Fishery economics

This presentation is done by Export Agriculture students of Uva Wellassa University of Sri Lanka as a requirement for the subject which is “Agricultura Resource Management”.

1. Fishery Economics Export Agriculture Uva Wellassa university of Sri Lanka 1

2. Fishery economics Definition : The production , distribution, and consumption of fish and seafood and all financial aspects of the fishing and seafood industry (including aquatic life in fresh water) 2

3. Introduction Fishery can be thought as a stock or stocks of fish and the enterprises that have the potential to exploit them The fish stock measured in terms of biomass , is the natural capital of the system 3

4. Factors which determine fish biomass; Ability to reproduce and provide new recruits Growth rate of individuals Natural mortality rate Rate of fishing mortality 4

5. Fish stock can be increased with time if; > Recruitment of new individuals & growth of existing individual Natural mortality & fishing mortality 5

6. Special Characteristics of Fisheries Resources Mobility Renewable Highly varied and poorly understood biology Dependence on ecosystem Tradition of open access 6

7. Renewable resource? A renewable resource is a natural resource which can replenish with the passage of time, either through biological reproduction or other naturally recurring processes 7

8. Reasons to depletion of fish stock Overfishing due to; Technology development Boats with deep freezer facility Satellite technology By-catch water pollution 8

9. Relationship between fish stock & growth rate when there is no harvesting Growth Rate Stock Size(kg) X MSY G*(x) 9

10. When there is a small fish stock, the growth of population is low As there are more fish in the water, reproduction rates go up, causing the population to grow Eventually however, due to crowding effects and competition for food, the growth rates decline 10

11. At the far right point, the carrying capacity of the fishery is reached and the stock is in equilibrium 11

12. Starting at a low level (the green dot) fish reproduce in the first period 12 Growth Rate Stock Size(kg)

13. This leads to growth so that in the second period the stock has increased 13 Growth Rate Stock Size(kg)

14. Again, reproduction and growth occur 14 Growth Rate Stock Size(kg)

15. This process continues until the carrying capacity of the fishery is reached Natural equilibrium for the fishery 15 Growth Rate

16. Sustainable yield Production of a biological resource (fish) under management procedures which ensure replacement of the part harvested by re-growth or reproduction before another harvest occurs 16

17. What is MSY? The highest possible annual catch for a given fish stock that can be sustained over time, by keeping the stock at the level producing maximum growth 17

18. Population dynamics A fishery population is affected by three dynamic rate functions: Birth rate Growth rate Mortality 18

19. Schaefer logistic Growth model x(t) = Size of fish stock at time t Growth of fish stock with time 19

20. r= Intrinsic rate of growth (Rate at which the stock would typically grow with no external effect) K= Carrying capacity (Largest stock size that can be achieved given food supplies, habitat, etc.) 20

21. shows that growth is proportional to stock size Adds the complexity that growth decreases with stock density, when stock size= carrying capacity, growth will fall zero 21

22. Maximum growth rate can be found by 1 st derivative Set it equals to zero & solving for X, 22

23. A critical issue in fisheries management is what will happen to stock size over time Most purposes, size of an unexploited fish stock will change through time according to following relationship; 23

24. With no harvest, stock size next year is the sum of stock size this year & growth generated by stock during the period of observation In terms of Schaefer model, stock reach equilibrium when X t = K Because, G( X t )=G(K)=0 So, X (t+1)= X t 24

25. Fish stock & growth rate when there is a harvesting When fishers begin to harvest, part or all of the growth that occurs in any period is taken out (harvested) so that growth in the stock doesn’t take place or is reduced 25

26. Effect of harvesting to fish stock Size of stock H1 H2 H3 Rate of growth X’ X” X MSY 26

27. Schaefer logistic growth with harvest Periodic change in stock size with harvest can be represented as, In this case, Stock will reach an equilibrium where, G( X t ) = Harvest 27

28. A more formal analysis of commercial harvest Annual yield can be viewed as a function of stock & amount of fishing effort applied to it (think effort as a today’s standard boat) Let Y t represent short run yield, 28

29. E- Fishing effort q- catchability coefficient (embodiment of technology that is used to harvest fish) 29

30. Fisheries production does not obey in economic law of diminishing marginal productivity Each additional unit of effort or stock size adds the same amount to catch 30

31. Relationship between effort, harvest & fish stock Yield Effort E0 H’ H H=G(E,X) H’=G(E,X’) 31

32. The same amount of effort will produce more harvest when the stock size is higher & vice versa 32

33. For long run analysis- can use concept of sustainable yield Sustainable yield curve shows the relationship between level of fishing effort & level of sustainable yield A sustainable yield is one that can be maintained indefinitely because, catch=growth 33

34. To achieve sustainable harvest, growth must equals to short run yield Growth Short run yield 34

35. Effect of increased effort to stock & harvest Growth Rate Stock Size E3 E2 E1 X’ X” MSY E3 > E2 > E1 35

36. Fishing Effort Population Relationship between population, effort and catch Catch per unit of effort is proportional to population Growth/Catch YE 1 e 1 C 1

37. Fishing Effort Population Relationship between population, effort and catch Catch per unit of effort is proportional to population Growth/Catch C 1 YE 1 e 1 YE 2 e 2 C 2

38. Fishing Effort Population Relationship between population, effort and catch Catch per unit of effort is proportional to population Growth/Catch YE 2 C 2 C 1 YE 1 e 1 e 2 YE 3 e 3 C 3

39. Population equilibrium curve (PEC) Solving for X obtains, PEC 39

40. Stock size Effort K 40

41. Sustainable yield function Substituting population equilibrium equation(PEC) into Short run yield equation, produces an equation for sustainable yield function as a function of E(effort) PEC Short run yield equation 41

42. 42

43. Stock size is obviously an important element in determining sustainable harvest But it is subsumed in equation, because equilibrium stock size is a function of effort 43

44. Sustainable Yield Curve Catch/Harvest Effort Low level of effort When E Sustainable yield B’coz growth increases with decreases in stock size Further increase of E Decrease yield B’coz further decrease of stock size cause growth to fall 44

45. Relationship between effort & revenue Revenue effort yield Revenue (Harvest× Price) Revenue=(Harvest × $ 1) 45

46. Deriving Revenue & Cost functions To keep things simple, assume:- Price of fish (P) Cost per unit effort (C E ) Constant 46

47. Total sustainable revenue as a function of effort, Price Sustainable yield 47

48. Total cost as a function of effort; Average sustainable revenue 48

49. Average cost 49

50. To show the relationship between Effort & Stock size, it is also useful to look at sustainable revenue & cost in terms of stock size TSR as a function of stock size; Price Growth of fish stock 50

51. Now, we have identified the basic theories needed to study the bio-economic equilibrium Bio economic equilibrium can be studied as 2 types; Open access equilibrium Private property equilibrium 51

52. Open access Private property 52

53. 1. Open access equilibrium 53

54. 54

55. open access equilibrium When all of the excess profits or economic rent that attracts new entrants to a developing fishery have been dissipated in the costs associated with the additional fishing effort The fishery is no longer attractive to new entrants 55

56. Usually occurs when fishing effort is higher than that which will obtain the greatest yield from a fishery 56

57. TR/TC E’ E0 TC” TC TR0 A B H0 Effort MC/MR E’ E0 MR MC=AC AR Effort X0 X’ Xmsy H0 Growth rate Biomass H0=G(E0,X) H’=G(E’,X) A C B 57

58. 2. Private property equilibrium 58

59. 59

60. TR & TC Rent TR TC E* E0 H* H0 Effort E0 E* Rent Unit Effort Effort MR MC AR A B 60

61. C Growth rate H* F(x) X* X0 H0 H*=G(E*,X) H0=G(E0,X) Biomass 61

62. Maximum economic yield The value of the largest positive difference between total revenues and total costs of fishing (including the cost of labor and capital) with all inputs valued at their opportunity costs 62

63. 63 TR & TC MEY TR TC E* E0 H* H0

64. Management of fishery resources Most important fisheries in the world at the state of open access So, fisheries have to be manage carefully Have to change the equilibrium from open access to private property equilibrium 64

65. This can be done by 2 ways; Control the harvest of fish at optimum effort Reduce the fishing effort 65

66. Above 2 status can be achieved by; Tax Quota 66

67. Tax on harvest of fish Effort TR & TC Tax Y* Y’ E* E TR TC TR’ 67

68. Tax on fishing effort TR & TC Effort TR TC’ TC” TC E* E 68

69. Theories of Agricultural Resource Management (Past papers)   2009 :- 01. a). Define the following terms; 1. Renewable resources 2. Non - renewable resources 3. Open access resources 4. Common pool resources 69

70. b). 1. Briefly explain the variable in fishery 2. "Increase in fishing effort always increase the profit in fishery" Comment on this. 70

71. 2010 :- 01. a). With the use of suitable illustrations describe the following in relation to fishery. 1. Sustainable yield. 2. Maximum sustainable yield. 3. Maximum economic yield. 4. Open access equilibrium level. 71

72. b). The effort catch relationship (production function) of a fishery is given by, Y = 90E - 2E 2 Where Y is the sustainable yield measured in kilograms of fish and E is fishing effort measured in number of fishing trips. Each fishing trip costs Rs. 900.00. Fish sell at Rs. 40.00 per kilogram.   Determine the following 1. Maximum sustainable yield, corresponding level of fishing effort and private profit. 2. Maximum Economic Yield, corresponding level of fishing effort. 3. Find the open access equilibrium level of effort. 72

73. 2013 :-   04. a). Define the term "Fishery" b). Briefly explain the variables in fishery. c). "Increase in fishing effort always increase the profit in fishery" Comment on this 73

74. d). The effort catch relationship ( production function ) of a fishery is given by,   Y = 1200E - 2E 2   Where Y is the sustainable yield measured in kilogram of fish and E is fishing effort measured in number of fishing trips. Each fishing trip cost Rs. 900.00. Fish sell at Rs. 40.00. per kilogram.   Derive the following 1. Maximum effort which yields no yield 2. Maximum sustainable Yield, corresponding level of fishing effort and private profit. 3. Maximum Economic Yield, corresponding level of fishing effort. 4. Find the open access equilibrium level of effort. 74

75. Thank You! H.K.I.J Thilakarathne (UWU/EAG/11/0022) Premasinghe (UWU/EAG/11/0023) 75