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Chapter: Aquaculture Principles and Practices: Marketing of Aquaculture Products

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Data requirements - Economics and Financing of Aquaculture

1. Assets and liabilities, 2. Variable and fixed costs, 3. Operating income,

Data requirements

 

The nature of data required will naturally depend on the purpose and type of evaluation to be carried out. Since most types of technological studies in aquaculture should include economic aspects, it may not be practical to list all items of economic data that would be useful.

 

However, a review of the basic data that are essential for proper development planning and farm level management can be attempted here.

 

Assets and liabilities

 

In most types of aquaculture, the capital costs of establishing the farm are generally the highest. A precise and detailed record of the established assets will therefore be required. Separate values of the costs of the land, facilities such as hatchery systems, rearing and grow-out facilities, the water supply system and buildings (residential, storage, office, laboratory, workshop, garage, processing and packing, feed storage, etc.) will be needed. Data on the cost of various types of equipment acquired for the farm will also be necessary. These will include farm equipment such as pumps, generators, refrigerators and cold stores, aerators, feed mills, feed dispensers, vehicles, etc.

 

It is necessary to have estimates of the years of economic life of these major farm assets in order to calculate their depreciation, which will be a fixed cost to be considered for most economic evaluations. The depreciation is derived by dividing the cost of the asset by the estimated years of economic life. If there is a salvage value for it after the estimated period, it is subtracted from the initial cost before the annual depreciation is computed. In the case of assets constructed or acquired a long time ago, the current replacement cost should be the basis for calculating depreciation. In the event that any of the fixed assets are shared with other activities, it will be necessary to determine the share of the assets that can be claimed for aquaculture, for purposes of calculating depreciation. Depreciation would not be applicable in the case of land or for regularly maintained fish ponds, as generally their value only appreciates and all maintenance costs are accounted for under operating costs.

 

Information on liabilities of a long-term nature, such as loans and mortgages, and terms and amounts of payment of interest and instalments will be required.

 

For assessment of productivity, data based on either the area of the farm or the volume of water, as appropriate, will be needed.

 

Variable and fixed costs

 

Variable and fixed costs constitute the main inputs in an aquaculture enterprise. Variable costs, as the name implies, vary with the level of production, whereas the fixed costs are not affected by it. The variable costs can be divided into two: production and labour. Similarly, the fixed costs can be classified into indirect operational costs and administrative costs and salaries. The main types of data required for each of these costs are listed below.

 

Variable production costs:Water fees

 

Farm preparation and maintenance

Purchase of fry, fingerlings or brood animals

Purchase of feeds or feed ingredients

Purchase of fertilizers, chemicals and drugs

Purchase of electricity and fuel

Purchase of product containers and packing materials

Freight and transportation costs

Adjustments for inventory changes in feeds and other major production materials

 

 

Variable labour costs:

 

Number of man-hours per day and number of man-days per month/year

Wages in cash and kind

Board and lodging provided

 

Indirect operational costs:

 

Running, maintenance and service of tools and equipment

 

Fixed costs:

 

By definition, fixed costs are those that do not vary with production. This would include interest on both own and borrowed capital (debt and equity) and depreciation of assets. It would also include the following administrative costs:

Salaries and wages to administrative personnel

Imputed salary of owner(s)

Telephone, postage and office accessories

 Travelling expenses

Commissions and contingencies

Auditing, legal and technical assistance Insurance

 

 

It is obvious that the administrative costs are applicable only in the case of large-scale enterprises.

 

In the absence of a system of detailed book-keeping at the farm level, the above types of data can be obtained only by detailed study of representative sample farms, by trained enumerators. An alternative is to base evaluations on data from pilot farms. Besides the normal economic analysis, pilot farms will also make it possible to test under practical farm conditions different management strategies, such as farm mechanization, modified production cycles, changes in product size, etc., and assess their economic implications.

 

Operating income

 

Details of the farm output (species, quantity) and their unit price and the sales in cash or credit should be available. The imputed values of products consumed on the farm and given away as gifts or as payments in kind, should be calculated. In cases where multiple stocking and harvesting are practised, inventory adjustments of the farm stock (increase or decrease from the last inventory) will be necessary. The farm stock may be expressed in number or weight of each species in the farm. In farms that produce subsidiary crops in association with fish, shellfish, etc., details of the products and income from their sale should be collected in the same manner as for the primary products.

 

It will be appropriate to consider subsidies or other tangible government support as part of the operating income and so the actual or imputed value of this should also be taken into account.

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