Break-even prices were developed based upon 1) a small prawn farm with a single 1-acre pond in Kentucky, and 2) a mediumsize to large prawn farm with 25 2-acre ponds in Mississippi (Posadas, 2004). Commercial data indicate that the size of prawn farms varies widely.
The average farm size in Kentucky is 0.86 water acres, with a range of 0.05 to 5 water acres. The break-even price is the total cost (the sum of fixed and variable costs) divided by output volume.
Using cost data from Tables 3 and 4, the total annual cost of prawn farming in Kentucky, based upon a single 1-acre pond, was $5,040 for extensive production, $6,152 for semi-intensive production, and $8,435 for intensive production.
Posadas (2004) indicates that the total cost (per acre) for Mississippi prawn farms was almost 50 percent less (Table 5).
Table 5 shows production costs, yield and break-even prices for three stocking densities using data from Kentucky and Mississippi. Survival rates represented poor (40 percent), medium (60 percent) and good (80 percent) years of production.
The average survival rate in Kentucky’s commercial prawn ponds in 2002 was 45 percent, with a range of 7 to 86 percent.
The price of juveniles was $0.10 per head in Kentucky and $0.045 per head in Mississippi. Table 5 also shows break-even prices with respect to total operating cost, variable costs and total cost. Total operating cost includes only cash expenses related to stocking, feeding, energy, etc.
It excludes expenses associated with land, ponds and equipment and it discounts noncash operating costs such as unpaid labor and management.
A typical small-scale farmer selling at this break-even price will not be able to finance pond construction, equipment purchase, or the value of labor and management supplied by family members and friends.
The break-even price computed with respect to total variable cost does account for the value of labor and management; however, this break-even price is not enough for a farmer to pay for land, ponds and equipment. The break-even price with respect to total cost is sufficient to cover all operating (cash and non-cash) and fixed expenses.
While a farm can survive in the short term by selling prawns at the break-even price, long-term success requires a greater return.
Table 5 shows that it is cheaper to culture prawns in Mississippi than Kentucky. It also shows that while the break-even price above cash costs and variable costs remains below $3.50 per pound for some scenarios, the breakeven price above total cost is consistently above $3.50 per pound (except for the semi-intensive stocking and 80 percent survival scenario in Mississippi).
This indicates that while prawns could be sold at wholesale prices to cover operating expenses, earning a profit in the long run will require higher prices. Posadas (2004) described scenarios in which the break-even price above total cost was less than the wholesale price for medium-sized marine shrimp, and in which low density stocking generated greater profit than more intensive stocking.
However, these outcomes were skewed by higher than usual survival (more than 80 percent) and larger than normal average sizes (eight per pound at a stocking density of 8,500 per acre). These scenarios were too specialized to reflect the typical producer.
Lower input prices were partly responsible for making prawn culture less expensive in Mississippi than in Kentucky. However, the Mississippi break-even prices also reflected the economies of scale of the 50-water-acre prawn farm (Posadas, 2004). Since the Mississippi farm size was an extrapolation, and not representative of typical prawn farms in the state, a similar extrapolation is required for Kentucky.
To address this issue, we assume a hypothetical Kentucky farm with 50 1-acre ponds where prawns are intensively stocked. Economies of scale calculations reduce the per-acre fixed cost from $2,360 to $1,627, assuming that there was one water pump, two holding tanks, and one seine for every ten ponds.
Labor and management costs per acre also diminish from $1,275 to $312 (four laborers and a manager working 4 hours a day for 160 days and an additional 4 hours per pond for harvesting). This reduces the total cost per acre of intensive production from $8,435 to $6,631 and yields break-even prices over total cost of $6.90 per pound, $4.61 per pound, and $3.45 per pound for 40 percent, 60 percent, and 80 percent survival, respectively.
Information Sourced From:
Southern Regional Aquaculture Centre
