GRIFFIN ET AL.: ECONOMIC AND FINANCIAL ANALYSIS 



Class II vessels had the highest landings, 

 48,602 pounds, of the five classes of vessels. They 

 also had the highest gross revenues even though 

 the average price per pound received was $0.14 

 less than class I vessels. They did experience 

 relatively high total costs, yet the variable costs 

 not proportional to catch, the "manageable" 

 variable costs, were $10,500 less than class I. 

 Class II vessels were able to register a positive 

 return to owner's labor and management of 

 $560 — the only one of the classes to achieve that. 

 Payback occurred only with the sale of the vessel 

 in the eighth year. The internal rate of return on 

 investment was 13.21%, which was the highest of 

 the five classes. 



Class in was the most populous class. Gross 

 revenue was approximately $15,000 below and 

 total costs were about $10,500 below those of 

 class II vessels. The difference in the total costs 

 was due to costs directly proportional to catch — a 

 reflection of the fact that class III vessels caught 

 roughly 9,000 pounds less shrimp than did the 

 class II vessels. Class IE vessels had a negative 

 net return of $5,010. The internal rate of return 

 on investment was 2.65% and payback occurred 

 during the eighth year only with the sale of the 

 vessel. 



Class rV vessel production was about 9,000 

 pounds less than class III vessels and the price 

 per pound was about $0.30 less, so that gross 

 revenue was $25,000 lower for the class IV 

 vessels. Variable costs not directly proportional 

 to catch were roughly $5,000 lower, and total cost 

 was $19,000 less for class IV vessels than for class 

 III vessels. Because of the low level of production 

 and gross revenues, class IV vessels had the sec- 

 ond greatest net loss, $11,224, of any of the five 

 classes, and payback did not occur. The internal 

 rate of return on investment was negative. 



Class V vessels reached roughly the same level 

 of production as did class IV vessels, but at 

 $6,000 lower variable costs not directly propor- 

 tional to catch. Comparison of the returns above 

 variable costs shows class V vessels contributed 

 over $4,000 more towards fixed costs than did 

 class IV, while receiving some $2,000 less in 

 gross revenues. Net revenue was a negative 

 $3,637, but was still the second highest with 

 respect to the other four classes. Payback 

 occurred in year 8 only with the sale of the vessel 

 and the internal rate of return on investment 

 was 2.63%. 



Financial Analysis with Cost Adjusted 

 to 1974 and 1975 



Fishing for shrimp in the Gulf of Mexico in 



1973 was definitely not an enterprise in which 

 profits could be achieved across the board. Figure 

 1 shows the break-even undiscounted cash flow 

 analysis for each of the five vessel classes, based 

 on 1973 costs and for costs updated to 1974 and 

 1975. Costs for 1974 were calculated by increas- 

 ing all cost items (fixed and variable) by 20%^ 

 except fuel and new vessel cost. Because fuel 

 represents such a large portion of a vessel's 

 operating costs, it was treated separately and 

 increased from 18 to 32 cents per gallon. New 

 vessel cost was held constant at 1973 levels since 

 there has not been a significant number of 

 vessels entering the industry since 1973. Infla- 

 tion is expected to continue to increase at a rate 

 between 5 and 15%; therefore, 1975 costs were 

 increased by 10% over 1974 levels with the 

 exception of new vessel prices. For comparison 

 purposes the vertical dashed lines, labeled 1973, 

 indicate the 1973 average landings and the hori- 

 zontal dashed lines indicate the 1973 average ex- 

 vessel price received for each vessel class. 



1974 Analysis 



Input prices continued their upward trends in 

 1974. At the same time landings showed approxi- 

 mately a 2% improvement over the 1973 levels, 

 but shrimp prices fell by approximately 20%; the 

 combined effect was a 15% drop in the value of 

 shrimp produced in the Gulf of Mexico in 1974.^ 

 Figure 1 explains graphically the ramifications of 

 such conditions on the undiscounted break-even 

 cash flows for each of the five vessel classes. As 

 the graphs show, none of the classes would have 

 experienced a break-even cash flow for 1974 

 given the 20% decrease in shrimp prices and 

 minimal increase in landings over the 1973 

 levels. This of course means that none would 



^Based on the July 1974 wholesale price index including all 

 commodities (Board of Governors of the Federal Reserve 

 System 1974). 



^Total Gulf of Mexico shrimp landings (heads-off) m 1973 

 were 114.8 million pounds, average ex- vessel price per pound re- 

 ceived was $1.50 and the value was $171.7 million (United 

 States Department of Commerce 1974). Landings for the same 

 period in 1974 were 116.9 million pounds, the average ex- 

 vessel price per pound was $1.18, and the value of the land- 

 ings was $1374 million (United States Department of Com- 

 merce 1974-75). 



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