The Annual Economic Survey of Federal Gulf Shrimp Permit Holders: Report on the Design, Implementation, and Descriptive Results for 2006

This technical memorandum documents the design, implementation, data preparation, and descriptive results for the 2006 Annual Economic Survey of Federal Gulf Shrimp Permit Holders. The data collection was designed by the NOAA Fisheries Southeast Fisheries Science Center Social Science Research Group to track the financial and economic status and performance by vessels holding a federal moratorium permit for harvesting shrimp in the Gulf of Mexico. A two page, self-administered mail survey collected total annual costs broken out into seven categories and auxiliary economic data. In May 2007, 580 vessels were randomly selected, stratified by state, from a preliminary population of 1,709 vessels with federal permits to shrimp in offshore waters of the Gulf of Mexico. The survey was implemented during the rest of 2007. After many reminder and verification phone calls, 509 surveys were deemed complete, for an ineligibility-adjusted response rate of 90.7%. The linking of each individual vessel’s cost data to its revenue data from a different data collection was imperfect, and hence the final number of observations used in the analyses is 484. Based on various measures and tests of validity throughout the technical memorandum, the quality of the data is high. The results are presented in a standardized table format, linking vessel characteristics and operations to simple balance sheet, cash flow, and income statements. In the text, results are discussed for the total fleet, the Gulf shrimp fleet, the active Gulf shrimp fleet, and the inactive Gulf shrimp fleet. Additional results for shrimp vessels grouped by state, by vessel characteristics, by landings volume, and by ownership structure are available in the appendices. The general conclusion of this report is that the financial and economic situation is bleak for the average vessels in most of the categories that were evaluated. With few exceptions, cash flow for the average vessel is positive while the net revenue from operations and the “profit” are negative. With negative net revenue from operations, the economic return for average shrimp vessels is less than zero. Only with the help of government payments does the average owner just about break even. In the short-term, this will discourage any new investments in the industry. The financial situation in 2006, especially if it endures over multiple years, also is economically unsustainable for the average established business. Vessels in the active and inactive Gulf shrimp fleet are, on average, 69 feet long, weigh 105 gross tons, are powered by 505 hp motor(s), and are 23 years old. Three-quarters of the vessels have steel hulls and 59% use a freezer for refrigeration. The average market value of these vessels was $175,149 in 2006, about a hundred-thousand dollars less than the average original purchase price. The outstanding loans averaged $91,955, leading to an average owner equity of $83,194. Based on the sample, 85% of the federally permitted Gulf shrimp fleet was actively shrimping in 2006. Of these 386 active Gulf shrimp vessels, just under half (46%) were owner-operated. On average, these vessels burned 52,931 gallons of fuel, landed 101,268 pounds of shrimp, and received $2.47 per pound of shrimp. Non-shrimp landings added less than 1% to cash flow, indicating that the federal Gulf shrimp fishery is very specialized. The average total cash outflow was $243,415 of which $108,775 was due to fuel expenses alone. The expenses for hired crew and captains were on average $54,866 which indicates the importance of the industry as a source of wage income. The resulting average net cash flow is $16,225 but has a large standard deviation. For the population of active Gulf shrimp vessels we can state with 95% certainty that the average net cash flow was between $9,500 and $23,000 in 2006. The median net cash flow was $11,843. Based on the income statement for active Gulf shrimp vessels, the average fixed costs accounted for just under a quarter of operating expenses (23.1%), labor costs for just over a quarter (25.3%), and the non-labor variable costs for just over half (51.6%). The fuel costs alone accounted for 42.9% of total operating expenses in 2006. It should be noted that the labor cost category in the income statement includes both the actual cash payments to hired labor and an estimate of the opportunity cost of owner-operators’ time spent as captain. The average labor contribution (as captain) of an owner-operator is estimated at about $19,800. The average net revenue from operations is negative $7,429, and is statistically different and less than zero in spite of a large standard deviation. The economic return to Gulf shrimping is negative 4%. Including non-operating activities, foremost an average government payment of $13,662, leads to an average loss before taxes of $907 for the vessel owners. The confidence interval of this value straddles zero, so we cannot reject, with 95% certainty, that the population average is zero. The average inactive Gulf shrimp vessel is generally of a smaller scale than the average active vessel. Inactive vessels are physically smaller, are valued much lower, and are less dependent on loans. Fixed costs account for nearly three quarters of the total operating expenses of $11,926, and only 6% of these vessels have hull insurance. With an average net cash flow of negative $7,537, the inactive Gulf shrimp fleet has a major liquidity problem. On average, net revenue from operations is negative $11,396, which amounts to a negative 15% economic return, and owners lose $9,381 on their vessels before taxes. To sustain such losses and especially to survive the negative cash flow, many of the owners must be subsidizing their shrimp vessels with the help of other income or wealth sources or are drawing down their equity. Active Gulf shrimp vessels in all states but Texas exhibited negative returns. The Alabama and Mississippi fleets have the highest assets (vessel values), on average, yet they generate zero cash flow and negative $32,224 net revenue from operations. Due to their high (loan) leverage ratio the negative 11% economic return is amplified into a negative 21% return on equity. In contrast, for Texas vessels, which actually have the highest leverage ratio among the states, a 1% economic return is amplified into a 13% return on equity. From a financial perspective, the average Florida and Louisiana vessels conform roughly to the overall average of the active Gulf shrimp fleet. It should be noted that these results are averages and hence hide the variation that clearly exists within all fleets and all categories. Although the financial situation for the average vessel is bleak, some vessels are profitable. (PDF contains 101 pages)

Preservation of Sardinella longiceps in iced and chilled seawater. Part 1 - Changes during storage with particular reference to bacterial load and nitrogenous compounds

Oil sardines in prime condition were subjected to onboard chilling. Two lots were chilled in CSW (samples C and CI), a third lot was chilled in crushed ice (sample I) and a fourth lot left not iced on deck (Sample AI). Upon landing sample AI was iced and sample CI was removed from the CSW and iced. All the four samples were kept in a chilled room for storage studies. The fish chilled and stored in CSW recorded the least, and the fish subjected to delayed icing, the highest values for all the indices of spoilage namely, free amino nitrogen, trimethylamine (TMA) and total volatile base nitrogen (TVBN). The total psychrophilic bacterial number also showed a similar trend. The organoleptic assessment of the cooked samples revealed C I, CI, AI to be the order of preference throughout the storage. This assessment was found to hold good for the rest of the parameters as well. The CSW held fishes were found to be distinctly superior to the iced ones for the first five days of storage. Such a marked prevalence in quality for five days would suffice for the fish to fetch a premium in the market over other landings of the same fish whether chilled or not chilled. Chilling on board in CSW and icing the same after landings, did not show encouraging results.

Preservation of Indian oil sardine (Sardinella longiceps) in iced and chilled seawater. Part 2 - Changes during storage with particular reference to salt penetration and lipid deterioration during CSW holding

Oil sardines in prime condition were chilled on board. Two lots were chilled in CSW (samples C & CI), one lot ice (sample I) and a fourth lot was left un-iced on deck (sample AI). Sample AI was iced after landing and sample CI was taken out of the chilled seawater and. iced. All the four samples were kept in a chilled room for storage studies. Sample C, chilled and stored in CSW, recorded a gradual gain in weight and an increase in salt content of the muscle. Presence of salt did not seem to cause any excessive protein denaturation. Salt extractability decreased at a gradual rate in all cases. Presence of salt seemed to wield no noticeable influence on lipid hydrolysis and subsequent peroxidation. Results of chemical and sensory evaluations highlight this. Holding sardines in CSW gave a product of excellent quality for the first four to five days of storage. Beyond the fifth day of storage quality deteriorated rapidly and there was no noticeable superiority for this sample (sample C) over the on board iced fish. This was evident in the sensory evaluation as well. However, a storage life of five days in a readily acceptable state is sufficient for the fish to be disposed in the market at a premium sale price over other landings of the same species.