Title: The economics of shrimp culture in Iran and future strategies

Author(s): Reza Faizbakhsh
Type:
Final project
Year of publication:
2003
Publisher:
UNU-FTP
Place of publication:
Reykjavík
Number of pages:
96

Abstract

A cost-benefit analysis (CBA) was conducted in this case study to determine the most economically efficient way of production in the shrimp culture in Iran. The goals of this analysis are to provide a tool that can founded profits. And uses for efficient policy making are to shrimp culture strategies for the future. This paper is including: When the looking at the analysis results, we can understand average shrimp production increases in 1998-2002. Average revenues increases in the 30 farms. But average total costs increases rapidly. Therefore Average profit in the 30 farms was in 1998 to 1999 increased, but decreased and go to the big lost in 2002. To increase profits the costs must be lowered and a decrease in the three largest factors, feed, labour, and post larvae, would matter the most. .In 2002 the industry operated at severally unprofitable levels. Industry losses in 2002.

Feed cost is one of the important costs in the shrimp farming. In fact productivity increased and cost per unit decreased during 1998 to 2002. In the future if the technology increased FCR come down, shrimp culture farms have possibility to decreases feed costs in the future.

Labour costs are one items important cost in the operating shrimp costs. In fact labour costs increased during 1998 to 2002. But if using new methods in the farm should be can decreased labour costs in the future.

Generally in this case study need for reduction capital costs like interest rate or depreciation reduce costs. If rate of interest for shrimp activity decreased, therefore decreases cost. For this work need to cooperation important between the public and private sectors also. Depreciation cost decreased just.

It was realizes that the economic success of shrimp culture and profitability was largely dependent upon the cost of production. Various discuss have relatively between the non profitability. By estimates can understand the can decreases cost the future. Conditions can increase production and revenues increase and also have better profitability.

Sensitivity analysis of costs show that some productions are more sensitive .If productivity changes in fact profits can change. Result of sensitivity can show that production in the shrimp farms is so sensitive to profitability the results can show that price and production are so sensitive after feed cost, labour cost and post larvae cost more sensitively. Other costs have less sensitivity to profits.

Break even analysis can show that if the price is 2 US$, variable costs are not covered and increasing shrimp production simply leads to more losses .But When if the price is 3 US$, variable costs are covered and break-even occurs at production. This shows that a shrimp price of 3 US$ per kg is not sufficient for this industry to break-even. When the price is 4 US$, Thus, this price will make the industry profitable.

Comparison can show that production per hectare is so far and productivity is weak. 

Finally one of the reasons for unpredictability is low productivity in the shrimp farms.

One is situation for world market prices and if these factors increased, in fact prices for shrimp farms increase. But other prices like transportation or processing are opposition. In fact if price for middle man increased prices for shrimp farm decreased.

When looking the future we can understand the prices for shrimp markets not so increases, so if we need to profitability, just have possibility to decreasing other prices like transportation for shrimp or decreasing the prices for processing or decreasing the prices middle man. In fact the decreases the prices for middle man is practical than others.

We consider three strategies for the shrimp culture. The first involves ending the shrimp culture program. The second and third continue the shrimp culture but include different actions to make this economically feasible for the operators based on the analysis. To end the shrimp culture no particular government action is needed. Due to the heavy losses, the industry will soon collapse by itself the collapse of the shrimp culture industry; however, will have repercussions that may require some action. First, a number of people will lose their jobs. Second, a number of people and firms, including suppliers and lenders, will suffer losses of assets. Third, the regional economies will suffer partly directly due to the bankruptcies and partly indirectly due to linkages and multiplier effects. All of these effects will lead to social and political problems as well which may evolve into serious unrest with possibly additional economic losses.

Moreover, the price of the most important material in the feed. However, feed costs can be reduced if the FCR (food conversion ratio) can be increased. That may be possible by improved farming technology. The post-larvae cost is perhaps the item that has most room for a reduction.

However, by improved product development, reduced transportation and marketing costs and better marketing it may be possible to increase the price to the farms (ex farm price) even when global shrimp prices remain constant. Moreover, production per unit of pool surface, the FCR and average shrimp size can clearly be improved substantially.

Some of the inputs such as post-larvae shrimp are supplied with the support of by government facilities. It can arrange for lower interests on loans or provide longer term loans. It can reduce the price of power and help to reduce post larvae prices for shrimp farmer and or feed costs.

However, is the strategy of providing subsidies is selected it is almost certainly preferable to subsidize production .Thus, it may well be that to maintain zero profitability for the average firm; the annual subsidy may have to be considerably.

Strategy 1, letting the industry collapse, implies a significant loss of human capital and possibly infrastructure. In addition it is probably not politically and socially feasible. Strategy 2 is good as far as it goes, but is unlikely to return the industry toindustry is to survive, it may be necessary to resort to Strategy 3 at least in part. To the extent that Strategy 3 is employed it should consist of output price supports, which are almost certainly less distorted than input subsidies.

I conclude that the most promising strategy is to use Strategy 2 and 3 in combinations for the next few years in order to maintain the industry and thus both avoid social losses due to irreversibility and provide time for a deeper analysis of its problems and opportunities on which a better informed long term strategy can be built. 

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