Performing Department
(N/A)
Non Technical Summary
Realizing new opportunities for growth in the U.S. aquaculture industry requires greater attention to managing various types of risks faced by aquaculture producers and identifying risk management strategies that enhance the resiliency of fish farmers to external shocks. Moreover, new producers and investors need guidance regarding the greatest risks in various species and production systems to chart out strategies to successfully navigate the early startup years. This project addresses the Program Area Priority of "Economic Research for Increasing Commercial Aquaculture Profitability" through an analysis of risk and risk management strategies. Robust datasets from commercial farm surveys of major finfish sectors will provide a basis for a comprehensive analysis of critical risk factors and effective risk management strategies for U.S. aquaculture producers. At least 30 risk models will be developed for catfish, trout, tilapia, hybrid striped bass, red drum, baitfish/sportfish, and marine shrimp in the production systems used by U.S. producers for commercial production. The results will be compared across species and production systems. Specific objectives include: 1) develop economic risk analysis models for seven U.S. aquaculture sectors for the most commonly used production systems in the U.S.; 2) identify the risk factors that are most common and of greatest economic importance for farm businesses in the seven sectors selected; 3) quantify and compare the most common and most important risks among the seven sectors and production systems selected; and 4) identity, model, and compare the potential effectiveness of various risk management strategies across the aquaculture sectors and production systems analyzed.
Animal Health Component
100%
Research Effort Categories
Basic
0%
Applied
100%
Developmental
0%
Goals / Objectives
This project addresses the Program Area Priority of "Economic Research for Increasing Commercial Aquaculture Profitability" through an analysis of risk and risk management strategies. The long term goal of this ptoject is to increase profitability and promote the growth of U.S. aquaculture by understanding and quantifying economic risks faced by U.S. aquaculture businesses, and identifying effective risk management strategies for aquaculture farms. Specific objectives of the project are to: 1) develop economic risk analysis models for seven U.S. aquaculture sectors for most commonly used production systems in the U.S.; 2) identify the risk factors that are most common and of greatest economic importance for farm businesses in the seven sectors selected; 3) quantifyand compare the most common and most important risks among the seven sectors and production systems selected; and 4) identify, model, and compare the potential effectiveness of various risk management strategies across the aquaculture sectors and production systems analyzed.
Project Methods
Data collected from previous farm-level surveys will be used for catfish, tilapia, redfish, hybrid striped bass, trout, and baitfish/sportfish. While these data are available, work will proceed to organize the data for risk analysis. The budgets developed previously were based on mean values for the various inputs, quantities, and prices. Risk analyses consider the entire set of input quantities and prices, along with the frequency of occurrence. Thus, distributions of the frequency of various outcomes will be developed for the various parameters to be used in the risk analyses. To do so, approaches used in previous risk analyses by Engle et al. (2021); Kumar et al. (2018); Kumar et al. (2016); Engle and Sapkota (2012); Neira and Engle (2009); and described in Engle (2010) will be followed. A national survey of shrimp grow-out facilities will be designed by the TAMU P.I.'s and Engle. A survey questionnaire will be developed and, subsequently, a census type survey of shrimp grow-out facilities will be launched and conducted by TAMU with the help of KSU. An introductory letter will be sent to each shrimp farmer explaining the study and will be accompanied by a confidentiality agreement that ensures that all farm data will be treated as Confidential Business Information. Follow-up contacts via email and by telephone will be used to schedule appointments for in-person interviews in Texas and telephone interviews with shrimp producers in other states.The next step involves developing appropriate risk models for the various species and production systems to be evaluated, which will be accomplished by TAMU in consultation with VT and MSU. Given the robustness of the dataset for catfish production, a Just-Pope stochastic frontier model is anticipated to be used. Depending on the statistical properties of the model estimated, alternative econometric specifications may be explored. For the other species and production systems, spreadsheet risk models will be developed within which Monte-Carlo simulations will trace the variability and frequencies of various outcomes. Tornado graphs will be developed to identify which types of risk contribute the most to the various risk metrics to be calculated. Appropriate matrices will be used to compare economically important risks in different species and production systems. The fourth step of this project is to identify important risk management strategies. We expect that appropriate risk management strategies will vary depending on the species and production system. To identify these strategies, focus groups1of producers, industry experts, agency personnel, and other stakeholders will be organized. The risk management strategies thus identified through focus groups will be modeled as scenarios that will be evaluated in the various risk models developed. The most effective risk management strategies will be compared across the species and production systems analyzed in the project to assess the potential for each strategy to reduce risk.