By: Ruth Beatriz Mezzalira Pincinato
This special issue of Aquaculture Economics & Management features five articles based on the 24 contributions presented at the International Association of Aquaculture Economics and Management (IAAEM) sponsored section on economics and marketing at the Aquaculture America conference in Honolulu, Hawaii, February 9–12, 2020. The contributions covered topics on different farmed species groups (e.g., tilapia, catfish, salmon, and oyster), from different producing or market regions (e.g., USA, China, South Africa, Norway, and Brazil), and also with a global scope.
The section provided an arena to discuss issues related to risk management, regulations, trade and border rejections, seafood certification, consumers’ preferences, market integration, product differentiation, mariculture tourism, food security, effects, and contribution of aquaculture to the regional economy.
The papers in this special issue reflect a variety of topics also seen in the section during the conference. One of the papers in this special issue focus on different aspects of aquaculture products demands, considering the consumers’ willingness to pay for different farmed fish products.
“Two papers investigate aspects in the supply chain, that is, market integration, and product differentiation challenges, and opportunities.“
The final two papers offer an evaluation of the effects of aquaculture farms on respectively nearby housing property values and the contribution of the overall aquaculture industry to the regional economy. This shows the increasing appreciation of aquaculture’s importance in a wider societal context highlighting user conflicts as well as positive externalities. Thus, this issue deals with two levels of decisions and their consequences; internal decisions related to aquaculture marketing, and external economic effects of aquaculture.
Profitability decides aquaculture’s fate
Farmers’ decisions with respect to which species group to farm (e.g., oyster or salmon), how to produce (e.g., organic or GMO soybean-based feed), where to produce (e.g., landbased or coastal farm), and which product forms to sell (e.g., whole or fillet) all contribute critically to the industry profitability.
In addition, population growth, income growth, and cultural changes such as health awareness are expected to lead to an increase in demand for seafood, giving incentives to the aquaculture industry to increase production. Thus, further development of aquaculture depends on its markets and demand growth. More specifically, consumers’ acceptance, preference for specific attributes and willingness to pay for the product to be sold are aspects that the producers must be aware of in order to be able to exploit the best opportunities in the market.
Some product attributes may not be directly observable such as food safety, sustainability, country of origin, animal welfare, the sustainability of production, and labor conditions. For instance, consumer concerns with environmental issues may provide incentives to farmers to address the industry negative externalities by their demand and wiliness-to-pay for products certified according to a good environment and social practices.
“Other attributes are observable by the consumer such as size, product form, flesh color, freshness, appearance, and convenience.“
In the first paper on this issue, Adhikari et al. show how these aspects influence their preferences, and accordingly can be used to target specific market segments. More specifically, the paper investigates these aspects for five newly developed convenient catfish products. Product attributes such as appearance, color, and glossiness were found to be key for the consumers’ preference for panko-breaded products. In addition, socioeconomic aspects such as education, household income, ethnicity, and fish-eating frequency, influenced significantly consumers wiliness to pay for the different products.
The importance of seafood market analysis
In general, product differentiation highlights the attributes that are unique to the product (e.g., species, geographical origin) to improve consumer’s perceptions and preferences for this product. So, a differentiated product is expected to achieve higher prices in a specific consumer segment. Product differentiation creates a potential for segmentation in the seafood market.
This means that understanding the seafood market boundaries and interactions between products and markets is also important to reach the potential of the seafood production opportunities (markets seg- mentation) and expansion as well as associated with specific markets or trade relationships. Landazuri-Tveteraas et al. investigate the market integration between Atlantic salmon and salmon-trout. Norwegian salmon farmers hold a license that allows them to farm Atlantic salmon or salmon-trout, and such licenses have been very valuable.
Even though the majority of the farmers produces salmon and the market seem to be highly integrated, the reason why some of them produce salmon-trout could be linked to product differentiation as there may be premiums associated with various cost product attributes even in an integrated market.
“For instance, the authors suggest that some markets (Japan) may have preferred, at least during the 1990s, the redder flesh color that salmon-trout can offer.“
However, this is no longer the case, for results show that these two “cousins” are close substitutes, with Atlantic salmon determining the price for salmon-trout. This makes it more difficult for salmon-trout to expand its production and segment away from Atlantic salmon and find new markets where salmon-trout specific attributes are preferred.
Opportunities and challenges
Opportunities and challenges go hand-in-hand, particularly in an industry where its product is traded globally, and the production process is frequently susceptible to shocks. Shocks due to environmental conditions, diseases, and trade may affect the consumer markets by segmenting it depending on how globally integrated in the market.
For instance, import- ant changes in the salmon market with respect to product form and destination happened after the Chilean producers experienced severe disease outbreaks from 2009 to 2012 resulting in high mortality rates. During the last decades, shrimp farming disease outbreaks and trade disputes have imposed challenges to the affected producers. However, this meant opportunities for their competitors to increase their shares in this globally integrated market.
For Brazilian shrimp producers, the U.S. antidumping tariff imposed in 2003 was a challenge difficult to overcome in this global market, so that their share was lost to other countries. However, Brazilian shrimp producers found an opportunity in the untapped domestic market related to its overexploited fisheries. It is expected that disease outbreaks can be somewhat controlled over time, since factors influencing them, such as inputs (e.g., vaccines) and other managerial factors can be improved by innovation and technology development.
“However, shocks in the seafood systems are likely to continue to occur, such as the pandemic related to Covid-19 and climate change.“
Thus, it is essential to build more resilience in the sector in order to address the challenges and to be able to identify the opportunities. The third paper in this issue, Cojocaru et al., breaks down the opportunities and challenges for Norwegian salmon product differentiation.
Based on an interview with salmon farmers they find that product differentiation takes place mostly on the non-directly-observable attributes such as country of origin, branding, and certification. In addition to high prices and constant supply issues, the strong brand of “salmon from Norway” and the certification process have also been cited as a challenge to be overcome for further differentiation within the sector.
“In general, the Norwegian salmon industry has been able to realize the opportunities for product differentiation in a very limited way, especially compared to other protein industries such as poultry.“
This is important because not only salmon, but seafood in general, has a relatively lower footprint when compared to the other proteins such as from poultry, and it is expected to be a source of protein for many from a more climate-friendly perspective. Farmers’ decisions, especially with respect to where to produce, impact not only their own profits but also other sectors and the regional economy.
The last two papers in this special issue look at the consequences of the individual aquaculture decisions on other sectors, such as residential land use, and the regional economy. These are important topics as the social impact of aquaculture is highly controversial.
Land-Based aquaculture advantages
In contrast to most land-based aquaculture, marine aquaculture development requires coastal and offshore areas that are common to other users. Farms located in these areas often meet opposition because they may negatively impact, for example, the fishery industry by altering the ecosystem and/or excluding a potential area for fishing. It can also limit the scenic view of some areas, which affects both the tourism activities and the pricing of housing properties nearby.
However, there are some exceptions such as the increasing tourism activities related to aquaculture and food culinary experiences. The fourth paper of this special issue, Sudhakaran et al. contributes to this literature. Using a difference-in-differences approach they estimate the effect of shellfish farm construction on property values in Rhode Island between 2000 and 2013. While construction of shellfish farms seemed to in general increase property value, it has decreased prices for luxurious housing property.
While there are benefits to the community and economy in having the aquaculture sector, there are conflicts to be pondered between the different sectors within the region and the overall benefits.
“Thus, the general public and policymakers may balance their willingness to accept the industry in their region according to how much economic and social benefits the industry adds to the regional economy.“
One way to assess this contribution is by regional economic assessments, which depend on quality data. In particular, the heterogeneity in aquaculture production makes the evaluation even more difficult, with different species, different production methods, and different regions. Botta et al. analyze this issue for the Florida (US) shellfish aquaculture industry. They provide an overview of economic contributions, challenges, and techniques to overcome these challenges.
To sum up, understanding farmer’s decisions, and their consequences for their business, and the external economy is key to ensuring the production of seafood. Studies addressing these aspects, such as the ones in this issue, contribute to the general literature and to more informed decisions, not only made by the individual farm level but also made by the other stake- holders in the aggregate level (e.g., regional economy).
This is a summarized version developed by the editorial team of Aquaculture Magazine based on the review article titled“Market aspects and external economic effects of aquaculture” developed by: Ruth Beatriz Mezzalira Pincinato. The original article was published onThe on Vol. 25-02, pages 127 – 134, year 2021 through Aquaculture Economics & Management.