Presentation on theme: "Review and Analysis Method at Farm Level"— Presentation transcript:
1 Review and Analysis Method at Farm Level AQUACULTURE ECONOMICSReview and Analysis Method at Farm LevelPongpat BoonchuwongFisheries Economic Division Department of Fisheries
2 Contents Introduction Economics of Aquaculture: Classification and Factors AffectingTools of Research: Record, analysis, and Survey
3 INTRODUCTIONHalf of the world’s population depends on fish as a principle source of animal protein.In many country, people derive more than 50 percent of their daily animal protein requirements from fish.
4 Fish is also second only to rice in the diets of low-income people of many developing country. Fish is an importance component of total human food consumption and, to a lesser degree, of animal feed.It is nutritionally equivalent to meat in protein, high in essential minerals, and low in saturated fats.
5 ADVANTAGE AND IMPORTANCE OF AQUACULTURE First :Fish culture is stock raising, as opposed to hunting. Stock raising is more efficient than hunting in harvesting a resource because extensive search efforts are not required; thus, harvest is proportional to effort and be predicted.Second :Environmental conditions can be largely controlled and genetics can be manipulated to improve yield.
8 ECONOMICS OF AQUACULTURE: Classification and Factors Affecting ContentsClassification of Aquaculture SystemFactors Affecting the Economics of Aquaculture
9 Classification of Aquaculture System CriteriaKinds1. Purpose of cultureHuman food, Improvement of natural stock, Ornamental Fish, Sports and recreation, Bait, and Industrial product2. National of enclosurePond Culture, Cage and Pen culture, Raceway Culture, Raft Culture, and Closed high-density culture3.Food habitHerbivorous Species, Carnivorous Species, and Omnivorous Species4. Sources of fryNatural waters, Captured gravid females, and Hatching5. Level of management intensityExtensive Farming, Semi-intensive-Farming, and Intensive Farming
10 Criteria Kinds 6. Number of species stocked Monoculture (single species), and Polyculture (more than one species)7.Water salinityFresh water, Brackish water, and Marine water8. Water movementStanding Water, and Running Water9. Water temperatureCold water, and Warm water10. Combination with agriculture productionRice-fish farming, Poultry-fish farming, and Pig-fish farming
11 Factors Affecting the Economics of Aquaculture The producers’ profit or net income per unit (Y) of land or water area is mainly affected by production (Q), the cost of production and marketing (C), and the price received (P), as shown in the basic equation below:Y = Q.P - C
12 (Increase in Production) (Reduction in Cost) Y = Q P - C(Increase in Production)(Reduction in Cost)Stocking RateSurvival RateGrowth Rate(Increase in farm Prices)Quality of fishSeasonality and social customsCooperative marketingDifferent markets and productsCost of constructionCost of fertilizer and feedCost of seedCost of laborCost of waterInterestMarketing costLand leaseFertilization & FeedingPolycultureAerationStock Manipulation- Multiple size- Same size in a system- Double croppingGood pond ManagementCorrect stocking rateRight kind and amount feed/fertilizerProper water qualityPrevent diseases & parasitesElimination of predators
13 INCREASE IN PRODUCTION 1. Increasing Stocking RateFertilization and supplementary feedingPolycultureStock manipulationMultiple-size stockingSame-size stocking in a system of pondsDouble croppingAeration:Running water and aeration can also increase the dissolved oxygen of the pond water, and hence the stocking rate
14 2. Increasing Survival and Growth Rates Correct stocking rateThe general formula for determiningthe appropriate stocking rates and stocking ratios is as follows:S = [A.Q/(W2 –W1)]/HS = stocking rate (number)A = size of fish pond (ha)Q = expected yield per ha based on experiences of previousyears (kg)W1= average weight of individual fry or fingerling whenstocking ( kg)W2= expected average weight of individual fishwhen harvesting ( kg)H = harvesting rate (percent)
15 Proper water qualityWater temperature and dissolved oxygen are two major factors that affect the water quality, and hence the survival and growth rates of fish.The amount of dissolved oxygen needed by fish usually varies according to the species. The oxygen content of a pond depends on the quantity of organic matter, the submerged aquatic vegetation, and the water temperature.Diseases, parasites, predators, and competitors are factors that inhibit successful pond production. Certain diseases cause considerable losses of the crop, especially under intensive farming. High-stocking density, water pollution, and inefficient farming conditions promote fish diseases.
16 REDUCTION COSTS OF PRODUCING AND MARKETING 1. Cost of ConstructionThe primary considerations in site selection are topography, water supply, and soil quality. The ideal location for a fish pond is on flat land.The size, shape, and depth of the pond and the clearing work required also affect the cost of construction.As costs of construction increase in proportionto depth, excavation should be minimized.
17 2. Cost of Feed and/or Fertilizer Feed and/or fertilizer are probably the most important cost items for intensive aquaculture. In many cases they compose more than 50 percent of the total cost of production.Cost of feed per unit of fish production (Cf) depends primarily on two elements: the conversion ratio of fish to flesh (R) and the unit price of feed (Pf) as shown in the following simple formula:Cf = RPfThe cost of feed can be reduced by an improvement in the conversion ratio or by lowering the unit price of feed, or by a combination of these two factors.
18 The economic principle of feeding is that the amount of feed should be at a level where the additional cost of feed equals its additional revenue.The relationships between the effectiveness of different kinds of feed or combination of feed and their costs should be studied in order to determine the optimum level of feeding or the least-cost combination of feeds.It would not be economically feasible to produce larger sizes if the increased cost of feed could not be offset by the increased unit price of larger fish.
19 Species Country % Reference Cost of Feed and Fertilizer as Percentage of Total Production Cost for Selected SpeciesSpecies Country % ReferenceSepat Siam Thailand 11 OAE, 1995Rohu Thailand 28 OAE, 1995Silver Barb Thailand 35 OAE, 1995Catfish (Pangasius) Thailand 38 OAE, 2000Nile Tilapia Thailand 39 OAE, 2000Catfish (Clarias) Thailand 73 OAE, 2000Striped Snake-head Thailand 74 OAE, 2000
20 3. Cost of SeedA reliable supply of good quality fish seed (fry, fingerlings, etc.), obtained at a reasonable cost, is one of the most important requirements for aquaculture.The price of fingerlings is higher than that of fry, but the survival rate of fingerlings is also relatively greater. Under certain conditions, the cost of seed per unit of marketable fish would be lower and growth period shortened if one starts with larger fingerlings rather than small fry.Large fish farms may benefit from their own hatcheries and small fish farms would benefit from central hatcheries operated either by government or by cooperatives.
21 4. Cost of LaborLabor cost is one of the major expenses of aquaculture because, in most cases, mechanization has not yet been inefficiently developed to replace the intensive use of labor. Harvesting, feeding, and maintenance are the major time consuming tasks. Therefore, efficient management and use of labor are essential in reducing the cost of production.When capital is limited and family labor is relatively abundant—which is true in many developing countries.Both labor and capital can vary, which is usually true in the long run, substituting one for the other might be desirable. Of course, the rate of substitution is related to their relative productivities and prices.
22 5. Cost of WaterIn many places good quality water, especially freshwater, is one of the major limiting factors for aquaculture because it is in great demand for other uses.In selecting sites for freshwater fish culture, effort should be made to locate the ponds in areas accessible to the water supply, e.g., near streams, rivers, groundwater, etc.In many cases, water recycling or water treatment for reuse is necessary and would increase the quantity of a given water supply many times.
23 6. InterestThe rate of interest varies with the supply of and demand for capital and with the risks involved in an operation.The risks involved in aquaculture are relatively high because of several factors: 1) the limited knowledge about controlling diseases and parasites; 2) the difficulty of reproducing species in captivity and controlling predators; 3) the lack of experience in managing dense populations of aquatic animals; 4) water population and storm and flood damage are also risks involved in fish culture.Investors in aquaculture encounter high interest rates because of the shortage of capital and the high risks involved.
24 7. Land LeaseThe value or the rental price of land varies mainly with its quality and its alternative uses. In selecting a construction site for a pond, effort should be made to avoid choosing valuable lands that could have competing or conflicting uses.Government intervention either by laws and regulations or by leasing public lands suitable for aquaculture may improve the situation.
25 8. Marketing CostsMarketing costs include preservation, processing, storage, transportation, commission, and waste.Fish is a highly perishable commodity. Poor transportation and marketing facilities also decrease farm price because they result in poor quality and oversupply.Government support for improved transportation, storage, and ice plants, marketing cost can be substantially reduced; consequently, production, either through direct or indirect effect of higher profits for producers, can be increased.The development of cooperatives or associations might increase marketing efficiency and lower marketing costs.
30 INCREASE IN FARM PRICES 1. Improvement in the Quality of FishMost of the production from fish ponds in Asia countries is sold while the fish are still fresh.Low quality, spoilage, and waste reduce the average price that the farmers receive.The quality of fish can be improved through proper preservation during transport and storage. Fish farmers will benefit from preserving their products as long as the cost of preservation is less than the benefit they gain. Well-graded fish usually command a higher price in the market than assorted sizes of fish.
31 2. SeasonalityThe price of fish usually fluctuates seasonally as a result of variations in the supply and demand.Stability—and perhaps even an increase in the average price farmers receive for their stock—are possible with a phased stocking operation, which promotes harvesting at desirable times with respect to the demand for and price of fish.The demand for and price of fish are usually high during the off-fishing season and the holidays associated with the local social customs. This practice is feasible only if the seasonal high can be predicted and the costs associated with a change in production pattern are less than the gains in price received.
32 3. Cooperative Marketing and Different Markets and Products The small-scale fish operators are usually in a weak bargaining position and often receive very low prices for their product. The situation may be improved through collective bargaining by fish pond operators’ associations or cooperatives.A regulated and sorted supply of fish means greater stability in price and, on the average, higher prices.Wasted time and unnecessary transportation costs can also be eliminated.Allocating fish to different markets and selling them in different forms (fresh, frozen, salted, smoked, etc.) may also increase the average price and maximize revenue.
33 TOOLS OF RESEARCH Record, Analysis, and Survey Contents:Record Keeping and Analysis for Fish FarmsInput recordsOutput recordsAnnual (or seasonal) recordsAnalysis of the farm operationThe Socioeconomic SurveyDetermining objectives of the surveyDeveloping sampling methodsAnalyzing data
34 RECORD KEEPING AND ANALYSIS FOR FISH FARMS The collection and analysis of data on costs and earnings based on farm records provide the information necessaryTo determine the relative profitability of various production techniques or systemsTo compare the productivity of major inputs, such as land, labor, and capital, with that of alternative production activitiesTo improve the efficiency of the farm operation
35 INPUT RECORDSVariable inputs : Variable inputs or variable costs are those varying with the level of production, such as fry, feeds, fertilizers, labor, pesticides, fuel, electricity, and waterFixed inputs : Fixed inputs or fixed costs are those that do not change with the level of farming activity, such as land rent, tax, interests, insurance premiums, depreciation on fixed assets, salaries of manager, and technicians
36 VARIABLE COSTSFor instance, if polyculture is practiced, then the stocking materials should be classified by stocked species and by size of the stocking materials, such as fry or fingerlings.Feed used should be specified by particular kind, such as pellet, rice cake, soybean cake, and trash fish. When fertilization is involved, the kind of fertilizer used should be specified, such as poultry or pig manure, tobacco waste or inorganic fertilizer. Each item, its amount, its unit cost, and its total cost should be recorded.Fish farming activities require labor, and it is better to keep a separate record for labor. Wage should include both in-cash and in-kind payments. The farmer must also record his family members’ labor as input.
37 FIXED COSTSFixed costs are usually payable on an annual, quarterly, or monthly basis and should be record separatelyA list of fixed assets with their initial or current costs and their estimated years of economic life is required to calculate depreciation.Depreciation = (Initial cost – Salvage)/ economic lifeThe current replacement cost, instead of the original cost of fixed assets or items that were constructed or purchased long ago, should be used for computing depreciation.It is important to note that land is not depreciable.
38 If the fixed assets are shared between aquaculture and other farm activities, an appropriate proportion should be determined before computing depreciation.If the farmer takes a loan to build fish ponds and/or buy equipment, it is important to keep a separate record for each loan, i.e., a record stating the purpose of the loan, the outstanding amount, and the interest payment.Cost of permanent personnel should include the salary and cost of fringe benefits, excluding the portion worked at other activities not related to fish farming.
39 Table 2.1 Sample Daily Records of Variable Inputs a a Each fish pond, or group of ponds in similar condition, should have a record of inputs.b Item of variable input, such as seed, feed, fertilizer, electricity, water, fuel, and oil, etc.c Kind of each input item. For instance, kind of send may be tilapia fry, or Chinese carp fingerlings, etc., or a combination of them; kind of feed may be rice cake, or soybean cake, or trash fish, etc., or a combination of them. Each kind of input item should be listed.d Quantity of each kind of input and its unit used such as kg , ton, etc.e Such as cost per kg, per ton, per 1000 fry, etc.f Quantity multiplied by unit cost equals total cost of each input at a time.
40 Table 2.2 Sample Daily Records of Labor Inputs a a Each fish pond, or group of ponds in a similar condition, should have a record of labor input.b Economic activities of fish farming can be classified as: pond preparation, fertilization, stocking materials acquistion, stocking, feeding, maintenance, harvesting, and marketing.c Such as adult, child, male, female, etc.d Number of man/day or man/hour should be specified.e Wage rate per man/day or per man/hour. Wages in kind should be imputed into value by using the market price of the product.
41 Table 2.3 Sample Records of Fixed Inputs a Item of fixed input such as rent, tax, salaries of manager and technicians, insurance premiums, etc.b Monthly salaries of the manager and technicians should include the cost of fringe benefits and exclude the portion worked on other activities not related to fish farming.
42 Table 2.4 Sample Records of Loans a a It is better to keep a separate record of each loan.b Such as pond construction, purchase of particular equipment,operating expenses, etc.
43 Table 2.5 Inventory of Assets and Calculation of Depreciation
44 a Acquisition cost may be used to calculate depreciation for short-lived assets and for assets constructed or purchased recently.a Prevailing market value should be used to calculate depreciation for those assets that were constructed or purchased long ago.c The estimated salvage value of the assets at the end of their economic life.d The differences between columns (1) and (3) or (2) and (3)e The number of useful years of the asset.f The proportion of the asset used for fish farming or for a given pond operation.g Depreciation is calculated by diving column 4 by column 5 and then multiplying by column 6.
45 OUTPUT RECORDSAll the details of the following items should be included in the record: date of harvesting, species harvested , and the disposition of the product.Gross revenue of the production should include the cash and credit sales of the products and the imputed values of the quantities consumed on the farm.
46 When continuous stocking and harvesting is practiced, the change (increase or decrease) in the value of inventory should be included in the calculation of the gross revenue.a Such as fry, fingerlings, growers market size, etc.b Number or kg of each type stock in the pond.c Difference between the values of beginning and ending inventories.
47 ANNUAL (SEASONAL) RRCORDS At the end of the year or each production cycle, the quantity and value of production by species and the operating costs by item of each fish pond or group of ponds in similar conditions should be summarized.All factors should be recorded directly from the daily farm records onto a single-page table so that the performance over the whole period can be seen at a glance and evaluated
49 ANALYSIS OF THE FARM OPERATION Based on annual records, several indicators that evaluate the performance of an operation can be calculated.- Profit- Average rate of return on investment- Average rate of return on operating cost- Yields (or value of output) per unit of major input- Cost of input per unit of output- Amount of major input per unit of land or water surface- Amount of major input unit of protein output
50 Profit Profit = TR – TC Where; TR = Gross revenue TC = Total cost of production
51 Average rate of return on investment Average rate of return = Profit/Initial investmentIt represents the average earning power for the investment. This measure is useful for those fish farmers who invest a substantial amount in capital items.
52 Average rate of return on operating cost Rate of return on operating cost = Profit/Operating costThis is a useful measure for those fish farmers who farm on rental basis.
53 Yields per unit of major input kg/ha or kg/per unit of water surface,kg/man-hour, kg/unit of feed or fertilizer,kg/unit of capital, etc.These indicators can be used to measure the efficiency of the operation. However, they usually indicate the relationship of one input to one output without considering the quality of the major input or the quantities of the other input.
54 Amount of input per unit of output (or cost of input per unit of output) - cost/kg,- man-hour/kg,- unit of feed or fertilizer/kgThese measure capital intensity, labor intensity, feed and fish conversion ratio respectively, as well as efficiency. Again, each of these measures ignores the variation in quality and quantity of the other inputs.
55 Amount of Major Input per Unit of Area - capital/ha,- man-hour/ha,- feed or fertilizer/haThese indicators also measure the intensity of operation and the possible impact on credit, employment, and necessary feed or fertilizer.
56 Amount of Major Input Unit of Protein Output - cost/unit of protein,- man-hour/unit of proteinThese indicators measure the efficiency of protein production as compared with alternatives.
58 SUMMARY OF KEY INDICATORS These key indicators are not only useful for fish farmers but also for and policymakers who make comparisons among different farm groups classified by size of farm, farming techniques or systems, location, pond ownership, and so on.In making comparisons, it is important to group the farms by either one characteristic (size, technology location, ownership, etc.) or a few characteristics (identical location and size, technology and location, or ownership and technology).For instance, to compare the profitability and efficiency of farms whose sizes are different, one can group farms using similar techniques in the same region and having similar kinds of ownership into several size groups for comparison. It is not necessary to compute all of the indicators, only those that relates to the specific objectives of the study.
59 THE SOCIOECONOMIC SURVEY • The basic premise of the survey is that thedata furnished by the respondent representsan honest effort to answer the questionsthat are asked in a personal interview ora mail questionnaire.• The survey is an extremely important methodof providing basic information about currentstatus, problems, and constraints onaquaculture development and on policymaking.
60 Procedure of Socioeconomic Survey • Define the problems and objectives• Determine the sample plan• Develop a questionnaire• Gather the data• Analyze the data
61 DETERMINING OBJECTIVES OF THE SURVEY - To examine the socioeconomic status and practice of the aquaculture industry (by species) from fry gathering (or production) through pond rearing, harvesting, processing, and marketing;- To analyze the details of production costs (fixed and operating) and the returns from different culture techniques and systems (intensive versus extensive, monoculture versus polyculture, etc.) used on various farm sizes and in different locations;- To identify the major factors affecting the productivity and profitability;- To study the market potential and to examine the market structures and channels; and- To identify the socioeconomic constraints on development.
62 DEVELOPING SAMPING METHODS The method best suited to the survey should be selected.1. Simple random sampling. In this approach, a sampleof size n is drawn from a population of size N in sucha way that every possible sample size n has thesame chance of being selected.2. .Stratified random sampling. The population is firstsubdivided into non-overlapping sub-populations orstrata. Then a simple random sample is drawn fromeach sub-population or stratum.3. Cluster sampling. This method may be defined as, asimple random sample in which each sample unit isa collection or a cluster of elements.4. .Systematic sampling. In this method, a sample isobtained by randomly selecting one element fromthe first K elements in a sampling unit and every Kth element thereafter.
63 CREATING A QUESTIONNAIRE Principles in creating a questionnaire- Simple words and sentences should be used;- The questionnaire should be as short as possible;- The questions should be easy to answer (a check list is often a useful method of presenting questions); and- The order of the questions should encourage a direct and logical flow of thought.
64 Pre-test• It is very important that it be tested in the field before beginning the general survey.• This initial test will determine the weaknesses in the questionnaire; thereafter, further testing and revising should be continued until test questionnaire is perfected.
65 COLLECTING DATAThe accuracy of the survey will be enhanced if the interviewers are well trained. All interviewers must fully understand the purpose of the survey, the sample plan, and the questionnaire itself. They should be carefully instructed on conducting the interview, the meaning and reasoning behind each question, and the manner of recording specific comments.Most of the operators of small fish farms in the developing countries do not keep records and their memories may be faulty. They sometimes give low figures on production and high figures on cost for tax collection purposes. In this case, multiple visits may be necessary to confirm data.
66 ANALYZING DATAData analysis is the core of a survey. Each specific objective requires separate consideration and appropriate analytical techniques. The appropriate analysis need not be complex; a good description with cross tabulation and graphs may be adequate in some cases. However, statistical methods may be necessary for estimating, predicting, testing significance, etc.To test whether a particular performance or two groups is significantly different, the z-test is usually used for large samples and the t-test for small samples. The F-test is frequently used to test the effectiveness of different treatments in the experiment. Finally, the chi-square test deals with the analysis of counted data that tests compatibility of observed and expected outcomes.
67 Sample List of Items for Socioeconomic Survey A. General Information(1) Name of respondent(2) Address of respondent(3) Location of Pond(4) Pond areas:(5) Water Supply(6) Experience: Years farm in operation(7) Pond ownershipB. Stocking/Pond No.(1) Beginning inventory(2) Cost or fry per crop(3) Source of stocking materials(4) How is price of fry/fingerlings determined(5) Number of stocking per crop
68 C. Feed/Fertilizer/Pesticides/Pond No (1) Type : Feed, Fertilizer, Pesticides, Supplementary feed(2) How knowledge of feeding/fertilization/pesticidetechnique acquiredD. Labor/Pond No.(1) Labor (man/hour) required for crop (Family labor)Pond preparationStockingFeedingFertilizationWeedingRepair and maintenanceHarvestingProcessingMarketingOther
69 E. Harvesting/Pond No. (2) Payment (Hired labor) Caretaker Hired (3) Annual salaries and wages of management personnelManagerTechnicianE. Harvesting/Pond No.(1) Production/crop(2).Ending inventory
70 F. Marketing G. Loans (1) Channels and costs Direct sale Auction sale Cooperative sale(2) Method of payment: Cash, Credit(3) Sale to same buyersG. Loans(1) Loans borrowed for initial capital(2) Sources of loans , amount of loans and interest(3) What factors accounted for the choice of the particular source(4) What problems do you encounter in borrowing
71 H. Other farm expenses for entire farm Fuel and oilElectricityWaterSuppliesInsuranceTaxesOthers (specify)
72 I. Inventory of Assets (1) Pond Levees Sluice gates Water canals Pond excavationWellOther (specify)(2) BuildingsOfficeResidence (on farm)Caretaker’s houseStorageOther (specify)(3) TransportationMotor boatTruckOther (specify)
73 J. Problems and Other Information (4) Nets(5) EquipmentPumpGeneratorFeeding machineRefrigeratorFeed mixtureOther (specify)J. Problems and Other Information(1) What problems are encountered in the industry?Unfavorable price structureLack of proper infrastructureUnavailability of creditShortage of fryHigh price of inputs such as feed, fertilizer, ice, Fuel.Limited marketLack of extension serviceLack of skilled workers
74 (2) Can government help to improve the industry? (3) Percentage of operator’s income from fish culture(4) Source of other income (specify)(5) Mortality rate from stocking to harvesting (percent)(6) Number of harvests per crop(7) Reason for harvesting schedule:To optimize productionTo get highest priceAvailability of fry restockingNeed for money(8) Method of harvesting