EPA-230/1-73-025
OCTOBER, 1973
ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
Seafoods Processing Industry
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
a
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This document is available in limited
quantities through the U.S. Environmental Protection Agency,
Information Center, Room W-327 Waterside Mall,
Washington, D. C. 20460
The document will subsequently be available
through the National Technical Information Service,
Springfield, Virginia 22151
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EPA-230/1-73-025
ECONOMIC ANALYSIS OF
PROPOSED EFFLUENT GUIDELINES
SEAFOODS PROCESSING INDUSTRY
R. E. Seltzer
D. L. Jordening
J. K. Allwood
October, 1973
Prepared for
Office of Planning and Evaluation
Environmental Protection Agency
Washington, D. C. 20460
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This report has been reviewed by the Office of Planning
and Evaluation, EPA, and approved for publication.
Approval does not signify that the contents necessarily
reflect the views and policies of the Environmental
Protection Agency, nor does mention of trade names or
commercial products constitute endorsement or recom-
mendation for use.
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PREFACE
The attached document is a contractor's study prepared for the Office
of Planning and Evaluation of the Environmental Protection Agency
("EPA"). The purpose of the study is to analyze the economic impact
which could result from the application of alternative effluent limitation
guidelines and standards of performance to be established under sections
304(b) and 306 of the Federal Water Pollution Control Act, as amended.
The study supplements the technical study ("EPA Development Document")
supporting the issuance of proposed regulations under sections 304(b) and
306. The Development Document -surveys existing and potential waste
treatment control methods and technology within particular industrial
source categories and supports promulgation of certain effluent limitation
guidelines and standards of performance based upon an analysis of the
feasibility of these guidelines and standards in accordance with the require-
ments of sections 304(b) and 306 of the Act. Presented in the Development
Document are the investment and operating costs associated with various
alternative control and treatment technologies. The attached document
supplements this analysis by estimating the broader economic effects
which might result from the required application of various control
methods and technologies. This study investigates the effect of alter-
native approaches in terms of product price increases, effects upon em-
ployment and the continued viability of affected plants, effects upon
foreign trade and other competitive effects.
The study has been prepared with the supervision and review of the Office
of Planning and Evaluation of EPA. -This report was submitted in fulfill-
ment of Contract No. WA-73X-425, Task Order No. 2 by Development
Planning and Research Associates, Inc. Work was completed as of
October, 1973.
This report is being released and circulated at approximately the same
time as publication in the Federal Register of a notice of proposed rule
making under sections 304(b) and 306 of the Act for the subject point
source category. The study has not been reviewed by EPA and is not
an official EPA publication. The study will be considered along with the
information contained in the Development Document and any comments
received by EPA on either document before or during proposed rule making
.proceedings necessary to establish final regulations. Prior to final promul-
gation of regulations, the accompanying study shall have standing in any
EPA proceeding or court proceeding only to the extent that it represents
the views of the contractor who studied the subject industry. It cannot be
cited, referenced, or represented in any respect in any such proceeding
as a statement of EPA's views regarding the subject industry.
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CONTENTS
Page
I INDUSTRY SEGMENTS ' 1-1
A. Types of Firms and Plants 1-1
1. Number and location of firms and
plants I-1
a. Canning plants 1-2
b. Freezing plants 1-4
B. Concentration in the Fisheries Industry 1-7
C. Level of Integration I-10
1. Tuna processors I-10
2. Shrimp processors I-10
3. Crab processors 1-11
4. Catfish processors 1-11
D. Technological Status of the Industry 1-12
1. Tuna processing 1-12
2. Shrimp processing 1-12
3. Crab processing 1-13
4. Catfish processing 1-13
E. Pack - Canned and Frozen Products 1-14
1. Tuna 1-14
2. Shrimp 1-14
a. Canned 1-14
b. Fresh and Frozen 1-14
3. Crab 1-18
a. Canned 1-18
b. Fresh and Frozen 1-18
F. Supply Conditions 1-21
1. Tuna supplies 1-22
2. Shrimp supplies 1-26
3. Crab supplies 1-31
4. Catfish supplies 1-36
G. Employment 1-38
II FINANCIAL PROFILES II-1
A. Tuna Processors II-2
1. Earnings as a percent of sales • II-2
2. f la.nl ucoi_i"iption II-3
a. Processing methods II-3
b. Processing volume II-5
c. Operating costs and gross
margin II-5
3. Earnings and cash flow - model tuna
plant II-5
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CONTENTS (continued)
B. Crab and Shrimp Processors
1. Plant description
a. Shrimp processing methods
b. Crab processing methods
2. Earnings and cash flow - model crab
plants II-14
3. Earnings and cash flow - model
shrimp plants 11-20
C. Catfish Processors 11-32
1. Plant description H-32
2. Earnings and cashflow - model plants 11-32
D. Salvage Value of Assets 11-37
E. Constraints on Financing Additional Capital
Assets ' n-38
III PRICE EFFECTS IH-1
A. Supply and Consumption Considerations III-l
B. Tuna Price Effects III-1
1. Canned tuna and fresh meat prices III-2
2. Canned tuna prices and disposable
income III-2
3. Canned tuna prices and changes in the
level of prices HI-2
4. Who will absorb the costs of pollution
control? III-7
C. Shrimp Price Effects III-9
1. Shrimp prices and prices of other
competing products III-9
2. Shrimp prices and changes in the
general level of prices III-14
3. "Who will absorb the costs of pollution
control? HI-15
4. Qualification of assessment III-16
D. Crab Price Effects HI-16
1. Supply-price considerations HI-16
2. Market channels and prices 111-21
3. Who will absorb the costs of
pollution control? HI-24
E. Catfish Price Effects HI-25
1. Price differentials by catfish types 111-25
2. Market channel price margins HI-25
3. Absorption of costs of pollution control 111-26
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CONTENTS (continued)
Page
F. Market Pricing Practices 111-27
1. Tuna pricing III-27
2. Crab and shrimp pricing 111-27
G. Sales Promotion IH-28
IV ECONOMIC IMPACT METHODOLOGY IV-1
Fundamental Methodology IV-1
Benefits IV-6
Investment IV-7
Cost of Capital - After Tax IV-7
Construction of the Cash Flow IV-9
Price Effects IV-9
Financial Effects IV-11
Production Effects IV-11
Employment Effects IV-13
Community Effects IV-13
Other Effects IV-13
V EFFLUENT CONTROL COSTS V-l
Description of Effluent Control Levels and Costs V-l
Current Status of Effluent Control in the Industry V-5
VI IMPACT ANALYSIS VI-1
Price Effects VI-1
Financial Effects VI-8
Profitability VI-9
Production Effects VI-12
Potential Plant Closures VI-14
Production Curtailment VI-19
New Source Performance Standards VI-19
Employment Effects VI-21
Community Effects VI-28
Impact on Foreign Trade VI-33
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CONTENTS (continued)
VII LIMITS OF THE ANALYSIS VII-1
General Accuracy VII-1
Range of Error VII-2
Critical Assumptions VII-3
Industry Structure VII-3
Raw Material and Product Prices VII-4
"Representative" Model Plants VII-4
Conversion Factors VII-6
Effluent Control Costs VII-6
Current Status of Municipal Treatment
in the Industry VII-7
Salvage Values VII-7
"Shutdown" Decisions VII-8
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ECONOMIC ANALYSIS
COSTS OF PROPOSED EFFLUENT LIMITATION GUIDELINES
FOR THE SEAFOODS PROCESSING INDUSTRY
I.- INDUSTRY SEGMENTS
This report is limited to Consideration of the economic impact of
proposed effluent guide line a... for the processing of the following
species of seafoods: tuna, .shrimp,., crab and.catfish. Both canned
an.d frozen processing is included. The volume of smoked, dried or
brined seafood products is not of commercial significance for the
-species, considered in this report.. Tuna, shrimp and Crab are marine,
species whereas catfish are produced in farm ponds or are caught
"•wild" from fresh water rivers; '
A. Types of Firms' and Plants
In general, the firms and plants included fell under two SIC codes:
SIC 2091 - Canned and Cured Fish and Seafoods (Partial)
Establishments primarily engaged in cooking and canning tuna, shrimp,
and crabs.
SIC 2092 - Fresh or Frozen Packaged Fish and Seafoods (Partial)
Establishments primarily engaged in preparing fresh and raw or cooked
frozen packaged fish or other seafoods. Includes tuna, shrimp, crab,
and catfish.
1. Number and Location of Firms and Plants
Tuna, shrimp and crabs are marine species and as a result, processing
plants are primarily located in coastal areas. All tuna plants are located
in coastal areas. However, some processors of shrimp and crab operate
on the basis of purchases of frozen raw product, either from domestic
or imported sources, and as a result, there are processors (particularly
freezers of prepared shrimp or crab items) who are located inland.
1-1
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The number and location of seafood canning and freezing plants, for the
species with which this project is concerned, is shown in Tables 1-1 and
1-2.
a. Canning Plants - Canning plants are generally located at seaports
where there are major landings of the species canned. Canning is the
principal method of processing for tuna and is important for both shrimp
and crab but no catfish are commercially canned.
(1) Tuna canneries are located in California (8), Oregon (5), Washington
(4), Hawaii (1), Maryland (1), Puerto Rico (5) and American Samoa (2).
In general, the canning of tuna is carried out in large-scale, specialized
plants although some tuna is canned in multi-product fish canneries.
The industry is dominated by five large canners:
Bumble Bee Seafoods Division of Castle and Cook Inc.
Del Monte Corporation
Starkist Foods Inc. , a division of the Heinz Company
Van Camp Sea Foods Co. , a division of the Ralston Purina Company
Westgate-California Tuna Packers Co. , a division of the Westgate-
California Corporation'
These five firms operate a total of 14 plants and account for over 90
percent of the total pack. All are either divisions of conglomerates,
diversified corporations or large diversified food processors.
Two other, medium-sized canners operate:
Whitney-Fidalgo Seafoods Inc. (Seattle) is primarily a salmon canner,
but canned tuna ($4 million sales 1972) accounts for 12 percent of its
total sales.
IBEC (International Basic Economy Corporation) is a diversified
development-investment New York corporation with substantial
business interest in Latin America, which operates a tuna plant in
Puerto Rico.
The other packers are relatively small or are parts of diversified fish
canning or custom canning firms.
(2) Shrimp canners are concentrated in Louisiana (12 plants), Mississippi (10),
Alaska (8), and Oregon (4), with Texas having one plant.
1-2
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Table 1-1. Number of shrimp, crab and tuna canning plants by state,
and total number of firms, 1972.1/
Number of Canning Plants
State Shrimp Crab Tuna
Alaska 8 19
Washington - 24
Oregon 4 25
California - - 8
Hawaii - - 1
Texas 1 - -
Louisiana 12
Mississippi 10 2 -
South Carolina - 1 -
North Carolina - 1 -
Maryland - - 1
Maine - 1 -
Puerto Rico - - 5
American Samoa - 2
Total plants 35 28 26
Number of firms 34 2_3
_L' There was no record of catfish canning in 1972.
In contrast to tuna canning, the canning of shrimp is carried out in a
larger number of small plants such that no group of firms tends to
dominate the industry. Shrimp canning is almost entirely carried out
by single-plant firms, only one firm out of a total of 34, having two
canning plants.
1-3
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(3) Crab is canned in seven states. Alaska is the most important state
in terms of number of plants, accounting for 19 out of the total of 28.
Washington, Oregon and Mississippi each have 2 plants canning crab
and there is one plant in North Carolina, South Carolina and Maine.
However, the canning of crab is of decreasing importance as the bulk
of processed crab is in the form of frozen whole crab, crab sections
or frozen crab meat. As was the case with shrimp canners, most
crab canners operate but a single plant. Out of a total of 23 firms,
5 firms operated 2 plants each. No firm had more than 2 plants.
b. Freezing Plants - Although seafoods freezing plants also tend to be
located in coastal areas, these plants are more widely distributed geo-
graphically. Lists of seafood freezing plants, equivalent to cannery
plant lists, are not available from "official" sources such as the National
Marine Fisheries Service. However, DPRA has developed a list of 580
plants that freeze crab, shrimp, catfish and tuna. The list was developed
from a variety of current trade association lists and listings from federal
and state government sources and has been cross-checked to avoid dupli-
cation. It is believed to be essentially complete and representative of
conditions which exist in this industry.
It should be noted that the list includes many inland plants which are
typically reprocessors or producers of specialty items. The list also
includes many blue crab processors that process fresh crab meat in non-
hermetically sealed containers. These are included in the blue crab
freezing category since it is impossible to differentiate fresh and frozen
producers at this time.
Seafood freezers fall into two general classes:
(1) Those which operate primarily with fresh fish.
(2) Those which operate primarily with imported, frozen fishery
stocks, particularly important in the case of shrimp processors.
Although the effluent problems of the two types of firms are somewhat
different, particularly where the frozen raw material is crab meat, shrimp
processors operating on frozen stocks usually receive frozen hlnrV.e of
headsoff, shell on shrimp and the thawing and shell peeling and deveining
operations do generate significant amounts of effluent which must be dis-
posed of.
Table 1-2 shows the estimated number of crab, shrimp, catfish and tuna
freezing plants and firms, by states, for 1972.
1-4
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Table 1-2. Estimated number of shrimp, crab, catfish and tuna
freezing firms and plants by state, 1972
State
Alabama
Alaska
Arizona
Arkansas
California
Delaware
Florida
Georgia
Illinois
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Mississippi
Missouri
New Jersey
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
Tennessee
Texas
Virginia
Washington .
Wisconsin
Total -All State si/
Crab
2
49
1
12
17
3
1
4
2
7
2
1
7
2
7
3
1
2
3
9
2
137
Shrimp
5
22
1
21
2
38
5
5
1
16
7
2
5
1
4
2
14
3
1
2
6
4
1
18
2
8
3
199
Catfish
5
4
1
1.
1
1
2
1
3
5
2
1
1
1
2
6
2
39
Tuna
2
1
1
1
5
_!_/ The number of crab plants would increase to 360 if those plants
that pack their product in nonhermetically sealed containers are
included.
1-5
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The industry primarily consists of single-plant firms. There are multi-
plant firms located in at least six states. Alaska has 42 firms operating
61 plants -- one firm operates 6 plants, one 5 plants and the other multi-
plant firms operate two plants each. California has four firms operating
two plants each, Florida has four firms operating two plants and one firm
operating three plants. Multiplant firms in the other three states
(Georgia, Maine, Oregon) are limited to one firm which operates two
plant s.
Crab freezers are concentrated in coastal states and operate primarily
with fresh crab. The leading states, in terms of number of plants, are:
Alaska - 49 plants
Florida - 17 plants
California - 12 plants
Washington - 9 plants
Oregon - 7 plants
Maryland - 7 plants
New York - 7 plants
These seven states account for 79 percent of the total number of crab
freezers in the United States. The inclusion of nonhermetically sealed crab
meat producers as was done in Table 1-2 would substantially increase
these numbers.
Shrimp freezers are also located primarily in coastal areas, but operate
to a higher degree, with frozen stocks than do crab freezers (Table 1-2).
The six leading states in number of shrimp freezing plants, are as follows:
Florida - 38
Alaska - 22
California - 21
Texas - 18
Louisiana - 16
New York - 14
These nine states account for 65 percent of the total number of shrimp
freezers in the United States.
1-6
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Catfish freezers account for 99+ percent of the total volume of processing
in this industry. There is essentially no production of canned catfish and
only a negligible quantity is smoked or otherwise cured. Frozen catfish
production considered in this report is confined to processing of pond-
reared catfish. Virtually all "wild" catfish are sold as fresh fish.
There are some plants which report freezing of ocean catfish, which is
a different species, and some firms which prepare frozen fish sticks or
other fabricated items based on imported frozen catfish stocks, but these
have not been included in this analysis. Pond-reared catfish are produced
and processed primarily in the Southern States (Table 1-2). Leading states,
in terms of numbers of freezers, in 1972 were as follows:
Texas - 6
Alabama -. 5
Mississippi - 5
Arkansas - 4
Louisiana - 3
These five states account for 62 percent of the total of 39 catfish processing
plants in the United States. Virtually all of the catfish processors are
operated in conjunction with production enterprises but also process fish
from other producers in the area. All firms but one are single plant organi-
zations.
Table 1-3 summarizes much of the above data by presenting plant numbers
by type of plant by species by geographical area.
B. Concentration in the Fisheries Industry
No data are available which permit an accurate evaluation of concentration
ratios by specific product groups (tuna, shrimp, crab, catfish). However,
general industry data are indicative of the overall situation which exists
in the canning and freezing of seafoods products. Data from the 1967 Census
of Manufactures indicates the following:
Percent of total value of shipments accounted for by:
4 largest 8 largest 20 largest 50 largest
Product line companies companies companies companies
Canned and cured
seafood 44 59 73 85
Fresh or frozen
packaged fish 26 38 56 72
1-7
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Table 1-3. Number of plants by species, geographical area and
type of plant
Species
Type of plant
Canne:
Freezer
Total
Catfish
Tuna
0
26
39
5
39
31
Shrimp
Gulf shrimp
West Coast
New England
Alaskan
Crab
West Coast crab
Alaskan crab
Blue crab
Total
2/
Other inland plants —
Crab
Shrimp
Total inland plants
Total all plants
23
4
0
8
4
19
5
89
89
35
30
22
28
49 I/
283-
580
Canners and Freezers
17
23
112
39
30
30
32
68
288
669
17
23
40
709
— Includes Rock crabs and producers of nonhermetically sealed products.
— Mostly reprocessors and producers of specialty items.
1-8
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Although these data indicate appreciable concentration in the processing
of fisheries products, for the products considered in this report (tuna,
shrimp, crab, catfish) the concentration of processing is as follows:
Tuna processing - the industry is dominated by five large firms
(see page 1-2) which together account for over
90 percent of the total pack.
Shrimp pro- - the industry is made up of a large number of
cessing small processors, some of which are associated
with large national seafoods processors, but
there is no significant degree of concentration
in the industry.
Crab processing - the situation is similar to that existing in shrimp
processing. In fact, some of the firms are the
same as those processing shrimp. No significant
degree of concentration exists in the industry.
Catfish pro- - the industry is small, processors are scattered
cessing and tied to production units. Three major firms,
Gold Kist, ConAgra and Southern Catfish Pro-
cessors, Inc. are large enough to exercise
some degree of dominance in this industry.
1-9
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C . Level of Integration
Integration within the fisheries industry varies by product. Horizontal
integration is most common, but examples of vertical integration also
exist.
Tuna Processors
Ownership in the tuna industry is dominated by large firms, mainly
conglomerates and diversified food processors. Ownership structure
of this industry was described on page 1-2 of this report.
Horizontal integration exists in that five of the major tuna packers operate
multiple plants. In addition, while tuna packing is the primary function
of the plants with which this report is concerned, other species of fish
and shellfish (salmon, crab, shrimp, etc.) are also processed by many
of these tuna packers, either in the same location or in plants at other
locations owned by these firms. Two of the major firms (Del Monte and
Heinz) are also diversified food processors. Three, Bumble Bee
(Castle and Cook ), "Westgate California Tuna Packers (Westgate California
Corporation) and IBEC (Internation Basic Economy Corporation) are parts
of conglomerates and one (Van Camp Sea Foods Co.) is a division of a major
feed manufacturer (Ralston Purina). Others such as Whitney-Fidalgo
or Lazioare diversified (salmon, tuna, crab, shrimp) seafoods processors.
The tuna packers are often vertically integrated backward to a degree in
that, in some cases, they either operate tuna fleets directly, through sub-
sidaries or exercise a degree of control over suppliers through delivery
contracts or financing arrnagements
Shrimp Processors
There is little integration in the shrimp processing industry. Almost all
processors - either canners or freezers are single-plant firms. However,
some shrimp processors are divisions of larger seafoods processing
companies such as Bumble Bee, California Westgate, etc.
Most shrimp processors also process crab and, in some instances, are
firms which process a wide variety of both finfish and shellfish.
Although there is some vertical integration backward, toward fishing
operations through the ownership of shrimp boats and through contractual
arrangements with private boat operators, such integration is net an
1-10
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important factor in this industry. Some processors carry integration
forward in that they not only process and freeze raw and cooked shrimp
but also produced breaded frozen shrimp and other prepared shrimp
products.
Crab Processors
There is less integration in crab processing than there is in the shrimp
industry. Most crab processors are single-plant firms. However, in
Alaska and the Pacific Coast States, combinations of crab with shrimp
processing are common and some crab processing is carried out by
diverisified fish and shellfish processors. In common with shrimp
processors, some crab processors are divisions of larger seafood
processing firms.
Although most crab processors produce only canned or cooked frozen
crab meat, a few firms also produce further processed (crab cakes,
deviled crab, etc.) crab products.
Catfish Processors
Vertical integration, backward to catfish production and forward to live
hauling, catfish restaurants and pay fishing lakes, is common in the
catfish industry. Data were available on 22 firms and showed the
following combinations:
No. Firms
Process only 5
Process plus food fish production 5
Process plus food fish plus live hauling 8
Process plus food fish plus live hauling plus catfish restaurant 1
Process plus food fish, plus live hauling, plus restaurant, 1
plus pay lake
Process plus food fish, plus live hauling plus pay lake 1
Process plus catfish restaurant . 1
Single plant firms are the rule, only one firm operating two plants.
At one time it was thought that the catfish industry offered opportunities
for integration in terms of feed supply, catfish production, processing
and marketing similar to that which exists in the broiler industry. Asa
result, large feed-broiler firms such as Ralston Purina undertook to
establish catfish operations. However, primarily as a result of marketing
problems, these integrated operations were not successful and only one firm
of this type (Gold Kist) remains in the catfish industry.
I- 11
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D. Technological Status of the Industry
Tuna Processing
There has been little change in tuna processing in recent years. New
plants, either built or planned, will incorporate the latest developments
in canning technology and effluent control, but the remainder of the plants
follow conventional canning procedures which have not changed materially
in recent years.
The major change affecting the tuna processing industry has been on the
supply side. The securing of adequate supplies of tuna for canning is the
most pressing problem facing the industry and many processors are inte-
grated backward towards fishing operations through direct or indirect
ownership of vessels or through contractual arrangements with private
tuna boat operators. Improvements in the size and equipment of tuna fishing
vessels have enabled the operators to forage the seas for hundreds and
even thousands of miles from the canneries where the fish are to be
canned. The fast freezing of tuna immediately after landing the fish on
the boat reduces their perishability to a low level and extends the "out" time
for a vessel up to several weeks. Such a vessel time "out" from port
reduces the number of unsuccessful fishing trips and insures the canneries
of a more stable tuna supply through the year.
Some, though not substantial, improvement has occurred in the use of
radar to locate new fishing grounds. Further efforts to improve the methods
of exploration and location of fish should be of great importance to the tuna
industry, particularly as the U.S. offshore fisheries are depleted.
Shrimp Processing
In the shrimp processing industry, the most important and far-reaching
technological change has been the invention and adoption of the mechanical
shrimp peeler. The PCA Lathrum peeler and the Model A mechanical
peelers will peel 700 - 900 pounds of shrimp per hour. Mechanical peeling
has resulted in substantial reductions in peeling costs, from 40 cents per
pound of shrimp meat to as low as 10 cents per pound. The change to
mechanical peeling is taking place at a time when the availability of shrimp
peeling labor has dropped substantially, the cost of such labor has risen
rapidly and the demand for shrimp has continued to increase. The develop-
ment of this equipment has been a major factor in enabling the shrimp
processing industry to meet the problems posed by scarce and costly labor
in the face of increased demand for shrimp.
I- 12
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Crab Processing
Technology in crab processing has not advanced at as rapid rate as is
true for shrimp. Mechanical extraction of crab meat from the shell
is not as widely adopted as has been the case for shrimp. However,
roller picking has become important in Alaska in spite of a somewhat
lower meat yield. In other areas, hand picking is still predominant.
For both crab and shrimp meat, the most significant technological-
marketing change has been the expansion of frozen shellfish sales to
both institutional and household users.
Catfish Processing
Industrialized processing of catfish is a relatively new industry and has
emerged in its present form only within the past 6 or 7 years. Processing
catfish consists of heading, gutting and skinning. Heading is ordinarily
done with a bandsaw, gutting and cleaning is done by hand and skinning
is either done mechanically or by hand or by a combination of machine
and hand dressing. In a survey of 1 6 catfish processors in the South,
completed by the USDA in 1970,]J seven plants used machine skinning,
seven used hand dressing only and two plants used a combination of
machine and hand operations. Sizing of dressed fish is ordinarily done
by sight-judgment, but one of the 16 plants had an automatic weighing-
sorting machine. In its present status, the catfish processing industry
is still at a relatively low-level stage of technology.
— Catfish Processing, A Rising Southern Industry, Agricultural Economic
Report No. 224, ERS, USDA, 1972.
I- 13
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E. Pack - Canned and Frozen Products
Tuna
Nearly all tuna are canned, only negligible quantities are frozen. Dis-
tribution of the 1971 canne.d pack, by states, is shown in Table I- 4
California is the leading state, accounting for 9.7 million cases or 43.8
percent of the total pack. Puerto Rico is the second most important tuna
canning state, 7.7 million cases or 34.9 percent of the total. The im-
portance of Puerto Rico has been increasing rapidly in recent years.
Maryland, Hawaii and American Samoa together account for 14. 9 per-
cent of the total pack, Oregon 5.4 percent and Washington 1. 0 percent.
Sh rim p
Canned - The Gulf States (Texas, Louisiana and Mississippi)
accounted for two-thirds of the pack of canned shrimp (2. 1 million
cases) in 1971. Louisiana had 12 canneries, Mississippi 10 and
Texas 1. Alaska, with 7 canneries packed 966 thousand cases
(30. 5 percent of the total) and the balance (64, 000 cases or 2. 0 per-
cent) was canned in 4 Oregon canneries (Table 1-5).
Fresh and Frozen - The pack of fresh (chilled) and frozen shrimp is
complex not only because of the number of locations and the variety
of products, but also due to the fact that plants operate with fresh,
frozen and imported frozen raw materials. Table 1-6 shows the dis-
tribution of the fresh and frozen shrimp pack, by state and type of
end product for 1971.
Although it is impossible to calculate the absolute importance of any
one state because of unreported small amounts shown, the amounts
reported account for 260 out of 280 million pounds total product. On
this basis, the principal freezing states are as follows:
I- 14
-------
Table 1-4. Tuna, canned pack, volume by state, 1971
State
California
Oregon
Washington
Puerto Rico
Maryland, Hawaii and
American Samoa (1)
Total, United States
Pack, thou.
std. casesi'
9,735,943
1, 196, 123
225,994
7, 744,296
3,302,617
22, 204,973
Percent of
total
43.8
5.4
1. 0
34. 9
14.9
100.0
— 48, 1/2-pound cans.
(l)Data unavailable by individual state or territory.
Source: Canned Fishery Products, 1971, U. S. Dept. Commerce, UNFS
Current Fishery Statistics No. 5901
Table 1-5. Shrimp, canned pack, volume by state, 1971
Alaska (7)
Oregon (4)
Gulf States
Pack, thou.
std. cases
966,100
63,726
2, 136,428
Percent of
total
30.5
2.0
67.5
Texas (1), Louisiana (12),
Missippi (lO)!/
Total, United States
3, 166,254
100.0
— Data unavailable by individual state.
Numbers in ( ) refer to number of canning plants.
Source: Canned Fishery Products, 1971, U. S. Dept. Commerce,
NMFS Current Fishery Statistics No. 5901
1-15
-------
Table 1-6. Pack of fresh and frozen shrimp, by state, 1971
Region and
State
New England
Me.
N. :n.
Ma £i s .
Mid Atlantic
N. Y.
N. J.
Pa. & Del
Chesapeak
Md.
V Va.
Haw
headless
(OCO Ib)
(:.)
(:.)
--
--
--
.
--
--
Cooked Peeled
whole raw
(000 Ib) (000 Ib)
8,583 2,231
--
(1)
(1)
._
__
__
__
Type of
Peeled
cooked
(000 Ib)
1,823
--
7,451
(1)
--
--
--
--
Preparation
Breaded
(000 Ib)
(1)
--
1, 327
(1)
--
205
(1)
183
Specialties
(000 Ib)
(1)
.
3,509
(1)
(1)
(1)
(1)
(1)
Total excluding
small items
(000 Ib)
12,637
(1)
12, 287
(1)
(1)
205
(1)
183
h-*
°" South Atlantic
N. Car.
!5. C:ar.
Ga.
?la.(East
Gulf
Fla.(West
Ala,
Miss.
.La.
Tex.
432
C-)
2,827
Coast) (!.)
Coast) S, 209
3,394
5, 562
31,612
3D, 083
(1)
1,186
--
15,357
(1)
(1)
791
12,676
--
--
(1)
--
(1)
--
--
2, 545
(2)
(1)
--
14,236
13,342
31,531
--
(1)
1,701
23,986
(1)
--
(1)
(1)
(1)
(1)
--
623
--
432
(1)
18,249
13, 342
53, 097
8,394
5, 562
37,272
72,745
continued
-------
Table 1-6. Pack of fresh and frozen shrimp, by state, 1971 (continued)
Region or
State
Pacific Coast
Alaska
Wash.
Ore.
Calif.
Great Lakes
Mississippi R.
Mo. , Okla. ,
Tenn. , Tex. ,
& Wiso
Total U. S.
Raw
headless
(000 Ib)
2,250
--
--
(1)
Cooked Peeled
whole raw
(000 Ib) (000 Ib)
1,309
-- .
--
351
All production imported in U. S.
--
94,139
__
9,892 34,315
Type of Preparation
Peeled
cooked Breaded Specialties
(000 Ib) (000 Ib) (000 Ib)
3,769
(1)
1,706
1,503 9,473 401
totals.
•
4,648 193
20,741 104,588 « 16,613
Total excluding
small items
(000 Ib)
7,328
(1)
1,706
11,728 .
4,841
280,288
(1) Included in U. S. totals.
(2) Included with Louisiana.
Source: Processed Fishery Products, Annual Summary, 1971, CFS No. 5903, NMFS, U. S. Dept. of Commerce
-------
State Percent of total pack
Texas 26.0
Florida 23.7
Louisiana 13.3
Georgia 6.5
Maine 4.5
Massachusetts 4.4
California 4.2
Alabama 3. 0
Alaska 2.6
Mississippi 2.0
Other States 9.6
Total 100.0
Thus it is s'een that raw headless and breaded together constitute 71
percent of the total pack and when peeled raw and cooked are added,
these four products constitute 91 percent of the total.
Crab
Canned - Crab must be delivered to the cannery either live or
freshly cooked -- or in some instances frozen whole or as
frozen meat. As a result, crab processing is normally re-
stricted to areas near crab fishing grounds. Three distinct
areas exist, Alaska, the Dungeness crab areas of California,
Oregon and Washington and Blue crab areas along the Atlantic
and Gulf States. Data on crab are not as detailed as for shrimp.
Of the total canned pack, Blue crab accounts for 52.8 percent,
Dungeness crab 13 percent, King crab 24.6 percent and Tanner
or Snow crab 9.6 percent. Alaska is the most important crab
canning state, accounting for 38 percent of the total pack
(Table 1-7).
Fresh and Frozen - The crab freezing industry is divided
along the same species and geographic lines as was described
for canning operations. In addition, there are four major pro-
duct forms: (1) cooked meat, (2) whole cooked crab, (3) cooked
sections and (4) specialty products. All crab is sold cooked.
The principal crab freezing states, 1971, are as follows
(Table 1-8).
I- 18
-------
Table 1-7. Crab meat, canned pack, volume by state and species,
1971
State
Alaska
Dungeness
King
Tanner
Total
California, Oregon
Washington
Dungeness.±/
Maine, N. Car., S. Car.
Mississippi
Blue!/
Total, U. S.
Pack, thou.
std. cases
5," 291
33,974
13,278
52, 543
12,737
73,079
138, 359
Percent of
total
3.8
24.6
9.6
38.0
9.2
52.8
100.0
— Data unavailable by individual state.
Source: Canned Fishery Products, 1971, U. S. Dept. Commerce,
UNFS Current Fishery Statistics No. 5901.
I- 19
-------
Table I- 3. Pack of fresh and frozen crab, by species, state and form, 1971
State
New England -
Mid Atlantic -
Pa.
Chesapeake -
S. Atlantic -
Fla.
Gulf - Fla.
Pacific -
Total U. S.
Dungeness
Cooked Whole
meat cooked Sect. Spec.
Me.
Mass.
U. Y.
N. J.
8c Del.
Md.
Va.
N. Car.
S. Car.
Ga.
E . Coast
W. Coast
Ala.
Miss.
l.a.
Tex.
Alaska 115 1,283 948
Wash. 1,421
Ore. 2,080
Calif. 1,298 100 (1)
4,915 1,383 948 Neg.
Species and type of preparation
King Tanner & Stone Blue &
Cooked Whole Cooked Whole Cooked
meat cooled Sect. Spec. meat cooked Sect. meat
. (000 lh^
107
(1)
(1)
3, 002
3,683
2,482
591
1,005
1, 159
1,402
322
498
618
687
9,884 24 6,266 -- 1,175 11 691
361 136
1,220
11,465 24 6,266 Neg. 1,311 11 691 15,592
Rock
Spec.
(1)
(1)
(1)
3,791
1, 228
237
115
338
(1)
521
(1)
437
(1)
9,749
(1) Included in U. S. totals.
Source: Processed Fisher'/ Products, Annual Summary, 1971, CFSNo. 5093, NMFS, U. S. Department of Commerce
-------
State Percent of Total
Alaska 39. 0
Maryland 8. 1
Virginia 7. 5
Oregon 6.3
Florida 5.9
North Carolina 5. 0
Washington 3.7
Other States 24. 5
Total 100. 0
These data illustrate two important points concerning the freezing of
crab: (1) Alaska dominates the industry, freezing nearly five times as
much as any other one state and (2) with the exception of Alaska, crab
freezing operations are widely distributed among coastal states no one
of which produces more than 10 percent of the total pack.
The pack of frozen crab, by species, in 1971 was as follows:
Species Percent of Total
Blue (includes Rock)- 48.4
King 33.9
Dungeness 13.9
Tanner (includes Stone) 3.8
The freezing of Blue crab is widely distributed along the Eastern and
Southern Coasts, but the freezing of King and Tanner crab is largely
restricted to Alaska and Dungeness crab processing is distributed from
Alaska to California.
By type of product, cooked meat-picked from the shell and body, is the
principal product frozen, accounting for nearly two-thirds of the total.
Specialty products accounted for 18.6 percent, 15. 1 percent was frozen
as cooked sections and whole frozen crab represented 2.7 percent of
the total.
F. Supply Conditions
Supply, as opposed to a rapidly increasing demand, is, in the minds of
the seafoods processing industry, the greatest single problem confronting
1-21
-------
the industry today. In general, offshore U. S. fisheries for most com-
mercial species, including tuna, shrimp and crab, have declined in
productivity and U. S. fishing fleets face increasing competition from
foreign fleets in international fishing grounds. The situation is further
confused by varying national claims to offshore fishing rights (from
3 to 12 to 200 miles) which has resulted in the impounding of U. S.
vessels in such countries as Peru and the recent "Icelandic Cod War"
between Iceland and Great Britain. The proposed Law of the Sea Con-
ference in 1974 will address itself to these problems but no immediate
solution appears to exist. The catch of some species, such as tuna,
is regulated by International Commissions or Agreements, but varying
degrees of inspection and enforcement tend to put U. S. fishermen at a
disadvantage.
As a result of supply limitations on the domestic catch, the seafoods
processing industry has been forced to turn increasingly to imported
materials. However, basic processing is still done in U. S. plants.
If, as a result of increased effluent control costs, returns to the U. S.
processing industry are lowered so much as to become unattractive, it
is entirely possible that a greater part of the processing of imported fish
and shellfish stocks may be transferred overseas.
Tuna Supplies
The supply of tuna, from both U. S. landings and imports, is shown in
Table 1-9 and Figure 1-1 for the period 1962-1972. A steady growth in
both U. S. landings and imports is seen. U. S. landings increased from
340.9 million pounds in 1962 to 524.4 million (a record) in 1972 -- a
gain of 54 percent. However, much of this increase came from the •
growth of the tuna industry in Puerto Rico. Of the total 1962-72 .increase
of 183 million pounds, 118 million, or 64 percent, was accounted for by
the growth of the Puerto Rican industry.
Imports of fresh and frozen fish for processing in the U. S. gained 400
million pounds, more than double the U. S. increase, the imports of
canned tuna remaining relatively unchanged. 1972 imports of 764. 8
million pounds exceeded the previous record level of 506. 6 million pounds
by over 50 percent.
The canned pack ot tuna in IVY^, bib. 6 million pounds, was the largest
on record, exceeding the 1971 pack, the second highest on record, by 40
percent (Table 1-9). Imported raw materials (fresh and frozen tuna)
1-22
-------
Table 1-9. Supply of tuna, 1962-72
Year
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
U. S. Landings
Atlantic
Gulf, and
Pacific
Coast States
and Hawaii
312, 157
321,619
305,829
318,895
269,172
328,368
293,868
324,884
* 3 93, 494
348,040
377,569
Puerto
Rico
28,790
37,026
48,393
54,576
64,698
97,882
107,660
96,268
84,852i/
128,770^
146,806*27
Total
Imports
Fresh and
frozen in-
cluding
cooked loins
and discs _'
--Thousand pounds --
340,947
358,'645
354,222
373,471
333,870
426,250
364,528
320,910
379,242
378,637
449,840
387,142
I
i
401,528 422,108
i
421,152 414,453
i
478,346 | 464,583
t
476,810 ! 506,602
!
524,375* 764,784*
Canned
In oil
358
224
201
211
160
186
150
158
153
1,050
384
In brine
56,361
57,270
54,446
50,750
61,400
65,135
67,023
72,958*
72, 109
58,792
56,129
* Record. ]J Round weight. Includes landings in American Samoa of foreign-caught fish. ^/Includes a small
quantity of fish landed in American Samoa by U. S. vessels.
Source: Fisheries of the United States, 1972, National Marine Fisheries Service, U.S. Department of Commerce,
Current Fisheries Statistics, 6100.
-------
Million pounds
600
450
300
150
0
Total supply.
1,~
Imported canned
.U. S. pack from
:':• imported fresh
:j: and frozen
5U. S. pack from
; domestic
; landings
1961 62 63 64
65 66 67 68
Year
69 70 71 1972
Figure I-1, Supply of tuna, 1961-1972, by source.
1-24
-------
Table I-10. Supply of canned tuna, 1962-72
Year
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
U. S. pack from
domestic
Landings ]J
Thousand
pounds
147,586
160,822
154,208
161,515
153,231
183,236
176,524
181,786
203,531
194,967
230,333*
I/ Tti/^ln/loG r»a i
Percent
37.6
41.8
38. 1
39-5
33.6
40.3
38.1
38.6
39-9
39.1
34.2
U. S. pack from
imported fresh
and frozen
tuna2/
Thousand
pounds
187,920
165,890
195,626
.196,890
241,037
205,609
219-433
216,651
234,109
243,774
386,282*
rlinors in "PnPT
Percent
47.9
43. 2
48.4
48. 1
52.9
45.3
47.4
45.9
45.9
48.9
57.4
•tri Rirn anH A
Total
--Thousand
335,506
326,712
349,834
358,405
394,268
388,845
395,957
398,437
437,640
438,741
616,615*
mpriran Samoa
Imported
canned
pounds --
56,719
57,494
54,647
50,961
61,560
65,321
6,7,173
73,116*
72,262
59,842
56,513
hv TI. S. vesi
Percent
14.5
15.0
13.5
12.4
13. 5
14.4
14.5
15.5
14.2
12.0
8.4
?e Is. 2/Tnck
Total
supply
Thousand
pounds
392,225
384,206
404,481
409,366
455,828
454,166
463,130
471,553
509,902
498,583
673,128*
ides
tuna canned in American Samoa from foreign-caught fish.
Source: Fisheries of the United States, 1972, National Marine Fisheries Service, U.S. Department of Commerce,
Current Fisheries Statistics No. 6100.
-------
accounted for 57.4 percent of the total supply of canned tuna and im-
ports of canned tuna added 8.4 percent more, for a total of 66.2 percent
(nearly two-thirds) from imported sources.. It is interesting to observe
that while imports of fresh and frozen tuna for processing in the U. S.
have risen dramatically, imports of canned product have been relatively
stable, exceeding the quota only one year (1970) since I960 (Table I-11).
Shrimp Supplies
In response to a growing U. S. demand, the supply of shrimp has in-
creased even greater than was true for tuna, rising from 267.6 million
pounds, heads-off basis in I960 to a record 487.5 million pounds in 1972,
a gain of 82 percent. U. S. landings increased 58 percent during the
1960-72 period, but imports gained 113 percent during the same period.
In 1972, over 50 percent of the total U. S. shrimp supply came from im-
ports (Table I- 12 and Figure 1-2).
Imports by Product Form
An increasing amount of the total shrimp imports are coming in peeled,
not breaded (Table 1-13), this category increasing from 27.4 million
pounds in 1964 to 90. 1 million in 1972, a gain of 229 percent compared to
an increase for shell-on imports from 112. 1 million pounds in 1964 to
126.8 million in 1972, a gain of 13 percent. Breaded shrimp imports,
although small -- 1.3 million pounds -- were up 160 percent over 1964.
Imports of peeled, canned shrimp remained relatively constant at about
3 million pounds. The substantial increase in peeled imports indicates
that an increasing amount of total shrimp imports are being processed
(peeled) in foreign countries (or on board foreign vessels) probably be-
cause of lower labor costs. However, should U. S. shrimp processing
costs increase as a result of water pollution controls, this trend toward
overseas processing would be further accentuated.
Shrimp Imports by County of Origin
Mexico and Central America represents the major area from which U. S.
shrimp imports are drawn. In reality, an even larger proportion of the
total shrimp supply comes from Latin American waters as the U. S.
shrimp fleet also fishes in these areas. These countries accounted for
51 percent of U. S. shrimp imports in 1972, compared to 56 percent of
our imports in 1967. However, in absolute terms, shrimp imports from
1-26
-------
Table I-11. Quota and imports of canned tuna not in oil, 1960-72
Year
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
Quota —
53,448
57, 115
59,059
63., 131
60,912
66, 059
65,662
69,472
66,985
71,703 .
70, 146
77,296
78,532
Imports
Under Over
quota— quota —
rp-i j -i
50,322
56,210
54,379
56,414
52,931
49,204
57,987
62,275
64,907
71,333
70,146 902
55,638
54,449
—• Imports have been subject to tariff quotas since April 14, 1956, and are
based on 20 percent of the previous year's domestic pack excluding
American Samoa.
— Dutiable in 1956-67 at 12.5 percent ad valorem; 1968, 11 percent; 1969,
10 percent; 1970, 8.5 percent; 1971, 7 percent; and in 1972, 6 percent.
— Dutiable in 1971 at 15 percent ad valorem; and in 1972 at 12.5 percent
ad valorem.
Source: Department of the Treasury, Bureau of Customs. (Data in this
table will not agree with tuna import data released by the Depart-
ment of Commerce, Bureau of the Census. )
I- 27
-------
Table I-12. Supply of shrimp, 1960-1972
Year
1960
1961
1962
1963
1964
1965
o 1966
1967
1968
1969
1970
1971
1972
U.S. Landings
Heads-on
Thousand
249,452
174,530
191, 105
240,478
211,821
243,645
239, 046
307,787
299,289
318,537
367,468
*387,932
384, 952
Heads- off
pounds
148,483
103,865
119, 154
150,737
133, 113
152, 346
148,255
189,972
184, 065
195,002
224,272
*236, 328
234, 432
Percent
of total
Percent
55.5
43.6
43.9
47.4
44. 0
46. 0
43.2
48.5
46.7
47. 1
47.7
52.5
48. 1
Imports —
Import Reads- off
weight
Thousand
113,418
126,268
141, 183
151,530
154,577
162,942
178,549
186,073
189,455
193,741
218,715
191,295
*223,226
pounds
119, 139
134,564
152,504
167,344
169,510
178,955
194,946
202, 105
210,063
218, 697
_245,658
213,857
*253, 065
Percent
of total
Percent
44.5
56.4
56. 1
52.6
56. 0
54.0
56.8
51.5
53.3
52.9
52.3
47.5
51.9
Total,
heads- off
Thousand Ibs.
267,622
238,429
271, 658
318, 081
302.623
331,301
343,201
392, 077
394, 128
413,699
469,930
450, 185
*487,497
— Imports were converted to heads-off weight on the basis of available data on the actual condition of the
imports. *Record.
Source: Fisheries of the United States, 1972, National Marine Fisheries Service, U. S. Dept. of Commerce,
Current Fishery Statistics No. 6100.
-------
Million pounds
400 -
>s
r-H
0,
200-
1 1 I I I T
I960 1962 1964 1966 1968 1970 1972
Figure 1-2. Supply of shrimp, 1960-1972. (Heads-off weight)
1-29
-------
Table 1-13, Imports of shrimp, by product types
Year
Shell-on
headless
Peeled
canned
Not breaded
Raw Other
Breaded
Unclassified Total
(thousand pounds)
1964
1965
1966
1967
1968
1969
1970
1971
1972
112,
114,
129,
131,
128,
121,
139,
123,
126,
149
177
919
927
042
243
978
926
771
3,
2,
1,
2,
4,
3,
3,
2,
1,
004
248
547
225
307
583
876
742
123
27,
31,
37,
38,
47,
63,
69,
60,
90,
385
961
233
959
450
792
501
136
143
2,
3,
2,
2,
1,
3,
3,
3,
3,
989
290
565
133
809
814
946
279
866
508
778
527
830
1,567
1,259
1,414
1,212
1,323
8,542 154,
10,488 162,
6,758 178,
9,999 186,
6,247 189,
193,
218,
191,
- 223,
577
942
549
073
455
741
715
295
226
Source: Fisheries of the United States, 1972, National Marine Fisheries Service,
U.S. Department of Commerce, Current Fisheries Statistics No. 6100.
-------
Mexico and Central America increased from 104 million pounds in 1967
to 114 million in 1972 (Table I- 14). Imports from South America rose from
32.5 million pounds in 1967 to 43.9 million in 1972, a gain of 35 per-
cent and now constitute 19.7 percent of total imports. The other major
source of imports is Asia and the Mid East (primarily India) where ex-
ports to the U. S. rose from 45.9 million pounds in 1967 to 60.0 million
in 1972, a gain of 30.6 percent. This area now contributes 26.9 percent
of the total U. S. imports. Imports from Australia and Oceania and from
Africa, although small, are growing whereas imports from Europe are
decreasing in response to increased demand for shrimp in Europe.
Supply of Canned Shrimp - Although the U. S. pack of canned shrimp has
increased from 19 million pounds to 24 million pounds in recent years,
imports of canned shrimp have decreased from 4.3 million pounds in
1968 to 1. 1 million in 1972 and exports (mainly to Canada and the United
Kingdom) have risen from 4.5 to 8.5 million pounds with the result that
the net supply of canned shrimp available for U. S. consumption has de-
creased and is lower than it was ten years ago (Table I- 15).
Supply of Frozen Shrimp - In contrast to the relatively stable supply of
canned shrimp available for U. S. consumption, the supply of frozen
shrimp has increased dramatically since 1967, from 103.3 million
pounds to 141.4 million in 1972, a gain of 37 percent (Table I- 16). How-
ever, a substantial part of this volume is "refrozen" shrimp.from im-
ported frozen blocks of shrimp which are thawed, peeled, packaged and
refrozen by U. S. freezers.
Crab Supplies
U. S. landings of crab have decreased since 1967 and imports of canned
crab have remained relatively steady (Table I- 17). However, the compo-
sition of the crab catch is changing. Blue crab supplies have remained
relatively constant, but catch of King and Dungeness crab has decreased.
Tanner crab and other species such as Jonah and Red crab have come into
commercial use. These changes are shown by the following data:
1-31
-------
Table 1-14. Imports of shrimp, by country of origin, 1967-1972
Imports -
Country
North America
Mexico
Panama
Nicaragua
El Salvador
Honduras
Other countries
Total
South America
Venezuela
Ecuador
Guyana
Brazil
Colombia
French Guiana
Other countries
Total
Europe (Total)
Asia & Mid-East
India
Pakistan
Kuwait
Other countries
Total
Australia & Oceania
Africa
Grand Total
1967
70,
11,
5,
6,
1.
8,
103,
4,
5,
9,
2,
6,
2,
32,
1,
18,
7,
20,
45,
1,
186,
460
126
053
724
922
686
971
773
986
452
726
176
717
623
453
675
436
457
-
034
927
671
376
073
1
59,
10,
5,
4,
2,
10,
94,
5,
6,
8,
3,
1.
7,
3,
36,
1.
22,
5,
37,
54,
1,
1,
189,
968
948
730
627
639
981
754
679
403
289
349
018
619
820
856
354
366
133
475
-
756
414
601
041
455
1969
56,
9,
7,
'5,
3,
9,
91,
5,
8,
8,
3,
3,
6,
3,
40,
1,
34,
5,
18,
58,
1,
1,
193,
239
927
206
026
925
111
434
851
901
155
703
707
037
993
347
235
357
409
-
357
123
514
088
741
1, 000 Ibs.
1970
72,
11,
6,
6,
2,
11,
110,
11,
5,
10,
4,
2,
5,
3,
43,
33,
7,
17,
58,
1,
3,
218,
018
613
021
354
626
937
569
563
992
165
802
065
054
937
578
992
570
125
-
418
062
608
906
715
1971
74,
9,
5,
6,
3,
7,
107,
10,
5,
8,
4,
4,
3,
2,
40,
1,
22,
2,
2,
7,
35,
3,
4,
191,
624
316
639
707
942
751
979
083
332
981
406
841
808
616
067
131
770
924
173
185
052
058
008
295
' 1972
80, 681
10, 105
6, 605
5, 735
4,811
6,212
114, 149
7,995
6,935
6,906
8,931
5,979
3,622
3,515
43,883
1,225
33,524
3,978
2,295
20, 188
59,985
1,497
2,487
223,226
I- 32
-------
Table I- 15. Supply of canned shrimp, 1960-72
Year
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
I/ Data
Source:
U.S.
pack
14,268
9,284
13,249
15,904
9,740
15,629
14,201
16,851
18,967
20,729
25, 125
22,345
23,795
not available
Fisheries of
Imports
(1)
(1)
(1)
4,120^
3,004
2,248
1,547
2,225
o-
4,307""
3,583
* 3,876
2,742
1,123
7 1
. — Partly estirra
the United States,
Exports
Domestic
3,482
2,503
2,21£
3,199
3,692
4,510
4,479
5,255
4,467
5,682
6,076
8,334
8,450
ted. * Record.
1972, National
Foreign
j
34
25
44
33
25
34
33
19
20
39
50
-
8
Marine Fisheries
Total for
U.S. con-
sumption
(1)
(1)
(1)
16,792
9,027
13,333
11,236
13,802
18,787
18,591
22,875*
16,753
16,460
Service,
U.S. Department of Commerce, Current Fisheries Statistics No. 6100.
1-33
-------
Table 1-16. Freezings of shrimp and crab, 1967-1972
Freezings (OOP Ibs. )
Year . Shrimp Crab
1967 103,322 6,566
1968 . 127,031 6,692
1969 128,006 4,340
1970 137,191 5,393
1971 146,691 7,659
1972 141,368 10,018
1-34
-------
Tab.!'? 1-17. Supply of fresh crab and canoed crab meat, 1967-1972
Year
1967
1968
1969
1970
1971
1972
U.S. Landings
(000 lb. live wt.)
315, 180
238,500
246, 000
268,500
276,374
281,077
Imports of
canned crab
(000 lb. canned)
2,160
4,635
3,436
2,765
3,723
2,547
Soxirce: Fisheries of the United States, 1972, National Marine Fisheries
Service, U.S. Department of Commerce, Current Fisheries
Statistics No. 6100.
1-35
-------
Species 1967 1972
(000 Ib) (000 Ib)
Blue 145,027 145,356
Dungeness 42,437 26,917
King 127,716 74,010
Tanner Neg. 28, 994
Other Neg. 5, 800
Total 315,180 281,077
In contrast to shrimp, imports of crab for processing in the United States
are negligible. Most crab are landed live and cooked immediately prior
to freezing or canning and importing live crabs is not practicable. Im-
ports of canned crab meat have declined in recent years as compared to
the early 1960's.
U. S. Pack of Processed Crab - The composition of the U. S. pack of
processed crab has changed markedly since 1966. In 1966 there was a
record canned crab pack of 11 million pounds, but the canned pack has
decreased steadily since that time and was only 2.4 million pounds in
1972 (Table I- 18). At the same time, freezings of crab increased from
6. 6 million pounds in 1967 to 10,0 million in 1972 (Table I- 16).
Catfish Supplies
The catfish processing industry operates primarily on pond-reared catfish
produced in the Central South and the Midwest. In 1970 there were 1, 642
producers producing catfish on 40, 406 acres of ponds in the United States.
Major producing states, in 1970, were as follows:
State Acres
Mississippi 13, 827
Arkansas 10,300
Texas 3,916
Alabama 3,439
Louisiana 3, 042
Georgia 1,975
Other States 3, 907
Total 40,406
Acreage in 1971 is estimated at 43, 100.
Size of individual producing units varied from less than one acre to more
than a thousand acres.
1-36
-------
Table I- 18. Supply of canned crab meat, 1960-72
Year
U.S.
pack
Percent
of
total
supply
Thousand
pounds
I960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
4,
5,
5,
7,
6,
9,
11,
9,
4,
5,
5,
3,
2,
115
000
621
356
567
139
002*
707
019
027
097
213
406
Percent
47.
54.
61.
58.
59-
68.
83.
81.
46.
59-
64.
46.
48.
7
1
6
1
3
8
1
8
4
4
8
3
6
Imports
Percent
of
total
supply
Thousand
pounds
4,
4,
3,
5,
4,
4,
2,
2,
4,
3,
2,
3,
2,
507
237
505
296
508
152
233
160
635
436
765
723
547
Percent
52.
45.
38.
41.
40.
31.
16.
18.
53.
40.
35.
53.
51.
3
9
4
9
7
2
9
2
6
6
2
7
4
Total
supply
Thousand
pounds
8,
9,
9,
12,
11,
13,
13,
11,
8,
8,
7,
6,
4,
622
237
126
652
075
291
235
867
654
463
862
936
953
* Record. Record imports, 13, 507, 000 pounds in 1939-
Source: Fisheries of the United States, 1972, National Marine Fisheries
Service, U.S. Department of Commerce, Current Fisheries
Statistics No. 6100
I- 37
-------
Collection of data on farm-raised catfish production was begun in 1967.
In that year there was an estimated production of 13.7 million pounds of
farm-raised catfish, compared to 38. 1 million in 1971. Although the
industry has grown, it is still experiencing problems concerned with
processing and marketing the processed fish.
Data on processing volume were available only for 1970, 1971, and 1972 as
follows:
Year Processed Volume
(000 Ibs)
1970 3,438
1971 6,741
1972 10,977
Catch of wild catfish varies from 30 to 38 million pounds per year.
However, virtually all of these fish are consumed fresh.
Catfish imports (frozen) vary between 3 to 5 million pounds annually.
They come mainly from Brazil and are used by fish stick manufacturers
and other processors of fabricated fish items.
G. Employment
Employment in the seafoods processing has a pronounced seasonal pattern
and within a processing season has intermittent ups and downs depending
on the landings of fish and shellfish which determine the supply available
to processors.
No published data are available which relate to employment by specific
segments of the industry, i.e. tuna, shrimp, crab and catfish. Industry-
wide data on employment in the seafoods processing industry are shown in
Tables 1-19 and 1-20. For seafoods products canning plants, 50 percent
of the plants employ fewer than 20 people, 90 percent fewer than 100, 98
percent fewer than 250 and only one plant employed over 1, 000 people.
For plants processing fresh or frozen packaged fish, 52 percent employed
fewer than 20 people, 92 percent fewer than 100 and no plant employed
~v«r OQQ
Contacts made with plants in industry showed the following ranges in em-
ployment.
1-38
-------
Table 1-19. Employment, by size of establishment, canned
and cured seafoods, 1967.1'
Number of employees Number of plants
1-4 84
5-9 25
10 - 19 50
20 - 49 81
50 - 99 46
100 - 249 26
250 - 499 4
500 - 999 3
1, 000 - 2,499 1
— U. S. Department of Commerce, Census of Manufactures,
1967.
Table 1-20. Employment, by size of establishment, fresh
or frozen packaged fishA'
Number of employees Number of plants
1-4 123
5-9 54
10-19 79
20 - 49 134
50 - 99 65
100 - 249 25
250 - 499 11
500 - 999 6
— U. S. Department of Commerce, Census of Manufactures,
1967.
1-39
-------
.Tuna processors - 200 - 1,800 employees
Combined shrimp and crab - 15 - 85, average 48
Shrimp processors - 10 - 30, average 25
Crab processors - 15 - 95, average 50
Catfish processors - 5 - 25, average 14
It becomes virtually impossible to isolate "shrimp or crab" employment
from other employment in many plants since these are often multi-product
finfish and shellfish processors. Tuna processors tend to be more
specialized, although most plants also process other species, and catfish
processors normally only process catfish.
Employment is highly seasonal, as related to landings of the particular
species. Processing seasons will run from 100 - 200 days. As with
any seasonally-produced product employment starts low, builds to a peak
and then decreases as the season draws to a close. Variation in employ-
ment during the processing season may vary as much as 200 percent, with
double-shift operations common during peak periods.
Shrimp and crab operations employ large numbers of women as "peelers"
and "pickers" . In the Pacific Coast area many of these workers are of
Oriental or Mexican extraction and in the Northwest and Alaska, sub-
stantial numbers of Indians and Eskimos are used. Thus, these pro-
cessing operations provide substantial temporary employment opportunities
for minority ethnic groups and plant closures would result in severe unem-
ployment in these groups which are not ordinarily mobile.
-------
II. FINANCIAL, PROFILES
Basic investment and operating costs for the seafoods industry are not
available in published form nor is such information generally available
from firms in the industry. The development of investment and oper-
.ating costs for specific products, e.g. tuna, shrimp or crab, becomes
particularly difficult where these products are processed as part of
multi-product plant operations. In addition, many of the major pro-
cessors are parts of conglomerates or diversified food processors so
that analysis of financial statements given in annual reports or of data
given in such publications as Standard and Poors reVeals little about the
costs and returns from the seafood processing operations of these cor-
porations.
The situation is further complicated by the fact that the age and construction
of seafoods processing plants varies greatly from plant to plant. Although the
tuna processing industry is more nearly "standardized" in terms of types
of plants than other segments of the industry, virtually no data on invest-
ments and operating costs are available. Shrimp and crab processors
operate from a variety of facilities. Some are parts of diversified sea-
foods processing plants, some have "floater" plants based on barges,
converted ferries, obsolete "Liberty" ships or other hulls, and some oper-
ate out of shore-based plants which vary from ramshackle operations in
old waterfront buildings to new, modern, specialized processing plants.
There have been no meaningful studies of the costs of processing seafoods
conducted by universities or by the National Marine Fisheries Service.
In its evaluation of the market research and service programs of the
National Marine Fisheries Service, reported in October, 1972, Develop-
ment Planning and Research Associates, Inc. recommended that priority
be given to costs of processing seafoods and to economies of scale in the
processing of seafoods. However, no work has been initiated in this area,
nor does it appear that such research will be undertaken in the near future.
An opportunity may exist for the establishment of such research by the
Sea Grants Institutes -- associated with about 25 universities, but to date
most Sea Grant funds have been allocated to biological or physical re-
search.
The pond catfish industry, as an extension of farming operations, has been
studied to a limited extent by the U. S. Department of Agriculture and by
Land Grant Agricultural Experiment Stations. However, most emphasis
II-1
-------
has been given to catfish production. In spite of this, more information
on investment and processing costs and returns is available for this
industry than is true for seafoods processing.
Faced with this situation, DPRA has been forced to develop its own
estimates of investment and operating costs based on such data as are
available from a variety of unpublished sources and on personal con-
tacts with firms engaged in seafoods processing. Due to the limited
amount of time available for Phase I, it has not been possible to contact
representatives of all segments of the industry. Personal discussions
have been held with representatives of the Pacific Coast seafoods in-
dustry from Kodiak, Alaska to San Diego, California. However, no
contacts have been made with the Blue crab or shrimp industries of the
Eastern and Gulf areas, nor with the tuna processors in Puerto Rico.
Contacts with these segments of the industry are planned during Phase II
of this project.
As a result, the processing costs and returns developed by DPRA must
be considered as preliminary and approximate. However, it is believed
that they are representative within a range of _+ 10-15 percent of the
situation existing for processors of the products studied.
Tuna Processors
The tuna processing industry is primarily composed of firms which are,
in turn, parts of conglomerates or large, diversified food canners. As
such, the financial profile of the parent company or conglomerate is an
important factor dictating the financial status of the tuna processor.
Earnings as a Percent of Sales
Composite industry data for the canned foods industry, which includes
such firms as Heinz (Starkist), Van Camp and Del Monte -- all of
which are major tuna packers -- shows earnings as a percent of sales
varying from 3.1 to 4.3 during the period 1965-1970, with earnings in
1970 of 3.4 percent of sales. Contact with representatives of the tuna
industry and review of other financial performance data on this industry,
indicate that industry earnings in the seafoods processing industry are,
in fact, in the area of 3-4 percent on sales. Analysis of the earnings
1967-1972 of a major, specialized seafoods processor showed average
earnings of 3.5 percent on sales.
II-Z
-------
Plant Description - Tuna Cannery
The representative plant as considered in this analysis is a large-scale
plant, specialized in the canning of tuna, but also producing pet food
(cat food) from fish by-products and non-fish ingredients.
Processing Methods - Most tuna canned in the United States are caught
in distant waters. A modern tuna boat can hold 150 to 300 tons of fish
and has a range of approximately 1, 000 miles. Because of the extended
fishing times, the fish are normally frozen aboard the fishing vessels.
The fish usually are unloaded (while frozen) by mechanical hoists and
conveyed to the weighing station. After weighing the fish are inspected
and thawed.
Tuna are eviscerated by hand in several steps. The body cavities are
flushed with fresh water and all adhering viscera carefully removed.
The viscera are used for fish meal or pet food and the livers are some-
times recovered for oil and vitamins.
After butchering, the fish are precooked in large, open chambers. The
time of cooking varies with the body size, but is usually about three
hours. 'Weight loss during cooking (attributable to oil and moisture loss)
averages 22 to 26 percent.
The cooked fish are cooled for approximately 12 hours to firm the flesh.
The meat is separated by hand from the head, bones, fins and skin. All
dark meat is removed and usually recovered for pet food. The meat to
be canned is placed on a conveyor belt and transferred to the "Pak-Shaper"
machine.
The tuna slices are arranged lengthwise in the Pak-Shaper. This device
molds the loins into a cylinder, fills the cans and trims-the meat after
filling. The machine can fill from 125 to 150 cans per minute.
Salt and vegetable oils or water are next added to the cans and they are
vacuum sealed and retorted by standard procedures. The entire process
is diagrammed on Figure II-1.
II-3
-------
PROCESS
WASTES
DISPOSAL
RAW
^PRODUCT,
STORE
I
THAW (
i
BUTCHER (
WASH (
i
PRE-COOK — — (
I
| COOL 1 (
i
CLEAN — (
|
PACK (
|
CLINCH (
I
| SEAM
|
CAN WASH] (
i
RETORT — — (
|
] COOL | (
i
CASE
i
WASH DOWt«j (
SOLIDS, WATER )
BLOOD, OIL, SLIME )
WATER )
OFFAL \
MEAT V-
SOYBEAN OIL \
CONDENSATE ^
WATER \
WATER , SOLIDS )—
(RENDI
FINISHED
^PRODUCT/
FIGURE II-1. TUNA CANNING
II-4
-------
Processing volume - Tuna canneries are normally large-scale, special-
ized plants. However, in some instances, tuna may be canned in com-
bination with salmon or other fish or shell fish.
Plant capacity for the representative plant used in this analysis is
approximately 350 tons of raw product (tuna) per eight-hour shift. Annual
pack is approximately 1,600, 000 standard cases of tuna (48 half-pound
cans).
Pet food production is considered to be completely separate from the tuna
processing operations, but an allowance was made for the sale of tuna
by-products to the pet food division.
Operating costs and gross margin - Estimated costs of canning tuna are
shown in Table II-1. Raw material costs account for 68 percent of total
operating costs, labor (11.4%) and cans and cases (9.7%) being the other
two major items. Since it is assumed that all tuna canning operations
are large-scale or are part of large-scale diversified seafoods processing
firms, no economies of scale are postulated. However, it is recognized
that with existing plants, the degree of utilization of capacity is an im-
portant factor influencing unit costs.
Total costs are $17.60 per case vs. revenue of $18.45, resulting in a
gross operating margin of $.85 per case.
Earnings and Cash Flow - Model Tuna Plant
Earnings and cash flow for the model tuna plant are shown in Table II-2.
These estimates were developed by DPRA from a variety of sources in-
cluding published prices for fish and canned product, annual reports of
firms in the industry, industry contacts, unpublished research and ex-
tablished financial operating ratios. In the absence of actual financial
data from the tuna processing industry, they must be considered as pre-
liminary estimates, but it is believed that they approximate conditions
existing in the tuna processing industry.
Annual throughput of 1. 6 million cases is based on average 1971 pack for
major California tuna packers. Given a price of $18. 45 per case (in-
cluding by-product credits) results in sales of $29,160, 000 and operating
expenses of $28, 160, 000 (Table II-1), cash earnings of $1, 680, 000 result.
Deducting depreciation and interest paid results in 1972 pre-tax income of
$545, 850 and after-tax income of $283, 842. Investment, working capital
and current liabilities were estimated from industry financial ratios.
Pre-tax return on investment for 1972 is 6. 1 percent, after-tax ROI is
3.2 and return on sales pre-tax is 1. 8 percent and after-tax 0.9 percent.
II-5
-------
Table II-1. Estimated cost of canning tuna, 1972,
dollars per easel/
Item
Raw product - fish
Direct labor and related costs
Cans and cases
Condiments (salt and oil)
Warehouse
General and administrative
Total cost
F.O.B. plant revenue
Income (over cost) per case
Cost
12.00
2. 00
1.70
.45
. 35
1. 10
17.60
18.45
..85
Percent of total cost
68. 1
11.4
9.7
2.6
2.0
6.2
100. 0
--
--
— Per case of 48, half pound cans.
II-6
-------
Table 11-2. Estimated earnings and cash flow for tuna canning plant, 1972
Item . AmoXint
Annual throughput (cases) $1,600,000
Sales, at $18.45/case 29,160,000
Operating expenses at $17.60/case - 28,160,000
Cash earnings 1,360,000
Depreciation (5% replacement cost) 223, 750
Interest 590,400
Pre-tax income . 545,850
After tax income 283,842
Annual cash flow 507, 600
Replacement investment 8,950,000
Working capital 10,332,000
Average fixed assets 4,475,000
Working capital 10,332,000
Current liabilities 5,904,000
Average fixed investment 8,903,000
Pre-tax ROI (Percent) 6. 1
After-tax ROI (Percent) 3.2
Pre-tax ROS (Percent) 1.8
After-tax ROS (Percent) 0. 9
II-7
-------
Crab and Shrimp Processors
Crab and shrimp are processed in both canned and frozen form- Since
initial preparation, up to the point of actual canning or freezing, is similar,
many plants will combine canning and freezing production. The principal
difference is that mechanically peeled shrimp are usually canned since
texture and color is not as good as where shrimp are hand peeled.
Plant Description - Shrimp and Crab Processing
The representative shrimp plants considered in this analysis process shrimp
for both canning and freezing and also can and freeze crab.
Products produced include canned and frozen shrimp and canned and frozen
crab. Shrimp products include canned shrimp, frozen raw peeled shrimp,
frozen cooked peeled shrimp and raw headless shrimp. The plant does not
produce breaded shrimp or prepared shrimp specialties - these being pro-
duced by secondary processors. Products are packed in both institutional
size and consumer size containers. Crab products include packed cooked
meat, cooked sections and whole cooked crab. Cooked crab meat is processed
both by canning and freezing. All other products are frozen only. No crab
specialty products are produced.
Shrimp processing methods - Shrimp are caught commercially in otter trawls
to a distance of approximately 50 miles offshore. The shrimp are separated
from the trash fish and stored by various methods. When snort storage times
will suffice, no preservation methods are used; the shrimp are taken directly
to a processing plant or to a wholesale marketing vessel. When longer storage
times are necessary, the shrimp are iced in the holds and re-iced every 12
hours. In some cases, notably the Gulf states, the shrimp are beheaded at
sea and the heads discarded. Since the heads contain most of the active
degradive enzymes, this practice retards spoilage. If the shrimp are be-
headed within 30 minutes after being caught, the intestinal vein is readily
removed with the head. This increases the value of the product.
The shrimp are unloaded from the vessel into a flotation tank to remove the
packing ice, conveyed to a rotary drum to remove surplus water and bits of
debris, and then weighed. In some areas (Texas and the South Atlantic states),
the shrimp are iced after the initial preparation to optimize peeling conditions.
Next the shrimp are peeled and picked, if the head is still attached, manually
or by machine. Machine peeled shrimp are used mostly for canning. The
machine-peeled shrimp are paler in color, and have poorer flavor and texture
than the hand-picked product. By hand, a picker can peel from 100 to 400
pounds of shrimp per day as compared to a machine's capacity of 4,000 to
12,000 pounds per day. Nearly all Pacific Coast and Alaskan shrimp are
machine-peeled, but manual operations are'more important for the larger
sizes of Gulf shrimp.
11-8
-------
After peeling, the meats are inspected and -washed. They are then blanched
in a salt solution for about 10 minutes and dried by various methods to
remove surface water. Again the shrimp are inspected and then canned.
The process is outlined on Figures II-2 and II-3.
Crab Processing methods - Crabs are harvested from shallow water in
baited traps. Rapid and careful handling is necessary to keep the crabs
alive; dead crabs must be discarded because of rapid decomposition.
At most plants, the whole crabs are steam cooked in retorts for 20 to 30
minutes. Pacific-Coast Dungeness crab operations first butcher the crabs
(remove the backs), and then cook them for 12 minutes or less.
Cooked crabs are marketed in the shell, butchered or whole, or the meats,
picked from the shell, are marketed fresh, frozen, or canned. The majority
of the Atlantic blue crab meat is marketed fresh or frozen, but the majority
of the Pacific Coast crab meat is canned. A large quantity of Dungeness
crab is sold in the shell and large quantities of king crab are butchered at
sea. Both practices minimize the quantity of butchering wastes to be handled
at the processing plant.
The crabs are water cooled after cooking to facilitate handling. The backs
are removed if the crabs were not butchered before cooking, and the re-
maining viscera are washed free. The cooking, cooling and washing waters
contain considerable solids and organic pollutants (see Figures II-4 and II-5).
The meat is picked from the shells by hand with a small knife. Mechanical
methods have only recently been developed to extract the meat from the shells.
Mechanical extraction known as "roller picking" involves passing crab legs
and parts through a wringer-like set of rollers which bones out the meat.
Crab meat quickly degrades in quality and must be chilled, frozen or canned.
Chilled meats can be stored for only a few days; even frozen meats lose
texture and flavor qualities rapidly. Canning of crab meat results in additional
wastewater flows: retort and can cooling waters. The canning and freezing
processes are shown in Figures II-4 and II-5.
II-9
-------
PROCESS
WASTES
DISPOSAL
WATER
SHELL
SOLIDS
WATER
WASH DOWN]—•{ WATER, SOLIDS
(RENDERING!
FIGURE II-2. SHRIMP HANDPICKING
11-10
-------
PROCESS
WASTES
DISPOSAL
SHELL.WATER
SHELL.WATER
MEAT, WATER
SHELL
MEAT
MEAT
MEAT
WATER
WATER
WATER
SOLIDS. WATER
(RECEIVING ]
FIGURE II-3. MECHANICAL SHRIMP PEELING
11-11
-------
PROCESS
WASTES
DISPOSAL
BUTCHER }——{ SHELL,VISCERA )
WATER
GILLS, WATER
COOK } /
E^-CT I ( SHELL .MEAT, WATER )
BLANCH | ( MEAT, WATER
FIGURE II-4. CRAB CANNING
-------
PROCESS
WASTES
DISPOSAL
VISCERA, SHELL.WATER
FIGURE II-5. CRAB FREEZING
11-13
-------
Earnings and Cash Flows - Model Crab Plants
Costs of production, revenues, earnings and cash, flows for model crab
processing plants are shown in Tables II-3 through II-7.
The following types and sizes of plants were analyzed:
Type of plant
1. Alaskan canned crab meat
2.
3. Alaskan frozen crab meat
4.
5. Blue crab canned meat
Size Annual throughput
(000 Ib. liveweight)
Small 2, 100
Medium 3, 750
Small 2, 100
Medium 3, 750
Small 2, 000
Earnings for the types and sizes of plants specified were as follows:
Type and size of plant
Pre-tax income ($000)
After-tax income ($000)
Pre-tax ROI (%)
After-tax ROI (%)
Pre-tax ROS (%)
After-tax ROS (%)
Cash flow ($000)
Alaskan Crab
Canned
Small
$73
38
1
1
4.
7.
0.
5.
8
7
1
2
58
Medium
$135
70
18.
9.
10.
5.
100
1
4
4
4
Blue C
Frozen
Small
$132
67
15.
7.
8.
4.
101
Medium
0
6
1
1
$248
129
18.
9.
8.
4.
179
0
3
5
4
rab
Canned
Small
$14
7
9.
4.
2.
1.
10
1
8
4
2
11-14
-------
Table II-3. Estimated cost of producing Alaskan canned crab meat
Item
Raw material
Labor
Cans and cases
Other direct costs
Overhead and other
Total cost
Average revenue
Return over cost
Cost per case
$22. ZO i/
6.95
1.90
3.05
6.50
$40.60
45.00
4.40
Percent of total
55
17
5
8
15
100
_' Assumes 6.7 pounds liveweight per pound of product, $. 17 live-weight
price per pound and 19.5 pounds per case
11-15
-------
Table II-4. Estimated cost of producing Alaskan frozen
crab meat
Item
Raw material
Labor
Cans and cases
Other direct costs
Overhead and other
Total cost
Average revenue
Return over cost
Cost per pound
$2. 25 -1
.50
.04 -
.09
. .34
$3.22
3.50
.28
Percent of total
70
16
1
3
10
100
— Assumes 4.5 pounds live weight per pound of product (75% meat, 25%
whole and sections) and $. 50 liveweight price per pound
Il-lb
-------
Table H-5. Indicative financial profile of Alaska crab processing plants
Medium
Item
Plant size (Tons per day)
Throughput (1,000 Ibs liveweight)
Sales ($1,000)
Operating expenses ($1,000)
Cash
Cash earnings ($1,000)
Depreciation ($1,000)
Interest ($1,000)
Int
Pre-tax income ($1,000)
After -tax income ($1,000)
Cash flow ($1,000)
Replacement investment ($1,000)
Estimated book value ($1,000)
Net working capital ($1, 000)
Invested capital ($1,000)
Pre-tax ROI (Percent)
After-tax ROI (Percent
Pre-tax ROS (Percent)
After-tax ROS (Percent)
Frozeni'
12.5
3,750
2,916
2,574
342
50
44
248
129
179
2,000
1,000
379
1,379
18.0
9.3
8.5
4.4
Canned
12.5
3,750
1,292
1,108
184
30
19
135
70
100
1,200
600
146
746
18. 1
9.4
10.4
5.4
Small
Frozen.!/
7.0
2, 100
1,634
1,443
191
34
25
132
67
101
1,340
670
212
882
15.0
7.6
8. 1
4. 1
Canned
7.
2, 100
724
620
104
20
11
73
38
58
800
400
94
494
14.
7.
10.
5.
0
8
7
1
2
— Assumes 75 percent frozen meat and 25 percent frozen whole and sections.
11-17
-------
Table II-6. Estimated cost of blue crab canning plant
Item
Cost per pound Percent of total
Raw material
Labor
Packaging and distribution
Overhead and other
Total cost
Revenue
Return over cost
$1.00
.93
.25
.48
$2.66
$2.80
. 14
38
35
9
18
100
11-18
-------
Table II-7. Estimated earnings and cash flow for model blue crab
canning plant
Item
Amount
Annual throughput (live weight)
Sales
Operating expenses
Cash Earnings
Depreciation
Interest
Pre-tax Income
After-tax Income
Annual cash flow
Replacement investment
Average fixed capital
Working capital 35% Nos
Current liabilities
Average fixed investment
Pre-tax ROI (percent)
After-tax ROI (percent)
Pre-tax ROS (percent)
After-tax ROS (percent)
2,000,000
560,000
532,000
28,000
3, 125
11,200
13,675
7, 100
10,225
125,000
62,500
196,000
112,000
146,500
9.3
4.8
2.4
1.2
11-19
-------
Earnings and Cash Flows - Model Shrimp Plants
Costs of production, revenues, earnings and cash flows for model shrimp
processing plants are shown in Tables II-8 through 11-18.
The following types and sizes of plants were analyzed:
Type of plant
Size
Annual throughput
(000 Ib. liveweight)
1. Alaskan canned shrimp
2. Alaskan canned shrimp
3. Alaskan frozen shrimp
4. Alaskan frozen shrimp
5. Gulf Coast canned shrimp
6. Gulf Coast frozen shrimp
7. Gulf Coast breaded shrimp
8.
Earnings for the types and sizes
Small
Medium
Small
Medium
Medium
Medium
Small
Large
of plants specified were
Income ROI
Pre-
Type & Size of Plant tax
($000)
Alaskan, canned, small $144
Alaskan, canned, medium 259
Alaskan, frozen, small 111
Alaskan, frozen, medium 206
Gulf, canned, medium 78
Gulf, frozen, medium 32
Gulf, breaded, small 9
Gulf, breaded, large 150
After- Pre- After-
tax tax tax
($000) (%) (%)
$ 75 21.4 11.2
135 '25.0 13.0
58 11.5 6.0
107 14. 1 7.4
41 7.6 4.0
17 4.4 2.3
5 3.8 1.9
78 7.6 3.9
2,600
4,550
2,600
4,550
3, 000
3,500
875
5,000
as follows:
ROS
Pre- After-
tax tax
(%) (%)
11.9 6.2
12.3 6.4
13.8 7.2
14.6 7.6
4.1 2.2
3.1 1.6
3.1 1.6
5.0 2.8
Cash Flow
($000)
$ 26
173
43
171
79
77
15
243
11-20
-------
Table II-8. Estimated cost of producing Alaskan canned shrimp
*
Item
Raw material
Labor
Cans and cases
Other direct cost
Overhead and other
Total cost
Average revenue
Return over cost
Cost per case
$3.10 -1
1.76
1.90
.94
1.63
$9.33
10.35
1.02
Percent of total
33
19
2.1
10
17
100
— Assumes 3.3 pounds liveweight per pound of product, liveweight price
of $. 14 per pound and 6.75 pound product per case.
11-21
-------
Table II-9. Estimated cost of producing Alaskan frozen shrimp
Item
Raw material
Labo r
Cans and cases
Other direct cost
Overhead and other
Total cost
Average revenue
Return over cost
Cost per pound
$ .75 I/
.16
.04
.19
. 18
$ 1.32
1.55
.23
Percent of total
57
12
3
14
14
100
— Assumes 5.0 pounds liveweight per pound of product and liveweight price
of $. 15 per pound.
11-22
-------
Table 11-10. Indicative financial profile of Alaska shrimp processing plants
Medium
Item
Plant size (Tons per day)
Throughput ($1,000 Ibs liveweight)
Sales ($1,000)
Operating expenses ($1,000)
Cash earnings ($1,000)
Depreciation ($1,000)
Interest ($1,000)
Pre-tax income ($1,000)
After -tax income ($1,000)
Cashflow ($1,000)
Replacement investment ($1,000)
Estimated book value ($1,000)
Net working capital ($1,000)
Invested capital ($1,000)
Pre-tax ROI (Percent)
After-tax ROI (Percent)
Pre-tax ROS (Percent)
After-tax ROS (Percent)
Frozen
17.5
4,550
1,410
1, 119
291
64
21
206
107
171
2,540
1,270
183
1,453
14. 1
7.4
14.6
7.6
Canne d
17.5
4,550
2, 112
1,783
329
38
32
259
135
173
1,520
760
275
1,035
25.0
13.0
12.3
6.4
Small
Frozen
10.0
2,600
806
640
166
43
12
111
58
43
1,720
860
105
965
11.5
6.0
13.8
7.2
Canned
10.
2,600
1,207
1,019
188
26
18
144
75
26
1,030
515
157
672
21.
11.
11.
6.
0
4
2
9
2
11-23
-------
Table 11-11. Estimated cost of producing canned shrimp, 1972 Gulf Coast
Item
Raw material
Labor
Cans and cases
Other expenses and overhead
Total cost
Revenue
Return over cost
Cost per case—
$8.50
1.60
1.35
1.55
$13.00
14. 15
1. 15
Percent of total
65
1Z
10
13
100
_' Per case of 24, 4 1/2 ounce cans.
11-24
-------
Table II-12. Estimated earnings and cash flow for Gulf Coast shrimp
canning plant, 1972
Item Amount
Annual throughput (live basis) 3,000,000
Sales 1,888,000
Operating expenses 1,734,500
Cash earnings 153,500
Depreciation 37,500
Interest 37,800
Pre-tax income 78,200
After-tax income 41,000
Annual cash flow 78,500
Replacement investment 1,500,000
Average fixed assets 750,000
Working capital 660,760
Current liabilities 377,500
Average fixed investment 1,033,260
Pre-tax ROI (percent) 7.6
After-tax ROI (percent) 4.0
Pre-tax ROS (percent) 4.1
After-tax ROS (percent) 2.2
11-25
-------
Table 11-13. Estimated cost of producing frozen shrimp, 1972, Gulf Coast
Item Cost per pound Percent of total
Raw material $ .91 62
Labor .15 10
Packaging and sales .25 17
Overhead . 16 11
Total cost $1.47 100
Revenue 1.65
Return over cost . 18
11-26
-------
Table 11-14. Estimated earnings and cash flow for shrimp freezing
plants, Gulf Coast 1972
Item
A mount
Annual throughput (live weight)
Sales
Operating expenses
Cash earnings
Depreciation
Interest
Pre-tax income
After-tax income
Annual cash flow
Replacement investment
Working capital
Average fixed investment
Current liabilities
Average fixed investment
Pre-tax ROI (percent)
After-tax ROI (percent)
Pre-tax ROS (percent)
After-tax ROS (percent)
3,500,000
1,010,625
900,375
110,250
60,000
18,200
32,050
16,666
" 76,666"
1,200,000
353,700
600,000
232,400
721,300
4.4
2.3
3. 1
1.6
11-27
-------
Table 11-15. Estimated cost of producing breaded shrimp, Gulf Coast, 1972
(large plant)
Item Cost per pound Percent of total
Raw material $2.28 88
Labor .18 7
Overhead .10 4
Other ^04 2
Total cost $2.60 100
Average revenue . 2.75
Return over cost . 15
11-28
-------
Table 11-16. Estimated earnings and cash flow for breaded shrimp, 1972,
Gulf Coast (large plant)
Item
Amount
Annual throughput (live weight)
Sales
Operating expenses
Cash earnings
Depreciation
Interest
Pre-tax income
After-tax income
Annual cash flow
Replacement investment -
Working capital
Average fixed assets
Current liabilities
Average fixed investment
Pre-tax ROI (percent)
After-tax ROI (percent)
Pre-tax ROS (percent)
After-taxROS (percent)
5,000,000
2,750,000
2,385,500
364,500 ,
82,500 _r ,..
49,500^'
150,000
78,000
3i '<
243,000 .
3,300-, 000-
962,500
1,650,000
632,500
1,980,000
7.6
3.9
5.0
2.8
11-29
-------
Table 11-17. Estimated cost of producing breaded shrimp, 1972, Gulf Coast
(small plant)
Item
Cost per pound Percent of total
Raw material $ . 90
Labor .21
Packaging, peeling and distribution .25
Other . 12
Total cost $ 1.48
Revenue 1.62
Return over cost . 14
60
14
17
9
100
11-30
-------
Table 11-18. Estimated earnings and cash flow for breaded shrimp, 1972,
Gulf Coast (small plant)
Item
A mount
Annual throughput (liveweight)
Sales
Operating expenses
Cash earnings
Depreciation
Interest
Pre-tax income
After-tax income
Annual cash flow
Replacement investment
Average fixed investment
Working capital
Current liabilities
Average fixed investment
Pre-tax ROI(percent)
After-tax ROI (percent)
Pre-tax ROS (percent)
After-tax ROS (percent)
875,000
283,500
259,000
24,500
10,000
5,670
8,830
4,590
14,590
400,000
200,000
99,225
56,700
242,500
3.8
1.9
3.1
1.6
11-31
-------
Plant Description - Catfish Processors
Pond-reared catfish are processed in specialized, single-product plants,
usually operated in conjunction with pond-catfish production enterprises.
Catfish processing methods - Catfish are harvested by draining the ponds
and are shipped alive in tank trucks to processing plants. Live hauling
eliminates the need for meat preservation before processing, but generates
the problem of disposal of the feces-contaminated holding water.
Figure II-6 depicts the processing method and the wastes resulting. The fish
are held in live tanks until processing, which results in more feces-contami-
nated water.
The fish are first stunned, commonly with electric shock, and then butchered.
The butchering process, which includes skinning, beheading, and eviscerating,
can be either manual or mechanical. Catfish traditionally have been skinned
before marketing.
Butchering machines remove only the outer layer of pigmented skin for
esthetic reasons. This process results in solid wastes containing skins,
heads and viscera and wastewaters containing blood, slime and flesh.
The processed fillets or steaks are marketed fresh and frozen (breaded or
plain).
Earnings and Cash Flow-Model Catfish Processing Plant
The model catfish processing plant is assumed to process 1, 600, 000 pounds
(liveweight basis) of catfish annually. This volume is based on 250 oper-
ating days, 8, 000 pounds daily capacity and 60 percent of capacity. How-
ever, a survey of 16 operating plants in the South in 1970_i' reported that
the 16 plants surveyed only processed an average of 400, 000 Ibs. per
plant, 25 percent of the indicated volume. This low utilization of capacity
is a problem which continues to plague the catfish processing industry.
Estimated costs of processing catfish are shown in Table 11-19. These
costs were developed by the Bureau of Commercial Fisheries and have been
adjusted by DPRA to reflect current costs and.prices. These costs result
in a gross margin of revenue over operating costs of 2.4£ per pound. How-
ever, it should be emphasized again that the low rate of utilization of pro-
cessing capacity, which characterizes many plants in the industry, will
reduce returns below the level indicated.
— Catfish Processing, A Rising Southern Industry, ERS, USDA, Agr. Econ.
Report 224, 1972.
11-32
-------
PROCESS
WASTES
DISPOSAL
RAW
J»RODUC1
TRANSPORT}—•{
STORE f——{
SKIN
FECES
FECES
SKINS
BEHEAD | ( BLOOD.WATER,HEADS )
ISCERAT^—(BLOOD.WATER.VISCERA )
WATER
WASH
WASH DOWN] ( SOLIDS, WATER
TINISHED^
sPRODUCp
FIGURE Jl-6. CATFISH PROCESSING
n- 33
-------
Table 11-19. Estimated processing costs for frozen pond-reared catfish
Item
Raw material (fish at plant)
Labor
Packaging material
Building and equipment costs
Overhead and sales cost
Total cost
F.O.B. plant revenue
Return over cost
Cost per pound
$ .640
.095
.040
.063
.055
$ .893
.917
.024
Percent of total
72
11
5
7
5
100
11-34
-------
Annual throughput of 1, 600, 000 pounds is based on the survey of Southern
processors and a 250-day year with an 80 percent utilization of capacity.
It is recognized that 60 percent utilization may be above the current
industry average.
At 60 percent utilization, with a price of 91.7 cents per pound for frozen
fish, f.o.b. processor, total revenue is $i, 100, 000. Processing costs
are estimated at 89/. 3 cents a pound. Gross margin is 2.4 cents per pound
resulting in cash earnings of $28,000. Deducting depreciation and interest
results in a pre-tax income of $1, 650 and after-tax income of $858. Pre-
tax income return on investment is 1. 4 percent after-tax ROI is 0.7 percent
and return on sales, pre-tax is 0.2 percent and after-tax 0. 1 percent.
11-35
-------
Table 11-20. Estimated earnings and cash flow for model catfish
processing plant
Item
60% Capacity
Annual throughput, pounds frozen fish
Sales at 91. 7£ per pound
Operating expenses at 89. 3£ per pound (Table II- 19)
Cash Earnings
Depreciation
Interest
Pre-tax income
After-tax income
Annual cash flow
Replacement investment
Working capital
Average fixed assets
Working capital
Current liabilities
Average fixed investment
Pre-tax ROI (Percent)
After-tax ROI (Percent)
Pre-tax ROS (Percent)
After-tax ROS (Percent)
1,600,000
1, 100,000
1,072,000
28,000
10,750
15,600
1,650
858
11,608
215,000
281,000
107,500
281,000
216,000
117,500
1.4
0.7
0.2
0. 1
11-36
-------
Salvage Value of Assets
The salvage value of seafoods processing plants •will vary widely from
plant to plant depending on the age of the plant and its equipment, the
condition of the plant and its equipment and its location.
In common with most food processing plants, seafoods processing plants
undergo periodic renovation, continuous repair and maintenance and equip-
ment items are replaced as they wear out or become obsolete.
Tuna processing plants are specialized canning installations and the
buildings and equipment would have little value above scrap. However,
in some locations, especially Southern California, site values may be
high as opportunities for sale of land for waterfront industrial sites may
be good.
Crab and shrimp processing plants vary greatly regarding type of structure
and site value. Some "floater" plants are located on barges, converted
ferries or obsolete ship hulls and these facilities would have only scrap
value. Some shore-based plants would have value for general purpose
use and for cold storage warehouse purposes. In some locations along
the California, Oregon, Washington coasts and particularly in Florida,
site values may be appreciable. In other locations, site values may be
nominal. Equipment would generally have only salvage value.
Catfish processing plants, although relatively new, are special purpose
plants tied to areas where pond catfish production is important. Generally
their locations would have low site values and with the exception of freezing
equipment, equipment would have only nominal salvage values. The same
would be true of buildings .
Where plants are forced to close because they are presently unprofitable,
or because they would become unprofitable if they were forced to assume
the added investments and operating costs required for -water pollution
control, then the salvage value of the buildings would be essentially zero,
the equipment might sell from 10 to 50 percent of its original cost and the
value of the site could vary widely, depending on location.
In many instances, the value of a seafoods processing plant, particularly
where a small firm is involved, would be greater to its present owner than it
would be to any potential buyer. In terms of "book value, " the physical
facilities and equipment may have been fully depreciated, or nearly so,
but in terms of their "use value" to their present owners, these plants
may represent assets of very tangible values—much greater than their
market or their salvage value.
U-37
-------
Since no data are available on actual salvage values for seafoods processing
plants and since a "market" for plants which would be forced to close, be-
cause of added costs of water pollution control, would be virtually non-
existent, the impact analysis will use arbitrary assumptions. All oper-
ating capital will be recovered intact, land will be valued at its original
cost and buildings and equipment will be valued at a series of percentages
of their original value as follows: 25 percent, 10 percent and 0 percent.
The combined value of operating capital, land, buildings, and equipment
will represent the salvage value to be used.
Constraints on Financing Additional Capital Assets
Constraints on financing additional capital required for water pollution
control facilities will vary greatly from firm-to-firm and from location-
to-location. In general, it is not anticipated that there will be any serious
constraints in securing capital required for pollution control for large and
medium size meat seafoods processing plants. However, in individual
situations where plants are old and absolete or unprofitable, and where
local conditions may require substantial investments for internal pollution
abatement systems or for participation in expanding capacity of sewer
systems in small communities, meat industry management may hesitate
to make the investments required -- even though capital may be available.
In a substantial number of situations, tuna, crab and shrimp processing
plants are owned by conglomerates, large diversified food processing
firms or by large diversified seafoods processing companies. This
ownership pattern was discussed in Chapter I. In these situations, it is
anticipated that capital availability would not be a limiting factor. Also,
it is known that a substantial proportion of these plants will be able to
connect to municipal sewers where, except for connection charges,
only nominal capital will be required. This should ease the problem for
many small plants.
Capital availability may be a much more serious problem for small plants
which continue to operate primarily because owners have depreciated out
original investment costs, consider their investment in the plant as "sunk
capital" and consider that the plant has a "utility value" if continued in
operation which is greater than the "market value" or "salvage value"
of the plant should they decide to cease operations. For such plants, the
increased investment required for pollution control may be difficult to
obtain and even if available may be unattractive to both the borrower and
the lender. In these situations, the decision to attempt to obtain additional
capital may be based on the desire of the owners to maintain the business
for personal employment reasons rather than on the expectation of realizing
a return on invested capital.
11-38
-------
III. PRICE EFFECTS
A. Supply and Consumption Considerations
Both the total and per capita consumption of all fishery products by U.S-
consumers have risen gradually since 1955, when the per capita rate
•was 10. 5 pounds to 12. 2 pounds in 1972. This 16. 2 percent rise occurred
during a period when the domestic catch used for human food declined
from 2,579 million pounds in 1955 to 2,579 million pounds in 1971.
The fishery industry increased its imports from 1,332 million pounds
in 1955 to 3,582 million pounds in order to meet the requirements of
U.S. consumers. Canned tuna and shrimp, both raw and processed,
accounted for a very substantial part of the rise both in supply and
consumption. Since there has been no substantive increase in the world
production of fishery products for human food when worldwide consump-
tion was rising, competitive buying intensified among fish processors and
distributors in various parts of the world. The competition for available
supplies, particularly for such items as shrimp, crab, tuna, halibut,
cod and salmon increased as demand increased both in the U. S. and
other countries.
Of primary concern to this analysis are the prices and pricing practices
in the tuna, shrimp, crab, and catfish industries.
B. Tuna Price Effects
Prices to fishermen for the various tuna species--albacore, skipjack,
bluefin, and yellowfin--tend to be based on the international market for
tuna, rather than U.S. markets alone. The reason is obvious: tuna are
found in many areas of the world and the U.S. tuna fleets fish the seven
seas for their prey. As the fish are caught, they are frozen and placed
in the bulk-heads for storage until the fishing vessels return to their
home ports where the fish are thawed and put through the canning processes.
Tuna (ex-vessel) prices have risen about 56 percent from 1968 through
1972. During this five year period, the supply of canned tuna made
available to U.S. consumers rose 45.3 percent, reflecting the failure
of tuna production and imports to keep pace with the rising demand.
The upward surge of raw tuna prices was carried in the wholesale and
m-i
-------
retail sectors, which recorded a rise of 39- 3 and 31. 9 percent, respec-
tively, over the 1968 price, (Figures III-l and III-2 and Tables III-l and
III-2). The latter percentage increased are on canned tuna which has a
unit price considerably above that paid to fishermen for raw fish.
Canned Tuna and Fresh Meat Prices
Nutritionists declare that tuna meat is a high protein food and is often
used in place of red meat and poultry. According to the conventional
wisdom, this ability to choose from among the various kinds of meats
must be considered when one attempts to explain prices and their relation-
ships. With this in mind, we found that the price on all U.S. slaughter
cattle rose from $24. 63 to $35. 77 per cwt or 45. 2 percent from 1968
through 1972. For the same period, the average per pound retail price
of choice beef in the U. S. rose 31. 4 percent, which also fully reflects
the higher prices of all slaughter cattle. In other words, the retail
prices for canned tuna and choice beef rose about the same percentage
31.9 and 31.4 percent, respectively.
Canned Tuna Prices and Disposable Personal Income
Disposable personal income in the U.S. was at a $591 billion rate in
1968 compared to $795 million in 1972. This 34. 5 percent rise in
disposable personal income is comparable to the increases in prices
discussed in the preceding paragraph.
Canned Tuna Prices and Changes in the Level of Prices
Both wholesale and retail prices for canned tuna have risen substantially
in recent years, the price rises being more drastic during 1972, Tables
III-l and III-2. In fact, canned tuna price rises have exceeded the averages
for all-commodity and the all-item categories included in the Wholesale
Price Index and the Consumer Price Index of the U.S. Bureau of Labor
Statistics.
Based on the indexes, -we found that the canne.d tuna wholesale prices rose
17. 8 percent more than the Wholesale Price Index for All Commodities
from 1968 through the fourth quarter of 1972. The calculations follow:
ITT-2
-------
Dollars/Case
18
17
16
15
14
13
12
11 1
10
1972
1968
JFMAMJ J AS ON D
Month
Figure III-l. Canned tuna: Average wholesale prices, Los Angeles,
1968 and 1972.
Ill-3
-------
Table III-l. Canned ';una: average wholesale case prices, — Los Angeles, by months, 1968 through 1972
Month
Year Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.
Dollars
1968 $12.13 $12.13 $13.05 $13.05 $13.05 $13.05 $13.05 $13.05 $13.05 $13.05 $13.05 $13.30
1969 13.30 13.30 13.30 13.30 13.30 13.30 13.30 13.50 13.50 14.18 14.18 14.61
1970 14.61 14.61 14.61 14.85 14.85 14.85 15.60 15.60 15.85 16.35 16.35 16.35
1971 16.35 17.10 17.10 17.10 17.10 17.10 17.10' 17.10 17.10 17.10 17.10 17.10
1972 17.10 17.10 17.60 17.60 17.60 17.72 18.23 18.35 18.35 18.60 18.60 18.60
— Light meat, chunk, 6 1/2 ounce, 48 cans per case.
Source: US NOAA, Fisheries of the U.S. , 1968-1972.
-------
Cents
47
46
45
44
35
34
33
1972
1968
J FMAMJ J A S
Month
O N D
Figure III-2. Canned tuna: Average retail prices per can, 44 cities,
1968 and 1972.
Ill-5
-------
Table III-2. Canned tuna: average retail price per can— in 44 cities, by months, 1968 through 1972
Month
Year Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.
cents pe r can
1968 34.3 34.2 33.7 33.8 34.5 34.7 34.6 . 34.9 34.9 34.9 34.8 35.0
1969 35.1 35.4 35.1 35.3 35.6 35.5 35.4 35.7 35.8 36.3 36.5 36.9
1970 37.5 37.8 38.3 38.7 39.2 39.4 39.4 40.1 40.7 41.7 42.2 42.7
1971 43.3 43.6 43.9 44.3 44.2 44.4 44.2 44.2 44.3 , 44.1 43.9 44.1
1972 44.1 44.7 45.2 45.6 45.8 45.9 45.7 45.3 45.6 46.0 46.1 46.4
— 61/2 ounce can .
Source: U.S. NOAA, Fisheries of the U. S. , 1968-1972
-------
Average canned tuna wholesale price per case, 1972 = $18. 00
Average canned tuna wholesale price per case for = 15. 27
1968, inflated by 18. 2 percent rise in the WPI
($12.91 x 118. 2%)
Price rise not accounted for by change in level
of all wholesale prices . $ 2. 73
or
17. 8 percent
Similarly, we found that the canned tuna retail price increase exceeded the
rise in the level of retail prices included in the Consumer Price Index.
The calculations follow:
Average canned tuna retail price per case, 1972 = $45. 53
Average canned tuna retail price per case in 1968,
inflated by 21. 8 percent rise in CPI
£$34. 53 x 121. 8) = 42.06
Price rise not accounted for by change in the
level of all retail prices (CPI) $ 3. 47
or
8. 25 percent
Who Will Absorb the Costs of Pollution Control?
On the basis of the forecasts of the U.S. Food and Agriculture Organization,
U.S. Department of Agriculture, and U.S. Department of Commerce that
protein food (especially meat and fish) will be in continuing short supply
for many years, we believe that the pressure of demand on canned tuna
supplies will cause prices to hold their present levels and possibly rise
faster than the general level of prices.
In view of the strength of consumer demand for canned tuna, we also believe
that any additional production costs attributable to pollution controls will be
passed on to consumers, provided price ceilings do not prevent such an
action. Should the domestic industry be barred from raising prices the
real possibility is that canners will absorb the extra costs, because the
shortage of tuna fish gives fishermen an exceptionally strong'bargaining
position in dealing with canners.
Ill-7
-------
There are several reasons that canneries are likely to absorb the additional
production costs arising from more rigid pollution controls; however, the
following are especially important.
1. Tuna fish canneries in the U. S. are few in number and it is
estimated that the six plants in the Terminal Island - San Diego
area in California pack 85 to 90 percent of the U.S. output.
Furthermore, the four firms that own the six canneries --
Del Monte (2), H. J. Heinz (2), Ralston-Purina and Westgate-
California (l)--are basing future production plans on an
assumption of a 5 to 7 percent annual increase in consumer
demand. Such a volume of production should enable the firms
to spread any added pollution control costs with a minimum
effect on unit costs.
2. The relatively short supplies of tuna and the strong consumer
demand should restrain, if not stop, the upward drift of brand
promotional costs, in both total and per unit expenditures.
If such restraints occur, unit marketing costs should de-
crease even with the present volume and decrease further
•with projected production increases.
3. The tuna canneries in California, Oregon, and Washington
are encountering no problems in disposing of fish offal.
In fact, such byproduct ope rations--sales to fish meal
manufacturers and subsequent sale to animal and poultry
feeders—have a positive effect on net income. The plants
major difficulties arise from liquid wastes associated with the
butchering and canning operations. Presently, such wastes
either are dumped into the waters adjacent to each cannery or
into city sewers which are becoming overburdened. Signifi-
cantly, however, each of the municipal sewer systems is
planning or has underway a program to increase its capacity
to receive and treat cannery wastes. The cities assumption
of the responsibility for this major waste disposal and treat-
ment problem relieves the canneries of any major capital
outlay for such purposes. Hence, tuna canners generally
will be required to invest in sewer connections and pay a
surcharge or fee for waste disposal services.
Ill-8
-------
Under prevailing competitive conditions, wholesalers and retailers would
likely shift more to imported canned tuna, if necessary to maintain their
selling margins. Since foreign tuna canners are not subject to U.S. EPA
environmental pollution controls, they may become increasingly strong
competitors for the U.S. canned tuna market. It is highly unlikely that
the wholesaler-retailer sector would absorb any of the added costs of
pollution controls.
C. Shrimp Price Effects
The U. S. supply of shrimp in 1968 consisted of 79. 4 million pounds,
heads off, from our domestic fisheries and 209- 3 million pounds from
imports. Of the 388. 7 million pound total, 1 2. 1 million pounds were
exported leaving 376.6 million pounds heads off, available for U.S.
consumption. Domestic production in 1972 amounted to 234.4 million
pounds, heads off, plus 253.0 million pounds of imports. From the
available total supply, there was 28. 9 million pounds exported leaving
458. 5 million pounds for U.S. consumers. This 21. 2 percent supply
increase from 1968 through 1972 was insufficient to prevent a price
rise of 35. 2 percent per pound to fishermen for the period studied.
Those most familiar with the domestic shrimp fisheries believe that
U.S. production has reached its peak or nearly so and it will level off.
If so, our dependence on foreign imports which have accounted for more •
than half of our supply since 1961, should increase as our population
grows. In fact, we are now competing strongly for foreign supplies with
shrimp buyers who are trying to satisfy a growing demand in the more
affluent nations of Western Europe and Asia. This -worldwide competition
has manifested itself by raising the prices for U.S. shrimp imports and
for domestic supplies which lack any major price restraints imposed by
lower priced imports.
Higher prices to fishermen have been fully carried over into the wholesale
and retail markets for shrimp, (Figures III-3 and III-4 and Tables III-3
and III-4) with wholesale prices showing a 57. 9 percent increase and retail
a 39-3 percent increase. As previously stated, disposable personal income
rose 34. 5 percent during the five years studied.
Shrimp Prices and Prices of other Competing Products
It is not entirely clear what degree of substitution exists among shrimp
meat and red meat or shrimp meat and poultry, or shrimp meat and
III-9
-------
Cents
220 ,
210 4
.200
190 ,
180 ,
170
160 •
150 .
140
130 .
120 ,
110 .
100
1972
1968
M
M
A
N D
Figure III-3. Shrimp average wholesale prices
111-10
-------
Table III-3. Shrimp: average wholesale prices on raw shrimp, — Chicago, by months, 1968-1972
Year Jan.
Feb.
March
April May June
Month
July
Aug. Sept.
Oct.
Nov.
Dec.
Dollars
1968 $1.06 $1.07 $1.09 $1.17 $1.24 $1.25 $1.23 $1.18 $1.25 $1.32 $1.30 $1.25
1969 1.24 1.24 1.26 1.28 1.31 1.33 1.34 1.34 1.40 1.37 1.31 1.31
1970 1.31 1.33 1.32 1.32 1.33 1.35 1.27 1.27 1.14 1.15 1.16 1.17
1971 1.19 1.28 1.34 1.40 1.52 1.58 1.55 1.62 1.56 1.55 1.73 1.80
1972 1.91 2.05 2.06 2.03 2.10 2.06 1.93 1.77 1.75 1.73 1.68 1.67
— Large (26-30 count), brown, 5 pound package
Source: U.S.D.C., NOAA, NMFS, Fisheries of the U.S. 1968-1972.
-------
Cents
130
120
110
100 .
90 .
80
1972
1968
M A M J
Figure IH-4. Shrimp average retail prices.
O N D
III-12
-------
Table III-4. Shrimp: Average retail prices raw shrimp— , 41 cities, by month 1968-1972
Month
Year Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.
cents
1968 8.2.0 81.8 82.1 82.3 83.1 84.0 84.7 84.7 85.3' 85.6 87.2 88.9
1969 90.2 91.7 92.3 92.9 94.3 95.1 -95.8 96.8 97.3 98.4 98.8 99.8
1970 101.3 101.7 102.2 102.0 102.3 102.7 102.3 101.8 102.0 101.6 101.2 100.4
1971 99.9 100.9 101.3 101.8 103.0 103.9 105.4 106.1 106.8 107.1 107.8 103.1
1972 109.0 111.5 113.5 115.7 116.8 117.7 118.2 118.6 119.7 119-5 121-9 121.8
i' Frozen, 10 ounce consumer package
Source: USDC, NOAA, NMFS, Fisheries of the U.S., 1968-1972
-------
canned tuna, or shrimp meat and crab or other fishery products. However,
we are assuming some substitutability in all cases and marked substituta-
bility for shrimp, crab and tuna meats. It may be worthwhile, therefore,
to compare shrimp and tuna price changes at the three levels of marketing
These follow:
Percent increase 1968-1972
Price to: Shrimp Tuna
Fishermen 35.2 51.3
Wholesalers 57.9 39-3
. Retailers 39-3 31.9
One cannot avoid noting the closeness of the change in retail shrimp prices
(39- 3 percent) to the change in disposable pesonal income.
Shrimp Prices and Changes in the General Level of Prices
The relationship of changes of shrimp prices to the changes in the levels
of all wholesale commodity prices and of consumer prices, as shown in
the two Bureau of Labor Statistics indexes, gives one a measure of change.
For example, the wholesale price comparison follows:
Average wholesale price per unit of shrimp in 1972 = $1. 895
Average -wholesale price per unit of shrimp in 1968
inflated by the 18. 2 percent rise in the WPI = 1.418
($1. 20 x 118.2)
Price rise not accounted for by the change in the level
of all wholesale prices = $ .447
or
33. 6 percent
We also found that the 1972 average increase in the retail price of shrimp
was in excess of other retail prices included in the Consumer Price Index.
The calculations follow:
Average retail price per unit of shrimp in 1972 = $1. 169
Average retail price per unit of shrimp in 1968
inflated by the 21. 8 percent rise in the CPI
($. 843 x 121.8) = 1.027
Price rise not accounted tor by the change in the
level of retail prices = $ - 147,
111-14 or
13.8 percent
-------
Who Will Absorb the Costs of Pollution Control?
Reference has been made to the prevailing and possible future strong demand
for meat, poultry, and fishery products. In addition to the strong U.S.
demand for shrimp, in all forms, Western Europe and Japan presently
are bidding competitively for available shrimp supplies. In view of the
demand situation and the likelihood that production will not increase
sufficiently to satisfy the growing consumer demand at prices lower than
those now prevailing, it is reasonable to expect further shrimp retail price
increases at all levels of production and marketing. Moreover, the demand
situation is so favorable to the shrimp industry that it should be able to pass
any cost increases on to consumers in the form of higher prices.
In the event that consumer price resistance should occur, the processing
sector--fresh, freezing, and canning--would most likely have to absorb
any cost increases. Under such conditions, the impact on shrimp processing
plants and firms would vary greatly. Even the largest shrimp processing
operation is relatively small, volumewise. For example, a plant receiving
5 million pounds of live shrimp would probably have about 1. 25 million
pounds of processed product -which could be sold at $1. 25 million. At present
1972 prices (about $1 per pound wholesale) the probable net return on invest-
ment would not exceed 12 percent or $150,000. Under the foregoing conditions,
a processor might well afford an additional pollution control cost of $10,000
annually. However, a plant receiving .5 million pounds of live shrimp might
sell its output of . 125 million pounds of shrimp meat for $125,000 from which
it would receive a net return of 1 0 percent or $12,500. Should this operator
be faced with $5,000 annually in added pollution control costs, he might choose
to sell his plant to a larger operator who would expand the output or he might
abandon his plant if alternative opportunities were more profitable. In
essence, the smaller plants and firms likely would be affected very adversely
by any rigid pollution standards that would require both more capital and
more operating costs.
Based on DPRA's survey of shrimp processing plants in California, Oregon,
Washington and Alaska, one must conclude that there would have to be a
complete restructuring of the shrimp processing industry unless some form
of cooperative action among processors for waste disposal and pollution
control is developed.
DPRA also believes that the wholesale and retail secotrs of the industry are
unlikely bearers of any further production cost increases. This sector would
turn to foreign suppliers.
Ill-15
-------
Qualification of Assessment
DPRA is fully aware of the technological changes taking place in both the
production and marketing of shrimp. It is possible, therefore, that new
shrimp fisheries may be found and propagation may become feasible as
a means of maintaining and expanding existing shrimp fisheries. If so,
the pressure of demand on existing production could be relaxed.
'This condition could lower prices at all levels. If such a supply improve-
ment were to occur, DPRA believes that the fishermen and processors
would have to share the added burden of pollution control costs in the
form of lower prices.
D. Crab Price Effects
The data on U.S. Landings, imports, and utilization of the various species
of crab--Blue, Dungeness, King and Snow--are sketchy. However, the
available data, when supported by other information about the production
and pricing practices of the different sectors of the fisheries industry,
provide some insight into the problems of supply, demand, and prices.
The supply of crab available for sale to U.S. consumers for the 1967-1972
period is shown in Figure III-5 and Table III-5. The supply from U.S.
landings ranged from about 242 to 315 million pounds liveweight, annually,
plus small amounts of imported canned crab. If we assume that a live crab
yields about 18 percent of edible meat, the crab meat supply, including
imports, ranged from about 43 to 57 million pounds, annually. It is apparent
that there were much greater fluctuations in the landing by species between
1968 and 1972 than there was in total landings of all species which rose each
year after 1968. Another observation is the erratic performance of the
Dungeness and King species—probably the most desirable and higher priced
species--and the fast rise in the production of Snow crab, a lesser-known
and less-favored specie.
DPRA estimates the 1968 average exvessel price per pound on all landed
species at 18.41 cents and the 1972 average at 20. 85 cents. However, a
look at the .-averages shows the relatively higher exvessel prices for Dungeness
and King crab, (Figure III-6 and Table III-6). Both tradespeople and consumers
differentiate between the different species. For example, Blue crab are a
product of Atlantic and Gulf waters. They are sold mainly as whole, fresh
III-16
-------
Million pounds
>*
I—I
ex
3
310
290
270
250
230
T
1967 1968
Imports of
Canned Crabmeat
U. S. Landings
(live weight)
1969 1970 1971 1972
Year
Figure IH-5. Supply of crab (live wt.) and imported crab meat,
1967-1972.
111-17
-------
Table III-5. U.S. Crab landings and imports by years
Species
Year
Blue
Dungeness
King
Snow
All Imports Total
million pounds
1967
1968
1969
1970
1971
1972
Total
145.
109.
129.
142.
145.
145.
817.
0
5
9
4
1
4
3
42.
44.
49.
58.
42.
26.
263.
4
0
1
7
7
9
8
127.7
85.0
55.8
51.9
70.4
74.0
464.8
N.
3.
10.
14.
18.
34.
80.
A.
2
2
5
2
8
9
2.
4.
3.
2.
3.
2.
19.
16
64
44
77
72
55
28
317.
246.
248.
270.
280.
283.
26
34
44
27
12
65
Source: USDC.NOAA, MMFS, Fisheries of the US, Annuals 1967-1972.
Ill-18
-------
Cents
45
40
35
30
25
20
15 .
10
Dun gene ss
King
1967 1968 1969 1970 1971 1972
Year
Figure III-6. Average Exvessel prices for U.S. Crab, by species,
by years, 1967-1972
111-19
-------
Table III-6. Average exvessel prices for crab, 1967 through 1972
Year
1967
1968
1969
1970
1971
1972
NA =
Blue
5.93
9.86
9.39
7.02
8.59
9.76
Not available
Species
Dungeness
f *^ A
15.67
18.60
21.38
23.67
24.48
44. 10
King
11.70
30.00
29.92
26.58
35.08
34.99
Snow
N.A.
N.A.
8.93
10.97
14.00
14. 00
Source: USDA, NOAA, NMFS, Fisheries of the U.S. Annuals 1967-1972.
Ill-20
-------
crab or fresh meat, crab meat cakes, etc. in the states adjacent to the
production area. Dungeness crab are harvested from the Pacific Ocean,
mainly between San Francisco and Vancouver, B.C. Again the sales
are primarily to consumers in the Pacific Coast states as whole fresh
crab or fresh or frozen meat. The sales area for frozen Dungeness meat
recently has widened to include all of the U.S. and some foreign countries,
as is true for the small amount that is sold as canned meat. King crab
is a product of Alaskan waters and is now sold mainly as frozen meat,
in both U.S. and foreign markets. Snow crab also is of Alaskan origin.
It is a relatively new product commercially and is marketed largely as
frozen meat. Its market is limited (Figure III-7 and Table III-7).
A further description of the markets for crab meat is essential to an
understanding of pricing practices and the characteristics of demand.
DPRA estimates that fully 90 percent of all crab meat is sold to consumers
in restaurants, either commercial or institutional. Moreover, the heaviest
volume is done by specialized seafood restaurants. This means that about
10 percent of all crab or crab meat sales are made directly to consumers
for home use. Such a market structure makes the principal buyers
more sensitive to supply conditions. For example, an oversupply (heavy
inventory) of frozen crab meat usually is eased by "specialing" the item
on restaurant menues and by making moderate to drastic price cuts to
restaurant buyers. When crab meat is in short supply and relatively high
priced, restaurant use substitutes except in specialty seafood restaurants
that cater to a less price conscious clientel. The essence of our analysis
is that the growth of the market for crab meat probably will relate largely
to the increases or decreases in the away -from -home eating habits of U.S.
consumers.
In view of the characteristics of the markets for the various species of
crab and an assumption that the annual crab harvest can decrease but not
increase substantially from year to year, DPRA believes that production
uncertainty is a critical factor affecting the well-being of crab fishermen and
processors. For example, the abrupt decline in the harvest of King crab
after 1967 ruined several small processors who could not get crab, even
though those who got crab prospered from a 63 percent price rise. This
high risk factor arising from uncertainty about the annual harvest is a
pervasive force throughout the crab processing sector. Moreover, the
reluctance of plant owners and managers to invest further in pollution ccontrol
is associated with their knowledge of both risk and uncertainty of supply.
Since the only supply and price data available to us relates to crab landings
and prices to fishermen, they were used to learning the statistical relation-
ships between the supply and exvessel price for each species. No statistically
111-21
-------
Million Ibs.
140 ,
130 .
120 .
110 ,
100 .
90 ,
80 .
70
60
50
40 ,
30 .
20 .
10 ,
0
Blue
King
Snow
Dun genes s
All imports
67 68 69 70 71 72
Year
Figure III-7. U.S. Crab landings and imports, by years 1968-1972
111-22
-------
Table III-7. Supplies and utilization of West Coast crabs, 1957-59 average, 1960-71
Year
l'J57-V.)
average
1960
,1961
19C2
1%3
"1964
1965
'1966
lcjG7
1968
1969
1?70
3971 5/
I/ Frozf
Supplies
1 '
Dug inn inj;
stud. a
L'.O
1.0
1.6
2.1
2.2
5.0
(1.3
f.-.K
5.2
2.9
0.3
V.O
7.0
Kinj1.
J4.4
28.6
43.4
52.8
78.7
86.7
131.7
1 riO. 9
127.7
85.0
57.8
51.9
70.0
Lain!
: Dunjji!
: ness
40.h
36.2
32.7
23.4
24.9
23.0
28.9
39.7
42.4
44.0
49.1
58.7
42.6
;,,£,
- : Snow
-
_
4/
4/
-
4/
_
"/
o7i
3.2
11.2
15.5
12.7
: Total
55.0
64.8
76.1
76.2
103.6
109.7
160.6
108.9
170.2
132.2
118.1
126.1
125.3
11
Imports Total
0.7 57.7
2.5 68.3
2.2 79.9
2.3 80.6
2.2 108.0
1.7 116.4
1.5 170.4
.7 208.4
1.3 17C.7
8.6 143.7
12.1 138.5
12.4 145.5
17.6 149.9
Utilization
Canned 3/ :
Ending
stocks
T H<- -
1.6
1.6
2.1
2.2
5.0
8.3
8.8
5.2
2.9
8.3
7.0
7.0
7.4
King
5.0
10.4
15.9
19.5
26.6
24.5
34.0
46.4
41.6
9.9
7.4
5.8
6/6.0
:Dunge-
: ness
5.2
4.8
6.0
4.6
5.6
4.3
5.3
5.9
4.9
3.6
5.4
5.0
1.1
: Snow : Total
10.2
15.2
21.9
24.1
32.2
28.8
4C.8
52.3
4/ 46.5
0.1 13.6
1.4 14.2
4.4 15.2
6/1.0 8.1
Exports: Fresh £
: frozen
:consump-
: tion
45.9
51.5
55.9
54.3
70.8
79.3
120.8
150.9
127.3
2.2 119.6
1.0 116.3
2.1 • 121.2
2.3 132.1
n op. I".
I
ts)
'2/ lYesh and I'i'ozun only.
3/ K.in£ ot'dlj ..nly.
4/ I.OLiS than bu.OOU pounds.
Source: USDC, NOAA, NMFS, Shellfish Situation and Outlook, Annual Review, 1971
-------
significant relationship was found for any of the species. The r for each
was Blue . 23, Dungeness .45, and King . 55. In view of the foregoing '
results, the relationship of the total value of landings (exvessel) and
the volume of landing was undertaken. The result here was an r^ of .19-
The 1972 landings of all species of crabs was 281. 1 million pounds com-
pared to 238. 5 million pounds in 1968. Despite this increase of 17. 85
percent in supply, the exvessel value of the landings rose from $20. 23
million in 1968 to $51.66 million in 1972 or 155.4 percent. DPRA calcu-
lations indicate that only 22. 8 percent of the exvessel price change can be
attributed to changes in the general price level. This further strengthens
DPRA's belief that the demand for crab meat is tied closely to the away-
from-home eating business.
Who Will Absorb the Costs of Pollution Control?
DPRA believes that the present level of disposable consumer income is
sufficient to maintain the level of demand for crab meat in all forms
despite the fact that present prices are at a record high. It also appears
that there is little possibility of any sustained increase in supplies of
crab meat, other than from Snow crab, -which has not been fully accepted
by the public as a substitute for Blue, Dungeness, or King.
In view of the strong leverage of sellers, DPRA believes that pollution control
costs will be passed on to consumers, especially if disposable incomes
remain high and the trend toward eating away from home continues to rise.
This latter condition is especially important, because it is reasonably easy
to pass along to consumers increases in raw materials costs when the main
part of the consumer price is for preparation and other services. DPRA
does not have an adequate statistical base on which to judge the impact on
fishermen and processors in different geographical areas and for different
processing plants. Deductively, however, its cursory study of the crab
industry leads to these tentative conclusions:
1. Small crab processors should have considerable difficulty finding
investment capital to pay for major plant improvements or for any
significant operating cost increases. Such plants may decrease
in number rather materially. It is doubtful, however., that this
closing of smaller plants would create any severe unemployment
problem. In the first place, most of the plant workers are
pickers who should find employment in the expanded operations
of larger plants that continue to operate. Second, the landings
of crab should be handled more efficiently in larger plants •
provided there is some concentration of processing operations.
II!-24
-------
2. Crab fishermen should not be affected in most instances.
However .there are a few areas -where the closing of small
plants located near a crab fishing area will increase the time
and cost to fishermen of getting their catch to the processor.
In warmer climates, this transportation time factor may limit
the "time at sea" for small boats and stimulate the purchase
of larger vessels with adequate refrigeration. This latter
condition, which is going on now for other reasons than
pollution control, should further affect the number of fisher-
men needed for the crab harvest.
3. Except in Alaska, crab processing is one of three parts of
processing plant's activity. Most plants in California, Oregon,
and Washington are multi-product plants, i. e. , crab, shrimp,
and fish of whatever species are found in local fisheries, and this
factor would.also operate to dampen the effects on crab prices
of pollution-associated cost increases.
E. Catfish Price Effects
In contrast to tuna, crab and shrimp, the market for catfish is small and
pricing systems are not organized. Three types of catfish are marketed:
pond-reared, wild, and imported, for which price differentials exist. The
market is not highly structured and marketing of processed, pan-ready
catfish remains the primary problem of the industry.
Price Differentials by Catfish Types
Pond-reared catfish normally bring premium prices when compared to
"wild" or imported fish. On a "pan-ready" basis, wholesale prices in
1970 were as follows:
Pond-reared catfish - $.72 - .75 Ib,
Wild catfish - . 58 - . 63
Imported (frozen) - . 60 - . 70
The greater uniformity and better preparation of pond catfish results in a
superior product which commands a premium price.
Market Channel Price Margins
Price margins f. o.b. producer-wholesaler-retail, in 1969 averaged
approximately 20 percent from producer to wholesaler and 45 percent from
wholesale to retail.
Ill-2 5
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The prices, pan-ready basis, quoted were as follows:
F.o.b. processor
Type producer or importer Wholesaler Retail
Pond-raised 82-99? 82-99? 119-139?
Wild . 60-65? 71-75? 99-109?
Imported 50-60? 60-65? 89-99?
There is no quoted market price published for farm-reared catfish.
However, the Chicago market price on wild, fresh catfish is reported.
Prices 1961-1971 were as follows:
Wild, fresh catfish, Farm-reared catfish, pan-ready
Year Pan-ready, ?/lb. average wholesale price/? Ib.
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973 (1st 6 mos)
42.5?
43.3
41.6
43.0
50.2
59.2
60.8
62.5
62.5
60.5
59.0
79.0?
81.0
94. 0
Absorption of Increased Processing Costs
The present (1973) market for farm-reared catfish is strong and the supply
of fish is inadequate to meet the demand. However, the market tends to
be localized, the Mid-South, and to some degree the Midwest, being the
areas where demand is strongest. Catfish is not accepted by consumers
to the degree true for tuna and shellfish. Further, a substantial part of
the demand is from low-income groups and Blacks. However, in view .
of the strong demand there should be opportunities to pass on to consumers
increased processing costs associated with pollution control.
111-26
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F. Market Pricing Practices
Tuna Pricing
The prices paid to fishermen for the various species are based on world
prices for canned tuna. While fishermen in the locality of a cannery
usually have a contract stating the minimum prices for the species, actual
operating conditions determine what canners pay for a given catch from
a local fisherman. Recently, the demand from canneries has been strong
and competitive bidding above contract levels has been commonplace.
Tuna canners usually are especially cost conscious, particularly when
raw material prices (tuna) are rising and foreign competition is strong
as they have been for the past 18 months. However, increases in con-
sumer demand and the prices of all red meat and all species of edible
fish and shellfish have enabled canners to raise the prices of their canned
product, thereby easing some of their traditional concern about raw
material (tuna) prices. Consequently, prices to fishermen have risen
on that part of their supply bought from independent fishermen. Because
tuna canneries are generally large volume operations, prices also must
be reckoned in terms of their impact on profits at different levels of
cannery output.
Fabricators, who use tuna meat in the preparation of frozen dinners, etc. ,
generally have not enjoyed the benefits of strengthened demand for fish
and shellfish. Such fabricators are being restrained by competitors who
are seeking to expand their sales to retail food stores and institutional
users of frozen dinners. Price cutting to gain market entry has been
and is a common practice.
DPRA learned from its 1972 study of the fishery industry, conducted for
the National Marine Fisheries Service, that the markup on canned tuna
in retail food stores generally ranges from 25 to 32 percent, with a good
turnover. However, the markup on such items as frozen tuna pies, etc. ,
may be about the same as canned tuna, with a relatively slow turnover.
"Specialing" of most frozen food items further reduces margins of retailers,
which is subsequently reflected in prices paid to fabricators.
Crab and Shrimp Pricing
"Brokers" in the shellfish trade generally are merchant-brokers or whole-
salers. They either own or have part ownership of the products they sell.
These fish and shellfish "brokers" and general food brokers are important
functionaries in marketing crab and shrimp, even though there are a few
III-27
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multi-product fishery firms that operate their own sales department.
Because fresh and frozen crab and shrimp meat is highly perishable
compared to red meat, cooperation among brokers is quite common and
necessary. Excessive inventories must be moved quickly. As one
prominent broker told DPRA, "we discover prices, we don't make them. "
In essence, high unit value items such as fresh and frozen crab and shrimp
respond quickly to supply-consumption imbalances, either up or down.
Hence, DPRA, at this point in its inquiry in the crab and shrimp markets,
and without any knowledge of price elasticity, accepts the thesis the nature
of demand is such that sellers are especially vulnerable when they have
excessive inventories of fresh and frozen shellfish, because their own
regular customers may not respond sufficiently to downward price changes.
It is under these conditions that brokers seek the help of other brokers to
broaden their market. A further consideration is that supply maladjust-
ments often occur between one broker and his regular trade at a time
when other brokers may be unable to satisfy the demands of their regular
customers.
According to the information obtained by DPRA, canned crab and shrimp
also is sold mainly by brokers, especially those who handle a full line of
canned food. Recognizing that both canned crab and shrimp are specialty
products, general food brokers have'a geographical coverage of food
markets that enables them to sell such low turnover items as crab and
shrimp. Again, DPRA cannot accurately assess supply-demand responses
without a very intensive price analysis.
G. Sales Promotion
The promotion of canned tuna under various proprietary brands is extensive,
well-financed, and it reaches all sectors of the consuming public, either
through newspapers and magazines and/or television and radio. As a
result of such promotional activities, "Star Kist, " and "Chicken-of-the-
Sea, " etc. , are almost as commonplace as using "Frigidaire" when
referring to all electric refrigerators. Furthermore, consumer know-
ledge about ways to prepare tuna is thought to be unusually good. Some
industry people claim that "tuna fish sandwiches and casseroles, unlike
hamburgers and hot dogs, have no national boundary."
Except for broker brand promotion of frozen and canned crab and tuna
in trade publications directed at wholesalers and retailers, advertising
of crab and shrimp is relatively small. None of the firms contacted by
DPRA in its 1972 study of the fisheries industry had any separate sales
promotion budget for the items discussed.
Ill- ?-8
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IV. ECONOMIC IMPACT ANALYSIS METHODOLOGY
The following economic impact analysis utilizes the basic industry infor-
mation developed in Chapters I-III plus the pollution abatement technology
and costs provided by Environmental Protection Agency. The impacts
examined include:
Price effects
Financial effects
Production effects
Employment effects
Community effects
Other effects
Due to the crucial nature of potential plant s.hutdowns (financial and
production effects) to the other impacts, a disproportionate amount of
time will be devoted to the financial and plant closure analysis.
In general, the approach taken in the impact analysis is the same as that
normally done for any feasibility capital budgeting study of new invest-
ments. In the simplest of terms, it is the problem of deciding whether
a commitment of time or money to a project is worthwhile in terms of
the expected benefits derived. This decision process is complicated by
the fact that benefits will accrue over a period of time and that in prac-
tice the analyst is not sufficiently clairvoyant nor physically able to re-
flect all of the required information, which by definition must deal with
projections of the future, in the cost and benefit analysis. In the face
of imperfect and incomplete information and time constraints, the industry
segments were reduced to money relationships insofar as possible and the
key non-quantifiable factors were incorporated into the analytical thought
process to modify the quantified data. The latter process is particularly
important in view of the use of model plants in the financial analysis. In
practice, actual plants will deviate from the model and these variances
will be considered in interpreting financial results based on model plants.
A. Fundamental Methodology
Much of the underlying analysis regarding prices, financial and produc-
tion effects is common to each kind of impact. Consequently, this case
methodology is described here .as a unit with the specific impact interpre-
tations being discussed under the appropriate heading following this
section.
IV-1
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The core analysis for this inquiry was based upon synthesizing physical
and financial characteristics of the various industry segments through
model or representative plants. The estimated cash flows for these
model plants are summarized in Chapter II. The primary factors involved
in assessing the financial and production impact of pollution control are
profitability changes, •which are a function of the cost of pollution control
and the ability to pass along these costs in higher prices. Admittedly,
in reality, closure decisions are seldom made-on a set of'well defined
common economic rules, but also include a wide range of personal values,
external forces such as the ability to obtain financing or considering the
production unit as an integrated part of a larger cost center where total
center must be considered.
Such circumstances include but are not limited to the following factors:
1. There is a lack of knowledge on the part of the owner-
operator concerning the actual financial condition of the
operation due to faulty or inadequate accounting systems
or procedures. This is especially likely to occur among
small, independent operators who do not have effective
cost accounting systems.
2. Plant and equipment are old and fully depreciated and the
owner has no intention of replacing or modernizing them.
He can continue in production as long as he can cover labor
and materials costs and/or until the equipment deteriorates
to an irrepairable and inoperative condition.
3. Opportunities for changes in the ownership structure of
the plants (or firms) exist through acquisition by con-
glomerates, large diversified firms, or through other
acquisition circumstances which would permit re-
evaluation of assets or in situations where new owner-
ship may be willing to accept temporary low returns
with the expectation that operations can be returned
to profitable levels.
4. Personal values and goals associated with business owner-
ship that override or ameliorate rational economic rules
is this complex of factors commonly referred to as a value
of psychic income.
IV-2
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5. The plant is a part of a larger integrated entity and it either
uses raw materials being produced profitably in another of
the firm's operating units wherein an assured market is
critical or, alternatively, it supplies raw materials to
another of the firm's operations wherein the source of supply
is critical. When the profitability of the second operation
offsets the losses in the first plant, the unprofitable oper-
ation may continue indefinitely because the total enterprise
is profitable.
6. The owner-operator expects that losses are temporary and
that adverse conditions will dissipate in the future. His
ability to absorb short-term losses depends upon his access
to funds, through credit or personal resources not presently
utilized in this particular operation.
7. There are very low (approaching zero) opportunity costs for
the fixed assets and for the owner-operator' s managerial
skills and/or labor. As long as the operator can meet labor
and materials costs, he will continue to operate. He may
even operate -with gross revenues below variable costs until
he has exhausted his working capital and credit.
8. The value of the land on which the plant is located is appreci-
ating at a rate sufficient to offset short-term losses, funds
are available to meet operating needs and opportunity costs
of the' owner-opera tor's managerial skills are low.
The above factors, which may be at variance with common economic
decision rules, are generally associated with proprietorships and
closely held enterprises rather than publicly held corporations.
While the above factors are present in and relevant to business decisions,
it is argued that common economic rules are sufficiently universal. To
provide an useful and reliable insight into potential business responses
to new investment decisions, as represented by required investment in
pollution control facilities thus, economic analysis will be used as the
core analytical procedure. Given the pricing conditions, the impact on
profitability (arid possible closure) can be determined by simply computing
the ROI (or any other profitability measure) under conditions of the new
price and incremental investment in pollution control. The primary con-
sequence of profitability changes is the impact on the plant regarding
plant shutdown rather than making the required investment in meeting
pollution control requirements.
IV-3
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In the most fundamental case, a plant will be closed when variable ex-
penses (Vc) are greater than revenues-(R) since by closing the plant,
losses can be avoided. However, in practice plants continue to operate
where apparently Vc > R. Reasons for this include:
lack of cost accounting detail to determine when Vc > R.
opportunity cost of labor or some other resource is less
than market values. This would be particularly prevalent
in proprietorships where the owner considers his labor as
fixed.
other personal and external financial factors.
expectations that revenues will shortly increase to cover
variable expenses.
A more probable situation is the case where Vc < R but revenues are
less than variable costs plus cash overhead expenses (TCc) -which are
fixed in the short run. In this situation a plant would likely continue
to operate as contributions are being made toward covering a portion of
these fixed cash overhead expenses. The firm cannot operate indefinitely
under this condition, but the length of this period is uncertain. Basic to
this strategy of continuing operations is the firm's expectation that re-
venues •will increase to cover cash outlay. Factors involved in closure
decisions include:
extent of capital resources. If the owner has other business
interests or debt sources that will supply capital input, the
plant will continue.
lack of cost accounting detail or procedures to know that TCoR,
particularly in multiplant or business situation.
labor or other resources may be considered fixed and the
opportunity cost for these items is less than market value.
Identification of plants where TCc > R, but Vc
-------
of earnings (CV), at the firms (industry) cost of capital, is greater
than the scrap or .salvage value (S) of the sunk plant investment. If
S > CV', the firm could realize S in cash and reinvest and be financially
better off. This presumes reinvesting at least at the firms (industry)
cost of capital.
Computation of C"\T involves discou&titig the futtjre earnings flow to
present worth through the general discounting function:
where
V = present value
AJJ = a future value in n*" year
i = discount rate as target ROI rate
n = number of conversion products , i. e.t
I year, 2 years, etc»
It should be noted that a more common measure of rate of return is
the book rate, which measures the after-tax profits as a ratio of in-
vested capital, is net worth or sales. - These ratios should not be
viewed as a different estimate of profitability as opposed to D-CF
measures (discounted cash flow) but rather an entirely different
profitability concept. The reader is cautioned not to directly compare
the DCF rates with book rates. Although both measures will be reported
in the analyses, the book rate is reported for informational purposes only.
The two primary types of DCF measures of profitability are used. One
is called the internal rate of return or yield and is the computed discount
rate (yield) which produces a zero present value of the cash flow. The
yield is the highest rate of interest the investor could pay if all funds
were borrowed and the loan was returned from cash proceeds of the
investment. The second DCF measure is the net present value concept.
Rather than solve for the yield, a discount rate equivalent to the firms
cost of capital is used. Independent investments with net present values
of above zero are accepted; those below zero are rejected. The concept
of comparing capitalized earnings with the sunk investment value is
a variation of the net present value method.
IV-5
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The data input requirements for book and DCF measures are derived,
to a large extent, from the same basic information although the final
inputs are handled differently for each.
1. Benefits
For purposes of this analysis, benefits for the book analysis have been
called after-tax income and for the DCF analysis after-tax cash proceeds.
The computation of each is shown below:
After tax income = (l-T)x(R-E-I-D)
After tax cash proceeds = (1 - T)x(R - E - D) + D
where
T = tax rate
R = revenues
E = expenses other than depreciation and interest
I = = interest expense
D = depreciation charges
Interest in the cash proceeds computation is omitted since it is reflected
in the discount rate, which is the after-tax cost of capital, and will be .
described below. Depreciation is included in the DCF measure only in
terms of its tax effect and is then added back so that a cash flow over
time is obtained.
A tax rate of 48 percent was used throughout the analysis. Accelerated
depreciation methods, investment credits, carry forward and carry back
provisions were not used due to their complexity and special limitations.
It is recognized that in some instances the effective tax rate may be lower
in a single plant situation, but with the dominance of multiplant firms, the
firm's tax rate •will be close to the 48 percent rate.
Revenue, expenses, interest and depreciation charges used were those
discussed in Chapter II and Chapter V for pollution control facilities.
These items were assumed to constant over the period of analysis.
IV-6
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2. Investment
Investment is normally thought of as outlays for fixed assets and working
capital. However, in evaluating closure of an on-going plant where the
basic investment is sunk, the value of that investment must be made in
terms of its liquidation o.r salvage value, that is its opportunity cost or
shadow price. — Fo-r purposes of this analysis* sunk investment was taken
as the sum of equipment salvage value plus land at current market value
plus^the value of the net working capital (current assets less current
liabilities)' tied up by the plant (see Chapter II for-values). This same
amount was taken as a negative investment in the terminal year. Replacement
investment for plant maintenance was taken as equal to annual depreciation,
which corresponds to operating policies of some managements and serves
as a good proxy for replacement in an on going business.
Investment in pollution control facilities was taken as the estimates
provided by EPA and shown in Chapter V. Only incremental values
were used, to reflect in-place facilities.
The above discussion refers primarily to the DCF analysis. Investment
used in estimating book rates was taken as invested capital - book value
of assets plus net working capital. In the case of new investment, its
book rate •was estimated as 50 percent of the original value.
3^ Cost of Capital - After Tax
Return on invested capital is a fundamental notion in U.S. business.
It provides both a measure of actual performance of a firm as well
expected performance. In this latter case, it is also called the cost
of capital. The cost of capital is defined as the weighted average of
the cost of each type of capital employed by the firm, in general terms
equities and interest bearing liabilities. There is no methodology that
yields the precise cost of capital-, but it can be approximated "within
reasonable bounds.
The cost of equities was estimated by two methods -- the dividend yield
method and the earnings stock price (E/P ratio) method. Both are
simplifications of the more complex DCF methodology. The dividend
method is:
— This should not be confused with a simple buy sell situation which
.merely involves a transfer of ownership from one firm to another.
In this instance, the opportunity cost (shadow price) of the investment
may take on a different value.
IV-7
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where
k = cost of capital
D = dividend yield
P = stock price
g = growth
and the E/P method is simply
k = E/P
where
E = earnings
P = stock price
and is a further simplication of the first. The latter assumes future
earnings as a level, perpetual stream.
The after tax cost of debt capital was estimated by using estimated 7. 5
percent cost of debt and multiplying by .52 -- assuming a 48 percent
tax rate. These values were weighted by the respective equity to total
asset and total liabilities —' to total asset ratios.
The average cost of capital for the seafoods processing industry was
estimated as follows:
Growth
Dividend Yield Plus Growth
.04
Average cost of capital
E/P
Equity .56 .060 -- .034
Debt .44 .039 -- .017
Average cost of capital .051
As shown in the above computations, the estimated after-tax cost is
5.6 to 6.7 percent. The subsequent analysis was based on 6.0 percent.
The four percent growth factor is roughly equal to inflation expectations.
— It is recognized that liabilities contain non-interest bearing liabilities,
but its weight is believed to be an adequate proxy for the weight of debt.
IV-8
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As shown in the above computations, the estimated after-tax cost is
5. 1 to 7.3 percent. The subsequent analysis was based on 6.0 percent.
The four percent growth factor is roughly equal to inflation expectations.
It was assumed that, for the seafoods processing industry, a pre-tax
cost of capital of 11.5 percent was used for evaluating new projects.
4. Construction of the Cash Flow
A thirty-two period cash flow was used in this analysis and was con-
structed as follows:
1. Sunk investment {salvage market value of fixed assets
plus net working capital) taken in year tQ.
2. After tax cash proceeds taken for years tj to t™.
3. Annual replacement investment, equal to annual current
depreciation taken for years t, to t,Q.
4. Terminal value equal to sunk investment taken in year tjj.
5. Incremental pollution control investment taken in year to
for 1977 standards and year t^ for 1983 standards.
6. Incremental pollution expenses taken for years t j to t^Q
for 1977 standards and years t_ to t^Q for 1983 standards.
7. Replacement investment taken on BPT incremental invest-
ment in years 10 and 20 and on BAT incremental investment
in year 26 based on useful lives of 10 and 20 years, respec-
tively.
8. Terminal value of pollution facilities equal to original cost
of land taken in year t^j.
IV-9
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B. Price Effects
At the outset, it must be recognized that price effects and production
effects are intertwined with one effect having an impact upon the other.
In fact, the very basis of price analysis is the premise that prices and
supplies (production) are functionally related variables which are simul-
taneously resolved.
Solution of this requires knowledge of demand growth, price elasticities,
supply elasticities, the degree to which regional markets exist, the degree
of dominance experienced by large firms in the industry, market concen-
tration exhibited by both the industry's suppliers of inputs and purchasers
of outputs, organization and coordination within the industry, relation-
ship of domestic output with the world market, existence and nature of
complementary goods, cyclical trends in the industry, current utilization
of capacity and, exogenous influences upon price determination (e. g. ,
governmental regulation).
In view of the complexity and diversity of factors involved in determin-
ation of the market price, a purely quantitative approach to the problem
of price effects is not feasible. Hence, the simultaneous considerations
suggested above will be made. The judgment factor will be heavily em-
ployed in determining the supply response to a price change and altern-
ative price changes to be employed.
Asa guide to the analysis of price effects, the estimated price required
to leave the model plant segment as well off will be computed. The re-
quired price increase at the firm level will be evaluated in light of the
relationship of the model plant to the industry and the understanding of
the competitive position of the industry. The required price increase can
be readily computed using the DCF analysis described above, but dealing
only with the incremental pollution investment and cash proceeds.
Application of the above DCF procedure to these costs will yield the present
value of pollution control costs (i.e. , investment plus operating cost less
tax savings). If this is known, the price increase required to pay for
pollution control can readily be calculated by the formula
IV-10
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(PVP) (100)
X ~ (1-T) (PVR)
whe re:
X = required percentage increase in price
PVP = present value of pollution control-costs
PVR = present value of gross revenue starting in the year
pollution control is imposed
Note that this formula implies that incremental profits resulting from
the price increase will be taxed at a rate of 48 percent.
C. Financial Effects
In Chapter II, the financial characteristics of model plants were presented.
These data will serve as the base point for the analysis of financial effects
of pollution control. The primary focus of analysis will be upon profit-
ability in the industry and the ability of the firms to secure external
capital. Hence, it is obvious that this portion of the analysis cannot
be divorced from production effects since profit levels and the ability
to finance pollution abatement facilities will have a direct influence on
supply responses -- utilization of capacity and plant closures.
The measures of profitability utilized will include after-tax book rate
of return on invested capital and cash flow (after-tax profit plus deprec-
iation) will be measured. After-tax profit as a percent of sales will
also be reported to assist in comparing financial data with standard
industrial measures.
In addition to these factors, two additional measures of economic profita-
bility will also be examined: (1) capitalized value of earnings and (2)
present values estimated by the procedures described in Section A above.
Both of these measures will be calculated on pre- and post-pollution control
bases.
IV-11
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Given these financial measurements, the ability of the industry to
finance the required pollution control expenditures will be reexamined
in light of the financial results and the information shown in Chapter II.
This ability will vary from one industry subsector to another due to
differential financial structures, profitability and abatement requirements.
Hence, capital availability and cost will probably have to be examined on
a model plant by model plant basis.
D. Production Effects
Potential production effects include reductions of capacity utilization
rates, plant closures and stagnation of industry growth. It is antici-
pated that reductions in capacity utilization will be estimated via quali-
tative techniques given the analysts' knowledge of the industry. The
same is true for assessing the extent to which plant closures may be
offset by increases in capacity utilization on the part of plants remaining
in operation. Data limitations and time constraints are expected to re-
quire that the impact of pollution control standards upon future growth
of the industry also be estimated via qualitative methods.
The remaining effect, plant closures, is very difficult to measure
realistically as discussed above in Section A. As a starting point
in the plant closure analysis, a shutdown model will be employed
to indicate which model plants should be closed, the marginal oper-
ations and the sound operations. These conclusions will be based upon
the decision rule that a plant will be closed when the net present value
of the cash flow is less than zero.
It is recognized that the use of model plants to represent an industry is
imperfect and that not all of the relevant factors can be included in the
models. In other words, for any given model plant one would expect to
find some actual plants with profits lower and some higher than shown
for the model plant. In a statistical sense, one can describe this phe-
nomenon via distribution functions. By examining various publications
and through numerous discussions with knowledgeable individuals in the
seafoods industry throughout the continental U. S. and Alaska, typical
profit levels and variations were estimated for each industry segment
covered in this report. A financial model was constructed for each
segment which best reflects median conditions indicated by the data
attainable within the constraints of the study. Where possible, models
for alternative plant sizes within a segment were also constructed. In
other cases a formal model was used for only one size grouping and the
IV-12
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results were modified qualitatively to reflect impacts on other size
groupings. It is recognized :hat the models may not exactly represent
median conditions in the in^uscry L-.gments studied. ^.. -i^l light, the
models should be viewed as surrogates based on the best data available
at this point.
The analysis was done under a without pollution control condition and
a with pollution control condition. The former (and including historical
trends) was used to establish a baseline against which total closures after
pollution control were compared, to arrive at an estimate of closures due
to pollution control.
Given the production effects of estimated production curtailments, plant
closings and changes in industry growth, a major consideration arises
in the implications of these factors upon employment in the industry.
The employment effects stemming from each of these production impacts
will be estimated. To the extent possible, the major employee classifi-
cations involved will be examined as will the potential for re-employment.
F. Community Effects
The direct impacts of job losses upon a community are immediately ap-
parent. However, in many cases, plant closures and cutbacks have a
far greater impact than just the employment loss. Multiplier effects
may result in even more unemployment. Badly needed taxes for vital
community services may dwindle. Community pride and spirit may be
dampened. However, in some cases, the negative community aspects
of production effects may be very short-term in nature with the total
impact barely visible from the viewpoint of the overall community. In
a few cases, the closure of a plant may actually be viewed as a positive
net community effect (e.g., a small plant with a high effluent load in an
area with a labor shortage).
These impact factors will be qualitatively analyzed as appropriate.
G. Other Effects
Other impacts such as direct balance of payments effects will also be
included in the analysis. This too will involve qualitative analyses.
IV-13
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V. EFFLUENT CONTROL COSTS
Water pollution control costs used in this analysis were furnished by
the Effluent Guidelines Division of the Environmental Protection Agency.
These basic data were adapted to the types and sizes of plants specified
in this analysis.
Three effluent control levels were considered:
BPT - Best Pollution Control Technology Currently
Available, to be achieved by July 1, 1977
BAT - Best Available Pollution Control Technology
Economically Achievable, to be achieved by
July 1, 1983
NSPS - New Source Performance Standards, apply to
any source for which construction starts after
the publication of the proposed regulations for
the Standards
Description of Effluent Control Levels and Costs
The specifications and descriptions of the effluent control guidelines and
control technologies -were developed for the Effluent Guidelines Division,
EPA by Environmental Associates in their draft report. — The proposed
technologies, capital and operating costs, furnished by EPA for use in
this analysis are shown in Table V-l. It is understood that these are
tentative recommendations, made in the draft report and are subject to
change based on comments received and further review by EPA.
— Development Document for Effluent Limitation Guidelines and
Standards of Performance -- Canned and Preserved Fish and Sea-
foods Processing Industry, Draft Report, Environmental Associates ,
Inc., July, 1973.
V-l
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I/
Table V-1. Effluent control costs, seafood processing plants, 197H —
Product
category
Catfish
Conventional
blue crab
Mechanized
blue crab
Alaskan
crab meat
Treatment
level 2/
BPT
BAT3-7
NI5PS
BPT
B\T
NSPS
B:?T
BAT
N:;PS
B:?T
B\T
NIJPS
Proposed effluent treatment
technology
Pond 1, screen and aerated lagoon
plus oxidation pond
Pond 1, scieen and aerated lagoon
plus extended aeration & clarifica-
tion
BPT plus spray irrigation
Screen plus aerated lagoon
BPT plus flow equalization, extendec
aeration and clarification
Same as BPT
Screen plus aerated lagoon
BPT plus flow equalization, extendec
aeration and clarification
Same as BPT
Screen and barge
BPT plus floatation
BPT plus in- plant operating
improvements
Capital cost 4/
Size of plant -- operating capacity
Half
$64,560
66, 712
65,313
4,260
20,551
4,260
7, 101
82,852
7, 101
236, 397
1,010, 146
269,032
Full
$97,916
100,068
99, 000
6,456.
31,204
6,456
10,760
125,892
10, 760
358,303 .
1,531,143
401,346
Twice
$148,488
151, 716
150, 640
9,813
47,430
9,813
16,355
190,452
16,355
543, 330
2,324, 160
600, 192
Daily operating & maintenance cost
Size of plant -- operating capacity
Half
$21
11
22
4
9
4
4
11
4
205
303
205
Full
$31
16
33
6
13
6
6
16
6
311
467
311
Twice
$47
25
50
9
21
9
9
25
9
-------
Table V-1. (continued)
Product
category
Ala.'ikan crab,
sections
Hungeness &i
(Calif. , Ore.
Wash. )
Sout hern
shrimp
Breaded
shrimp
-"
Alaskan
shrimp
Treatment
level i/
BPT
BAT
NSPS
BPT
BAT
NSPS
PBT
BAT
NSPS
BPT
BAT
NSPS
BPT
BAT
NSPS
Proposed effluent treatment
technology
Screen and barge
BPT plus floatation
Screen,' reduction
Screen, floatation
BPT plus aerated lagoon
Same as BPT, plus in-plant
operating improvements
Screen, floatation
BPT plus aerated lagoon
Same as BPT, plus in-plant
operating improvements
Screen, foatation
BPT plus aerated lagoon
Same as BPT, plus in-plant
operating improvements
Screen, barge
BPT plus floatation
Screen, reduction
Capital cost 4/
Size of plant -- operating capacity
Half
$159,248
682, 134
313, 496
75, 320
143, 108
104, 372
136,652
177,540
144, 184
177,540
257, 164
220,580
403,500
2,046,552
794, 088
Full
$242, 100
1,034, 036
482,098
115, 132
217,352
. 158, 172
207,668
269,000
218,423
267,000
390,588
333,560
611, 168
3, 102, 108
1,204,044
Twice
$366,916
1,567,732
730,604
174,312
329,256
239,948
314, 192
407,304
331,408
407, 304
591,800
505,720
926,436
4,702, 120
1, 324,896
Daily operating & maintenance cost
Size of plant -- operating capacity
Half
$133
"°8
220
22
29
22
18
28
IS
53
66
53
297
515
589
Full
$210
315
334
35
44
35
28
42
28
80
100
80
451
781
893
Twice
$318
477
506
53
67
53
42
64
42
124
151
. 124
684
1, 183
1,353
Land
required at
full capacity
(acres)
0.2
1. 0
0.2
1.0
3.0
1. 0
1.0
13.0
1.0
1.0
12.0
1. 0
0.2
0.7
0.2
V-3
(continued)
-------
Table V-l. (continued)
Product
category
Northern
pink shrimp
(Calif. ,Ore. ,
Wash. )
Tuna
Treatment
level L/
BI'T
BAT
MS PS
SFT
B •( T
NSPS
Proposed effluent treatment
technology
Screen, floatation
BPT plus aerated lagoon
Same as BPI, plus in-plant
operating improvements
Screen, floatation
BPT plus hi|jh rate trickling filter
and activated sludge
Same as BPT, plus in-plant
operating improvements
Capital cost 4/
Size of plant -- operating capacity
Half
$96,340
128,044
104,373
299, 123
1,052,000
342, 168
Full
$147, 4-1 Z
193,680
158, 172
454,072
1,595,000
518,632
Twice
222,732
293,748
239,948
638,640
2,417,000
786, 556
Daily operating & maintenance cost
Size of plant -- operating capacity
Half
13
19
13
108
333
108
Full
19
30
19
165
505 •
165 '
Twice
30
45
30
250
765
250
Land
required at
lull capacity
(acres)
1.0
8.3
1.0
0.5
8.3
0.5
II
2/
3/
Source: Effluen: Guidelines Division, Environmental Protection Agency, from materials developed by Environmental Associates, Inc.
1971 costs adjusted to 1972 levels by DPRA by applying appropriate cost adjustment factors.
BPT = Best Pra :ticable Technology (1977)
BAT = Best Ava .lable Technology (1J83)
NSPS = New Sou:rce Pollution Standard
Cost of BAT starting from no contrcl. However, incremental cost of reaching BAT from BPT would be $18, 292 for full utilization,
$12, 761 for half utilization and $26, 900 for twice utilization.
4/ Does not include land acquisition costs (see Ch. VI).
V-4
-------
The technical document describing the recommended technology for
achieving the BPT, BAT and NSPS guidelines was prepared for EPA
by Environmental Associates, Inc. of Corvallis, Oregon and is titled
"Development Document for Effluent Limitation Guidelines and Standards
of Performance--Canned and Preserved Fish and Seafoods Processing
Industry," Draft Report, July, 1973. To avoid duplication and possible
confusion, no detailed, technical descriptions of BPT, BAT and NSPS
guidelines are given in this report. The interested reader is referred to
the above-mentioned document for technology descriptions.
All effluent control technologies, costs and related plant characteristics
to which these costs apply were specified by EPA Effluent Guidelines
Division, based on the technical report of Environmental Associates, Inc.
Since the system costs were in terms of 1971 cost levels, it was necessary
to up-date these to 1972 by the use of appropriate cost inflators, i. e. ,
Index of Sewage Treatment Plant Construction Costs for Investment and the
Implicit Price Inflator for GNP for operating costs.
The updated investment and operating costs for the specified product
categories and treatment levels are shown in Table V-l. The daily
capacities for the plants specified in the EPA treatment costs are shown
in Table V-2. The plant sizes shown are all for large, commercial pro-
cessors and the effluent treatment costs are "single point" estimates in
that they apply specifically to the plants shown. Limited data for other
sizes of plants were available from EPA and it was necessary to extra-
polate from these data to get estimates of treatment costs for other sizes
of plants specified in the analysis.
Current Status of Effluent Control in the Industry
The availability and usage of municipal wastewater treatment systems
will be an important factor influencing potential closures of seafoods pro-
cessing plants. There are no published sources of information concerning
the extent to which seafoods processors utilize municipal sewage systems.
For the purposes of this study, estimates were made on the basis of industry
contacts and discussions with men in industry and government who are
knowledgeable concerning conditions in their industry. These estimates
are shown in Table V-3. For those plants, located on the seacoast, which
do not have sewer connections, fishery processing wastes are usually
returned to the ocean through outlet pipes where tidal action sweeps
the waste into the ocean. In some instances, solids are ground before
being discharged. In other instances screens are used to remove solids
which are then disposed of in land fills or, in a few cases, are processed
into animal feeds, pet foods or fertilizer.
V-5
-------
Table V-2. Plant capacities, two-shift operation, on which effluent
control costs were based J.'
Product and Category apaci y,
tons per day raw product 2_/
Catfish 15.0
Conventional blue crab 6. 0
Mechanized blue crab 11.7
Alaskan crab I/ 25.0
Dungeness crab (Calif. , Ore., Wash.) 14.0
Southern shrimp 40. 0
Breaded shrimp 14.0
Alaskan shrimp 35.0
Northern pink shrimp (Calif. , Ore., Wash., New England) • 20. 0
Tuna 375.0
— Development Document for Effluent Limitation Guidelines and Standards
of Performance -- Canned and Preserved Fish and Seafoods Processing
Industry, Draft Report, Environmental Associates, Inc., July 1973.
— Capacity is for full-sized plant.
— Alaskan crab has two segments, (1) meat and (2) whole and sections,
both the same size.
V-6
-------
Table V-3. Estimated percentage of seafoods processing plants discharging
into municipal wastewater treatment systems,
by product category, 1973
Estimated percentage
plants discharging into
Product category • municipal systems
Catfish 50
Conventional blue crab 50
Mechanized blue crab 50
Alaskan crab meat —' 5
Dungeness and tanner crab (Calif. ,• Ore. , Wash.) 10
Southern shrimp • 50
Breaded shrimp 50
Alaskan shrimp 5
Northern pink shrimp (Calif. , Ore. , Wash., New England) 10
Tuna 20
y
Alaskan crab has two segments, (1) meat and (2) whole and sections,
both the same size.
V-7
-------
In some locations in the Pacific Northwest,- where sewers are available,
cook waters are sewered but all other liquid wastes and cleanup water is
dumped into the ocean or rivers.
V -»
-------
VI. IMPACT ANALYSIS
The imposition of effluent controls on seafood and fish processing in-
dustry will have both direct and indirect impacts on the industry, on
consumers, on its suppliers and on communities in which plants are
located. An analysis was made, for specified effluent control levels,
in both quantitative and qualitative terms, of the impacts which are
expected.
The following types of impacts have been analyzed:
A. Price Effects
Bo Financial Effects
C. Production Effects
D. Employment Effects
F. Community Effects
G. Balance-of-Trade
A. Price Effects
As will be seen in the following section of this report, the role of price
effects in this analysis is critical. The industry is one with a relatively
low value added and low profit margin in relation to sales, A small
change in the wholesale price with raw product prices staying constant
results in significant changes in industry profits. The converse of this
argument is likewise true. Hence, if an increase in processor margins
can be expected as a result of mandatory effluent treatment practices,
the adverse economic impacts of those controls on the industry will, in
some cases, be ameliorated. Given the diversity of industry segments
covered in this study, it is best to examine prices on a segment by
segment basis.
The extent to which price increases can be passed on depends on many
factors. These factors include essentially all demand and supply con-
siderations, some of which are listed below:
1. the number of firms in the industry
2. the number of plants with low cost waste treatment options
such as municipal sewer availability
3. the relationship of domestic production relative to imports
4. possible substitution effects
5. the competitive structure of the industry.
VI-1
-------
Given the diversity of industry segments covered in this study, it is best
to examine prices on a segment by segment basis. Even when approached
on this basis, time, data availability and budget constraints are sub-
stantial. The procedure that has been adopted is therefore to calculate
the price increases required to completely ameliorate adverse production
impacts, estimate the closures in the absence of any price increase and
then to reduce the calculated price effects and estimated closures to the
level that is actually expected. The expected price changes and the pro-
jected closures therefore reflect the influence of many factors such as the
above list of five items as well as the judgment of qualified persons.
1. Catfish
The catfish processing industry is, for all practical purposes, still in
its infancy,, The 1960's saw a rapid proliferation of catfish rearing and
processing enterprises as rumors of large profits spread,, A wide
cross-sections of firms, both large and small, rushed in. Processor
capacity surged ahead of supplies and profit margins dropped accordingly,,
Both supplies and demand are expanding but, a full recovery from the
over-capacity problem in processing will not be forthcoming for quite
some time.
Utilization of processing capacity is currently estimated at 40-60 percent.—
Industry sources report few, if any, firms have experienced profits
during the past two years,. Price freezes imposed by the Federal govern-
ment have further compounded the problem. Most firms are staying
in operation in hopes of a larger supply of fish and an increasing demand.
Low plant salvage values have also probably influenced many of the
firms to try to maintain operations in hopes of a more profitable future.
Effluent treatment investment and operating costs are expected to have
a large impact on this depressed industry segment. We feel 25-40
percent of the industry capacity could be closed without substantially
increasing processor margins (except for a few isolated cases). Con-
sidering that small and medium plants would be most likely to close in
face of the proposed standards, over 50 percent of the plants could
probably be closed without significantly raising processor margins.
Therefore, due to excessive idle capacity in this industry segment, we are
not projecting a price i-icrease to result from mandatory pollution abate-
ment standards.
— "Catfish Processing -- A Rising Southern Industrys " ERS, USDA,
Agricultural Economic Report No. 224, April, 1972,
VI-2
-------
2. Blue C rab
The blue crab industry is relatively old, well established, and has been
processing a rather stable volume in recent years. The bulk of the
industry's output is sold fresh, cold packed in nonhermetically sealed
containers or in frozen form. A few plants produce hermetically sealed
cans. Given the nature of the industry and knowledge gained through
industry representatives, we feel excess capacity exists in the industry -
perhaps more than 20 percent. Since it is projected in the following
section, production imports, that the proposed effluent guidelines will
close less than 10 percent of the industry capacity which is less than the
estimated idle capacity', no price effects impacts are projected for the
blue crab industry.
3. Southern Shrimp
The southern shrimp industry segment applies to those plants in the
South Atlantic and Gulf areas which do not bread their final product.
Since only a small percentage of all shrimp are processed fresh, most
of the output appears as canned or frozen. Many of the plants producing
frozen shrimp (unbreaded) also produce breaded shrimp. Therefore,
it is difficult to analyze southern shrimp separately from breaded
shrimp. In placing freezer-breader plants in the two categories, we
defined a plant with over 50 percent of final product breaded as in the
breaded shrimp segment and a plant with less than 50 percent of final
product breaded as in the southern shrimp segment. However, the
data available are less than adequate for such a classification scheme
and, therefore, should be viewed as indicative of existing plant types
rather than a tabulated estimate based upon detailed data.
If no price effects were, induced by effluent guidelines, the production
impacts on the southern shrimp industry segment would be substantial.
The role of price effects serving to ameliorate those impacts will be
highly influenced by two critical factors' (1) the relationship between
municipal sewage charges and private industrial treatment costs for
shrimp processors and (2) the quantity and price of imported shrimp.
We feel a wholesale price increase of about 1.6 percent would be
required to pay for private effluent treatment costs under BPT guide-
lines in a large southern shrimp plant. BAT treatment would cost
another 1 percent or more -- depending on land costs. Although
municipal waste treatment would be expensive for these plants, we
feel it definitely would cost less than BAT private treatment and
should be less than BPT costs. Hence, direct dischargers under BAT
VI-3
-------
controls would be at a. distinct economic disadvantage when compared
to sewered plants. Any disparity under BPT controls would be less
than under BAT conditions. Since we estimate 50 percent of the industry
segment is sewered, long run price adjustments induced by BAT guide-
lines would be unlikely.
Since shrimp imports exceed domestic production, significant price
changes on the domestic market could alter the industry's structure.
Processing cost increases would encourage final processing of imported
shrimp prior to importation. Price increases would enable importers
to buy more shrimp in the international market.
Recognizing that the southern shrimp harvest varies substantially from
year to year (e. g. 1973 should be much lower than the past two years),
projecting price effects is very difficult., Still, there is a strong demand
for the large southern shrimp and demands on the international market
is growing. When all factors are considered; i. e. , imports, municipal
sewer availability, recent demand trends and land availability, the calcu-
lated price increase of 1. 6 percent for BPT and 1 percent or more for
BAT would be substantially reduced. While it is impossible to pinpoint
the exact price effect it is estimated that it will be sufficiently large to
reduce plant closures under the no price cHange assumption by a factor
of one-fourth.
4. Tuna
In many respects, the tuna segment is different from other industry
segments studied in this report. Tuna canning has a much higher market
concentration than does shellfish and catfish. There is a tariff quota
on canned tuna with the quota equalling 20 percent of the previous
year's domestic pack excluding American Samoa. The duty rate has
been declining since 1967. Imports over the quota were dutiable at 12.5
percent ad valorem in 1972. During the past ten years, only 1970
saw imports above the quota.
Even though there is a quota on canned tuna, about one-half of the in-
dustry's raw material is imported. The record pack of 616.6 million
in 1972 consisted of 57.4 percent imported fresh and frozen tuna and
8.4 percent canned tuna for a total of 66.2 percent imported. Imported
raw product varies in form from raw fish to frozen loins.
VI-4
-------
The cost of effluent treatment as a percent of sales (both computed as
net present values of future cash flows) is fairly small for large tuna
canning plants -- 0.2 for BPT, 0.5 for BAT and 0.8 for BAT-A. Net
profit on sales for the same plant would be about 0.9 percent under median
conditions. Even though these costs are fairly small when compared to
value of product, the added costs might be enough to encourage pre pro-
cessing at the fishing fleet level and/or form and volume of imports.
Given the import tariff quota, a price change would seem to be a reason-
able expectation. However, we do not believe price changes would be
sufficient to pay the entire cost of treatment for large plants. Given the
substantial economies of scale in tuna canning and waste water treatment,
the price increase would-pay for an even smaller portion of the medium
and small plants' waste water treatment costs. Changes in wholesale
canned tuna prices resulting from effluent guidelines are expected to be
roughly 0.1, 0.2 and 0.3 percent for BPT, BPT + BAT and BPT + BAT-A,
respectively. Price changes of this magnitude will reduce plant closures by
by approximately 25 percent from those calculated assuming no price
changes. The price change would be borne by the consumers due to the
international competition at the ex-vessel level.
5. Northern Pink Shrimp
Processors in this industry segment are primarily located in the Pacific
Northwest and New England. In the Northwest, shrimp proce ssing may
take place in a shrimp only plant or may be in conjunction with other sea-
food processing (e. g. , crab or salmon). In New England, there are a
few plants which specialize in shrimp but, most process finfish (e. g. ,
whiting). In cases where shrimp is processed in conjunction with finfish,
we have assumed the other products would have profit margins and effluent
treatment costs similar to shrimp and that one treatment system would
serve the combined effluent streams from processing all of the plants
products.
Using the same logic as described for Southern shrimp, above, we estim-
ate a price increase of 1. 6 percent and 1 percent would be required to
ameliorate the impacts of BPT and BAT standards respectively. The ex-
pected price change is substantially less, perhaps in the neighborhood of
50 percent of the above and is expected to be sufficient to cover land costs
and reduce plant closures (in the absence of the expected price increases)
by one-fourth.
VI-5
-------
6. Alaskan Shrimp
As in Washington and Oregon, shrimp processing is usually found in
shrimp only or combined shrimp - crab plants and, in some cases
finfish plants. The finished product domestically competes with northern
pink shrimp and the smaller sizes of southern shrimp. Again, imports
also play an important role in price analysis. Hence, we conclude the
f.o.b. plant price change -will closely approximate that for northern pink
shrimp. However, it is very critical to note that proposed effluent
treatment costs per dollar of sales are much higher for Alaskan shrimp
than for continental shrimp. As a result, price changes will probably
decrease closures from those projected under the no price change assumption
by only roughly 10 percent.
7. Alaskan Crab
Although effluent treatment cost data were provided for two levels of
Alaskan crab processing (i.e. , meat only and whole and sections), we
have analyzed the price effects impact on the basis of an average for the
entire industry segment. We feel this position is justifiable given pre-
vailing crab processing methods in Alaska. The majority of plants prefer
to pack meat only unless processing volume exceeds picking capacity or
temporary market conditions favor whole and sections. However, it is
recognized that some plants specialize in whole and sections while still
others buy frozen sections as their raw product and sell the meat.
In examining this industry segment, the only close substitutes found
were dungeness and tanner crab from the continental West Coast and
imports from Canada. Given the stability and location of the blue crab
market, it is doubtful that this industry segment could influence the Alaskan
market appreciably. The combined volume of West Coast dungeness and
tanner and Canadian import potential is small enough in relation to the
Alaskan volume that they could not dictate price. However, the lower
effluent treatment costs on the West Coast will have a dampening affect
on upward price movements. Also, if prices of Alaskan crab should
rise drastically, we would likely see some cross product substitution
from crab to shrimp.
VI-6
-------
The proposed effluent treatment costs for Alaskan crab are quite high
and projected plant closures assuming no price changes are quite high (see
Table VI-2 in Section C). Price increases required to cover all additional
costs of pollution abatement standards are approximately 2 and 5 percent
for BPT and BPT + BAT, respectively. Expected price increases are
in the neighborhood of 1. 5 and 3 percent for BPT and BPT + BAT,
respectively. This increase is expected to be of sufficient magnitude to
cover land costs and reduce closures by 50 percent from the level pro-
jected in Table VI-2.
As a note of interest, if BAT technology was to include aerated lagoons,
the land requirements would increase by a factor of four-five. The cost
of land in that case would probably place costs and plant closures beyond
reach for a large portion of the Alaskan crab plants. Also, it should be
noted that the BAT technology we have analyzed requires an estimated
one acre of land for a 25 TPD plant. If one acre of land cannot be ob-
tained reasonably (e. g. , less than $100,000) when extraordinary land
preparation costs are included and placing the equipment on piling is not
feasible, the closure impacts could be more severe than projected. We
would suggest that more effort needs to be devoted to the land availability
and alternative problems for Alaskan plants prior to terming this analysis
as truly reflective of Alaskan conditions.
8. Dungeness and Tanner'Crab -- Continental
As noted in the Alaskan discussion, above, this segment's market is
highly influenced by Alaskan operations. Also, several of the West
Coast plants serve as final product preparation points for crab originally
processed in Alaska (e. g. , large blocks of-frozen meat are sawed into
consumer package size, packaged and labeled). Given the comparative
per unit product effluent treatment costs between West Coast and Alaska,
it is believed that the West Coast segment -will not be impacted nearly
as severely as the Alaskan segment. We would predict price changes to
be roughly equivalent to those for the Alaskan crab segment.
VI-7
-------
9. Price Impacts Summary
As was indicated above, the price changes required to offset the impacts
of pollution abatement standards can be assessed ceteris paribus. The
required price changes range from less than one percent for BPT for
Blue crabs to approximately two percent for Alaskan crab. BAT
standards would add only an additional fraction of a percent for Blue
crabs to approximately three percent for Alaskan crabs. All other
industry segments would be included in this range, most being approx-
imately 1.5 percent for BPT and one percent for BAT.
The expected price changes are however much more difficult to assess
since the influence of many other factors must be considered. In general,
however, the expected price changes fall into three groups, zero expected
price changes for catfish and Blue crabs, less than one percent for
Southern shrimp, tuna, Northern pink and Alaskan shrimp for BPT and
BAT and greater than 1 percent for BPT Alaskan crab and approximately
3 percent for BAT Alaskan crab.
10. Price Controls
For the purposes of the above analysis, it was assumed that a free
market would prevail. It should be realized that if price controls are
in effect when firms are faced with mandatory effluent treatment costs
and the price controls are not responsive to the added costs of production
resulting from such effluent treatment, the above analysis would be in
error and plant closure effects would be much more severe than the esti-
mates presented below.
B. Financial Effects
Financial profiles for the relevant portions of the seafood processing in-
dustry have been presented in Chapter II of this report. Basic industry
information and data assimilated during the completion of this segment of
the study has revealed that there is a great disparity in profit rates, pro-
duction practices, prevailing technology and expected future profitability
within and between all industry segments.
VI-8
-------
Attempts to acquire specific plant financial data has also indicated that
many plants and entire industry segments are operated on a day to day
basis influenced primarily by the availability of raw product. Detailed
raw product costs, production and financial data are in many cases
considered incidental to raw product availability. The variation in
raw product availability and the failure of many plants to accurately
account for specific production costs and financial data has, in some
cases, thwarted attempts to quantify numerous inter and intra industry
relationships. The lack of accurate and applicable financial and pro-
duction data has necessitated a higher degree of generalization than would
be normally desirable. For example, in most cases the data constraint
permitted the construction of only one model plant for an entire industry
segment. The impacts of pollution abatement standards for other plants
within these segments were developed by extrapolating the model plant
impacts using fundamental industry relationships as reported by know-
ledgeable industry representatives and published reports.
The following subsection briefly summarizes the profitability of the in-
dustry segments considered. (Also see Table VI-1 in Section C).
1. Profitability
Catfish - The 1972 data for the model catfish processing plant show that
catfish processors are currently realizing very low returns on invested
capital. The model catfish processing plant operating at 60 percent
capacity is realizing an after tax return on investment of less than one
percent. This low rate of return is the result of rising production and
raw material costs and a general over supply of processing capacity in this
a new and developing industry. Current processing capacity greatly exceeds
both the demand for final product and the supply of raw product. Recent
plant closures, industry contacts and published reports concerning the
profitability of catfish processing tends to confirm the general situation
portrayed in the model plant analysis. It is the opinion of DPRA that
if the model plant were to be adjusted to reflect the 1973 situation, it would
show an even lower or perhaps negative rate of return on investment and
sales. Only the passage of time and the accompanying reduction in the
number of processing plants, increased supply of raw product and/or a
dramatic upward shift in demand for the final product will improve the
financial prospects of catfish processors.
VI-9
-------
Conventional and mechanized blue crabs - The model plant developed in
Chapter II depicts the financial situation for a large East Coast crab
plant processing two million pounds of live weight crabs. The after tax
return on investment for this plant is 4.8 percent. While this is a
satisfactory or adequate rate of return for large plants, it does not or
can not be generalized for the industry as a whole. Medium and to a
greater extent small plants tend to be quite old and much less profitable.
Industry sources indicate that many older plants are less efficient and
are essentially only meeting expenses or selling the labor of the
proprietor.
The shortage of experienced crab pickers has also had an adverse effect on
on many small conventional Blue crab processing plants. There are re-
ported cases of low plant utilization due primarily to the inability to ac-
quire experienced pickers. For these reasons the modern and partially
mechanized plants, are experiencing a competitive advantage over the
small, olde r plants.
Alaskan Seafood Processors - The Alaskan seafood processors included
in the scope of this report includes frozen and canned Alaskan crabs and
shrimp. The profitability of the Alaskan processor is severely dampened
by high processing and transportation costs. This is partially offset by
the fact that the Alaskan plants are typically quite large and process a
diversified product line to take advantage of beneficial economies to scale.
High processing costs are also frequently offset by shipping the inter-
mediate product to plants located on the West Coast or in inland states
for final processing and distribution.
In general, the target pre-tax return on sales is reported to be 10 percent
with the realized rate approximating that achieved by other West Coast
seafood processors.
West Coast Seafood Processors - While many specific line items of
West Coast seafood processors are considerably different from Alaskan
processors, the final line, i.e. , return on investment, is quite similar to
the Alaskan segment of the industry. The differential previously favoring
Alaskan processors has diminished in recent years resulting in very com-
parable or nearly equal returns. At the present time the data indicates that
the return ^or W^ct Coast- anH Ala.slcan shrirrTD and crabs exceeds that
realized by East Coast and Gulf processors.
VI-10
-------
Gulf Seafood Processors - Gulf- seafood processors included in the scope
of this study include canned and frozen shrimp and canned and frozen crabs.
The processing plants within this segment range from the very small single
product-process to the very large diversified and integrated processing
plants. The profitability varies accordingly. For example, the large
shrimp breading plant portrays a 2.8 percent after tax return on sales
while the small shrimp breader is shown to have a 1.6 percent after tax
return on sales. In general, however, this segment is similar to others
in that the large plants can be characterized as the more profitable. In
addition, the shrimp freezing and breading, and crab freezing segments
possess a slight profit advantage over the respective canning segments.
It should be noted, however, that there are occasionally brief periods of
time when the larger plants find themselves in a relatively unfavorable
position. For example, in years such as 1973 when there is a drastic re-
duction in the domestic shrimp landings, the small plants can utilize a greater
percentage of their capacity due to their ability to start production lines
with a very limited volume of raw product. The larger plants requiring
a greater volume of raw product find it undesirable, to initiate production
processes with limited raw material supplies. This is, however, an
^ ». situation.
New En0.and Shrimp Processors - A review of the data indicates that
the New England shrimp processors are quite similar to the West Coast
shrimp processors in many respects. The New England shrimp that is
processed is the small northern variety as is the West Coast shrimp.
Industry representatives indicate that the profit levels are also quite
comparable to the West Coast profit levels. It is, however, worthwhile
to note that a sizeable proportion of the New England shrimp is processed
in conjunction with finfish. In many of these plants, shrimp represents
a production sideline during slack winter months and does not represent
the plant's primary product. This increases the difficulty of assessing
the profitability as well as the potential impacts of pollution abatement
standards .
Tuna Processing Plants - The tuna processing industry consists of 3 1
plants, most of which fall into two categories, i.e. , small or very large
processing plants with very few medium sized plants. There are con-
flicting reports concerning the profitability of these plants. Some reports
indicate that the industry in general as well as many specific plants are
very profitable. As of the present time, however, we have not been able
to substantiate these reports and, in fact, the reverse has been true.
Industry sources report isolated cases of plants that incurred losses as
great as half a million dollars in 1972. Other reports indicate that one
plant in the Northwest recently closed because of an unfavorable profit
VI- 11
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position. Other reports indicate that still another plant located in
Southern California is scheduled also to discontinue production in the
near future.
The model plant portrayed in Chapter II is based on data supplied by
industry sources and financial reports of tuna processing companies
and shows an after tax return on investment of 3.2 percent which is be-
lieved to adequately represent much of the industry. In addition to the
plants included in the above segments, there are many plants located in
inland states that process shrimp, crabs and tuna. No attempt has been
made to include these plants in the analysis in that almost all of these
plants receive partially processed raw product and produce specialty
items and are therefore in many respects fundamentally different from
the majority of the plants included in the above segments.
A succinct summary of cash flow and net present value data for selected
industry segments with and without pollution controls is presented in
Table VI-1.
C. Production Effects
Of real and fundamental interest are the production impacts which the
inauguration of BPT and BAT effluent controls may bring about. Of par-
ticular interest are potential plant closures. As discussed in Chapter IV,
the methodology used was the economic shutdown model or model plant
analysis. The financial burden of pollution abatement standards were
applied to the model plants to ascertain the financial impacts. Inference
regarding closures for each segment was drawn, based on the relation-
ship to models as well as factors not reflected in model plant data. In
order to obtain tractable models, the seafood industry was characterized
by specific product segments. It is recognized that many multi-product
complexes do exist and that the economics of these complexes may not be
fully reflected in the building block models employed in this analysis.
However, it is DPRA's opinion that the building block economics do not
greatly differ from those found in complex situations and that use of this
procedure will produce usable and reasonable conclusions.
It is also expedient to mention that the lack of published data and the
great variability within and between industry segments has, in some cases,
necessitated extending projected impacts on the basis of the results de-
rived from a single model plant.
VI-12
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Table VI-1. Estimated cash flow and net present value for model
plants with and without effluent controls --
without price adjustments and without
considering land requirements
Present
Model Plant
Catfish
Gulf Shrimp Canner
Gulf Shrimp B reader
Gulf Shrimp Freezer
East Coast Blue Crab
Alaskan Crab
Canned
Freezer
Alaskan Shrimp
Canned
Freezer
West Coast Shrimp
Frozen
Canned
West Coast Crab
Canned
Frozen
Capacity
(TPD)
4
14
2
10
7
5
12.5
12.5
17.5
17.5
10
10
7.0
7.0
Cash
flow
9
60
15
103
27
13
80
152
151
118
64
84
44
82
Net
present
value
89
432
128
797
145
95
1, 101
1,564
1,687
1,203
612
916
442
809
BPT
Cash
flow
- -
-------
1. Potential Plant Closures
The underlying model plant financial parameters relating to the closure
analysis are shown in Table VI-1 above. Two kinds of data are reported --
cash flows and net present values based on investment and after tax cash
proceeds. The cash flows indicate the cash position of the plants.
Clearly, if it is negative over time the plant can not continue operations.
Also, if it is only slightly positive, replacement investment might not be
able to be met, meaning eventual plant closure.
Net present values, computed at 6.0 percent after tax cost of capital,
present a better long run analysis of future financial performance, since
they include returns over time and replacement investment as well as a
measure of the efficiency of capital use. In interpreting net present
values (NPV) in Table VI- 1, values less than aero indicate that the
firm would be financially better off by liquidating the sunk investment and
reinvesting where that money could yield the firms target return on capital.
None of the model plants fit actual plants exactly, so these results must
be interpreted in light of what is known about actual plants. Unfortunately
there is also conflicting data concerning the amount of pollution equipment
in place. While it is commonly recognized that the seafood industry does
not, in general, have a great deal of pollution equipment in place, there
are many areas where screening and dehydration of solids is practiced.
At EPA direction, however, the across the board assumption was that
none was in place.
The statistical procedure used to estimate the percent closures given
net present value is described in the methodology section of this report.
In general, however, the assumption is that the actual net present values
prevailing in the industry would be distributed about the estimated model
plant net present value. Actual industry samples could be expected to un-
cover both higher and lower net present values. Estimating the percentage
of the plants within the industry that possess negative net present value
after the imposition of pollution abatement standards will produce the ex-
pected closures attributable to pollution abatement standards. Where
observations were available for only one plant size within a given segment,
closures for other size categories were developed by extrapolating the
derived results and applied to other industry size segments. The extra-
polation procedures were based on both reported industry data and temperted
with a priori industry information.
VI-14
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The application of the above quantitative and qualitative methods resulted
in the estimated plant closure percentages listed in Table VI-2. Table
VI-2 depicts the percent of direct discharges by size classifications that
are expected to close. These estimates do not reflect expected price
changes or the cost of land required for pollution abatement equipment
and lagoons. These factors are considered at a later point in the
analysis.
The estimated baseline closures between the present and 1977 and between
1977 and 1983 are presented in Table VI-3. For most industry segments
baseline closures are expected to be nominal with a few small, marginal
plants leaving the industry between now and 1977 and between 1977 and
1983. This, however, is not true for the catfish segment where high
baseline closures are projected. If Gulf shrimp yields are reduced by
the same magnitude during the next production season as they were in
the 1973 season, the same may be true for the Gulf shrimp industry.
This, however, is conjecture at this point and the baseline closures do
not reflect this situation.
Price increase, land costs and other qualitative aspects were then con-
sidered to determine the expected number of plant closures. These
closure estimates were developed by considering only those plants that are
direct discharges.
The estimated number of plant" closures which appear in Table VI-4 were
developed by appropriately adjusting the closure percentages to reflect
municipal sewer availability, expected price changes, baseline closures,
land values and requirements and other quantitative and qualitative data.
All of these factors require a certain amount of judgment and intuition and
without a doubt increases the likelihood for disagreement or controversy.
The factors that affect expected closures are many and diverse. For ex-
ample, contacts with industry indicated that land prices (only one of the
factors that affects closures) may vary from $500 to $100,000 an acre.
Inquiries into land prices in the Gulf indicated that plants located in rural
areas may be able to acquire land at $50.0 or less per acre. Plants located
in urban areas could be expected to pay $10,000 or more per acre. On the
other hand, land availability on Terminal Island and other west coast cities
indicate that lease or acquisition and land preparation costs could be $100,000
per acre or higher. Other relevant factors have a similar degree of variability.
It is believed, however, that the final plant closures are an accurate pro-
jection of the likely impacts resulting from mandatory pollution abatement
standards for the selected segments of the seafood processing industry.
Further refinement of the closure estimates would require and is indeed
possible only with an on-site evaluation of all of the above factors.
VI-15
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Table VI-2. Estimated percent plant closures without price increases and
•without land costs and net of base closures*
Percent of direct discharges estimated to close
Industry Segment/
Plant Size
Gulf shrimp canners
Gulf shrimp b readers
Gulf shrimp freezers
Blue crab
Catfish
Tuna
Alaskan frozen crab
Alaskan canned crab
West Coast frozen crab
West Coast canned crab
Alaskan frozen shrimp
Alaskan canned shrimp
Small
30
81
32
5
46
13
9
29
3
7
33
18
BPT only
Plant size
Medium
20
54
21
3
64
10
6
19
2
5
22
12
BPT and BAT .
Large
13
36
14
2
63
6
3
12
1
3
14
7
Small
38
88
50
20
46
40
33
97
6
23
97
97
Plant size
Me dium
26
59
33
. 14
64
39
22
74
4
15
90
65
Large
17
39
22
9
64
25
14
49
2
9
- 59
43
West Coast canned
northern pink shrimp
West Coast frozen
northern pink shrimp
30
17
20
11
14
39
20
26
13
18
—' Estimates indicate incremental closures above a baseline estimate (assuming
currently prevailing effluent treatment practices). The percent of closures
are percent of direct discharges by size classification. Percent on municipal
sewers and total plant numbers by industry segment has been presented in
Tables VII-7 and 1-3, respectively.
VI-i6
-------
Table VI-3. Estimated baseline closures by industry segment
Current to 1977 1977 through 1983
Catfish 15 0*
Tuna 1 2
Shrimp
Gulf
West Coast 5 5
New England
Alaskan
Crab
West Coast
Alaskan crab 9 10
Blue crab
__
Baseline closures of 15 plus closures attributed to BPT standards
eliminate 70 percent of the industry. No baseline closures have
been estimated from the remaining 30 percent of the industry
beyond 1977.
VI-17
-------
Table VI-4. Estimated number of plant closures by industry segment
after considering baseline closures, land availability, price
adjustments and municipal sewer availability
Industry segment
Estimated number of plant closures
BPT BPT 4- BAT
Tuna
Catfish
2
12
10
12
Northern pink
shrimp (Calif. , Ore. ,
N. Eng.) canners &
freezers combined
15
Southern shrimp
Canners
Breaders & freezers
California shrimp breaders
Alaskan shrimp canners
& freezers
Blue crab
3
7
5
7
6
18
20
23
Dungeness & Tanner
Crab (Calif. , Ore. ,
Wash) Canners &
freezers combined
Alaskan crab meat
canners & freezers
combined
Total
53
15
125
VI-18
-------
2. Production Curtailment
Data concerning current utilization of capacity by industry segment is
not generally available except for catfish. To further complicate matters,
a measurement of capacity utilization at a given point in time may not be
reflective of typical conditions (e. g. , capacity utilization in southern
shrimp plants has been very low this year after two near peak years)..
However, there are indications that some over-capacity exists in nearly
all industry segments. In segments where market concentration is higher
(e.g., tuna), utilization of capacity probably runs somewhat higher.
Without detailed knowledge of capacity utilization by segment, the price
analysis presented earlier was necessarily based upon subjective judgment
formed through general knowledge of the industry segments and observa-
tions of impacts of past events. As a result, precise estimates of pro-
duction curtailment were not made. • With the exception of Alaskan crab
and shrimp plants, we would not predict substantial reductions in domestic
production as a result of the proposed effluent guidelines. This conclusion
is based upon the premise that with the projected price increases and
anticipated charges for municipal treatment of industrial effluents, some
new (probably large) plants would be constructed. The increase in .capacity
utilization by old plants which do not close, added production of new plants
and, in some cases, increases in imports should make any changes in total
product consumption fairly small except for Alaskan crab where consumption
might drop 5-10 percent under BAT guidelines.
Even though it is perhaps difficult and further opens the door for con-
troversy it is desirable to present the plant closures by size of plant.
This information is presented in Table VI-5.
3. New Source Performance Standards
New facilities on line after approximately January 1, 1974 must meet
the NSPS guidelines for direct discharge into navigable waters. The
general impact of NSPS guidelines will be to slow down new plant con-
struction rates.
VI-19
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Table VI-5. Number of plant closures by size classification
Industry Segment/Standard
Tuna
BPT
BAT
Catfish
BPT
BAT
Shrimp (Northern
Pink shrimp, Southern
shrimp and Alaskan
shrimp)
BPT
BAT
Crab (Blue,
Dungeness and
Tanners and
Alaskan )
BPT
BAT
Size Classification
Small
(xL400, 000 cases
annually)
2
3
U.3,000 Ib.
live weight
annually)
3
0
(£.1, 000,000 Ib
or 50, 000 cases
annually)
18
22
(Less than 1
million Ibs live-
weight annually)
8
17
Medium
(400,000 to
1,599,000
annually)
0
2
(3,000 to 11, 999
Ibs liveweight
annually)
5
0
(1-5 million Ibs
or 50 to 100, 000
cases annually)
5
9
( 1 M to 3 M live-
Large
(1, 600,000 cases
and up annually)
0
3
(>12,000 Ib
liveweight. annually)
4
0
(>5 million Ibs
or 100, 000 cases
annually)
2
6
(Greater than 3 M
weight Ibs annually) Ibs liveweight
3
5
annually)
3
5
VI-20
-------
In terms of the continental U. S. , these guidelines are generally not
too expensive when compared to the investment cost of a new plant --
especially after 1977 when BPT guidelines put upward pressure on
processor margins. However, NSPS guidelines plus anticipation of
BAT guidelines in 1983 will contribute to the relative advantage of plant
sites where municipal sewage treatment is available. There is some
evidence that this trend is already emerging (e.g., a tuna plant on
Terminal Island is being closed and replaced by one in San Die go which
will be sewered). In summary, in the Continental U. S. , where good
sewered sites and reasonable NSPS guidelines are involved, these guide-
lines are not expected to induce large economic impacts.
In Alaska however, we believe NSPS guidelines will severely limit new
plant construction. In most areas municipal treatment of seafood
processing wastes is not available. New plants would probably have to
provide private effluent treatment facilities. Prior to 1977, price effects
would not be available to help pay the added cost of treatment. Treatment
costs also appear to be much higher than the cost of equivalent technology
in the 48 states. After publication of the NSPS guidelines, it is unlikely
that any new plants would be planned in Alaska prior to 1977.
It is possible that new Alaskan plant construction in these industry
segments could be halted until closures induced by BAT guidelines
materialize.
D. Employment Effects
1. Distribution of Employment by Plant Size
There is substantial concentration of employment in large firms in the
seafoods processing industry. Published data are not available on each
industry and product category considered in this study, but industry-
wide data from the Census of Manufactures provides an indication of
the situation which exists.
In the fresh and frozen packaged fish industry, in 1967, 79 percent of
the plants employed less than 50 people and accounted for 29 percent
of total employment. At the other end of the scale, 3 percent of the
plants employed over 250 people, but had 34 percent of the total number
of employees. Details, by plant size are shown in Table VI- 6.
VI-21
-------
Table VI-6 . Employment in the fresh and frozen packaged fish
industry, by size group, 1967.1'
Number of
employees
per plant
Less than 10
10 - 49
50 - 99
100 - 249
250 - 499
500 and over
Total
Number of
establishments
178
213
65
25
11
6
497
— Source: Census of Manufactures
Table VI-7 .
Number of
employees
per plant
Le s s th-an 1 0
10 - 49
50 - 99
100 - 249
250 - 499
500 and over
Total
Number of
employees
600
5,600
4,500
3,500
3,500
3,800 .
21,400
, U. S. Department
Average per
firm
3.4
26.3
69.2
140.0
318.0
633.0
43.1
of Commerce.
Employment in the canned and cured seafood products
industry, by size group, 1967 —'
NuTiber of
establishments
109
131
46
26
4
4
320
Number of
employees
400
3, 300
3, 300
3,700
1,500
3. Aon
15, 800
Average per
firm
3.7
25.2
71.7
142.0
375.0
900. n
49 • 4
I./ Source: Census of Manufactures, U. S. Department of Commerce.
VI-22
-------
In the canned, cured and preserved seafoods industry, in 1967, 75 per-
cent of the plants employed less than 50 people and accounted for 23
percent of total employment. In the large plant category, 3 percent of
the total number of plants employed over 250 people, but had 33 percent
of the total number of employees. Details, by plant size, are shown in
Table VI- 7.
Approximately 91 percent of the total employees in the fresh and frozen
fish industry and 89 percent in the canned seafoods industry are pro-
duction employees.
2. Annual Earnings
Estimated average earnings, for all employees, in fresh and frozen fish
plants, in 1973, averaged $5, 050 in the 48 states and. $7, 550 in Alaska.
In the canned seafoods industry earnings averaged $6, 122 and $9, 152 for
the two areas. Distribution of earnings, by plant size, is shown in Table
VI-8 and VI-9 for 1973.
3. Unemployment and Employee Earnings Losses Associated with Plant
Closures
The closure of seafood processing plants as a result of their inability to
bear the cost of effluent control systems would result in substantial un-
employment and loss of earnings throughout all segments of the industry.
In aggregate, at the BPT control level, for tuna, crab, shrimp and cat-
fish, plant closures could result in the loss of 3, 100 jobs and a reduction
in employee earnings of as much as $19,500, 000. At the BAT control
level, job losses could go as high as $9, 400 and employee earnings would
be reduced as much as $67, 000, 000. Details of these estimates of un-
employment and loss of earnings are shown in Tables VI-10 and VI-11.
4. Possibility of Reemployment in New Plants Being Built
There would be little probability that new plants would be built in the
same area to replace small or obsolete plants which were forced to close
because of their inability to add necessary equipment to comply with water
pollution control requirements. This is especially true for the Alaskan
segments. It does however hold to varying degrees for the other segments
as well. Small seafood processing plants face substantial disadvantages
VI-23
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Table VI-8. Estimated annual earnings per employee, fresh and
frozen fish industry, 48 States and Alaska,
by size group, 1973JV
Number of employees
Less than 10
10 - 49
50-99
100 - 249
250 - 499
500 and over
Average
— 1967 earnings inflated by
manufacturing industry,
— Includes earnings of both
Average
48 States
$5, 132
5,099
4,760
4,560
5,440
5,268
5, 050
21
earnings —
Alaska
$7,672
7,623
7, 116
6,817
8, 132
7, 876
7,550
changes in wage rates in food
1967-1973.
production workers and management
Table VI-9. Estimated annual earnings per employee, canned and
cured seafoods, 48 States and Alaska,
by size group, 1973A'
- 2/
Average earnings —
Number of employees
Less than 10
10 - 49
50 - 99
100 - 249
250 - 499
500 and over
Average
48 States
$6, 300
6,405
6, 4i6
5, 148
4, 946
7, 078
6 1 22
Alaska
$ 9,418
9,575
V,64U
7, 750
7, 394
10,582
9, 152
— 1967 earnings inflated by changes in wage rates in food
manufacturing industry. 1967-1973.
— Includes earnings of both production workers and management
employees.
-------
Table VI-10. Estimated unemployment and employee earnings losses resulting
from imposition of PPT (1977) level effluent controls on
the seafoods processing industry
Estimated
Type and size number of
of plant closings
Tuna
Catfish -
Northern pink
shrimp (Calif. Ore.
Wash, N.Eng. ) can-
ners & freezers
combined
Southern shrimp
Canners
Dreaders &
freezers
Other shrimp
breaders
Alaskan shrimp
canners and freezers
Blue crab
Dun gene ss & Tanner
crab (Calif. ,Ore.
Wash.) Canners &
freezers combined
Alaskan crab meat
2
12
9
3
7
5
5
7
2
canners &z freezers 5
combined
Total 53
Estimated
employees
per plant
447
14
40
70
80
40
60
40
25
40
Estimated
unemploy-
ment
894
168
360
210
560
200
300
280
50
200
3,062
Estimated
arm. avg.
earnings
$7, 170
5, 100
6,000
6,000
5,000
5,000
8,250
5,000
6,000
8,250
Estimated
ann. earn-
ings lost
$6,401,000
857,000
2,160,000
1,260,000
2,800,000
1,000,000
2,475,000 .
1,400,000
300,000
1,650,000
$20,303,000
^ _ _____ j. _ _._ -_ —u u v w .*. v ••• V J.M.J.*.£TV U
of BPT controls in 1977, closures not associated with pollution control factors.
VI-25
-------
Table VI-11. Estimated unemployment and employee earnings
losses resulting from imposition of BPT-KBAT effluent
controls on the seafoods processing industry
Estimated
Type and size number of
of plant closings
Tuna - 10
Catfish - 12
Northern pink
shrimp (Calif. , Ore. 15
N.Eng. ) canners
Si freezers combined
Southern shrimp
Canners 6
B readers &
freezers 18
Other shrimp
b readers 3
Alaskan shrimp
canners & freezers 20
Blue crab 23
Dun ge ness & Tanner
Crab (Calif. , Ore. , 3
Wash) Canners &
freezers combined
Alaskan crab meat 15
canners & freezers
combined
Total 124
Estimated
employees
per plant
447
14
40
70
80
40
60
40
25
40
Estimated
unemploy-
ment
4,470
168
600
490
1,440
120
1,200
920
75
600
9,373
Estimated
ann. avg.
earnings
$7, 170
5, 100
6,000
6,000
5,000
5,000
8,250
5,000
6,000
8,250
--
Estimated
ann. earn-
ings lost
$32,050,000
857,000
3,600,000
2,940,000
7,200,000
600,000
9,900,000
4, 600,000
450,000
4,950,000
$66,727,000
I/
11^ for tuna processors. Closures on the basis of treatment strategy BAT + BPT -•
II are estimated to be a total of 6.
_' These closures are the same as shown for BPT since BPT guidelines would close
all remaining direct discharge plants in 1977.
VI-26
-------
due to economies of scale in processing and water pollution control oper-
ations. As a result, it is doubtful that these small plants would be re-
placed since medium or large plants which might survive could absorb the
added volume represented by these small plants. Obsolete plants are most
likely to persist in areas where the fishing and seafood processing industries
are declining and as a result there would be little inducement to replace
plants in these areas.
5. Absorption of Laid-off Employees by Other Plants
Little opportunity would exist for absorption of laid-off employees by other
plants in the same area. Although the seafoods industry is geographically
dispersed, total employment in the industry has been declining during the
past ten years as larger, more-highly-automated plants have been built
which require fewer employees per thousand pounds of seafood processed.
In addition, many plants operate only on a single-shift basis at less than 100
percent of capacity. The volume represented by these plants could be ab-
sorbed by remaining plants without taking on additional employees.
There is the possibility that some plants could increase imports of partially
processed raw materials, reorganize their production lines and concentrate
on final processing only. To the extent that this occurs, some employees
would be retained and the adverse unemployment impacts partially ameliorated.
In general, however, this is expected to have a minor influence on unemploy-
ment impacts.
6. Secondary Unemployment Effects
The closure of seafood processing plants could result in some unemployment
among fishermen who depended on these plants to provide a market for the
fish and shellfish which they caught. The implication of the impact of plant
closures on fishermen are discussed in more detail in the section dealing
with community impacts.
Several other considerations or qualifications should be introduced at this
juncture. These facors are briefly mentioned below.
Cooperative treatment or barging efforts by contiguous plants could result
in a substantial reduction in waste treatment costs. Improved by-product
recovery could also, and in some cases, substantially lower the net effluent
treatment costs. In addition, provisions have been made (Section 301-C)
•which would allow the administration to modify BAT effluent guidelines on a
case by case basis. All of these factors, jointly or separately, could result
in a substantial reduction in plant closures, unemployment impacts and com-
munity impacts. The uncertainty and nebulous nature of these considerations
prohibits a detailed analysis at this point in time. The important point to be
gleaned from the above factors is that to the extent that each or all occur, the
estimated impacts will have to be modified accordingly.
VI-27
-------
E. Community Effects
The seafoods processing industry is concentrated in coastal communities
from Alaska to Florida to Maine. The pond catfish processing industry
is concentrated in the Mid-South.
Seafood processing plants are located primarily in small towns and large
cities. There are large numbers of small towns scattered up and down
the coasts where fishing and seafood processing is the major industry.
This is particularly true in Alaska. However, many major freezers and
canners are located in major cities such as Seattle, San Francisco,
Los Angeles, San Diego, New Orleans, Tampa, Miami, etc.
Distribution of processors by size of community is shown in Table VI- 12.
Table VI-12. Distribution of seafood processors by size of city in which located
Size of City
(population)
Less than 1, 000
1,000 - 4,999
5,000 - 9,999
10,000 - 24,999
23, 000 and over
Total
Percentage of total processors
. . , , Pond catfish
Seafood canners— Seafood freezers — processors
27
22
6
7
38
100
7
22
6
6
59
100
13
59
13
9
6
100
— Includes tuna, shrimp and crab processors.
Although the closing of a major canner or freezer reprsents a substantial
economic loss to any community, the impact in a major city such as
Los Angeles, San Diego or Tampa, would not be as disastrous as would
the closing of a much smaller plant in a location such as Kodia.k, Alaska
(population under 3, 000) where processing of fishery products is the
primary local industry. There are 13 shellfish processors in Kodiak and
unless they can individually or collectively solve their effluent control
problems at a cost which will permit them to stay in business, plant
closures could wipe out the economic base of Kodiak. Although the situation
in Kodiak is dramatic because of the concentration of seafood processing
VI-28
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at this location and the lack of alternative employment opportunities,
the impact of plant closures would be equally severe in large numbers
of isolated communities where the landing and processing of fish and
shellfish represents a major segment of the local economy.
As shown in Table VI- 12, 49 percent of the seafood canners and 29 percent
of the freezers are located in towns of less than 5, 000 population. The
impact on these small communities would be severe. Small to medium
canners and freezers employ 40-80 workers. In spite of the fact that
the processing of seafood is seasonal, the closure of a plant employing
60 workers could mean the loss of $360, 000 in plant payroll plus $30, 000
in management salaries. This could equal 6-8 percent of the total
community income. If loss of income to fishermen is added, the impact
becomes greater.
The catfish processing industry is already in difficulty. Most processors
are operating at less than 50 percent of capacity. However, at present
the demand for frozen catfish fillets is strong and the low utilization rate
is primarily the result of limitations in the supply of fish for processing.
However, if as a result of required investments in effluent control systems,
these processors cease operations, the impact would be greatest on low
income families in the Mid-South where the seasonal labor required by
catfish processing provides a welcome supplement to family incomes.
Since much of this income is spent in the local community, it would have
a direct effect on the level of business activity in affected areas.
Impacts on Suppliers
Closure of seafoods processing plants will have a direct impact on the
suppliers of raw fish-(fishermen and pond catfish producers). Because
of the perishable nature of fish and shellfish and because of the high wast-
age in processing operations, the seafoods processing industry is supply
oriented. This is particularly true of the shellfish and pond catfish
industries. If plants close, fishermen and catfish producers will, in
many instances, encounter severe problems in finding alternative outlets
for their production.
Pond catfish are hauled live in tank trucks to processing plants. Plants
are located in areas where there is a concentration of production. If
catfish producers are forced to haul their fish greater distances because
of nearby plant closures, the increased cost of hauling would result in
substantial reductions in grower incomes. The industry is already faced
with a shortage of fish for processing and if catfish farmers reduced
production in response to lower returns, this problem would become in-
creasingly severe.
VI-29
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A similar situation would exist in the crab fishing industry. Crab are
normally landed live and are cooked and cleaned immediately after land-
ing. Although it would be possible to cook and clean crab where landed
and then ship chilled carcasses to processing plants for meat extraction
and canning or freezing, the transportation costs involved in shipping
iced crab, which would be 60-70 percent waste, would add substantially
to product cost and would probably be reflected in lower ex-vessel prices.
While it would be possible to land crab at other ports, where processing
plants would exist, the additional time at sea would reduce production
per boat and lower returns to crab fishermen.
Although the market problem would not be as severe for shrimp, fisher-
men would still be faced with the problem of delivering chilled, heads-off
shrimp greater distances to the remaining processors. This would add
transportation costs, whether by truck or by boat, would increase product
costs and reduce returns to fishermen. As an alternative, shrimp proc-
essors might increase their imports of frozen shrimp and rely less on
domestic landings. However, increasing world demand for shrimp,
particularly in Japan, has resulted in greater competition for shrimp
supplies throughout the world.
The closure of tuna processing plants in any given location would have a
lesser impact on fishermen than was true for the other products considered
in this study. Tuna are normally caught in distant waters. The tuna fleet
is at sea for extended periods and delivery of the tuna catch to alternative
locations does not constitute as serious a problem as it does to shrimp
or crab fishermen.
While it is impossible to investigate community impacts for all possible
plant closures, it is possible to present a few generalizations beyond what
has been discussed above. Rather than attempting to pinpoint the location
of all expected closures, we have briefly investigated the location charac-
teristic by industry segment to provide additional insight into probable
community impacts.
The location characteristics of a random sample of plants in the Blue
Crab, Gulf Coast and west coast segments produced the location char-
acteristic distribution presented in Table VI-13.
VI-30
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Table VI- 13. Plant location and size of local population
Percent of Plants by City Size
250 or
Industry Segment less
Blue Crab 40
Gulf Coast Processors
West Coast
250 to
999
40
20
20
1,000 to 5,000 to 10,000 to
4,999 9,999 49,999
15 5
10
50,000 to 100,000
99,999 and over
30 40
80
Total
100
100
IOC
I
OO
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Eighty percent of the plants in the blue crab sample •were found to be
located in communities with less than 1,000 persons. On the other
hand, 80 percent of the plants in the west coast sample were located
in communities of 100,000 or larger. The Gulf Coast segment revealed
that 70 percent of the plants were located in communities with a popu-
lation base of 50, 000 or greater while the remainder were located in
communities with less than 5,000 persons.
This information (along with other information presented above) per-
mits a few other observations and summary statements concerning the
relative impacts by segment. They are as follows:
1. The community impacts are expected to be rather substantial
in the Alaskan segment which has a relatively large number
of closures in small communities.
2. The west coast plants in general are located in larger com-
munities where the projected impacts for the most part
could be easily absorbed.
3. The Gulf Coast segment, while impacted less than the blue
crab segment are located in larger cities where the economic
readjustment would be enhanced by a broader economic base.
4. The blue crab segment which can be characterized as having
a large number of plants in small communities is expected
to experience a relatively minor impact. There will, how-
ever, in all likelihood be some clustering of plant closures in
very small communities.
5. While the expected plant closures in the catfish segment are
relatively large, the geographical dispersion of these plants
is great. This will tend to ameliorate to a substantial degree
the expected community impacts.
VI-32
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F. Impact on Foreign Trade
The impact of substantial plant closures associated with the imposition
of effluent guidelines on the fisheries processing industry could result
in driving additional processing overseas. This would be particularly
true for tuna, crab and shrimp. The farm- raised catfish industry is
not as greatly affected by imports since these fish are sold mainly as
fresh or frozen fillets whereas imports of catfish go primarily into
fabricated fish sticks and other similar items.
Tuna
The total supply of canned tuna in the United States has increased from
392 million pounds in 1962 to 673 million in 1972, a gain of 72 percent.
Approximately 91.6 percent of the total supply was packed in the United
States. However, of this total, 63 percent was represented by imports
of fresh or frozen tuna purchased from foreign fishermen by U.S.
canners. Imports of canned tuna are relatively unimportant and nor-
mally account for 4 to 5 percent of the total supply. Canned imports
are subject to tariff quotas equivalent to no more than 20 percent of
the previous year's domestic pack. Canned imports have varied between
50 and 73 million pounds and in 1972 were 56, 513, 000 pounds, equal to
8.4 percent of the total U.S. supply. In only one year, 1970, have
imports above quota come in (902, 000 pounds). The tariff quota system
does not limit total imports but provides for a differential duty, quota
imports being levied 6 percent ad valorem in 1972 as opposed to 12.5
percent duty on above-quota imports. Japan is the principal supplier of
canned tuna imported into the United States. The low level of imports
in 1972 was the result of two major factors, FDA detention of large
quantities of Japanese product because of problems associated with de-
composition and Japanese currency revaluation. With the prospect of a
continued strong demand for canned tuna by the American consumer,
and if U.S. pack is reduced as the result of plant closures associated
with the imposition of effluent guidelines, it is anticipated the U.S. canned
tuna prices will rise still further and that these higher prices will attract
increased imports of canned tuna in spite of higher duties for shipments
above tariff quota levels. In addition, it is possible that a higher proportion
of tuna imported for canning in the United States, may come in the form of
loins (frozen or cooked) as partial processing on board ships or overseas
could increase. Another possibility would be the establishment of overseas
canning operations by major U. S. tuna packers.
VI-33
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Shrimp
Consumption of shrimp in the United States has nearly doubled since
I960. Prices reached record levels in 1972, but demand continued
strong. Of the total 1972 supply of 487. 5 million pounds (heads-off),
253. 1 million, or 52 percent came from imports. Composition of
imports, 1964 and 1972, was as follows:
Percent of total imports
Form imported 1964 1972
Shell-on headless 72.7 56.8
Peeled, not breaded 19.6 42.1
Peeled, breaded 0.3 0.6
Peeled, canned 1.9 0.5
Not classified 5.5 -
Total 100.0 100.0
These data show a definite swing toward the importation of a higher pro-
portion of processed or partially processed shrimp. In particular, the
relative quantity of peeled shrimp imported has more than doubled
since 1964. Most of these shrimp enter as heads-off, peeled frozen
shrimp in blocks and are thawed, de-veined if necessary, individually
quick frozen and packaged in consumer or institutional packages.
These shrimp may be frozen raw, cooked or breaded. Although the
volume of breaded shrimp imported more than doubled 1964-1972 (from
0.5 million pounds to 1. 3 million pounds), the total volume is still
only 0.5 percent of total imports. Imports of peeled canned shrimp
have remained'fairly stable at around 2. 5 to 3.5 million pounds. Con-
sumption of canned shrimp in the United States is small, Alaska has
potential to expand canning operations, and little change in imports of
canned shrimp is expected.
Mexico is the most important source of shrimp imported into the United
States, supplying 80.7 million pounds (36 percent of total imports) in
1972. Central American countries shipped 33.5 million pounds to the
U.S., South America -- 43.9 million, and India -- 33.5 million. A
potentially important shrimp fishery may exist off the coast of West
Africa, but this source has not been highly developed. However,
recent exploratory efforts by the Japanese indicate that West African
waters may produce large quantities of shrimp in the future.
VI-34
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Closure of U.S. shrimp processors as the result of the imposition
of effluent limitations would accelerate the existing trend towards
increased processing (peeling and de-veining) of shrimp either on
board ships or in land-based processing plants located outside the
United States. Shrimp landed by U.S. vessels would continue to be
processed by those U.S. firms which would remain in operation.
Given the expected maintenance of a strong demand for shrimp in
the United States and normal yields from U.S. shrimp fisheries, the
principal impact of closure of substantial numbers of U.S. shrimp
processors would be to encourage more processing overseas. The
total volume of shrimp imports would not change materially from
that which would have existed otherwise, but the trend toward the
importation of an increasing proportion of peeled and de-veined shrimp
could be substantially accelerated.
Crab
In contrast to tuna and shrimp, imports of crab for processing in the
United States have been relatively small. Most crabs are landed live
and cooked immediately prior to processing. Imports of Blue crabs
to the East Coast are negligible. However, imports of West Coast
crabs (King, Snow and Dungeness) have increased rapidly since 1967.
In 1967 imports were only 1. 3 million pounds. Imports jumped to
8.6 million pounds in 1968 and in 1971 were 17.6 million pounds. Most
of the imported crabmeat comes from the Canadian Northwest. Imports
of canned crabmeat (mainly from Japan) have decreased during the
past ten years, from a high of 5.3 million pounds in 1963 and were 2.5
million pounds in 1972, which was, however, equal to 51 percent of
the total U.S. supply of canned crabmeat. The U.S. pack of canned
crabmeat has also declined, from 11 million pounds in 1966 to 2.4
million'in 1972.
It is doubtful that closure of U.S. crab canners would result in sub-
stantial increases in canned crab imports. The demand for canned crab
is small and has been decreasing. However, should crab freezers in
Alaska, Washington, Oregon and California be forced out by effluent
guideline requirements, it is probable that, in the absence of equivalent
effluent controls by Canada, expansion of crab processing on the West
Coast of Canada could occur with the bulk of the crabmeat destined
for export to the United States.
VI- 35
-------
The supply of crab has not increased during the past six years. Since
1968, combined U.S. landings (live weight) have varied between 238.5
and 281. 1 million pounds. Crab does not share the popular demand for
either shrimp or tuna and crab imports will be tied to the total level
of consumer demand for crab.
Catfish
The closure of catfish processing plants would have very little impact
on foreign trade in farm-raised catfish. Catfish imports (mainly from
the Amazon River area of Brazil) do not serve the same market as
farm-raised catfish fillets. Therefore, it is believed that curtailment
of catfish processing would have virtually no effect on catfish imports
to the U.S.
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VII. LIMITS OF THE ANALYSIS
A. General Accuracy
The seafoods processing industry is complex in terms of the number,
ownership, location and type and size of plants. Variations in the .
seasonal pattern of operations, extreme variation in climatic conditions
(Kodiak, Alaska to Key West, Florida) and substantial differences in
raw product characteristics all contribute to the complexity of this
industry.
Detailed information on size distribution by types of plants is not avail-
able, nor is information concerning processing costs and returns. Very
little research has been conducted, by any source, on the economics of
seafoods processing. As a result, the financial aspects of the analysis,
were, of necessity, based on synthesized costs and returns for "repre-
sentative" types and sizes of model plants. These costs and returns were
developed from a variety of unpublished and published sources and from
contacts made with firms in the industry. They are, as a result, indica-
tive only and not representative of any one plant or firm, but are believed
to be useful for the purposes of this analysis.
Published information from the Internal Revenue Service, such refer-
ences as Standard and Poors, Dun and Bradstreet, and other sources
of data on financial ratios and financial performance were used as checks
on the reasonableness of results obtained in the financial analysis of
representative plants.
Throughout the study, an effort was made to evaluate the data available
and to update these materials wherever possible. Checks were made with
informed sources in both industry and government to help insure that data
were as reliable and representative as possible. In some instances, e. g. ,
catfish data, visits were made to offices of agencies responsible for develop-
ment of these statistics and access was permitted to unpublished data which
was necessary for background purposes or to provide data for recent periods.
Although processing cost data, information on investments and other
"representative plant" cost and returns information must be considered
approximate, general information on these items was obtained from a
substantial number of processors and when classified and cross-checked,
showed reasonable degrees of consistency.
VII-1
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Water pollution control costs were furnished by EPA, Effluent Guidelines
Division. These costs were developed for a variety of industry categories
and subcategories and effluent treatment systems. It was necessary to
adapt these effluent control costs to the types and sizes of model plants
used in this analysis. In addition, because there was presented a range
of waste treatment techniques, and associated costs, purported to be
adequate for meeting specified effluent limits under varying conditions,
it was necessary to arbitrarily select one waste treatment technology for
each industry segment and treatment level. This selection was made
with the assistance of EPA. Given this designated treatment technology,
it was necessary to adapt the effluent treatment costs to the types and
sizes of model plants used in the analysis. In addition, it was necessary
to make specific assumptions regarding the current status of effluent
treatment and disposal in the seafoods processing industry. These assump-
tions are dexcribed in detail in the "Critical Assumptions" section of this
report. The validity of these assumptions and of the effluent control costs
which result introduce an additional element of uncertainty and possible
inaccuracy.
However, given the accuracy of the pollution control costs as being
acceptable, it is believed that the analysis represents a usefully ac-
curate evaluation of the economic impact of the proposed effluent guide-
lines on the seafoods processing industry.
B. Range of Error
Different data series and different sections of the analysis will have
different possible ranges of error. Estimated error ranges as an
average for the industry are as follows:
Error Range
%
1. Information regarding the organization and
structure of the industry, number, location
and size of plants , and other information
descriptive of industry segments +_ 10
2. Price information for products and raw
materials + 10
-------
Error Range
3. Cost information for plant investments and
operating costs +_ 15
4. Financial information concerning the sea-
foods processing industry + 15
5. Salvage values of plants and equipment _+ 20
6. Water pollution control costs Unknown
7. Present status of effluent control in the
industry + 20
C. Critical Assumptions
The complex of types and sizes of seafoods processing plants, processes
involved and effluent control levels and systems proposed to meet these
levels, all required the making of a series of assumptions required to
keep the analysis within manageable limits and to specify "representative"
situations which would permit further development of industry-wide im-
pacts. These assumptions fall into seven general areas :
1. Assumptions regarding industry structure
2. Assumptions concerning raw material and product prices
3. Assumptions concerning " representative" model plants
4. Assumptions concerning water pollution control costs
5. Assumptions concerning current status of effluent disposal
systems in use by the industry
6. Assumptions concerning the salvage value of plants and
equipment
7. Assumptions concerning "shutdown" decisions.
1. Industry Structure - The seafoods processing industry is complex
and geographically scattered. Although this project •was concerned only
with tuna, shrimp, crab and farm-raised catfish, many of the firms and
plants in the industry can and/or freeze a much wider variety of fish and
shellfish. Many of these plants are parts of diversified seafoods pro-
cessing forms or of general food processing companies. Restricting
the analysis to the four species mentioned above introduces an element
of artificiality insofar as a description of industry structure is concerned,
Although the National Marine Fisheries Service maintains lists of seafoods
canning plants, no comparable information exists for the freezing industry.
As a result, it -was necessary to develop much of the industry structure
information from primary sources.
VII-3
-------
Substantial differences develop when "official" or published lists or
directories of seafood processing firms are compared with reports from
firms and individuals located in the areas of concern. For example,
review of materials from the National Marine Fisheries Service (canners
only) and directories of frozen food processors indicated that there were
only 7 Blue Crab processors in Maryland. However, conversations with
processors in the area indicated that thre may be as many as 36 firms
processing Blue Crab in Maryland. It is recognized that many of these
"processors" may be very small operators who clean or pick crab and
sell chilled crab to local markets or restaurants in non-hermetically
sealed containers. The same situation undoubtedly exists along the Gulf
Coast and on the West Coast. Listings for Alaska, of commercial fisheries
processors, obtained from the State of Alaska, Department of Fish and
Game, are believed to be reasonably complete. Since the projected number
of plant closures is related to the number of plants in operation, a con-
certed effort was made to make the estimates of plant numbers as complete
as possible. Although some small operators have undoubtedly been over-
looked, it is believed that the processor numbers shown represent a high
proportion of commercial processing capacity.
2. Raw Material and Product Prices - There is no single source which
publishes satisfactory prices for raw fish and shellfish and processed
seafood products. Major reliance was placed on contacts with firms in
the seafoods processing industry, but prices for both raw and processed
products were checked with both published and unpublished price infor-
mation from the National Marine Fisheries Service. Prices of both fish
and processed seafoods products have increased sharply during the past
year, along with the prices of all other protein foods. A particular effort
was made to insure that raw material and processed product prices were
on a comparable basis for the types of products and for the time periods
considered.
3. "Representative" Model Plants - No single plant is "representative"
of the complex of types and sizes of plants which constitute the various
segments of the seafoods processing industry. Although specific types
of plants (e.g. tuna canners, shrimp breaders, etc.) will have certain
items of equipment in common, the plants will vary greatly regarding
size, construction, equipment combinations and layout and sites. For
example, shrimp processors are tound at coastal areas and at inland
locations such as Phoenix, Arizona. Plants are located on piers built
out into the bay, on converted ship hulls and at shore-based sites. A
distinction often made relates to "shore-based" U.S. "ship-based" plants.
They vary in size from small, simple operations to large, mechanized
processing plants.
-------
The technical information on effluent control systems and costs, supplied
by EPA, was based on specified types and sizes of plants. As a result,
it was necessary to pattern the impact analysis around those types of
plants included in the technical study of effluent control systems.
The "model" plants used in this analysis are described in Chapter VI.
The types of plants used were as follows:
1. Tuna
2. Southern shrimp
3. Shrimp breader
Plant processing. 1, 600, 000 cases of canned
tuna per year, operating season 250 days,
single shift basis
a. Canner processing 14 tons per day of
raw product, 110 day season, single shift
basis
b. Freezer processing 7 tons per day of
raw product, 260 day season, single shift
basis
a. Small plant, processing 2 tons per day
raw product, 260 day operating year, single
shift basis
4. Alaskan shrimp
b. Large plant, processing 10 tons per day
raw product, 260 day operating year, single
shift basis
Combination canning and freezing plant
processing 17.5 tons per day raw product,
130 day season, single shift basis
5. Northern pink shrimp Combination canning and freezing plant pro-
(Calif. , Ore. , Wash. , cessing 10 tons per day raw product, 130
New England) day season, single shift basis
6. Alaskan crab meat
a. Canner processing 12.5 tons per day
raw product, 150 day season, single shift
basis
b. Freezer processing 12. 5 tons per day
raw product, 150 day season, single shift
basis, 75 percent meat, 25 percent whole
and'sections
VII-5
-------
Single product canning plant and
7. Dungeness and single product freezing plant
Tanner Crab processing 7 tons per day, 150 day season,
(Calif. , Ore. , single shift basis
Wash.)
8. Blue crab Combination conventional and mechanized
plant processing 5 tons per day raw product
into canned and fresh chilled product, 200
day season, single shift basis
9. Catfish Processes fresh and frozen catfish fillets,
4 tons per day raw product, operates at
60 percent of capacity, 250 day season,
single shift basis
It is recognized that this classification of plants does not approach the
variety of types and sizes of plants which comprise these segments of
the seafoods processing industry. In reality, each plant is individually
engineered and equipped to meet the requirements of a particular site
and location. In addition, the product mix will vary from plant to plant
and from time to time within a given plant. However, it is believed
that the types of plants used in the analysis serve to illustrate the nature
and the severity of the economic impact which would result from the
imposition of proposed effluent limitation guidelines on the tuna, shrimp,
crab and farm-catfish processing industries.
4. Conversion Factors - Conversion factors for converting from raw
product to processed product, e.g. raw crab to crab meat, tuna to canned
tuna, etc. are critical in that a small change in the conversion factor
results in a substantial change in the yield of processed product and affects
plant returns accordingly. Conversion factors used were obtained from
both industry and published sources and are believed to be representative
for the types of raw and processed products with which this project is
concerned.
5. Effluent Control Costs - Effluent control systems and costs for systems
specified were supplied by the Effluent Guidelines Division of EPA. Critic-
al limitations regarding the applicability of these effluent control systems
include the following:
a. The physical availability and the cost of land where lagoons
are proposed as a part of the effluent treatment system.
b. The validity of extrapolating costs to obtain estimates for
treatment systems for plants of various sizes required
beyond the limits of cost data provided by EPA.
VII-6
-------
c. The application of treatment costs based on 2-shift opera-
tions (as supplied by EPA) to plant situations involving
single shift days. The calculations used considered treat-
ment costs as related to total tons processed per day
regardless of the number of shifts. For some types of
non-biologic treatment systems, this could result in an
understatement of treatment costs as capacities of certain
items of equipment, e.g. screens, might not be adequate
to handle the volume specified on a one-shift basis.
d. The effluent treatment systems costs assumed that the
plants had none of the required equipment currently in
place. However, it is known that some plants do have
screening devices, grinders, etc. which are being used
to process effluent prior to its discharge from the plant and
in some cases to recover solid materials for utilization as
by-products or for disposal as solid wastes in landfills, etc.
To the extent that such equipment is in place in existing
plants, the incremental cost of achieving BPT or BAT
controls would be reduced.
6. Current Status of Municipal Treatment in the Industry - Only limited
information is available concerning the number, location and types of
seafoods processing plants discharging into municipal sewage systems.
As a result, it was necessary to develop estimates of the number of
plants served by municipal sewer systems. These estimates were made
by personal visits to plants and by telephone contacts with processors
and others knowledgeable concerning effluent control practices at specific
locations. The estimates are shown in Table V-3. Although these
estimates are not based on a complete survey of all of the plants in each
area and product category, it is believed that contacts made in each area
were adequate to provide a useful estimate of the importance of municipal
waste treatment system connections to the seafood processing industry in
1973. In some situations, e.g., Astoria, Oregon and Terminal Island,
California, expanded and/or improved sewage treatment facilities are
either planned or actually under construction. These new facilities will
relieve the situation in those locations as they are completed and come
on stream.
7. Salvage Values - Salvage values of buildings, equipment and land
will vary greatly from one location to another and with the type and condi-
tions of structures and equipment.
VII- 7
-------
In order to avoid problems which would be inherent in attempting to
establish differential salvage values, a set of "standard" assumptions
concerning salvage values was developed:
a. Land was salvaged at its estimated 1972 value.
b. Buildings and equipment were salvaged at a net amount
equivalent to 10 percent of their 1972 replacement value.
c. Net operating capital was recovered intact.
8. "Shutdown" Decisions - The general purpose of the "shutdown" model
is to examine the profitability of the model plants before and after the
imposition of effluent limitation guidelines, to determine the probability
of forced closures which would result and to calculate the price changes
required to cover the added effluent control costs. The model requires
assumptions relative to numerous factors and are described in detail
in previous sections of this report. Assumptions used, while arbitrary,
were made on the basis of the best information which could be developed
regarding conditions prevailing in the seafoods processing industry.
VII-8
-------
BIBLIOGRAPHIC DATA '• Import No. ; |2.
SHEET . EPA-230/ 1-73-025 |
4. li.le and Subtitle
Economic Afialysis of Proposed Effluent Guidelines
Seafoods Processing Industry
7. Authorfe)
R.' E. Seltzer, D. L. Jordening, J. K. Allwood
9. Performing Organization. Name and Address
Development Planning and Research Associates, Inc.
P. O. Box 727, 200 Research Drive
Manhattan, Kansas 66502
12. Sponsoring Organization Name and Address
Environmental Protection Agency
Waterside Mall
4th & M Streets, S. W.
Washington, D. C. 20460
3. Recipient's Accession No.
S* Report Date
October, 1973
6.
8- Performing Organization Kept.
No.
10. Project/'Task/U'ork Unit .No.
Task Order No. 2
11. Contract/Grant No.
Contract No. 68-01-153:
13. Type or' Report St. Period
Covered
Final Report
14.
IS. Supplementary Notes
stracts The economic impacts of proposed effluent guidelines on the seafoods pro-
cessing industry are assessed. The analysis is confined to tuna, shrimp, crab and
farm-reared catfish processing plants and includes classification and description of
types of firms and plants, financial profiles, investment and operating costs and profits
for selected types of model plants, evaluation of pricing relationships and analytical
procedures. The financial impact of proposed effluent treatment technology was
assessed in terms of prices, industry returns, volume of production, community
impacts and international trade.
It is estimated that BPT standards will close 53 seafood processing plants.
This includes 12 catfish, 2 tuna, 25 shrimp and 14 crab processing plants. Ithas
further been estimated that BAT standards will close 8 tuna, 37 shrimp and 27 crab
processing plants.
17. Key U'ords and Document Analysis. 17a. Descriptors
Water pollution, economic analysis, seafoods, tuna, shrimp, crab, catfish, pollution,
industrial wastes, economic demand, supply, prices, feasibility analysis , discounted
cash flow
17b. Idcntifiers/Open-Ended Terms
02 Agriculture, B-Agriculture Economics
05 Behavioral and Social Sciences, C-Economics
17c. COSATI F;c!J/C.r..up
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