These results represent a
distribution of benefits between producers and consumers of 92%
and 8% respectively. All three economic profitability measures (IRR,
MIRR, and NPV) were positive, indicating that the CYVT was
economically profitable. Sensitivity analyses were conducted to
analyze the effect of varying the elasticity of substitution and
supply elasticity of live catfish. The results indicate that
adoption of extension recommendations should reduce the cost of
producing catfish by more than 5% for the trials to be
economically profitable.
- Cost Efficiency of Catfish Farms in Chicot County,
Arkansas: The impact of extension services
Aloyce R. Kaliba and Carole R. Engle
Cost efficiency measures of a sample of catfish farms in Chicot
County, Arkansas were estimated using a data envelopment analysis
technique. The technique was used to estimate minimum costs of
each sample farm under constant, variable, and non-increasing
returns technology. Input-output data used in the analyses were
collected from 44 catfish farms in Chicot County, Arkansas. Data
collection included both mail surveys and personal interviews.
Five inputs were used for cost efficiency analysis: labor, cost of
electricity for aerating the ponds, quantity of
fingerlings/stocker, quantity of feeds, and miscellaneous costs.
Overall and pure cost efficiency for each farm were estimated as
ratios of the possible minimum cost under constant and variable
returns-to-scale technologies, respectively, to the actual cost
incurred in production. The minimum cost under non-increasing
returns-to-scale was used to determine if the production was
characterized by decreasing or increasing returns-to-scale. In
determining factors affecting cost efficiency, pure cost
efficiency was regressed on operator’s characteristics, farm
practices, and institutional support services available to the
farmers. Estimated overall and pure cost efficiency scores were
relatively low indicating that there was room for greater
improvement. About 61% of the farms were over 80% scale efficient.
This indicates that, while most of the catfish farms were
operationally inefficient, they were of optimal size. Most catfish
farms could become more efficient by adjusting input use rather
than by adjusting scale of operation. However, this study was
conducted when catfish price was very low. As farmers struggle to
meet short-run financial obligations, some of the decisions for
financial survival made may have been sub-optimal. However,
balancing feeding rates and stocking densities may achieve the
greatest cost efficiency improvement. Experience of the operators
and extension contacts were important factors that influenced pure
cost efficiency in a positive manner. The marginal value of
Extension services in Chicot County was estimated to be $2,988 per
contact. Based on the number of contacts, the Extension services
saved the catfish industry in Chicot County about $5.6 million.
Strengthening existing Extension services in the area is of
paramount importance for the catfish industry.
- Risk Analysis of Trout Aquaculture in Transylvania County,
North Carolina
Aloyce R. Kaliba and Carole R. Engle
Commercial trout farming started in NC more than 45 years ago.
North Carolina ranks second behind Idaho in trout production. In
2002, 21 of the 57 firms in North Carolina were located in
Transylvania County. Data on resource inputs and production levels
collected from 13 of the 21 trout farms in Transylvania County
were used to develop enterprise budget for a medium-sized farm
producing 68,182 kg/year (150,000 lb/yr). The estimated net return
was $8,644. Simulation was conducted to assess the impact of price
and production variability on net returns. The results show that
when price and production variability are considered, about 36% of
the farms were not likely to breakeven and 18% of the farm were
likely to get less than $8,644 in net returns. Only 45% of the
farms were likely to get above $8,644 in net returns.
- IQF Catfish Retail Pack: A Study of Consumers' Willingness
to Pay
Kwamena K. Quagrainie
The catfish industry may be interested in grocery retail sales of
catfish because of the competitive nature that imported catfish
fillets pose at foodservice market channels. The study examined
the potential for selling a household-size pack of IQF 6-fillets
of catfish through the grocery market channels, and consumers'
willingness to pay for the product. Data used were obtained from a
survey conducted in selected southern US cities. Results suggest
that households will purchase such grocery retail packages and
will be willing to pay an average price of $4.37/lb. Important
factors found to affect willingness to pay include; fish buying
patterns, household size, race, age and gender.
- A Study of the Catfish Preferences of Restaurant Outlets
Kwamena K. Quagrainie
Catfish is mostly sold through the food service sector, i.e.,
restaurants. In order to expand catfish sales in non-traditional
catfish areas, it is very important to understand the preferences
of restaurants as these establishments’ purchasing behavior
reflects consumer demand. A nation wide survey was administered to
all the restaurants listed in the Chain Store Guide® 2003. A total
of 900 surveys were mailed out and 98 surveys were completed and
returned (11% response rate). Sixty percent of the respondents
indicated that their restaurants served US farm-raised catfish.
The major forms in which these restaurants purchase the catfish
are fresh-on-ice (60%) and frozen (47%). Quality, reliable supply,
price and taste in that order are the important factors which
governs the fish purchasing decision of restaurants manager
nationwide. The closest substitutes for US farm-raised catfish as
indicated by restaurant manager were tilapia (48%) basa/tra (22%),
pollock (16%), orange roughy (8%) and cod (6%). The top five
selling seafood species in restaurants nationwide that served
catfish was catfish (55%), shrimp (53%), tuna (39%), flounder
(28%) and bass (26%). Sixty-one percent of restaurants that
currently do not serve catfish were selling catfish before. These
restaurants also indicated that tilapia (40%) and basa/tra (20%)
were substitutes for US farm-raised catfish. The findings of this
study suggest that the catfish industry needs to focus on product
quality, consistent supply and freshness of the product to beat
the competition from the substitutes and regain the lost market.
Marketing efforts should be directed to increase customer demand
in non-traditional catfish belt of the US in order to expand
catfish sales.
- A Study of the Catfish Preferences of Supermarket Outlets
Kwamena K. Quagrainie
Supermarkets can play a vital role in the expansion of catfish
sales outside the traditional catfish consumption areas of the
southern states. The choice of handling or providing shelf space
to specific aquaculture products by supermarket managers enables
them to indirectly influence the consumer choices or control
consumer access to various aquaculture products. In order to
understand the latest perception of supermarket managers regarding
US farm-raised catfish, a nation wide survey was administered to
all supermarkets listed in the Chain Store Guide® 2003 that sell
seafood. A total of 1,800 surveys were mailed out and 186 surveys
were completed and returned (10% response rate). Distributors and
wholesalers were the major suppliers of farm-raised catfish
products to 88% of supermarkets followed by direct from processor
(6% of supermarkets), and food brokers (4%). Supermarkets
purchased catfish in the form of fresh-on-ice (58% of
respondents), frozen (49%), value-added products (9%), packaged
(7%) and cooked (1%). Supermarkets sell more fillets (68% of
respondents), 11% sell more nuggets, 10% sell more whole fish, and
2% sell more value-added products. Twenty-nine percent of
supermarket managers indicated that tilapia is the closest
substitute for farm-raised catfish. Others indicated basa/tra (20%
of respondents), bass (7%), cod (6%) and pollock (4%).
Seventy-three percent of supermarket managers indicated shrimp as
the top seafood products in terms of sales value. Others indicated
salmon (62% of respondents), catfish (56%), tilapia (37%), and cod
(37%). For supermarkets that do not handle catfish, the reasons
given for not handling catfish include lack of demand (53%
respondents), consumer attitude (12%), inconsistent supply (6%),
and storage problems (6%). The study suggests that the catfish
industry needs to further improve the quality of its product.
Industry needs to work on packaging and appearance as indicated by
supermarket managers. Supermarkets are ready to add catfish in
their product lines if consumers demand it and quality is
guaranteed.
- Contracting as an Alternative Marketing Strategy: Evidence
from Arkansas Catfish Farmers
Kwamena K. Quagrainie
It is believed that food processors are generally less risk averse
than farmers so that processors shift some risk from farmers in
order to increase their profits. But in the catfish industry,
processors are not well diversified and have a limited ability to
bear risk. Over 93 percent of farm-raised catfish are sold through
fish processing companies. If we assume that catfish processors
behave as other food processors, then catfish processors, being
relatively concentrated, dictate the terms of transactions for the
purpose of profit maximization. However, some processors of late
have been willing to bear some market risks through selling
delivery rights. To fully understand the development of catfish
markets and contracts, it is necessary to understand whether
catfish processors, being concentrated but not well diversified,
are more risk averse and/or have less ability to absorb risks from
producers. This relationship in terms of risk aversion between
processors and producers would imply that catfish processors are
more likely to offer terms of trade that do not shift risk from
producers. Additionally, if catfish processors are facing price
risk in their terms of trade from retailers, they are more likely
to pass that risk on to producers. The study examines the risk
shifting characteristics of cooperative processors versus
independent processors.
- Catfish Quality Differences and the Impact of Imports on
the US Catfish Industry
Kwamena K. Quagrainie
The United States lifted a trade and investment embargo against
Vietnam in 1994 paving the way for normal trade relations between
the two nations. Currently, Vietnamese basa accounts for over 95
percent of the catfish products imported into the U.S. The seafood
market demand in the U.S. is large and with the relative strength
of the dollar and a bilateral trade agreement with Vietnam, it is
expected that Vietnamese exports of aquaculture products into the
U.S. will continue to grow. Since 1998, Vietnam has become the
largest exporter of competing fillets to the US. The species from
Vietnam are the Pangasius hypothalamus and Pangasius bocourti. US
farm-raised catfish is the channel catfish, Ictalurus punctatus.
This study will examine factors that affect trade flows of catfish
from Vietnam to the US as well as any quality differences between
the Ictalurus punctatus and the Pangasius species. The potential
differences will help to differentiate US farm-raised catfish from
the competition. Unique qualities of catfish can be used in
product promotion.
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