Topic Area: Aquaculture
Geographic Area: Oregon
Focal Question: Salmon farms raise fish and then release them
into the ocean, harvesting them when they return to breed due to
natural homing instincts. How does this affect the sustainability
salmon industry, which is characterized as a common property resource
in terms of price and harvest amounts?
Sources:
(1) Anderson, James L. "Private Aquaculture and Commercial Fisheries:
Bioeconomics of Salmon Ranching" Journal of Environmental Economics
and Management Volume 12, Number 4, December 1985 pp 353-370.
(2) Cacho, Oscar J. "Development and Implementation of a Fish-Farm
Bioeconomic Model: A Three Stage Approach" found in Hatch, Upton and
Kinnucan, Henry Aquaculture: Models and Economics Westview Press,
Boulder, 1993, pp 55-74.
Reviewer: Conrad Saam, Colby College '96
Review:
As natural fish stocks have become increasingly scarce due to
overexploitation of the ocean, fish prices have risen, creating a
great demand for the remaining fish. In the face of price increases,
aquaculture has become a substitute supply of fish, growing 20%
annually in the 90s.
Salmon ranching on the Oregon coast poses an interesting question.
The juvenile fish are released into the wild and harvested when the
return to the ranch to spawn. This creates a dynamic interaction
between the natural and 'farmed' fish in which fishermen can take
aquacultured and natural fish, but the rancher can only harvest what
he has raised. The size of the rancher's harvest is partially
determined by the effort expelled by salmon fishermen who have made
no investment; similarly, the size of the fisherman's potential catch
is partially determined by the salmon rancher. Both the rancher and
the fisherman are also tied to the market demand.
Salmon ranching is distinguished from most forms of aquaculture, in
that most of the fish's life is spent out of control of the rancher.
Costs are therefore focused on nurturing and harvesting costs and do
not include feeding, aeration, temperature control, and water quality
costs which are traditionally associated with aquaculture. Economic
returns are literally based on the physical return of the salmon;
number of smolts released minus the natural mortality and capture by
fishermen. It is especially important to note that fish that are used
in spawning have little or no market value, consequently, there is a
tradeoff between harvesting and reproduction. Therefore, the
rancher's most important consideration is the long term regulation of
his stock given the short-term price conditions.
These considerations yield a backward bending supply curve when
including the interaction with the common property resource. At very
low prices, aquaculture is not economically feasible. If demand
continues to increase, thereby raising prices, fishermen may exploit
the natural common property resource to an extent where they are
beyond the maximum sustainable yield, the fish stocks start to
diminish. This causes further increases in price. When the price
rises sufficiently for aquaculture to become a financially viable
alternative, the fish stocks within the common property resource
become augmented with aquacultured fish. A further increase in prices
can cause fishermen to continue to increase effort until the natural
stock of fish to becomes completely extinct. The industry; however,
will continue to exist, being supplied entirely by aquacultured fish.
It is important to note that as the industry becomes more and more
dependent on salmon ranchers to augment the population, the ranchers
must increase the amount of salmon used for reproduction. This causes
a reduction in the harvest rate, but is necessary to ensure long run
efficiency. This effect is somewhat offset by the fact that salmon
raised through aquaculture can withstand greater exploitation due to
the fact that salmon fry have a greater survival rate in a controlled
pond.
As the industry depends more and more on the rancher to supply
salmon, he must leave more and more fish to reproduce, reducing his
harvest. It is this market structure that ensures long-run
equilibrium at any constant price level. If fishermen decide to
capture the rancher's profits by increasing effort and therefore
reducing the rancher's harvest, the rancher can retain his profits by
increasing his harvest rate. This in turn reduces the amount of
salmon used in spawning and reduces the population for the fishermen
in the next time period. This is naturally more effective and
efficient when prices are high and fishermen are more dependent on
the aquaculturalists for supply.
In summary, price increases will cause the effort expended by
fishermen to gradually increase which reduces the salmon stock.
Aquaculturalists will supplement the supply of salmon, in extreme
cases supplying the entire population when overfishing has reduced
the natural population to zero. As prices rise, aquaculturalists will
reduce their harvest rate to ensure future fish stocks in the future.
A long-run equilibrium is established between the salmon fishermen
and aquaculturalists that changes only due to fluctuations in
price.
It is suggested that in order to enhance efficiency, aquaculture
could be artificially encouraged by advancing the aquaculturists'
property rights to include surrounding ocean water. This would reduce
the catch by fishermen and increase the salmon return rate, therefore
enhancing the financial feasibility of aquaculture. It would increase
the salmon market supply, thereby reducing prices and reducing
fishing effort. This is a current proposal in Oregon to preserve the
natural fish stock. Other proposals seek to constrain fishing effort
in order to save the natural stock; however, this has meet serious
resistance among Oregonian fishermen because it would artificially
increase salmon ranch profits.