_ _ \ -, a , - x TEXAS ran unrvsnstrv tronnnv for atiishr ~WiihR€CirCuloiiflPondsi - x J 5- § P L Q .7 - \ / i Q Q \ . ' x I . \\ ' . \ — ‘i § ~ ' i e»? . \_ \ 1x‘ V‘ % Texas Agricultural Experiment Station - J. Charles Lee, interim Director - The Texas A&M University System - College Station, Texas s [Blank Page in Original Bulletin] ' av.- Estimated Costs and Returns for Catfish Farms with Recirculating Ponds Along the Upper Texas Coast ].AD. Lambregts, Marketing Manager for N iaid, Liverpool, Texas W.L. Griffin and R.D. Lacewell, Professors in the Department of Agricultural Economics, Texas A&M University, College Station, Texas ].T. Davis, Extension Specialist in the Department of Wildlife and Fisheries Sciences, Texas A&M University, College Station, Texas ' G.M. Clary, Extension Economist, Texas A&M University Agricultural Research and Extension Center, Overton, Texas Contents Executive Summary .................................................................................................................................... ..3 Introduction ................................................................................................................................................. ..4 Methods ........................................................................................................................................................ ..4 Simulation Assumptions .................................................................................................................... ..4 Financial Evaluation ............................................................................................................................ .. 6 Data ......................... .; .................................................................................................................................... ..6 System Dimensions ............................................................................................................................. ..6 Biological Parameters .......................................................................................................................... ..7 Investment ..................................................................................................... .§ ..................................... .. 7 Start-up Costs .................................................................................................................................. ..7 Real Estate ........................................................................................................................................ .. 8 Buildings .......................................................................................................................................... ..8 Pond Construction .......................................................................................................................... ..8 Pond Pumps ..................................................................................................................................... ..8 Major Pond Equipment ................................................................................................................. ..8 Implements and Pond Equipment ............................................................................................... ..9 Shop, Office Equipment, and Miscellaneous ............................................................................. ..9 Product Prices ...................................................................................................................................... ..9 Operations ............................................................................................................................................ .. 9 Feeding ............................................................................................................................................. ..9 Harvesting and Hauling ................................................................................................................ ..9 Stocking .......................................................................................................................................... .. 10 Water Exchange and Supply ....................................................................................................... .. 10 Aeration .......................................................................................................................................... .. 11 Pond Rebuilding ........................................................................................................................... .. 11 Maintenance and Repairs ............................................................................................................ .. 11 Insurance and Miscellaneous Expenses .................................................................................... .. 11 Financial Management ................................................................................................................. ..11 Labor ............................................................................................................................................... .. 11 Results and Discussion ............................................................................................................................ .. 12 Investments ................................................................................................................................... ., .... .. 12 Costs and Revenues .......................................................................................................................... .. 13 Average Costs ............................................................................................................................... ..13 Average Revenues .................... .., ................................................................................................. .. 13 Cash Flows .......................................................................................................................................... .. 14 Sensitivity ............................................................................................................................................ .. 15 a References ........................................................................................................................................... .. 17 Appendix ............................................................................................................................................ ..18 ml w!|i:;l1|‘s-l')o*-1(H‘\;1\P,pr. Executive Summary Interest from investors in catfish farming in Texas is increasing. Natural resources, climate, and produc- tion methods used along the upper Texas coast are sufficiently different from those in traditional produc- tion areas to require a separate economic evaluation of catfish farming in Texas. The objectives set for this study are to investigate catfish farming along the upper Texas Coast with respect to: 1) economic returns, 2) economies of scale, and 3) costs compared with those in other catfish production areas. Hypothetical farms using the modified recirculating system are studied. Three farm sizes are cost engi- neered and evaluated, a small farm with 66 (163) total land ha (ac), a medium farm with 132 (323), and a large farm with 264 (643). The farms are analyzed with a farm-level simulation program (CATSIM) to determine costs, returns, and economies of scale of catfish farm- ing. Production of the catfish ponds is set at 11,227 kg per ha (10,000 lb per ac) when the ponds are in full production, with an annual mortality of 10 percent and a feed conversion ratio of 2.0. After harvest, the ponds are restocked to maintain a population of 22,230 fish per ha (9,000 per ac). Ponds are dried up and rebuilt in the seventh year of operation. The feed cost is $303 per s metric ton ($275 per short ton), and the price of catfish is $1.54 per kg ($0.70 per lb). Results of the study are: first, that the internal rate of return (IRR) of catfish farms along the upper Texas coast varied from 15 to 22 percent (0.150, 0.183, and 0.219, for the small, medium, and large farms, respec- tively.) These rates compare favorably with traditional returns in the United States stock market, and suggest that catfish farming along the upper Texas coast pro- vides attractive returns compared with other agricul- tural enterprises. Second, the total investment required for the small, medium, and large farms is $763,526, $1,433,088, and $2,694,680, respectively, resulting in economies of scale of 12 percent. Pond construction accounts for between 45 and 49 percent of investment. Most economies of scale are gained in the buildings, start-up, and vehicles and equipment categories. The investments necessary for the farms analyzed here are nearly double those of equal size farms with static ponds in Mississippi; how- ever, the investment per unit production capacity is lower. Third, in the Texas upper coast region, average total costs for catfish farms are generally lower than those for farms with static ponds in Mississippi (11- 20%). The most important costs on a catfish farm are feed, stocking, and labor. The average total cost per kg (lb) is between $1.245 ($0.565) and $1.193 ($0.541). Economies of scale in production costs are about 7 percent. Most scale economies lie in depreciation, fixed costs, and labor. A number of conclusions are appropriate based on the work presented. First, returns to the farms are highly sensitive to production yields, the price of cat- fish, cost of feed, and, to a lesser extent, the price of fingerlings. All farms are expected to generate a posi- tive return to the investor when the price of catfish is at least $1.32 ($0.60) per kg (lb). The medium and large farms achieve a positive rate of return for catfish prices as low as $1.19 ($0.55) per kg (lb). Second, the high investment required in the three catfish farms suggests that catfish farming is a capital intensive venture. However, it appears that the recirculating production method used in Texas reduces the investment in the per unit production capacity by between 16 and 7 percent. On the other hand, the recirculating system also raises the threshold for total investment required (capital investment and initial operating costs) to over $1,000,000; a farmer must operate a complete system to achieve the savings asso- ciated with this production method. Third, the extreme sensitivity of farm returns to production levels implies that the trade-off between levels of aeration and water exchange on one side and the level of biological performance in the ponds on the other should be given close attention. Because energy is one of the least important cost categories, the known benefits of added aeration and mixing (including im- proved feed conversion, growth, and survival) may far outweigh the added costs, even in recirculating sys- tems. Fourth, there is a substantial start-up period that requires careful cash flow planning by management. This is especially true for the small farm, which does not generate a positive cash flow until the end of the second year of operation. The large farm is able to issue a dividend in the second year. Introduction Farm raised catfish has become a substantial part of the United States (U.S). seafood market during the past decade. Per capita consumption of catfish is now more than 450 grams (1 pound) annually (USDA). Growth of the industry has taken place almost completely outside Texas, despite the availability of land and water (Steinbach and Boettcher). Early research showed the economic viability of catfish farming in the state (Lacewell et al.), yet a lack of suppliers and processing facilities hindered large scale production. Recently, two processing facilities have been constructed in Texas and a number of farms are under construction. Production is expanding substan- tially along the upper Texas coast, in and surrounding Brazoria county. The basic technology used for catfish production in Texas is identical to that used in other areas, but several parameters are significantly differ- ent, including off-flavor, capital investment, marketing constraints, water supply, and climate. Off-flavor has been a bane of catfish farmers in the South. In Texas, experience has shown that the occur- rence of off-flavor can be reduced significantly or even eliminated when pond water is circulated through non- catfish producing ponds. This technology, used by the major producer in the state, requires a significantly larger capital investment, but it also increases produc- tion. Almost no marketing constraints exist in Texas since the existing processing capacity is substantially greater than the production capacity in the area, and farms can market the fish when they reach optimal size. Water is an essential factor that is different from Missis- sippi and other major production areas, both in quality and in quantity. Due to the salt content of the local surface water, catfish disease incidence is compara- tively lower, and the availability of surface water elimi- nates the need for wells. Finally, the geographic loca- tion of many of the production areas in Texas implies a growing season for catfish that is nearly two months longer than in other southern states. Therefore, economic analysis such as those by Hatch et al.(1989); Sindelar et al.; Hatch et al.(1987); Keenum; Fuller and Dillard; Keenum and Waldrop; Burtle et al; Dellenbarger and Vandeveer; and others, are not accurate in a Texas setting, and a study of the economic viability of this industry is needed. The objec- tives of this study are: 1) Investigate the economic returns of catfish farms with recirculating ponds in Texas; 2) Evaluate the economies of scale in catfish farming in Texas; 3) Compare the costs and returns of catfish farming in Texas with those in other states. Estimates in this work are based in part on actual data and in part on estimates and extrapolation. As- sumptions made here do not necessarily apply to all situations. No limitations on availability of water are considered. No marketing limitations are imposed. It is assumed that farmers can obtain financing for operat- ing loans and that qualified management is available. Effects of hurricanes and other natural disasters are ignored. The limited experience with recirculation sys- tems suggests that production estimates should be evaluated carefully in light of each producer's indi- vidual situation. Methods Following Keenum and Waldrop, an economic engineering approach is used to evaluate farms of three sizes: 66 (163), I31 (323), and 260 (643) hectares (acres). The economic engineering approach requires a com- plete cash flow for an operation, including investments, operating costs, and returns. The three farms will be referred to as small, medium, and large, respectively, throughout this paper. Because in aquaculture the im- portance of economies of scale is well established (Lambregts et al.; Adams et al., Keenum and Wal drop), it is important to use farms of identical sizes for com- parison purposes. These farm sizes allow for direct comparisons with the Keenum and Waldrop estimates for Mississippi. Calculations are made by the firm-level economic engineering program for catfish, CATSIM. This computer program is based on the program MARSIM (Hanson et al.). Modifications to the program are extensive; however, the basic flow of the data is identical. Simulation Assumptions Each of the three farms is assumed to be an inde- pendently operating venture, with a full-time staff and dedicated equipment. It is also assumed that each farm is a grow-out operation only: fingerlings are purchased and food size fish are sold to a processor. The farms are presumed to be located along the upper Texas coast, in or adjacent to Brazoria county. The use of custom services allows the farms to operate without harvesting and hauling equipment. Especially for the smaller farms, this reduces the investment needed. Each farm is equipped with adequate hardware to feed, sample, control diseases, monitor water quality, and perform other necessary tasks. The production facilities are designed as a "modi- fied recirculating system". This system was originally developed by Naiad, currently the largest catfish pro- ducer and processor in Texas. A sample layout of a recirculating system is shown in Figure 1. This produc- tion method has a number of distinguishing features, particularly recirculation pumps, treatment ponds, and canals. In a recirculating system, a number of catfish ponds are connected to inflow and outflow canals. The canals are connected in turn to a treatment pond. 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A production ponds B outflow canals C treatment pond D inflow canal E pump station Figure 1. Schematic of a single recirculating pond system. to the treatment ponds. The maximum daily water exchange is 20 percent of the catfish pond volume. Treatment ponds contain filter feeding fish, which eat zooplankton, phytoplankton, and particulate waste, thus reducing the biological oxygen demand and waste accumulation in the system. The area of the treatment pond is between 10 and 20 percent of the total area of the catfish ponds. By reducing the accumulation of by- products in the ponds, annual production in catfish ponds can be increased substantially. Proprietary data show that some commercial systems have produced in excess of of 16,840 kg per ha (15,000 lb per ac) annually. CATSIM follows the basic production schedule used for catfish farming. There are several assumpti ons that are critical to this analysis. First, ponds are har- vested selectively. Much like enterprises such as cattle, “the larger animals that are ready for market are gath- ~ Jered and sold. Harvesting takes place with a large seine, which traps larger fish but lets the smaller fish escape. Restocking takes place after each harvest. A pond is stocked and restocked to maintain the target popula- tion based on the number of fish harvested, mortality, and predation. Second, CATSIM simulates the off-flavor problem as follows: when the catfish in a pond are ready for harvest, a random number routine, using maximum probabilities supplied by the user of the software, determines if the fish in a pond are on- or off-flavor. Ponds with off-flavor fish are not harvested. A differ- ent user-supplied probability value is then used with the random number routine to determine if the fish will be off-flavor the following week. This is repeated until the fish are again on-flavor, at which time they are harvested. The model manipulates the probabilities related to off-flavor based on the water temperature to model seasonal fluctuations in off-flavor occurrence (Sindelar et al.). Third, given the lack of marketing constraints in Texas, no limitations are set on harvest timing. Each pond is harvested when the target weight of harvestable catfish is reached, provided, of course, that the pond is on-flavor. After a number of years, as specified by the user, each pond is completely harvested, rebuilt, and restocked. The time required to rebuild the pond is specified by the user. Rebuilding a pond requires the renovation of levees as well as inflow and outflow structures. The cost to rebuild the pond is equal to its original building cost, including the cost of inflow and outflow structure, gravel and grass cover, and other factors. Fourth, although the concept of the management learning curve is well established, all production pa- rameters are held constant over the planning horizon of the farms. Since the objective of this project is to estab- lish the current economic feasibility of catfish farming in Texas, the use of learning curves would confound results. Therefore, the learning curve capacities of CATSIM for growth, survival, and overall production are not used. Fifth, because growth rate of fish fluctuates with the water temperature, feeding rates also are based on water temperatures. Average pond temperatures are calculated from regional average atmospheric tem- peratures between 1950 and 1980 (Sadeh et al.). Finally, the issue of risk is essentially ignored in this project. Although there are substantial operating risks involved with catfish farming, the effects of fluctuating production on the commercial viability of a farm is a separate issue. For an investigation of the effects of risk, a substantial amount of data is needed to generate the necessary parameters, and such (commercial or experi- mental) experience does not exist in Texas at this time. There are inherent differences in risk between a recirculating system and static ponds, since recirculating systems allow exposure of a series of ponds to cata- strophic biological events. Also, the risk of relying on a key processor or feed manufacturer should be consid- ered. Financial Evaluation The profitability of each farm is measured by the Internal Rate of Return (IRR; Brealey and Meyers) generated over a 10 year planning horizon of the firm. Although the average budget is the tool used most often in the analysis of catfish farmers, it is not the most appropriate one. The Net Present Value (NPV) is usu- j ally presented as the most appropriate measurement of financial success. However, the difference in invest- ment among the three farms makes the related mea- sure, the IRR, more desirable. The NPV fuses a rate to discount the cash flows to the investor, usually the investor's next best use for funds. Essentially, the N PV is the additional amount of cash, in current value, that the project will produce over the best available alternative. By comparing the N PV of a project, an investor compares the project's cash value, at that moment, with the alternative. The internal rate of return (IRR) is a related measure. The IRR is that discount rate at which the N PV of the investment equals zero. The IRR measure, in principal, reflects the rate of return, or "interest", the investment will generate dur- ing the planning horizon. An essential difference between the average bud- get approach and cash flow analysis (N PV or IRR) is the effect of time. A venture such as catfish farming has a substantial start-up phase, in which there is little or no income. This is not taken into account by the average budget, with the IRR it is. Compared with cash flow analysis, an average budget favors projects with cash returns mostly in later years. CATSIM calculates a modified IRR. The IRR is calculated using the user supplied discount rate to discount the negative cash flows. In this analysis the only negative cash flows are the initial investment and the beginning cash on hand. Each investment is mea- sured in real dollars, as are returns. Estimates made should be adjusted by the projected inflation rate and a risk factor to be comparable to yields offered by finan- cial institutions. The returns are also before income taxes, an appropriate assumption since most catfish farmers operate with Subchapter S status. For returns on farms to be directly comparable, farm construction and development are 100 percent equity financed. Although the effects of leveraging are widely debated, the Miller and Modigliani theorem supports the 100 percent equity comparison. Farm managers are allowed to borrow for operating ex- penses to reflect industry practices. In such a case, the deficit is financed with an operating loan and repaid at the earliest possible date. Operating loans outstanding on December 31 are refinanced with 5-year, intermedi- ate-term loans. Depreciation on farms is based on useful life of machinery or construction. Equipment is depreciated on a relatively fast schedule to reproduce accurately the wear and tear that occurs in a humid and slightly saline environment. All depreciation schedules are straight line. Since this analysis is on a before-tax basis, depre- ciation schedules accurately reflect the economic life of assets as opposed to using IRS guidelines. Data The equipment necessary on each farm was deter- mined in cooperation with industry leaders and mem- bers of the Texas Agricultural Extension Service. Cost information was obtained from suppliers and industry members. Because of the lack of experience in Texas with state of the art technology in large scale produc- tion, judgment and expert opinion were used to set parameters in some cases. System Dimensions Systems in this study are engineered to be approxi- mately 65 ha (160 ac) and contain 8 catfish ponds of 6 surface ha (14.5 ac) each, and one 6.9 ha (17 ac) treat- ment pond. Thus, the small farm has one system, the emedium farm has two, and the large farm has four. Biological Parameters The biological figures chosen for catfish (Table 1) and carp (Table 2) are based on commercial production records and discussions with producers, extension, and university personnel; they are not average produc- tion figures. The lack of areliable long term production history in Texas makes calculating average production values impossible. Off-flavor seems to be negligible in well managed ponds. In this analysis, the maximum probability of off-flavor is therefore set at 10 percent, which is low compared to other production areas (Sindelar et al.). The survival rate for catfish is assumed to be 90 percent annually. The feed conversion ratio (feed fed / weight gain) is assumed to be 2 to 1. The feed conversion ratio is calculated by dividing the weight of feed fed by the net fish weight gained. Ponds are treated twice a year with a two parts per million potassium permanganate KMnO4. No other chemical treatments are used. The size of the harvested fish is essential in a cost analysis. Processors consider marketable size for cat- fish to be from 550 to 1300 g (20 to 45 ounces). After discussions with producers, the following assumptions on the population dynamics are made: The population size distribution is an approximate truncated normal curve, with a standard deviation of 1 / 3 of the mean. The industry practice is to harvest ponds with at least a truckload of harvestable fish (approximately 18 metric or 20 short tons). Production levels for catfish are set at 11,227 kg per ha (10,000 lb per ac), and the minimum harvest size is 550 g (1.2 lb). After harvest, ponds are restocked with fingerlings to bring the population in the pond to 22,230 per ha (9,000 per ac). Table 1. Biological parameters for catfish on the upper Texas coast,1991. Based on these assumptions, CATSIM calculates the sizes for the fish harvested. The average size of fish in ponds about to be harvested is approximately 470 g (1.05 lb). The average size of catfish harvested is 582 g (1.28 lb), while the average size of the fish in the pond after harvest and restocking is 243 g (0.54 lb). Very little information is available concerning carp used in the treatment ponds. Production levels for the treatment pond species are assumed to be at 5,614 kg per ha (5,000 lb per ac). The treatment pond species are not fed. The target population is 9,880 per ha (4,000 per ac), and fish over 700 g (1.5 lb) are harvested. The average size of fish in a pond about to be harvested is approximately 639 g (1.41 lb). The average size of the fish harvested is 729 g (1.60 lb), while the average size of the fish in the pond after harvest and restocking is 386 g (0.85 lb). Investment A detailed investment listing for each farm appears in Table A1. Since each of the farms is assumed to be an independentlyoperating unit, a number of items, such as a building with an office, is included. Operating each farm as an independent unit may not be the most efficient alternative for the smaller operations, but experience in other states shows that the large majority of catfish farmers do not have other enterprises. Where possible, commercial quotes are used for equipment and construction costs given in this analysis. Cost of pond construction, pumps, and feeding equipment is obtained from commercial farms. Start-up Costs Construction of the farms takes place in a one-year period under the supervision of a paid construction Table 2. Biological parameters for carp in treatment ponds on catfish farms on the upper Texas coast, 1 991 . Parameter Unit Value Parameter Unit Value Growth Gram/week 0-24 Growth Gram/week (>30 Feed conversion kg feed/kg body mass 2.0 Feed conversion kg feed/kg body mass n.a. Feeding rate % biomass/day 0-2.8 Feeding rate % biomass/day 0 Mortality % of population /year 10 Mortality % of population/year 10 Max. pond population 1000’s/ha(1000’s/acre) 22 (9) Max. pond population 1000's/ha (1 000’s/acre) 10 Stocking size Stocking size D length cm (inch) 17.5 (7) length cm (inch) 1 5 (6) weight grams (ounces) 50 (1.8) weight grams (ounces) 40 (1 .4) Harvest size Harvest size minimum grams (lb) >550 (>1 .1) minimum grams (lb) >650 (>1 .43) average grams (lb) 582 (1 .3) average grams (lb) 729 (1 .6) Parasite occurrence times/year/pond 2 Parasite occurrence times/year/pond 2 / Annual production kg/ha (lb/acre) 11,227(10,000) Max. annual production kg/ha (lb/acre) 5,614 (5,000) Off-flavor probability Off-flavor probability on-flavor week before % 10 on-flavor week before % none off flavor week before % 60 off flavor week before % none supervisor, with additional labor as necessary. Includ- ing the start-up costs is essential in a cash flow analysis as performed in this study to accurately estimate the returns to the farms. During this start-up period, costs such as utilities, fuel, telephone, and insurance are prorated according to the number of people employed and size of the farm. Real Estate Land for the farms is assumed to be a flat, contigu- ous area, easily adapted to a catfish production system as described earlier. Land is valued at the current market value in potential catfish production areas. The soil was assumed to have good water retention as well as adequate erosion characteristics. The volume of water needed and frequency of levee repair are depen- dent on these characteristics. The land parcels are assumed to have a connection to a commercial electric grid and adequate access to publicly maintained roads. The water supply to a farm is assumed to be gravity fed surface water. This is a major diversion from practices in Mississippi, but it is a justified assumption for the upper Texas coast. Pumps are still necessary to provide recirculation. Each farm manager purchases enough water rights in the start-up year for approximately 5 acre feet of water per pond acre (3,053 M3 per pond ha). Although such volume is typically not necessary, a large volume of water is required in the start-up year for the initial filling of the ponds as well as to compensate for normal losses such as seepage and evaporation. Buildings The farms are supplied with buildings to house the offices, shops, and storage, according to size. It is assumed that one building includes all these functions. Since the farms are assumed to be independently oper- ating units, each is equipped with a potable water and septic system. ’ Pond Construction One of the largest investments on the farms is the cost of dirt moving. The costs and sizes are based on experiences of a local catfish farm and discussions with extension personnel. Although the advantage of mul- tiple ponds has been established (Yates), the three farms here have the same per unit cost of earth moving. Justification for this diversion from traditional assump- tions is the layout of the recirculating systems. Since each system is almost surrounded by canals few oppor- tunities exist to share levees. Hence, the normal savings achieved by large facilities are reduced substantially. The levees are assumed to have a 6 m (19.7 foot) crown, a 3 to 1 slope for inside levee's, and a 3.5 to 1 slope for outside levees. The average depth of the ponds is 1.5 m (4.9 foot), with a 50 cm (1.6 foot) freeboard. The depth of the ponds allows for fluctuation in water levels inherent in the recirculating system. Pond and levee dimensions and characteristics can be found in Table 3. Other important costs associated with construct tion of the ponds are the electric grid, engineering, land clearing and preparation, and inflow and outflow struc- tures. The costs of a vegetative cover, such as grass, and gravel for roads depends largely on the type of soil on the farm, while the cost of electric wiring depends on the arrangement with the local utility supplier. In this analysis, the ponds have gravel on three of the four levees, all levees are seeded, and each pond has a simple inflow and outflow structure that can be screened if necessary. Table 3. Pond and levee dimensions for catfish farms. Dimension Dimension Levees m feet Ponds m feet Crown: Growout: internal 6 19.7 Length 370 1214 external 8 26.2 width 1 85 607 Slope: depth 1 .5 4.9 internal 3:1 3:1 Treatment external 3.5:1 3.5:1 length 500 1640 Height: width 1 23 405 internal 1 .5 4.9 depth 1 .5 4.9 external 1.5 4.9 Bottom Slope <1 % Freeboard: internal 0.5 1 .6 external 0.5 1 .6 Pond Pumps Each system on the farms is equipped with a recirculating pump. Given the cost of electricity in the areas most suited for catfish farming, the recirculating pump is powered by a 74 kW (100 h.p.) air cooled diesel engine, rather than an electric motor. The pump capac- ity is 1.304 ma/s (20,698 gpm). Pumps are placed on concrete mounts with a screened intake. Each pump station is equipped with a fuel tank and miscellaneous hardware, including timers. Because the situation re- quires low lift, pumps with an axial flow design are preferred. The low lift also allows large volumes of water to be moved with relatively low horsepower engines. Nevertheless, the capital investment in pumps is substantial. Major Pond Equipment Farms purchase one stationary floating 7.46 kW (10 h.p.) paddle wheel aerator for each catfish pond plus one backup per subsystem. The paddle wheels are _ included in the analysis as a risk reduction measure. ' Aside from the paddle wheels, substantial aeration and mixing are provided by the recirculating water in each system. All farms are supplied with equipment to distrib- ute bulk feeds to the grow-out ponds. A truck mounted feeder with computerized scales (to measure the amount fed to each pond) is assumed to be the basic feeding equipment for all three farms. Feed storage capacity is constructed to accommodate standard delivery trucks. Each farm manager also invests in vehicles as necessary, including half ton pickups and four wheel ATV's (all terrain vehicles). All supplies necessary to control weeds and diseases also are included, notably boats and motors, chemical storage capacity, as well as tools to measure and distribute the necessary therapeu- tic chemicals. As stated, farms are grow-out operations only and have no fingerling or brood stock ponds. On the as- sumption that custom harvesting services are available from either the processor or an independent contractor, farm managers do not invest in harvesting and hauling equipment. It is also assumed that the fingerling pro- clucer will be able to deliver the stocker fish to the ponds. Custom harvesting and hauling fees are in- curred as an operational cost. These also represent limitations of the analysis since such services may or may not be readily available to a new producer. Implements and Pond Equipment Each farm is also outfitted with basic maintenance equipment for roads and levees, including a grader blade and a disk. The largest farm is outfitted with a mobile radio system. Basic pond necessities, such as screens, waders, and dip nets, are included on all farms ln proportion to size. Additionally, all farms are as- sumed to have cutting seines and scales for taking sample counts. Shop, Office Equipment, and Miscellaneous All farms have shop equipment to be able to com- plete basic repairs to aerators and other hardware, including a welder and hand and power tools. The tools and equipment necessary for pond monitoring are also provided, including oxygen and pH meters, sampling scales, and the like. Offices are provided with sufficient equipment to monitor and record farm activities and meet all business responsibilities. Each office has a computer system and basic office supplies. Other items, such as furniture and software, are added as needed. A number of miscellaneous items to control birds, pro- vide amenities, and laboratory equipment also are provided. ' Product Prices One of the most important and most difficult pa- rameters to set in economic evaluations is the product price. Some industry members suggest that vertical integration of operations to include processing de- creases the exposure to market price swings. There is considerable variation in prices at both the farm gate and processor level (Figure 2). Vertical integration of companies, therefore, appears to have had little effect on the exposure to price risk. Future prices for catfish are clearly highly uncertain. This analysis assumes a constant catfish price of $1.54 per kg ($0.70 per lb) throughout the 10 year planning horizon. The price for carp is assumed to be $1.10 per kg ($0.50 per lb). The market for carp is thin, and the amount of fish that can be sold at this price is presently limited. Other species are available, however, if this market cannot be developed to accept sufficient vol- ume at an acceptable price. l Operations Parameters used for the operations on the three farms are set to reflect the_production activities re- quired (Table 4). Due to the seasonal nature of catfish farming, most activities, such as feeding and harvest- ing, occur more often during the summer months; while in the cool winter months, the necessary activities decrease in frequency. This analysis is based on the assumption that non-critical items, such as pond and machinery maintenance, take place during the slow periods to even out the demands on labor and equip- ment. Feeding Feeding takes place from twice daily to once weekly, depending on average water temperatures on the farms. The feed price of $303 per metric ton ($275 per short ton) is based on current feed prices in Texas, delivered to the farm. Fuel consumption and labor costs are calculated from feeding frequencies. It is assumed that the feed was distributed from the pond bank by a truck mounted feeder/ blower apparatus. The hopper on the feeders has a capacity of 2 short tons of feed. The average time required to feed one pond is 30 minutes. The feed is assumed to be a standard 32 percent floating catfish ration, to be delivered to the 20 ton farm silos in bulk, ready for distribution. Each farm is provided with adequate equipment to complete the feeding task. Han/vesting and Hauling Harvesting and hauling charges are obtained from the CATSIM calculations. It was assumed that each pond is harvested once the minimum harvest quantity [one truckload, approximately 18 metric tons (20 short tons)] is reached, given that it is not off-flavor. This assumption causes a significantly higher number of ponds to be harvested during summer and fall. In this study, for the case of the upper Texas coast, no market limitations are imposed. Given the over capacity in processing and freezing and the small number of pro- ducers in this region, it is assumed that the farms will be able to sell fish when they reach harvestable size. The farm gate price (cents / pound) 80 75 processed price (cents / pound) 240 230 220 210 200 190 180 170 160 150 140 130 -—-—— farm gate price —-°-— processed price Figure 2. Average U.S. prices for food size catfish at the farm gate and processed catfish (all cuts) F.O.B plant from 1980 to 1991 (USDA). effects of this ”glut" can be counteracted by marketing strategies (Lambregts et al.), and by manipulating the average size harvested through the year. Harvests are performed by custom operators, and hauling is per- formed by the processor. Charges for these services are $0.044 per kg ($0.02 per lb) for the harvest crew and $0.044 per kg ($0.02 per lb) for the hauler. Stocking It is assumed that fingerlings are purchased from outside sources. Ponds are restocked after each harvest to maintain the pond target populations of 22,230 per ha (9,000 per ac). The number of fingerlings stocked is equal to the number of fish harvested plus mortality and bird ‘ predation. Fingerlings are delivered to the pond bank by the seller, and the hauling charge is included in the fingerling price of $0.006 per cm ($ 0.015 per inch). Treatment species are harvested using the same criteria, but are restocked once a year. The price for catfish and carp fingerlings is assumed to be identical. Water Exchange and Supply The average depth in the ponds is 1.5 m (4.9 feet). Effects of heavy rainfall or periods of drought are ignored since the water supply to the farms is assumed to be gravity fed. No fuel charge is made to the farms 10 for adding water to the ponds. A total of 3,053 m3 (one acre foot) of water per surface ha (ac) is purchased from the local water district to replace that lost through evaporation. This is approximately the amount of evapo- ration over rainfall [1,328 mm (52.28 inches)] in Brazoria Table 4. Operational parameters for catfish farms with recirculating ponds on the upper Texas coast, 1991. Parameter Unit Value Feeding frequency #/week 1-14 Harvest costs $/kg($/lb) 0.044(0.02) Hauling costs $/kg($/lb) 0.044(0.02) Min. harvest quantity (1 ,000's) kg (lb) 18 (40) Stocking quantity #/ha (#/acre) 0 - 11,040 (0 - 9,000) Internal water exchange %/day 0-20 Water addition (annual) ma/ha (acrefeet) 3,053 (1) Pumpingtime hrs/day 0-24 Aerationtime hrs/day 0-8 Aeration kw/pond (h.p./pond) 7.46 (10) Rebuilding Period between reconstruction years 7 Downtime for reconstruction weeks 1 6 Maintenance (annual) . Machinery % new value 3-8 Ponds % of construction cost 1 Insurance Liability % of investment 1 Crop $lkg harvested ($/lb) 0.0158(0.0072) County. The fuel charge for water recirculation in the ’ _ ystems is calculated by CATSIM based on standard a engineering efficiency ratios and the hours pumped per day. The water recirculation rate is between 0 and 2O percent daily, depending on feeding rates and biomass in the ponds. The ponds start exchanging 1 percent of the pond volume daily when biomass in the pond exceeds 1,122 kg / ha (1,000 lb/ ac). It then increases linearly with biomass until the maximum of 20 percent when 4,488 kg/ ha (4,000 lb / ac) is reached. The dynamic head of the pumps is assumed to be 3.5 m (10.5 feet). The pumping rate varies linearly with feeding rate accord- ing to temperature. Since the flow rate of each pond can be manipu- lated relative to the other ponds, an off-flavor pond is exchanged at 100% daily until the occurrence of off- flavor disappears. The cost of diesel delivered to the fuel tanks at the pumps is $0.317 per liter ($1.00 per U.S. gallon). Aeration Aeration strategies on the farms are determined by features of the recirculating system. Each pond is equipped with a 7.46 kW (10 hp) electric paddle wheel. During the summer growing season, all ponds are monitored daily for dissolved oxygen deficiency dur- fng the early morning hours. CATSIM applies aeration if pond biomass surpasses 1,704 kg per ha (1,500 lb per ac). Aeration time starts at 3 hr per day, and increases linearly with biomass until it reaches a maximum of 8 hr per day at 5,682 kg per ha (5,000 lb per ac). Standard engineering efficiency formulas are used to calculate the energy consumption of the paddle wheels in the ponds Pond Rebuilding After a production period of 7 years, a pond is considered for rebuilding. After the next harvest, the undersized fish are transferred and the pond is dried in preparation for reconstruction. In a period of 16 weeks, the pond is dried, completely rebuilt, and restocked to resume production. The reconstruction cost is set equal to the original construction cost of the pond. Character- istics of the recirculating system are assumed to allow the operators to store 30 percent of the water from the ponds being rebuilt in other ponds so less water has to ‘ be added to the system after reconstruction. fMaintenance and Repairs Labor, supplies, and equipment are included in the analysis for essential maintenance functions on the . arm equipment and ponds. Aside from expenses on ‘emergency repairs, the grounds and equipment are assumed to be maintained regularly, including feeders, pumps, vehicles, roads, ponds, and water intake and outflow structures. When possible, maintenance is 11 scheduled during slow periods. Farms are charged a cost for repairs based on the new value of all equipment and ponds. This percentage was determined in discus- sions with suppliers and producers. For machinery, the annual repair cost is a function of the equipment cost and its age: it ranges from 3 percent in the first year to 10 percent from the 8th year on. The annual repair cost for ponds is 1 percent of the construction cost. This does not include the rebuilding charge in the seventh year of operation. The cost for maintenance materials, such as lubricants, is included. Insurance and Miscellaneous Expenses Cost for standard agricultural liability insurance is included at 1 percent of the original investment and included in the analysis. All farms carry crop insurance, which costs $0.0158 per kg ($0.0072 per lb) fish har- vested. Estimates for administrative costs, such as legal fees, accounting costs, insurance, and property taxes are estimates from experiment station personnel or producers. Fuel, supplies, utilities, and other opera- tional expenses are estimated based on the expected activities on the farms. Financial Management All farms start operations with $100,000 cash on hand. Farms may borrow when their cash on hand falls below the minimum amount of $50,000. During the year, operating deficits may be financed by operating loans (12% annual interest rate), but any outstanding operating loans are converted to 5-year, level amortiza- tion, intermediate-term loans (12% annual interest rate) at the end of the year. The owners / investors receive all cash on hand above $100,000 on December 31 as divi- dends. The farms are assumed to be managed by professional managers who are compensated by a fixed salary according to the level of skill required. Labor Labor requirements are calculated based on the tasks necessary on each farm and are verified by indus- try members (Table 5). It is assumed that the salaried labor force is flexible with respect to working hours during the busy summer and slack winter months. The single most time demanding activity is feeding. Other time demanding activities are, in order of importance, maintenance, supervision, bird control, and adminis- trative. Miscellaneous pond activities, such as sam- pling, disease checks, and aeration management, re- quire a substantial amount of time on all three size farms. It should be understood that these categories are highly dependent on the age of equipment used, quality of employees, soil and water characteristics, and other variables. Farms with more erodible soils, for example, can expect to spend considerably more labor and equip- ment time rebuilding roads and levees than producers Table 5. Annual labor requirements (in hours) for small, medium, and large catfish farms* on the upper Texas coast, 1991, by activity. Farm size Category Small Medium Large Feeding 2,160 4,320 8,640 Maintenance 910 1 ,403 2,509 Supervision 619 1,306 2,651 Bird duty 900 1,300 2,200 Administrative 732 1 ,062 1 ,470 Disease checks 540 960 1,920 Repair 483 870 1 ,362 Rebuilding ponds 300 600 1,200 Water checks 264 528 1 ,056 Sampling 243 486 972 Aeration 240 480 960 Breaks 225 375 675 Removing dead fish 160 320 640 Record keeping 243 308 386 Water flow mgmt 150 150 150 Mowing 48 96 192 Disease treatment 32 64 128 Water weeds 32 64 128 TOTAL 8,281 1 4,692 27,238 Personnel Needed 4.31 7.65 14.19 *The total area in ha (ac) forthe small farm is 66 (163), forthe medium farm 132 (323), and for the large farm 264 (643). with less erodible soils. Farms with PTO driven aera- tors can expect a considerable amount of additional labor for aeration activities. Resources are allocated to record keeping and other administrative tasks as necessary. Growth, feed consumption, mortality, pH, dissolved oxygen levels, and water flows are recorded and analyzed at least weekly. Time is also allocated for disease and parasite checks and other essential biological control activities. Administrative time is allotted for activities like pay- roll, hiring and other personnel activities, banking, and harvest scheduling. This category also includes miscel- laneous secretarial tasks such as accounts payable. Farm managers are assumed to follow the weed control program developed by the Mississippi Coop- erative Extension Service (Wellborn). Boats, motors, trailers, and water analysis equipment are provided as l prescribed. The necessary operational costs for items like chemicals are included. Recirculating systems appear to experience less frequent disease incidence than traditional production methods based on production records. This is partly attributable to the high salt content of the local water supply and partly to the improved water quality in a properly managed recirculating system. This analysis includes two pond treatments annually of potassium permanganate. The prevention of bird predation is a major concern on catfish farms. During cormorant season, the small 12 farm has one employee on full time "bird duty". Larger k farms have similar allotments of time to prevent preda- tory losses. All farms are outfitted with standard bird gear, including shotguns with scare and shot shells, propane cannon, and other scare equipment. Predation on the farms is included in the mortality rate. Results and Discussion Investments Total investment is $763,526, $1,433,088, and $2,694,680 for the small, medium and large farms, respectively (Table 6). The required investment per catfish surface ha (ac) decreases substantially as farms become larger (Table 7). There is a 6 percent saving in investment per unit production capacity between the small and medium farm and between the medium and large farm that is caused by economies of scale. Econo- mies of scale have been found to be larger in other aquaculture operations (Keenum and Waldrop, Lambregts et a1.), but the savings of scale in recirculating Table 6. Total investments in small, medium, and large catfish farms* on the upper Texas coast, in 1991 dollars. Farm size Category Small Medium Large Land and water 192,600 382,200 761 ,400 Pond construction 346,612 671 ,420 1 ,316,675 Pond pumps 33,408 66,815 100,223 Buildings 32,230 42,680 57,530 Start-up costs 40,961 71 ,295 113,210 Vehicles and equipment 101,805 171,215 309,265 Tools, furniture and miscellaneous 15,910 27,463 36,377 TOTAL 763,526 1 ,433,088 2,694,680 *The total area in ha (ac) forthe small farm is 66 (163), for the medium farm 132 (323), and for the large farm 264 (643). Table 7. Total investment per area and per annual unit production capacity in small, medium, and large catfish farms* on the upper Texas coast, in 1991 dollars. Farm size Category Small Medium Large Total per area Total per ha (catfish only) 16,258 15,257 14,345 Total per ha (all fish only) 14,180 13,307 12,511 Total per ac (catfish) 6,582 6,177 5,807 Total per ac (all fish) 5,741 5,388 5,065 Total per unit production capacity Total per kg prod. capacity, catfish 1.45 1.36 1.28 Total per kg prod. capacity, all fish 1.35 1.27 1.19 Total per lb prod. capacity, catfish 0.66 0.62 0.58 Total per lb prod. capacity, all fish 0.61 0.58 0.54 *The total area in ha (ac) forthe small farm is 66 (163), forthe medium farm 132 (323), and for the large farm 264 (643). fi,’ V, systems are less because of unique construction features and the addition of pump stations. Pond construction accounts for 45 to 49 percent of the total investment, while land and water account for 25 to 28 percent of the costs. Vehicles and equipment, start-up costs, pumps, buildings and tools together account for between 30 and 33 percent of the invest- ment. The largest economies of scale are found in the buildings, start-up, and vehicles and equipment cat- egories. The investment required for these farms is between 56 and 70 percent higher than the identical size farms with static ponds analyzed by Keenum and Waldrop ($488,407, $840,348, and $1,587,795, respectively). However, farms with recirculating ponds in this analy- sis produce nearly twice as many pounds of catfish [527,273 (1,160,000 vs. 287,181 (631,800) kg (lb) for the small farms]. Investment per unit production capacity for recirculating farms located in the study area is between $1.45 ($0.66) and $1.28 ($0.58) per kg (lb) (Table 7). This is 7 to 16 percent lower than 1988 estimates for static ponds in Mississippi, which were $1.69 ($0.77), $1.45 ($0.66) and $1.36 ($0.62) per kg (lb) for small, medium, and large farms, respectively. If investment costs are compared on an "all fish" basis, the cost for farms with recirculating ponds along the upper Texas coast is 14 to 20 percent lower than competitive south- eastern operations. Costs and Revenues Profitability of a farm can be described in different ways. One of the most common ways is the average budget (cash basis income statement), in which the average costs and revenues of farms are described either on a per unit weight or total cost and revenue basis. Such analyses are useful when comparing differ- ent production sites within the same industry or differ- ent methods of production. Average Costs Average costs over the ten years of operation for three farm sizes are compared in Table 8. The costs for any given year will depend on the inventory in the ponds, weather, rebuilding of ponds and other factors. Feed, stocking, and labor account for over 60 percent of the costs for the smallest system. Feed is a variable expense that remains constant between farms and is the most important cost factor. None of the categories account for more than 50 percent of total average costs. The most important costs are feed, fingerlings, and labor. Other categories are of lesser importance. The average total cost per kg (lb) of all fish produced varies from $1.245 ($0.565) for the small farm to $1.193 ($0.541) for the large farm, a reduction of 7 percent (Table 9). The cost per kg (lb) catfish produced ranges from $1.327 ($0.602) to $1.265 ($0.574). Most scale economies lie in 13 Table 8. Relative cost (%) by category for a 10-year period for small, medium, and large catfish farms* on the upper Texas coast, 1991. % of 10 year total cost Category Small Medium Large Stocking 0.161 0.167 0.172 Feed 0.409 0.423 0.438 Fuel 0.052 0.044 0.032 Harvest Costs 0.070 0.072 0.075 Labor 0.116 0.112 0.102 Repairs 0.022 0.021 0.020 Fixed Costs 0.047 0.045 0.037 Interest pmt. 0.024 0.026 0.027 Depreciation 0.080 0.073 0.082 Miscellaneous 0.019 0.016 0.015 *The total area in ha (ac) for the small farm is 66 (163), forthe medium farm 132 (323) and for the large farm 264 (643). Table 9. Total costs and total revenue per kg (I b) by category for a 1 0year period for small, medium, and large catfish farms* on the upper Texas coast, 1991 . Catfish All Fish Category Small Medium Large Small Medium Large $/k9 Revenue 1.543 1.543 1.543 1.519 1.519 1.519 Total costs 1.327 1.284 1.265 1.245 1.206 1.193 $/lb Total Costs 0.602 0.582 0.574 0.565 0.547 0.689 Revenue 0.700 0.700 0.700 0.689 0.689 0.541 *The total area in ha (ac) for the small farm is 66 (163), for the medium farm 132 (323), and for the large farm 264 (643). depreciation, fixed costs, and labor, although some savings exist inother categories. These costs compare favorably to the per kg (lb) costs of $1.489 ($0.677), $1.386 ($0.630) and $1.318 ($0.599) for the small, medium, and large farms in Mississippi, respectively (Keenum and Waldrop). If the secondary species is ignored, average costs per unit of catfish is 4 to 12 percent lower for the farms with recirculating systems. If total production cost per unit (all fish) is compared, production costs appear to be 11 to 20 percent lower for recirculating systems located along the upper Texas coast. Average Revenues Farms are assumed to receive the same price for their products and to produce the same mix of carp and catfish. Therefore, average revenue for catfish is $1.543 ($0.70) per kg (lb) for all three farms (Tabl e 9). Average revenue for all fish on the farms is $1.519 ($0.689). Although costs decrease with farm size by 7 percent, the margin between average revenue (all fish) and average costs (all fish) increaseswith farm size from 22 to 27 percent, an increase of 25 percent. Cash Flows A second method to evaluate investments is cash flow analysis. For entrepreneurs, cash flow is impor- tant; timing of inflows and outflows of cash must be projected carefully. A manager of a start-up catfish farm must plan for the first 12 to 24 months when no fish are harvested and, therefore, no cash is generated. Managers must plan to ensure that economically prof- itable farms are not faced with bankruptcy because of poor cash flow planning. A company will not be able to sustain a 2-year period of no revenues without prior arrangements with investors or lenders. Consolidated cash flows for the three farms appear in Table 10, while detailed cash flows appear in Tables A2, A3, and A4. Loan amounts in these cash flow statements should not be used to determine outstand- ing debt because outstanding operating loans are con- verted to intermediate loans annually on December 31. Therefore, the "loans" category includes both the origi- nal operating loan and intermediate term loans. The category "interest pmt." includes interest payments on intermediate- and short-term debt. Catfish farms generally reach full production 2 years after the ponds are first stocked; the start-up period extends through the second year of operation. The start-up phase can be shortened by stocking larger animals in the ponds. Although the farms produce a substantial crop the second year of operation, inthis analysis, year 3 is the first year of full production. The smallest farm does not have a positive cash flow until year 3. The medium sized farm has a positive cash flow by the end of year 2, and the largest farm has enough funds to issue a small dividend by December of year 2. In the first year, the principal cost on the farms is stocking. Labor and feed are also important. In year 2, feed becomes relatively more important, as the fish in the ponds are increasing in size and require larger daily rations. Although the first fish are harvested, the farms have not yet reached full production. All farms are able to issue dividends in the third year of operation. The IRRs are provided in Table 1 1 with the net cash flows of the three farms. The first two cash flows, the initial investment and the beginning cash on hand, are negative while the last 10 entries, dividends issued, are zero or positive. The IRRs are based on these cash flows (investme nts and dividends), as well as the net worth of the farms in the last year. If the net worth is not included, the IRR will be lower. The IRRs are 15, 18.3, and 21.9 percent, for the small, medium, and large farms, respectively. These are real rates of return to the investor, unadjusted for risk and inflation. By comparison, the average real rates of return of U.S. stocks and treasury bills have been 8.3 and 0.1 percent, respectively, between 1926 and 1981 (Ibbotson and Sinquefield, 1982). The individual inves- tor should adjust expected rates of return by expected Table 10. Cash flows for small, medium, and large catfish farms on the upper Texas coast, 1991, for the first 3 years of operation. (May not add due to rounding.) Farm size* 163 323 643 yr. 1 yr. 2 yr.3 yr. 1 yr. 2 yr.3 yr. 1 yr. 2 yr.3 Beginning cash on hand 100,000 50,000 50,000 100,000 50,000 50,000 100.000 50,000 100,000 Revenues catfish 0 616,346 817,674 0 1,233,683 1,678,271 0 2,472,716 3,359,906 Revenues carp 0 17,094 34,540 0 38,941 50,275 0 77,882 133,476 Loans 544,532 195,347 74,833 1,164,970 334,774 141,294 2,281,676 541,015 172,133 Interest income 3,474 3,446 7,238 3,260 4,380 11,853 3,250 7,012 25,299 TOTAL 648,007 882,233 984,285 1,268,230 1 ,661,779 1,931 ,693 2,384,927 3,148,625 3,790,814 jstocking 1 1 1 ,200 84,584 106,633 222,400 169,109 215,699 444,800 338,790 437,553 Feed 68,544 287,691 308,414 137,087 574,991 610,054 274,174 1,148,919 1,232,963 Labor 75,860 75,860 75,860 143,700 143,700 143,700 251 ,490 251 ,490 251 ,490 Energy 18,546 35,192 36,579 34,963 59,016 60,587 59,373 82,870 82,641 Harvesting 0 38,509 52,086 0 77,476 105,170 0 155,273 213,313 Fixed Costs 35,612 37,433 43,227 65,094 68,361 81,522 102,389 107,772 127,390 Debt service 281,092 259,227 158,837 604,038 494,927 312,499 1,184,612 887,945 492,684 Other 7,153 13,739 16,061 10,948 24,198 28,934 18,088 44,643 54,569 Dividends 0 0 86,587 0 0 273,529 0 30,922 798,210 TOTAL 598,007 832,233 884,285 1,218,231 1,611,779 1,831,693 2,334,926 3,048,625 3,690,813 Ending cash 50,000 50,000 100,000 50,000 50,000 100,000 50,000 100,000 100,000 Beginning cash 100,000 50,000 50,000 100,000 50,000 75,281 100,000 50,000 100,000 *The total area in ha (ac) for the small farm is 66 (163), for the medium farm 132 (323), and for the large farm 264 (643). 14 T? Table 1 1. Net investor cash flows and internal rates of return (IRR) for small, medium, and large catfish farms on the upper Texas coast, in 1991 dollars, for a 10-year planning horizon. Table 12. The Internal rates of return (IRR) for small, medium, and large catfish farms on the upper Texas coast, 1991, at selected prices for feed, fingerlings and catfish, and at selected yields. Farm size* Farm Size* Date Small Medium Large hem Price Small Medium Large Jan. yr. 0 -763,526 -1,433,088 -2,694,680 Feed, $/metric ton (shortton) Jan. yr. 1 -100,000 -100,000 -100,000 248 (225) 0.192 0.225 0.263 Dec. yr. 1 0 0 0 275 (250) 0.171 0.204 0.241 Dec. yr. 2 0 0 30,922 302 (275) 0.150 0.183 0.219 Dec. yr. 3 86,587 273,529 798,210 330 (300) 0.129 0.159 0.197 Dec. yr. 4 233,623 415,587 950,917 358 (325) 0.108 0.136 0.173 Dec. yr. 5 138,564 342,625 929,340 _ _ _ Dec. yr. 6 163,550 290,645 776,091 Fmgerhng pnce w) Dec. yr. 7 101,313 500,409 923,436 0.080 0.169 0.202 0.239 Dec. yr’ 8 O O o 0.090 0.159 0.192 0.230 Dec. yr. 9 154,344 394,767 864,460 0'1 00 0150 .0183 0219 Dec. yr.1 o 196,522 456,462 1,039,880 0'1 10 0'1 41 0172 0209 0.120 0.131 0.162 0.198 IRR 0.150 0.183 0.219 Catfish price, 9kg w/Ib) *The total area in ha (ac) for the small farm is 66 (163), forthe medium 121 (055) -0091 -0_011 0_044 farm 132 (323), and for the large farm 264 (643). L32 (Q60) 0049 0.077 0114 1.43 (0.65) 0.103 0.134 0.170 inflation rates to generate nominal rates of return. 1_54 (070) 0150 0133 0219 These nominal rates of return can then be compared to 1.65 (0.75) 0.192 0.225 0.265 rates investors expect to attain for investments with _ Comparable risk Annual yield, kg/ha (lb/ac) 6,736 (6,000) -0.166 -0.109 0.004 Sensitivity 8,982 (8,000) 0.054 0.080 0.121 11,227 (10,000) 0.150 0.183 0.219 Results of evaluating the sensitivity of the three 13,473 (12,000) 0.196 0.231 0.269 farms to fluctuating prices and yields are shown in 15,718 (14,000) 0.247 0.285 0.324 Table 12. The unit price of feed, the largest production cost, is varied from $248 ($225) to $358 ($325) per metric ton (short ton). The farms have returns greater than 10 percent for all feed price levels analyzed. Nevertheless, a feed price increase to $358 ($325), 18 percent, results in a decrease in the IRR between 21 and 28 percent. Feed prices must nearly double before returns to the farms become negative. The effect of fingerling price fluctuations is signifi- cantly smaller than for feed price swings. When the price of fingerlings decreases by $0.02 from $0.10 to $0.08 (20%), the IRR of the farms increases between 9 and 13 percent. As the price of fingerlings increases from $0.08 to $0.12, the IRR's decrease from 15, 18, and 22 percent to 13, 16, and 20 percent for the small, medium, and large farms, respectively. Although stock- ing is the second largest cost, the effect of price fluctua- tions on returns is relatively small. Returns to the farms are very sensitive to fluctua- tions in the price of catfish. A decrease in the catfish price from $1.54 ($0.70) to $1.21 ($0.55) per kg (lb) results in a negative return for the smallest farm. The largest farm still generates a 4 percent IRR at this price, but the smaller two farms generate negative returns. An increase of 11 cents per kg (5 cents per lb) to $1.65 ($0.75) increases the IRR between 25 and 28 percent for the 15 *The total area in ha (ac) for the small farm is 66 (163), for the medium farm 132 (323), and for the large farm 264 (643). farms. Price fluctuations affect the returns of the small farm more than the larger farms, indicating that small farms are subject to more risk from price changes. The annual production yield per area strongly influences the returns. A drop in maximum production by 20 percent decreases the IRR between 45 and 64 percent. On the up side, increasing production by 40 percent increases the IRR between 48 and 64 percent. Clearly, the production yield will be one of the most important determinants of the farm's success. It also suggests that farm managers evaluate the tradeoffs between mechanical aeration (paddle wheel aeration and water flow-through) and production yield. The relationship between the IRR to the farms and the price of feed, fingerlings, and catfish is remarkably linear. Only in the lower regions, where the IRR be- comes negative, is the relationship clearly curvilinear. Rates of return for the farms at other prices may be easily obtained from Figure 3 by interpolation. Such rates can be used to provide individual investors with approximate returns for their particular situation. Care should be taken when extrapolating these relationships outside the range of prices analyzed here. IRR IRR 03s 1. 03s ..- o“ nu- Ill- dr- 0.25 ~- unn m- 0.15 ... 0.15 u 0,10 qr III 0.05 -.- 0.05 -- I I I I I I I I I : I I I Ifi aw I I I I : I : I I I #1 2(1) 2S0 3G) 350 0.07 0.08 0.09 0.10 0.11 0.12 0.13 (a) feed price ($/ short t0“) (b) price for 7" fingerlings ($) ‘RR IRR 03s 1. 0.3 1- 0'3 " 015 .... a 0.2 - 0.2 ~- t‘ Ii»- . 0 0.1 ~- 0.05 -. o ' 4,C 8,0(X) 100D 12,00) 14,000 ° I 1 i I *1 - 0J0 3’ om om om -0.1 -- (d) 111330111. umannual -0.05 .. _ PfOdUCflOn (lb/ac) (c) Pnce / lb -0.1 -- -0.2 ~- -—-A>sma11 farm —-¢-—-medium —-U-——large farm farm a Figure 3. The internal rate of return (IRR) by (a) feed price, (b) fingerling price, (c) catfish price, (d) yield, for small (66 ha, 1 63 ac), medium (132 ha, 323 ac) and large (264 ha, 643 ac) catfish farms on the upper Texas Coast, 1991 . 16 References Adams, C.M., W.L. Griffin, J.P. Nichols, and R.E. Brick. ”Application of a Bio-Economic-Engineering Model for Shrimp Mariculture Systems." Southern ]ournal of Agricultural Economics, July 1980. Brealey, R. A. and S. Meyers. Principles of Corporate Finance, 2nd ed. New York: McGraw-Hill, 1984 Burtle, G. J., D. L. Gray, and L.W. Dorman. Catfish Production Budget for Farms with Level La nd.. AUCES Bulletin 263, University of Arkan- sas, May 1986. Dellenbarger, L.E., and L.R. Vandeveer. ”Economics of Catfish Pro- duction", Louisiana Agriculture, 29 (1986): 4,5-7. Fuller, M. J, and J.G. Dillard. Cost-Size Relationships in the Processing of Farm-Raised Catfish in the Delta of Mississippi. MAFES Bulletin 930, Mississippi State University, December 1984. Hanson, J.S., W.L. Griffin, J.W. Richardson, and C.J. Nixon. "Economic Feasibility of Shrimp Farming in Texas: an Investment Analysis for Semi-Intensive Pond Grow-out.” journal ofthe World Maricul- ture Society, 16 (1985): 129-150. Hatch, U., J. Atwood, and J. Segar. "An Application of Safety-First Probability Limits in a Discrete Stochastic Fann Management Programming Model." S. ]. of Agr. Econ: 21 (1989): 65-72. Hatch, U., R. Dunham, H. Hebicha, and J. Jensen. "EconomicAnalysis of Channel Catfish Egg, Fry. Fingerling, and Food Fish Production in Alabama" AAES Circular 291, Auburn University, July 1987. Ibbotson, R.G., and R.A. Sinquefield. "Stocks, Bonds, Bills and Inflation: The Past and the Future." Financial Analysts Research Founda- tion, Charlottesville, Va. (1982): 71. Keenum, M.E., and J.E. Waldrop. "Economic Analysis of Farm-Raised Catfish Production in Mississippi. " Technical Bulletin 155, Missis- 17 sippi Agricultural and Forestry Experiment Station, Mississippi State University. July, 1988. Lacewell, R.D., J.P. Nichols, and H.T. Jambers, Jr. " An Analysis of Pond Raised Catfish Production in Texas.” Southern journal of Agricul- tural Economic, July 1973. Lambregts, J.A.D., S.G. Thacker, and W.L. Griffin. Comparison of Semi- Intensive, Intensive and Very-Intensive Production Strategies for Various sized Shrimp Farms in Texas. " Manuscript in the Depart- ment of Agricultural Economics at Texas A&M University, Col- lege Station, Texas, U.S.A. , 1991. Sadeh, A., C.R. Pardy, W. L. Griffin, and A.L. Lawrence. ‘Uncertainty Consideration Resulting from Temperature Variations of Growth of Penaeus stylirostris in Ponds.” The Texas journal of Science 38: 2 (1986). Sindelar, S., H. Kinnucan, and U. Hatch. Determining the Economic Effects of Off-Flavor In Farm-Raised Catfish. Alal: ama Agricultural Experiment Station Bulletin No. 583, Auburn University, March, 1987. Steinbach, D.W., and J. Boettcher, "Natural Resources." "I exas Aquacul- ture — Status of the Industry, G.W. Chaimberlain, Ed. Review Draft for 1990 Texas Aquaculture Conference, Jan. 30-Feb. 1, 1990, pp. 25-30. U.S.DA., Economic Research Service. Aquaculture Situation and Out- look. Aqua-6, March 1991. Wellbom, T.L. Catfish Farmers Handbook, Miss. Coop. Ext. Service, Mississippi State University, Extension Wildlife and Fisheries Dept. Publication No. 1549, 1987. Yates, M.E. The Relationship Between Engineering Design and Construc- tion Costs of Aquaculture Ponds. Masters Thesis, Texas A&M University, College Station, Texas, USA, 1988. Appendix Table A1. Total investments in three catfish farms (small, medium,and large) on the upper Texas coast in 1991 dollars by size (may not add due to rounding). Farm size* Small Med|um Large Eco- Category units price total units price total units price total life STARTUP COSTS Laborer 0.50 11,000 5,500 0.5 11 ,000 5,500 2 11,000 22,000 General manager 0.50 35,000 17,500 1 35,000 35,000 1 35,000 35,000 Assistant manager 0 0 0 0 0 0 0.2 22,000 4,400 Accountant fees 40 40 1,600 63 40 2,500 87 40 3,480 Legal fees 25 75 1 ,875 68 75 5,100 98 75 7,350 i Insurance (liability) 1 1,929 1,929 1 2,508 2,508 1 3,575 3,575 Insurance (health) 1 3,216 3,216 1.5 3,216 4,824 3.2 3,216 10,291 Insurance (auto) 1 1,406 1,406 1 1,406 1,406 2 ' 1,406 2,812 Repair nonmachine 40 20 800 80 20 1,600 160 20 3,200 Repair machine 22 40 880 40 40 1,600 8O 40 3,200 Utilities (electricity) 4,500 0.07 315 8,500 0.07 595 12,000 0.07 840 Utilities (phone) 6 75 450 12 75 900 12 95 1 ,140 Supplies 1 500 500 2 500 1 ,000 3 500 1 ,500 Fuel 400 1-19 476 600 1.19 714 850 1.19 1,012 Property tax 163 4.85 791 323 4.85 1,567 643 4.85 3,119 Miscellaneous 1 3,724 3,724 1 6,481 6,481 1 10,292 10,292 SUBTOTAL 40,961 71,295 113,210 REAL ESTATE Land 163 1 ,000 163,000 323 1 ,000 323,000 643 1 ,000 643,000 50 Water rights (acre feet) 800 37 29,600 1,600 37 59,200 3,200 37 118,400 50 SUBTOTAL 1 92,600 382,200 761 ,400 BUILDINGS 0 0 0 Buildings (shop/off) 1,200 15 18,000 1,500 15 22,500 2400 15 36,000 20 Well 1 5,000 5,000 1 5,000 5,000 1 5,000 5,000 20 Septic system 1 6,300 6,300 1 6,300 6,300 1 6,300 6,300 20 Architect fee 0 5,000 0 1 5,000 5,000 1 5,000 5,000 20 Miscellaneous 1 2,930 2,930 1 3,880 3,880 1 5,230 5,230 20 SUBTOTAL 32,230 42,680 57,530 POND CONSTRUCTION Dirt moving 189,600 1 170,640 379,200 1 322,320 758,400 1 621,888 7 Gravel 2,285.714 14 32,000 4,571.429 14 64,000 9,142.86 14 128,000 7 System pipe and const. 160 165 26,400 320 165 52,800 640 165 105,600 7 Clearing and preparation 160 148 23,680 320 148 47,360 640 148 94,720 7 Grass 80 12 960 160 12 1 ,920 320 12 3,840 7 Survey (to permit) 1 4,800 4,800 1 9,600 9,600 1 19,200 19,200 7 Engineering design 1 30,400 30,400 1 60,800 60,800 1 121,600 121,600 7 Electric lines 8 1 ,800 14,400 16 1 ,800 28,800 32 1,800 57,600 7 Miscellaneous 1 43,332 43,332 1 83,820 83,820 1 1 64,227 1 64,227 7 SUBTOTAL 346,612 671,420 1,316,675 ' POND PUMPS Pump mount 1 6.400 6,400 2 6,400 12,800 3 6,400 19,200 15 Hardware and installation 1 4,150 4,150 2 4,150 8,300 3 4,150 12,450 15 Fuel tank 1 1 ,500 1 ,500 2 1 ,500 3,000 3 1 ,500 4,500 7 Pump 1 8,600 8,600 2 8,600 17,200 3 8,600 25,800 7 Diesel engine 1 8,400 8,400 2 8,400 16,800 3 8,400 25,200 7 Miscellaneous 1 4,358 4,358 1 8,715 8,715 1 13,073 13,073 7 SUBTOTAL 33,408 66,81 5 100,223 MAJOR POND EQUIP. Bulk feed silos (incl. pad) 1 9,500 9,500 2 9,500 19,000 2 9,500 19,000 15 1 ton Feed Pickup 1 13,200 13,200 2 13,200 26,400 4 13,200 52,800 7 Feeder with scales/printer 1 9,800 9,800 2 9,800 19,600 4 9,800 39,200 7 Tractor /45HP/used 1 10,000 10,000 1 10,000 10,000 2 10,000 20,000 7 Boat, motor and trailer 1 3,800 3,800 1 3,800 3,800 1 3,800 3,800 5 Stationary aerators 9 3,400 30,600 18 3,400 61,200 35 3,400 119,000 5 1/2 Ton pickup 1 8,500 8,500 1 8,500 8,500 2 8,500 17,000 5 Miscellaneous 1 8,540 8,540 1 14,850 14,850 1 27,080 27,080 5 SUBTOTAL 93,940 1 63,350 297,880 18 0 f‘ Table A1. (continued) Farm size* Small Medium Large Eco- Category units price total units price total units price total life IMPLEMENTS Mower 1 3,000 3,000 1 3,000 3,000 1 3,000 3,000 7 2-way radio system 0 3,200 0 0 3,200 0 1 3,200 3,200 7 Portable pump 1 650 650 1 650 650 1 650 650 7 Grader 1 1 ,500 1 ,500 1 1 ,500 1 ,500 1 1 ,500 1,500 7 Disk 1 2,000 2,000 1 2,000 2,000 1 2,000 2,000 7 Miscellaneous 1 715 715 1 715 715 1 1,035 1,035 7 SUBTOTAL 7,865 7,865 1 1 ,385 POND EQUIP. Seine rods 10 20 200 10 20 200 1 0 20 200 3 Cutting seine '1 500 500 1 500 500 1' 500 500 3 Pond screens 16 50 800 32 50 1,600 32 50 1,600 3 Four wheeler 0 3,600 0 1 3,600 3,600 2 3,600 7,200 3 Dip nets 2 50 100 2 50 100 2 50 100 3 Waders 4 80 320 6 80 480 8 80 640 3 Oxygen kits 1 1,490 1,490 1 1,490 1,490 2 1,490 2,980 3 Chemical kits 1 360 360 2 360 720 3 360 1,080 3 Miscellaneous 1 377 377 1 869 869 1 1 ,430 1 ,430 3 SUBTOTAL 4,147 9,559 15,730 OFFICE Desk & chair 1 250 250 1 250 250 3 250 750 12 Blackboard 0 100 0 1 100 100 3 100 300 12 Bookshelves 1 1 50 150 2 150 300 2 150 300 12 Filing cabinet 1 150 150 2 150 300 2 150 300 12 Computer system 1 1,500 1,500 1 4,000 4,000 1 4,000 4,000 6 Typewriter 0 500 0 1 500 500 1 500 500 6 Telephone system 1 150 150 1 150 150 1 150 150 5 Light fixtures 1 200 200 3 200 600 3 200 600 5 Xerox machine 0 500 0 1 500 500 1 500 500 5 Calculator 1 75 75 1 75 75 1 75 75 5 Software 1 750 750 1 750 750 2 750 1 ,500 5 Miscellaneous 1 323 323 1 752.5 753 1 898 898 5 SUBTOTAL 3,548 8,278 9,873 SHOP EQUIP. Drill press 0 400 0 1 400 400 1 400 400 10 Grinder 1 125 125 1 125 125 1 125 125 10 Welder 0 300 0 1 300 300 1 300 300 1 0 Torch 1 300 300 1 300 300 1 300 300 1 0 Work bench 1 60 60 1 60 , 60 1 60 60 10 Air compressor 1 400 400 1 400 400 1 400 400 7 Battery charger 1 50 50 1 50 50 1 50 50 7 Jack 12 Ton 1 400 400 1 400 400 1 400 400 7 Wheelbarrow 1 90 90 1 90 90 1 90 90 7 Hand truck 1 120 120 1 120 120 1 120 120 7 Hand tools 1 250 250 1 250 250 1 250 250 7 Gen supplies 1 250 250 1 250 250 1 250 250 7 Generator(small) 1 1,000 1,000 1 1 ,000 1 ,000 1 1 ,000 1,000 7 Hand drill 3/8 1 120 120 1 120 120 1 120 120 3 Sawtable 1 150 150 1 150 150 1 150 150 3 Jigsaw 1 100 100 1 100 100 1 100 100 3 Circular 1 150 150 1 150 150 1 150 150 3 Ladder 1 50 50 1 50 50 1 50 50 3 Miscellaneous 1 362 362 1 432 432 1 432 432 3 SUBTOTAL 3,977 4,747 4,747 MISCELLANEOUS EQUIP. Binoculars; 1 110 110 1 110 110 1 110 110 7 Propane cannon 2 250 500 2 250 500 4 250 1,000 7 Triple beam balance 1 90 90 1 90 90 2 90 180 7 Microscopes 1 300 300 1 300 300 1 300 300 7 Scare equipment 1 140 140 2 140 280 4 140 560 7 Sampling scales 1 114 114 2 128 256 2 215 430 7 Air conditioner 1 2,000 2,000 1 2,000 2,000 1 2,000 2,000 7 Refrigerator 1 300 300 1 300 300 1 300 300 5 PH meter 1 300 300 2 300 600 2 300 600 5 Miscellaneous 1 385 385 1 444 444 1 548 548 5 SUBTOTAL 4,239 4,880 6,028 TOTAL 763,526 1 ,433,088 2,694,680 19 *The total area in ha (ac) for the small farm is 66 (163), for the medium farm 132 (323), and for the large farm 264 (643). Table A2. Cash flow for a small (66 ha, 163 ac) catfish farm along the upper Texas coast during the first 5 operating years (in 1991 dollars). Year Category 1 2 3 4 5 Beginning cash 100,000 50,000 50,000 100,000 100,000 Plus: Revenues specie 1 0 616,346 817,674 930,797 843,121 Revenues specie 2 0 17,094 34,540 34,872 34,926 Interest inc. 3,474 3,446 7,238 11,102 8,619 Short term loan 272,266 174,763 74,833 848 24,1 10 Intermed. loan 272,266 20,584 0 0 0 Total 648,007 882,233 984,285 1 ,077,619 1 ,010,775 Minus: Stocking 111,200 84,584 106,633 120,549 108,933 Feed 68,544 287,691 308,414 310,020 292,449 Pumping energy 4,811 16,585 17,825 17,912 18,058 Aeration energy 1,735 6,607 6,754 6,754 6,754 Salt 0 915 1,237 1,399 1,274 Harvesting 0 18,294 24,744 27,989 25,486 Hauling 0 18,294 24,744 27,989 25,486 Crop insurance 0 6,586 8,908 10,076 9,175 Lab testing fees 0 1 ,006 1 ,361 1 ,539 1 ,402 Diseasetreatment 4,212 4,212 4,212 4,212 4,212 General manager 25,000 25,000 25,000 25,000 25,000 Pond mgr/feeder 16,000 16,000 16,000 16,000 16,000 Parttime labor 23,100 23,100 23,100 23,100 23,100 Fringe & benefits 11,760 11,760 11,760 11,760 11 ,760 Prop. Tax (4.85) 790 790 790 790 790 Accountant fees 2,000 2,000 2,000 2,000 2,000 Legal fees 1 ,500 1 ,500 1 ,500 1 ,500 1 ,500 Water rights(1 ') 5,032 5,032 5,032 5,032 5,032 Insurance (1%) 7,635 7,635 7,635 7,635 7,635 Repair mach. & pond 8,929 10,750 12,570 14,278 16,025 Machine replacement 0 0 3,974 1 ,697 39,872 Epa lab fees 200 200 200 200 200 Test kits (k&w) 245 245 245 245 245 Fuel and lube 1,464 1,464 1,464 1,464 1,464 Fuel (feed: 5/hr) 12,000 12,000 12,000 12,000 12,000 Utilities 2,800 2,800 2,800 2,800 2,800 Travel & dues 1,250 1,250 1,250 1 ,250 1,250 Miscellaneous 6,708 6,708 6,708 6,708 6,708 interest inter. 0 32,672 29,999 23,850 16,964 Interest short 8,826 8,935 2,765 8 251 Principal inter. 0 42,857 51 ,240 57,389 64,276 Principal short 272,266 174,763 74,833 848 24,1 10 Sub total 598,007 832,233 797698 743,997 772,212 Dividends paid 0 0 86,587 233,623 138,564 Total 598,007 832,233 884,285 977,61 9 91 0,775 Ending cash bal. 50,000 50,000 100,000 100,000 100,000 20 t“ @ D Table A3. Cash flow for a medium (132 ha, 323 ac) catfish farm alon g the upper Texas coast during the first 5 operating years (in 1991 dollars). Year Category 1 2 3 4 5 Beginning cash 100,000 ' 50,000 50,000 100,000 100,000 Pius: Revenues specie 1 0 1,233,683 1,678,271 1,748,687 1,768,448 Revenues specie 2 0 38,941 50,275 88,802 64,276 Interest inc. 3,260 4,380 11,853 16,439 14,666 Shortterm loan 582,485 315,810 141,294 20,710 67,614 lntermed loan 582,485 18,964 0 0 0 Total 1,268,231 1,661,779 1,931,693 1,974,638 2,015,005 Minus: Stocking 222,400 169,109 215,699 229,592 229,594 Feed 137,087 574,991 610,054 617,107 618,419 Pumping energy 7,493 21,775 23,078 23,049 23,005 Aeration energy 3,470 13,241 13,509 13,509 13,509 Salt 0 1,840 2,498 2,676 2,655 Harvesting 0 36,806 49,962 53,515 53,098 Hauling 0 36,806 49,962 53,515 53,098 Crop insurance 0 13,250 17,986 19,265 19,115 Lab testing fees 0 2,024 2,748 2,943 2,920 Diseasetreatment 8,424 8,424 8,424 8,424 8,424 General manager 35,000 35,000 35,000 35,000 35,000 Pond mgr./feeder 32,000 32,000 32,000 32,000 32,000 Mechanic 14,000 14,000 14,000 14,000 14,000 Laborers 13,000 13,000 13,000 13,000 13,000 Seasonal labor 26,500 26,500 26,500 26,500 26,500 Fringe & benefits 23,200 23,200 23,200 23,200 23,200 Property taxes 1,567 1,567 1,567 1,567 1,567 Accountant fees 3,000 3,000 3,000 3,000 3,000 Legal fees 2,000 2,000 2,000 2,000 2,000 Water rights(1‘) 10,064 10,064 10,064 10,064 10,064 Insurance (liab.) 14,040 14,040 14,040 14,040 14,040 Repair mach. & pond 16,517 19,784 23,052 26,038 29,181 Machine replacement 0 0 9,893 2,852 64,687 Epa lab fees 300 300 300 300 300 Test kits (k&w) 490 490 490 490 490 Fuel and lube 2,432 2,432 2,432 2,432 2,432 Fuel (feed: 5/hr) 24,000 24,000 24,000 24,000 24,000 Utilities 4,800 4,800 4,800 4,800 4,800 Travel & dues 2,250 2,250 2,250 2,250 2,250 Miscellaneous 10,158 10,158 10,158 10,158 10,158 Interest inter. 0 69,898 61,171 48,490 34,287 interest short 21,553 17,530 4,357 207 1,412 Principal inter. 0 91,689 105,677 118,358 132,561 Principal short 582,485 315,810 141,294 20,710 67,614 Sub total i 1,218,231 1,611,779 1,558,165 1,459,051 1,572,380 Dividendspaid 0 0 273,529 415,587 342,625 Total 1,218,231 1,611,779 1,831,693 1,874,638 1,915,005 Ending cash bal. 50,000 50,000 100,000 100,000 100,000 21 Table A4. Cash flow for a large (264 ha, 643 ac) catfish farm alongthe upper Texas coast during the first 5 operating years (in 1991 dollars). Year Category 1 2 3 4 5 Beginning cash 100,000 50,000 100,000 100,000 100,000 Plus: Revenues specie 1 0 2,472,716 3,359,906 3,521,265 3,531,996 Revenues specie 2 0 77,882 133,476 139,393 128,650 Interest inc. 3,250 7,012 25,299 29,763 26,077 Short term loan 1,140,838 541,015 172,133 110,361 150,060 lntermed loan 1,140,838 0 0 0 0 Total 2,384,927 3,148,625 3,790,814 3,900,782 3,936,783 Minus: Stocking 444,800 338,790 437,553 454,252 456,909 Feed 274,174 1,148,919 1,232,963 1,230,434 1,235,682 Pumping energy 9,232 13,189 12,424 12,374 12,394 Aeration energy 6,941 26,481 27,017 27,017 27,017 Salt 0 3,688 5,067 5,309 5,303 Harvesting 0 73,764 101,336 106,183 106,060 Hauling 0 73,764 101,336 106,183 106,060 Crop insurance 0 26,555 36,481 38,226 38,182 Lab testing fees 0 4,057 5,574 5,840 5,833 Disease treatment 16,848 16,848 16,848 16,848 16,848 General manager 35,000 35,000 35,000 35,000 35,000 Foreman 17,000 17,000 17,000 17,000 17,000 Feeder 64,000 64,000 64,000 64,000 64,000 Mechanic 14,000 14,000 14,000 14,000 14,000 Laborers 39,000 39,000 39,000 39,000 39,000 Seasonal labor 41,900 41,900 41,900 41,900 41,900 Fringe & benefits 40,590 40,590 40,590 40,590 40,590 Propertytaxes 3,119 3,119 3,119 3,119 3,119 Accountant fees 4,000 4,000 4,000 4,000 4,000 Legal fees 2,500 2,500 2,500 2,500 2,500 Water rights 20,128 20,128 20,128 20,128 20,128 Insurance (liab). 14,040 14,040 14,040 14,040 14,040 Repair mach. & pond 29,314 34,697 40,079 45,057 50,284 Machine replacement 0 0 14,236 3,535 7,654 Epa lab fees 400 400 400 400 400 Test kits (k&w) 980 980 980 980 980 Fuel and lube 3,165 31,65 3,165 3,165 3,165 Fuel(feed: 5/hr) 43,200 43,200 43,200 43,200 43,200 ' Utilities 6,400 6,400 6,400 6,400 6,400 Travel & dues 2,875 2,875 2,875 2,875 2,875 Miscellaneous 16,708 16,708 16,708 16,708 16,708 lnterestinter. 0 136,901 115,351 91,216 64,184 Interest short 43,774 30,450 4,071 2,761 3,671 Principal inter. 0 179,579 201,129 225,264 252,296 Principal short 1,140,838 541,015 172,133 110,361 150,060 Sub total 2,334,926 3,017,703 2,892,604 2,849,865 2,907,443 Dividends paid 0 30,922 798,210 950,917 929,340 Total 2,334,926 3,048,625 3,690,813 3,800,782 3,836,783 Ending cash bal. 50,000 100,000 100,000 100,000 100,000 22 ‘wa " 511;.» [Blank Page in Original Bulletin] ‘ ‘n.1,..- i.‘ “".r’