PA—230/1-76-056
ovember, 1976
ECONOMIC ANALYSIS OF POTENTIAL
EFFLUENT GUIDELINES FOR
SELECTED SEGMENTS OF THE
FISH HATCHERY AND
FARM INDUSTRY
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Water Planning^ and Standards
Washington, D.C. 20460

*
<•

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.ECONOMIC ANALYSIS OF POTENTIAL
EFFLUENT GUIDELINES FOR
SELECTED SEGMENTS OF THE
FISH HATCHERY AND FARM INDUSTRY
Prepared for
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF WATER PLANNING AND STANDARDS
WASHINGTON, D.C. 20460
by
Development Planning and Research Associates, Inc.
P.O. No. WA 6-99 2054-A
November, 1976

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This report has been reviewed by the Office of
Water Planning end Standards, 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 recommendation
for use.

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PREFACE
The attached document is a Contractor's report prepared with the
supervision and review of the Office of Water Planning and Standards,
Economic Analysis staff of the U. S. Environmental Protection Agency.
Its purpose is to evaluate the potential economic impacts of effluent
limitations which may be used pursuant to Section 304(b) and 306 Water
Pollution Control Act. This report was submitted in fulfillment of
Contract No. 68-01-2436 and Purchase Order No. WA-6-99 2054-A by
Development Planning and Research Associates. The work was com-
pleted as of November 1976.
The study analyzes potential effluent limitations suggested in the
EPA Technical Development Document for this industry category.. The,
industry segments reviewed here-include all for which guidelines,have
not yet been issued. It is important to note that the draft effluent
guidelines and associated costs do not necessarily represent potential
future guidelines or costs. This document will be used for internal
decision-making regarding specific effluent limitations to be issued
at a later date.
This report represents the conclusions of the Contractor. It has been
reviewed by the Office of Water Planning and Standards and approved for
pub!'i cat ".oil. Approval does riot signify the coi'it&f'its Hticessari ly reflect
the views of the Environmental Protection Agency nor does mention of
trade names or commercial products constitute endorsement or recommen-
dation for use.

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CONTENTS
Page.
EXECUTIVE SUMMARY	i
PART 1: INTRODUCTION AND METHODOLOGY	1-1
I. INTRODUCTION	1-1
A.	Scope	1-1
B.	Organization of This Report	1-1
C.	General Industry Situation	1-3
D.	Data Sources	1-5
II. METHODOLOGY	II-l
A.	Fundamental Methodology	II-3
B.	.Price Effects	11-9
C.	Financial Effects	11-10
D.	Production Effects	11-11
E.	Employment Effects	11-12
F.	Community Effects	11-12
G.	International Trade Effects	11-12
PART 2: FLOW-THROUGH FISH CULTURING (TROUT AND SALMON)	III-l
III. INDUSTRY STRUCTURE	III-l
A.	Characteristics of the Industry Segments	III-l
B.	Market and Product Corcentration	III-5
C.	Number of Employees	111-7
IV. FINANCIAL PROFILE OF THE INDUSTRY	IV-1
A.	Sizes and Types of Model Farms	IV-1
B.	Investments and Assumptions	IV-3
L. Current Assets, Current Liabilities and
Net Working Capital	IV-5
D.	Model Plant Capacity and Utilization	IV-6
E.	Annual,Profits	IV-6
F.	Annual Cash Flow	IV-9
G.	Cost Structure	IV-9
V. PRICING PATTERNS	V-1
VI. EFFLUENT CONTROL COSTS	VI-1
A.	Present Status of Effluent Controls	VI-1
B.	Effluent Control Costs	VI-3
VII. IMPACT ANALYSIS	VII-1
PART 3: POND FISH CULTURING (CATFISH, CATFISH FINGERLINGS,
MINNOWS, AND GOLDFISH)	VIII-1
VIII. INDUSTRY STRUCTURE	VIII-1
A.	Characteristics of the Industry Segments	VIII-1
B.	Market and Product Concentration	VII1-20
C.	Number of Employees	VI11-22

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CONTENTS (Continued)
Mi
IX. FINANCIAL. PROFILE OF THE INDUSTRY AND MODEL
FARMS	IX-1
A.	Sizes and Types of Model Farms	IX-1
B.	Investments and Assumptions	IX-4
C.	Current Assets, Current Liabilities, and
Net Working Capital	IX-10
D.	Levels of Production	IX-10
E.	Annual Profits	IX-10
F.	Annual Cash Flow	IX-14
G: Cost Structure	IX-14
X. PRICING PATTERNS	X-l
XI. EFFLUENT CONTROL COSTS	, .	XI-1
A.	Present Status, of Effluent Control
in the Industry	XI-1
B.	Control Costs	XI-3
XII. IMPACT ANALYSIS	XII-1
A.	Catfish	XII-1
B.	Minnows	XI1-15
C	XTI-?6
W •	• Ul I	I U ( I VJl	'* * * I - W
PART 4. NON-NATIVE ORNAMENTAL FISH CULTURING	XITI-1
XIII. INDUSTRY STRUCTURE	XIII-1
"A. Characteristics of the Industry	XIII-1
B.	Market and' Product Concentration	XI11-5
C,	Number of Employees	XI11-6
XIV. FINANCIAL PROFILE OF THE INDUSTRY	XIV-1
A.	Sizes and Types of Model Farms	XIV-1
B.	Investments and Assumptions	XIV-1
C.	Annual Profits	XIV-3
D.	Annual'Cash Flow	XIV-5
E.	Cost Structure	XIV-5
XV. PRICING PATTERNS	XV-1
A.	The Pricing Process	XV-1
B.	Quantities Sold and Prices Received	XV-1
C.	Expected Price Impact	XV-2
XVI. CONTROL COSTS	XVI-1
A.	Present Status of Effluent Control	XVI-1
B.	Effluent Control Costs	XV1-3
XVII. IMPACT ANALYSIS	XVI1-1

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CONTENTS (Continued)
Page
PART 5: STATE AND FEDERAL FISH HATCHERIES	XVIII-1
XVIII. INDUSTRY STRUCTURE	XVIII-1
A.	Characteristics of the Industry Segments
Federal Hatcheries	XVIII-1
B.	Number of Employees	XV111-11
XIX. FINANCIAL PROFILE OF THE INDUSTRY AND
MODEL FARMS	XIX-1
A.	Sizes and Types of Model Farms	XIX-1
B.	Investments and Assumptions	XIX-1
C.	Cost of Production for Federal and
State Hatcheries	XIX-2
XX. EFFLUENT CONTROL COSTS	XX-1
XXI. IMPACT ANALYSIS	XXI-1
REFERENCES

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LIST OF TABLES
Table No.	Page
IV-1 Sizes and types of model farms	IV-2
IV-2 Estimated invested capital for model for commercial
trout and salmon farms	IV-4
IV-3 Net income, returns on sales, and returns on total
invested capital for commercial trout and salmon
farms	IV-7
IV-4 Annual cash flow for model commercial trout farms	IV-10
IV-5 Pro forma statement of income and expenses for model
commercial trout farms	IV-11
IV-6 Pro forma statement of income and expenses for pan-
size salmon production project, Northwest 1975	IV-12
V-3 Imports of trout, fresh wat::r other than lake trout,
1969 to 1973, by major country of origin	V-l
VI-1 Current pollution control status of native fish.flow-
through culturing facilities and alternative treat-
ment requirements to meet BPT and BAT Standards	VI-2
VI-2 Effluent control costs for native fish flow-throuqh
culturina facilities	VI-4
VII-1 Percent price increase required to pay for incre-
mental pollution control - trout farms	VII-2
V1I-2 Pre-tax acid dFler-tax iiicoine for model commercial
trout farming operations, assuminq no price chanae VI1-4
VII-3 Pre-tax and after-tax rate of return as a percent of
average invested capital for model commercial trout
farming operations, assuming no price change	VII-5
VII-4 Pre-tax and after-tax return on cales for model
coimiercial trout operations, assuming no price
change	VII-7
VII-5 Estimated cash flow for model commercial trout farm-
ing operations	VI1-8
VI1-6 Net present values of model commercial trout farms
before and after the imposition of alternative
effluent treatment standards VII-10
VIII-1 Catfish production in Alabama, by size and type-
of operation, 1971	VI11-3
VI11-2 Commercial catfish production in Arkansas during
1972	VI11-5
VI11-3 Summary of commercial catfish production, 1970-1973 VII1-6
VI11-4 Estimated total number of conmercial acres and
pounds of foodsize catfish produced, by state,
1973	VIII-7
VIII-5 Estimated number of commercial catfish producers,
1973	,VI 11-9

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TABLES (Continued)
Table No.	Page
VI11-6 Estimated number of commercial catfish producers and
total number of commercial acres by major producing
states, 1973	VIII-10
VI11-7 Size distribution of commercial catfish producers in
Alabama, Louisiana and Mississippi, 1973	VI11-11
VIII-8 Size distribution of commercial Mississippi finger-
,1ing, producers, 1973	VI11-14
VI11-9 Estimated number of commercial minnow producers, total
number of commercial acres, and acreage yield by
major producing states, 1973	V111-15
VIII-10 Size distribution of commercial Mississippi minnow
farms	VII1-17
VIII-11 Estimated number of commercial fancy goldfish producers
and total number of ponded acres	VI11-18
VI11-12 Estimated total number of employees in pond fish
culturing operations	VI11-23
IX-1 Sizes arH types of model farms	IX-2
IX-2 Estimated invested capital for catfish farm models	IX-5
IX-3 Estimated invested capital for minnow farm models	IX-6
IX-4 Estimated invested capital for model fancy goldfish and
uait minnow farms (1975 dollars)	IX-9
IX-5 -Net income, returns on sales and return on total invested
capital for-model catfish farms	IX-
IX-6 l.et income, returns on sales and return on total
invested capital for model minnow and fancy
goldfish farms	IX-12
IX-7 Annual cash flow for model pond culturing farms	IX-15
IX-8 Pro forma statement of income and expenses for catfish
model farms (1975 dollars)	IX-16
IX-9 Pro forma statements of income and expenses for minnow
model farms (1975 dollars)	IX-18
IX-10 Pro forma statement of income and expenses for model
fancy goldfish and bait minnow farms (1975 dollars)	IX-20
X-l Quantity demanded, price elasticity, and total revenue
at different points on a log-linear demand curve for
catfish, si stores, Atlanta, Ga., 1972	X-2
X-2 Quantity of catfish processed by month as reported by
national processors 1970-1975	X-4
X-3 Catfish imports, 1969-1974	X-5
X-4 Prices paid by national processors for catfish 1970-1975 X-6
XI-1 Current pollution control status of native fish pond
culturing facilities and alternative treatment require-
ments to meet BPT and BAT standards	XI-2
XI-2 Effluent control costs for native fish pond culturing
farms - catfish, 1975 dollars	XI-4
XI-3 Effluent control costs for native fish pond culturinq
farms - minnows, 1975 dollars	XI-F

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TABLES (Continued)
Table No.	Page
XI-4 Effluent control costs for native fish pond culturing
farms - fancy goldfish, 1975 dollars	XI-6
XII-1 Percent price increase required to pay for incremental
pollution control, catfish	XI1-2
XI1-2 Pre-tax and after-tax income for model catfish farm-
ing operations - assuming no price change	XII-5
XII-3 Pre-tax and after-tax. rate of return as a percent of
invested capital for model commercial catfish farm-
ing operations, assuming no price change XII-6
XII-4 Pre-tax and after-tax return on sales for model
catfish operation (no price increase)	XI1-8
XII-5 Estimated cash flow-on invented capital for model
commercial catfish farming operations assuming
no price increase	XI1-9
XII-6 Net present values of model commercial catfish
farms before and after the imposition of alter-
native effluent treatment standards	XII-10
XI1-7 Estimated closures of catfish farms from effluent
controls	XI1-13
XII-8 Percent price increase required to pay for incre-
mental pollution control	Xli-lb
XII-9 Pre-tax and ?.fter--tax incorns for model commercial
minnow farm operations	XII-17
XII-10 Pre-tax and after-tax rate of return as a percent
of invested capital for model commercial minnow
frrming operations	XII-19
XII-11 Pre-tax and after-tax return on sales for model
commercial minnow operations	XII-20
XII-12 Estimated cash flow and as percent of invested
capital for model commercial minnow farming
operations	XII-21
XII-13 Net present values of model commercial minnow farms
before and after the imposition of alternative
effluent treatment standards	XIT-22
XII-14 Estimated shutdown for commercial minnow operation XI1-25
XI1-15 Percent price increase required to pay for incre-
mental pollution control - fancy goldfish	XII-27
XII-16 Pre-tax and after-tax income for model fancy gold-
fish farms XII-29
XII-17 Pre-tax and after-tax rate of return as a percent of
average invested capital for model commercial fancy
goldfish farming operations XII-30
XII-18 Pre-tax and after-tax return on sales for model
fancy goldfish farms	XI1-31
XII-19 Estimated cash flow and as percent, of average invested
capital for model commercial fancy goldfish farming
operations	XII-33

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TABLES (Continued)
Table No.
Page
XI1-20 Net present values of model cormiercial fancy goldfish
fish farms before and after the imposition of alter-
native effluent treatment standards	XI1-34
XI1-21 Estimated shutdown for commercial fancy goldfish
operations	XII-36
XIII-1 Functional classification, Florida, tropical fish
farmers and wholesalers, 1973	XIII-1
XI11-2 Florida tropical fish breMers, locations by major
countries and cities, 1973	XI11-4
XIV-1 Estimated investment capital for model non-native
ornamental fish farms	XIV-2
XIV-2 Net income, returns on,sales and return on total
invested capital for model non-native ornamental
fish farms	XIV-4
XIV-3 Pro forma statement of income and expenses for model
non-native ornamental fish farms stitement of in-
come and expenses - tropical fish	XIV-6
XV-1 Imports of fish live for other than human consumption
1969-72	XV-3
XVI-1 Current pollution control status of non-native fish
cuituring facilities and alternative treatment re-
quirements to-meet BPT and BAT Standards	XVI-2
XVI-2 Effluent control cost for non-native ornamental fish
culturing farms, 1975 dollars	XVI-4
XVII-1 Pre-tax and after-tax income for model non-native
ornamental fish farming operations	XVI1-3
XVII-2 Pre-tax and after-tax rate of return as a percent of
average invested capital for non-native ornamental
fish farming operations	XVI1-4
XVI1-3 Pre-tax and after-tax rate of return on sales for
model non-native ornamental fish	XVI1-6
XVII-4 Cash flow fanning operation for model non-native
ornamental fish	XVI1-7
XVI1-5 Net present values of model non-native ornamental
# fish farming operation	XVI1-8
XVI11-1 Number of federal hatcheries by state and number of
species, 1972	XVIII-2
XVI11-2 Federal fish hatcheries, total pounds of fish and
fish eggs distributed, 1972	XVI11-4
XVI11-3 Federal fish hatcheries, production by species, 1972 XVI11-5
XV111-4 Size distribution of federal and state fish hatcher-
ies	XVI11-6
-XVI11-5 Number of state fish hatcheries and rearing ponds,
1970	XVI11-8

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TABLES (Continued)
Table No.	Page
XVI11-6 Volume of production from state fish hatcheries	XVI11-9
XVI11 - 7 Estimated total number of employees in federal and
state fish hatcherier, 1972	XVI11-12
XIX-1 Production costs, national fish hatcheries, 1968-
1972	XIX-6
XX-1 Effluent control costs for cold water state and
federal hatcheries	XX-2
XX-2 Effluent control cost for warm water state and
federal hatcheries	XX-3
XXI-1 Estimated increase in the cost of production to meet
the proposed effluent control standards - federal
and state hatcheries	XXI-2
Exhibit No.


II-l
Schematic of impact analysis of effluent control


guidelines
11-2
XIX-1
Cost of production as a function of volume produced,


cold water federal fish hatcheries 1972
XIX- 3
AlA-6
Cost of production as a function of volume produced,


warm water federal hatcheries 1972
XIX-5
XIX-3
Cost of production as a function of volume produced,


cold water state hatcheries 1972
XIX-8

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ECONOMIC ANALYSIS OF POTENTIAL EFFLUENT GUIDELINES FOR
SELECTED SEGMENTS OF THE FISH HATCHERY AND FARM1INDUSTRY
EXECUTIVE SUMMARY
I. INDUSTRY DATA AND ANALYTICAL FRAMEWORK
A. General Description of the Industry
This report analyzes the economic impact of the effluent control guide-
lines proposed by the Environmental Protection Agency on selected seg-
ments of thj fish hatchery and fish farm industries, on specifically
two four-digit SIC code industries: SIC 0921, Fish Hatcheries and Pre-
serves, and' SIC 0279, Fish Farms. Although the latter SIC segment
covers a broad category of farms, this report examines only establish-
ments (catfish, trout, goldfish, and minnow farms) primarily engaged
in the production of fish under controlled feeding, sanitation, and
harvesting procedures.
DPRA's investigations revealed that the SIC designations anJ dcscriptio;,
are inadequate as definitive categories for an intensive examination of
these industries because of their complex and varied production and mark
ing structures. Data are made complex because both commercial firms
(usually denoted farms) and federal and state fish producing units
(usually denoted hatcneries) may carry on mult.iole, complex producing
patterns expending from egg production to adult fish raising, from opera
tions concerned with breeding to operations emphasizing volume produc-
tion. Farms may operate as single-specie operations or they may handle
multiple types and sizes of fish for either "wholesale" or "retail" or
both marketing operations. Too, many commercial farms-included in this
study raised applicable fish species in production units which also
handled non-applicable species.
B. Industry Segments
To facilitate its analysis DPRA segmented the SIC industries as follows
in order to reflect more realistically industry production and marketing
conditions.
I. Commercial Fish Farm,Operations
A. Cold water, native fish
1.	Trout: Northwestern United States and Other Areas
2.	Salmon
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B.	Warm water, native fish
1.	Catfish
2.	Catfish and fingerings
3.	Minnows
4.	Goldfish
5.	Game fish
C.	Non-native, ornamental fish
1.	Pond
2.	Tank
II. Federal and State Hatchery Operations
A.	Cold water
B.	Warm water
C.	Combined cold anc' warm water
Any economic analysis of fish farming and hatchery characteristics is
made complex by the vastly differing conditions among production units.
Ranging from small, uncomplicated operations requiring relatively little
capital investment, the industry's operations also encompass large, heavily
capitalized units which require complex technological features, advanced
breeding and control programs, and sophisticated management expertise.
Too, any economic analysis is further ccir.plicatcd by the industry's'lack
of adequate, definitive, and consistently compiled data on production
and management. DPRA's segmentation of the industry was'guided", thus,
by both the little available data and by its own empirical research.
C_.	Industry Structure by Producing Segments
1. Trout Farms: Although trout culture began in the United States during
the first half of the 19th Century, not until the later 1960's did it
become a viable commercial industry. Recent growth had been substantial,
indeed had doubled, until steeply rising, production costs, mostly For
feed, sharply leveled production in 1973 and 1974. The industry antici-
pates production cutbacks for the immediate future.
Existing throughout all regions of the nation, the trout industry •
most heavily concentrated in the Northwest, specifically in Idaho'1;
Snake River area where approximately 70-80% of the national produc'
is found. Most production outside of this area is by small and me-
sized operations. Accurat. figures detailing the numbers of produ> . are ,
not available, but extrapolations from state, federal, and industry ;ta
and from DPRA's consultations with industry sources place those figu-.-s
at between 200 and 250 commercial producers (perhaps, as many as ?00
operations are licensed to produce, sell, or distribute trout but most
are not actively engaged in doiny so).
The industry units' size of operations varies greatly. Data compiled by
the U.S. Trout Farmers Association indicate that, comparatively and
approximately speaking, 71% of its member operations are small (up to
$30,000 gross revenues), 14% range from $30,000 to $60,000, and only
ii

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555 have revenues in excess of $100,000. Indications of typical production
volumes for the industry are seen in data applicable to the Northwestern
producers where the nation's largest producers are usually found.
DPRA estimated the total U.S. production of commercial production of
trout in 1974 at 14-16 million liveweight'pounds. Data furnished by a
limited number of producers over the last five years indicate that pro-
duction levels increased 280%.
2	.	Salmon Farms: Among ihe fish farming segments, salmon farmi-ng is
technically most difficult. Still embryonic, the industry faces difficult
problems in breeding,'hatching, and harvesting. The survival rate for the
fish remains quite low, and its consequent effects on production lead to
high costs and low returns. Too, the industry must solve marketing prob-
lems typical of relatively new industries. Presently only 16 commercial
production operations exist, and 13 of these are found in the Northwest.
Three or, perhaps, four operations are financed by major corporations,
and the remainder are but sm^ll operations. Based upon smolt production
data, a total 1974 production of 1.2 million pounds was eXDected. Firm
vSize distribution and future production data proved too tentative to be
useful.
3.	¦ Catfish Farms: .DPRA's analysis of catfish farming production was
complicated by the absence of authoritatively compiled and consistently
categorized data from a single agency concerned with nation-wide produc-
tion information. DPRA, therefore, supplemented through consultation with
industry sources and state conservation offers the data of the National
Marine Fisheries Service (NMFS), data secured from such agencies as USDA,
the Soil Conservation Service, the Department of the Interior, and the
U.S. Fish and 'Wildlife Service. To further the analysis, DPRA categorized
and regularized the data by segmenting the industry - producers into four
groups: commercial farmers, combination farmers, fish-out operators, and
personal-use operators. (Except where the latter two categories contained
commercially significant operations, they were excluded from further
analysis because they were irrelevant to any EPA effluent guideline
controls).
(Level of Production and Numbers of Producers): Commercial catfish produc-
tion increased rapidly between 1967 and 1971 and leveled off, because of
rising production costs, in 1972. Small, then, the industry has declined
in production. Though found in most states, catfish producers are con-
centrated in the Mississippi Delta region where estimates place their
production at 80% of the national volume. In. 1967, approximately 15,000
acres of commercial ponds existed of which 10,000 were harvested-, NMFS
1971 data indicated an increase to 46,034 commercial acres, yielding 38
million pounds, and an average yield of 1,471 pounds per acre. The 1973.
NMFS data show commercial pond acreage at 54,600 and an estimated produc-
tion of 48.8 million pounds; total harvested acreage amounted to 29.9
thousand acres or approximately 55% of that total acreage. These data
Number of Producers
7
10
Size of Operation (Dressed weight pounds)
31-42 (Farm grow-out
operations)
500,000 - 2,000,000
100,000 - 500,000
30,000 - 100,000
iii

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show the four major producing states to be: Mississippi, 51.9% of total
production, Arkansas, 16%; and Alabama andvLouisiana with 7.4% and.7%^
respectively. The NMFS data further reported a total of 1,759 producers.
DPRA's.further data compilations indicate that, though the NMFS data are
incomplete, their general indication of a cutback in production since
1972 is accurate. Indeed, the rising cost of feed for the farming opera-
tions has reduced the very extensive numbers of small, family size opera-
tions whose marginal production was but.supplemental to income. In some
areas as much as 50% of the small producers have discontinued production.
(Size of Operations): DPRA compiled detailed size distribution data for
43% o^ ihe operations in three of the. major producing states -- Alabama,
,-1ississippi, and Louisiana. Small producers (ten or few acres) accounted
for 72% of all producers; medium-sized Droducers (11 to 99 acres)
accounted for 25%. Both groups use their catfish farming operations as
an important supplement to their income and participate in production
on a part time basis. Only 3% of the remaining producers handled acreage
in excess of 100. Generally 160 acres are needed for full-time produc-
tion, and obviously this greater production admits of better management
techniques and greater yield per acre. The average production for com-
mercial producers is considered to be 1,500 per acre, but it may range
from 800 to 2,800 pounds.
,4. Minnow Farms-: DPRA's research indicated that commercial minnow farm-
ing is carried on by approximately 400 producers on a total water acreage
of 57,000, yielding approximately 13.9 mi 11 ion.pounds.of minnows. Arkansas
with its nearly 50% of the overall acreage is the leading state in produc-
tion and in average yield per acre and produces 60%-to 70% of the nation's
total. Kansas, Missouri, Mississippi, Louisiana, and Minnesota are also
leading producers with the latter's 13,000 producing acres making in
second in acreage allotment. Industry farm size ranges from less than 10
acres to more than 1,000 and averages 145 acres: thus, minnow farms are
generally larger than those of any other fish farm category.
5. Goldfish Farms: DPRA's investigations revealed that the relatively
high technological sophistication required by aquarium production of
ornamental goldfish justified its being considered a. category separate
from that of goldfish bait production (included in minnow farming). Too,
the sophistication of the industry limits the numbers of producers; con-
sequently, DPRA's data was aggregated to avoid disclosure of individual
operations.
Nationally, only 12 commercial farms raise ornamental goldfish, and these
firms range in size from 60 to over 700 acres. Smaller producers may
exist, but their production is inconsequential. Total production-approxi-
mates 120 million head: 42 million in the Pennsylvania - Maryland region;
a total of 51 million in North Carolina, Alabama, Georgia, and Indiana;
and an estimated 27 million in Arkansas and Missouri. Acre yields may
iv

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range up to 150,000 head and averages 110,000.
6.	Other Gamefish Farms: Data on the production of crappies, bluegill,
bass and other gamefish could not be reliably gathered because the indus-
try is not significantly commercialized. Their cost of production is
relatively very high, many states prohibit their sale as food fish, and
government hatcheries distribute them to non-profit organizations for
stocking purposes; consequently no commercial producers could be identi-
fied. For these-reasons and because their most limited production is
managed in conjunction with that of catfish fingerlings, DPRA recommends
that they not be included in this study.
7.	Non-native Ornamental Fish: Started in 1932, the non-native ornamental
fish industry has grown rapidly: the 1973 Survey of the Florida Tropical
Fish Farm Association, Inc., indicated the annual growth rate of the pet
fish industry since 1969 at 18.7%.
The industry is composed of domestic producers, importers, and combination
producers and importers. Approximately 90?£ of the domestically bred fish
are raised in Florida with 80" of these in the Tampa area. Aside from
the Florida production and for some limited California, Texas, and
Louisiana, non-native ornamental fish, usually warm water fish, are
produced in tanks or in acquariums. Approximately 1000 species are
raised in the United States.
Though the fish are raised in every state, Florida is the only state
having reasonably reliable dcta on numbers and sizes of producers.
The Florida GaiTie and Fresh Water Commission publishes listings of state
tropical fish wholesalers and farmers, a:id its 1973 data list- 17S pro-
ducers (industry sources, however, believe that some 300 producers may
exist). Aside from the availability of a proper climate, industry loca-
tion is also partly determined by producers accessibility to adequate
air freight services. In 1972, Florida shipped 750,000 cartons of
ornamental fish at 200 fish a carton. At 11.25 million pounds made
tropical fi~h the large air freight class exported by air from Florida.
The most accurate measure of farm size is the industry's dollar volume
of sales. The size distribution of Florida's 158 farms is:
Size	Dollar Sales Volune	Number
Very Large	over $600,000	5
Large	$300,000 to $600,000	13
Medium	$150,000 to $300,000	60
Small	Less than $150,000	80
8. . Federal Fish Hatcheries: Federal data indicate that 92 federal fish,
hatcheries are in operation: 28 propagate warm water fish; 47, cold
water; and 17 propagate both.
Y

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Data on production volumes show that federal hatcheries distributed, in
1972, a total of 251.6 mil'lion fishes and eggs and ranged on a per hatchery
basis from 106 thousand to a high of 18.8 million.
Individual hatchery size by total fish poundage showed that federal cold
water hatcheries ranged from 5,000 to over 500,000 pounds. Nineteen per-
cent of these produced less than 25,000 pounds, and the largest size
range (25%) was between 50,000 and 100,000 pounds. Four percent of the
hatcheries produce more than 300,000 pounds. Ponded warm water hatcheries
have lower pound vo.lume: 25% produced less than 5,000 pounds in 1972, and
61% produced less than 10.000 pounds. Of the 16 cold-warm water hatcheries,
38% produced less than 10,000 pounds and the remainder ranged from 25,000
to 20^,000 pounds.
9. State Fish Hatcheries: The Division of Fish Hatcheries of the U.S.
Department of.Interior reported 479 state.hatcheries in 1970, and DPRA was
able to compile data of 296 of these.
The incomplete data indicate that 21 states raised a total of 19.4 million
pounds of cold water fish and seven states reported that they raised a
lotal of 652 million warm water fish. Seventy-nine co1 i-w
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2.	Salmon: Still a most embryonic industry, commercial salmon markets
have not yet been sufficiently established to have demarked characteris-
tics. The retail product, "pan-sized" salmon is sold through brokers to
hotel and restaurants. Its reception in 1972 was most favorable, but
production problems have hampered tHe industry. Very few firms, only
four or five were active in salmon aquaculture in 1974 and they were pro-
jected to market 1.3 million pounds.
3.	Catfish: The catfish market is widely diverse with a considerable por-
tion of it concentrated at the local level. Though market channels vary
greatly from state to state, they are generally divided as reported by
NMFS data for eight states:
Of the estimated 20 U.S. commercial-size producers, only four show signifi-
cant influence in the domestic market.
4_.	Minni'.vs: Minnow production and marketing are highly integrated func-
tions among larger firms. Seven or eight of the larpest producers market
on an interstate basis and may ccver much of the nation with approximately
20% of the nation's overall production. Kecauseor the ncavy investment
required to transport "live minnows, the larger firms realize economics of
scaJe.
Market competition is active because of the many sm 11 producers that can
supply local markets.
5.	Goldfish: The high costs of investment and significant degree of
managerial expertise required by the goldfish industry encourage the
integration of its production'and delivery systems. The industry is
heavily concentrated, and its twelve known producers (one of which
dominates marketing with a high percentage of sales) acquire their own
orders, sort and grade fish, package them in oxygen-fed containers, and
air freight them directly to pet suppliers and dealers.
6.	Non-native Ornamental Fish: This industry is highly competitive, ,and
although but a few firms market most of the fish, the market is stabalized
by competition from importers and by the fact that many of the largest
firms purchase a substantial portion of their total fish from small
producers. The industry is generally integrated forward through whole-
saling, for most producers, sell directly to jobbers. Small producers
frequently sell fingerlings to larger farmers who further develop them
Market Movement
Percent
Processor
Local retailers
Live haulers
Pay lake
32
24
31
13
vii
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to final sale size. Only the largest firms are integrated forward to
retailing.
E. Number of Employees
Definitive total employment data are not available. DPRA's estimates,
though depending upon data covering fish culturing operations and
direct industry consultation, may vary substantially from actual employ-
ment. Total full-time employment in fish culturir.g'apparently ranges
from 6,000 to' 9,200; part-time employment is approxiamtely 1,848. Too,
fo'r each production employee, the industry must utilize one in th.-: pro-
cessing, marketing, and distribution. Thus, iiiciuding part-time employees,
the induscry employs approximately 20,0u0 persons.
vii i
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II. FINANCIAL PROFILE OF THE INDUSTRY AND MODEL FARMS
Data for this chapter was difficult to obtain. Because the industry's
commercial firms are either family owned corporations or divisions of
larger corporations, financial data are private and closely held. DPRA
necessarily relied upon industry contacts for investment, operating
costs, and performance measure data. Some university publications,
generally dates, were available. The Soil Conservation Service provided
information to develop the study's farm models. Published data on
federal hatcheries were accessible, and individual states supplied pro-
duction and cost data for state hatcheries.
A. Sizes and Types of Model Farms
The industry was segmented by type and size of fish culturing operations
as shown below. The'categories indicated determined this study's model
configurations for size and- yields.
B.Investment and Assumption
Model c'ato reflecting invcstriiont cosLs were obtained free -industry personnel
2nd checked against published reports. The or.t:, by ,r,jo'c:l , i nJ i cai.j:
1.	replacement values,
2.	book value of investment, and
3.	salvage values.
1.	Trout ''cJel Farms: Large commercial producers in the Northwest'had the
lowest investment costs per 1000 pounds of production capacity. Replace-
ment values were reported at $920 per 1000 pounds for the largest producers
and at $1,200 per 1000 pounds for the Northwest medium-sized producers.
Replacement values in other geographic areas reflected differing land
values and facilities and were $1,800 per 1000 pounds for medium-sized
farms and $2,200 for small producers.
Northwest area models indicated book values of 50% and salvage values of
16% of replacement costs; similarly, these cost for other areas were 65%
for book values and 20% for salvage values.
2.	Salmon: Because this industry's production facilities are but'newly
constructued, their replacement values and book values -- $550 per 1000
pounds of capacity -- were considered identical.. Land values vary con-,
siderably by location.
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Table II-1. Concentration of fish and shellfish processing, 1972
1/	2/
Plants—	Value —	Percent of Total
($1,000)
4 largest plants	354,457	16.8
8 "	"	511,097	24.3
10 "	"	582, 128	27.6
20 "	"	850,548	40.4
30 "	"	1,028,340	48.8
40 "	«'	1,158,258	55.0
50 "	"	1,254,354	59.6
60 "	"	1,329,898	63.2
70 "	"	1, 393,757	66.2
80 "	"	1 f 447,774	68. 8
90 "	"	1, 496,381	71.1
100 »	»	1,538,204	73.1
125 "	"	1,615,279	76.7
150 "	"	.1,675', 015	79. 6
175 11	"	1,725,680	82.0
200 11	"	1,769,109	84.0
Total all	plants
l.ssg-'	2,105,290	100.0
—' Ranking is by individual plant rather than by companies.
2/
— F. O. B. Plant.
3 /
_ Docs not include Alaska.
Source: National Marine Fisheries Service.
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3'. Catfish, Catifsh-finqerlinqs, and Minnows: Replacement values for
this segment vary widely and reflect differing land values, the level
of production technology and economies of scale. Land costs for small
farms were estimated at $300 per acre and at $300 Der acre for large
delta farms whose land could be productively used for other types of
farming. Pond and well costs (the latter ranging from $3,000 to $4,500
per well) ranged from $100 to $500 per acre. Both book and salvage
values similarly differed considerably depending upon the location and
the level of technology of each operation. Considering the variables,
DPRA estimated book values at 50% of investment costs and salvage value
of equipment at 10% of current cost and of facilities at 50%.
4. Goldfish: Goldfish farm models included a medium and large goldfish-
minnow farm and a medium-sized goldfish-only farm and their investments
cost differed on the basis of their location (land values) and their
technological facilities. Land values were reported at $400 per acre
for combination farms and $1,200 per acre for goldfish-only farms. Pond
and well costs reflected the higher costb for goldfish only farms, also:
$2,000 per acre for combination and $3,000 per acre for goldfish-only
farms. The current replacement costs for facilities were estimated to
be between $800 and $900 per acre and were dependent upon the size and
type of the farms. As the data indicated, book values for each model
was approximately 50% of current values.
5_;	Non-native Ornamental Fish: Current values for land and equipment
for small farms with sales of $65,000 were reported at $98,000 and at
$325,000 for rredium-sized farms with sales cf $200,000. Sm^ll farms
had a book value of $40,COO and salvage values of $70,000; medium-sizeo
fa wis showed values of $160,000 and $120,000 respectively.
6. State ar.cJ Federal Hatcheries: Because the economic analysis of pollu-
tion control ccs'ts were handled" less intensively for government operated
hatcheries than -for commercial operations, investment costs for state
and federal hatcheries were not obtained.
C. Current Assets, Current Liability, and Met Working Capital
DPnA's investigations show a general industry oattern, excect for trout
and salmon farming, for both current assets and current liabilities.
Current assets for the general industry were 75% of total sales, current
liabilities were estimated at 40% of sales. .Northwest trout and salmon
operations current assets were ,80% of production costs and current
liabilities were estimated at 45%. For all other trout and salmon
operations, current assets were 100% of total production costs before
taxes and current liabilities were at 30%.
D. Annual Profits
An important determinant of this study's estimate of profits is its
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distinction between family-owned and corporation controlled operation.
Pre-tax income for family farm models was calculated to represent return
to the land capital and management and owner labor, and the labor costs
included in the financial models included only hired-labor costs. 'Actual
labor values would reflect owner labor, but the variables determining
these are too diverse to be measured for the pruDoses of this study.
1.	Trout: Recent data on trout operations indicate declining profit-
ability because of the increase in production costs which began in 1972.
The return to land capital and owner management and labor for family-
trout operations were found to be between $2,000 and $10,500, rates
considerably lower than those of the 1969 to 1971 period for medium-
sized family operations. Cur'ent corporate pre-+ax income for large
operation" showed declines of 50%. Some large corporations operate
at losses. The return on book value of investment was also low, and
the after-tax basis ranged from 1.6% for large corporate farms to 4.6%
for the small, family farm.
2.	Salmon: The relatively high prices for salmon places the medium-
sized farm model in a most profitable position with pre-tax returns
on sales of 9.3%, pre-tax returns on investment at 10% and at 6.6%,
after-tax.
3.	Catfish: The general level of profit for family's operated catfish
farms are low, ranging from $15 to $85 returns for the 5-acre operations
to a high of $9,300 r'or the 160 acre catfish-fingerling production.
Corporate farms and fingerling operations range from $6,000 to $24,000.
After-tax rates of returns of investment for catfish farms are from
1.3% to 7.5%; combined catfish and fingerling farms show returns of
1.8% to 21.5% for the 5-acre operations.
4^	Minnows: Pre-tax returns on sales for family operated minnow farms
are low .^nd range from $700 to $5,000. .Pre-tax income for corporate
farms j's approximately $29,000. Similarly, returns on invested capital
range from the 5-acre farm's 23% to the 1,000 acre corporate farm's
2.4%.
5.	Fancy Goldfish: In general, corporate fancy goldfish farms are in
more profitable position than are the family-owned operations. Corporate
farms show at 10% pre-tax return on sales and after-tax returns on
investment at 5.2%. Family-owned farms show an 8% to 9% range and a
3.8% to 5%.range, respectively.
6.	Non-native Ornamental Fish: The non-native ornamental fish operations
have the most favorable rate of return on invested capital in the fish
farming industry with after-tax rates for the small family farms at 35%
for medium-sized corporate farms at 10%. Net income for the family farm
is $20,000 per year; for the medium-sized corporate farm, $22,500.
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E. Annual Cash Flow
The estimated annual cash flow for the model farms	were calculated as the
sum of after-tax income and depreciation.
Cash Flow as Percent	Cash Flow as Percent of
Model Farm Classification 	of sales	invested capital	
1.	Trout
' Large, corporate	6%	6% - 9%
Medium-si zed family	18%
2.	Salmon	10.7%	11.3%
3.	Catfish
5 acre catfish family	7% - 27%
160 acre catfish-
fingerling family
320 acre catfish corporate	4% - 5%
1,000 acre catfish-
minnow corporate
4.	Minnow
5 acre, family	48%	27%
1,000 acre corporate	13%	5%
5.	Fancy Goldfish	8% - 11%
6.	Non-native ornamental
Small, family	33.9%	46%
Medium-sized corporate	13%	16%
F. Cost Structure
In the absence of reliable published data, DPRA constructed cost data
tables from industry consultation and supplemental references in public
service agencies. Direct costs included, where applicable, such costs
as those for eggs or fries, brood fish maintenance,- feed (the largest
single cost), medicines, chemicals, and equipment maintenance and fuels.
Indirect costs included these fcr administration, insurance, taxes*
(except income), fees, and miscellaneous.
G. Abi1ity to Finance Mew Investment
Because of current feed and labor costs, the fish farming industry's
profits are low. Though the industry has-been able to pass through
some of these increased costs, 1973 profits are approximately 50% of
those in recent years.
xiii
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Product substitution, too, places food fish in a steadily increasing
uncompletive position over the short-run. The demand for ornamental
and bait fish is highly dependent upon consumer disposable income, and
the current high rate of inflation argues against the strengthening of
prices in the industry.
Apparently 1974 saw a number of small and/or inefficient producers dis-
continue operations. The trend is expected to continue. The general
pattern of the 1960's and early 1970's of increased caDital outlays
has been reversed in the past few years and, consequently, increases
in industry productivity have been slight.
In summary, then, the industry has not been able to maintain its earlier
profit margins. With an average annual return on invested capital for
most segments ranging from 2% to 8%, the industry's profitability is
substantially lower than that of the average U.S. manufacturer.
The decline in profit levels, therefore, makes it extremely difficult
for the industry to internally or externally generate new investment
funds for pollution control facilities.
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III. PRICE EFFECT
The economic effects on the commercial fish farming industry of the
proposed effluent controls are lower profits and decreased production.
With the possible exception of the goldfish and minnow industries in
which major producers hold significant portions of the market, most
industry farmers can be considered "price-takers" because of their
minimal control over prices, a conditon resulting from industry frag-
mentation, product perishability, and underutilized production capa-
city.
The inability of the producers to stimulate higher profits because of
the marketing and pricing characteristics of the industry has been
exacerbated in the last few years, also, because of higher industry
cos Is for feed and labor -- costs which producers cannot completely,
pass through.
The presence (except in the goldfish industry) of many small, inefficient
producers who market locally throughout the industry also Drevents the
large, more efficient producers increasing industry profitability.
Thus, projected price effects or the possible pass-through of costs
resulting from pollution control placement are assumed negligible
in all industry segments except fancy goldfish and minnows and, even
those, will have limited opportunities.
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IV. ECONOMIC IMPACT METHODOLOGY-
A. Fundamental Methodology
The economic impact analysis utilizes the basic data developed on industry
segments, financial profiles and price effects, together with pollution
abatement technology and costs developed by EPA. Impacts analyzed include:
*	Price effects
*	Financial effects
¦*	Production .effects
*	Employment effects
*	Community effects
*	Foreign trade effects
The determining force of plant shutdowns on these impacts is crucial;
consequently, the financial and production effects which most immediately
reflect plant shutdowns, were given most emphasis in this analysis.
In general, the approach used can be simply stated as the problem of
deciding whether a commitment of time or money to a project is worth-
while in terms of the expected benefits. The primary factors involved
in assessing the financial and production impact of pollution control are
profitability changes and these, in turn, are a function of the cost of
pollution control and the ability to pass along these costs as higher
prices. In reality, of course, closure decisions are seldom made on
the basis of well-defined economic rules. Such decisions invariably
include a wide range of personal values, external forces such as the
ability to obtain financing, or the role of the production unit in an
integrated larger cost center.
However, the analysis was made on the premise that economic returns in
the industry would be the primary determinants of plant closures. In
the most fundamental case, a plant will close when variable expenses
(Vc) are greater than revenus(R). A more probable situation is the
case in which Vc ^ R, but revenues are less than variable costs plus
fixed, short-run cash overhead expenses (TCp). In this situation a
plant would likely continue to operate in the short-run but would be
forced out over a longer period of time. Necessary to such a situation
is the firm's expectation that revenues will increase to cover total
cash outlay. Identification of plants where TCc > R but Vc < R leads to
an estimate of plants that should e- entually close if revenues do not
increase.
The next level of analysis, where TCc < R, involves estimating the
earnings before and after investment is pollution abatement. Under
conditions in which TCc < R, it seems likely that investment in pollu-
tion control will be made and that plant operations will continue so
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long as the capitalized value of earnings (CV) is greater than the sal-
vage value of the sunk investment of the plant. Computation of CV in-
volves discounting the future earnings flow to the present worth. Dis-
counted internal rates of return (the computed discount rate, or yield,
which produces a zero present value of the cash flow) was the measure
of profitability used. These rates of return, with and without pollu-
tion controls and the estimated salvage values of plant, equipment and
land were the major factors used to determine potential plant shutdowns
B. Price Effects
In order to provide a standard to reflect price effects, an estimated
price adjustment sufficient to offset required pollution control costs
was calculated. Application of the discounted cash flow procedure .to
pollution control costs yields present values and from this the price
increase required to pay for pollution co.itrol was calculated by the
formula:
y _ PVP (100)
A " (1-T (PVR)
where: 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 ifiipossd
C. Production Effects
A study of the technological characteristics of the industry and of
industry production practices underlay the analysis of probable changes
in plant capacity utilization and in the industry's ability to absorb
capacity losses as marginally productive plants are closed.
D. Employment Effects
Given the production effects of estimated production curtailments, of
plant closings, and of changes in industry growth, employment effects
were estimated on the basis of known production-employment relationships.
xv ii
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ECONOMIC ANALYSIS OF POTENTIAL EFFLUENT GUIDELINES FOR
SELECTED SEGMENTS OF THE FISH HATCHERY AND FARM INDUSTRY
Part 1. INTRODUCTION AND METHODOLOGY
I. INTRODUCTION
A. Scone
This report evaluates the economic inpact of the effluent limitations
guidelines being proposed by the Environmental Protection Agency for
the fish hatcheries and fish farms industry. The proposed guidelines
are described in "Fish Farms and Hatcheries", Development Document,
January, 1976 (1) hereafter referred to as the Development Document.
This report analyzes two four-digit SIC code industries:
SIC 0921 - Fish Hatcheries and Preserves—Establishments primarily
engaged iri operating fish hatcheries (;r preserves.
SIC 0279 - Fish Farm segment of Animal Specialties—Establishments
primarily engaged in the production of fish under con-
trolled feeding, sanitation, an'4 harvesting procedures,
specifically, fish farms, catfish farms, trout farms,
- minnow farms, and golafish farms.1/
This report does not consider fish piers, fish outs, fishing preserves,
frog farms, oyster beds, mariculture or aquaculture facilities as covered
by Section 318 of the Federal Water Pollution Control Act.
B. Organization of This Report
An examination of the industry and the limitations in the data suggests
that a strict interpretation of the above SIC Code classification scheme
is inadequate for the purposes of this study. Both government sponsored
hatcheries—state and national—and commercial operations may engage in
all phases of production from that of producing eggs through growing
— Note SIC 0279 contains other farms not included in this report includ-
ing alligator farms, frog farms, worm farms, cat farms, dog farms, and
laboratory animal farms (rats, mice, guinea pigs).
1-1
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adult fish.. For example,, many state and national hatcheries may produce
brood fish, hatch eggs, and raise the fry to fingerling or adult size fish,
sell eggs or sell fry, fingerlings or adult fish. In any given culturing
operation, any given range of production may be carried out. (Commercial
fish culturing firms that buy eggs or fry.to produce fingerlings or adult
size fish for market are generally called farms. State or national opera-
tions that produce eggs, fry, fingerlings and adult fish for stocking pur-
poses .are usually considered hatcheries.)
Industry classification is further complicated because firms may carry on
either single or multi-species operations. Although commercial operations
tend to concentrate on one snecies such as trout, catfish or minnow, many
individual firms may culture more than one species of fish such as catfish
and minnow, or minnows and goldfish or all three at the same location.
Others may produce various species of carp or buffalo-fish in the same
ponds or may produce a limited number of game fish such as bass and blue-
gill on their farms.
The Development Document (1) segments the fish farm and hatchery industries
into three categories:
(1)	Native Fish -- Flow-through culturing system
(2)	Native Fish-- Pond culturing system
(3)	Non-native fish culturing system
To facil itact:' the economic analysis, the industry was furtner segmented
into commercial fish farming operations and federal and state operated
fish hatcheries. Because specific species production results in o > f fei^iit
economic parameters, these segments were identified where possible and
further segmented in order to consider the major types of commercial
and government fish culturing systems in tne United States today. Thus,
-this economic analysis segmented the industries as follows:
COMMERCIAL FISH FARM OPERATIONS
Flow-through fish culturing (native fish)
Trout
Salmon
Pond fish culturing (native fish)
Catfish
Catfish fingerlings
Minnows
Goldfish
Non-native or ornamental fish culturing
GOVERNMENT FISH HATCHERY OPERATIONS
State and federal fish hatcheries
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C. General Industry Situation
Current commercial fish farming industry profits are low because of the
dramatic increases in feed costs over the past 18 months. Increases in
other costs, primarily labor, have also reduced profits. The industry
has been able to pass through some of these costs in the form of higher
prices; however, profit levels in 1973 are considerably lower than those of
1970 and 1972. Specific available data suggest that present profit rates
are approximately 50 percent of those experienced in recent years.
Because of a lack of definitive studies on marketing and pricing, especially
on cross elasticities between other competitive products such as seafood,
imported products (catfish and trout) and red meats, future profitability
expectations are difficult to assess. With low-cost imports increasing and
red meat prices decreasing, the short term picture for food fish is not
bright. The demand for minnows, fancy goldfish and non-native ornamental-
fish is highly dependent on consumer disposal income. Certainly current
high levels of inflation can-reasonably be expected to continue over the
short term future, a condition which argues a-gainst the strengthening of
prices.
Apparently in 1974 a number of small and/or inefficient nroducers discontinued
commercial production; further shutdowns can be expected before the industry
recovers.
Capital Expenditures
Unfortunately, there are no yearly compiled data on capital expenditures
for the fish farming industry similar to those contained in the Annual
Survey of Manufactures for many other industries. In general, capital
expenditures expanded greatly in the late 1960's and early 19701s as the
productive capacity of the industry expanded significantly. These monies
came from large corporations entering the industry, commercial bank loans,
and the Federal Land Bank funds. Also, much of the new capital was equity
capital invested by expanding producers. The Production Credit Association
has long been a supplier of operating capital through its ir.^ny local
offices.
During the past two years, however, capital expenditure has declined
sharply, and increases in productive capacity have been slight.
Capital Availability
With an average return on invested capital ranging for most of the segments
from 2 to 8 percent, the industry's profitability is substantially lower
than that of the average manufacturing plant in the United States. In
contrast to its rapid growth rate during the 1968-1972 period, the industry
now shows but little growth.
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The industry's large number of small, part-time and full-time' family
operations tend to hdve a high ratio of net worth to total assets. Many
of the larger operations are also family owned or closely held, but they
would tend to have a lower ratio of net worth to total assets.; 60 percent
equity to 40 percent debt. . There is however, a wide range with farming
at both ends of the scale. Financing for the pollution control equipment
would come primarily from equity capital among the smaller farms with the
large operations leaning more heavily toward conventional sources of fin-
ancing.
Low profit levels makes it increasingly difficult for producers to obtain
capital from conventional sources for new investment or for investment in
pollution control facilities.
Ability to Finance,Mew Investment
The ability of a firm to finance new investment for pollution abatement is
a function of several critical financial and economic factors. In general
terms, new capital must come from one or more of the following sources:
(I) funds borrowed from outside sources, (2) equity capital raised through
the^sale of common or preferred stock, (3) and'internally generated funds
retained earnings and the stream of funds attributed to depreciation of
fixed assets.
For each of the three major sources of new investment the most critical.
r • i ^	j- u ^	7 ^ ^ ^ j; .l,*	a u ^ Ji,.; j„,i -r:Cr —
Suu ui iqllui i i :> umc . 11 iai i a i luiiu i l iuii ui ui ic imuiviuuui i u m. rui
debt financing, the firm's credit rating, earnings record over a period
of years, stability of earnings, existing debt-equity ratio, and the 1 ndt. -
confidence in management will be major considerations. New equity funds
through the sale of securities will depend upon a firm's anticipated future
earnings which, in turn, will reflect.past earnings records. The firm's
record, compared to others in its own industry and to firms in other similar
industries, will, be a major determinant of the case with which new equity'
capital can be acq.uired. In considering such factors, the investor will
probably look at the trend of earnings for the past five years or so.
Internally generated funds depend upon a firm's margin of profitability
and operational cash flow. 'In addition, stockholders of publicly held
corporations must forego dividends in order to allocate reinvestment
funds.
The condition of the firm's industry and general economic conditions are
also major considerations in attracting new capital. The industry will
be compared to other similar industries (i.e., other processing industries)
in terms of net profits on sales and on net worth, supply-demand relation-
ships, trends in production and consumption, the state of technology,
effects of government regulation, condition of foreign trade and other
significant variables. Declining or depressed industries are not good
prospects for attracting new capital. At the.same time, the overall con-
dition of the domestic and international economy can influence capital
markets. A firm is more likely to attract new capital during a boom
period than during a recession. (On the other hand, the cost of new
capital will usually be higher during an expansionary period.) The
money markets also play a determining role in new financing.
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These general considerations can be applied to the commercial segment of
the fish fanning industry. Although specific historical data on the indus-
try are not available on investment in the industry, a general view of the
industry was obtained from numerous discussions with consultants and analysis
of the limited data that do exist.
D. Data Sources
Fish hatchery and farming industries are vast, complex, and highly diverse
in size and types of fish culturing operations. Producing units may range
from a simple farm pond with casual hand feeding and limited management to
large, complex operations with highly technical culturing systems, innova-
tive breeding programs., and sophisticated feeding and management systems.
Economic analyses are further complicated because little, if any, published
data exist concerning certain aspects of the industry (i.e., industry .
characteristics, financial performance and the economic characteristics of
various segments). Only recently has the National Marine Fisheries Service
begun publishing some basic production data and market prices for the cat-
fish industry. Other commercial segments are not reported in any way. As
a result, much of the information contained in this report was obtained
directly from industry management.
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II. METHODOLOGY
The economic imoact analysis utilizes basic industry information and
information concerning pollution abatement technology and costs provided
by the Environmental Protection Agency for each of the industry segments.
The impacts examined include:
Price etfects
Financial effects
Production effects
Employment effects
Community effects
International trade effects
The fish hatchery and fish farming industries today can be generalized
into two broad categories for purposes of analyzing the economic impacts
resulting from the costs of pollution controls. This would include the
fish hatcheries operated by divisions of the Federal or State governments
and those operations (generally referred to as fish farms) organized and
operated as strictly commercial ventures.
Needless to say, the crucial nature of potential plant shutdowns (finan-
cial and production effects) for the private sector is not as important
for the government-operated hatcheries. A closure decision on a govern-
mental hatchery would be made on the basis of budgetary considerations
and not on the basis of production costs plus a "reasonable" rate of
return exceeding revenues over the long-run. As a result, the analysis
of public hatcheries, was concentrated on the incremental increase in the
cost of .production required by state and federal requirements to meet
the proposed standards. This was then translated into budgetary consider-
ations.
Detailed cost of production data by pounds of fish produced, was obtained
from the national hatcheries and similar information was obtained (with
.varying degree of detail.) from nearly all state hatcheries. These data
will provide the basis for the. impact analysis on governmental hatcheries.
In the analysis of the private sector the required impact analysis was
not a simple sequential analysis, but rather, it was composed of a number
of interacting steps with feedback. The schematic of the analytical
approach is shown in Exhibit 11-1. Due .to the nature of potential farm
shutdowns (financial and production effects) comoared to the other impacts,
more time was devoted to the closure analysis.
The fundamental aspect of the imoact analysis is similar to that normally
done for any capital budgeting study of new investments. The problem is
one of deciding whether a commitment of time or money to a project is
worthwhile and it is complicated by the fact that benefits and investments
will accrue over a period of time. In practice, the analyst is not suffi-
ciently clairvoyant nor physically able to reflect simultaneously on all
of the required information, which by definition, must deal with future
projections.
II-l
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Exhibit I I- 1. Schematic of impact analysis of effluent control guidelines.
11-2
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In the face of imperfect and incomplete information and time constraints,
the industry segments were described in the form of financial budgets
of model plants. Key non-quantifiable factors were incorporated into the
analytical thought process to interpret the quantified data. Actual fin-
ancial results differ from model, results and these variances were consider-
ed in interpreting the findings based on model farms.
A. Fundamental Methodology
The fundamentals for analysis are- basic to all impacts. The core method-
ology described here is a unit with the specific impact analysis discussed
under the appropriate heading following this section.
The core conceptual data used in this analysis are the physical and finan-
cial characteristics of the various industry segments as projected on the
basis of model farms. The estimated cash flows for these model farms are
summarized.
The primary factors involved in assessing the financial and production im-
pact of pollution control are profitability changes and these, in turn,
are a function of the cost of pollution control and the ability to pass
along these costs in higher prices. In reality, of course, closure de-
cisions are seldom made on the basis of well defined common economic rules;
such decisions "invariably include a wide range of personal Valuc-s, eXtciYial
forces such as the ability to obtain financing, or the role of the produc-
tion unit in an integrated larger cost center.
Such variables include but are not limited to the following conditions
and are generally characteristic of proprietorships and closely-held
enterprises rather than publicly-held corporations.
1.	Production units may lack sufficient financial accounting
data. This is especially likely to occur among small,
independent farmers who do not have effective cost
accounting systems.
2.	Production units may be old and fully depreciated so that
management has no intention of replacing or modernizing
them. Production continues only so long as it covers labor
and materials costs and/or until the equipment becomes
inoperative.
3.	Marginally productive units may be acquired by new owner-
ship that can re-evaluate existing assets or that can
absorb temporary low returns with the expectation of
eventual acceptable profit returns.
4.	Production unit ownership may have value as psychic income.
Such ownership, that is, may answer personal values that
are great enough to override rational economic decisions.
11-3
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5.	The owner-operator expects that adverse conditions and'
consequent losses are temporary. His ability to absorb
short-term losses depends upon his access to funds through
credit or personal resources not presently utilized.
6.	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.
7.	Production units may also continue to function if the
value of the land on which the plant is located is appre-
ciating at a rate sufficient to offset short-term losses,
funds are available to meet operating needs, and opportunity
costs of the owner-operator's managerial skills are low.
While the above variable factors are frequently relevant to business deci
s.ions, economic rules are commonly universal. This, to provide as use-
ful and reliable an insight into potential business responses to new
investment decisions involving pollution control facilities, economic
analysis will be used as the core analytical procedure. Given known
pricing conditions, the impact of pollution control costs and resulting
prices on profitability can be determined by employing the return on
investment (or any other) profitability measure under conditions of the.
new price and incremental investment in pollution control. The primary
consequence of profitabi1ity changes is the impact on the plant regarding
plant shutdown rather than making the required investment in meeting
pollution control requirements.
In the most fundamental case, a farm will close when variable expenses
(Yc) are greater than revenues (R). However, in practice, farms may con-
tinue to operate where Vc is greater than R under such conditions as:
*	a lack of cost accounting detail to determine when Vc is greater
than R,
*	the opportunity cost of labor or other resource is less than
market values.(this would be possible in a proprietorship
whose owner considers his labor as fixed),
*	other personal and external financial factors exist, or
*	there are expectations that revenues will shortly increase
to cover variable expenses.
11-4
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A more probable situation is the case in which Vc is less than R but
revenues are less than variable costs plus fixed, short-run cash overhead
expenses (TCc). In this situation, a farm would likely continue to oper-
ate as contributions are being made toward covering a portion of these
fixed cash overhead expenses. The farm cannot operate indefinitely under
this condition, but the length of this period is uncertain. Necessary
to such a situation is the expectation that revenues will increase to
cover cash outlay. The conditions affecting closure decisions in such
cases include:
*	the extent of capital resources (if the owner has other
business interests or debt sources that will supply
capital input, the farm will continue),
*	there are not adequate cost accounting details or pro-
cedures to know that TCc is greater than R (particularly
in multi-farm situations), or
*	labor or other resources are considered fixed and the
opportunity cost for these items is less than market
The identification of plants where TCc is greater than R, but Vc is less
than R leads to an estimate of farms that should eventually close if
revenues dc not increase. The timing of such closures, however, is
difficult to predict.
The next leve'l-of analysis, whore TCc is less than R, involves estimating
the earnings before 2nd after investment in pollution abatement. Under
conditions in which TCc is less than R, it seems likely that investment
in pollution control wiilbe made and that plant operations will continue ¦
so long as the Capitalized value of earnings (CV) (at the farm's cost cf
capital) is greater than the scrap or salvage value (S) of the sunk invest-
ment. If S is greater than CV, the farm could realize S in cash and re-
invest and be financially better off. This presumes reinvesting at least
at the farm's (industry's) cost of capital.
Computation of CV involves discounting the future earnings flow to present
v/Oi-th through the general discounting function:
value.
V
t
I
n=l
An (1+i)~n
where
V
A
i
n
present value
t h
a future value in n year
discount rate as target ROI rate
number of conversion products, i.e.,
1 year, 2 years, etc.
11-5
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It should be noted that a more common measure of rate of return is the
book rate, the rate which measures after-tax profits as a ratio of in-
vested capital. These ratios should not be viewed as a different esti-
mate of profitability as opposed to DCF (discounted cash flow) measures;
they reflect an entirely different profitability concept. The DCF rates
do not compare directly with book rates.. Although both measures will be
reported in the analyses, the book rata is reported for informational
purposes only.
The two primary types of DCF measures of profitability are used. The
first is the internal rate of return or yield, and it is the computed
discount rate (vield) which nroduc^s 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 were returned from the cash pro-
ceeds of the investment. The second DCF measure is the net present value
concept.. Rather than solve for the yie,ld, a discount rate equivalent to
the farm's 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.
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.
Benefits
In this^ analysis, benefits for the book analysis have been called after-
tax income; and for the DCF analysis they are called 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 is omitted in the cash proceeds computation since it is reflected
in the discount rate, the after-tax cost«of capital (see below). Depre-
ciation 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.
II-S
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A tax rate of 20 percent on the first $25,000, 22 oercent on the second
$25,000, and 48 percent on the remaining income was used for the larger
sized operations assumed to be operating under some type of corporate
structure. For the family operated farm, returns to land, labor, manage-
ment and the owner-operators' labor v/ere obtained. The personal income
tax tables were then used to determine tax.
Accelerated depreciation methods, investment credits and carry forward
and carry back provisions were not used dun to their complexity and
special limitations.
The revenue, expense, interest, and depreciation charges used were those
discussed for pollution control facilities in Parts 2-4. These were
assumed to.be constant over the period of analysis.
Investment
Although investment is normally thought of as outlays for fixed assets
and working capital, in evaluating the closure potentiality of an on-goinc,
operation where the basic investment is sunk, the.value of that invest-
ment must be made in terms of its liquidation or salvage value, that is
in its opportunity cost or shadow Drice.1/ For 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 net working capital (current
assets less current liabilities). This amount v.1 as taken as a negative
investment in the terminal .year. Replacement investment for plant and
equipment maintenance was considered approximately canal to one-half of
annual depreciation, a-procedure which corresponds to the operating
policies of some farm managements and which serves as a good proxy for
replacement in an on-going business.
Investments in pollution control facilities are the estimates provided by
EPA and shown in Parts 2-5. Only incremental values were used.
The above discussion refers primarily to the DCF analysis. Investment
for estimating book rates was taken as invested capital at the 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.
— 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 invest-
ment may be different.
11-7
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Cost of Capital - After Tax
Return on invested capital is a fundamental notion in U. S. business. It
provides both a measure of a firm's actual performance as well as its
expected performance. In the latter case, it is also called the cost of
capital. In this analysis the cost of capital is defined as the weighted
average of the cost of each type of capital employed by the firm, general-
ly its equities and interest bearing liabilities. There is no methodology
that yields the precise cost of capital, but the cost can be approximated
within reasonable bounds.
From the discussions with members of the industry, it was learned that
the debt equity ratio may range from 30 percent debt and 20 percent
equity to 100 percent equity. A meaningful average that seemed to emerge
was 40 percent debt and 60 percent equity.
Returns on equity capital in a'jricul ture .production has historically been
low. Although meaningful studies on the return to equity in fish farming
do not exist, there are many parallels between fish farming and other
types of fanning. In a farm cosc and returns publication pub I is had' by
tne USDA in 1958, a rate of 4.1 percent .return onvequity caoital was
used. Since that time, however, interest rates haVe increased as well
as returns to agriculture. The opportunity cost for safe, non-sophisticated
investment now ranges between 7 to 9 percent through the use of .certificates
of deposits or. treasury bills. Recognizing that the historical returns to
agriculture eiiLerprises have bten low, we are estimating the cost of equity
capital for commercial fish farms at 7.5 percent.
From the interviews with people involved in commercial fish farms, both
from the production end and those servicing the industry, it was learned
that the cost of debt capital was about 10 percent. An average rate of
10 percent was used for'tax.
To determine the weighted average cost of capit.al, it is necessary to
adjust the before-tax cost to after-tax cost (debit capital only in this
case). This is done by multiplying the costs by one minus tne tax rate.
For most of our models this approximated 20 percent; thus, 20 percent
was used .for the tax computation.
Weighted average after-tax cost of capital
Before-tax After-tax Weighted
Item Weight	Cost	Tax Rate • Cost		Cost	
Debt 40	10.0	.20	8.0	3.2
Equity 60	-	7.2	4J.
7.5
An estimated after-tax cost of capital of 7.5 percent was used in the
subsequent analysis.,
11-8
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Construction of the Cash Flow
A twenty-year cash flow was used in this analysis and was constructed as
follows:
1.	Sunk investment (salvage market value of fixed assets plus
net working capital) taken in year t .
2.	After-tax cash proceeds taken for years t^ to t2Q.
3.	Annual replacement investment, equal to one-half annual
depreciation taken for years t-j to t2Q.
4.	Terminal value equal to sunk investment taken in year t2j.
5.	Incremental pollution control investment taken in year tQ.
6.	Incremental pollution expenses taken for years t-j to t2Q.
7.	No replacement investment taken on pollution control equip-
ment on assumption of 20-ryear useful life.
8.	Terminal value of pollution control equal to zero.
B. Price Effects
At the outset, it must be recognized tho.t price effects and production
effects are so interrelated that eachhes an associated impact upon the
other. In fact, tht very basis of price analysis is the premise that
prices And supplies (production) are furictio; illy related variables which
are simultaneously resolved.
The determination of price effects requires a knowledge of demand growth,
price and supply elasticities, the extent of regional market influence,
the degree of large firm dominance in the industry, the market concentra-
tion of the industry's suppliers of inputs and purchasers of outputs, the
organization of and coordinate c-.i withir. the industry, the relationship
between doi.estic output and the world market, the existence and nature
of complementary goods, the industry's cyclical trends, the current
utilization of the industry's capacity, and the effect of exogenous
influences that bear upon price determination (e.g., governmental regula-
tion).
In view of this complex diversity of factors involved in determining the
market price, a purely quantitative approach to the problem of price
effects is not feasible; hence, the simultaneous considerations suggested
above have been made. The judgment factor was heavily employed in deter-
mining the supply response to a price change and the alternative price
changes to be employed.
11-9
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In order.to provide a standard which would reflect price effects, this
study computed an estimated price sufficient to insure profit stability
The required price increase was evaluated in light of the relationship
of the model farm to the industry and to the competitive characteri§tic
of the industry. The required price increase was computed by the des-
cribed DCF analysis. It dealt only with incremental pollution invest-
ment and cash proceeds.
The application of the above DCF procedure to these costs yielded the
•present value of pollution control costs (i.e., investment plus operat-
ing cost less tax savings). Wherever this is known, the price increase
required to pay for pollution control can readily be calculated by the
formula
y (PVP) (100)
(1-T) (PVR)
where
X = 'required percentage increase in price
i
PVP = present value of pollution control costs
which includes PC investment + PC operat-
ing cost-tax savings but does not include
.inJ;^rast charges on PC equipment
PVR = present value of gross revenue starting
in the year pollution control is imposed
T = effective tax rate (varies with the model
farm)
C. Financial Effects
In Parts 2-5, the financial characteristics of model farms were presented.
These data served as the base point for the analysis of the financial
effects from pollution control costs. The primary focus of the analysis
was upon profitability in the industry and the ability of the. farms to
secure external capital. Obviously, then, this portion of the analysis
cannot be divorced from production effects since profit levels and a
farm's ability to finance pollution abatement facilities will have a
direct influence on supply responses, on utilization of capacity, and
closures.
To measure profitability, the analysis employed after-tax book rate of
return on invested capital and cash flow (after-tax profit plus deprecia-
tion) measurements. After-tax profit as a percent of sales was reported
in order to compare financial data with standard industrial measures.
11-10
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In addition to these factors, two additonal measures of economic profit-
ability were also examined: (1) capitalized value of earnings and" (2)
present values estimated by the procedures described in Section A above.
Both of these measures were calculated on pre- and post-pollution control
bases.
Given these financial measurements, the ability of the industry to finance
the required pollution control expenditures was examined in light of the
financial results and the information shown in Chapter II (Parts 2-5).
The ability to do this varies from one industry subsector to another due
to differential financial structures, profitability and abatement re-
quirements; hence, capital aval ability and cost had to be examined on a
model by model basis.
D. Production Effects
The potential production effects of the imposition of pollution controls
include reductions of capacity utilization rates, closures and industry
stagnation. Reductions in capacity utilization were estimated via
qualitative techniques based upon the analysts' knowledge of the industry.
The same was true for assessing the extent to which closures may be offset
by increases in capacity utilization on the part of operating farms. Data
limitations and time constraints required that the impact of pollution
control standards upon future grov.'th of the industry also be estimated
via qualitative methods.
The remaining effect, closures, was difficult to measure realistically
as discussed previously. As a starting point, a shutdown analysis was
employed to determine which model farms should close, which would func-
tion as marginal operations and which would operate on a sound basis.
The analysis recognized that model farms are theoretical and cannot pro-
ject all relevant factors; thus, for any given model farm one wou^d expect
to find some actual farms with profits lower, and some higher than shown
for the model farm. One can describe this phenomenon statistically via
distribution functions if sufficient data exist. Unfortunately,-these
data do not exist for the commercial fish farming industry; therefore,
the estimate of normality was assumed.
The methodology employed assumes implicitly that the model farm represents
the median farm and that.there will be a different standard deviation for
each farm. The procedure further implies that the standard deviation is
larger for the more profitable industry segments. Net present values were
calculated under alternative effluent treatment assumptions. By utilizing
the standard deviations described above, and the assumption that plants
with a negative for net present value will be forced to close, the percentage
of farms closing in each industry segment can be estimated through accepted
statistical techniques.
11-11
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E. Em pi oyn.-it Effects
Given the effects of estimated production curtailments, farm c.losures,
and changes in iindustry growth, the impact on employment can be estimated.
To the extent possible, the major'employee classifications involved were
examined as was the potential for re-employment.
F. Community Effects
Although the di -ect impacts ^f job losses upon a community are immediate-
ly aDpar/.nt, in r.iany cases, plant closures and cutbacks have a far greater
impact than just that of employment loss. .Multiplier effects may result
in even more unemployment. Badly needed taxes for vital community ser-
vices ,niay dwindle. Community pride and spirit may be dampened. However,
in some cases, the negative community aspects of production effects may
be short-term and relatively minor within the overall community. In a
few cases, the closure of a farm may actually be viewed as a positive net
community effect (e.g., a small farm with a high effluent load in an area
with a labor shortage).
These impact factors were qualitatively analyzed as appropriate.
International Trade Effects
Other impacts such as balance of payments effects were also qualitatively
analyzed.
11-12
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Part 2. FLOW-THROUGH FISH CULTURING (TROUT AND SALMON)
III'. INDUSTRY STRUCTURE
A. Characteristics of the Industry Segments
Trout Farms
Although trout culture in the United Stat3s began in the first half of
the 19th century, the commercial industry progressed rather slowly until
the late 1960's and early 1970's. Existing producers then expanded their
operations and outside interests installed additional capacity. As a re-
sult, production capacity had more than douoled between 1967 and 1-972.
Higher feed costs in 1973 and 1974 which doubled the 1972 prices and other
market considerations caused a leveling off of production. The industry
anticipates future production cutbacks.
A major portion of the commercial trout Droduction is located along the
Snake River in Idaho's Hagerman Valley where there exists an abundance
of springs with water of the proper quality (Nlow, constant temperature
and high oxygen content). .HI Snake River operations use raceway or flow-
through type production. Although no accurate statistics are maintained
On the trout farming industry, annsrpnl-ly 7D i.n 80 pprcpnt of U.S. produc-
tion comes from the State of Idaho—primarily the Hagcrrnan Valley.
Other operations are scattered throughout the United States including
some in Southern states such as Virginia, North Carolina and Louisiana.
Operations outside tiie northwestern part of the United States could be
categorized as small and medium-size operations, some of which are part
commercial — part recreational operations.
Number of producers. The exact number of commercial trout producers in
the United States is not known; however, it is estimated that there are
between 200 and 250 commercial producers. Many more, perhaps ud to 700,
may be listed by the State Fish and Game Departments as licensed to pro-
duce, sell or distribute trout.
The locations by state of producing members of the U.S. Trout Farmers Asso-
ciation in 1972 are reported in Table 111-1. Of the 92 members, Idaho
has 13, California - 11, and Colorado - 8. In contrast, the Idaho Fish
and Game Department data list 48 Commercial Fish Pond permits in 1974 and
discussions with industry sources indicate that approximately 40 of these
48 are actively engaged in commercial production. Other states have
issued many more permits than there appear to be actual commercial pro-
ducers. Minnesota, for example, lists 40 producers but only 3 are reported
to produce in the area of 20,000 pounds of trout per.year. In summary,
apparently half of the commercial qrowers are members of the association;
therefore, Table III-l should be useful in indicating the location of pro-
duction only.
III-l
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Table 111-1. Location by state of members of U.S.	Trcut Farmers
Association producing trout, 1972
Reported	Reported
Producing	Producing
State Member State	Member
Idaho
13
Tennessee
2
California
11
Virginia
2
Colorado
8
. Minnesota
2
Pennsylvania
7
r?w York
2
Wisconsin
7
Ohio
2
Washington
5
Louisiana
1
North Carolina
5
Georgia
1
Utah
4
Hawaii
1
Michigan
4
Nevada
1
Missouri
4
Oregon
1
Montana
4
South Dakota
1
illinois
3
Other
1
TOTAL	92
Source: U.S. Trout Farmers of America
111-2
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Size of Operations. Information which indicated the size of operations
in 1972 was provided by the U.S. Trout Farmers Association for members
as follows:
Commercial Members of U.S.
Trout Farmers Assoc.
Gross Revenue
Number
Percent
ITT
30,000- 60,000
60,000-100,000
100,000-200,000
200,000-400,000
>400,000
<30,000
62
12
3
6
1
4
70.6
13.6
3.4
6.8
1.1
4.5
TOTAL
88
100.0
As a result of-discussions with Idaho trout farmers, the following size
structure for producers of the northwestern area of the United States in-
cluding Washington, Idaho, Utah arid Montana were approximated.
The largest trout producers are concentrated along the Snake River in the
Hagerman Valley. According to the size distribution developed by the
Idaho trout farmers, 15, percent of the Northwestern growers are among the
largest producers compared with 4.5 percent from the U.S. trout farmers
membership. Many smaller operations produce trout partially for commercial
and partially for recreational fish-out facilities.
Total Volume of Production. The commercial volume of trout produced in
Idaho is estimated at 80 to 90 percent of the total U.S. commercial pro-
duction for food fish and 95 percent of the rainbow trout production.
Industry estimates place Idaho commercial production at about 12-14 million
pounds for 1973 up from about 6 million pounds five years ago.
Production data in Idaho are not definitive; however, one consultant source
(9) estimates 1973 production at 27 million pounds (liveweight equivalent).
This estimate considerably varies from that of another professional con-
sultant (10) and industry sources. These estimate 1972 production at 10-12
million pounds and, on that basis, 1974 production at 14-16 million.
Number of Producers
Size of Operation (pounds) 1/
7
10
31-40 2/
500,000-2,000,000
100,000-500,000
30,000-100,000
1/ Dressed weight
2/ Farm grow-out operations
111-3
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In our discissions with members of the industry, 6 of the 7 or 8 major
producers provided detailed information on production levels. Total
trout sold by the six major producers amounted to 10.0 million liveweight
pounds in 1973. The discussions also indicate that production has in-
creased substantially over the past five years. For a limited number of
producers that reported production data over the past five years, a 280
percent increase in production was indicated.
Salmon Farms
The first commercial production of 6an-sized salmon from eggs through
harvest was accomplished in the Puget Sound Area in 1972. Prior to that
time hatched salmon v.'ore at various aces depending upon th ~ species,
released to the ocean and allowed to cimolete their life cycle. The
industry is embryonic and faces some technical and marketing problems.
Considerable effort is being expended upon genetic problems to develop
a salmon that has both a high survival rate and a high growth rate under
confined conditionsand upon such mechanical problems as v/ater circula-
tion, oxygen levels and feeding techniques. The overall survival rate
has often been low resulting in high production cost, but considerable
progress is believed possible.
There are two basic commercial production techniques for salmon. Under the
first, the sea-ranching system, salmon are released into the sea to return
later to the point of release to be harvested as adult salmon. For species
released at birth.such as chum, the return, rate is aoproximately 1 to 2
percent. For salmon released at a later growth stage (i.e., a size of
20-25 fish/pound and 7 months of age for Coho), the producer may obtain a
harvest of 2 to 5 percent. Laws permitting and restricting sea ranching
vary from state to state.
The second system involves some type of saltwater confinement (ponds or
pens) for the final grow-out stage. Salmon are raised to. the smelt size
of about 20-25 fish/pound and are then transferred to the seawatrr pens
for grow out. One modification of this procedure uses a ssawater race-
way. Salmon thus produced are marketed either at a size of 12-14 ounces
or at 2-4 pounds.
A modification of the second system has been tried in which the final
grow-out period is in a fresh v/ater raceway. This method is still in
the development stage with producers reporting varying degrees of success.
Number and size of producers. Approximately 16 commercial salmon Deduc-
tion operations exist at various stages of development. Additional firms
or individuals may be experimenting with the concept. The commercial
operations for 1975 are distributed approximately as follows:
California	1--Sea release
Maine	2--1 more next year (pan-size)
Oregon	9-11—1 confined, 8-10 with sea release permits
(no significant returns yet)
Washington	4--2 in pan size, several Indian tribes in
sea release
111-4
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Two of these operations are owned and operated by Indian tribes: the
Lummi Indian Tribal Enterprises and the Squaxin Salmon Farm operated
by the Small Tribes of Western Washington. Two operations, one in
Washington and one in Oregon are divisions of or are financed by major
corporations. The remaining operations are small.
Volume of production. A total of 1.5 million pounds of domestically
produced pan-size salmon has been projected for'1976.
Any attempt to quantify the group by size would be premature. Only
four of the above achieved any degree of harvest in 1975. Future yield
projections are also conjecture at this time. It can be speculated that
the companies realizing a 1976 harvest will achieve a larger harvest
next year. New producers may also come on line.
No sea-release operations have harvested adult salmon as yet. Experimental
programs using tagged fish prove that the salmon return to the point of
release and, thus, these types of operations are feasible.
B. Market and Product Concentration
The commercial production of food fish in the United States may date back
to the late 1800's: however, most industry growth occurred during the
lste I960's and early 1970's. As a result, industry's h'gri volume is
relatively new, its markets not yet large scale and dependable, and its
producers still relatively fluid. Generally speaking, the industry has
concentrated on production rather than marketing. Host of the promotional
efforts to develop increased market size and greater product loyalty are
of recent origin and relatively small in scope.
Producers tend to market on an independent basis. Many small producers
sell locally to families, restaurants or fish markets. Larger producers
tend either to market through processors, who hardle the selling functions,
or process the fish themselves and market through a number of brokers
located in the larger cities. Each segment of the industry is somewhat,
unique and will be discussed in turn.
Very little published data are available on the market organization or
concentration. Even basic statistics in terms of pounds of fish marketed
are virtually non-existent with the exception of recent data compiled by
the National Marine Fisheries Service. Marketing analyses are necessarily
general.
Trout
The production and processing of trout are highly integrated. Of the
seven major trout farms, all have their own processing facilities and
handle approximately 70 to 80 percent of the commercial trout sold in the
111-5
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United States. Information indicates t'nat none'of the major producers
enjoys a competitive advantage either through s.ize of operation or product
differentiation". The major producers have historically marketed on a
very competitive basis. .No firm is integrated further into the marketing
channel than the processing function. Brokers in various major cities
sell the industry's product.
Marketing efforts have been concentrated on the hotel and restaurant,
the so-called, gourmet trade. Most commercially-produced trout are so
marketed.
TrouL imports ;>?oarently constitute no market threat at the present tima.
Over the past five years, imports, primarily from Japan, reached a H-eak
in 1971 of 3.8 million pounds but since that time ti.ey have declined to
2.5 million pounds in 1972 and 1.6 million in 1973. Fish diseases in
Japan had reportedly been responsible forv the reduction in shipments.
Salmon
The marketing function for commercially-produced'salmon is somewhat dif-
ficult to assess because the industry is new. Basically, three sizes of
product are produced by commercial salmon comoanies, pan-sized salmon
variously referred to as pan fried, baby, mini, or individual size salmon,
a 2-4 pound salmon, and^ adult salmon from sea ranching operations. The
marxet for adult size salmon landed by commercial fisheries is'well-
established, however.
Production of pan-size salmon began in 1972, and the product was sold to
gourmet and specialty restaurants. Initial reaction to the pan-sized
salmon was generally favorable. Unfortunately, due to production dif-
ficulties in 1973-, a continuing supply could not be maintained. The
industry reoorted.a good demand for its 1 imi,tsd- production in 1974. Prices
and demand were depressed in 1975, but are significantly improved in 1976.
Basically, only four or five organizations were active in pan-size salmon
production and in marketing salmon. Total pounds marketed in 1975 were
approximately one million pounds (13) and are expected to increased
1975 depending on the successes of the individual firms in developing
and improving their production system .
To date, established seafood brokers market pan-size salmon. Such brokers
located in major cities have established individual relationships with
producers. The responsibility for product preparation has been assumed by
the producing firm. Because of the newness of the industry and the limited
amount of product harvested, the entire marketing system is embryonic.
Neither price nor customer are firmly established, and none of the producers
has a firmly established position in the market.
Ill-6
-------
As yet, no adult size salmon have been captured and marketed by the sea
ranching operations. However, the market for salmon of this size is
well established, as shown by the landings of adult salmon of all species
by commercial fisheries: 201.2 million pounds harvested in 1974 in the
states of California, Oregon, Washington and Alaska.
A new size salmon, in the 2-4 pound range, is nearing the test market
stage of development.
C. Number of Employees
Total, employment for commercial fish farms is not available through any
form of census. As a result, employment figures were estimated on the
basis of the number of fish culturing operations that are reported and
numerous discussions with industry personnel. These estimates are shown
in Table 111-2. It is well to point out that the number of commercial
fish culturing operations in many cases are also based upon estimates;
consequently, actual employment figures could vary substantially from
estimates. Too,, many more operations may be licensed with various state
agencies for domestic culturing of fish. However, since many of these
are not producing on a commercial basis, they were not included in the
number of firms.
-» K /-»• » +• 1 CS r. ^ f fimo ?	O O C + A /' CO	f i no	¦{ n
iUCiL. uiu auiji.: i. j.	put w ~ v •	Cm lu jl j .cu	ki I i * lln)w v_i i <_ L. im wm
trowt culturing operations. Between 80 and 160 employees are maintained
in salmon operations.
111-7
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Table III-2. Estimated total number of employees in flow-through
fish culturing operations


Estimated
No. of



Size of
number
of
employees
Total
Employees
Segment
operation
operations
per farm
Part time
Full time


, No.
%



Trout
S
166-
83.0
1 oart time
165


M
25
12.5
.3-4
-
75-100

I
10
4.5
25-35
-
:Z 5 0-3 50-


201
100.0

166
325-450
Salmon
-
16
100.0
5-10

80-160
111-8
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IV. FINANCIAL PROFILE OF THE INDUSTRY
Commercial fish culturing farms are either family-owned and operated,
closely held family corporations or divisions of large corporations. As
a result, financial data are difficult to obtain. For most industries,
financial ratios and other performance measures are available in published
sources. However, this is not the case with the flow-through fish culturing
industry. Consequently, information used to develop industry characteris-
tics was obtained principally from industry contacts, the National Marine
Fishery Services and the Soil Conservation Service (USDA).
A. Sizes and Types of Model Farms
The industry was segmented by type and size of fish culturing operations
as shown in Table IV-1.
Trout
Trout producers group into two general categories: large commercial pro-
ducers in the Northwest who market nationally (including small and medium-
size producers marketing through a major producer-processor) and small to
medium-size producers who market to local or regional markets including
fish outs. Prices received and production costs are classified by pro-
ducer location. In general, farms have similar facilities for cold-water
raceway operations. The exception to this is the part-time, small fanner -
feed out operation located in the Northwest which uses a relatively low
cost flow-through pond type raceway without a concrete or gravel bed. Such
farms acquire, unde.* contract, six-inch fingerlings from large producer-
processors, grow out the fish to a marketable weight and secure 10 cents
per pound of gain with all inputs, except facilities and labor, supplied
by the processor. All other trout farms operating were assumed to be
family operations with the exception of the large-Northwest producer-
processor which is generally established on a corporate basis.
Salmon
The pan-size salmon industry is currently in the development stage. Only
four organizations (total confinement) harvested in 1975 and these varied
in size from 30,000 to approximately 700,000 pounds of production. In
addition to the variance in size, different types of final-stage grow out
systems were utilized: seawater cages, both seawater and freshwater race-
ways, and salt water Donds. Because of the limited number of firms and
the diverse methods of production,'a highly generalized model was developed,
based on a midpoint size of 500,000 pounds of liveweight production and an
IV-1
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Table IV-1. Sizes and types of model farms
Yield	
	Types	Model Size	Representative Range	per acre per farm
Trout
Northwest
Small	27,000	lbs.	<50,000 lbs.	-	27,000 lbs.
Medium	150,000	lbs.	51,000 - 500,000 lbs.	-	150,000 lbs.
Large	1,000,000	lbs.	>500,000 lbs.	-	1,000,000 lbs.
Local Market
Small	30,000	lbs.	<50,000 lbs.	-	30,000 lbs.
Medium	.150,000	lbs.	51,000 - 250,000 lbs.	-	150,000 lbs.
Salmon - Pan Size
Small	100,000	lbs.	<250,000 lbs.	-	100,000 lbs.
Medium	500,000	lbs.	>250,000 lbs..	-	500,000 lbs.
IV-2
-------
»
average investment cost applicable to the various types of systems. It
may-be noted that a saltwater pen system would mpst likely represent
a lower cost investment than a raceway operation. Direct and indirect
production costs were found to be comparable among the various sy.tems.
Investment and production cost data were obtained by personel discussions
and from published sources.
Since sea release operations are less well-developed with severa1 farms having
released fish but none being harvested, no model farms were developed for
this type of operation. However, the fresh water stage would be identical
in costs for the two types of operations. The salt water stage would
require less investment, perhaps a tenth, as equipment is needed for
only the short period of acclimation to salt water and later for the
capture of adult salmon in salt water.
B. Investments and Assumptions
Investment values of model farms was based on information obtained from
industry personnel. Three values were developed for each model farm:
1.	replacement'value
2.	book value, and
3.	salvage value
Trout
The estimated investment capital for model commercial trout farms is shown
in Table IV-2. The basic data for the investment analysis were obtained
directly from commercial trout farmers representative of the various sizes
and types of production units. Although much variance was reported,
general patterns emerged as reflected in the model farm.
Current or replacement value. As expected, large commercial producers in the
Northwest had the lowest investment, cost per 1,000 pounds of production
capacity. Current or replacement value including land, plant .and equipment
was reported at $920 per 1,000 lbs. for the large operations and $1,200
per 1,000 lbs. for those of the medium size in the Northwest. For those in
areas .other than the Northwest, replacement costs for medium operations were
$1.8C0 per 1,000 lbs and $2,200 per 1.000 lbs. for the small producers.
Such a geographic variance were due to land values and possibly more ela-
borate facilities. Small, grow-out operations in the Northwest are sub-
stantially different in configuration and use basically one to three flow-
through earthen ponds constructed in a flowing stream with intake and
outflow'structures of concrete. These operations cost between $2,000 and
$3,000 per flow through pond. In the model farm, 2 units are assumed with a
grow-out capacity of 27,000 pounds. (Fish are stocked 3 times a year for a
3 month grow-out period and in each period the grower can realize a 9,000
pound gain for a total of 27,000 pounds over the productive year.)
IV-3
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Table IV-2. Estimated invested capital for model for commercial trout and salmon farms
Small - Northwest	Medium - Norhtwest		Large - Northwest	
	30,000 lbs/y~r.	 	166,000 lbs/yr.		1,111,000 lbs/yr.	
	 Current Salvage Book	Current Salvage Book	Current Salvage	Book
Trout
Plant & Equipment
5,700 1,150
2,800 230,000 28,000
138,000
1,175,000
160,000
575,000
Current Assets
570 570
570
100,000 100,000
100,000
630,000
630,000
630,000
Current Liabilities
120 120
120
50,000 50,000
50,000
340,000
340,000
340,000
Net Working Capital
430 430
430
50,000 50,000
50,000
290,000
290,000
290,000
Total Invested Capital
6,200 1,580
3,230 280,000 75,000
188,000
1,465,000
450,000
865,000

Sma 11
- Local Market Medium
- Local Market



35
,300 lbs/yr.
166,000 lbs/yr
•



Current
Salvage
Book Current
Salvage
Book


Plant & Equipment
93,000
18,300
61,000- .345,000
69,000
198,000


Current Assets.
25,900
25,900
25,900 120,000
120,000
120,000


Current Liabilities
8,600
8,600
8,600 35,000
35,000 '
35,000


Net Working Capital
17,300
17,300
17,300 85,000
85,000
85,000


Total Invested Capital
110,000
35,600
78,000 430,000
154,000
283,000




Medium - Northwest-







500,000 lbs/yr.




Salmon - Pan size

Current
Salvage Book



Plant & Equipment

275,000.
14,000 . 275,000



Current Assets

300,000
300,000 300,
000



Current Liabilities

150,000
150,000 ,150,
000



Not Working Capital

150,000
150,000 150,
000



Total Invested Capital

425,000
164,000 425,
000



-------
Bock value. Book values were reported at approximately 50 percent of replace-
ment cost for the Northwest operations and at 65 percent for the local
market operation.
Salvage value. Salvage values ranged from 16 percentof the replacement
cost for Northwest operations to 20 percent for local market operations.
Salmon
Estimated investment capital for a model medium-sized commercial salmon
farm is. shown in Table IV-2. Basic data for the investment analysis were
obtained directly from commercial salmon producers and from published
sources. The production facility represents an average investment for the
freshwater stage and for the grow-out facilities for the saltwater phase.
Investment costs for a processing facility were not included. For a sea
ranching operation, the investment capital for the freshwater stage
would be identical; the investment for the saltwater release and capture
facility is estimated to be about a tenth of that for the confined saltwater
facility.
Current or replacement and book value. Current or replacement value'and book
value are identical in this model farm because the facility was considered
to be newly constructed. The land, facilities and equipment were estimated
to cost approximately $550 per thousand pounds of capacity. Land costs vary
considerably by location.
C. Current Assets, Current Liabilities and
Net Working Capital
The current assets, current liabilities and net working capital for each
of the model farms are reflected in the preceding tables as elements of the
total invested capital.
For the trout and salmon farmers, current assets were reported to be 80
percent of production costs for the Northwest operations and approximately
100 percent of total production costs before tax for those firms marketing
on a local basis. For the remaining operations, current assets were
determined by taking 75 percent of total sales as a reasonable operating
capital asset value.
Current liabilities were reported as approximately 45 percent of production
costs for the Northwest trout and salmon farming operations and approximately
30 percent for the smaller, local trout farming operations. Current
liabilities and current assets were approximately the same for salmon and
for trout operations. Current liabilities for the remaining types of
farms were estimated at 40 percent of total sales, and working capital
was then estimated by subtraction.
IV-5
-------
After discussion with industry personnel, it was concluded that small
and medium size operations were mainly family owned and operated and that
they have been constructed over a period of years on a pay-as-you-go basis.
Such was also true for some of the larger operations that were visited.
Many of the small to medium operations were built basically with a hundred
percent of equity capital. The larger operations vary from a hundred percent
of equity capital to a low of approximately 10 or 20 percent of equity
capital in the operation. Generally, larger operations had a higher ratio
of debt to equity than did. the smaller operations. Generally, the debt-
equity ratio of 40 percent debt and 60 percent equity represented the
industry.
D. Model Plant Capacity and Utilization
Pl«nt capacity and utilization in the fish farming industry is very elusive.
The concept is more measurable in the -trout industry where the major
producers have reported utilization of capacity in rather definitive
terms. Commercial salmon production is so new and piant capacity so
undefined that it was1 not reasonable to attempt a measurement.
Utilization of the production capacity for the trout industry was reported
at about 80 percent from 1969 through 1971 and reached a peak in 1072 at
90 percent. Since that time utilization declined to 86 percent of capacity
in 1973 and it is generally considered that the present production is
somewhat below the 1973 level. It is well to point out that during the
same period of time production capacity more than doubled.
E. Annual Profits
Net income, as a percentage of sales and return on invested capital (book
value) is shown for the representative model farms in Table IV-3.
It should be noted that this study's model farms are classified as either
family or corporate farms, an important distinction in the financial analysis.
Pre-tax income for the family farm model was calculated to represent return
to the land capital and management and owner labor. Labor costs in the, fin-
ancial models include only cash outlay for hired labor.
The problems involved in estimating the value of owner-operation labor are
obvious. Any estimate which considers only his economic opportunity costs
(i.e., what he would make on another job with comparable skill level,) ig-
nores the psychological value he receives from ownership; the satisfaction
of independence, his optimism regarding his future, his financial success,
or his satisfaction of producing a product. Furthermore, if an operator's
economic opportunity cost (if it could be estimated) were included in the
model farm, the model would project a loss or a shutdown situation. , This,
of course, would not be representative, as we have seen the small family,
fish-cultring operation as a viable business. The annual profit parameter
shown in the accompanying tables should, therefore, be interpreted with
this basic concept in mind.
IV-6
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Table IV-3. Net Income, returns on sales, and returns on total invested capital for commercial trout
and salmon farms
Type and Size of Farm
Pre-Tax
Income!/
Pre-Tax Return
on Sales
After-Tax Return
on Sales
	($) 	
Pre-Tax
ROI
After-Tax
ROI
Northwest
Small - family farm
Medium - family farm
Large - corporate farm
Local Market
Small - family farm
Medium - family farm
1,950
7,500
15,500
3,100
10,500
72.2
8.3
2.2
8.1
9.2
Trout
72.2
7.6
1.7
8.1
8.2
67.2
4.5
2.1
4.6
3.8
67.2
4.2
1.6
4.6
3.5
Salmon
Medium -.corporate farm?/ 32,200
7.1
5.6
7.6
5.7
—''would represent return to land, capital, management and owner's labor for family farm.
2i
— None have actual profits as yet.
-------
Trout
The return to land, capital and the owner's management and labor for
family trout operations ranges from $2;000 to a high of $10,500. Such a
projection represents a return rate considerably lower than that for the
medium size family operation during the 1969 to 1971 period — $15,000 to
$20,000.
Pre-tax income for the large corporate farm is estimated at $15,500.
Historical data obtained on the large trout farms suggest that this
level of profit is approximately 50 percent of the 1970 and 1971 level.
It is well to noint out that profit rates vary widely; some of the large
operations operate in a loss position.
Pre-tax return on sales ranges from a low of 2.2 percent to a high of
9.2 percent except for the small, family farm in the Northwest. For this
grow-out pond operation, sales are based on the 10 cents per pound received
for providing feeding facilities and labor. Its low sales level and the minor
production costs incurred by the operator allow a pre-tax return on sales of a
estimated 72 percent.
Taxes were calculated on the basis of personal income tax schedules for
the family farm operations and the corporate schedule for the large corporate
farm. After-tax return is'only slightly reduced since, because of the low
level' of profits made, the tax rate paid is in the lower brackets.
The return on the book value of investment is low in the trout operation,
and the after-tax basis ranges from 1.6 percent on the large corporate farm
to a high of 4.6 percent on the small family farm. The rate, is low when
the industry's relatively high investment costs for facilities and equip-
ment are compared to its recently depressed sales and current profilevels.
Salmon
Salmon production, is shown in a relatively profitable position because of
the current high price level received for salmon. It must be realized
that th£ profits are projected; no profits have been.realized by an exist-
ing firm as yet although several believe they will show a profit in 1976.
It is anticipated, however, that as the volume of salmon production in-
creases, the price may decline. On the.basis of current prices, a model
medium-size salmon farm producing pan-size salmon can achieve a pre-tax
return on sales of 7.1 percent. Translated into pre-tax return on invested
capital, this represents a'return of approximately 7.6 percent ore-tax and
5.7 percent of after-tax returns resulting from the salmon industry of
capital investment compared with sales.
Most of the companies involved in salmon aquaculture have or will incur
substantial.research and development costs before they achieve a viable
level of production. These costs have not been included in our model, but
an on-going operation was assumed. To this extent we have reflected an
optimistic picture - at least for the next few years.
IV-8
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F. Annual Cash Flow
The estimated cash flow for the model farms analyzed	in this report are
shown in Table IV-4. Cash flow, calculated as a sum of after-tax income
plus depreciation, is shown in dollars, as a percent of sales, and as a
percent of total invested capital.
Trout
The annual cash flow for trout farming operations range from $2,200 to
$42,900 for the large corporate operation. Generally this reflects a
considerable increase over annual profits, because of the high level of
depreciation incurred by trout operations, in all models other than the
small family farm located in the Northwest where invested capital is at
a very low level. As a percent of sales, the cash flow ranges from 6 per-
cent for the large corporate farm to a high of 19 percent for the medium-
size family farm marketing locally. As a percent of total invested capital,
these ratios make trout farming operations a little more attractive
with cash flows representing 6 to 9 percent of total invested capital.
Salmon
The cash flow for the medium size salmon farm is estimated at $46,000.
This constitutes 10.0 percent of sales and 10.7 percent of invested capital.
G. Cost Structure
The pro forma statements of income and expenses for the representative mod-1
commercial tourt and salmon farms are snown in Tables IV-5 and IV-6.
Some general observations aan be made.
The data required were obtained from consultations with industry experts.
Informal discussions were held with growers in each model type.
Production levels were obtained from reported yields by producers in the
various size and types of operations. A~ a result, yield levels will vary
by size of operations as well as the various combinations of species produced.
Variable costs included eggs or fry where applicable. Labor costs included
labor hired only for family size operations. For corporate operations (in-
cluding closely held corporation and family corporations) direct labor included
production labor with administrative costs included in the indirect cost
category;
Feed costs are the largest single direct cost item. These reported costs
were remarkably consistent among the similar types of producers. Other
costs included such items as medicine, chemicals, pumping, fuel, repair,
and maintenance, administration and insurance costs.
IV-9
-------
Table IV-4. Annual cash flow for model commercial trout farms!/
Type and Size of Farm
Annual
cash flow
Cash flow as
percent-of sales
Cash flow as percent?/
of total invested capil
m
Trout
Northwest
Small - family farm
Medium - family farm
Large - corporate farm
Local Market
Small - family farm
medium - family farm
Medium - corporate farm
.2,200
9,810
43,300.
6,000
21,000
45,616
81.5
11.3
6.1
15.7
19,2
Salmon
10.0
75.9
5.8
5.7
8.3
7.7
10.7
-^Annual cash flow for family farm operations calculated on the basis of return to lam
capital, management and owner's labor before taxes plus depreciation.
2/
- Return on total invested capital calculated b-y-financial statement method.
IV-10
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Table IV-5. Pro forma statement of Income and expenses for model commercial trout farms
Northwest!./	Northwest	Northwest	Local Market	Local Market
Small (grow out only)	Mediurn		Large	Small		Medium	
Annual Percent "Annual Percent	Annual Percent Annual Percent" Annual Percent
Production Capacity


166,000

1,111,000

35,300

105,000

Annual production (lbs.)
27,000

150,000

1,000,000

30,000

100,000

Sales
2.7C0
100.0
90,000
100.0
706,000
100.0
38,300
100.0
114,800
100.0
Variable Cost










Eggs or fry
-
•
2,500
2.8
24,700
3.5
1,800
4.8
4,100
3.6
Labor (hired)
250
9.2
22,500
25.0
141,200
20.0
9,700
25.3
21,800
19.0
Feed
-
-
32,200
35.7
333,200
47.2
11,800
30.7
32,700
28.5
Other
150
5.6
21,500
23.0
145,400
20.6
_
-
29,200
25.4
Total
400
14.8
78,700
P7.4
644,500
91.3
32,000
83.6
87,800
76.5
Fixed Cost










Depreication
250
9.3
2.700
3.0
30,900
4.4
2,900
7.5
11,500
10.0
Interest
100
3.7
1,100
1.2
15,100
2..1
300
.8
5,000
4.4
Total Cost
750
27.8
82,500
91.7
690,500
97.8
35,200
91.9
104,300
90.8
Net income before tax or










.'Return to land mgmt.
1,950
72.2
7,500
8.3


3,100
8.1
10,500
9.1
:capital (family operation)










Income Tax
0

390
0.4
3,100
.5
0

929
.8
Net income after tax
1,950
72.2
7,110
7.9
12,400
1.7
3,100
8.1
9,571
8.3
Cash Flow
2,200
81.5
9,310
11.3
43,300
s:i
6,000
15.7
21,071
19.2
—A small Idaho grower who contracts with a'major producer for growing out trout. The small operator would provide the facilities and
labor, and receive 10 cents per pound of gain: The major company provides the fish at 7-8 ounces, feed, supplies, and harvest the fish.
-------
Table.IV-6. Pro forma statement of income and expenses for pan-size salmon
production project, Northwest 1975.
Medium Size
Item
Fresh Water
Stage
Salt Water
Staqe
Total
Annual
Percent
Pounds produced
(LiV'--:;,;3igiit basis)
Salns £> 31 c?nts/lb.
(round weight)
Variable Cost
Eggs or fry
Direct labor
Feed
Other direct cost
Total direct cost
Indirect Cost (including
admin istration
Total Direct and Indirect
Interest
Depreciation
Total Cost
Net income before tax
Income tax
Net income after tax
Cash flow
9,600
14,200
12,600
26,500
61,000
24,000
37,000
20,800
182,-600
44,500
247,900
32,000
273,700
500,000
4 55', 000
9,600
35,000
195,200
71,000
310,800
56,000
366,800
36,000
20,000
422,800
32,200
6,584
25,616
45,616
100.0
2.1
7.7
42.9
iJL6
68.3"
12.3
30.6
7.9
4.4
92.9
7.1
1.4
5.6
10.0
IV-12
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Net income before tax was calculated for all corporate types of operations.
Returns to land and capital and the owner-operator's labor were estimated
for family operations. Taxes were calculated in the conventional manner
both for corporate and' family operations. It must be emphasized that the
profit shown for the salmon operations is projected as no pan-size salmon
operation has shown a profit as yet.
IV-13
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V. PRICING PATTERNS
Pricing for the fish farming industry largely reflects supply and demand.
Supply determinants include large numbers of producers and large numbers
of substitute products, i.e., imported seafoods and other meats. Demand
characteristics are relatively undeveloped and markets are frequently very
selective for domestically produced fish. Demand appears to have a high
price elasticity; a one percent increase in price will cause a greater
than one percent decrease in consumption.
To place the entire pricing system in perspective, one can examine a few
general statistics on total fish consumption in the United States. In
1950, total per capita consumption of all fish, including shell fish,
was 11.8 pounds: 6.3 pounds, fresh and frozen; 4.9 pounds, canned; and
0.6 pounds, dried. By 1973, fresh and frozen consumption increased to
7.2 pounds but canned and cured consumption levels remained nearly con-
stant for a total per capita consumption of 12.6 pounds.
\
Data have not been compiled On the per capita consumption of such domes-
tically produced fish as trout and salmon, but total consumption amounts
to approximately 0.3 pounds per capita, an indication that domestically
produced fish play a relatively small but increasingly important role
in total fish consumption.
The market concentration is such that there are a number of sellers of
trout and salmon in the market place, such that no individual producer
or processor maintains any substantial oegree of market power. The
domestically produced food fish are sold competitively and are subject
to competition from other seafoods, imported catfisli and trout and other
meat products.
Unfortunately, very little research has been accomplished to investigate
the marketing processes involved or to delineate the" market potrntial for
any of the three food fish under consideration. Emphasis has been on the
production side with little attention being placed on commercial markets
and marketing problems. This probably has been due to the fact that the
najor markets until recently have been local or recreational (fish-out).
However, increased production and increasing volumes through the commer-
cial processors over the past five years have added importance to this
segment.
Although no definitive studies have been.made, the current price level
suggests that substantial consumer resistance is being 'felt because of
recent declines in meat prices. As other meat prices have decreased,
trout prices have been weakened. Price decreases of approximately five
cents,per pound have reportedly been made to move the fish to marketable
size. Once trout pass the optimum market size of 10 to 13 ounces, they
decrease rapidly in price and result in seasonal market imbalances or in
added freezing and holding costs.
V-l
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Trout Production and Prices
The quantity of trout produced on farms has increased over the past few
years. Total estimated quantity produced in the U.S. is summarized'
below for both live weight and dressed-weight (million pounds).
Total Trout Produced	Imported
Year
Live Weiqht
Dressed Weiqht
Dressed Weiqht
1970
9-12
6-3
2.0
1971
NA
NA
3.8
1972
14
9.3
2.5
1973
14-16
9.3-10.5
1.6
Total imports of trout have declined since 1969 as shown in Table V-l.
Imports from Japan of 1.5 million pounds accounted for almost 94 percent
of total trout imports in 1973.
Prices received by,farmers for live weight trout in the Northwest have
been reported by the industry as. follows:
Year
Cents/Pound
1970
45-50
19/1
45-50
19/2
50-60
1973
60-70
The above are based on live weight price or live weight equivalent price.
Tne 1973 price to the retailer for processed-boned trout was approximate-
ly $1.60 per pound, up from the $1.23 per pound reported in 1970.
Prices received by proaucers in other parts of the country were reported
at considerably higher levels than Northwest prices. These ranged up to
$1.20 live weight resulting from local sales and sales to fish-outs. It
shguld be noted also these small to medium-sized operations also experi-
enced much higher production costs.
V-2
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Table V-l. Imports of trout, fresh water other than lake trout,
1969 to 1973, by major country of origin
1969		1970		1971		1972		1973	
Country Pounds	Dollars	Pounds	Dollars Pounds	Dollars Pounds	Dollars Pounds	Dollars
Canada 4,196	2,982	34,328	19,4]4	60,506 35,125	107,879 32,445	15,101 14,050
Argentina, -	22,520	7,029	31,100	11,308	23,938	4,343
Honduras -	--	-	-	-	- -	11,550 8,075
Norway -	38,922	31,699
Japan 2,212,936	1,000,102	1,980,538	1,277,604	3,634,418 2,562,272	2,241,082 1,189,962	1,496,831 1,156,462
Other 27,630	14,044	9,991	3,616	114,478 78,341	129,174 67,649	10,890 5,566
Total 2,244,762	1,017,128	2,024,857	1,300,634	3,831,922 2,682,767	2,509,235 1,301,364	1,597,232 1,220,195
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Salmon Production and Prices
The estimated production of domestic pan-size salmon is about 1.2 to 1.5
million pounds for the 1975-76 season. Liveweight equivalent price is
approximately*$0.90 to $1.00. Prices at the retail level are reported
at $2.50 to $2.60 per pound for processed and about $2.85 for boned.
-------
VI. 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 fish culturing
facilities specified in this analysis.
Three effluent guidelines were considered:
BPT - Best Practicable Control Technology Currently Avail-
able, to be achieved by July 1, 1977
BAT - Best Available Technology Economically Achievable,
to be. achieved by July 1, 1983
NSPS - New Source Performance Standards (NSPS), apply to any
source for which construction starts after the publica-
tion of the proposed regulations for-the Standards
A technical document describing the recommended technology for achieving
the three guidelines to be published as a separate report by EPA is
referred to as the. Development Document (1).
A. Present Status of Effluent Controls
Flow-through culturinr: facilities. The current pollution control status
of native fish flow-through culturing facilities and alternative treat-
ment requirements to meet BPT and BAT Standards are outlined in Table VI-1.
At the present unie, approximately 17 percent of the industry operations
meet BPT standards. Included in this total are 12 percent of the farms
wh.ich treat normal flow and 5 percent which treat cleaning flow. The
remaining 83 percent of the farms would be required to install effluent
control facilities to meet the proposed standards. Treatment alternatives
available which would meet the standards are:
Alternative	Description
A-l	Construct new settling pond with pumping
facilities
A-2	Use existing pond for settling gravity
flow
A-3	Construct new settling pond - gravity flow
B	Vacuum cleaning
VI-1
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Table VI-1. Current pollution .control status of native fish flow-through culturing facilities
and alternative treatment requirements to meet BPT and BAT Standards*
In-Place Technology/Status
Treatment Alternative
Percent of Industry
Municipal Discharge


0.0
Treat Normal Flow
Sedimentation in rearing pond
Sedimentation in settling pond
Remove 80-90% through biological
treatment
TOTAL
Currently meeting BPT
Currently me&ting BPT
Currently meeting BPT
Currently meeting BPT
5
5
2
12.0
Treat Cleaning Flow
Currently meeting BPT

5.0
Have Existing Ponds-Gravity Flow
A-2

29.0
Must Construct New Ponds - Gravity Flow
A-3

29.0
Nothing in Place - Land Restraints
B

16.7
Nothing in Place - Require Pumping and
New Settling Pond
A-l or B

8.3
Total Native Flow. Through


-100.0
* BPT and BAT Standards are identical.
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B. Effluent Control Costs
Effluent control costs for the various types and sizes of fish culturing
facilities were presented in the Development Document (1). Costs were
prepared for each alternative treatment. These costs as prepared by
EPA for 1973 were inflated to 1975 levels and modified to fit the model
farm sizes.
Capital investment and annual operating cost for the alternative treat-
ment strategies as presented in the Development Document were based on
the flow rate cf 1, 10, 25 and 100 mgcT To convert the costs of the
alternatives as presented by EPA to fit the model farms, the water flow
for a given size of operation was estimated. The following scale was
used to convert the pounds of fish produced as shown in the model farm to
water flow:
Hatchery Flow (mgd)	Pounds of Fish Produced
The effluent control costs provided by EPA were "single point" estimates
in that they applied sDecifically to a given size of farm with a given
production volume. Effluent treatment cost vary with wasteflow and,
hence, processing volume. Estimates were made by assuming'that, for a
given treatment level, both investment and operating costs were a function
of quantity of wasttflow. Given that assumption, the four size facil-
ities provided by EPA were plotted and a cur\> was drawn to "fit" the
points.
Incremental investment and operating costs to meet the DroDosed BPT stand-
ards for flow-through operations are shown in Table VI-2. Costs were
developed for the four alternatives listed in the previous section and
for each size of model trout farm.
No costs were developed oy EPA specifically for the salmon fresh water
stage nor for the salt water grow-out stage. Since the industry is
quite new, most of the industry spokesmen indicated that they anticipated
little or no additional investment will be required to meet the 1977 and
1983 proposed effluent guidelines.
Investment costs shown in Table VI-2 include an approximate average
interest cost computed as follows:
1
10
25
100
11,458
114,583
286,458
1,145,833
VI-3
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Table VI-2. Effluent control costs for native fish flow-through
culturing facilities
Trout
Treatment	Northwest	Local
Alternative
Cost Item
Smal 1
Medium
Large
Small
Medium
(A-l)
Investment
7,500
11,800
23,300
7,800
10,300

Annual Cost
Interest
Depreciation
Operating Cost
375
375
110
590
590
510
1,165
1,165
2,330
390
390
130
515
515
320

Total Annual Cost
860
1,690
4,660
910
1,350
(A-2)
Investment
1,250
2,800
9,000
1,300
2,200

Annual Cost
Interest
Depreciation
Operating Cost
65
65
20
140
140
85
450
^50
530
65
65
25
110
110
60

Total Annual Cost
150
365
1,430
155
280
(A-3)
Investment
1,900
4,000
12,600
2,000
3,200

Annual Cost
Interest
Depreciation
Operating Cost
95
95
20
200
200
85
630
630
530
100
100
25
iro
160
60

Total Annual Cost
210
485
1,790
225
380
(B)
Investment
2,800
7,700
19,700
3,200
6,300

Annual cost
Interest
Deoreciation
Operating Cost
140
140
100
385
385
540
985
985
2,510
160
160
130
315
315
380

Total Annual Cost
380
1,310
4,480
450
1,010
VI-4
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Interest Cost = 1/2 x r
where	I = investment
r = rate of interest of 10 percent
Investment cost to meet the proposed guidelines range from $1,250 to
$7,500 for the small trout farm with total annual cost ranging from
$150 to a high of $860. For the large size t~ out operation, capital
investment ranges from $9,000 to $23,300 with a total annual cost of
$1,43.0 to $4,660.
VI—5
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VII. IMPACT ANALYSIS
The imposition of effluent control on fish hatcheries and farms will have
both direct and indirect impacts on the industry, on consumers, on sup-
pliers to the industry and on the communities where the farms and processing
plants are located. An analysis was made for the specific effluent con-
trol levels and for alternative treatment strategies designed to meet
these levels both in quantitative and qualitative terms to identify those
impacts that may be expected.
For the trout farms, the following types of impacts have been analyzed:
1.	Price effects
2.	Financial effects
3.	Production effects
4.	Employment effects
5.	Community effects
6.	International trade
No analysis was performed on the salmon farms as complete control costs
were unavailable.
Price Effects
Considerable competition exists among, the trout farmers in the production
and marketing of trout and to a limited extent among the salmon producers.
The salmon industry is in a very early stage of development with only
limited commercial marketing to date. As a result, the marketing struc-
ture is in a relatively undefined state at this time. Basically, the
trout farmer sells his o."oduct on the open market \.here competition is
keen, especially from other competing product3 and prices are set through
prevailing supply and demand conditions. As a result of these existing
pricing conditions, the trout farmer is faced with an*extremely difficult
situation in terms of the ability to pass increased costs forward to the
consumer.
Required Price Increase. Table VII-1 shows the price increases required
to pay for incremental pollution control facilities. These p.ice increases
were calculated as a percent of sales whe. e a 20-year cash flow was used.
Both treatment costs and revenues were discounted back to year 0 prior to
calculating the percentage increase required. This increase then indicates
the change necessary to keep the net present value of the farm constant.
The price increases were calculated on the basis of the wholesale prices,
f.o.b. plant, as stated, in the descriptions of the model farms. Relatively
high percentage increases are required for the small trout farmer located
in the Northwest based upon a 10
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Table VII-1. Percent price increase required to pay for incremental
pollution control - trout farms
	BPT above baseline alternatives
Type & Size of Plant	A-l	A^2	A^3
Northwest:




Small 1/
' Medium
Lane.
31.32
1.74
0.G8
5.28
0.38
0.21
7.64
0.51
0.27
13.87
1.33
0.62
Local:




Small
Medium
2.34
1.18
0.40
0.24
0.58
0.32
1.16
0.89
17 Based on 10 cent-per-pound grow-out margin for farmer.
V11-2
-------
lower price received by the farmer than for the other operations mentioned.
For the other operations, the price increases required to meet BPT standards
range from 0.21 for the large trout farming operations that can use alter-
native A->2 to a high of 2.34 for the small local trout farmer.
Expected Price Increase. The ability of firms to pass these costs through
the marketing system to the consumer is considered to be negligible. The
general, structure of the industry tends to be competitive with no major
producer or supplier maintaining any degree of control over the market
price. As a result, most farmers in this industry could be considered
price takers due to the marginal control over product prices. Factors
which contribute to this lack of price control include product perishability,
underutilization of production capacity and the fragmented nature of the
industry.
The inability of the industry to control prices is evidenced by the low
profit levels currently being achieved ir. this industry. Higher feed
costs as well as increased costs of other production inputs have resulted
in narrower profit margins than have been historically true. If the in-
dustry were able to pass increased costs through to the final consumer,
profit levels would have remained at the levelachieved in the late 60's
and early 70's.
Financial Effects
Two primary types of analyses were completed to assess the financial
impacts of the proposed cost on the model farms: (1) profitability, and
(2) present value of future net income stream.
Profitability impacts include the following:
1.	Pre-tax and after-tax income
2.	Return on sales
3.	Return on invested capital
4.	Annual cash flow
Pre-tax and After-tax Income. The impacts of effluent treatment costs on
pre-tax and after-tax incomes for model trout farms alternatives are
shown in Table VII-2. ^.Although incomes are reduced, the levels of reduc-
tion are not considered substantial. After-tax income reductions for
small farms range from $150 to $860, for medium size farms, the reductions
range from $300 to $1,430 and for large size operations, $1,140 to $3,700.
Return on Invested Capital. Return.on invested capital before and after
tax for model trout operations for the effluent treatment alternatives are
shown in Table VII-3.
VI1-3
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Table VII-2. Pre-tax and after-tax income for model commercial trout farming operations,
assuming no price change
Pre-tax Income	After-tax Income
Type and Size		 BPT 			BPT
of farms Baseline A-l	B Baseline A-l A^2 A-3
	(Dollars)			(Dollars)--
Trout
Northwest:
Small	1,950
Med i um	7,500
Large	15,500
1,090 1,800 1,740
5,810 7,135 7,015
10,840 14,070 13,710
1,570 1,950 1,090
6,190 7,110 5,680
11,020 12,400 8,672
1,800 1,740 1,570
6,809 6,705 6,009
11,256 10,968 8,815
Local:
r Small	3,100 2,190 2,945 2,875 2,650 3,100 2,190 2,945 2,875 2,650
Medium	10,500 9,150 10,220 10,120 9,490 9,571 8,478 9,348 9,267 8,761
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Table VI1-3. Pre-tax and after-tax rate of return as a percent of average Invested capital for model
commercial trout farming operations, assuming no price change
Pre-tax Income		After-tax Income
Type and Size		BPT			 BPT
of farms
Baseline
A-l
A-2
A-3
B
Baseline
A-l
A-2
A-3
B
Trout










Northwest:










Smal 1
60.4
33.3
55.7
53.9
48.6
60.4
33.8
55.7
53.9
48.6
Medium
4.0
3.1
3.8
3.7
3.3
3.8
3.0
3.6
3.6
3.2
Large
1.8
1.2
1.6
1.6
1.3
1.4
1.0
1.3
1.3
1.0
Local:










Small
4.0
2.8
3.8
3.7
3.4
4.0
2.8
3.8
3.7
3.4
Medium
3.7
3.2
3.6
3.6
3.4
3.4
3.0
3.3
3.3
3.1
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The baseline profit situation for the trout operations is relatively low
with a 1.8 percent return on invested capital for the large size opera-
tions. Small and medium sized operations have a higher percentage of
return on invested capital, but this includes a return to the operators'
labor as well as-capital and management.
With effluent controls, the reductions in the profits of the model trout
farms are relatively slight. Af-ter-tax profits for the small local opera,-
tions are reduced from 4.0 percent to a low of 3.0 percent after-tax for
alternative A-l. For the medium size local operations, after-tax returns
are reduced from an estimated 3.4 percent to 3.0 for alternative A-l, the
most expensive alternative, ':arge size operations are expected to have
profits reduced from 1.4 percent after-tax to approximately 1.0 to 1.3
percent, depending upon the alternative employed.
Return on Sales. Pre-tax and after-tax return on sales for model com-
mercial trout operations are' shown in Table VI1-4. Under baseline con-
ditions, pre-tax returns average between 8 and 9 percent for the small
and medium size operation. The exception is the small Northwest opera-
tion where sales are based on a 10-cent grow-out margin rather than a
full cost of production. The large operation has an estimated 2.2 per-
cent return on sales. Considering that the returns for the small and
medium sized.family operations also include the owner's lahor, it can
easily be seen that the margins of profitability for the trout producers
is at present at a low level. -The Dre-tax returns are reduced with the
imposition of pollution control standards to 5.7 to 7.9 depending upon
alternatives employed. For the large operations, the reduction is from
2.2 percent Lo 1.6 to 2.0 percent for the various alternatives. A similar
picture is portrayed by viewing the after-tax income as a percent of
sales.
Annual Cash Flow. The estimated cash flow is shown in Table VII-5. The
annual cash flow for the small Northwest operation is estimated at $2,200.
This is reduced to a low of $1,715 under alternative A-l. For medium
sized Northwest operations, an annual cash flow of $9,810 was estimated.
A reduction for the least cost alternative, A-2, is about $160; whereas,
the reduction for alternative A-l, the most expensive, is aoproximately
$840.
A similar pattern is shown in the cash flow for the large operations. The
annual cash flow is estimated at $43,300. The cash flow was reduced to a
low of $40,700 for alternative B.
The local trout operations have a slightly higher cash flow than the North-
west operations as represented by information received from the producers.
An annual cash flow of $6,000 was estimated for the small operations which
is subsequently reduced to $5,480 to $5,910. Medium sized operations have
a cash flow of $21,071 which is reduced to $20,500 under alternative A-l.
VI.I-6
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Table VI1-4. Pre-tax and after-tax return on sales for model commercial trout operations,
assuming no price change
Pre-tax Income	After-tax Income
Type and Size		 BPT 			BPT
of Farms Baseline A^l K^2 A^5	B Baseline 7TT A^2 A-3
	(Percent)			(Percent)--
Northwest:
Small	72.2	40.4	66.7	64.4	58.2	72.2	40.4	66.7	64.4	58.2
Medium	8.3	6.5	7.9	7.8	6.9	7.9	6.3	7.6	7.4	6.7
Large	2.2	1.5	2.0	1.9	1.6	1.8	1.2	1.6	1.5	1.2
Local:
Small	8.1	5.7	7.7	7.F	6.9	8.1	5.7	7.5	7.6	6.9
Medium	9.2	8.0	8.8	8.8	8.3	8.3	7.4	8.1	7.9	7.6
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Table VII-5. Estimated cash flow for model commercial trout
farming operations
Type and Size		BPT	
of Farms	Baseline A-l	A-2	A-3	B
(Dollars)-
Northwest:
Small	2,200	1,715	2,115	2,085	1,960
Medium	9,810	8,970	9,649	9,605	9,094
Large	43,300	40,737	42,606	42,498	40,701
Local:
Small	6,000	5,480	5,910	5,875	5,710
Medium	21,071	20,493	20,958	20,927	20,576
VII-8
-------
Net Present Value (NPV). Another measure of the financial viability of a
farm is the present value of projected streams of costs and revenues. With
this measure it is possible to access the likelihood of a continued plant
operation versus plant closure. By discounting the future cost and revenue
stream for a particular operation, at the estimated cost of capital, neg-
ative net present values would indicate probable plant shutdown. To com-
plete this analysis, the following assumptions were made:
(1)	Existing plants have sunk investments but they presumably could
-be scrapped or salvaged and the salvage value reinvested else-
where as an alternative to the farming operation. Based on.
information from the farmers, salvage values of buildings and
facilities were estimated at 16 percent of the replacement cost
for the Northwest operations and 20 percent for local operations.
This relatively low value is based on little opportunity or no
opportunity for use outside of commercial fish production for
the facilities developed. L?nd constitutes a major salvage
value for a fish farm and the salvage value of land is based
upon its current valuation.
(2)	Revenue and expenses are assumed to remain constant over time;
i.e., 20 years of operation.
(3)	The after-tax cost of capital for the industry is estimated at
7.5 percent.
The net present values for model commercial trout and salmon farms are
shown in Table VII-6.
The net present values of farms are reduced only slightly in all cases
after the imposition of effluent control standards. Even for alternative
A-l, the most expensive alternative, the net present values are not reduced
to a point where shutdown may be considered.
Production Effects
The imposition of effluent control standards will cause only minor pro-
duction effects in the trout segments. No significant long-runcurtail-
ment in total production resulting from the imposition of these standards
is expected nor are there any farms that are expected to shutdown their
operations because of the economic burden the controls may impose.
Employment Effects
Total employment in the trout segment is estimated for 1973 at between 325.
to 450 full time employees.plus an estimated 160 part-time employees. The
imposition of effTuent control standards on the industries should not have
any effect on employment.
VI1-9
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Table VI1-6. Net present values of model commercial trout farms
before and after the imposition of alternative
effluent treatment standards
Type and Size
of Farm
NPV of Farm
Before Controls
A-l
A-2
A-3
B
Northwest:





Small 1/
Medium JJ
Large
20,995
38i248
61,855
12,374
23,114
22,641
19,541
35,010
49,654
18,891
33,901
46,452
17,176
26,664
26,241
Local Market:





Small 1/
Med'.um 1/
2?,223
80,556
13,098
68,278
20,668
78,122
19,968
77,234
17,698
71,381
1/ Family operations
VII-10
-------
Community Effects
With only slight reduction in profits on the trout industry and no expected
shutdown of operations or reduction in the level of production, no com-
munity effects are visualized at this time.
International Trade
The trout industry is receiving some competition from imported trout.
However, due to disease problems in overseas producing countries, this
impact has been decreasing over the recent years. Only a negligible
amount of trout are exDorted overseas. As a result, the imposition of
effluent controls should have little impact on international trade.
VII-11
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Part 3. POND FISH CULTURING
(CATFISH, CATFISH FINGERLINGS, MINNOWS, AND GOLDFISH)
VIII. INDUSTRY STRUCTURE
A. Characteristics of the Industry Segments
Catfish Farms
United States commercial catfish production is found primarily in the
South with the heaviest concentration in the Mississippi River Delta
region. Some estimates place that region's production as high as 80
percent of the nation's total commercial production (11).
An analysis of the industry is difficult because the overall structure
of the industry is not well defined and considerable differences exist
in published production estimates. No nationwide census exists to pro-
vide information on a consistent basis from a single agency. The Nation-
al Marine Fisheries Service in Little Rock, Arkansas has recently begun
collecting production data from a variety of sources and has issued pro-'
duction estimates for recent years. For 1973, this effort was accom-
plished with the help and assistance of the U. S. Dept. of Agriculture,
Soil Conservation Service, and the U. S. Dept. of Interior, Fish and
Wildlife Service. The state conservationsists in each of the major
producing states were contacted for additional information on catfish
production as well as that for such other fish as minnows, goldfish,
and game fish.
Catfish are produced in a variety of operations including: conmercial
farming, combination farms, fish-outs, and personal use ponds. Thou-
sands of private pond operations located throughout the United States
stocked catfish and may sell fish locally. The categories are not clear-
ly defined on a national basis nor are the estimates of the numbers of
the various type of producers consistent from state to state. States
such as Alabama and Arkansas have rather detailed compilations of their
own production but these are not necessarily consistent with other
states or with the National Marine Fisheries Service data. However,
much progress on obtaining a consistent set of data for all states has
been realized in recent months. For the purposes of the present study,
producers may be grouped into four categories:
Commercial Farmers. The above mentioned producers and levels of
production refer to commercial producers. Catfish farmers are
considered commercial if they market through a processor or
various local marketing outlets. The size of farms vary greatly
from less than one acre of pond area to a thousand acres or more.
The commercial farmers may produce food size fish, fingerlings,
or both.
VIII-1
-------
Combination Farmers. Combination farms are harvested yearly,
initially by fee fishing and then by a commercial harvest at the
end of the season.
Fish-out. Fish-out farmers sell to individuals who come to a pond
and pay for the privilege of fishing. Many of the fish-out ponds,
if the operator actually produces the fish, are included in the
overall industry estimates as compiled by the Soil Conservation
Service; however, pay lake or fish-out operations involving no
commercial harvests are excluded from the present Guidelines as
defined in the Development Document (1).
Personal I'se. Literally thousands of ponds throughout the U. S.,
especially in the South, Midwest, and the Great Plains States,
stock catfish or other warm water game fish. These ponds are
typically harvested on only a casual basis by personal fish-out
or in some case? by pay fish-out; thus, they are not covered by
the guidelines. They will not be considered further in this
report.
Catfish Production In Perspective
Data obtained on total catfish production in Alabama in 1971 place the
various categories of catfish production in perspective. The percentage
of acreage devoted to each category is assumed to be fairly representative
of the percentage nationwide. A total of 8,166 acres devoted to catfish
production in 1971 were identified in Alabama. This consisted of the
following breakdown by type of producer.

Acres
Percent
Commercial
2,888
35.4
Combination
2,100
25.7
Fish-out
2,104
25.7
Personal
1,074
13.2

8,166
100.0
This tends to place commercial catfish acreage in perspective with total
acreage. Thirty-five percent of the acreages reported was devoted to.
commercial production ana with an additional 26 percent to a combination
of,fish-out and commercial, representing 4,988 acres. The data indicate
some differences. These data listed 1,330 commercial catfish acres for
Alabama in 1971 compared with the above 2,888. This is partially, explained
by the method of data collection. NMFS commercial acreage (1;440) was
derived from actual commercially processed acreage, while .the 2,880 acres
in the Alabama survey represents the total acreage of ponds that sold fish
through either a private sale or a commercial processor (Table VIII-1).
VII1-2
-------
Table VIII-1. Catfish production in Alabama, by size and type of operation, 1971
1 ¦
	Acres	
1-5 6-10 11-25 26-50 51-100 100-200 Total
Commercial acres	310 368 540 712 900 150 2,888
Combination acres 402 360 594 600 150		 2, 100
Subtotal	712 728- 1134 1312 1050 150 4,988
Fish-out	2,104
Personal	1» 0.74
Total	8, 166
Commercial farms	124 49 30 19 12 1 235
Combination farms-'' 161 48 33 16 	2		0	260
Subtotal	285 97 63 35 14 1 495
Fish-out	341
Personal.	340
Total	1,176
Consists of fish-out ponds followed with commercial harvest.
Source: Dept. of Agricultural Economic and Rural Sociology, Auburn
University, "Alabama Catfish Producers and Southern United
States Catfish Processors," (3).
VI11-3
-------
The production of commercial catfish in Arkansas amounted to 8,487 acres
harvested in 1972 according to a joint unpublished report by.the Arkansas
Game and Fish Commission (Bureau of Sport Fisheries and Wildlife) and the
Arkansas Agricultural Extension Service (6 ). Total production of catfish
was reported at 16.2 million pounds for an average yield of 1,892 pounds
per acre' (Table VII1-2). It was further reported that the acreage solely
devoted to channel catfish increased by less than one percent over the
period 1970 through 1972. The tremendous growth of the previous three
year period 1967-1970 was halted due for the most part, to the narrowing
profit margin in 1969 and 1970. Some small farms stopped producing, but
these were offset by new operations. Some farms switched from c.'ti'isn to
minnow fanning or other crops (5).
These estimates are also larger than those reported by the National
Marine Fisheries*Service for reasons noted earlier. The NMFS estimated
a commercial production in 1971 at 6,653 acres and 3.8 million pounds;
the state survey 8,487 acres and 16 million pounds.
Commercial Production. The commercial production of catfish increased
rapidly during me perioci of 1967 through 1971 and reached a peak in
1973. Since that time the rising cost of production has caused a-decline
in total production. Many operations have stopped or cut back, and many
producers in the Delta have converted their ponds to rice or soybean
production because of the higher profit potential.
In 1967, approximately 15,000 acres of commercial catfish ponds existed
of which 10,000 acres were' harvested.]_/ . B/ 1973, the National Marine
Fisheries Service reported 54,633 commercial acres with a total yield
of 50 million pounds (Table VIII-3) and an average yield per harvested
acre of about 1 ,500 pounds.
NMFS production data for 1973 show commercial pond acreage for food
size catfish at 54.6 thousand with an estimated production of 49.8
million pounds. Tota.l harvested acreage was esimated at 29.9 thousand
acres, approximately 55 percent of the total commercial acres. 1970
was the first year the NMFS compiled such data, and though the data are
not complete, they are becoming increasingly so each year. For 1973, the
data maintained by the Soil Conservation Service were incorporated into
the estimate.
A detailed breakdown of commercial acres, harvested acres, and pound
yields by major producing states is shown in Table VIII-4. Mississippi
is the major producing state with 51.9 percent of total production,
Arkansas is second with 16.0 percent of production, and Alabama and
1/ Commercial acreage refers to the total number of acres stocked with
commercial catfish. Harvested acres refer to the actual acreage har-
vested. This variation reflects management decisions not to harvest
during the normal harvesting season. Some producers will maintain
their ponds and grow the catfish to a larger size. Others may only
partially harvest a pond leaving the small fish to reach marketable
size. In addition, various feeding programs cause differing rates of
growth and, consequently, require longer growing periods.
VIII-4
-------
Table VII1-2. Commercial catfish production in Arkansas during 1972.
Acres
Pounds/
Acre
Total
Pounds
Price
per
Pound
$
Total
Value
$
Food Fishes - Intensive
	 (Harvested)	
Channel catfish
8,433
1,892
15,955,200
.44
7, 020,300
Blue catfish
54
2,000
108,000
.40
43,200
Buffalo fish
363
529
192,100
. 19
36, 100
Trout
27
61,296
1,655,000
.89
1,473,000
Total
8,877

17,910,300

8,572,600
Food Fish in Polyculture





(Intensive)





Channel catfish )
51.5
1,243
640,000
.44
281,600
Buffalo fish )

651
335,400
. 19
63,100
Sport fishes )

23
11,800
.95
11,300
Total
515

987,200

356,000
Food Fish - Extensive





Buffalo fi sh )
9,959
25
256, 0-00
. 19
48,100
All other species )

4.4
44,000
.35
15,400
Total
9,959

300, 000

63,500
Total Food Fish
19,351

19,287,500

8,992,100
Intensive
9,392

18,897, 500

8,928, 600
Extensive
9,959

390,000

63,500
Source: Bailey,' Msyer, Martin, and Gray, "Farm Fish Production in
Arkansas during 1972." Unpublished report by Arkansas Game
and Fish Commission, Bureau of Sport Fisheries and Wildlife
and Arkansas Agricultural Extension Service.
VI11—5
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Table VIII-3. , Summary of commercial catfish production, 1970-1973
Year
Commercial
acres
Harvested
acres
Pounds
produced
1970
1971
1972
1973
40,406
46,0.34
Not available
54, 633-'
19,842
25, ?35
29,900
34,086,695
38,084,000
49, 809,433
Source: National Marine Fisheries Service, Little Rock, Arkansas.
VII1-6
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Table VIII-4. Estimated total number of commercial acres
and pounds of foodsize catfish produced, by state, 1973
Other Production
Commercial Harvested Pounds	(Raceways, Cages
State	Acres	Acres (Live Weight)	Tanks)	Value
Arkansas
9.
197
5,
276
7,
993,429


$ 4,
156,
583
California

917

391

.568, 200
5,
000

544,
540
Florida

241

158

238, 545
280,
000

305,
941
Kansas
1,
141

610

438,564



315,
766
Kentucky

49

14

10, 650



10,
117
North Carolina

59

29

29, 100



14,
550
Oklahoma

919

445

457, 355



352,
163
Texas
2.
391
1,
337
1,
718,540
51,
500
1,
527,
394
V
Alabama
4,
773
2,
460
3,
690, 000


1,
845,
000
Georgia
1,
607

884
1,
326, 000
907,
500
1,
116,
750
Louisiana
4,
241
2,
333
3,
499, 500


1,
749,
750
Mississippi
26,
112
14,
362
25,
851,600


12,
925,
800
South Carolina

399

220

330, 000
118,
500

224,
250
Tennessee
1.
381

760
1,
140, 000
316,
500

728,
250
2/ .











Arizona

41

22

22, 000



11,
000
"Illinois

462

254

254, 000
80,
000

167,
000
Indiana

47

26

26, 000



13,
000
Missouri

619

341

341,000



170,
500
Others

37

20

20, 000
90,
000

10,
000





47,
954, 483
1, 855,
000



National Total
54,
633
29,
942

49,
809,483

$26,
188,
354
1/ Productior estimated from reported acreage
2/ Production and acreage estimated
Source: National Marine Fisheries Service, Little Rock, Arkansas.
VIII-7
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Louisiana are third and fourth with 7.4 and 7.0 oercent, respectively.
Combined, the 4 states account for a total of 82.3 percent of total
production.
Number of Farms. In the 1973 production survey, NMFS estimated the
total number of producers to be 1759 (Table VIII-5). According to that
survey, 30 percent of the farms were located in Mississippi and 24
percent in Alabama. Only 8 percent were located in Arkansas.
A similar survey was conducted by the Soil Conservation Service (USDA)
coveri.-.g essentially the same period of time. The results of that
survey are contained in Table VIII-6. In that survey a coca! of 2,337
producers were estimated with 28 percent in Mississippi' and 21 percent
in Alabama. The number of producers in Arkansas reported in this
survey was twice as high as that in the NMFS survey. Possible reasons
for the discrepancies between the surveys lies in the extent of the
area surveyed and the criteria used in identifying a producer. Obviously
the criteria used bv the NMFS was more stringent or limiting. For
example it may be assumed that the USDA survey included forms which
were not actively iri production at the time or the suwey.
Subsequent to the above survey, the Soil Conservation Service conducted
a survey of producers in 1975. The total number of producers was
estimated at 1934 reflecting close to a 20 percent decline since 1573.
This estimate is used subsequently in this analysis- in developing a
baseline for 1977.
Size of Farms. Detailed information on the size distribution of catfish
producers was obtained from three major producing states, Alabama,
Mississippi and Louisiana. Although these data do not cover all of the
estimated 2,100 producers, its approximately 43 percent coverage reflects
typical total size distributions (Table V111-7).
Small' producers (ten or fewer acres) account for 72 percent of all producers.
Ftfty percent raise from 1 - 5 acres of catfish and an additional 22
percent, raise from 5-6 acres. This group would represent part-tir.:3
producers engaged, most likely, in other types of agricultural production.
They would use their catfish programs as an important supplement to
their income.
Medium-size producers (11 to 99 acres) are also primarily part-time
producers, they represent approximately 25 percent of the total number
of producers.
Approximately three oercent of the remaining producers were reported to
have acreages totaling more than 100. Generally at least 160 acres are
needed for full-time catfish production. Because of better management
VII1-8
-------
Table VIII-5. Estimated number of commercial
catfish producers, 1973

No. of

No. of
State
Producers
State
Producers
Alabama
416
No. Carolina
6
Arkansas
144
Oklahoma
6
California
37
So. Carolina
25
Florida
18
Tennessee
82
Kansas
91
Texas
94
Kentucky
9
Other
6
.Louisiana
167


Mississippi
539
TOTAL
1, 759
Source: National Marine Fishery Service, Little Rock, Arkansas.
VIII-9
-------
Table VIII-6. Estimated number of commercial catfish producers and
total number of commercial acres by major producing states, 1973
State	No. of Producers	Potential
Commercial Acres
Alabama
495

4, 773
Arkansas -
341

9, 179
California
?3

920
Georgia raceway
21

571
pond
43

1,875
Total
64

2,446
Illinois
14

213
Kansas
50

1,500
Louisiana
167

3, 114
Mississippi
675

28,826
Missouri
140

2,520
N. Carolina
5

46
S. Carolina Pond
25 (includes 3 raceway) 478
Tennessee
.125
Pond
1,381


Raceway
211
Texas
100

2,280
Oklahoma
38

933
Other
50

500
Total
2,387

59, 320
Source: USDA, Soil Conservation Service from representative states.
VIII-10
-------
Table VII1-7. Size distribution of commercial catfish producers in Alabama, Louisiana and Mississippi, 1973
Acres
Alabama
. Louisiana
Missis
sippi -

Total
No.
%
No.
%
No.
%
No.
%
1-5
124
52.8
87
61.7
241
44.8
452
49.5
6-10
49
20.8
20
14.2
135
25. 1
204
22.3
11-20
30
12.8
18
12.8
73
13.6
121
13.2
21-40
19
8. 1
8
5.7
33
6.1
60
6.6
40-100
12
5. 1
6
4.2
29
5.4
47
5.1
> 100
1
0.4
2
1.4
27
5.0
30
3.3
Total
235
100.0
141
100.0
538
100.0
914
100.0
Source: USDA, Soil Conservation Servire
-------
and feeding programs and more detailed attention, larger producers
will produce greater yields per acre than smaller ones. The average
production for commercial producers is considered about 1,800 pounds
per acre but it may range from 800 to 2,800 pounds.
Catfish-Fingerling Farms
The National Marine Fisheries Service has completed a partial listing
of commercial catfish-fingerling producers for 1973 as summarized
below:
State
Number
Alabama
8
Arkansas
71
California
10
Florida
3
Georgia
Z5
Illinois
3
Iowa
3
Indiana
1
Kansas
25
Kentucky
3
Louisiana
73
Michigan
2
Mississippi
111
Missouri
99
North Carolina
2
Ohio
24
Oklahoma
17
Oregon
1
Pennsylvania
7
South Carolina
5
Texas
12
Other
15
Total
520
Many fish culturing activities combine the production of fingerlings
with food size catfish or to a more limited extent may combine fingerlings
with minnow production.
Detailed statistics are not available that cover the volume of fingerling
production. In most cases fingerling production- is included with catfish
production. Arkansas, however, reported a total of 1,564 acres devoted
to commercial fingerling production, 98 percent of which were channel
catfish. Total yield was reported at 34.6 million head representing an
average production of 22,100 head per acre. (5)
VIII-12
-------
Mississippi reported the number and size distribution for fingerling
producers, and food fish and fingerling producers. Of the 675 producers
of catfish in Mississippi 538 produced only food fish, 25 produced
fingerlings only and 112.produced both food fish and fingerlings. This
indicates that approximately 20 percent of the catfish producers also
produce fingerlings if this pattern would hold true for the remaining
states. A size distribution is shown in Table VIII-8 for fingerling
producers in Mississippi.
Minnow Farms
Commercial minnow oroduction in the United St-tes is compai atively
recent. In the past twenty years as Stocks of wild minnows declined
and fishing pressure increased, the commercial production of minnows
has grown rapidly. Today approximately 57,000 acres of ponds and lakes
are used for commercial minnow production in the United States.
Commercial Production. In an effort to obtain current data on the
minnow industry USOA Soil Conservation Engineers and Biologists were
contacted in the main producing states and information was compiled
on the number of oroducers, commercial acres and the estimated volume
of production. This is shown in Table VII1-9. The number of farms has
remained relatively stable since 1973 and the data in the table are
considered to reflect the current situation.
Arkansas is the ma.ior producer and accounts for nearly half of the total
acres. Its higher average acreage yields *llow Arkansas to produce an
estimated 60 to 70 percent of the U.S. total. Arkansas production con-
sists of 86 percent Golden Shiners; the remainder is made up of Fathead
Minnows, and goldfish (used for bait purposes).]/
Minnesota, the second largest producer, has an estimated 13,000 acres of
ponds and natural lakes--the majority of water used is natural lakes.
Production in the natural lakes is not as intensive as that of the pond
culture found in such Southern states as Arkansas. Also, in the attempt
to control production levels, many are withheld from yearly production.
Minnesota has only 57 producers for the 13,000 acres.
Other states with substantial production include Missouri, Mississippi,
Kansas, and Louisiana.
Overall, there appear to be approximately 400 commercial minnow producers
with r. total water acreage of 57,000. Total production is estimated at
approximately 13.9 million pounds (excluding the production in Minnesota
which is unknown).
1/ Goldfish are generally classified in the trade as "plain" or "fancy".
Plain goldfish are used in the bait-trade;.fancy goldfish are sold in the
aquarium trade. Because many growers produce goldfish for bait and
minnows in the same facilities bait trade goldfish have been placed in
the same category as minnows. Fancy goldfish grown for the aquarium trade
are classified in the goldfish farm category.
VIII-13
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Table VIII —8. Size distribution of commercial Mississippi fingerling producers, 1973

Fingerlings o
inly
Fo^d fis
h and fingerlings.
Acres
No. farms Percent
Ave. size
No. farms
Percent
Ave
. size





FF
Fing.
1-5
13 52.0
2.8
13
11.6
3.0
1. 1
o
1
NO
3 12.0
7.3
17
15.2
5.4
2.6
11-20
3 12.0
15.0
16
14.3
10.8
2.8
21-40
3 12.0
35.3
19
16.9
23.5
4.5
40-100
2 8.0
81.5
14
12,5
60.8
7.6
> 100
1 4.0
320.0
33
29.5
319. 3
52.3
Total'
25 100.0
693
112
100.0 13,139
Total 14.
2. 021
160
Source: USDA Soil Conservation Service (17).
-------
Table VII1-9. Estimated number of commercial minnow producers, total number of
commercial acres, and acreage yield by major producing states, 1973
State
No. of Producers
Commercial Acres
Production (lbs)
Per acre Total
Alabama
3
350
250
87.500
Arkansas
53
30, 500
350
10,675,000
California
24
250
240
60,000
Georgia
3
20
250
5, 000
Illinois
4
125
363
45,800
Kansas
10
1, 000
150
150,000
Louisiana
10
1, 070
300
321,000
Minnesota
57
13,000
-
Unknown
Mississippi
35
1,649
350
577,000
Missouri
40
3, 400
250
850,000
Oklahoma
20
431
200
86,200
N. Carolina
6
127
150
19,000
S. Carolina
14
76
94
7, 100
T ennessee
15
300
200
60,000
All other states
100
5,000
200
1,000,000
Total
394
57,298

13. 993, 600—7
— Excluding Minnesota.
-------
Size of Minnow Farms. As Table VI11-9 indicates, the average minnow farm
is 145 acres; thus, the average commercial minnow farm tends to be larger
than other types of warm water acquacultural activities. The industry has
some farms of more than 1,000 acres. A complete size distribution is
available only for Mississippi and is shown in Table VIiI-10. Mississippi's
size distribution data may be useful. Small farms, those with 10 or fewer
acres, accounted for forty-three percent of the farms. Fifty-three per-
cent are "medium" and have from 11-100 acres. Large farms, those of greater
than 100 acres, constitute 3.3 percent of the Mississippi farms.
Goldfish Farms
Aquarium goldfish production, perhaps pore than any other type of fresh
water aquaculture, demands a very high degree of management and investment
for successful production. Sophisticated techniques in breeding, controlled
growing, disease control, pond management, selection, shipping and handling
all determine the success of an aquarium fish producer. In fact, the high
level of technology and management required to produce quality goldfish
readily converts some would-be aquarium goldfish producers to bait pro-
ducers.
Because there is such a difference in the level of'technology, investment
and economies between the production of aquarium-type goldfish and bait-
type goldfish, it is recommended that bait-tyDe goldfish production be
classified among other bait fish production. Aquarium goldfish producers
would then necessarily constitute the goldfish category.
Discussions with industry personnel resulted in data which estimate the
number of commercial goldfish producers, ponded acres and volume of pro-
duction. The limited number of commercial producers in many states,
necessitated the aggregation of volumes to avoid disclosure of individual
operations. Because only the producers of fancy goldfish were included
and all those identified were at least 60 acres in size, the total pro-
duction number is low. (Many smaller producers may dea1., on occasion, in
a limited number of fancy goldfish or may produce fancy goldfish during
certain months of the year, but their operations are primarily in bait-
goldfish. As a result, those operations were included in the minnow
segment.)
Number of Producers and Volume of Production. Industry sources indicate
that the United States has aporoximately 12 commercial producers of fancy
goldfish (Table VII1-11) and they range from 60 to over 700 acres (3 separ-
ate farms). A number of sources have listed names and numbers of small
goldfish producers in the 1-10 acre category, but the contractor was un-
able to consult such growers. Either the;farmers were no longer producing
goldfish, could not be located, or were producing for bait purposes only.
VII1-16
-------
Table VIII-10. Size distribution of commercial Mississippi
minnow farms
Total		Minnows only
acres
No. farms
Percent
Ave. size
1-5
8
26.7
2.5
6-10
5
16.7
7.4
11-20
8
26.7
18.1
21-40
3
10.0
33.3
40-100
5
16.6
74.4
> 100

3.3
800.0
Total acres
30
100.0
1,474
Source: USDA, Soil Conservation Service, Jackson,
Mississippi, July, 1973.
VII1-17
-------
Table VIII-11. Estimated number of commercial fancy goldfish producers and total
number of ponded acres


Ponded

State
No. of Producers
Acres
Volume



(million head)
Maryland and )
Pennsylvania )
4
380
42.0
Arkansas and )
Missouri )
3
270
27.0
North Carolina )



Indiana )
Alabama )
5
440
51. 0
Georgia )




12
1,090
120. 0
-------
Total production approximates 120 million head: 42 million are produced
in the Maryland and Pennsylvania area, 51 million are produced in the
four state area of North Carolina, Alabama, Georgia and Indiana, and an
estimated 27 million are produced in Arkansas and Missouri with most
being grown in Missouri.
Industry production averages approximately 110,000 head per acre based
upon gross acres, including those used for the maintenance of brood fish.
Yields by exceptionally good producers may average up to 150,000 fancy
goldfish per acre.
Size of Producers. Individual fancy goldfish farms range from one acre
to the largest producer with 750 acres (3 separate farms). For the purpose
of this study, the industry was classified into three size categories:
1-10 acres, representing the small producers; 11-100 acres, representing
the medium size producers and greater than 100 acres representing the
large producers.
Other Gamefish Farms
Data for this segment cannot be effectively gathered. The segment produces
crappies, bluegili, large and small mouth bass, and other game fish. The
species are raised to a fingerling stage and sold to sporting clubs, civic
organizations, and private game pond owners for stocking purposes.
Because of their very low conversion rates (four pounds.of feed to one
pound of gain for Other-Game fish vs.' 1.75 to 1 for catfish or 2 to 1 for
trout), the production of these species has not been commercialized. Some
states prohibit their sale as commercial food fish. State and federal
hatcheries produce these species for stocking purposes and distribute
them free or at a low cost (below commercial cost of production) to in-
terested non-profit organizations for stacking purposes. As a result, no
commercial producer of oredominately game fish production was identified -
other than pay lake operations.
Several of the producers contacted- produced game fish as a very limited
portion of their total operation and, in some cases, only on a consignment
basis. In moist cases, this represents less than one percent of their
total production though on occasions as high as 10 percent.
Production generally is in conjunction with catfish fingerlings, and the
game fish are sold at the fingerling stage.
The Bureau of Sport Fishermen has developed a partial list of producers
by state including:
VI11-19
-------
State
Partial Number of Producers
Bluegill and CrappTe
L. Mouth Bass
Arkansas
Georgia
Kansas
Louisiana
Mississippi
Missouri
Oklahoma
Texas
TOTAL
70
2
6
1
4
11
2
80
2
8
3
8
24
4
3
96
132
Results of an industry survey indicate that these producers are active
producers of other types of fish such as trout, catfish, and minnows or
goldfish. No information is available on size of operation, value of
production, or on the production integration of these species with
others.
Based upon information surmiarized below, it was recommended to EPA that
the game fish category be dropped from further consideration in this
report. The recommendation was followed. The reasons are:
1.	All identified commercial gamefish operations were produced in
conjunction wiih other species production and normally accounted
for less than 10 percent of overall production.
2.	The production of Other-Gamefish is not comDetitive with trout
and catfish because of the larger area required to culture them
and the lower feed conversion efficiency.
3.	The production for stocking is in direct competition with pro-
duction from state and federal hatcheries.
4.	In many states the marketing of Other-Gamefish for food is
prohibited.
The commercial production of food fish and minnows in the United States
may date back to* the late 1800's; however, most industry growth occurred
during,the late 19601s and early .19701s. As a result, industry's high
volume is relatively new, its markets not yet large scale and dependable,
and its producers still relatively fluid. Generally speaking, the in-
dustry has concentrated on production rather than marketing. Most of the
promotional efforts to develop increased market size and greater product
loyalty are of recent origin and relatively small in scope.
B. Market and Product Concentration
VII1-20
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Producers tend to market on an independent basis. Many small producers
sell locally to families, restaurants or fish markets. Larger producers
tend either to market through processors, who handle the selling functions,
or process the fish themselves and market through a number of brokers
located in the larger cities. Each segment of the industry is somewhat
unique and will be discussed in turn.
Very little published data are available on the market organization or
concentration. Even basic statistics in terms of pounds of fish marketed
are virtually non-existent with the exception of recent data compiled
by the National Marine Fisheries Service on catfish. Marketing analyses
are necessarily general. Neither prices nor customers are firmly established
and none of the producer? has a firmly established position in the market.
Catfi sh
Three types of catfish are marketed in the United States: pond-reared,
wild, and imported. Total production of pond-reared catfish is estimated
at 46 million pounds; wild caught ranges between 30 to 40 million pounds,
(19) and imported catfish amounted to 6.6 million pounds (dressed weight)
in 1973. In 1975, over. 10 million Dounds (live weight) were imported.
As a result, the marketing system is widely diverse with much of the
marketing activity taking place at the local level.	'
Recent market information released by NMFS identified the movement of
farm raised catfish through the marketing process. Based on data from
a sample of 8 catfish producing states, catfish moved to the market through
the following channels:
Market Movement	Percent
Processor	32
Local retailers	24
Live haulers 1J	31
Pay lake	1,3
\J Live hauler? may sell to local outlets v;hc offer
live fish for sale, but the majority sell to pay
lakes for fish out operations.
It is well to note that there was considerable variation reported by the
•various producing states. For example, the amount moving through com-
mercial processors may vary from 0 percent in states like Kentucky and
North Carolina to as high as 70 percent in Florida.
VI11-21
-------
The United States has an estimated 20 coironercial size processors. Of
that group, only four are large enough to exercise some degree of domi-
nance in the industry.
Mi nnows
The production and marketing of minnows is generally a highly integrated
operation among the larger firms. Approximately seven or eight large
producers market on an interstate basis and, in fact, may cover much of
the United States. The largest producers may account for approximately
20 percent of total volume. Because of the high investment for delivery
equipment required to transport live minnows, the large producer-distributor
enjoys economies of scale.
The large-scale producer-distributor.establishes delivery runs and services
his customers regularly. Deliveries may be made directly to bait retailers
or to bait suppliers who further distribute the minnows to the local bait
shops. Because a constant and reliable delivery service is essential, a
producer must have a large, well-managed operation to supply minnows of a
consistent size, on a year-around basis with a peak seasonal requirement.
In addition, many small local producers compete favorably and tend to
sLabilize marketing. In many cases, they market part of their minnows
through the large operators during certain seasons of the year.
Goldfish
The goldfish industry is highly concentrated with 12 known producers,
one of which would dominate marketing with a very high percentage of the
total market.
The marketing of goldfish is again a sophisticated operation requiring a
high level of technology and equipment to sort, pack and ship live fish
for distribution throughout the U.S. The major Droducers are fully in-
tegrated through wholesaling and delivery. They acquire orders, sort and
grade fish, package in oxygen-supplied containers for delivery, and ship,
primarily by air, to pet suppliers and dealers throughout the country.
C. Number of Employees
Total employment for commercial fish farms is not available through any
form of census. As a result, employment figures were estimated on the
basis of the number of fish cultur.ing operations- that were reported and
numerous discussions with industry personnel. These estimates are shown in
Table VII1-12. It is well to point out that the number of commercial fish
VII1-22
-------
Table VI11-12. Estimated total number of employees 1n pond fish culturlng operations
Estimated
Size of	number of	No. of employees 	Total Employees
Segment operation	operations	per farm	Part time Full time


(No.)
A%)




Catfish
S
1,572
81.3
1 part
time
1,570


M
203
10.5
1 part
time
200


L
132
6.8
3-4


400-560

XL
27
1.4
.10-40


300-500


1,934
100.0


1,770
700-1,060
Minnows
S
150
38.5
1 part
time
150


M
174
44.0
1 part
time
174


L
60
15.0
3-5


250-350

XL
10
2.5
10-15


100-200


394
100.0


324
350-550
Goldfish
M
3
25.0
6-8


18-24

* L
7
58.3
8-12


56-84

XL
2
15.7
15-20

--
30-40


12
lOO.O


0
104-148
TOTAL
2,100
1,150-1,760
-------
culturing operations in many cases are also based upon estimates; con-
sequently, actual employment figures could vary substantially from
estimates. Too, many more operations may be licenses with various state
agencies for the domestic culturing of fish. However, since many of
these are not producing on a commercial basis, they were not included 1n
the number of firms.
Total full-time employees involved in pond fish culturing operations are
estimated to be between 1,150 and 1,760. The number of part-time employees
is estimated at approximately 2,100. Approximately one additional employee
is- involved in processing, marketing, or distribution for each of the pro-
duction employees. Includinq the part-time employees, total employment
nears 6,000.
VII1-24
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IX. FINANCIAL PROFILE OF THE INDUSTRY AND MODEL FARMS
Commercial farms are either family owned and operated, closely held family
corporations, or divisions of large corporations. As a result, financial
data are difficult to obtain. For most industries, financial ratios and
other performance measures are available in published sources; however,
this is not the case with the commercial fish farming industry. Conse-
quently, information used to develop industry characteristics was ob-
tained principally from industry contacts, the National Marine Fishery
Service, and the Soil Conservation Service (USDA).
A. Sizes and Types of Model Farms
Pond fisi operations were segmented by type and size as shown in Table IX-1.
Catfish Farms
Catfish farm models reflect representative sizes, types of operation, and
the general nature of the business which each model represents. Table IX-1
presents the model sizes discussed.
Small, 5-acre farms. The five-acre food fish farm reoresents 70 percent of
the producers in this industry. This group utilizes one or more ponds
ranging from less than one acre.in size to five acres in size (occasionally
up to a total of 10 acres). If the ponds are larger than five acres
individually, then the investment cost representative of the next size
farm would be more appropriate. Generally, these ponds are not drainable,
except by siphon. Most producers drain aowr. to a seinabie level v/hen har-
vesting. Producers prefer to keep water in the ponds on a year around
basis since the ponds can serve for livestock watering before and after
harvest.
A majority of the estimated 1,500 producers in this category are found
in uplands or hilly areas and a high percentage are in Mississippi and
Al.abama. The producer generally considers his operation as a supplement to
family income entailing little extra risk, labor or management. As a
result, many of these small farmers shift in and out of production from
, year to year on the basis of the economic conditions of the industry.
A lack of uncontaininated, rainfed water is a major problem for this size
of producer and it necessitates lower stocking rates and a more natural
type of production which causes many problems for management. Seining
and feeding constitute the major hired labor requirement.
ix-i
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Table IX-1. Sizes and types of model farms


Representative

Yield

Types
Model Size
Range
per acre
per farm
Catfish!/





Small
5 acres
1-10 acres,
800

4,000
Medium
40 acres
11 - 99 ^cres
1,50C

60,000
Large
160 acres
lOu - 360 acres
1,800

238,000
X-Large
360 acres
360 acres
2,000

640,000
Minnows





Small
5 acres
1-10 acres
250
lbs.
1,250 lbs
Medium
40 acres
10 - 100 acres
300
lbs.
12,000 lbs
Large
160 acres
100 '- 360 acres
300
lbs.
43,000 lbs
X-Large
1,000 acres
360 acrts
300
lbs.
300,000 lbs
Fancy Goldfish





& Minnows





Medium





goldfish
48 acres
50 - 100 acres
27,300
hd. 9/l
,324,000
minnows
12 acres

1,250
1 bs.—/
14,500 lb.
total
60 acres




Large





goldfish
96 acres
100 acres
121,000 hd. „11
,600,000 hd.
mi nnows
64 acres

600
Ibs.i7
38,400 hd.
total
160 acres




Fancy Goldfish





Large
100 acres
100 acres
96,000
hd. 9
',600,000 hd.
-^Acreage used
in production of fingerlings is not included.


2/
— Purchases and
resells minnows in
addition to those produced.
Some golifish sold
as minnows.





3/
— Includes brood fish for minnows and goldfish.
IX-2
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Medium, 40-acre farms. Producers with 30-100 acres are generally adding
diversification to their farming operations or beginning operations
leading to fish farming on a larger scale. This production size is planned
with convertibility factors (i.e., capable of being cropped or fish farmed).
Generally, producers in this size range comprise a large percentage of the
"ins" and "outs" of fish farming. An estimated 200 producers constitute
this category.
Ponds use supplemental water from wells, and are drainable. These ponds
employ family labor or a portion of a full-time employee's time.
Large, 160-acre farms. An estimated 130 producers or 7 percent of the total
catfish producers employ large, 160 acre fish farms. On the average, they
employ three persons. This sire of producer is still not considered a full-
time fish farm even though additional labor is needed for operations.
X-Ltirge, 320-acre farms. About 30 plants are estimated to be in this cate-
gory of greater tnan 320 acres. An estimated 25 percent of the food fish
comes from these acres. Average farm labor requirements are 12 employees
and a relatively sophisticated manager.
Finger!inqs
In developing costs for catfish model farms, it was assumed that the small
plants were purchasing fingerlings for stocking, while the other size
categories were producing their own. Acreage used in this production was
over and above that specified for catfish production in each of the size
categories. Approximately ons acre was devoted to fingerlings for each
25 acres used in producing food fish.
Mi mow Farms
This series of models characterize the types of operations found in the
mfnnow industry. Approximately 400 commercial minnow producers make up
the segment and they range from less than one to several thousand acres.
It is estimated that 43 percent of the minnow producers fall into the 1-10
acre category represented by t' e 5 acre farm. The typical five acre p'roducer
usually ha; 3 to 5 pondi of approximately 1 acre each. Yields are low -
about 250 pounds per acre compared with up to an average of 500 pounds for
more intensively managed operations. Such units are strictly part-time
operations and hired labor is used only for harvesting.
Models of 40, 160, and 1,000 ponded acres represent the larger operations.
Yields range from 200 to 400 pounds with an estimated industry average of
approximately 250 pounds.
IX-3
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Goldfish Farms
Very few acres are devoted to the separate production of fancy goldfish
and two of the estimated goldfish producers fall into this category.
Fancy goldfish production, though a small-industry, has an important
place in the pet and aquarium trade.
Only one model was necessary to represent pure fancy goldfish production.
A much broader base of intensive management skills are needed in the fancy
goldfish production than in some of the other segments. This added sophis-
tication creates labor requirements, for skilled and semi-skille/i labor.
The 100-acre model farm requires an average of 10 full-time employees.
Labor requirements are twice that of bait goldfish or other types of warm
water fish.production.
Fancy Goldfish and Minnow Farms.
Fancy goldfish production can effectively accommodate other* fish production,
primarily minnows in part of the production areas.
Generally, the intense management skills needed for fancy goldfish production
provide a highly skilled labor which is capable of producing more pounds
of minnows1per acre than average minnow producers. Minnow marketing creates
an additional supply channel for disposing of any surplus fancy goldfish
as bait minnows. Combination producers of fancy goldfish have' found that
greater pond, labor and equipment utiliz?tion is achieved by the combination.
Goldfish and minnow farms are much more labor intensive than food fish or
separate minnow farming operations. For example, eighteen persons may be
employed in a fancy goldfish and minnow farm.
B. Investments and Assumptions
Investment values of model farms were based on information obtained from
industry personnel. Three values were developed for each model farm:
1.	replacement value,
2.	book value, and
3.	salvage value.
Catfish and Minnows
Investment costs for catfish and minnow farms were found to be similar.
Although there- are specific differences, these two farms were discussed
together. Costs are shown in Tables IX-2and IX-3. Pond size was found to
follow the same general patterns for both farms. Although variations exist,
the general pattern applies.
IX- 4
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Table IX-2. Estimated invested capital for catfish farm models.
Small	Medium

High Yield

Low Yield





Current
Salvage
Book
Current
Sal vane
Book
Current
Salvage
Book
Land
1,500
1,500
1,000
1,500
1,500
1,000
19,552
19,552
8,736
Ponds/Wells
2,340
293
1,755
2,340
293
1,755
20,686
3,650
12,979
Equipment
134
13
67
134
13
67
10,452
1,045
3,136
Facilities
--
. --
--

	
	
7,475
398
3,986
Total
3,974
1,806
2,822
3,974
1,806
2,822
58,165
24,645
28.E537
Current Assets
2,550
2,550
2,250
2,040
2,040
2,040
31,824
31,824.
31,824
Current Liabilities
1,360
1,360
1,360
1,088
1,088
1,088
16,973
16,973
16,973
Net working capital
1,190
1,190
1,190
952
952
952
14,851
14,851
14,851
Total invested capital
5,164
2,996
4,012
4,926
2,758
3,774
73,016
39,496
43,688
Land
Ponds/Wells
Equipment
Facilities
Total
Current Assets
Current Liabilities
Net working capital
Total invested capital
Large
Current
Salvage
Book
87,516
87,516
58,344
113,771
14,602
60,670
65,151
6,, 968
19,545
27,957
1,495
14,909
294,395
110,581
153,468
127,2%
127,295
127,295
67,891
57,891
67,891
59,405
59,405
59,405
353,700
169,936
212,873
X-Large
Current
Salvage
Book
155,584
155,584
116,688
227,542
29,203
121,355
130,302
13,030
39,091
55,913
3,727
29,816
569,341
201,544
306,950
254,436
264,436
264,436
141,033
141,033
141,033
123,403
123,403
123,403
692,744
324,947
430,353
-------
Table IX-3. Estimated invested capital for minnow farm models^/


Small


Medium


Current
Salvage
Book
Current
Salvage
Book
Land
•1,500
1,500
1,000
18,800
18,800
8,400
Ponds/Wells
2,340
293
1,755
19,890
3,510
12,479
Equipment
134
13
67
10,050
1,005
3,015
Facilities
--
--
--
7,188
383
2,833
Total
3,974
1,806
2,822
55,928
23,61:3
27,727
Current assets
1,784
1,784
1,784
15,504
15,504
15,504
Current liabilities
952
952
952
8,269
8,269
8,269
Net working capital
832
832
832
7,235
7,235
7,235
Total invested capital
4,806
2,638
3,654
62,533
30,933
34,962


Large


X-Large


Current
Salvage
Book
Current
Salvage
Book
Land
84,150
84,150
56,100
920,000
920,000
345,000
Ponds/Wells
109,395
14,040
58,336
588,656
42,120
313,946
Equipment
62.645
6.700
18,794
337,680
33,768
101
Facilities
26,881
1,438
14,336
165,600
8,815
88
Total
283,071
106,328
147,666
2,011,936
1,004,704
848 ,<.« j
Current assets
62,016
62,016
62,016
353,684
353,684
353,684
Current liabilities
33,075
33,075
33,075
165,052
165,052
165,052
Net working capital
28,941
28,941
28,941
188,632
188,632
188,632
Total invested capital
31?,012
135,269
176,607
2,200,568
1,193,336
1,036,907
IX-6
-------
Total Ponded Acres
Average Pond Size
5
1
10
5
10
40 delta
40 other
160 and up
Many of the larger operations have ponds up to 40 acres; however, the
overall average approximates 10 acres. Furthermore, many farmers are
dividing larger ponds in order to obtain more manageable units of approx-
imately 10 acre?.
In the construction of the investment costs schedules, typical farms were
assumed to be approximately 4 to 7 years old. This was critically important
in estimating book values in the cases where they were not reported.
Replacement Value. Replacement values were based upon 1975 prices. Land
costs were a major component of all sizes of farms. Total land costs were
estimated on the basis of total land in ponds, roads, dikes, drainage and
ditches. For example, a farm with 40 ponded acres was assumed to have 49
total acres devoted to fisf} farming and its land costs were so computed.
Land costs for small farms were valued at $300 per acre. Generally, this
land is non-tillable in wooded or hill areas. Land values per acre were
increased on larger farms to represent the higher current values which were
reported by fish farmers, extension personnel, and others knowledgeable of
industry and local conditions. Land values were increased from $300 per
acre for the small farms to $800 an acre for the large Delta farms with a
highly desirable potential for corn or soybean production.' In many cases.,
higher land values we'e reported but a conservative acreage was used.
Pond and v/eil costs are the second major cost component. Farmers reported
a range of current construction between $300 and $400 per acre. When the
costs of wells (from $3,000 to a high of $4,500 per well) are added the
current costs for ponds and'wells ranged from $100 to $500 per acre. Small
farms with less sophisticated outflows (possibly ncne) and plumbing generally
were lower in costs than were 1-arge operations. The X-large farm generally
averaged lower per acre costs thru the large size because of the economies
of scale in -onstruction. Equipment costs were taken at the original value
as reported by the'various size of operations and inflated to represent
current values.
Book Value. The book value of plant and equipment were estimated on the .
basis of a range of original costs obtained from farm owners. Many of the
farmsfwere approximately 5 years of age (in 1973). Book value estimates
were based on a 15 year depreciation for ponds, wells, and facilities and
an 8 year life on machinery and equipment.
IX-7
-------
On the basis of consultation with industry representatives, it was
assumed that book value was approximately 50 percent of the original
investment.
Salvage value. The salvage value of fish farms varied widely and depends
upon the opportunity cost of land for other agricultural purposes and the
age and condition of facilities and equipment. Land constituted the major
salvage value of a fish farm, and this value was based on present replace-
ment values. Ponds normally are not convertible to any other type of
farming operation and, thus, were given a zero salvage value. They may,
in many cases, have a negative value if no lonqer used for fish production.
Wells were assumed to retain value for other possible uses and, thus, were
included in the salvage value at the book value rate. Consideration was
given to the actual cost of removing the pond dikes in order to farm all
acres available; however, lacking relevant information on the related costs,
it was assumed that the value of added fertility from the fish operation
plus the presence of the well would offset much of the cost of required
leveling.
The salvage value of equipment was estimated at 10 percent of the current
cost, and the salvage value of the facilities was estimated at approx-
imately 50 percent.
Fancy Goldfish Farm
The estimated investment capital requirements for model goldfish farms,
including a medium and large goldfish-minncw farm and a medium size,
goldfish-only farm are shown in Table IX-4. Fancy goldfish farms are
typified by relatively small ponds with an average size of 3 acres and
high investment per ponded acre. Current investment in ponded acres
(ponds and wells) was reported at approximately $3,500 per acre vs. $500
to $700 for catfish,.minnow and combination farms.
Replacement value. Replacement value for land depended on th* location.
For those farms with a combination of fancy goldfish and minnows a value
of $400 per acre was reported: but for ;• goldfish-only farm located in
more densely populated areas, a replacement value of $1,200 per acre was
used.
Replacement value for ponds and wells was reported at $3,500 per acre for
the combination farms and $5,000 per acre for the goldfish-only model.
Equipment cost was reDorted at its original cost and then inflated to
reflect current replacement costs assuming the same level of technology.
Current value amounted to between $1,800 and $2,000 depending upon the model
farm size and type. The current replacement value for facilities was
estimated similarly and ranged from $1,100 and $1,200 per ponded acre
depending on the size and type of farm.
Book value. To estimate book value, the same procedure was employed
as that used for catfish-minnow and combination farms. Book values
were approximately 50 percent of original investment. Specific values
are shown in Table IX-4.
IX-$
-------
Table IX-4. Estimated Invested capital for model fancy goldfish and bait minnow farms (1975 dollars)
Medium
	Large	
(goldfish and minnows)
Large
(goldfish only)

Current
Salvage
Book
Current
Salvage
Book
Current
Salvage
Book
Land
31,200
31,200
23,400
85,600
85,600
64,200
140,400
140,400
58,500
Ponds/Wells
194,220
7,020
67,859
537,615
21,668
216,680
410,670
13,689
136,889
Equipment
91,455
9,380
27,437
296,797
29,680
89,039
137,183
13,719
41,154
Facilities
56,063
2,990
29,900
175,346
9,352
93,517
84,094
4,485
44,850
Total
372,938
50,590
148,596
1,095,358
146,300
463,436
772,347
172,293
281,393
Current assets
63,238
68,238
68,238
401,982
401,982
401,982
283,968
283,968
283,968
Current liabilities
40,943
40,943
40,943
241,189
241,189
241,189
170,381
170,381
170,381
Net working capital
27,295
27,295
27,295
160,793
160,793
160,793
113,587
113,587
113,587
Total invested capital
400,233
77,885
175,891
1,256,151
307,093
624,229
885,934
285,880
394,980
-------
Salvage value. Similarly salvage values were estimated for catfish-minnow
and combination farms. Land was taken at its current value; ponds were
given a 0 value. Wells were treated slightly differently because goldfish
farms require more wells than do agricultural operations;, thus, wells were
assigned a value less than the book value used for catfish-minnow and
combination farms.
C. Current Assets, Current Liabilities, and
Net Working Capital
The current assets, current liabilities, and net working capital for ?ach
of ths model farms are reflected in the preceding tables as elements of
the total invested capital. For the three types of farms, current assets
were estimated as 75 percent of total sales and current liabilities as
40 percent. Net working capital is the excess of assets over liabilities.
D. Levels of Production
Approximately 60,000 ponded acres are used for commercial catfish pro-
duction as reported by the Soil Conservation Service. Many of the small
and medium size farmers who use catfish production to supplement other
farm income tend to swing in and out of production. Currently, a number
of farmers are not producing fish. In addition, the large Delta catfish
producers can convert their ponded acres to, high value grain crops such
as corn and soybeans with little increased effort over normal tillage
operations. As. a result, the production of catfish may shift widely from
year to year depending on economic conditions. Precise data on these
general conditions are non-existent, but conversations with knowledgeable
individuals in the.industry, indicated that only 30,000 to 40,000 of the
60,000 acres are under intense fish production. On this basis, the level
of production would represent between 50 ana 67 percent of the present
constructed capacity.
E. Annual Profits
Net income, as a percentage of sales and as return on invested capital
(book value) is shown for the representative model farms in Tables IX-5
and IX-6.
It should be noted that this study's model farms are classified as either
family or corporate farms, an important distinction in the financial
analysis. Pre-tax income for the family model farm was calculated to
represent return to the land capital and management and owner labor.
Family farm labor costs in the financial models include only cash outlay
for hired labor.
IX-10
-------
Table IX-5. Net Income, returns on sales and return on total Invested capital for model catfish farms.
Type and Size of Farm
Pre-Tax
Incomel/
Pre-Tax
R0S
After-Tax
R0S
Pre-Tax
ROll/
After-Tax
ROll/

($)

	 [%)


Catfish (foodflsh)





5 acres - high yield family farm
412
11.0
9.0
10.2
8.3
low yield
-162
-8.1
-6.2
-4.3
-3.3.
40 acres family farm
3,570
11.9
9.8
8.2
6.7
160 acres family farm
22,074
15.3
11.4
10.4
7.7
320 acres corporate farm
42,440
13.3
10.5
9.9
8.4
—Afould represent return to land, capital, management and owner labor for family farm.
2/
— Book value.
-------
Table IX-6. Net income, returns on sales and return on total invested capital for model minnow and
fancy goldfish farms.

Pre-Tax
Pre-Tax
After-Tax
Pre-Tax
After-Tax
Type and Size of Farm
Income!/
R0S
R0S
R0I
R0I

(J)


U) 	

Minnows





5 acres, family farm
855
46.6
36.5
23.4
18,9
40 acres, family farm
4,713
26.2
21.5
13.5
11.1
160 acres, family farm
10,612
14.7
11.7
6.0
4.8
1,000 acres, corporate farm
96,023
21.3
14.1
9.2
6.2
Fancy Goldfish





78-60 acres (goldfish & minnows)
4,988
5.8
4.8
2.9
2.4
family farm





214-160 acres (goldfish & minnows)





corporate farm
27,597
6.3
5.1
4.6
3.7
117-80 acres (goldfish only)




2.0
family farm
9,372
3.1
2.5
2.4
-^Represents return to land, capital, management and owner laior for family farm.
^Book value.
-------
The problems involved in estimating the value of owner-operation labor
are obvious. Any estimate which considers only the farmer's economic
opportunity costs (i.e., what he would make on another job with compar-
able skill level), ignores the psychological value he receives from
ownership: the satisfaction of independence, his optimism regarding
his future, his financial success, or his satisfaction of producing a
product. Furthermore, if an operator's economic opportunity cost (if
it could be estimated) were included in the model farm, the model would
project a loss or a shutdown situation. This, of course, would not be
representative, as the small family, fish-culturing operation is a viable
business. The annual profit parameter shown in the accompanying tables
should, therefore, be interpreted with this basic concept in mind.
Catfish
The general levels of catfish operation profits are low. The return to
land capital and the owners' labor and management for family catfish farms
is relatively low and ranges from a $162 loss to a $412 profit for the five-
acre operation to a high of over $22,000 for the 160 acre operation. In
1973, particularly, fingerling production was- one of the more profitable
enterprises in the ponded fish farming industry. Because of this, the
industry experienced an overproduction. Consequently, most of the farms
which had previously specialized in fingerlings either converted to other
types of farming or reduced production levels.
The after-tax rate of return on investment ranges from--3.3 to 8.4 per-
cent of invested capital for the catfish operations.
Mi nnows
The return on sales and return on total invested capital for model minnow
farms are shown in Table IX-6. Again, returns are low, and the pre-tax
returns for the family operations range from $855 to a high of over
$10,000. For a large corporate operation, pre-tax income is estimated
at $96,000. After-tax return on invested capital ranges from a high of
19 percent for the small five-acre farm to a low of 4.8 percent for the
160 acre farm. The decline in returns results from the higher invests
ments required for the larger size operations. Again, it should be
remembered, that the returns for the family farm include the owner's
labor and management.
Fancy Goldfish
Net income for the fancy goldfish family operations ranges from $4,980 to
$9,372, approximately 3 to 6 percent of a pre-tax return on sales. The large
corporate minnow operations shows a return of $27,597 and a 6 percent pre-
tax return on sales. Return levels on invested capital after-tax are
relatively low, ranging from 2.0 percent to 2.4 percent on the family
farms. Returns on invested capital for the corporate farm is estimated at
3.7 percent.
IX-13
-------
F. Annual Cash Flow
The estimated annual cash flow for the model farms analyzed in this study
are shown in Table IX-7. Cash flow was calculated as a sum of after-tax
income plus depreciation. It is shown in dollars, as a percent of sales,
and as a percent of total invested capital.
Catfish
The annual cash flow for'family size catfish farms ranges from $76 for
the 5-acre catfish farm to a high o;' $21,829 for the 160-acre farm. For
the corporate operations the annual cash flow is estimated at $45,763
for the 320-acre catfish farm.
Cash flow as a percent of total invested capital ranges from 2 percent to
a high of 16 percent for the family-size operations and approximately 10
to 11 percent for the corporate operations. Again, it should be remembered
that returns to the family farm do not include the operators' management
and labor.
Mi nnow
The annual cash flow for model minnow farms has a wide range from $801 for
the five-acre farm to a high of $95,832 for the large thousand-acre farm.
As a percent of sales, annual cash flow ranges from 20 percent on the 160-
acre farms to a high of 43 percent on the small farms. Cash flow as a per-
cent of total invested capital for the minnow farms range from 8 percent
on the 160-acre farm to a high.of 22 percent on the small operation.
Fancy Goldfish
The annual cash flow for fancy goldfish farms ranges from $11,500 for the
small operation to a high of $51,571 for the large one. The goldfish-only
farm's annual cash flow is $29,000. This represents from 6.6 to 8.3 per-
cent of invested capital for the various farm operations.
G. Cost Structure
The pro forma statements of income and expenses for the representative
model commercial farms are shown in Tables IX-8 through IX-10. Some
general observations can be made.
The data required for statements were obtained from consultations with
industry experts. Informal discussions were held with growers in each
model type. These were supplemented with information obtained from dis-
cussions with the Soil Conservation Service, Production Credit Association,
Cooperative Extension Service, and land grant universities. The basic
data obtained were modified to fit the model farm categories-.
IX-14
-------
Table IX-7. Annual carh flow for model pond culturlng farms
Type and Size of Farm
Annual
Cash Flow
Cash flow as
Percent of Sales
Cash flow as percent
of total invested capital!/
(J)
Catfish
5 acres -
40 acres
160 acres
320 acres
high yield
low yield
636
76
4,035
21,829
45,763
16.9
3.8
13.5
15.2
14.3
15.9
2.0
9.2
10.2
10.6
Minnow
5 acres
40 acres
160 acres
1,000 acres
Fancy Goldfish
78-60 acres r
214-160 acres
117-80 acres (goldfish only)
801
5,540
14,049
95,832
11,584
51,571
28,940
42.7
30.7
19.5
21.3
13.6
11.7
9.4
21.9
15.6
7.9
9.2
6.6
8.3
7.3
—^Annual cash flow calculated on the basis of return to land capital management and owner labor
before taxes plus depreciation for family farm operations.
—^Return on total invested capital calculated by financial statement method.
-------
Table IX-8. Pro forma statement of income and expenses for catfish model farms (1975 dollars)
Small (5 acres)
		High	Yield			Low Yield 	^
(dollars) (cents/lb.) percent (sales). (dollars; (cents/lb.-)	percent (sales)
Yield/acre	1,500	lbs.	800	lbs.
Total Production	7,500	lbs.	4,000	lbs.
Sales	3,750 50.0	100.0	2,000	50.0	100.0
Variable Costs
Feed	1,500 20.0	40.0	800	20.0	40.0
Fingerlings	-450 6.0	12.0	360	9.0	18.0
Labor	576 7.7	15.4	360	9.0	18.0
Other!/	512 6.8	13.6	442	11.1	22.2
Total	3,038 40.5	81.0	1,962	49.1	98.2
Fixed Costs
Depreciation	300 4.0	8.0	200	5.0	10.0
Interest	-	-	-
Total Cost	3,338 44.5	89.0	2,162	54.1	108.6
Net income before tax
or return to land
management (family
operation)	412 5.5	11.0	(162)	(4.1)	(8.1)
Net Income After Tax	336 4.5	9.0	(124)	(3.1)	(6.2)
Cash Flow	636 8.5	17.0	76	1.9	3.8
CONTINUED
-------
Table lx-8. (continued)
Large (160 acres)

dollars
cents/lb.
percent (sales)
dollars
cents/lb.
percent (sales)
dollars
cents/lb.
percent (sales)
Yield/acre
Total Production

1,500 lbs.
60,000 lbs.


1,800 lbs.
288,000 lbs.


2,000 lbs.
640,000 lbs.

Sales
$30,000
50.0
100.0
144,000
50.0
100.0
320,000
50.0
100.0
Variable Costs
Feed
Fingerllngs
Labor
Other
Total
12,000
3,300
2,760
6,020
24,080
20.0
5.5
4.6
10.0
40.1
40.0
11.0
9.2
20.1
80.3
57,600
15,840
15,000
22,110
110,550
20.0
5.5
5.2
7.7
38.4
40.0
11.0
10.4
15.4
76.8
128,000
35,200
44,760
44,000
251,960
20.0
5.5
7.0
6.9
39.4
40.0
11.0
14.0
13.7
73.7
Fixed Cost
Depredation
Interest
Total
1,100
1,250
2,350
1.8
2.1
3.9
3.6
4.2
7.8
5,472
5,904
11,376
1.8
2.1
3.9
3.8
4.1
7.9
12,160
13,440
25,600
1.9
2.1
4.0
3.8
4.2
8.0
Total Cost
26,430
44.0
88.1
121,926
42.3
84.7
277,560
43.4
86.7
Net Income before Tax
or return to land manage-
ment (family operation)
3,570
6.0
11.9
22,074
7.7
15.3
42,440
6.6
13.3
Net Income After Tax
1
2,935
4.9
9.8
16,357
5.7
11.4
33,603
5.2
10.5
Cash Flow
4,035
6.7
13.5
21.829
7.6
15.2
45,763
7.2
14.3
1/ Includes pumping, supplies, chemicals, harvesting.
-------
Table IX-9. Pro forma statements of income and expenses for minnow mo-'el farms
(1975 dollars)
dollars
Small (5 acres) ,	
cents/lb. percent (sales'
dollars
Medium (40 acres)	
cents/lb. percent (sale's!"
Yield/acre
Total production
Sales
Variable Costs
1,875
312
108
455
875
Feed
Labor
Other!/
Total
Fixed Cost
Depreciation	107
Interest	38
Total	145
Total Cost	1,020
Net Income Before"Tax
or return to land management
(family operation)	855
Net Income After Tax	694
Cash Flow	801
250 lbs.
1,250 lbs.
150.0
24.0
8.6
36.4
70.0
8.6
3.0
11.6
81.6
68.4
55.5
64.1
100.0
16.6
5.8
24.3
46.7
5.7
2.0
7.7
54.4
45.6
37.0
42.7
18,000
3,000
1,693
6,398
11,091
1,674
£22.
2,196
13,287
4,713
3,856
6,387
300 lbs.
12,000 lbs.
150.0
25.0
14.1
53.3
92.4
13.0
4.3
18.3
110.7
39.3
32.2
53.2
100.0
16.7
9.4
35.5
61.6
9.3
2.9
12.2
73.8
26.2
21.5
35.5
CONTINUED
-------
Table IX-9 (continued)
Large (160 acres)	X-Larqe (1,000 acres)

dollars
cents/lb.
percent (sales)
dollars
cents/lb.
percent (sales)
Yield/acre
Total production

300 lbs.
48,000 lbs.


300 lbs
300,000 lbs
•
•
Sales
72,000
150.0
100.0
450,000
150.0
100.0
Variable Costs
Feed
Labor
Otheri/
Total
12,000
12,794
28,746
53,540
25.0
26.6
59.9
111.5
16.7
17.8
39.9
74.4
75,000
94,433
138,664
308,077
25.0
31.5
46.2
102.7
16.7
21.0
30.8
68.5
Fixed Cost
Depredation
Interest
Total
5,616
2,232
7,848
11.7
4.7
16.4
7.8
3.1
10.9
32,400
13,500
45,900
10.8
4.5
15.3
7.2
3.0
10.2
Total Cost
1,388
127.9
85.3
353,977
118.0
78.7
Net Income Before Tax
or return to land management
(family operation)
10,612
22.1
14.7
96,023
32.0
21.3
Net Income After Tax
8,433
17.6
11.7
63,432
21.1
14.1
Cash Flow
14,049
29.3
19.5
128,423
42.8
28.5
-------
Table IX-10. Pro forma statement of income end expenses for model fancy goldfish and
bait minnow farms (1975 dollars)
		Medium	 	Large	 	Large	
Goldfish and Minnows	Goldfish and Minnows	Goldfish Only
dollars percent of sales dollars percent of sales dollars percent of sales
Land Acres
Surface Acres
Acres in Goldfish
Acres in Minnows
Sales - Goldfish
Minnows
Total
Variable Costs
Minnows
Labor
Feed
Other
Total
Fixed Costs
Depreciation
Interest
Total
Total Cost
Return to land, management,
capital (family farms)
Net Income Before Tax
(corporate farm)
Taxes
Net Income After Taxes
Cash .
78
60
48
12
214
160
96
64-
117
100
80
41,960
43,500
85,190
36,300
10,200
5,025
18,632
70,157
7,497
2,556
10,053
80,210
4,980
48.9
100.0
42.6
12.0
5.9
21.9
82.4
8.8
3.0
11.8
94.2
5.8
369,820
69,480
439,300
139,440
50,400
165,633
355,473
28,993
27,237
56,230
-------
Production levels were obtained from reported yields by producers in the
various sizes and types of operations; consequently, yield levels will
vary by size of operations as well as by the various combinations of species
produced.
Variable costs included those for eggs or fry where applicable. In some
cases, the cost of maintaining brood fish was incorporated in the general
cost levels of the farms. Labor costs included labor hired in addition to
the owner-operator labor for family-size operations. For corporate operations
(including closely held and family corporations) direct labor included
production labor with administrative costs included in the indurect cost
category.
Feed costs are the largest single cost item and were quite consistent
among similar types of product:.. Other costs included such items as
medicine, chemicals, pumping fuel, repair and maintenance, administration
and insurance costs.
Indirect costs included administration, insurance and taxes (except income
tax), various fees, and other costs not included elsewhere.
Depreciation and interest costs were taken as reported and were checked
against estimates of depreciation based on a 20-year life for ponds and
raceways and generally 5 tc- 8 years for various types of machinery and
equipment.
Net income before tax was calculated for all corporate types of operations.
Returns to land and capital and the owner-operators' labor were estimated for
family operations. Taxes were calculated in the conventional manner both
for corporate and family operations.
In computing the tax for family farms, it wai assumed that fish farming
was a part time operation with the owner receiving an additional income
of'$10,000 from other sources. Tax on the owner's total income (fish
farming plus $10,000) was computed from the tax tables applying standard
deductions with four exemptions. Tax was then calculated on the $10,000
separately (this amounted to $840). The tax on fish farmers income
represents the incremental increase of the owners total tax over $840.
IX-21
-------
X. PRICING PATTERNS
Catfish
Pricing for the fish fanning industry largely reflects supply and demand.
Supply determinants include large numbers of producers and large numbers
of substitute products, i.e., imported food fish, seafoods and other
meats. Demand characteristics are relatively undeveloped and are frequently
very selective markets for domestically produced fish. Demand is highly
price elastic: a one percent increase in price will cause a greater than
one.percent decrease in consumption.
To place the entire pricing system in perspective, one can examine a few
general statistics on total fish consumption in the United States. In
1950, total per capita consumption of all fish, including shell fish, was
11.8 pounds: 6.3 pounds, fresh and frozen, 4.9 pounds, canned; and 0.6
pounds, cured. By 1973, fresh and frozen consumption increased to 7.2
pounds but canned and cured consumption levels remained nearly constant
for a total per capita consumption of 12.6 pounds.
Data have not been compiled on the per capita consumption of such domestically
produced fish as catfish, but total consumption amounts to approximately 0.3
pounds per capita, an indication that domestically-produced fish play a
relatively small but increasingly important role in total fish consumption.
The industry has a sufficient number of sellers of catfish in the market-
place to prevent an individual producer's or processor's domination of the
market. The domestically produced food fish are sold competitively and
are subject to competition from other seafoods, imported catfish and Jther
meat products.
Data are not available to definitively describe the marketing processes
or potential for the food fish under consideration. Industry research
has emphasized production rather than marketing in part because until
recently, markets were primarily local or recreational (fish out). However,
increased production and increasing commercial consumption over the past
five years have added importance to industry marketing.
In 1973, the USDA published a study of supermarket demand for farm-raised
channel catfish (20). In this study of a select supermarket, a demand
curve was estimated for commercial catfish and the resulting price
elasticities estimated. Under prices from $0.79 to $1.29 oer Dound,
price elasticities calculated on a log-linear relationship ranged from
-2.07 to a high of -3.38. In other words, a 1 percent increase in price
caused a resulting decrease in consumption of -2.07 percent to -3.38 depending
on the price (Table X-l).
X-l
-------
Table X-l. Quantity demanded, price elasticity, and total revenue at
different points on a log-linear demand curve for catfish,
six stores, Atlanta, 6a., 1972
Price per
pound
Quantity demanded
per 1,000 customer
Elasticity 1/
Total Revenue
$
(pounds)

$/1,000 customer
0.79
38.36
-2.07
30.30
o.8;
29.52
-2.33
26.27
0.99
22.71
-2.59
22.48
1.09
18.27
-2.86
19.04
1. 19
13.45
-3. 12
16.01
1.29
10.35
-3.38
13.35
— Elasticity calculated on a log-linear relationship Other function forms
were used including a linear and log-log. The log-linear form is shown
here because it is known to yield an elasticity estimate which would
change with price and it is expected that the elasticity estimates would
not be completely unrealistic at the data extreme.
Source: USDA, "Demand for Farm-Raised Channel Catfish in Supermarkets, "
Marketing Research Report, No. 993, May 1973.
X-2
-------
The current price level suggests that the higher prices of other food-
stuffs have shifted the demand curve to the right (or higher price) as
other food costs have escalated. The 1974 prices for farm-raised channel
catfish in the retail store ranged from $1.29 to $1.49 per pound. According
to industry reports, substantial resistence is being felt at the current
level because over the recent past other meat prices have decreased
slightly. Also, imported catfish are offered at a price savings to the
consumer of $0.15 to $0.20 per Dound and are rapidly increasing in volume.
In 1973, profit margins for processors were very marginal.
The total quantity of catfish sold through processors is shown in Table X-2.
This increased from 5.7 million pounds live weight equivalent in 1970 to
19.7 million pounds in 1973. On the basis of total commercial production
reported by NMFS, the processors now handle about 39 percent of the total,
up from 17 percent in 1970.
Imports have been increasing rapidly from 3.7 million pounds (dressed
weight) in 1969 to 5.8 million in 1972 and 6.6 million in 1973 (Table X-3).
This amounted to 56 percent of that marketed through commercial processors
In 1973.
NMFS estimates place the wild caught catfish at" approximately 30-35 million
pounds from 1967 through 1970 (19). On this basis, the volume handled by
commercial processors in 1973 amounted to approximately 15 to 20 percent of
total catfish consumed.
Prices paid by national processors averaged between 42 to 48 cents per pound
in 1973 as reported by NMFS. This is up from 32 to 36 cents in 1972, a price
reflective of the 1970 level (Table X-4). Producers selling to local mar-
kets may achieve a higher price, possibly in the present range of. 50 to 60
cents; however, this would require either ad^ed costs for marketing or
more time and effort for a family operation to market locally rather than
through a major processor.
Mi nnows
The production and marketing of minnows is generally a highly integrated
operation through the delivery stage; several large minnow producers can
provide a consistent so-jrce of quality minnows throughout the year, on an
interstate basis. Numerous producers provide minnows on a local and
regional basis.
Minnows are sorted by size, graded, and shipped in large oxygen or air
supplied tanks mounted on trucks or large semi trailors. Delivery
capability with the most modern transportation units extends for several
days and enables a truck to travel throughout the United States. The bulk
of the minnows that are shipped interstate are delivered on a route basis.
A truck may begin with a full load and stop at intervals to service
regular customers. Normally, the deliveries are made to suppliers who,
in turn, supply local retail bait shops. In some cases, producer deliveries
are made directly to large retailers.
X-3
-------
Table X-2. Quantity of catfish processed by month as reported by national pro-
cessors 1970-1975
(000 lbs.).

1970
1971
1972
1973
1974
1975
January
412
555
790
1,274
1,267
1,664
February
654
691
910
1,351
1,417
1,729
March
311
830
1,278
1,344
1,733
1,504
April
106
537
890
831
1,355
1,011
May
58
292
916
754
1,395
790
June
89
333
817
79:
1,436
1,481
July
132
428
706
986
1,304
1,426
August
145
550
9S1
1,062
1,541
1,369
September.
208
603
888
983
1,277
1,339
October
433
662
1,001
1,012
1,530
1,402
November
423
656
1,067
748.
1,324
1,100
December
460
602
731
676
1,364
1,325
Total!/
3,436
6,739
10,970
11,808
16,944
16,140
Adjusted
1iveweight
5,730
11,231
18,283
19,680
28,073
26,900
—^Whole skinned, collarbone removed, tail on, individually frozen and/or fish.
Source: National Marine Fishery Service, Little Rock, Arkansas.
X-4
-------
Table X-3. Catfish imports, 1969-1974
(000 pounds)

1969
1970
1971
1972
1973
1974
January
NA
420
378
232
543
947
February
285
341
85
744

290
March
?67
413
190
290


April
200
277
58
394


May
344
584
148
216


June
364
208
123
277


July
255
475
209
358


.August
344
423
338
678
473

September
518
358
321
361
593

October
274
437
121
503
1,068

November
531
644
264
450
396

Decembe r
280
221
932
1,322
572

Total
3,762
4,801
3,203
5,835
6,613

Source: National Marine Fishery Service, Little Rock, Arkansas
X-5
-------
Table X-4. Prices paid by national processors for catfish 1970-19751/
(dollars per pound)
1970	1971	 1972	1973	1974	1975
January
.35-
.40
.28-
.35
.30-
.35
.32-.36
.45-
.50
.43-
.50
February
.35-
.40
.28-
.35
.30-
.35
.32-.42
.45-
.50
.45-
.50
March
.35-
.40
.28-
.37
.30-
.35-
.36-.45
.42-
.50
.45-
.50
April
.32-
.40
.28-
.37
.32-
.35
.42-.55
.40-
.50
.45-
.53
May
.32-
.45
.30-
.37
.32-
.37
.42-.50
.40-
,50
.50-
.55
June
.32-
.45
.30-
.45
.34-
.45
.45-.50
,45-
.50
.50-
.54
July
.31-
.45
.30-
.45
.33-
.35
.45-.50
.45-
.56
.50-
.55
August


.30-
.45
.33-
.36
.48-.50
.49-
.53
.50-
.55
September
.30-
.40
.30-
.40
.32-
.35
.48-.50
.48-
.53
.47
.55
October
.30-
.35
.30-
.35
.32-
.35
.45-.50
.45-
.51
.45-
.50
November
.30-
.37
.30-
.35
.32-
.35
.45-.50
.45-
.50
.43-
.50
December
.30-
.37
.30-
.35
.30-
.35
.45-.50
.43-
.50
.43-
.50
Average
.32-
.41
.29-
.38
.32-
.36
.42-.48
.44-
.51
.46-
.52
—^Prices paid to farmers, harvested at plant site.
Source: National Marine Fisheries Service, Little Rock, Arkansas.
X-6
-------
The ultimate demand point for minnows is retail bait shop, a condition
which reflects the basic recreational demand for fishing in the United
States. Studies have broadly defined the demand factors and, needless
to say, the quality of fishing is a major component. Population, income
levels, social and esthetic characteristics, season of the year, and other
factors influence the ultimate demand.
Because the industry is highly competitive, existing price levels for
various sizes and types of minnows are generally known throughout the trade,
and individual retailers are'reluctaht to change their prices. Too,
retail competition's tendency to hold down prices is intensified by
competition from other numerous live and artificial baits.
Minnow prices range from $1.20 to $2.10 per pound depending upon size,
type, and location. Average prices approximated $1.50 in 1975. Commercial
minnow production was estimated at 14.0 million pounds (excluding Minnesota
with 22.7 percent of total acres but a much lower production rate per acre).
No information is available to construct a time series on either quantities
produced or prices received.
Goldfish
All 12 major ornamental go";d fish producers in the United States sort,
grade, pack and ship to retail stores and local suppliers. Thus, the indus-
try can be characterized as integrated forward through the wholesaling and
delivery function.
Once the fish are sorted, graded and conditioned for shipment, they are
placed in oxygen supplied bags, packed in boxes, and generally air
freighted throughout die U.S. and the world.
Although there are several suppliers, one firm with its approximately 60
to 70 percent of the sales clearly dominates the industry. The smaller
firms tend to compete favorably and provide a stabilizing effect on prices.
No doubt the dominate firm exerts some price leadership in the marketing
process.
Standard prices generally prevail for the various types and sizes of gold-
fish in the trade. For example, a typical price sheet contains the prices
for 25 to 75 different line items.
Ultimate demand for ornamental goldfish lies at the local retail pet shop
or ornamental fish department of a larger retail outlet.
Here the goldfish sell in competition with other types of ornamental fish
and other pets. No definitive studies on the market for goldfish were
available; however, the market is apparently highly elastic and highly
dependent upon the level of consumer's disposal income..
X-7
-------
Ornamental goldfish are normally sold at the wholesale level on a per 100
head lot basis. Current prices for various sizes and species may range
from $250 to $400 per 100 minus a percentage discount, normally in the 33
percent range, for volume orders. Common varieties average from $2.50 to
$5.00 per hundred. Following discounts, the average producers may realize
about $2.75 to $3.50 per hundred. For the model farm $2.90 was used, an
average reported by the producers.
Total volume of production is estimated at 120 million fish. Historical
data on production are not available.
X-8
-------
XI. EFFLUENT CONTROL COSTS
Water pollution control costs used in this analysis were furnished by the
Effluent Guidelines Division of the Environmental Protection Agency as
developed by the National Field Investigation Center, Denver. These
basic data were adapted to the types and sizes of fish culturing facilities
specified in this anlaysis.
Three effluent guidelines were considered:
BPT - Best Practicable Control Technology Currently
Available to be achieved by July 1, 1977.
BAT - Best Available Technology Economically Achievable,
to be achieved by July 1, 1983.
NSPS - New Source Performance Standards (NSPS), apply to any
source for which construction starts after the publi-
cation of the proposed regulations for the Standards.
A technical document describing the recormiended technology for achieving
the three guidelines will be published as a separate report for EPA,
referred to as the' Development Document (1).
A. Present Status of Effluent Control in the Industry
The Development Document outlines the current status of effluent control
now assumed to be practiced in the industry. This information and further
discussion with EPA have been used to establish the current status of the
industry by production segments as outlined in this section. This infor-
mation is outlined in Table XI-1 and is used as the basis for the impact
analysis to follow.
The current pollution control status of pond culturing facilities for the
catfish, minnows and fancy goldfish segments and alternative treatment
requirements to meet the proposed standa ds are shown in Table XI-1;
Only one percent of the operations is estimated to be currently meeting
the proposed standards, the remaining facilities will be required to
implement one of the following treatment alternatives to control draining
during the harvesting process.
Alternative
Description
A-l
A-2
B
C
Construct new pond outlet
Modify existing outlet
Drain through existing pond
Harvest without draining
XI-1
-------
Table XI-.l. Current pollution control status of native fish pond culturing facilities
and alternative treatment requirements to meet BPT and BAT Standards *
In Place Technology/Status	Treatment Alternative	Percent of Industry
Currently meeting BPT and BAT	No additional required	1
Construct new pond outlet	A-1	20
Modify existing outlet	A-2	59
Drain through existing pond	B	19
Harvest without draining	C 	1
Total	100
*BPT and BAT Standards are identical.
-------
Twenty percent of the operations will have to construct a	new pond outlet
and 59 percent will only have to modify the existing pond	outlet. It is
estimated that 19 percent of the operations can make some modification -
and drain through an existing pond and one percent of the	operations will
be required to harvest without draining.
B. Control Costs
The effluent control costs for pond culturing facilities as developed by
EPA were based upon one-acre pond sizes. For treatment alternatives A-l,
A-2 and B,_the costs are based upon controlled drainage rates making size
a critical factor in determining control costs for model farms. Represen-
tative model pond sizes were developed through discussions with industry
contacts and are as follows:
Type of
.arm
Size Category
Pond Size
(acres)
BPT Cost
Catfish
Small
Small
Medium
Medium
Large
X-Large
1.0
,2.5
5.0
10.0
10.0
10.0
High
low
high
low
Mi nnows
Smal 1
Small
Medium
Medium
Large
X-Large
1.0
2.5
5.0
10.0
10.0
10.0
high
low
high
low
Fancy Goldfish
All Sizes
3.0
State and Federal
Warm Water Hatcheries All Sizes
3.0
Alternative treatment effluent control costs for catfish farms are shown in
Table XI-2, Table XI-3 exhibits minnow farms control costs and the costs for
fancy goldfish farms are given in Table XI-4.
XI-3
-------
Table XI-2. Effluent control costs for native fish pond culturing farms - catfish, 1975 dollars.


Small
Medium


Treatment
Alternative
Cost Item
Low
Cost
High
Cost
Low
Cost
High
Cost
Large
X-Larqe





Hoi 1 a _ _







UU 1 1 CM b ™ ¦


(A—1)
Investment
4,020
10,050
8,360
16,720
33,450
66,890

Annual cost
Interest
Depreciation
Operating cost
Total annual cost
201
402
181
784
503
1,005
452
1,960
418
836
376
1,630
8,316
1,672
753
3,261
1,672
3,345
1,504
6,521
3,345
6,689
3,008
13.042
(A-2)
Investment
0
0
0
0
0
0

Annual cost
Interest
Depreciation
Operating cost
Total annual cost
0
0
181
181
0
0
452
452
0
0
376
376
0
0
753
753
0
0
1,504
1,504
0
0
3,008
3,008
(B)
Investment
8,890
22,230
18,490
37,000
73,980
147,960

Annual cost
Interest
Depreciation
Operating cost
Total annual cost
445
445
407
1,297
760
950
900
2,510
925
925
846
2,696
1,850
1,850
1,693
5,393
3,699
3,699
3,384
7,083
7,398
7,398
6,769
21,565
(C)
Investment
4,460
11,150
8,920
17,840
35,680
71,350

Annual cost
Interest
Depreciation
Operating cost
Total annual cost
223
223
2,232
2,678
558
558
5,582
6,698
446
446
4,466
5,258
892
892
8,932
10,616
1,784
1,784
17,863
21,431
3,568
3,568
35,726
42,862
-------
Table XI-3. Effluent control costs for native fish pond culturing farms - minnows, 1975 dollars.
Small	Medium
Treatment	Low High Low High
A1 ternative Cost Item	Cost Cost	Cost Cost	Large X-Large
	— dollars 	
(A-l)
Investment
4,020
10,050
8,040
16,080
32,160
201,000

Annual Cost
Interest
Depreication
Operating
Total annual cost
201
402
181
784
503
1,005
452
1,960
402
804
362
1,568
804
1,608
723
3,135
1,608
3,216
1,446
6,270
10,050
20,100
9,040
39,190
(A-2)
Investment
0
0
0
0
0
0

Annual Cost
Interest
Depreciation
Operating Cost
Total annual cost
0
0
1P1
181
0
0
452
452
0
0
362
362
0
0
723
723
0
0
li446
1,446
0
0
9,040
9,040
(B)
Investment
8,890
22,230
17,780
35,570
71,140
444,600

Annual Cost
Depreication
. Operating cost
Total annual cost
445
445
407
1,297
1,112
1,112
1,107
3,241
889
8'89
814
2,595
1,779
1,779
1,627
5,185
3,557
3,557
3,254
10,368
22,230
22,230
20,340
64,800
(C)
Investment
4,290
10,720
8,580
17,150
34,300
214,400

Annual Cost
Interest
Depreciation
Operating Cost
Total annual cost
215
215
2,147
2,577
536
536
5,368
6,440
429
429
4,294
5,152
858
858
8,588
10,304
1,715
1,715
17,176
20,606
10,720
10,720
107,350
128,790
-------
Table XI-4. Effluent control costs for native fish pond culturing farms -
fancy goldfish, 1975 dollars
Treatment

Goldfish
& Minnows
Goldfish Only
Alternative
Cost Item
Medium
Large
Large



	 dollars





(A-l)
Investment
40,200
107,200
53,600

Annual Cost
Interest
Depreciation
Operating cost
Total Annual Cost
2,010
4,020
1,512
7,542
5,360
10,720
4,032
20,112
2,680
5,360
2,016
10,056
(A-2)
Investment
0
0
0

Annual cost
Interest
Depreciation
Operating Cost
Tpt^l Annual Cost
0
0
1,512
1,512
0
0
4,032
4,032
0
0
2,016
2,016
(B)
Investment
88,920
236,340
118,170

Annual Cost
Interest
Depreciation
Operating Cost
Total Annual Cost
4,446
4,446
4,068
12,960
11,817
11,817
10,848
34,482
5,909
5,909
5,424
17,242
(C)
Investment
10,720
113,900
59,950

Annaul Cost
Interest
Depreciation
Operating Cost
Total Annual Cost
536
536
21,470
22,542
5,695
5,695
57,178
68,568
2,848
2,848
28,589
34,285
XI-6
-------
XII. IMPACT ANALYSIS
The Imposition of effluent control on fish hatcheries and farms will have
both direct and indirect impacts on the industry, on consumers, on suppliers
to the industry and on the communities where the farms and processing plants
are located. An analysis was made for the specific effluent control levels
and for alternative treatment strategies designed to meet these levels
both in quantitative and qualitative terms to identify those impacts that
may be expected.'
For each segment, the following types of impacts have been analyzed:
1.	Price effects
2.	Financial effects
3.	Production effects
4.	Employment effects
5.	Community effects
6.	International trade effects
A. Catfish
Price Effects
The catfish and catfish fingerling industry can be characterized as a very
competitive industry in the production and marketing of catfish. Basically
the. catfish farmer sells his product on the open market where competition
is not only from other commercial catfish producers but also from wild
caught catfish, seafoods and other meat products. Prices are set through
prevailing supply and demand conditions and as a result the catfish farmer
can be classified as a price taker rather than a price setter.
Expected price impacts. Table XI1^1 shows the estimated price increase
required to pay for the various alternatives recommended to meet the effluent
control standards. As can be noted, a wide variation exists in the percent
of price increase required to pay for controls, ranging all the way from
less than one percent over 100 percent for the very small producers.
This results primarily from the great variation cf control costs found
from small to large farms. As was noted in Chapter V, the cost of coi-
trolling effluent is approximately the same for a one acre pond as for a
ten acre pond. Because the small operators with approximately 5 ponded
acres generally have five one acre ponds, the cost is substantially higher
than for the medium and large size operators where normally a ten acre pond
is used. In some cases the pond sizes may go as high as 40 acres. As a
result, on a per pound of fish produced basis, the cost of controlling
effluent in a one acre pond is ten times that incurred in a 10 acre pond.
In addition, large farmers generally are more efficient in their management
and generally produce more pounds of fish per acre than do the small farmers.
As a result, we see the wide variation in the cost of controlling effluents
by farm size.
XII-1
-------
Table XII-1. Percent price increase required to pay for incremental
pollution control, catfish
PI ant	A1ternative
size
Yield
BPT Costs
A-1
A-2
B
C
S
High
Low
15.77
4.54
37.24
72.28
S
High
High
38.25
13.01
92.24
180.89
S
Low
Low (normal)
29.03
9.50
. 69.82
136.85
S
Low
High
72.39
22.87
172.17
3?7.92
M

Low
3.96
1.40
9.47
18.80
M

High
7.20
2.84
19.31
35.69
L

2.72
0.87
7.36
12.85
X-L


2.34
0.63
6.58
12.78
XI1-2
-------
Two variations in the catfish and catfish finger!ings analysis should be
noted. For the small catfish producer, a high yield farmer and a low
yield farmer were presented. This reflects the differences found in
visiting the small catfish farmers in the southern states. In addition,
a low effluent control cost and high effluent control cost is used for the
small and,medium size operations. The low cost for the medium size operation
is based on an average 10 acre pond size, the high cost is based on average
5 acre pond size. The low cost for the small farm is.based on a 2^ acre
pond while the high cost is based c.i a one acre pond.
As can be seen from Table XII-1, there is a tremendous variation in the
percent of price increase required to pay for incremental pollution con-
trol costs. As with the trout and salmon section, these price increases
were.calculated as a percent of sales where 20-year cash flow was used, cost
and revenues were discounted back to the year zero prior to calculating the
percentage increase required. The increase then indicated the change that
was necessary to keep the present value of the farm constant. Price increases
for the medium to extra large operations range from a low of approximately
0.6 percent to a high of nearly 20 percent. A very substantial percentage
of the industry production is Included in the less than one percent category.
A similar situation exists for the catfish-fingerling producers.
Expected price increases. The ability for farmers to pass these costs
through the marketing system and on to the consumer is considered to be
negligible. Again, several factors are considered in reaching this con-
clusion. The general structure of the industry tends to be competitive with
no major producer or supplier maintaining any degree of control over the
market place. As a result, most of the fanners in this industry could be
accurately labeled as price takers, due to the marginal.control over
product prices. This inability to influence product prices is due to the
fragmented nature of the industry. The National Marine Fisheries Service
estimates proce'sors now handle only about 40 percent of the total vclume
of catfish produced on a commercial basis. The remainder or 60 percent are
marketed through various means on a local and regional basis. Also product
perishability and underutilization of production capacity are factors.
As with the trout industry, an example of the inability of the industry to
control price can be demonstrated by the very low profit levels currently
bsing achieved in this industry. High feed costs as well as increased
costs of other production inputs have resulted in narrower profit marg.'ns
than have been historically true. If the industry was able to pass increased
costs through to the final consumer, profit levels would have remained at
the level achieved in the late 1960's and early 1970's. As a result of these
factors, it is our conclusion that the ability to pass increased costs through
to the consumer with the exception of certain local situations will, be negli-
gible.
Financial Effects
Two primary types of analyses were completed to assess the financial impacts
of the proposed cost on the model catfish farms, (1) profitability and (2)
present value of future net income streams. Profitability impacts include
the following:
XII—3
-------
1.	Pretax and after tax income
2.	Return on invested capital
3.	Return on sales
4.	Annual cash flow
Pretax and after tax income. The effects of effluent control costs on income
are shown in Table X11-2. General levels of profits on catfish and catfish
fingerling operations are very low. It should be remembered that small,
medium and large size operations are considered to be family farms with
the "-large operations established on a corporate basis. As a result,
the return figures shown also include the owner's. labor and management.
It should be noted that the small and medium operations are generally
considered to be part time operations with the large and extra large
farm being full time operations.
Baseline profits for the catfish operations range from a loss of $162 for
the very small catfish farms to approximately $3,570 on medium part-time
farms. The large operation has a return of $22,074 and the X-large
$42,440. After the imposition of effluent controls, the small farms
with high costs will all experience negative returns. For medium size
farms, under the normal cost of control assumption, assuming 10 acre ponds,
the reduction in profits is> substantial for three of the alternatives.
However, for Alternative A-2, the profit reduction is relatively modest.
For the large operation, a modest reduction in income is shown for Alter-
native A-2; however, the remaining alternatives will cause severe reductior
in income. This is on a pretax basis.
The impact on the X-large farm is rather substantial with pretax income
declining from $42,400 to $39,432 for the least cost alternative. The
remaining alternatives reduce income significantly.
Return on invested capital. Changes in the return on investment associated
with the various controls are shown in Table XII-3. The baseline profit
situation for the catfish segments is relatively low with ? pretax
return on invested capital ranging from less than zero to 12 percent for
the family size operations. For the large and Xrlarge catfish farms, a
pretax base!ine. condition was estimated at 11 percent. This is reduced
in all cases after the imposition of effluent control guic- ' ines. For
the small farmer the income levels are reduced to negative igures for
most of the alternatives considered. Income for medium size fish farmers
is reduced from a pretax baseline condition of 7.5 percent to a high of
6.8 percent under Alternative A-Z, tc a low of a negative 15 percent under
Alternative C. Pretax income for the large operation is reduced from 11 to
10.3 percent for Alternative A-2, the least cost alternative. In the
remaining alternatives, significant reductions occur. A similar situation
exists for the X-large catfish operation where the A-2 Alternative also reduce:
pretax income from 11 to 10.3 percent with the remaining alternatives
causing more severe reductions.
XII-4
-------
Table XI1-2. Pre-tax and after-tax Income for model catfish farming operations - assuming no price change
Plant	BPT 		 Pre-tax income (3PT)			After-tax Income (BPT)
size Yield Cost Basel ine ?P1	B	Basel ine TPI	IT	C
s
High
High
412
-1,548
-40
-2,829
-6,286
336
-1,262
-30
-2,329
-54,527
s
High
Low
412
- 372
231
-885
-2,266
336
-296
193
-714
-1,854
s
Low
High
-162
-2,122
-614
-3,409
-6,860
-124
-1,734
-490
-2,816
-6,026
s
Low
Low
-162
-946
-343
-1,459
-2,840
-124
-765
-276
-1,181
-2,340
M

Low
3,570
1 ;940
3,194
-874
-1 ,"88
2,935
1,581
2,633
- 722
-1,459
M

High
3,570
309
2,817
-1,823
-7,046
2,935
252
2,314
-1,486
-6,212
L

22,074
10,553
20,570
14,991
643
16,357
11,746
15,395
11,336
529
X-L


42,440
29,398
39,432
20,875
-422
33,603
23,430
31,257
16,700
-422
-------
Table XI1-3. Pre-tax anc} after-tax rate of return as a percent of invested capital for model commercial catfish
farming operations, assuming.no price change		
Plant	BPT 	Pre-tax (BPT)		After-tax (BPT)
size
Yield
Cost
Baseline
A-l "
A-2
B
" c '
Baseline
A-l
A-2
B
C
S
High
High
11.8
-44.2
-1.1
-80.6
-179.2
9.6
-36.0
-0.9
-66.4
-155.4
S
High
Low
11.8
-10.6
6.6
-25.2
-64.6
9.6
-8.5
5.5
-20.3
-52.9
S
Low
High
-5.1
-66.2
-19.2
-106.4
-214.1
-3.9
-54.2
15.3
-87.9
-188.1
S
Low
Low
-5.1
-29.5
-10.7
-45.5
-88.7
-3.9
-23.8
-8.6
-36.9
-73.0
N

Low
7.5
4.1
6.8
1.8
-3.8
6.2
3.3
5.6
1.5
-3.1
M

High
7.5
0.7
5.9
-3.9
-14.9
6.2
.5
4.9
-3.2
-13.1
L

11.1
7.8
10.3
7.5
0.3
8.2
5.9
7.8
5.7
0.3
X-L


11.1
7.7
10.3
5.4
-0.1
8.8
6.1
8.2
4.3
-0.1
-------
Return on sales. Returns on sales on a pretax and after tax basis for
model catfish and catfish-fingerling farms are shown in Table XI1-4.
Margins are relatively close under baseline conditions and are further
reduced under the various alternative control levels. For the small cat-
fish farmer, reductions are very severe and in most cases end up with a
negative return on sales. The medium size operation is estimated to have
a baseline return on sales of 11.9 percent on a pretax basis. Only slight
reductions are seen if the farmer can use Alternative A-2 to meet the
proposed standards but the remaining three alternatives cause severe
reduction of income. The large and X-large catfish farms have a baseline
return on sales of 15.3 and 13.3 percent pretax, respectively. Again these
are reduced to very low ratios for all alternatives except A-2.
Annual cash flow. The estimated annual cash flow in absolute terms and
as a percent of invested capitalfor catfish farms is shown in Table XI1-5.
Small catfish farms are severely impacted with the annual cash flow in
absolute terms reduced to negative- values for all alternatives considered
except for A-l and A-2 under the low cost assumption. For the medium
size operation, the cash flow.is reduced to a negative value for only Alter-
native C.. Under Alternative A-l and A-2, the cash flow remains positive.
For tfte large and X-large catfish farm the annual cashflow is reduced from
$21,829 and $45,763, respectively to negative values for Alternative C. The
remaining three alternatives, however, show a positive value ranging from
$15,000 to a high of $31,000.
Net present value (NPV). As discussed previously, another measure of finan-
cial viability of a plant is the net present value (NPV) of projected
streams of cost and revenues. With this measure it is possible to assess
the likelihood of continued farm operation versus closure by discounting
future cost and revenue streams and an estimated cost of capital. Positive
NP.V's would indicate the likelihood of continued operation whereas negative
values would indicate probable shutdowns. However, there is a complicating
factor with regard to the net present value analysis that should be discussed
at this time.
The returns for the family size operation also included the return to the
operator's labor. As a result, the net present values of these farms
would overstate the true economic position of the farm. It was concluded
that this may not be a good indication for a shutdown situation, or, in
other words, it may conservatively estimate when a shutdown is likely to
occur.
Table XI1-6 shows the net present values of model commercial catfish farms
before and after the imposition of effluent treatment standards. For most of
the small catfish operations, the net present values are reduced to well
below zero after control, some as low as a negative $56,000 Medium size
operations have their net present values reduced to near zero or less than
zero, for Alternatives B and C, but still retain a positive net present
value after the imposition of Alternative A-2. A similar situation for the
large farms exists.
XI1-7
-------
Table XI1-4. Pre-tax and after-tax return on sales for model catfish operation (no price increase)
Plant	BPT 	 Pre-tax (BPT)	 	 After-tax (BPT)	
size Yield Cost Baseline A^T	B	(T~ Baseline I ' X-2	B	C
s
High
High
11.0
-41.3
¦ -1.1
-75.4
-167.6
9.0
-33.7
-0.8
-62.1
-148.4
s
High
Low
11.0
-9.9
. 6.2
-23.6
-60.4
9.0
-7.9
5.1
-19.0
-49.4
s
Low
High
-8.1
-106.1
-30.7
-170.5
-343.0
-6.2
-86.7
-24.5
-140.8
-301.3
s
Low
Low
-8.1
-47.3
-17.2
-73.0
-142.0
-6.2
-38.3
-13.8
-59.1
-117.0
M

Low
11.9
6.5
10.6
2.9
-6.0
9.8
5.3
8.8
2.4
-4.9
M

High
11.9
1.0
9.4
-6.1
-23.8
9.8
.8
7.7
-5.0
-20.7
L

15.3
10.8
14.3
10.4
.4
11.4
8.2
10.7
7.9
.4
X-L


13.3
9.2
12.3
6.5
-.1
10.5
7.3
9.8
5.2
-.1
I
00
-------
Table XI1-5. Estimated cash flow on Invested capital for model commercial catfish farming operations assuming no
price increase
i I I -	¦	L J ¦	1	¦	!	—f—I—I——» - n ¦_ ¦ F 1
				BPT	_	
BPT Baseline ^	B C
Size Yield Cost ~~1 % ~1 : 5T 1	I ~1 ~1	£
s
High
High
636
21.2
-257
-8.6
-30
-1.0
-1,217
-40.6
-4,894
-163.5
s
High
Low
636
21.2
106
3.5
193
6.4
- 269
-9.0
-1,631
-54.4
s
Low
High
76
2.8
-729
-26.4
-490
-17.8
-1,704
-61.8
-5,468
-198.3
s
Low
Low
76
2.8
-363
-13.2
-276
-10.0
-736
-26.7
-2,117
-76.8
M

Low
4,035
10.2
2,417
6.1
2,633
6.7
1,647
4.2
-1,013
-2.6
M

High
4,035
10.2
9,924
4.9
2,314
5.9
364
.9
-5,230
-13.5
L

21,829
12.8
15,091
8.9
15,395
9.1
15,035
8.8
2,313
1.4
X-L


45,763
14.1
30,119
9.3
31 ,257
9.6
24,098
7.4
3,146
1.0
-------
Table XI1-6. Net present values of model commercial catfish farms before and after the imposition of alternative
effluent treatment standards
Size'
Yield
BPT
Cost
NPV of farm
before controls
A-l
A-2
B
C
S
High
High
2,664
-9,180
-1,067
-25,897
-56,115
S
High
Low
2,664
-2,039
1,:'06
-8,724
-20,393
S
Low
High
-2,353
-14,309
-6,084
-31,138
.-62,294
S
Low
Low
-2,353
-.7,148
-3,903
-13,741
-25,183
M

Low
15,717
5,787
12,638
-8,023
-29,710
M

High
15,717
-2,345
9,458
-32.130
-75,962
L


101,740
72,210
92,504
20,714
-51,044
X-L


247,386
187,163
231,432
77,773
-86,177
-------
For those large or X-large farms that are able to implement Alternatives A-l
A-2, or B, the net present values remain positive.
Production Effects
The imposition of effluent control standards will cause serious production
effects in the catfish industry. Farms most seriously impacted are small
and medium size operations and to a limited extent larger operations that
are not able to use Alternative A-2 or A-l in meeting the proposed standards.
The size distiibution and percent of total production accounted for in 1975
by each of the catfish size categories is sumnarized below.
Size of Farm Number of Farms Production!/	Production
(000 lbs.)	(percent)
Small 1,572 3,912	8
Medium 203 7,826	16
Large 132 19,564	40
X-large 27 17,608	36
Total 1,934 48,910	100
-^Extrapolated from total pounds processed assuming that only one third of
fish produced go to processors.
Farm closures (conversion from fish farming). A conventional analysis of
the corporate farm's profitability including absolute reduction in income
as well as net p/orits as a percent of sales and percent of invested capital
was used to appraise the firm's ability to ecover capital expenditures
for pollution control equipment. The net present value was used to view
the present value of future earnings of the firm with and without the
inpositi.on of pollution controls. This present value has been compared
with present salvage, value of the firm. If the present salvage value of
the firm is greater than the present value of future earnings with the
imposition of controls, a shutdown situation is suggested. For evaluating
family farm operations, an esJimation of the family income after the
impositio . of controls was made, (a supplemental annual income of $10,000
w£s assumed for tax calculation purposes).
An estimated of baseline closures through 1977 is extremely difficult
to develop for any industry. This is especially true for the catfish
industry where industry trends are not documented and only an estimate
is made regarding the number of farms. However, after discussion with
industry leaders, some approximation of what may occur has to be developed.
It should be noted that the total number of catfish farms probably reached
a peak in 1971, and in 1972 and 1973 a large number of farms discontinued
operation. As a result, it is believed that the large commercial producers
with high investments are relatively stable, barring any unforeseen mis-
XII-11
-------
fortunes in the industry. Profit levels appear to be as good in 1974 as
in 1973, the year of the farm models, and perhaps better. The number of
part-time small farmers, however, are subject to fluctuations. . If the econ-
omic climate worsens, numbers would quickly decline. Assuming thef
economic climate to remain at about the present level, the following changes
are expected to occur in number of catfish farms between 1975 and 1977
under baseline conditions.
Size
1975
Baseline
1977
Number
Closures [%)
Small
1,572
1,415
9
Medium
203
180
11
Large
132
130
2
X-large
el
27
-
Total
1,934
1,752
9
The imposition of the proposed standards will impact the small catfish
farn.ers very severely as shown in Table XII-7. An estimated 87 percent
of the small catfish farmers will be forced to shutdown operations. The
impact on medium size farms will be less severe. However, most of those
farms utilizing Alternatives 6 ana C are expected to shut down operations..
The number of remaining farms using Alternative A-l and A-2 will be reduced
by about one third. Closures will amount to approximately 40 percent of the
estimated 180 medium size catfish producers.
Impact on the large firms will not be substantial with 3 large plants and
2 X-larg'e plants projected to close, This will amount to 2 percent of the
Targe farms and 7 percent of the X-large catfish farms. A total of 1,313
plants is projected to close, amounting to about 75 percent of the farms.
Production curtailment. No significant long run curtailment in total
production resulting from the imposition of increased water pollution
control requirements is expected. If plants continue to operate, it is
highly unlikely that they would reduce volume to meet the proposed
standards.
Although, as indicated previously, no long run curtailments are expected
the imposition of controls will have significant short-run effects on
the production capacities of the industry. These are illustrated below:'

Estimated
Production in 19771/
Capacity lost from
BPT Closures
Siz3 Farm
(000 lbs.
) (percent)
(000 lbs.)
(percent)
Small
3,500
7
3,045
87
Medium
7,000
14
3,010
43
Large
20,000
40
400
2
X-large
14,500
39
1,365
7
Total
50,000
100
7,820

—^Assume production levels remain constant between 1975 and 1977.
XI1-12
-------
Table XII-7. Estimated closures of catfish farms from effluent controls
Alternative Number of farms (1977) Closures (BPT)
Segment Size	required No.	Percent No. Percent
Catfish Small
None
10
1
.
0

A-l
281
20
281
100

A-2
840
59
665
79

B
274
19
274
100

C
10
1
10
TOO


1.415
100
1,230
87
Medi urn
None
1
1
None
0

A-l
36
20
19
52

A-2
108
59
27
79

B
34
19
31
91

C
1
1
1
100

Total
180
loo
78
~*3
Large
None
1
1
•
•

A-l
26
20
-
-

A-2
78
59
-


B
24
19
2
8

C
1
1 .
1
100

Total
130
T0O
3
2
X-Large
None
0
1
_
_

A-l
5
20
- -
-

A-2
17
59
-
-

B
5
20
2
40

C
0
0
-
-

Total
27
100

7
Total farms

1,752
1,313

75
XI1-13
-------
A'n estimated 8,000,000 pounds of production capacity will be lost as
a result of effluent controls. This represents about a 16 percent reduc-
tion in the overall industry capacity.
Employment Effects
Total employment in the catfish and catfish fingerling segments is esti-
mated to be between 1,140 and 1,575 part time workers and 855 and 1,045
full time employees. The employment impact will be severe even if baseline
closures are not included in the calculation. Employment loss is estimated
as the following:
Employees Leaving Industry
Farm Size BPT Closures	Part time Full time	Total
Small	1,230	1,230	~	1,230
Medium	78	80	—	80
Large	3	—	10	10
X-large	2	20	20
Total	1,313	1,310	30	1,340
Because of the geographical dispersion of farms in the industry, the impact
will be felt throughout the southern states particularly in Mississippi,
Arkansas, Alabama, Georgia, Texas, Louisiana and Tennessee.
Community Effects
Obviously all of the farms that will be forced to close will be in the
rural area. Much of the impact will be felt in the Delta region including
the state of Mississippi, Arkansas and Louisiana. Accurate prediction
on impact by location will be difficult except that it can be said that the
impact will be felt throughout the south with heavy, impacts falling in
areas of large production.
Since most of the small farms market on a local or regional basis, there
will be many facilities, restaurants and local fish markets that will
feel a severe cutback in local supplies of fish. Also local processors
will be deprived of an additional source of income. Basically most of the
farms that will be forced to close will be the part time operators who
rely on the added income- from fish production to supplement their incomes.
International Trade
At the present time, imports of catfish are increasing. Any cutback of
production wi 1,1 tend to increase imports. An estimated increase in
imports would cause an additional dollar outflow, but it is not known
at this time the magnitude of dollar outflow.
XI1-14
-------
B. Minnows
Price Effects
The percent price increase required to pay for the cost of pollution controls
is shown in Table XII-8: The required .increases range from an estimated
less than zero percent to a high of over 300 percent for the small opera-
tions using Alternative C. Negative prices shown for Alternative A-2
result from the added labor costs due to controls being less than the tax
savings.
With the present industry structure, we felt it will be possible for the
large firms using Alternative A-2 to pass their prices through the marketing
system and on to the final consumer. Approximately 42 percent of the commer-
cial minnows are produced in large and X-large farms that will be able to
implement Alternative A-2 to meet the proposed standards. As a result,
we are estimating a possible price increase of 1.5 percent.
Financial Effects
Two primary types of analyses were completed to assess the financial
impacts of the proposed cost on model farms (1) profitability and (2) net pre-
sent value of future net income stream.
Profitability impacts include the following:
1.	Pre-tax and after tax income
2.	Return on invested capital
3.	Return on sales
4.	Annual cash flow
Pre-tax and after-tax income. Changes in income for model minnow farms
under effluent controls are shown in Table XII-9. Under Alternative A-2,
the income is reduced between 20 and 50 percent for the small farms while
it is reduced between 10 and 15 percent for the other sizes,, under assump-
tions of both a price increase and no increase.
All four size model farms retain profit? under Alternative A-2. Under A-l,
the only farm that incurs a loss is the small farm. Under the higher costs
this farm experiences a reduction from a profit of $855 to a loss of over
$1,000. Under the lower costs, income is reduced to close to zero. For
the remaining size farms, income is reduced betv/een 40 and 70 percent under
AlternativeA-1, with the greatest reduction being experienced by the
medium farm. Under Alternative B, losses are incurred by the two
smaller size farms while income is reduced severely for the larger farm.
Income for the large plant becomes marginal (both with and without a price
increase). That of the X-large plant is reduced by about 60 percent even
with a price increase. Under Alternative C, all size farms experience
severe losses.
XI1-15
-------
Table XI1-8. Percent price increase required to pay for incremental
pollution control1
Plant
Minnows Size
BPT
Costs

Alternative

A-l
A-2
B
C
r»
Lo'.;
20.65
10.08
59.63
140.17
S
High
77.52
23.58
184.47
345.10
M
Low
1.98
-2.36
10.83
25.00
M
High
8.36
-. 35
26.56
53.33
L
2.37
-1.12
11.61
24.63
X-L

7.94
-1.61
13.49
19.85
XI1-16
-------
Table XI1-9. Pre-tax and after-tax income for model commercial minnow farm operations
Plant
size
BPT Cost Baseline
Pre-tax income (BPT),
XT JPT	B
Baseline A-l
After-tax income (BPT)
~K-2







Before price
increase


s
Low

855
11
674
-422
-1,722
694 62
551
-356
s
High

855
-1,105
- 403
-2,386
-5,585
694 -887
327
-1,958
M
Low

4,713
3,145
4,351
2,184
- 434
3,866 2,593
3,568
1,785
M
High

4,713
1,578
3,990
-472
-5,599
3,866 1,284
3,281
-377
L

10,612
.4,342
9,166
244
-9,994
8,433 3,569
7,349
206
X-L


96,023
56,833
86,983
31,223
32,767
63,432 43,053
58,731
24,854







After price increase


S
Low
855
883
99
702
-414
-1,694
-722 90
569
-328
S
High
855
883
-1,077
431
-2,358
-5,557
722 -868
355
-1,930
M
Low
6,713
4,983
3,415
4,621
2,391
- 169
4,090 2,808
3,792
-1,960
M
High
6,713
4,983
1,348
4,260
-202
-5,321
4,090 1,506
3,496
-154
L
10,612
11,692
5,422
10,246
1,324
-8,914
9,240 4,475
7,324
1,077
X-L

96,023
102,773
63,583
93,733
37,973
-26,017
66,942 46,563
62,241
30,119
-1,402
-4,751
- 353
-4,757
-9,100
¦32,707
-1,382
-4,732
131
-4,487
-8.080
-20,017
-------
Return on invested capital. A pre-tax and after-tax rate of return as a
percent of average invested capital for the model minnow farms is shown in
Table XII-10. Income wais reduced for the small farms from a baseline
return of 28 percent on invested capital to negative levels for most of
the Alternatives; the after price increase rate of return for Alternative
A-2 is reduced to between 14 and 23 percent'. A similar pattern is shown
for the remaining size farms with Alternatives B and C reducing income
to negative returns for most farms and Alternative A-l causing severe
reductions. Decreases for those firms that are able to utilize Alternative
A-2 are relatively slight.
Return on sales. Pre-tax and after-tax return on sales for model com-
mercial operations is shown in Table XII-11. We again see a pattern
suggested by the earlier two tables. Pre-tax return on sales is estimated
on the baseline condition for small operations of 45 percent. This is re-
duced to between 21 and 35 percent for Alternative A-2 and negative values
for the remaining alternatives. After the price increase the pre-tax return
on sales for the small operations is increased by about a percent Pre-tax -
return on sales is esMmated under baseline conditions at 26 percent for
the medium size operation, 15 percent for large, and 21 percent f<.r X-large.
Again these return rates are .reduced to negative values for Alternative C
with substantial reductions occurring for those farms using Alternatives A-l
and B. For those farms using Alternative A-2, only slight reductions in the
rate of return is evident.
Annual cash flow. Table XII-12 shows the annual cash flow in absolute terni*
as well as percent of invested capital for the model farms. For the small
operations, the annual cash flow is reduced to negative levels for Alterna-
tives B and C, but remains positive for Alternatives A-l and A-2. For the
medium and X-iarge size farm, only Alternative C reduces the annual cash flow
to a negative position "with some reduction occurring for the other alterna-
tives considered. The medium farm is the only farm which experiences a
positive cash flow under Alternative C.
Net present value (NPV).- Procedures similar to those described under the
net present value section for catfish were used in estimating the net
present value for the minnow farms as shown in Table XII-13. As indicated
previously, the net present value of the small farms tend to overstate the
true economic position of these farms. The contrary is true in the case
of the large farms. This is apparent for the X-large minnow farm which
has a negative net present value (baseline) when current land costs are
used in calculating salvage value. This would suggest that if owners of
the farm valued the land at current costs, they would be economically
justified in. selling the farm and going out of business. However, farmers
generally tend to value the land as a fixed asset at a cost lower than its
current replacement value. Consequently, a second calculation of the net
present value was made for the farm using the book value of land reflecting
cost of land several years ago when the farms were initially established.
This resulted in a positive NPV as shown in Table XI1-13 under Alternative
land value.
Xir-18
-------
XII-10. Pre-tax and after-tax rate of return as a percent of Invested capital for model commercial minnow
farming operations
Plant	,		Pre-tax (BPT)	After-tax (BPT)
size	BPT cost Baseline	^2	B	C~ Baseline 7PI		5	C






Before price increase



s
Low
28.0
2.3
22.1
-13.8
-56.5
22.7
2.1
18.1
-11.7
-45.9
s
High
28.0
-36.2
13.2
-78.2
-183.1
22.7
-29.1
10.7
-64.2
-155.8
M
Low
13.0
8.7
12.1
6.1
-1.2
10.7
7.2
9.9
5.0
-0.9'
M
High
13.0,
4.4
11.1
-1.3
-15.5
10.7
3.6
9.1
-1.0
-13.2
L

6.8
2.8
5.9
0.2
-6.4
5.4
2.3
4.7
0.2
-5.9
X-L

6.8
4.1
6.2
2.2
-3.8
4.5
3.1
4.2
1.8
-3.8






After price Increase



S
Low
28.0
3.3
22.9
-13.5
-55.3
22.7
2.9
18.6
-10.7
-45.1
S
High
28.0
-35.3
14.0
-77.3
-182.3
22.7
-28.5
11.7
-63.3
-154.8
M
Low
13.0
9.4
12.8
6.6
-0.4
10.7
7.8
10.5
5.4
-0.3
M
High
13.0
5.1
11.8
-0.6
-14.7
10.7
4.2
9.7
-0.4
-12.4
L

6.8
3.5
6.6
0.9
-5.7
5.4
?. 9
4.7
0.7
-5.7
X-L

6.8
4.5
6.8
2.7
-3.0
4.5
1.3
4.4
2.1
-3.0
-------
Table XII-11. Pre-tax and after-tax return on sales for model coi^nercial minnow operations
Size
BPT
cost

Pre-tax
(BPT)


After-
•tax (BPT)
Baseline
A-l
A-2
B C
Baseline
A-l
A-2
B C





Before
price increase



S
L
44.9
3.7
35.4
-22.2 -91.8
36.5
3.3
29.0
-18.7 -74.8
S
H
44.9
-58.1
•21.2
-125.4 -297.9
36.5
-46.6
17.2
-102.9 -253.4
M
L
25.8
17.2
23.8
12.0 -2.4
-21.2
T4.2
19.5
9.8 -2.0
M
H
25.8
8.6
21.8
-2.6 -31.1
21.2
7.0
18.0
-2.1 -26.4
L

14.5
5.9
12.5
.3 -13.9
11.5
4.9
10.1
.3 -12.7
X-L

21.0'
12.4
19.0
6.8 -7.3
13.9
9.4
12.9
5.4 -7.3





After price increase.



S
L
44.9
5.2
36.9
-21.Q -89.0
37.9
4.7
29.9
-17.2 -72.6
S
H
44.9
-56.6
22.6
-123.9 -292.0
37.9
-45.6
18.7
-101.4 -248.2
M
L
25.8
18.7
25.3
13.1 -.9
22.4
15.4
20.8
10.7 -.7
M
H
25.8
10.1
23.3
-1.1 -29.1
22.4
8.2
19.1
-.8 -24.6
L

14.5
7.4
14.0
1.8 -12.2
12.6
6.1
10.1
1.5 -11.1
X-L

21.0
13.9
20.5
8.3 , -5.7
14.7
10.2
13.6
6.6 -5.7
-------
Table XII-12. Estimated cash flow and as percent of Invested capital for model commercial minnow farming operations
BPT
BPT
Size cost	 Baseline	 .	 A-l 	 A-2	B		C


$
%
$
%
$
%
$
%
$
%






Before price increase



s
L
801
30.4
464
17.6
551
20.9
89
3.4
- 1,187
- 45.0
s
H
801
30.4
118
4.5
327
12.4
-846
-32.1
- 4,215
-139.8
ri
L
5,540
17.9
3,397
11.0
3,568
11.5
2,674
8.6
76
.2
H
H
5,540
17.9
2,892
9.3
3,281
10.6
1 ,402
4.5
- 3,899
- 12.6
L

14,049
10.4
6,785
5.0
7,349
5.4
3,763
2.8
- 7,445
- 5.5
X-L

95,832
8.0
63,153
5.3
58,731
4.9
47,084
3.9
-27,047
- 3.0






After price increase



S
L
801
30.4
492
18.7
569
21.6
117
4.4
-1,167
- 44.2
S
H
801
30.4
137
5.2
355
13.5
-818
-32.0
-4,187
-158.7
M
L
5,540
17.9
3,612
11.7
3,792
12.3
2,849
9.2
298
1.0
M
H
5,540
17.9
3,114
10.1
3,496
11.3
1 ,625
5.3
-3,629
- 11.7
L

14,049
1?.4
7,691
5.7
7,324
5.4
4,634
3.4
-§,365
- 4.7
X-L

95,832
8.0
66,663
5.6
62,241
5.2
52,349
4.4
-15,297
- 2.0
-------
Table XII-13. Net present values of model commercial minnow farms before and after the imposition
of alternative effluent treatment standards
" BPT FTPV of farm
Size	cost	before controls	_A-J	A-2	B	C_	
Before price increase
S L 5,996 1 '191 4,435	-5,402	-15,706
S H 5,996 5,858 2,255	-22,555	-49,417
M L 22,092 -IS.108 25,640	5,800	-15,073
M H 22,092 S.509 22,62?	-17,393	-59,202
L 10,711 - 6,689 17,185	-59,195	-144,761
X-L r 29,051. -280,483 -76,974	-474,609	-939,521
After price increase
S L 5,996 1 .,477 4,722	-5,203	-15,512
S H 5,996 -5.664 2,4-+9	-2° ,279	-49,202
M L 22,092 21 .392 28,290	7,982	-12,800
M H 22,097 11.333 24,906	-15,053	-56,888
L 10,711 1.568 25,167	-50,612	-133,935
X-L -29,051 -143,837 -41 ,193	-436,911	-870,709.
Alternative (book value of land) - after price increase
L 446,377 295,809 398,553	2,735	-4,310.637
-------
The net present value for small operations is estimated at $5,996 under
baseline. It is reduced to negative values for all treatment alternatives
except A-2 and A-l (for low cost model). This strongly suggests such shut-
downs for Alternative A-l, B and C. The net present value of about $22,000
for the medium size operations is reduced only slightly under Alternative
A-2 but is reduced to negative values under Alternatives B and C. Under
Alternative A the net present value is reduced to $19,100 for a normal
cost operation and $9,500 for the high cost control reflecting smaller
size ponds. The large farm has a NPV of close to $11,000 under baseline.
With effluent controls and the expected price increase associated with
these controls, the NPV is actually increased for the farm when subjected
to A-2 costs. However under the other alternatives the NPV is reduced
significantly, taking on negative values with Alternatives B and C.
Under the Alternative calculations, the large plant has a NPV of over
$400,000 under baseline. Under Alternative A-2 this value reduced only
slightly. With the other Alternatives the NPV is reduced significantly
with a negative value occurring under Alternative C.
Production Effects
The imposition of effluent control standards will cause serious production
effects in the minnow segment. Farms most seriously impacted are small
and medium sized operations and to a limited extent larger operations that,
are not able to use Alternatives A-l and A-2 to meet the proposed standards.
Farm closures (or conversions) resulting from pollution control guidelines.
A conventional analysis of the farm profitability including absolute
reduction in income as well as net profits as a percent of sales and as a
percent of invested capital was used to appraise the firms ability to recover
capital expenditures for pollution control equipment. Net present value
was used to view the present value of future earnings of the firr, with
and without the imposition of controls. This present value was compared
with the present salvage value of the firm. If the present salvage value
of the firm is greater than the present value of future earnings with the
imposition of controls, a shutdown situation is suggested. ;f'nis procedure
is used for farms organized under a corporate or similar structure. A
second analysis was employed for evaluating family size operations. This
procedure is described in previous sections. By usinn the conventional
analysis, the net present value an;lysis and/or an estimation of family
living income after the imposition of controls, it is believed that a clear
picture of farms financial situation can be obtained under the different
organizational structures that exist in the industry.
Between 1975 and 1977, the total number of minnow farms is expected to decline
by about 7 percent as shown below (25 farms). The number of large farms
is expected to remain constant at 10. The remaining size farms will experi-
ence reductions of between 6 and 8 percent.
XI1-23
-------
Baseline
Farm Size
1975
1977
Small
130
120
Medium
160
150
Large
60
55
X-large
10
10
Total
360
335
The imposition of the proposed standards will impact the minnow industry
very severely as shown in Tabic X11-14. Also shown in the table is the
number of operations that are estirated to be able to use the various
alternatives ?nd the number and percent of operations using those
alternatives that will be forced to close.
Essentially all of the small farms using Alternative A-l, B and C will
be forced to close. As a result, we estimate that 63 of the 120 farms
or 52.5 percent, will be forced t' shutdown. For the medium size segment,
the total number of farms we are projecting to shut down is estimated at
29 or 19.3 percent of the 150 farms estimated to be in the segment. This
includes 27 percent of those farms using Alternative A-l, 71 percent using
Alternative B.
In the large size category, 70 percent of the plants under Alternative A-l
would close while most would close under Alternatives B and C. / Farms
that could aHnpt Alternative A-2 would remain open.
In the X-large category, only one farm is projected to close', this one
would have been forced to adopt Alternative B. A total of 110 farms
representing 33 percent of the industry would be expected to close.
Production curtailment. No significant long run curtailments of total pro-
duction resulting from imposition of water pollution control requirements
are expected.' If plants continue to operate it is highly unlikely that
they would reduce volume to meet the proposed standards.
The size distribution and percent of total production accounted for by each
of the :ninncw size categories for 1975 is summarized below.
Type and Size	No. of Farms	Percent of Production
Minnows - small	130	2.4
medium	160	23.4
large	60	36.8
X-large	10	37.4
Total	360	100.0
the productivity capacity of the industry is estimated to be reduced by
20.9 percent. This is summarized as follows:
Size Present % of Production % of Farms Closing Production Los
Small	2.4	52.5	1.3
Medium	23.4	19.3	4.5
Large	36.8	30.9	11.4
X-large	37.4	10.0	3.7
Total	100.0	"20"
-------
Table XII-14. Estimated shutdown for commercial minnow operation
Alternative Number of operations (1977) Projected shutdown
Size	required	Number Percent	Number Percent
Small None	1
A-l	24
A-2	72
B	22
C	1
Total	120
Medium None	1
A-l	30
A-2	90
B	28
C	1.
Total	150
Large None	1
A-l	10
A-2	33
B	10
C	_JL
Total	55
X-Large None	0
A-l	2
A-2	6
B	2
C	0
Total	10
Total Industry	335
1
20	22	92.0
59	18	25.0
19	22	100.0
1	1	100.0
100	63	52.5
1
20	8	27.0
59
19	20	71.0
1	1	100.0
TOO	29	"TO"
1
20	7	70.0
59
19	9	90.0
1	1	100.0
TOO	17	30.9
1
20
59
20	1	50.0
1
TOO	1	~T070
100	110	32.8
XI1-25
-------
Employment Effect
Total employment in the minnow industry is estimated at 324 part time
employees and 350 to 550 full time employees. The employment'impact
will be severe even if baseline closures are not included in the calcu-
lation. Employment loss is estimated as the following.
Employees dislocated
Size
No. of Closures
Part Time
Full Time
Small
63
63
—
Medium
29
29
—
Large
17

90
X-large
1

15
Total
110
92
105
Because of the geographical dispersion of farms, the impact will be felt
throughout the southern states with the major impact in Arkansas and
Missouri.
Community libraets
Obviously ?11 of the farms that will be forced to close will be in rural
areas and will be predominately in Arkansas. Lesser impacts will be felt
in the other Southern states.
The loss of farms will"cause a reduction of income to the comrcunity.and
to a limited extent a loss of jobs. The small and medium size farms are
essentially part time operations with the added income from the minnow
operation being used to supplement the existing income.
A reduction of bait minnows of approximately 33 percent will cause a
reduced supply of minnows to sport fisherman throughout the United
States.
International Trade
The impact of pollution controls on the minnow industry will not affect
our international trade.
C. Fancy Goldfish
Price Effects
The percent price increase required to pay for the cost of pollution control
is shown in Table XII-15. The required increase ranges from an estimated
0.2 to a high of 24.8 percent for Alternative C.
XI1-26
-------
Table XII-15. Percent price increase required to pay for incremental
pollution control - fancy goldfish
Type and Size of Plant
A-l
Alternative
A-2 B
C


	Percent


Fancy Goldfish & Minnows




Medium
6.42
1.56
13.35
24.80
Large
2.27
.65
6.81
11.76
Fancy Goldfish




Large
3.53
.16
5.54
9.35
XI1-27
-------
The present industry structure suggests that it will be possible for
large firms meeting the proposed standards with Alternative A-2 to pass
their increased cost through the marketing system in the form of increased
prices. Forty-eight percent of the total volume of production is pro-
duced by the large farm that will be in a position to use Alternative A-2.
The remaining farms will be required to use higher cost alternatives. As
a result, a projected price increase of 0.7 percent is expected.
Financial Effects
Two primary types of analyses were completed to assess the financial
impacts of the proposed cos^.s from model farms: (1) profitability and
(2) prer.ent value of future net income stream.
Profitability impacts include the following:
1.	Pre-tax ana after tax income
2.	Return on invested capital
3.	Return on sales
4.	Annual cash flow
Pre-tax and after tax income. The impact of alternative effluent controls
on pre-tax and after tax income for model fancy goldfish farms is shown
in Table XI1-15. Baseline income on a pre-tax basis is estimated at $4,900
for medium ^i.zp farms. This is snhspnupntly reduced to ppgat.ivp values
for all alternatives except A-2. Alternative A-2 reduces pre-tax .income
to $3,468. After the projected price increase of 0.7 percent, the pre-tax
income is increased to $4,045 under the Alternative A-2 situation.
Baseline incomes' for.the two large operations are estimated at $27,597 for
the combination farm and $9,372 for the goldfish only farm. Losses
occur for both farms Under Alternative .C and for the goldfish farm also
under Alternative B. Profits under Alternative A-l are reduced by about
a half for each type farm. Under Alternative A-2, profit's are reduced only
slightly.
Return on invested capital. Rates of return on invested capital are shown
in Table XII-17. Pre-tax rates under bas.eline vary from 2.4 percent for the
large goldfish dnly farm to close to 5 percent for the large corporate farm.
With the imposition of the guidelines, rates are significantly changed
for all alternatives except Alternative A-2. Under A-2, returns on
investments are nearly the same as those under baseline. The rates under
Alternative C are negative for all farms. Under the assumption of a price
increase and Alternative B the rates vary from a negative 1.7 for the medium
farm to a pasitive 1.3 percent for the large corporate farm.
Return on sales. Rates of return on sales are shown in Table XI1-18.
Under baseline, pre-tax rates vary from 3.1 percent for the large goldfish
only farm to over 6 percent for the large corporate farm. With the imposi-
tion of the guidelines, all rates are substantially changed. Assuming
XI1-28
-------
Table XI1-16. Pre-tax and after-tax Income for model fancy goldfish farms
Type and size


Pre-tax income
" BPT


After-tax Income
BPT

of farms
Baseline
A-l
A-2
B C
Baseline
A-l
A-2
B
C




(Dollars)



(Dollars)





Before price
Increase




Fancy Goldfish
& Minnows:
Medium
Large
4,980
27,597
-552
12,8*5
3,468
23,565
-3,534 -17,026
4,932 -35,276
4,087
22,578
-552
11,793
2,852
19,763
-3,534
4,928
-17,026
-35,270
Fancy Goldfish:
Large
9,372
3,996
7,356
-1 ,961 -22,065
7,503
3,287
5,984
-1,961
-22,065




After price increase




Fancy Goldfish
& Minnows:
Medium
Large

25
15,921
4,045
25,641
-2,957 -16,449
8,008 -32,200

25
14,030
3,327
21,928
-2,957
7,653
-16,449
-32,200
Fancy Goldfish:
Large

4,140
9,500
183 -19,921

3,404
7,599
155
-19,921
-------
Table XII-17. Pre-tax and after-tax rate of return as a percent of average invested capital for model commercial
fancy goldfish farming operations
Type and size
of farms
Fancy Goldfish
& Minnows:
Medium
Large
Fancy Goldfish
Large
Pre-tax
Baseline A-l
A-2
2.9
4.6
2.4
•0.2
2.1
1.2
1.9
3.8
1.5
-2.0
0.8
¦0.5
....
Baseline A-l
After-tax
-- (percent)	
Eefore price increase
-5.5
-£.6
-E.6
2.4
3.7
'2.0
-0.2
3.7
0.7
A-2
1.6
3.2
1.5
-2.0 -9.5
0.8
-5.6
-0.5 -5.6
Fancy Goldfish
& Minnows;
Medium	2.9
Large	4.6
Fancy Goldfish:
Large	2.4
0.0 2.2	-1.7
2.6 4.3.	1.3
1.1 2.4	0.1
Ifter price increase
-£.2	2.4	0.0
-3.1	3.7	2.3
-5.1	2.0	0.8
1.8	-1.7 -9.2
3.6 1.2 -5.1
1.9	O'.O -5.1
-------
Table XII-18. Pre-tax and after-tax return on sales for model fancy goldfish farms
Type and size
of farms
Baseline
XT
Pre-tax
A-2
Baseline A-1
After-tax
Fancy Goldfish
& Minnows:
Medium
Large
Fancy Goldfish:
Large
5.8
6.3
3.1
-0.6
2.9
0.7
4.1
5.4
2.4
-4.1
1.1
-0.6
	(Percent)	
Before price increase
-20.0
-8.0
-7.2
4.8
5.1
2.5
-0.6
2.7
0.5
3.3
4.5
2.0
-4.1
1.1
-0.6
-20.0
-8.0
-7.2
After price Increase
Fancy Goldfish
& minnows:
Medium	5.8	,0.0	4.7 -3.4 -19.1	4.8	0.0	3.9	-3.4 -19.1
Large	6.3	3.6	6.0	1.8 -7.3	5.1	3.2	5.0	1 .7 -7.3
Fancy Goldfish:
targe	6.3	1.3	3.1	0.1 -6.5	5.1	1.1	2.5	0.0 -6.5
-------
that the expected price increase of 0.7 percent occurs, the rate goes from
5.8 percent for the medium farm to below 5 percent under Alternative A-2.
Under this alternative, the rate of return on sales for the large goldfish
farm is cut in half to 3.1 while that of the large corporate farm is
reduced from 6.3 percent to 6.0 percent. Under the other alternatives,
the rates are severely affected. All farms show a negative rate under
Alternative C while only the medium farms show a negative rate under
Alternative B although the large goldfish farm shows only a 0.1 'percent.
Under Alternative A-l, all farms have positive rates. Mowcv-ar, all of the
rates are extremely low.
Annual nash flow. Table XIi-19 snov:s the annual cash flow, both in absolute
terms and as a percent of invested caDital for the model coirmercial goldfish
farming operations. The baseline cash flow of $11,5CC* is shown for the
iridium sized operation which is subsequently reduced to a nejative value
under conditions imposed by Alternative C. For the remaining alternatives
the cash flow remains positive ranging from $900 to a high of $4,045 after
the projected price increase.
The large operations are estimated to have cash flows ranging from .1 negative
$30,000 to a positive $22,500. The greatest changes occur under Alternative
C.
Net present value (NPV). Net present values for the three farming operations
are shown in Table Xll-20 for baseline cufiuicions aiid witn imposition of
the guidelines. Under baseline, these values are all substantially high r,
from about $60,000 for the medium farm to over $400,000 for the large cor-
porate farm. With the imposition of the guidelines, the NPV's of all farms an
reduced considerably should no price increase occur. With the expected
price increase, the values under Alternative A-2 remain essentially the
same as those under baseline'for all three farms. Under Alternative A-l,
the values are reduced by about a third. Under Alternative B, values are'
changed significantly. The value for the large corporate farm is cut in
more than a, half. The values for the other two farms are low' (negative,
in one case) reflecting the severe impacts that would result from the
Alternative. Under Alternative C, the NPV's of all 'farms fall well below
zero pointing out the economic infeasibility of this alternative.
Production Effects
The imposition of effluent control standards will cause serious production
effects in the medium size goldfish segment but will not seriously disrupt
the larger operations. Farms most seriously impacted are the medium-size
operations that will not be able to use Alternative A-2 to meet the proposed
standards.
Production curtailment. No significant long-run curtailments of total
production resulting from imposition of water pollution control require-
ments are expected. If farms continue to operate, it is highly unlikely
that they will reduce volume to meet the proposed standards.
XII-32
-------
Table XI1-19. Estimated cash flow and .as percent of average Invested capital for model commercial fancy gold-
fish farming operations
Type and size



BPT




of farms
Baseline

A-l
A-2

B
C

Fancy Goldfish
& Minnows:
Medium
Large
$ i
$
i
$ * $
Before price increase
%
5
%
11,584 7.8
51,571 10.0
3,468
22,513
2.3
4.4
,2,852 1.9
19,763 3.8
912
16,745
0.6
3.2
-16,490
-29,581
-11.1
-5.7
Fancy Goldfish:
Large-
28,940 8.8
8,647
2.-6
5,984 1.8
3,948
1.2
-19,217
-5.8




After price increase



Fancy Goldfish
& Minnows:
Medium
Large

4,045
24,750

3,327
21,928
1,489
19,470

-15,913
-26,505

Fancy Goldfish:
Large

8,764

7,599
6,064

-17,073

-------
Table XII-:20. Net present values of model commercial fancy goldfish fish farms
before and after the imposition of alternative effluent treatment standards
Type and size
. of farm
NPV of farm
before controls
A--1
A-2
B
C



Before
price increase

F--in.cy Goldfish
Minnows:





Medium
Large
53,220
410,413
13,055
333,215
46,935
389,851
-577,787
156,366
-156,991
-116,374
Fancy Goldfish:





Large
130,616
80,696
117,384
After
-7,719
price increase
•161,164
Fancy Goldfish
& Minnows:





Med i um
Large

19,448
350,923
50,932
405,540
-51,700
185,929
-150,905
-85,017
Fancy Goldfish:





Large

96,212
13,452
8,521
-139,307
XI1-34
-------
The size distribution and percent of total production accounted for by
each of the segments is surrenarized below:
Type	Size No. of Farms Percent of Production
Fancy goldfish and
minnows	Medium	3	14.2
Large	7	66.1
Fancy goldfish only Large	2	19.7
Farm shutdowns resulting from pollution guidelines. A conventional analysis
of the farm profitability, including absolute reduction of income as well
as net profit as a percent of sales and as a percent of invested capital,
was.used to appraise the farm's ability to cover capital expenditures
for pollution control. The nec.present value analysis was used to view
the present value of future earnings of the farm with and without the
imposition of controls. This present value was compared with the present
salvage value of the firm. If the present salvage value of the firm is
greater.than the present value of future earnings with the imposition
of controls, a shutdown situation was suggested.
The imposition of proposed standards will impact the medium size segments
of the fancy goldfish industry very severely. A summary of the impacts
is shown in Table XII-21. Medium size operations required to use Alter-
native A-l or B to meet the proposed standards will be forced to shutdown.
This is estimated to include 2 of the 3 medium size operations.
After evaluation of the financial strength of the large operations, and
consideration of the cost of control, it appears there will be a reduction
of profits but not to the point of closure. This includes seven of the
fancy goldfish - minnow farms and two fancy goldfish only farms.
In summary, the estimated shutdowns for the commercial fancy goldfish
segment include two medium size operations. This represents 16.6 percent
of the total operations in the segment.
The productive, capacity of the industry is estimated to be reduced by
9.5 percent, this can be summarized as follows:
Si7e
Percent of Production
Percent of Farms Closing
Production
Medium
14.2
66.7
9.5
Large
66.1
0
0
Large
19.7
0
0
Total
100.0
16.6
9.5
There are no baseline closures expected prior to 1977.
XII-35
-------
Table XII-21. Estimated shutdown for commercial fancy goldfish operation.
Alternative No. of Operations Shutdowns.
Segment	Size	required No. Percent No. Percent
Fancy goldfish






and minnows
Medium
A-l
1
33.3
1
100


A-2
1
33.3
None
0


B
2
33.3
1
100


r.
0
0
NA
—



3
100.0
2
66.

Large
A-l
2
23.6
None


A-2
4
57.1'
None
100


B
1
14.3
None
100-


C
0
0
NA
—



7
100.0
0
0
Fancy goldfish






only
Large
A-l
1
50.0
None
0


A-2
1
50.0
None
0


B
0
0
NA
—


C
. 0
0
NA




2
100.0
• 0
0
Total


12
100.0
2
16.6
XII-36
-------
Employment Effect
Employment in the fancy goldfish farming segment is estimated to be between
100 and 150 full time employees. The employment impact resulting from the
closure of 2 medium sized firms is estimated to amount to 12 to 16 persons.
This is based on an estimated six to eight employees per farm.
Community Effects
Because of the special dispersion of fancy goldfish farms, we would expect
that the closure of two medium size farms would correspondingly effect two
communities. The impact is expected to be relatively slight. The jobs
lost would amount to only six to eight per community.
International Trade
The closure of two medium size fancy goldfish farms is expected to have a
negligible impact on international trade.
XI1-37
-------
Part 4. NON-NATIVE ORNAMENTAL FISH CULTURING
XIII. INDUSTRY STRUCTURE
A. Characteristics of the Industry
Non-native fish are considered to be ornamental or tropical fish pro-
duced on a commercial basis excluding such non-native fish as carp and
goldfish.
The ornamental fish industry is relatively new. Started in 1932 in
Tampa, the industry is still concentrated in that area. The industry
has grown rapidly since the mid-1940's. A survey completed, in August,
1973, for the Florida Tropical Fish Farms Association, Inc., (11) reported
that since: 1969, the average annual growth rate of fapiily-owned pet fish
industry has been 18.7 percent.
Approximately 90 percent of the domestically bred ornamental fish are
raised in Florida and 80 percent of these are in the area surrounding
Tampa--in Hillsborough, Polk, Manatee and Sarasota counties. The .
remainder of the Florida production is concentrated about Miami. Though
ornamental fish are produced in nearly every state; with the exception of
Florida ana in limited areas of California, Texas ana Louisiana, all
ornamental fish are produced iindoors in tanks or aquariums.
Types of Firms and Producers
Three basic typer. of firms make up the industry:
1.	domestic producers of non-native ornamentals,
2.	importers, and
3.	combinations of domestic producers and importers.
These groups sell as many as 1,000 different species in the United States.
Among domestic producers, firms have varying combinations of functions.
The most common type of operation combines fish hatching with growing
to a marketable size. Others hatch and grow their own fish, but also
purchase fish from other producers to fill out orders where they do not
produce all of the species required by the purchaser. Some firms are
specialized importers, handling only imported fish. Others combine
domestic production and purchasing from other farms with importing.
Finally,.a number of firms produce no fish and purchase from domestic
producers and importers for sale to distributors, etc. Many ornamental
fish producers also prpduce aquatic plants. Table XIII-1 shows these
functional combinations that existed in Florida in 1973.
XIII-1
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Table XI11 — 1. Functional classification, Florida, tropical fish
farmers and wholesalers, 1973
Function	Number of firms
Rear only	102
Rear and purchase	18
Import, rear, purchase and
produce aquatic plants	10
Rear, purchase, import	8
Import, purchase	5
Rear and produce aquatic plants	4
Rear and import	3
Import only	3
Rear, purchase and produce aquatic plants	2
Import, purchase and produce aquatic plants	1
Import and produce aquatic plants	1
Purchase only	I
Total	158
Source: Industry Survey, 1973
XII1-2
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Out of a total of 158 Florida ornamental fish producers it is estimated
that 90 percent are involved only in domestic fish production and the
remaining 10 percent imported at least a part of their total sales.
Among domestic producers of ornamental fish, two general classes predominate:
1.	live bearers - primarily raised out-of-doors in pools, and
2.	egg layers - primarily bred indoors in tanks with young fish
transferred to outdoor pools for grow out.
Number and Location of Firms
As indicated earlier, approximately 90 percent of the non-native ornamental
fish production is concentrated in Florida. Ornamental fish are primarily
"tropical" fisn. and they require warm water for outdoor production. Only
in Florida arc ¦ -mperatures high enough to permit such production and even
there, ocasi:. periods of cold weather result in substantial losses in
outdoor pools. Utle information is available on the number of outdoor
ornamental fi.- ..rms in other states. It is known that outdoor production
facilities hev. existed in California, Hawaii, Texas and Louisiana. How-
ever, the nur.'^.v of farms end the volume of production is insignficant com-
pared to that cf Florida. Ornamental fish are bred in nearly every stats,
but with the exception of those located in, Florida and the. other warm-
weather states indicated above, such production is all indoors.
Even in Florida, the tctal number of producers is not known. The Florida
Game and Fresh Water Fisii Commission requires the licensing of all orna-
mental fish farms—mainly because of the concern over the possible release
of ornamental fish into streams and ponds—and publishes an inventory of
tropical fish wholesalers and fish farmers. The 1973 inventory lists 153
producers; but the number is.larger now as great efforts have been made
during the last three years to enforce licensing requirements. Florid.:
has perhaps as many as 300 ornamental fish producers.
Within Florida, the industry is concentrated in the general Tampa, West
Coast Area. Of the total of 153 producers listed in 1973, 84 (53 percent)
are in Hillsborough County and 21 (13 percent) are in the .surrounding
counties (Table XI11-2). The remaining 34 percent are on the east-coast
from Vero Beach south to Miami and in other locations.
One major determinant of industry location is its accessibility to major
air freight terminals thus, both Tampa and Miami are major air shipping
points for ornamental fish. In 1972 (11), 750,000 cartons of ornamental
fish, 200 fish to the carton, were air shipped out of Florida. The air
freight, 11.25 million pounds, made tropical fish the largest class of
air freight moved by airlines operating in the state.
XII1-3
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Table X111 - 2. Florida tropical fish breeders, locations by major
countries and cities, 1973

-Number of
Location
establishm ents
By County

Hillsborough
84
Dade
19
Indian River
16
PaJ'.ti Beach
13
Polk
11
Manatee
7
Other counties
3
Total
158
By City

Gibsonton (Hillsborough Co.,)
25
Riverview (Hillsborough Co.)
20
Ruskin (Hillsborough Co..)
20
Miami (Dade Co.)
14
Tampa (Hillsborough Co.)
10
Lakeland (Polk Co.)
9
Lake Worth (Palm Beach Co.)
9
Sebastian (Indian River Co.)
8
Vero Beach (Indian River Co.)
6
Other cities in Florida
37
Total
158
Source: Florida Game and Fresh Water Fish Commission.
XII1-4
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Size of Producers
Size.classification of non-native tropical fish farms is complicated by
the fact that these farms differ widely in their organization. Farms
represent varying combinations of inside aquarium-type tanks and con-
crete vaults and outside earthen pools. In addition, the pools vary in
size from farm to farm.
The best measure of farm size would be the number of fish produced or sold,
but data on production and sales are not available. Although dollar
volume will not completely reflect the number of fish sold since it does
not indicate the proportion of rare to common varieties sold from a given
farm, the proportion of fish produced on the farm, the proDortion purchased
from small farms and the proportion of imports, it does represent a useful
measure of volume.
Only rough estimates of number of farms by size (in terms of dollar volume)
were available, and these estimates came from major producers acquainted
with the industry.
The size distribution of the 158 farms licensed in 1972 in Florida, is
estimated as follows:
Size	Dollar volume of sales	Est, number of
farms
Very large	Over $600,000	5
Large	$300,000 to $600,000	13
Medium	$150,000 to $300,000	20
Small	Less than $150,000	120
Total	158
Small producers generally raise 20 to 25 species, medium-sized producers,
60-75 species and may .purchase from other breeders, and large producers
handle a wide variety through production, purchase from other breeders,
and import. Many limited species producers purchase other species from
other producers to fill orders from retailers or wholesalers.
B.Market and Product Concentration
Level of Integration
In general, the industry is integrated forward through the wholesaling
function. Most producers, except small farmers, sell directly to jobbers
and retailers throughout the United States. Small producers often sell
XIII—5
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fish to larger fanners who in turn sell them to their customers. Only
the largest firms are integrated forward to retailing. Most producers
are specialized ornamental fish raisers; however, some firms sell a wide
range of domestic and imported, tropical fish, aquatic plants, and other
fish and snails.
Competi tion
The ornamental fish industry is highly competitive. Amcng domestic
producers, end "the domestic industry faces continued competition from
imports of main of the same jpecles-that are produced domestically. In
addition, the importation of exotic species,' not produced in the United
States, introduces further competition into the industry.
Although a relatively few large firms sell most of the total fish marketed,
no ore firm dominates the industry, and the fact that many of the largest
firms buy a substantial part of their total fish from small producers
serves to help maintain competition within the industry.
Variety of Fish
More than 1,000 species of ornamental fish are produced in or imported-to
the United States. In 1971, imports of fifteen species exceeded 100,000
fish.
Common ornamental varieties include: guppies, angels, moons, mollies,
cichlids, swords, tetras, bettas, platies, and discus.
At this time imports are largely wild fish.caught in South America, Asia
and Africa principally from Peru, Colombia, Guyana and Brazil in South
America and Hong Kong, Thailand, Singapore, Japan, Taiwan and Indonesia
in Asia. China represents a major ootential source of imports, and
fish are now coming from China through Hong Kong.
C. Number of Employees
As the total number of people employed in the ooeration of commercial
fish farms is not available through any form of census, the number of
employees was approximated from interviews with industry personnel.
The actual number of employees on a farm of a particular size varies with
the particular type of operation (e.g. whether a small farm is primarily
an egg layer or live bearer operation). On larger farms with wide
variations among farms as to volume of purchased and imported fish, the
number of employees also varies greatly.
XII1-6
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XIV. FINANCIAL PROFILE OF THE INDUSTRY
Conmercial fish culturing farms are either family-owned and operated,
closely held family corporations or divisions of large corporations.
As a result financial dat^ are difficult to obtain. For most industries
financial ratios and other performance measures are available from published
sources. However, this is not the case with the non-native ornamental
fish culturing industry. Consequently, information used to develop
industry characteristics was obtained'principally from industry contacts.
A. Sizes and Tvoes of Model Farms
The industry was segmented by size of operations as shown'below:
Size	Production Area	Sales Volume
S-l	14 acres - 84 pools	$ 45,000
S-2	14 acres - 84 pools	60,000
M	30 acres - 180 pools	190,000
L	60 acres - 360 pools	450,000
The small size model farmi, with a oroduction area of 14 acres are two
types. One type designated S-l, produce fish for sale to other Tarms
only. The other designated S-2 produce fish and ship all production to
distributors or ship oart and sell part of production to other farms.
These farms are family owned and operated, typically by the family with
1 or 2 employees.
The medium and large size model farms are corporate farms, producing, fish
and purchasing from small farms. About 10 percent of these farms also
import. The number of emp.loyec-s for the medium and large size model farms
are 10 and 25, respectively.
B. Investments and Assumptions
Investment values of modal farms was based on information obtained from
industry personnel. Three values were developed for each model farm:
1.	replacement value
2.	book value, and
3.	salvage value
The estimated investment capital' for model non-native ornamental fish farms
was shown in Table XIV-1. These costs were based upon investment costs
XIV-1
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Table XIV-1. Estimated investment capital for model non-native
ornamental fish farms
-


Smal 1


Medium

Larqe

Item
Current
Salvage
Book
Current
Salvage
Book Current
Salvage
Book
Plant and equipment
(including land)
$ 98,000
$ 72,000
.$40,000
$325,000
$150,000
$150,000 $650,000
$310,000
$320,000
Net working capital
8,000
8,000
8,000
27,000
27,000
27,000 54,000
54,000
54,000
Total invested capital
106,000
80,000
48,000
352,000
177,000
157,000 704,000
364,000
374,000
<
-------
reported by ornamental fish growers. Current value of land and equipment
for a small farm was reported at $98,000, for a medium-size farm at $325,000
and ,$650,000 for a large size farm.
Salvage values were based largely, on current land values; equipment values
were based upon 10 percent of the replacement cost.
Book values were based on the origir.jl cost of the land plus the original
cost of facilities minus depreciation.
C., Annual Profits
Net income as a percent of sales and as return of invested.capital is shewn
for the model farm in Table XIV-2.
It should be noted that this study's model farms are.classified as either
family or corporate farms, an important distinction in the financial analysis.
Pre-tax income for the»family farm models (S-l and S-2) was calculated to
represent return to the land capital and manaq'ement and'owner labor. Family
farm labor costs included in the pro forma statements (Table XIV-3 and 4)
include only cash outlay for hired labor.
The problems involved in estimating the value of owner-operation labor
are. obvious. Any estimate which considers only nis economic opportunity
costs (i.e., v/hat he would make on another job with comparable skill
level), ignores the psychological value he receives from ownership: the
satisfaction of independence, his optimism regarding his future, his
financial success, or his satisfaction of producing a product. Further-
more, if an eper-tor's economic opportunity cost (if it could be estimated)
were included in the model farm, the model would project a loss or a snut-
down situation. This, of course, would not be representative, as the
small family, fish-culturing operation as a viable business. The annual
profit parameter shown in the accompanying tables should, therefore, be
interpreted with the basic; conceot in mind.
Met incoir.e for the small family farm are $11,600 for the S-l size and
$15,800 for S-2 before the owner's labor and manacement is taken out.
The medium and large sized corporate farms show incomes of $30,030 and
$50,000, respectively.
Based on the after-tax return on invested capital, the small farms achieve
22 and 25 percent, medium farms 14.3 percent and large farms 12.0 percent.
XIV-3
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Table XIV-2. Net income, returns on sales and return on total invested capital
for model non-native ornamental fish farms
Size of
Farm
Pre-tax
Income
Pre-tax
Return on Sales
After-tax
Returh on Sales
Pre-tax
Return of Irvestr.ent
After-tax
Return on Investment
S-l
11,600
25.8
23.6
24.2
22.1
S-2
15,800
26.3
23.2
32.9
29.0
M
30,000
15.8
12.6
18.0
14.3
L
60,000
13.3
9.9
16.0
12.0
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D. Annual Cash Flow
Cash flows shown below were calculated as the sum of after-tax income
plus depreciation. It is shown in dollars as a percent of sales,
and as a percent of total.invested capital (book value).
Annual	Percent	Percent of
Size Cash Flow	of Sales	Total Invested Capital
S-l 14,100	31.3	29.4
S-2 18,500	30.8	38.6
M 32,100	16.9	19.2
L 63,600	14.1	17.0
In comparing the values for the small farms with those of the larger
sizes it should be remembered that the returns to the family farms
do not include the owners' management and labor.
E. Cost Structure
Tho pro forma statements of income and expenses for the representative
model commercial farms are shown in Table XIV-3. Some general obser-
vations can be made.
The data required for statements were obtained from consultations with
industry experts. Informal discussions were held with growers in each
model type. These were supplen-anted with information obtained from
informal discussions with the Soil Conservation Service, Production
Credit Association, Cooperative Extension Service, and land grant
universities. The bo.sic data obtained were modified to fit the model
farm categories.
Production levels were obtained from resorted yields by producers in
the various sizes and types of operations; consequently, yield levels
will vary by size of operations as well as by the various combinations
of species produced.
•Variable costs included those for, eggs or fry where applicable. In
some cases, the cost of maintaining brood fish was incorporated in the
general cost levels of the farms. Labor costs included labor hired
in addition to the owner-operator labor for family-size operations.
For corporate operations (including closely held and family corporations)
direct labor included production labor with administrative costs
included in the indirect cost category.
XIV-5
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Table XIV-3. Pro forma statement of income ;nd expenses for nodel non-native ornamental fish farms
statement of Income and expenses - tropical fish

Smal1-produce only
Small-produce only
Medium
1/
Larqe ^


sell farm to
rarm
sell farm to distributor
•Af -iuoI
%
Annual
%

Annual
%
Annual
i









30 acres
180 pools

60 acres
360 pools

Sales
45.000
100.0
60,000
100.0
190,.CO
100.0
450.000
100.0
Variable Costs








Egg or Fry (Produce Own}



£0,400
31.7
140,000
31.1




Labor
8.000
17,8
6,800
14.7
58,000
30.5
136.000
30.2
Feed
3.700
8.2
4.000
6.7
6,500
3.4
15,100
3.4
Other
16.100
35.7
24,000
40.0
19,'">0
10.3
62,000
13.8
TOTAL
27.800
61.7
36,800
61.3
144,200
75.9
353,100
78.5
Fixed Costs








Depreciation
3,500
7.8
_ 4,600
7.7
8,200
4.3
18,900
4.2
Interest
2.100
4.7
2,800
4.7
7,600
4.0
18,000
4.0
TOTAL COSTS
33,400
74.2
44,200
73.8
160.000
84.2
390,000
86.7
Net Income Before Tax
or
Return to Land, Management.
Capital (Family)








11,600
25.8
15,800
26.3
33,000
15.8
60,000
13.3
Income Tax
i.ooo2/
2.2
l,900l/
3.2
6,100
3.2
15,300
3.4
Net Income After Tax
10.600
23.6
13.900
23.2
23,900
12.6
44,700
9.9
Cash Flow
'"14.100
31.3
18,500
30.8
32,100
16.9
63,600
14.1
1/ Produce and purchase from farms, possibly Import.
y Calculated assuming family of four and standard deduction.
-------
Feed costs are the largest single cost item and were quite consistent
among similar types of producers. Other costs included such items as
medicine, chemicals, pumping costs, fuel, repair and maintenance,
administration and insurance costs.
Depreciation and interest costs were determined from information pro-
vided by the industry.
Net income before tax was calculated for all corporate types of opera-
tions. Returns to land and capital and the owner-operators' labor
were estimated for family operations. Taxes were calculated in the
conventional manner both for corporate and family operations.
XIV-7
-------
XV. PRICING PATTERNS
A. The Pricing Process
In general, the non-native fish industry is integrated forward through
wholesaling. Most producers (except the very small farms) sell directly
to jobbers and retailers throughout the United States. Non-natiye fish
are placed in oxygen-supplied bags, packed in boxes, and shipped,
generally by air freight.
The ornamental fish industry is highly competitive and the general level
of prices for various types and sizes of species is usually known. The
large number of small producers and imports tend to keep prices competitive
at the wholesale level. The industry not only faces competition from
other ornamental fish producers but also intense competition from importers,
many of whom handle the same species that are grown domestically.
Competition from imports is greatly affecting the price structure on
domestic ornamental fish. At one time almost all imports were sold through
Florida farms; therefore, the Florida farmer could control the prices of
both imported and domestic fish. At this time, imports were largely wild
fish caught in South America and Asia. The Florida farmer produced all
the domestic fish. Then the Far Eastern exporter began to ship directly
to the distributor or the retail dealer, and the transshipper came on the
scene acting primarily in the capacity of a broker clearing customs for
the distributor. Imported fish of the same species as those being pro-
duced domestically were nowaffecting price increases on Florida-produced
domestic varieties. Consequently, many Florida Producers are now either
receiving less money for some varieties or about the same that they were
getting 20 years ago.
In recent years, the California imDorter (jobber) and transshipper have
had definite advantages over Florida producers in that the air freight cost
from the Far East to California is much cheaper than the air freight cost
from the Far East to Florida. The California transshipper bears freight
cost of about half of the amount paid by the Florida transshipper.
B. Quantities Sold and Prices Received
Published, historical price series for non-native ornamental fish are not
available. However, industry representatives state that 1975 prices of
many species of domestically produced ornamental fish are no higher than
they were in 1945. The rapid growth of the industry, the ease of entry,
and technological improvements in production and particularly in air freight,
shipping cartons and other handling techniques have combined to attract an
increasing number of both small and large producers. This factor and the
competition from imports have apparently combined to keep prices relatively
low and stable.
XV-1
-------
Although prices vary widely by species, representative 1975 prices for
non-native ornamental f-ish are as follows:
Standard varieties -- Farm-to-farm	= 9£/fish
Fam-to-distributor = 12^/fish
Rare varieties — $1.00/fish
Different levels of pricing exist:
1.	Farm price for sales to other tropical fish farmers
2.	Sales to wholesalers of jobbers
3.	Sales directly to retail outlets
Small farmers sell a large part of their fish to larger producers. Most
of the remainder is sold to wholesalers, jobbers or other distributers,
and only a relatively small portion is sold directly fi retailers.
Competition from imports has been increasing. Table XV-1 shows the
dollar value of imports increasing from $2.7 million in 1969 to 5.9 in
1972 and 9.5 in 1973. This represents 20 percent of the estimated total
wholesale value of fish sold in 1973. In 1975, it was estimated that 30
xo 40 percent of the total value of ornamental tish sold in the U.S. were
domestically bred.
In comparing dollar value of imports and domestically bred tropical fish,
it must be remembered that the exotic higher priced fish are imports.
The species of tropical fish which are domestically bred are the main-
stay of the industry.
C. . Expected Price Impact
The economic impact on the commercial fish farming industry of the pro-
posed effluent control are lower profits. The general structure of the
industry is competitive, most farmers could be labelled accurately as
price takers because of their minimal control over product prices.
XV-2
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Table XV-1. Imports of fish live for other than human consumption 1969-72
Country
1969
1970
1971
1972
1973
Dollars
Dollars
Dollars
Dollars
Dollars
Trinidad
51,706
86, 915
104,793
77,146
64,216
Columbia
385,754
346,505
444,850
547,485
896,668
Venezuela
	

29,_360
45,571
68,448
Guyina
577,228
	
481,682
705,529
696,316
Peru
308,824
349,923
338,696
344,444
480,750
Brazil.
189,764
248,483
272,394
304,032
367,721
Thailand
330,689
541,186
818,333
1,162,018
1,807,163
Singapore
80,255
295,632
358,280
621,359
1,188,876
Phil. Repub.
2,979
1, 944
30,042
157,069
509,137
Hong Kong
'614,851
783,345
906,972
1,367,956
2,215,345
Taiwain
9,372
63,860
126, 811
279,848
578,939
Japan
58,117
64,128
88,798
95,463
128,320
Nigeria
8,395
	
	
20,608
75,562
Haite
	
— - -
	
	
18,288
Zaire
- - - -
	
	

19,460
Other
71,839
713,280
188,282
205,998
419,221
Total
2,739,773
3,495,201
4,189,293
5,937,529
9,534,930
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XVI. CONTROL COSTS
Water pollution control costs used in this analysis were furnished by the
Effluent Guidelines Division of the Environmental Protection. Agency. These
basis data were adapted to the types and sizes of fish culturing facilities
specified in this analysis.
Three effluent guidelines were considered:
BPT - Best Practicalbe Control Technology Currently
Available, to be achieved by July 1, 1977
BAT - Best Available Technology Economically Achiev-
able, 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
A technical document describing the recommended technology for achieving
the three guidelines will be published as a separate report by EPA (1).
A. Present Status of Effluent Control
The current pollution control status of non-native fish culturing facilities
is shown in Table XVI-1. It is estimated that 80 percent of the non-native
fish culturing facilities are direct dischargers and 20 percent discharge
through municipal facilities. (All of these farms would be required, to treat
efflue/it). The treatment alternatives include:
Alternative	Description
B	Filtration and ultraviolet "disinfection
C-l	Land Jispcsal - sp^ay irrigation
C-2	Land disposal - percolation pond
Pretreatment is required for facilities disposing into municipal facilities
and Alternative B is used in the impact analysis for the pretreatment re-
quirement. The proposed.Standards require that there be no biological
pollutant discharge. As a result, Alternative B is also a suitable alter-
native for farms that are direct dischargers. The other acceptable method
of discharge is land disposal. Since the cost of land disposal is estimated
by EPA to be greater than that for Alternative B, the latter was used in
the impact analysis for all non-native fish culturing facilities.
XVI-1
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Table XVI-1. Current pollution control status of non-native fish cultur-
ing facilities and alternative treatment requirements
to meet BPT and BAT Standards. 1/
In-Place Technology/Status Treatment Alternative Percent of Industry
On Municipal System
Pre:reatment.Required	B	20
Direct Discharge	B-C1-C2	30
Total Industry	100
— Bi'T and BAT Standards are identical.
XVI-2
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B. Effluent Control Costs
Effluent control costs for non-native ornamental fish culturing facilities
were developed by EPA based on a system consisting of 10 ponds. It was
assumed that a pond was drained an average of once per year and had an
annual production of 10,000 fish per pond. It was further assumed that
only one pond is drained at any tire and that the draining takes place
over a 24-hour period. Since the systems occupy only a small space,
no costs were included for this space.
These investment costs were adjusted to fit our model farms, which have
84, 180, and 360 ponds (or pools) as shown in Table XVI-2.
The 1973 controls costs given in the Development Documents were inflated
to 1975.
XVI-3
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Table XVI-2. Effluent control cost for non-native ornamental fish culturing farms, 1975 dollars
Treatment
Alternative
Cost
Item
84 Pools
S-l
84 Pools
S-2
180 Pools
M
360 Pools
L
Chiorination
B
Filtration and Ultraviolet
Disinfection
Investment
Annual Cost
Interest
Depreci ation
Operating Cost
TOTAL ANNUAL COST
Investment
Annual Cost
Interest
Depreciation
Operating Cost
TOTAL ANNUAL COST
8,600
8,600
59,000
2,950
2,950
8,820
14,720
8,500
8,600
59,000
2,950
2,950
8,820
14,720
18,360
18,360
126,000
6,300
6,300
18,900
31,500
35,700
36,700
252,000
12,600
12,600
37,800
63,000
No Discharge with Land
Disposal
C-l
Spray Irrigation
C-2
Percolation Pond
Investment
Annual Cost
Interest
Depreciation
Operating Cost
TOTAL ANNUAL COST
Investment
Annual Cost
• Interest
Depreciation
Operating Cost
TOTAL ANNUAL COST
47,000
2,300
2,300
15,500
20,100
91,600
4,600
4,600
11,500
20,700
47,000
2,300
2,300
15,500
20,100
91,600
4,500
4,500
11,500
20.7C0
100,800
5,000
5,000
33,300
43,300
196,000
9,900
9,900
24,700
44,500
201,600
10,000
10,000
66,600
86,600
392,000
19,300
19,800
49,300
88,900
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XVII. IMPACT ANALYSIS
The imposition of effluent control on fish hatcheries and farms will have
both direct and indirect impacts on the industry, on consumers, on sup-
pliers to the industry and on the communities where the farms are located.
An analysis was made for the specific effluent control levels and for al-
ternative treatment strategies designed to meet these levels both in
quantitative and qualitative terms to identify those impacts that may be
expected.
For the non-native ornamental fish farms, the following types of impacts*
have been analyzed:
1.	Price effects
2.	Financial effects
3.	Production effects
4.	Employment effects
5.	Community effects
6.	International trade
Price Effects
The non native ornamental fish industry is characterized as very compet'!ti
with no major producer or supplier maintaining any degree of control over
the market place. Severe competition from the importation of foreign wild
caught and domestically produced ornamental fish and increased production
efficiencies has resulted in a relatively constant wholesale price for
fish for the past 20 years. As a result, most farmers in the industry
could accurately be labeled as price takers due to the marginal control
over product prices.
Required price increase. The required percentage price increase necessary
to keep the net present value of the farm at a constant level are as folio;
for alternative B.'
Alternative B, the least cost alternative, can be utilized by all farms,
both direct dischargers and those discharging to publicly owned treatment
systems.
Small - 1
Small - 2
Med i um
Large
42.4
30.0
19.0
20.9
XVII-1
-------
Expected price increase. The price is expected to ir.crease .by about 6
percent. Within the market system, the equilibrium reo'ched will reflect
the relative market power of the domestic producers and the importers.
The required increase for the very large farm is anticipated to be approx-
imately 15 percent. Since over 50 percent of the tropical fish are imported
into the country, the actual price increase can be expected to be consider-
ably less.
Financial Effects
Two primary types of analyses were completed to assess the financial im-
pacts of the proposed costs on the model non native fish farms (1) profit-
ability and (21) present value of future net income streams. Profitability
impact include the following:
1.	Pre-tax and after tax income
2.	Return on invested capital
3.	Return on sales
4.	Annual cash flow
Pre-tax and after-tax income. Income under baseline and the various
alternatives is shown in table XVII-1, both before price increases and
after. Under baseline conditions income ranges from $11,600 for the small
family operations to $60,000 for ths large corporate farm. With the im-
position of the. guidelines, substantial lossss would be incurred by all
of the model farms under all alternatives, except for- the sniall-2 fann
under A1 ternative B. Under Alternative B, profits for this model farm
are reduced f.*om over $15,000 to about $1,100, a 90 percent reduction.
With the expected price increase, the impact is much less severe with
all farms earning profits under Alternative B except the Small-1 farm
which has a $400 loss. However, the impact continues to be significant
with income of all model 'farms being reduced over 60 percent. The income
of the small-2 farm is reduced to about $5,000 while that of the largev
farm is reduced from $60,000 to about $2,400.
Return on invested capital. Rates of return on average invested capital
are, shown in Table XV11-2. Under baseline, before tax rates vary from
close to 33 percent for the Small-2 farm to 16 percent for the large
farm. Before a price increase these rates become negative under controls
(except for the Small-2 farm under Alternative B) reflecting the losses,
incurred. Under Alternative B. the rate of return for the Small-2 farm
is 3.8 percent. With the expected price increase, the changes in the
rate from baseline to contracts is much less severe. Under Alternative B,
rates of return for the model farms all remain positive except the Small-1
farm. Impacts are still significant with the ratio being reduced over
75 percent. The rate for the Small-2 farm is reduced to 10 percent while
that of the large is reduced to 0..6 percent.
XVI1-2
-------
Table XVII-1. Pre-tax and after-tax Income for model non-native ornamental fish farming operations.
Type and Size		Pre-tax			After-tax
of farm
Basel in®
B
C-l
C-2
Baseline
B
C-l
C-2




Before
price increase



Small-1
11,600
-3,120
-.8,500
-9,100
10,600
-3,120
-8,500
-9,100
Small-2
15,800
1,080
-4,300
-4,900
13,900
1,080
-4,300
-4,900
Medium
30,000
-1,500
-13,300
-14,500
23,900
-1,500
-13,300
-14,500
Large
60,000
-3,000
-26,600
-28,900
44,700
-3,000
-26,600
-28,900




After price increase



Small-1
11,600
- 420
-5,800
-6,400
12,693
-420
-5,800
-6,400
Small-2
15,800
4,680
-700
-1,300
16,690
4,680
-700
-1,300
Medium
30,000
9,900
-1,900
-3,100
32,792
7,920
-1,900
-3,100
Large
60,000
2,400
400.
-1,900
58,740
1,920
320
-1,900
-------
Table XVII-2. Pre-tax and after-tax rate of return .is a percent of average invested capital for non-native
ornamental fish farming operations.
Type end Size		Pre-tax			After-tax
of farm
Baseline
B
C-l
C-2
Baseline
B
C-l
C-2




Before, price 1ncref.se



Small-1
24.2
-12.5
-17.7
-19.0
22.1
¦12.5
-17.7
-19.0
Small-2
32.9.
3.8
-9.0
-10.2
29.0
3.8
-9.0
-10.2
Medium
18.0
-4.7
-8.0
-8.7
14.3
-4.7
-3,0
-8.7
Large
16.0
-4.2
-7.1
-7.7
After
^.0
price Increase
*
-pi
ro
-7.1
-7.7
Small-1
24.2
-0.9
-12.1
-13.3
26.4
-0.9
-12.1
-13.3
Small-2
32.9
9.8
-1.5
-2.7
34.8
9.8
-1.5
-2.7
Medium
18.0
5.9
-1.1
-1.9
IS.6
4.7
-1.1
-1.9
Large
16.0
0.6
0.1
-0.5
15.7
0.5
0.1
-0.5
-------
Return on sales. Rates of return on sales for model non native ornamental
fish farms are shown in Table XVI1-3. Pre-tax rates under baseline range
from 26 percent for the small farm to 13 percent for the large farm. Under
controls, these rates will become neqative before a price increase (except
the Small-2 farm under Alternative B] reflecting the severe impacts of
control. The rate of return on sales for the Small-2 farm is reduced
from 26 percent to just under 2 percent. With the expected price increases
the changes in the rates reflect the less severe impacts of- control. All
rates remain positive under Alternative B except for that of the Small-1
farm, although they are reduced significantly. The rate for the Small-2
farm is reduced from 26.3 percent to 7.4 percent; the rate of the large
farm is reduced from 13.3 percent to 0.5 per:ent.
Annual cash flow. Annual cash flow expressed in dollar amounts is shown
in table XVII-4. Under baseline, cash flow varies from $14,TOO for the
small farm to over $63,000 for Lhe large farm. With the imposition of the
effluent treatment, the cash flows are reduced severely. Under Alternativ
assuming no price increase, the cash flow for the small farm is reduced to
$3,330. Those of the other farms are reduced by 55 to 60 percent. With
the expected price increases; reductions are less severe. The Small-2
farm cash flow is reduced from $14,100 under baseline to $6,030 under
Alternative B. That of the large farm is reduced from $63,600 to $33,420.
Net Present Value (NPV)
The changes in the net present value of the model farm under the alter-
natives are shown in Table XVI1-5. Under baseline, these values vary
from $82,000 for the Small-1 farm to about $370,000 for the large cor-
porate fara. With the imposition of controls, NPV for all farms became
negative under all alternatives, except the Small-2 farm under Alternative B.
The NPV for this farm is only $137. With the expected price increase,
the NPV's are all reduced significantly although the Small-1 farm is the
only operation which shews a negative value under Alternative B. The'
net present value of the Small-2 farm is reduced from $126,000 under base-
line to $30,000 under Alternative's. The net present value of the large
farm is reduced to a third of its-baseline value decreasing-from $369,000
to about $121,000.
Production Effects
The imposition of the guidelines will have a severe impact on the produc-
tion of non na-tive ornamental fish within the United States. As indicated
below, a total of 104 farms is projected to close as a result of the re-
quired costs of control with a resulting decrease of 40 percent in pro-
duction. The greatest impact will be born by the small and medium farms
with about 70 percent of these farms projected to close. About 30 percent
of the large farms are expected to close down while none of the X-large
farms are projected to close.
XV11 - 5
-------
Table XVI1-3. Pre-tax and after-tax rate of return on sales for model non-native ornamental fish.
Type and Size		Pre-tax			After-tax
of farm
Baseline
B
0
1
H
C-2
Baseline
3 ^
C-l
C-2




Before price increase



Small-1
25.8
-6.9
-18.9
-20.2
23.6
-6.9
-18.9
-20.2
Small-2
26.3
1.8
-7.2
-3.2
23.2
1.8
-7.2
-8.2
Medium
15.8
-7.9
t
•
o
-7.6
12.6
-7.9
-7.0
-7.6
Large
13.3
-0.7
-5.9
-6.4
9.9
-0.7
-5.9
-6.4




After price increase



Small-1
25.8
-0.8
-12.2
-13.4
26.6
-0.8
-12.2
-13.4
Small-2
26.3
7.4
-1.1
-2.0
26.2
7.4
-1.1
-2.0
Medium
15.8
4.9
-0.9
-1.5
16.3
3.9
-0.9
-1.5
Large
13.3
0.5
0.1
-0.4
12.3
0.4
0.1
-0.4
-------
Table XVII-4. Cash flow farming operation for. model non-native ornamental
fish
Type and Size
of farms
Baseline
B
C-l
C-2
Snail-1
Small-2
Medium
Large
Small-1
Small-2
Medium
Large
T
Before price increase
14,100	3,330	-2,700
18,500	8,630	2,600
32,100	13,000	1,600
63,600 28,500	2,300
After price increase
14,100	6,030	0
18,500 12,230	6,200
32,100	22,420	11;300
63,600	33,420	29,220
-1,000
4,300
3,600
9,800
1,700
7,900
15,000
36,800
XVI1-7
-------
Table XVII-5. Net present values of model non-native ornamental fish
farming operation.
Type and Size
of farm
Baseline
B
C-1
C-2


Before Price
Increase

Small-1
82,064
-52,578
-108,677
-112,499
Small-2
126,411
137
-53,118
-56,940
Medium
210,545
-54,182
-150,500
-164,144
Large
369,138
-80,962
-270,214
-299,541


After Price
Increase

Small-1
82,064
-25,053
-81,153
-84,975
Sma11-2
126,411
30,405
-16,417
-22,013
Medium
210,545
38,793
-56,099
-71,170
Large
369,138
121,543
-50,704
-81,561
XVII-8
-------


Baseline 1977.
BPT Controls

Number
Percent of total
Farms projected
Total production
Si ze
of farms
production
to close
cost
Small
120
18.2
90
13.7
Medi um
20
36.8
10
18.4
Large
13
27.6
4
8.5
X-large
5
17.4
—
—
Total
158
100.0
104
40.6
Employment Effects
With the imposition of controls, the employment level in non native
ornamental fish farming will be reduced by 3 percent as indicated
below. Under baseline, close to 1300 employees are projected to be
involved in this type of farming. With imposition of controls, the level
is projected to decrease to about 80C.
Baseline
Employees	Total number of Reduction of employees
Farm Size	per farm	employees	under BPT	
Small	2-3	300	200
Medium	8-10	180	90
Large	20-30	330	110
X-large	>30	200
Total	1,280	TOO
Community Effects
The projected closures of farms is not expected to have a significant
impact on communities. The majority of the farms are located near large
cities in Florida which would be able to readily absorb the employment
losses.
International Trade
The imposition of effluent control guidelines is expected to result in
a substantial increase in the in:D0"ts of ornamental fish. Over 50 Dercent
of the ornamental fish are now being provided through imports to the U.S.
With a reduction of 40 percent of the domestic production, these imports
can be expected to significantly increase not only because of the increase
in demand but also because of the expected price increases.
XVI1-9
-------
Part 5. STATE AND FEDERAL FISH HATCHERIES
XVIII. INDUSTRY STRUCTURE
A. Characteristics of the Industry Segments Federal Hatcheries
¦ t
Number of Hatcheries. According to the publication, "Propagation and
Distribution of Fishes from National Fish Hatcheries for.Fiscal Year 1972,"
U.S. Department of Interior (2), there' are 92 federal fish hatcheries in
operation. They are summarized in Table XV111-1. Of tiie 92 hatcheries.
28 propagate warm water species: 47, cold water; and 17, propagate both
cold and warm water species.
Volume of Production. As one indication of production in 1972, the
number of fishes and eggs distributed amounted to a total of 251.6
million ranging from 106 thousand to a high of 18.8 million per
hatchery. Total pounds produced amounted to 6.4 million with a
range (Table XVI11-2) per hatchery of from 1.9 thousand to a high of
199 thousand. These, of courseware only two measures of volume and
include the production of eggs, fry", fingerlings and adults. For
example, 1,000,000 northern pike eggs may weigh 34 pounds; 1,000,000
fry; 32 pounds; 1 ,000,000 fingerlings, +850 pounds; ar.d 1,000,000
adult pike, from 1 - 4 million pounds. For the purpose of this report
the number of pounds of fish would be a good indication of the total
pounds of feed fed, one indicator of the magnitude of discharged
wastes.
Most federal hatcheries propagate more than c~e species of fish. As
shown in Table XVIII-1, only 18 federal hatcheries propagate one species
of fish--and these are all cold water hatcheries; 32, propagate two to
three species; 33, four to six species; and the remainder, over seven
species.
Production by species for fishes and fish eggs distributed by all
federal hatcheries is shown in Table XVI11-3.
Size- uf Hatcheries. Size distribution was determined using total
pounds of fish produced by typo of hatchery (Table XVI11-4). The number
of pounds of fish produced in federal cold water hatcheries varies,
from 5,000 pounds to over 500.000. . Nineteen percent of the hatcheries
produce less than 25,000 pounds, and the heaviest distribution ranges
between 50,000-100,000 pounds (26 percent). Four percent of the
hatcheries produce more than 300,000 pounds of cold water fish per
year.
XV111r1
-------
Table XVI11-1. Number of federal hatcheries by state and number
of species, 19721/
Hatcheries	. 	Number of species per hatchery	
Region	State	total	J	2-3	4-6	7-10	H
California
1

1

Idaho
3
1
2

Montana
4
1
1
I
Nevada
1

1

Oregon
1

1

Washington
10
3
5
2
Arizona
2
1
1

Colorado
2
2


Kansas
2

1
1
New Mexico
2
1

1
Oklahoma
1



Texas
3


3
Utah
2

2

Wyoming
2
1
1

Iowa
2

2

Michigan
3
2
1

Minnesota
1


1
Missouri
1

1

Nebraska
1

1

North Dakota
3

1
1
Ohio
2


2
South Dakota
3



Wisconsin
2



Alabarpa
2



Arkansas
4
2

1
Florida
1


1
Georgia
4
1

3
Kentucky
1



Louisiana
1


1
Mississipipi
3


3
North Carolina
3

1
2
South Carolina
3

1
2
Tennessee
2
1
1

Virginia
3
1
1
1
continued
XVII1-2
-------
Table XV111-1 - Number of federal hatcheries ,by state and number
of species 19721/ (continued)



Hatcheries
Number of species per hatchery

Region
State
total
1 2-3 4-6 7-10
11
Maine
1

1

Massachusetts
2
1

1
New Hampshire
2

1
1
New York
1

1

Pennsylvania
1


1
Vermont
1


1
West Virginia
3

1
2
Total
92
18
32
33
Source: Propagation of Distribution of Fishes from National Fish Hatcheries for
fiscal year 1972; Fish Distribution. Report 7, U. S. Department of the
Interior, Fish and Wildlife Service, Bureau of Sport Fisheries and
Wildlife.
XVII1-3
-------
Table XVI11-2. Federal fish hatcheries, total pounds of fish
and fish eggs distributed, 1972
Species
Product
Warm water fish Trout Salmon	Total
Fish egg«
159
2,076
6,232
3,467
F ry
336
35
1,716
2,637
Fingerlings
183,C35
608,953
815,428
1, 607,466
Adults (6 inches +)
215,464
4,422, 112
169,846
4,307,422
Total
399,594
5,033,176
993,222
6,425,992
Sourcs! I?i"op2.2.lion 3.nci IDi- c2rifou.ti.0n Fisiiss £roiii 1^13. lioricil
Hatcheries, 1972, Fish Distribution Report 7, USDI, Bureau of
Sport Fisheries and Wildlife.
XV111-4
-------
Table XVIII-3. Federal fish hatcheries, production by
species, 1972
Species	Pounds
Trout - Brook	338,845
Brown	227,749
Cutthroat	92,991
Lake	171,671
Rainbow	3,867,634
Other	16,717
Total	4,715,607
Anadromous - Fall Chinook salmon	404,817
Spring Chinook salmon	161,830
Winter Chinook salmon	44
Chum salmon	12, 156
Coho salmon	377,414
Landlocked salmon	1,802
Atlantic salmon	16, 756
Steelhead trout	346, 046
Total	1,320,865
Pond Fish - Largemouth bass	33,529
Smallmouth bass	1,951
.Bluegill-sunfish	38,399
Redear-sunfish	10,592
Channel catfish	268, 420
Walleye pike	4,091
Other	38,053
395,035
Source: Propagation and Distribution of Fishes from National Fish
Hatcheries, 1972, Fish Distribution Report 7, USDI, Bureau of
Sport Fisheries and Wildlife.
XVII1-5
-------
Table XV111-4. Size distribution of federal and state fish hatcheries
Federal	'	State ] /
Size category,
lbs. of fish
Cold water
Warm water
Mixed
Cold water
Warm water
Mixed
No.
%
No.
%•
No..
%
No.
%
No.
%
No.
%
> 10,000
1
2. 1
17
60.7
6
37.6
26
13.5
12
100.0
10
37.1
10,000 - 25,000
8
16.7
8
28.6
-
-
27
14. 0
-
-
3
11.1
25, 000 - 50, 000
5
10.4
2
7. 1
4
25. 0
30
15.6
-
-
4
14.8
50, 000 - 100, 000
12
25.0
1.
3.6
3
18.6
41
21.2
-
-
5
18.5
100,000 - 150,000
13
27.1
-
-
1
6.3
31
lo. 1
-
-
-
-
150, 000 - 200, 000
3
$.3
-
-
¦?
12.5
21
10.9
-
-
1
3.7
200, 000 - 300, 000
4
8.3
-
-
-
-
8
4. 1
-
-
2
7.4
> 300,000
2
4.2
-
-
-
•
9
4. 6


2
7.4
Total
48
100.0
28
100.0
16
100. 0
193
100. 0
12
100.0
27
100.0
232 of 479 hatcheries reporting.
-------
Warm-water hatcheries with ponded production tend to much lower pound
production than do cold water hatcheries. Twenty-five percent produced
less than 5,000 pounds in 1972, and 61 percent produced less than 10,000
pounds. Only one federal hatchery produced more than 50,000 pounds.
Sixteen federal hatcheries produced both cold and warm water species; 5
(38 percent) produced^less than 10,000 pounds of fish. The remainder
produced from 25,000 to 200,000 pounds.
State Fish Hatcheries
Number of Hatcheries. The division of Fish Hatcheries of the U. S. Depart-
ment of Interior reported 479 state hatcheries in 1970. This number is
summarized by state in Table XVI11-5.
Volume of Production. The volume of state hatchery production of warm and
cold water fish is shown, in Table XVI11-6. Some states reported produc-
tion in numbers, some in pounds, and others in both.numbers and pounds.
Of the 50 states contacted, 48 responded and 37 provided production data
by hatchery. However, some states reported that'production data for
specific hatcheries were not available. As a result, the data contained
in Table XV111-6 represent production figures from 296 of the 479 state
hatcheries (66 percent).
Total reported pounds of the cold water fish produced amounted to 19.4 million,
but the data are incomplete. Total number of warm water fish reported
wtre 6.52 million with a high percentage of fry. Total pounds were not
given, but available data indicate that Lotal volume in pounds would be
approximately 50,000-60,000.
Seventy-nine hctcheries reported mixed production totaling 100 million
fish.
Size of Hatcheries. Size distribution for the 232 reporting state fish
hatcherifes was tabulated and is compared to similar data from the national
hatcheries in Table XVI11-4.
"?'he size distribution is very similar to that of the federal hatcheries.
As may be expected, the chief difference is that the slates have a la.^or
percentage of their hatcheries in the less than 5,000 pounds category.
For example. 9.3 percent of the cold water hatcheries produced less thso
5.000	pounds, and 4.1 percent of those less than 10,000 pounds of fry,
fingerlings, end adult fish. This 13.4 percent can- be compared with the
2.1	percent for the federal hatcheries. Fifty percent of the state cold
water hatcheries fall into the 10,000 to 100,000 size category as com--
pared to the 53 percent.of the federal hatcheries. An additional 27
percent of the state hatcheries are in the 100,000 to 200,000 category,
XVIII-7
-------
Table XVI11-5. Number of state fish hatcheries
and rearing ponds, 1970

Number of

Number of
State
facilities
State
facilities
Alabama
2
Montana
7
Alaska
4
Nebraska
5
Arizona
4
Nevada
5
Arkansas
3
N*-\v Hampshire
8
California
22
New Jersey
2
Coir, rado
21
New Mexico
6
Connecticut
3
Mew York
16
17'lorida
2
North Carolina
7
Georgia
9
North Dakota
6
Hawaii
1
Ohio
7
Idaho
17
Oklahoma
4
Illinois
2
Oregon
32
Indiana
7
Pennsylvania
11
Iowa
32
PJicde Island
2
Kansas
4
South Carolina
6
Kentucky
1
South Dakota
4
Louisiana
3
Tennessee
6
Maine
10
Texas
12
Maryland
6
Utah
13
Massachusetts
8
Vermont
6
Michigan
9
Virginia
6
Minnesota
40
Washington
60
Mississippi
1
Wi scons in
15
Missouri
11
Wyoming
11


Total
479
Source: U. S. Department of Interior, Division of Fish Hatcheries, 1970,
XVI11-8.
-------
The average number of employees in commercial non-native fish culturing
operations is estimated as follows:
Size of Farms
No. of Farms
No. of Em-
ployees Per
Farm
Total Employees
S (up to 25 acres)
120
2-3
240 - 360
M (25 to 40 acres)
20
8-10
160 - 200
L (40 to 75 acres)
13
20-30
260 - 390
XL (over 75 acres)
5
75-125
375 - 625

158

1,035-1,575
XII1-7
-------
Table XV111-6. Volume of production from state fish hatcheries
Cold Water
Warm Water
Mixed
State
Number
Pounds
Number
Pounds
Number
Alabama


2,463, 168
5, 162

Alaska
6,546,300




Arizona
1,862,644
42,239



Arkansas




1,887, 164
California
60, 339,884
4,439.634


685,819
Colorado

1,558,699



Connecticut





Florida


545.000
8, 000

Georgia





Hawaii




104, 000
Idaho
25,624.383
1,463, 655



Illinois





Indiana




800,000
Iowa
335,090
157,741
507.361
11,704

Kansas


1,268, 306
20, 220

Kentucky





Louisiana





Maine





Maryland





Massachusetts

678,000



Michigan

729,200



Minnesota
1,240,438
135,641
340,778, 000


Mississippi





Missouri




4,739, 300
Montana
9,218,783
348,331



Nebraska




1.391,899
Nevada
2,545,15'
301,812



N. Hampshire

161,897



New Jersey
571,057
118, 970(est)


New Mexico
5,023,297
306,724



New York
4,728,044
481,967
214,650,425
5,270

N. Carolina




9,181,854
N. Dakota





Ohio





OMaliom?.




17,294, 15-1
Oregon
55,815,312
1,676,641



Pcnn.




41,548, 826
Rhode Island
115,000
67, 000



S. Carolina


92,025,000


Sa Dakota




11,135,167
T ennessee





TexaG




21,290, 750
Pounds
25, 199
60.856
73,445
27,833
XVII1-9
continued.
-------
Table XV111-6. Volume cf production from state fish hatcheries
(continued)

Cold
Water Warm Water
Mixed
State
Number
Pounds Number Pounds
Number Poun
Utah
33,997, 524.
1,611, 340

V ermont
853,900
128, 174(est)

Virginia



Washington
147,252,473
3,900,831

Wisconsin

534, 937

V/ yoming

523, 559

Total

19, 366, 992 6L>2,037,260
100,058,933
Number of



hatcheries



reporting
208
23
79
XVIII-10
-------
4.1 in the 200,000 to 300,000 pound category, and 4.6 percent in the
greater than 300,000 pounds category. Maximum production reported by
state hatcheries was between 50,000 and 600,000 pounds, a production
similar to that of the federal hatcheries.
Data on 12 warm water hatcheries were reported by states. Of this
number, 75 Dercent fell into the less than 5,000 pound category and the
remaining 25 percent in the 5,000 and 10,000 pound group.
Hatcheries reporting mixed production ranged in size from less than 5,000
pounds to between 300,000 and 400,000 oounds. Thirty-three percent of
the mixed hatcheries produced less than 5,000 pounds, the remainder were
spread over the remaining size distribution.
B. Number of Employees
Total employment for federal and state fish hatcheries is not available
through any form of census. As a result, employment figures were esti-
mated on the basis of the number of fish culturing operations that are
reported and numerous discussions with industry personnel. These esti-
mates, shown in Table XV111-7, are based on discussions with hatchery
personnel.
Total employment for federal hatcheries is esimated to be between 462
and 750 full-time employees. Between 2,647 and 4,275 persons are employed
by state hatcheries. No part-time positions are maintained in either
segment.
XVIII-11
-------

Table XVIII-7
. Estimated total
number of employees in
federal


and
state fish hatcheries, 1972.




Estimated



Size of
number of
No. of employees
Total Employees
Segment
operation
operations
per farm
Part-time Full-time


No.
%


Federal Hatch-





eries
S
40
43.4
3-5
120-200

M
28
30.4
5-8
140-224

L
22
23.9
8-13
176-286

XI.
2
2.3
13-20
26- 40


92
100.0

0 462-750
State Hatcheries S
161
33.6
3-5
483- 805

M
165
34.5
5-8
825-1,320

L
130
27.1
8-13
1,040-1,690

XL
23
4.8
13-20
299- 460


47$
100.0

2,647-4,275
-------
XIX. FINANCIAL PROFILE OF THE INDUSTRY
AND MODEL FARMS
A. Sizes and Types of Model Farms
Models for federal and state hatcheries were not developed. Instead
cost functions were constructed representing the total production
costs on a per-pound-of-fish-produced basis for hatcheries ranging
in size from 5,000 to 500,000 pounds of fish, as summarized below;
Federal Hatcheries
Cold water Cost data presented in functional form from E,000 lbs. to
500,000 pounds of fish produced per hatchery.
Warm water Cost-data presented in function form from 5,000 lbs. to
50,000 pounds of fish produced per hatchery.
State Hatcheries
Cold water Cost data presented in functional form from 5,000 lbs.
to 500,000 pounds of fish produced per hatchery.
Warm water Insufficient data available.
EL	Investments and Assumptions
Investment costs v/ere not obtained for state and federal hatcheries. The
economic analysis of the impact of pollution control was handled in a
less intensive manner fcr government hatcheries than for commercial
enterprises. Only the estimated increase in production costs were
developed, for all cases, government hatchery investment was considered
as a sunken investment with little or no alternative use for the
facility except in the unliked event that it be converted to a park or
sold to a cbmmerciiaT interest.
The annual cost summaries published by the Bureau of Sport Fisheries
and Wildlife for federal hatcheries and respective state, fish and
wildlife departments, do not include investment costs; thus, investment
cost is apparently not considered in the annual oberation evaluation for
hatcheries. Certainly, such costs are not considered in the. same manner
as are investment and depreciation costs for'a commercial enterprise.
Investment cost, however, would be important in the construction of new
hatcheries.
XIX-1
-------
Discussions with hatchery personnel indicated that investment costs
vary tremendously for hatcheries based on size, location, terrain,
and age. Some recently constructed hatcheries have very high investment
costs. Many were built during the 1930's under various CCC programs and
their costs could not be estimated.
C. Cost of Production for Federal and State Hatcheries
The cost of production was obtained from all federal hatcheries and
from several .sLate hatcher-its as discussed in Chapter I. These costs
were summarized and arrayed by. production levels based upon pounds of
fish produced.
A regression analysis determined a functional representation of the
costs involved in the operation of cold-water state, warm-water federal,
and cold-water federal fish hatcheries. The cost per Dound of product
was assumed to be the dependent varaible and was plotted on the "x'-axis".
Total production in pounds of product was considered the independent
variable and* thus, was plotted on the "x-axis". Various function forms
and transformations were examined. Through other functional forms or
transformations provided individual improvements in fit, logarithmic
variable transformation provided the most consistent "fit" for all
Segments in general.
Cold Water cederal Hatcheries.
Costs for the cold-water federal hatcheries were divided into labor,
production, ar.d total. The analysis consisted of a multiDle regression
on fifty-one observations over a wide range of costs and productions.
The three representative cost curves are illustrated in Exhibit XIX—1.
The functions in 100 pound units were as follows:
Total Cost:
Log (cost per lb.) = 1.651 - 0.5245 (log lbs.) r2 = .76928
(.1180) (.04103)
Production Cost:
Log (cost/lb.) = 1.193 - 0.4309 (Log lb.) r2 = .61942
(.1388) (.04825)
Labor Cost:
Log (cost/lb.) = 1.280 - 0.5331 (Log lb.) r2 = .71175
(.1394) (.04846)
XIX—2
-------
-------
The transformed functions are:
Total cost: cost/lb. = 44.7 (lbs.)""^2^^
Production cost: cost/lb. = 15.6 (lbs.)~•^^09
Labor cost: cost/lb. = 19.1 (lbs.)"'^*
The cost curves, as illustrated, were considered fair representations
of the costs of the industry segment.
Harm-water Fedqral
Costs for- the wmn-water federal hatch.?ries were also divided, into
total, production, and labor. The analysis consisted of a multiple
on thirty-five observations over a wide range of coslS and productions.
The three representative cost curves are"diagramed in Exhibit XIX-2.
The functions in 100 pound units were:
Total cost: Log (cost per lb.) = 2.291 -.6380 (Log lbs.) r2 = .74623
(.1357) (.06934)
Production cost: Log (cost/lb.) = 1 .729 -.5693 (Log lbs.) r2 = .6".'1969
Labor cost: Log (cost/lb.) = 1.670 - 0.6108 (Log lbs.) r2 = .58358
(.1746) (.08982)
The transformed functions are:
Total cost: cost/lb. = 195.0 (lbs.)"*6830
Production cost: cost/lb. =.y - 53.6 (lbs.)"'569®
Labor cost:' y = 46.8 (lbs^)"'^10^
The illustrated cost curves were fair representations of the costs, of the
industry segment.
The relatively higher cost of production for warm water fish results in
part from the distribution of fish at the fry or fingerling level rather
than as in cold water hatcheries at the adult level.
Table XIX-1 provides a historical perspective on the costs incurred by
federal hatcheries. These costs represent an average cost per pound
produced for all fish produced in federal hatcheries. Total costs have
been steadily increasing over the past five years. The average cost
per pound of trout produced was reported at $1.00 for 1.972 compared with
$.83 in 1968. The 1968 cost of $1.18 per pound of andronmous fish in-
creased to $1,37 in 1972. It appears that most of the increased produc-
XIX-4
-------
: P*
20'
19
ie
17
16
IS
|4
13
12
11
-------
Table XIX-1. Production costs, national fish hatcheries, 1968-1972 —
Year &
Production costs
- pe r pound
Adm.
Tota
type
Labor
Food
Other,
T otal
other costs
cost/1
T rout
1972
1971
1970
1969
1968
$ .41
.45
.39
.33
.32
$. 16
. 17
. 15
. 16
. 16
$. 12
. 15
. 08
.09
. 11
$ .69
.77
.62
.58
.59
$ .31
. 31
.25
.26
.24
$1.00
1. 08
.87
.84
.83
Pond-fish
1972
1971
1970
1969
1968
2.42
2. 32
2.40
2. 17
2.26
2/
2/
2/
2/
2/
•863
.88-
3.17
2.97
3.07
3.03
3.14
4.21
3. 16
3.65
3.30
3. 57
7.38
6. 13
6.72
6.33
6.7,1
Andronmous fish
1972
1971
1970
i969
1968
.56
.54
.45
.38
.41
.24
.25
.25
.27
.28
.07
. 10
. 19
. 13
.07
.87
.89
.89
.68
.75
. 50
.59
.49
.51
.43
1.37
1.48
i. /
1.18
— Statistical Appendix, Annual Report, Fiscal Year 1972, Division of Fish Hatcheries,
Btireau of Sport Fisheries and Wildlife, U. S. Dept. Interior.
—	Included in "Other" costs.
3/
—	Includes food costs.
XIX-6
-------
tion costs resulted from higher direct labor costs and administration
costs. These costs do not reflect increases in feed costs which would
greatly impact the 1973 and 1974 costs of production.
Cold Water State
Costs'for the cold-water, state fi*= h hatcheries were not divided and,
therefore, only one function total cost, was derived. The analysis was
multiple regression - eighty-ohe observations over a wide range of costs
and production levels. The representative cost curve is illustrated in
Exhibit XIX-3. The function is as follows (in 1,000 pound units):
.Total cost:,log (cost/lb.) = .7649 -.4044 (Log lb.) r^ -.52951
(.08208) (.04261)
The transformed function is:
Cost/lb. = 5.82 (lbs.)''4044
These data suggest that the production cost for state cold-water hatcheries
is lower than that for federal hatcheries. For example, a state hatchery
producing 100,000 pounds of cold water fish would on the average incur
production costs of SO.90 per pound, and a federally operated hatchery,
$1.20. At a production level of 200,000 pounds, the state hatchery
costs would be $0.70 and the federal, $0.83. The margin is'narrowed
f'irther as production increases: at a production level of 400,000 pounds,
state hatchery costs are $0.55 per pound and federal, $0.60.
Warm-water State Hatcheries
Insufficient dnta were obtained from state warm water hatcheries to
develop a production cost function. The limited data available suggest
that the cost data would follow a pattern similar to those of state and
federal cold-water hatcheries.
XIX-7
-------
Exhibit XIX-3. Cost of production as a function of volume
produced, cold water state hatcheries 1972
Cost per pound
Total production (thousand pound*)
-------
XX. 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 fish culturing
facilities specified in this analysis.
Three effluent guidelines were considered:
BPT - Best Practicable Control Technology Currently
Available, to be achieved by July 1, 1977
BAT - Best Available Technology Economically Achievable,
to be achieved by July 1, 1S83
NSPS - New Source Performance Standards (NSPS), apply
to any source for which construction starts after
the publication of the proposed regulations for
the Standards
A technical document describing the recommended technology for achieving
the three guidelines will be published as a separate report by EPA, referred
to as the Development Document (1).
Effluent control costs for various types and sizes of fish culturing facili-
ties are presented by EPA for flow-through fish culturing (cold water) and
pond culturing (warm water) facilities were modified in order to develop
costs for federal and state hatcheries. These costs are shown in Tables
XX-1 and XX-2. Basically the 1975 costs were developed for the different
size operations representing the size spectrum of hatcheries as they'existed
in 1973.
Costs were developed for five sizes of cold water hatcheries ranging from an
annual production rate of'25,000 to 400,000 pounds. For the smallest size
hatcheries, investment cost ranged from $1,520 to a high of $9,600 for
Alternative A-l. On.an annual basis, these costs ranged from $175 to •
$",080. For the largest size hatchery investment cost ranged from $5,670
to a high of $22,800. Total annual cost ranged from $820 to a hiof
$3,850. This, includes interest, depreciation as well as annua'i operation,
maintenance and energy.
Costs for four of warm water hatcheries, ranging in size from an annual
production of 5,000 to 50,000 pounds, was developed. Investment cost
for pollution control ranged from 0 to a high of $18,490 for Alternative
B for the smallest size operation. Annual operating, cost for the small
hatcheries ranged from $315 to a high of $5,375 for Alternative C. For
the large size warm water hatcheries, investment costs range from 0 to
a high of $185,210 for Alternative B with annual cost ranging from
$3,165 for Alternative A-2 to $53,665 for Alternative C.
XX-1
-------
Table XX-1. Effluent control costs for cold water
state and federal hatcheries
Effluent
control
level Cost Item
Annual Production (lbs.)
25,000 50,000 100,000 250,000
-lbs.---
dollars
3PT (A-l)
Investment-
9,600
11,000
13,700
19,300
22,80(

Annual cost






Interest
480
550
685
965
1,14C

Depreciation
480
550
685
965
1,14(

Operating cost
120
210
445
1,030
1,57(

Total annual cost
1,080
1,310
1,815
2,960
3,85(
BPT (A-2)
Investment
1,520
1,930
2,750
4,390
5,67(

Annual cost






Interest
75
100
140
220
0*1

Depreciation
75
100
140
220


Operatinq cost
25
40
70
165


Total annual cost
175
240
350
605
82(
BPT (A-3)
Investment
2,220
2,690
3,860
6,320
8,42(

Annual cost






Interest
110
135
195
315
42(

Depreciation
110
135
195
315
42t

Operating cost
25
40
70
160
25C

Total annual cost
245
310
460
790
1.09C
BPT (B-l)
Investment
4,300
5,900
8,600
12,600
15,80C

Annual cost






Interest
215
295
430
630
79(

Depreciation
215
295
430
630
79(

Operating cost-
120
190
400
1,030
1,59(

Total annual cost
550
780
1,260
2,290
3,17(
XX-2
-------
Table XX-2. Effluent control cost for warm water
state and federal hatcheries
Effluent
- control
level
Annual Production (lbs.)
Cost Item
5,000
10,000
25,000
50,000


1 he .




dollars

Investment-
8,380
16,750
41,880
83,750
Annual cost
Interest
Depreciation
Operating cost
Total annual cost
420
420
315
1,155
840
840
630
2,310
2,095
2,095
1,580
5.770
4,190
4,190
3,165
11,545
Investment
0
0
0
0
Annual cost
Interest
Depreciation
Operating cost
Total annual cost
0
0.
315
315
0
0
630
630
0
0
1,580
1,580
0
0
3,165
3,'.65
Investment
18,490
37,090
92,660
185,210
Annual cost
Interest
Depreciation
Operating cost
Total annual cost
925
925
850
2,700
1,855
1,585
1,695
5,405
4,635
3,960
4,240
13,510
9,260
9,260
8,475
26,995
Investment
8,980
17,820
44,620
89,380
Ar.nual cost
Interest
Depreciation
Operating cost
Total annual cost
450
450
4,475
5,375
890
890
8,950
10,730
2,230
2,230
22,350
26,820
4,470
4,470
44,725
53,665
BPT (A-l)
iPT (A-2)
JPT (B)
XX-3
-------
XXI. IMPACT ANALYSIS
Projected increases in the cost of production for Federal and State
hatcheries have been calculated and summarized in Table XXI-1.
Federal Cold Water and Mixed Hatcheries
There are 64 Federal cold water and mixed cold water and warm water
hatcheries in the U.S. The estimated production cost per pound of
fish produced ranges from a low. of $.80 per pound for those hatcheries
with an annual production of greater than 300,000 pounds to a high
of $2.90 per pound for those producing less than 25,000 pounds per
year.1 The pollution control costs for Alternatives A-l, A-2, A-3,
and B designed to meet the Standards for flow through operations were
calculated. The costs calculated on an annual basis range from
$175 to a high of $3,850. This amount to a range of 0.6 to 1.1
cent per pound of fish produced or an increase of 0.2 to 1.1 per-
cent of present production costs.
Federal Harm Water Hatcheries
There are 28 Federal warm water hatcheries in the U.S. Production
costs range from a low of $3.70 per pound of fish produced to a high
of $15.90 for the hatcheries with a production level of about 5,000
pounds per year.
The pollution control costs range from a low of $315 calculated on
an annual basis to a high of $53,655 for the hatcheries producing
50,000 pounds of fish per year and using Alternative C. This amounts
to a cost ranging from $.06 to $1.07 per pound of fish or an increase
in production costs from 0.4 to 26.3 percent.
State Cold Water and Mixed Hatcheries
Data on 220 State cold water hatcheri.es was obtained. It is not
known what percent of the 247 state hatcheries for which information
was not obtained are cold water hatcheries. Production costs were
reported lower than Federal hatcheries ranging from $.50 per pound
to a high of $2.00.
The costs of control for the various size hatcheries range from a
low of $175 to a high of $3,850 when calculated on an annual basis.
This amounts to an increase in the cost of production of 0.2 to 3.4
cents per pound. As a percent of 1975 production costs this amounts
to an increase of 0.2 to 1.2 percent.
XXI-1
-------
Table XXI-1, Estimated Increase in the cost of production to meet the proposed effluent control standards - federal
and state hatcheries




Current Product
Projected Increase in Production
Cost


Segment
Number
Approximate size
Cost
Total dollars
Per Pound
% Increase


(1,000 lbs. pro-
$ per lb.









duction)








Federal Cold










Water & Mixed
15
<25
$ 2.90
175 to
1,080
0.005 to
0.034
0.2
to
1.2

9
25 - 50
2.00
240 to
1,310
0.005 to
0.024
0.2
to
1.1

15
51 - 100
1.40
350 to
1,815
0.002 to
0.011
0.3
to
1.1

23
100 - 300
.90
6u5 to
2,960
0.002 to
0.011
0.3
to
1.1

2
>300
.80
820 to
3,850
0.002 to
0.011
0.3
to
1.1

U









Federal Warm










Water

<5
15.90
315 to
5,375
0.06 t.o
1.07
0.4
to
6.1

17
5-10
9.80
630 to
10,730
0.05 to
1.07
0.7
to
9.9

8
11 - 25
4.90
1,580 to
26,820
0.06 to
1.07
1.4
to
19.8

3
26 - 50
3.70
3,165 to
53,665
0.06 to
1.07
1.8
to
26.3

IS









State Cold^










Water & Mixed
66
<25
2.00
175 to
1,080
0.006 to
0.034
0.2
to
1.2

34
25 - 50
1.50
246 to
1,310
0.005 to
0.024
0.2
to
1.1

46
51 - 100
1.10
356 to
1 ,815
0.002 to
0.011
0.2
to
1.1

63
100 - 300
.70
605 to
2,960
0.002 to
0.011
0.2
to
1.1

11
>300
.50
820 to
3,850
0.002 to
0.011
0.2
to
1.1

220









State Warm^










Water
12
<25
Unknown
315 to
26,820
0.06 to
0.79
0.2
to
1.2
y 23? of 479 hatcheries reporting
-------
State Warm Water Hatcheries
Little or no information was obtained on State warm water hatcheries
including the number in existence. It is estimated that production
costs would be the same as or lower than Federal water hatcheries. On
this basis with general production levels of less than 25,000 pounds,
an increase in annual cost.would range from $315 to a high of $26,820.
This would represent an increase in the cost of production of 6 to 79
cents per pound.
XXI—3
-------
REFERENCES
1.	Environmental Protection Agency, "Fish Farms and Hatcheries," Develop-
ment Document, January, 1976.
2.	J. Lawrence Robinson, U. S. Trout Farmers Association, Washington
D. C., Telephone Conversations.
3.	U. S. Department of Interior, Propagation and Distribution of Fishes
from National Fish Hatcheries for Fiscal Year 1972, Fish and Wildlife
Service, Bureau of Sport Fisheries and wildlife, 1973.
4., J. C. Adrian, E. W. McCoy, A. B. Shirley, "Alabama Catfish Producers
'and Southern United States Catfish Processors," Mimeograph Series,
Dept. of Agricultural Economics and Rural Sociology, Auburn University,
Auburn, Alabama, 1971.
5.	William M. Bailey, Fred P." Meyer, J. Mayo Martin and D. Leroy Gray,
"Farm Fish Production in Arkansas During 1972," Mimo publication "by
Arkansas Game and Fish Commission, Little Rock, Arkansas, Bureau of
Sport Fisheries and Wildlife, Stuttgart, Arkansas Agricultural Exten-
sion Service, Little Rock, Arkansas.
6.	Orvetz, Charles, "Some Projected 1974 Spring Harvest Conditions for
the Farm-Raised'Catfish Industry—Nationally and for the State of
Texas," Unpublished 1974 National Marine Fisheries Service, Little
Rock, Arkansas.
7.	U. S. Department of Interior, "List of State Fish Hatcheries and
Rearing Stations," Fish and Wildlife Service Bureau of Sport
Fisheries a;.d Wildlife, 1970.
8.	U. S. Department of Interior, "Partial Listing of Fingerling Pro-
ducers," Bureau of Sport Fisheries and Wildlife, Stuttgart, Arkansas.
9.	George W. Klontz, "A Survey of Fish Health Management in Idaho,"
Forest Wildlife and Range Experiment Station, University of Idaho,
1973.
10.	Araji, A. A., "An Economic Analysis of the Rainbow Trout Industry,"
A. E. Series 118, College of Agriculture, University of Idaho, 1972.
11.	C. Greenfield, "Economic and Business Dimensions of the Catfish
Fanning Industry," Bureau of Commercial Fisheries, U. S. Dept. of
Interior, St..Petersburg, Florida, 1970.
12.	David Boozer, Florida Tropical Fish Farms Associates, Inc., Winter
Haven, Florida, Telephone Conversations.
13.	The Pet Dealer, Trade magazine.
-------
14. T. H. Jambers, An Economic Analysis of Commercial Catfish Production
in Texas, Texas A & M University Masters Thesis, 1972.
15.	R. D. Lacewell, J. P. Nichols, and T. H. Jambers, "An Analysis of
Pond Raised Catfish Production in T6xas," Southern Journal of Agri-
cultural Economics, Vol. 5, No. 1 (73MS-21T!
16.	R. D. Lacewell, J. P. Nichols, and T. H. Jambers, "Costs of Pro-
cessing Catfish in 1971", Proceedings: 1973 Fish Farming Conference,
College Station, Texas, January, 1971.
17.	U. S. Department of Agriculture, "Unpublished list of Commercial
Catfish Fanners in Mississippi" Soil Conservation Service, Jackson,
Mississippi, July, 1973.
18.	Terry Nosho, "Marketing the Pan-Size Salmon," draft, Washington
University Sea Grant, April, 1974.
19.	Morton M. Miller and Darrel A. Nash "The Development of Catfish as
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20.	U. S. Department of Agriculture, "Demand for Farm-Raised Channel Cat-
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21.	Samuel T. Hi note "We Have Some Problems to Overcome," The Catfish
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22.	U.S. Department of Interior, "Annual Report Fiscal Year ,1972
Statistical Appendix" Fish and Wildlife Service, Bureau of Sport
Fisneries and Wildlife, Division of Fish Hatcheries, Washington,
D. C.
23.	U. S. Department of Agriculture, Soil Conservation Service, State
Area Conservationists Personal Discussions.
24.	Charles A. Oravetz, "Farm Raised Catfish Market/Production Analysis
1973," National Marine Fisheries Service, Little Rock, Arkansas.
25.	Gerald R. Chrobuch "System and Economics for Pan-Sized Salmon Aqua-
culture in Washington State," Unpublished report, Economics 572
University of Washington, Seattle, Washington, 1974.
26.	Jack A. Richards, Conrad V. W. Mohnhen, and George K. Tononaha,
"Evaluation of the Commercial Feasibility of Salmon Aquaculture in
Puget Sound," National Oceanic & Atmospheric Administration, National
Marine Fisheries ^Service, Seattle, Washington, 1972.
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