Lecture 3 Economy of Aquaculture

PRINCIPLES OF
AQUACULTURE
FMA2001 (2+1)
Lecture 3: Principles of Aquaculture
Economy
Learning Outcomes
1. Student understand micro and macro economics in aquaculture.

Introduction
• Economics  is the social science that studies the production,
distribution, and consumption of goods and service.
• Technical ability is a precondition for successful aquaculture.
• BUT if the aquaculture is uneconomic, it will fail to develop and
survive
• To be profitable: need to market product actively and effectively.
Introduction
DEMAND and SUPPLY
Condition Price
High Demand; Low Supply HIGH
Low Demand; High Supply LOW

Aquaculture economics two levels
a) Micro-economics: concerns single farm. Management measures

and elements affecting the operation efficiency.
b) Macro-economics: concerns whole economy. Management
determine aquaculture policy. (Protein source, employment,
foreign exchange, income distribution)
MICRO
1. Profit = total revenue = (volume of output x price / unit of output) – total cost
2. Cost of production:
a. Species (herbivorous < omnivorous > carnivorous)
b. Feed (conversion ratio, unit price)
c. Culture system (Extensive > semi-intensive > Intensive)
d. Labor requirement (small farm > large farm)  mechanization
e. Seed (survival rate)
f. Construction cost
3. Accounting cost actual cost (purchases, salary, depreciation, feed)
4. Economic cost opportunity cost (benefit forgone for not choosing the
best alternative)
Economic cost = actual cost + opportunity cost

Marginal analysis
• Marginal analysis is an examination of the associated costs and

potential benefits of specific business activities or financial
decisions.
• Examine the results of small changes as the effects cascade
across the business
• The goal is to determine if the costs associated with the change in
activity will result in a benefit that is sufficient to offset them
Marginal analysis
• AP=(output/input) • MC= (Price of food/ MP)
• MP=(change in output/change in input) • AC= (VC/output)
• • VC= unit price x input

MR=(selling price)
• In this case Unit price = 0.44
Feed conversion ratio (FCR)
• Ratio or rate measuring the efficiency of feed convert to animal

weight.
• Determine the level of performance of a feed
• FCR = Feed given / Animal weight gain
Stocking density
• Extensive fish farming system (1-5 ha):

5,000 fish/ha
• Semi-intensive fish farming system (0.5-1 ha):
10,000-15,000 fish/ha
• Intensive fish farming system 100ha = 1km2

100,000-500,000 fish/ha
Carrying capacity
• Carrying capacity of an environment

is the maximum population size of a
biological species that can be
sustained in that specific
environment. Above the threshold,
population size tend to decrease due
to the shortage of food and space.
Markets and marketing
• Price maker VS Price takers
• Factor influencing demand:
• Price per unit
• Income level of buyers
• Price of substitutes (capture fishery)
• Tastes
• Population number increases
•Factor influencing supply
• Price of input (feed)
• New technology that reduce production cost
• Improvement in solving disease related problems
• Genetic selection & breeding (increase productivity)
Economics of scale and similar factors
Definition: decreasing cost per unit of production or output.
• Construction of
facility/ farm
• Salary
• Distance from
market/supplier
• Feed
• Electricity
Business risk (uncertainties)
• Level of prices
• wages
• rate of interest
• Mortality in farmed stock
• unfavorable weather patterns
• Future price
• Level of productivity
Business risk (counter-measures)
• Product diversification
• Diversification in techniques for production
• Incorporation of flexibility into capital equipment / facility (multiple
uses)
• Increase shareholders/ business partners
• Ensure fixed cost are low to sustain economic loss.
MACRO
1. Benefit-Cost evaluation
2. Improve nutrient for the rural poor
3. Create employment
4. Foreign exchange
5. Land and water use (Agriculture, fisheries, urban development)
6. Management and development strategies
Economic assessment
• Is aquaculture giving private profit > social net benefit?
• Destruction of valuable habitat Wild stock decreases Reduce capture
fishery benefit
• Large-scale displaces small farmers
• Pollution
Economic assessment
•Aquaculture private profit = social net benefit
• Job opportunity
• Area development
• Improve nutrient in rural areas
• Aquaculture private profit < social net benefit

• Policy maker tax  Law for development
SOCIO ECONOMIC IMPACTS OF AQUACULTURE
Internal and External Environments of
Aquaculture

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PRINCIPLES OF

1. Student understand micro and macro economics in aquaculture.

High Demand; Low Supply HIGH

Low Demand; High Supply LOW

a) Micro-economics: concerns single farm. Management measures

Economic cost = actual cost + opportunity cost

• Marginal analysis is an examination of the associated costs and

• AP=(output/input) • MC= (Price of food/ MP)

• MP=(change in output/change in input) • AC= (VC/output)

• • VC= unit price x input

• Ratio or rate measuring the efficiency of feed convert to animal

• Extensive fish farming system (1-5 ha):

• Intensive fish farming system 100ha = 1km2

• Carrying capacity of an environment

• Aquaculture private profit < social net benefit

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