ASSESSING HAWAII'S AQUACULTURE FARM AND INDUSTRY PERFORMANCE

Abstract

This investigation uses farm-level data from the U.S. Census of Agriculture to evaluate the economic performance of the aquaculture industry in Hawaii. We first examine the entire aquaculture industry by assessing its profitability, efficiency, and input cost structure over time and across economic farm sizes; we then proceed to analyze the farms at the individual subsector levels of crustacean, Chinese catfish, other foodfish, and ornamental farms. The results reveal a wide variation in performance across farms, even within the same subsectors. In 2007, 57.6% of the aquafarms generated a profit; however 39.4% of the farms were found unable to cover their variable cash expenses. The presence of significant economies of scales were detected in performance with full-time operations being found more profitable and efficient than part-time operations. Finally, Hawaii's labor cost share for aquaculture enterprises is about 3.5 times greater than that found on the continental United States.

Keywords:

• aquaculture industry
• economic assessment
• farm performance
• Hawaii
• input cost structure
• profitability analysis

ACKNOWLEDGMENTS

The authors are thankful to Mr. Mark Hudson, Director of the Hawaii Field Office, National Agricultural Statistics Office, USDA, for his generous and expert assistance with access to the micro data of the Census of Agriculture. Constructive comments and suggestions from John Corbin (Aquaculture Planning & Advocacy, LLC), Dilini Hemachandra (University of Hawaii at Manoa), Todd Low (Hawaii Department of Agriculture) and Professor Harry Ako (University of Hawaii at Manoa) are very much appreciated. Responsibility for the final content rests with the authors. This research is made possible through funding support from the United States Department of Agriculture, Center for Tropical and Subtropical Aquaculture (Award No. 2010-221/ORS #20101135) and Multistate Project (W-2004) entitled “Marketing, Trade, and Management of Aquaculture and Fisheries Resources.

Notes

Note: Total expenditures = Variable cash expenditures + Fixed cash expenditures + Depreciation.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means. One farm is excluded in 1997 due to disclosure issues.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means.

*The crustacean sector was not a subsector category in 1997. It was grouped under “others.” Due to an inconsistent definition for “mollusks and others,” the performance indicators are incomparable over time in this sector.

**For the crustacean analysis, we used data from 2002 and 2007.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means. “n.d.” means “not disclosed” due to the disclosure rules. Due to an inconsistent definition for “mollusks and others,” the performance indicators are incomparable over time in this sector.

Note: “n.d.” means “not disclosed” due to the disclosure rules. Due to an inconsistent definition for “mollusks and others,” the performance indicators are incomparable over time in this sector.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means. One farm is excluded in 1997 due to disclosure issues.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means. One farm is excluded in 1997 due to disclosure issues.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means.

Note: Output-input ratio and return on asset are expressed as geometric means while others are arithmetic means. One farm is excluded in 1997 due to disclosure issues. “n.d.” means “not disclosed” due to the disclosure rules. Due to an inconsistent definition for “mollusks and others,” the performance indicators are incomparable over time in this sector.

Note: One farm is excluded in 1997 due to disclosure issues. “n.d.” means “not disclosed” due to the disclosure rules. Due to an inconsistent definition for “mollusks and others,” the performance indicators are incomparable over time in this sector.

Due to data limitations, this article focuses only on the animal aquaculture sector and does not analyze algae farms.

The 2005 sales value is not disclosed.

The moi operation filed bankruptcy in 2010 and is currently under re-structuring. The kampachi operation also stopped harvesting fish since 2009 and finfish production has since been reduced. However, as of 2011 the kampachi operation is currently under new management and has resumed hatchery and cage culture operations.

In our data set we only include an aquaculture farm if its primary production output was in the aquaculture sector. Although the Hawaii Department of Agriculture reported there were 70 aquaculture farms in 2007, only 33 of these farms produced aquaculture as primary products. The remaining farms were not included in our analysis as they were primarily engaged in a different agricultural sector.

We use the term machinery and equipment interchangeably in this publication to include both equipment and machinery.

Farms were classified as full-time operator in 2007 if operators spent zero days of their work day for off-farm work. Farms where the principal operators spent at least one day working off-farm were classified as part-time operated farms.

Even though the census yearbook uses a broader category of “aquaculture and other animals,” we feel the comparison can still reveal the characteristics of Hawaii's cost structure compared to the U.S. national level. For a more detailed discussion about a comparison between the Hawaii and U.S. national level, see Arita et al. (2012).

One of the reasons for the exceptionally low feed cost share may be due to reporting discrepancies. Because the census questionnaire related to feed asked “Feed purchased for livestock and poultry,” some aquaculture farmers might have reported their feed cost in “other costs.”

We sorted farms into crustacean, ornamental fish, finfish, catfish, and mollusks and others. Multi-product farms were assigned according to the largest sale product of these farms.

Our foodfish sub-sector analysis does not include open-ocean culture due to disclosure issues.

In our data, some catfish farms reported zero feed cost. One of the reasons for the exceptionally low feed cost share may be due to reporting discrepancies.

Because of the inconsistent definitions within the category of “mollusks and others”, we did not analyze the changes in this sector.

The analysis was performed on aggregated data reported in the 2007 Census of Agriculture Yearbook (NASS, 2007). Aquaculture was reported by the wider category, “animal aquaculture and other animals.”