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ECONOMIC ANALYSIS OF PRODUCING SURIMI FROM CATFISH BYPRODUCTS

Benedict Posadas, Ph.D.
Mississippi state University, Coastal Research and Extension Center
1815 Popps Ferry Road, Biloxi, MS 39532
Ben.Posadas@msstate.edu
July 1, 2018

Working with seafood scientist (Dr. Sam Chnag) and chemical engineer (Dr. Santanu Kundu), Dr. Posadas started creating a hypothetical surimi processing plant using results of previous studies performed at the MSU Experimental Seafood Processing Laboratory and analysis performed by faculty and staff at the MSU Department of Agricultural Economics.

This is a three-year project externally funded by the U.S. Department of Agriculture, National Institute of Food and Agriculture. Dr. Posadas devotes 13.33 percent (5.33 hr/wk on Fridays) of this time to perform the tasks outlined in the project proposal starting on July 1, 2018.

 SIGNIFICANCE TO THE AQUACULTURE INDUSTRY

Catfish processing generates byproducts consisting of heads, guts, skins and frames. These byproducts are generally sent to rendering plants, sold to pet food companies or could be used to produce fish meal. The entire catfish industry sold 320.174 million pounds of live catfish in 2016 (USDA, 2017. In catfish fillet processing, approximately 60% of the whole catfish is the by-product, which would translate into more than 190 million pounds of byproducts. Since Mississippi growers produced 54% of all live sales, catfish processing byproducts in 2016 could be more than 100 million pounds. The results of this research will provide an economic opportunity for the catfish industry to convert processing waste products into safe and domestically-produced surimi products. The expansion in the processing activity in the catfish industry will provide more employment and income opportunities in the rural communities in the catfish-growing areas. Furthermore, this processing system, after appropriate adjustments can be applied to other foodfish species grown in the United States. Overall, the production of surimi from byproducts of foodfish processing reduces wastes and expands economic opportunities in rural America.

 RESEARCH OBJECTIVES

The overall objective of this economic analysis is to evaluate the economic potential of producing surimi from the byproducts of catfish processing. Specifically, it aims to achieve the following objectives:

  1. To estimate the potential supply of catfish processing byproducts suitable for surimi production.
  2. To evaluate the economic and financial feasibility of producing surimi out of catfish processing byproducts.
  3. To develop optimal economic models of surimi production systems subject to supply and technological constraints. 

RESEARCH METHODS

The potential supply of catfish processing byproducts suitable for surimi production will be estimated using secondary data on catfish production (USDA, 2017), catfish processing (USDA, 2013) and related literature on processing yields. The quantity of catfish byproducts supplied will be estimated by using the following formula:

BYPRODUCTi = LIVESALESt x PERCENTj

where BYPRODUCTi = quantity of ith catfish byproduct supplied at time t, LIVESALESt = total quantity of live catfish sold at time t, and PERCENTj = percent of jth product form to total quantity of catfish processed at time t. Some forms of industry verification will be conducted to validate these estimates.

To evaluate the economic and financial feasibility of producing surimi out of catfish processing byproducts, four major research tasks will be performed. First, using the results of the research conducted by McAlpin et al. (1994), the updated equipment and initial investment requirements for a catfish surimi processing system will estimated. Second, the updated annual ownership costs and operating costs of a catfish surimi processing plant will be established. Third, long-term data on wholesale surimi prices will be collected from secondary sources. Fourth, ten-year annual cash flow analysis will be performed to assess the financial feasibility of the catfish surimi processing system. The discounted economic indicators that will be used in the financial feasibility analysis will include among others, internal rates of return and net present values. Random values of key variables such as unit prices and production quantities will be incorporated in the analysis to capture the element of risk and uncertainty. Posadas and Hanson 2006) and Posadas and Bridger (2003, 2004) conducted annual cash flow analysis for saltwater shrimp and offshore production systems in order to determine the financial feasibility of these production systems.

To develop optimal economic models of surimi production systems subject to supply and technological constraints, two major research tasks will be completed. First, profit maximizing or cost minimizing economic models will be developed subject to supply and technological constraints. Second, these models will be optimized using current and expected market conditions and supply and technological constraints. The robustness of these models will be tested against the element of risk and uncertainty mentioned above. Posadas (1998, 2001) used mixed integer linear programming model to determine the optimum catfish-crop-wetland farm organization. Similar programming approach will be conducted to determine the optimal catfish-surimi processing systems subject to market, supply and technological constraints.

 SELECTED REFERENCES

Argue, Brad J., Zhanjiang Liu, and Rex A. Dunham. 2003. Dress-out and fillet yields of channel catfish, Ictalurus punctatus, blue catfish, Ictalurus furcatus, and their F1, F2 and backcross hybrids. Aquaculture 228(1-4):81-90.

J. M. Kim, C. H. Liu, J. B. Eun, J. W. Park, R. Oshimi, K. Hayashi, B. Ott, T. Aramaki, M. Sekine, Y. Horikita, K. Fujimoto, T. Aikawa, L. Welch, R. Long.  1996. Surimi from Fillet Frames of Channel Catfish. Journal of Food Science 61(2): 265–476.

McAlpin, C.R. II, J.G. Dillard, J.M. Kim, and J.L. Monanez. 1994. An Economic Analysis of Producing Surimi from Catfish Byproducts. Mississippi Agricultural and Forestry Experiment Station Bulletin 1013, Mississippi State, Mississippi. Last accessed: May 17, 2017. http://mafes.msstate.edu/publications/bulletins/b1013.pdf.

Posadas, B.C. Catfish Aquaculture Production, Farm-gate Values and Prices in the United States. http://coastal.msstate.edu/aquaculture-catfish. Last visited: January 10, 2019.

Posadas, B.C. 2001. Comparative Economic Analysis of Using Constructed Wetlands in Recirculating Catfish Pond Production. Journal of Applied Aquaculture, 11(3): 1-20.

Posadas, B.C. 1998. Evaluating the Use of Constructed Wetlands in Producing Catfish in Multi-enterprise Farming in Mississippi Black Belt Area. UMI Dissertation Services, Ann Harbor, Michigan.

Posadas, B.C. and T.R. Hanson. 2006. Economics of Integrating Nursery in Indoor Bio-secure Recirculating Saltwater Shrimp Growout Systems. Shrimp Farming: Economics, Market, and Trade. Blackwell Publishing.

Posadas, B.C., and C.J. Bridger. 2004. Economic Feasibility and Impact of Offshore Aquaculture in the Gulf of Mexico. In pages 109-127, Bridger, C.J., (ed.). Efforts to Develop a Responsible Offshore Aquaculture Industry in the Gulf of Mexico: A Compendium of Offshore Aquaculture Consortium Research. MASGP‑04‑029. Mississippi‑Alabama Sea Grant Consortium, Ocean Springs, Mississippi.

Posadas, B.C. and C.J. Bridger. 2003. Economic potential of offshore aquaculture in the Gulf of Mexico. Pages 307-317 in Christopher J. Bridger and Barry A. Costa-Pierce (eds.). Open-Ocean Aquaculture: From Research to Commercial Reality. The World Aquaculture Society, Baton Rouge, Louisiana.

USDA. 2013. Catfish Processing. Released March 20, 2013, by the National Agricultural Statistics Service, Agricultural Statistics Board, United States Department of Agriculture.

USDA. 2017. Catfish Production. Released February 3, 2017, by the National Agricultural Statistics Service, Agricultural Statistics Board, United States Department of Agriculture. Last accessed: May 4, 2017.