Technical efficiency of shrimp fishery in South Carolina, USA

Abstract

The increased inflow of imported shrimp into the US has lowered shrimp prices in the marketplace and with it, ex-vessel prices received by shrimp fishermen. Proposed remedies are aimed at strategies to increase the prices received by domestic producers. This study looks into issues related to the production side by estimating the technical efficiency of South Carolina shrimp boat operators. Estimates using a stochastic production frontier method show that average efficiency is 46%. This finding has strong implications on the long-term survival and viability of the local shrimp industry as it continues to face competition from low-priced imports.

Acknowledgements

An earlier version of this article was presented at the 44th Southern Regional Science Association (2005) annual meeting in Arlington, Virginia, USA. I thank Mark S. Henry for helpful comments and suggestions. All remaining errors are those of the author. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent.

Notes

¹ See Federal Reserve Bank of Dallas (2004), Haby et al. (2002, 2003), Henry et al. (2001, 2005), Keithly et al. (2004), NMFS (2004) and Travis and Griffin (2004).

² The shift in the imported shrimp supply could either be due to the lowering of the marginal cost of production by exporting firms from abroad, or could be due to dumping, similar to the claim by domestic producers in their antidumping case.

³ A trip may be a day or several days. Vessels with freezer capacity on board tend to stay out 4–5 days per trip while ‘ice’ boats' typical trip is only for a day or two.

⁴ For example, a γ close to one would imply that most of the variations in output are due to inefficiencies rather than the random component of the composed error term.

⁵ Formally, the mean technical efficiency of a shrimp boat given the estimated variance parameters from Equation 1(1) is: where φ(.) represents the density function for the standard normal variable and μ is the mean inefficiency.

⁶ There are basically three seasons in South Carolina shrimp fishery. The first is the so-called ‘roe shrimp’ season in May and June; the second is the brown shrimp season from June to August; and third, the white shrimp season that begins in August and could last until January of the following year.

⁷ An alternative production function like the translog was estimated but the additional terms were not statistically significant.

⁸ Some estimates (Henry et al., 2005), indicate that this percentage increase in price is about what might be expected as ‘niche’ market price premium. However, it is important to consider the cost to the shrimp producer of promotional and quality improvement efforts to earn this premium.