FISHERY BULLETIN: VOL. 74, NO. 2 



METHODOLOGY 



Standard techniques of cost and return, cash 

 flow, and break-even analysis were used in this 

 study. A budget-generating computer program 

 was established to assimilate and report the data 

 according to each of the desired vessel configura- 

 tions, in the form of total costs and returns 

 budgets, unit costs and returns budgets, and 

 projected cash-flow budgets. 



The vessels were classified in terms of their 

 average costs per pound of shrimp landed. An 

 average cost equation was estimated using 

 regression analysis with construction, keel 

 length (U.S. Coast Guard registry), and effort 

 index'* as dummy variables. Vessels included in 

 the sample were constructed of either wood or 

 steel. Grouping of vessels according to keel 

 length and effort index for use as dummy 

 variables in the regression analysis was based on 

 a natural frequency distribution of the vessels in 

 the sample. 



It must be stressed here that this method of 

 classification is simply a means to group the 

 vessels for the purpose of analysis and is not 

 necessarily a criterion for evaluation of the 

 performance of the different classes. Performance 

 or profit depends not only upon unit cost but also 

 upon unit price. Even though one class of vessels 

 may have a higher average cost curve for a given 

 level and type of shrimp produced, it may not 

 necessarily produce less profit. Therefore, while 

 the product produced may be homogeneous with 

 respect to cost of production, it may be hetero- 

 geneous with respect to price. 



DATA DESCRIPTION 



Data Collection and Vessel Description 



The cost and return and financial data used in 

 this study were gathered by personal interview 

 with shrimp vessel owners and/or managers 

 operating fi-om ports in Florida, Mississippi, and 



Texas. Additional financial information was ob- 

 tained from officials of various lending institu- 

 tions which engage in shrimp vessel financing. 

 All data were for the period covering the calen- 

 dar year 1973. 



The original sample for this study consisted of 

 126 vessels. However, due to incomplete data, 

 only 115 vessels were used in the analysis. 

 Vessels in the sample were constructed of wood 

 and steel, with keel lengths of from 45 to 78 feet, 

 and from 104 to 777 horsepower. The ages of the 

 vessels ranged from 1 to 36 yr. 



Costs and Returns and 

 Cash Flow Data 



Variable cost items were separated into vari- 

 able costs not directly proportional to catch: ice; 

 fuel; nets, supplies, and groceries; repair and 

 maintenance; and variable costs directly propor- 

 tional to catch: crew shares, payroll taxes, and 

 packing charges. Actual variable cost data re- 

 ported by the vessel owoiers were used except for 

 crew shares, payroll taxes, and packing charges, 

 which were determined on the basis of reported 

 pounds landed and gross revenues. Vessel owners 

 paid their captains and/or crew on the basis of a 

 percentage of pounds landed. This percentage 

 ranged from 30% in the eastern Gulf to 40% in 

 the western Gulf. Thirty-five percent was the 

 average share paid and is used in the analysis. 



Fixed cost items were separated into: insur- 

 ance, depreciation, overhead, interest, and oppor- 

 tunity cost (required return to equity capital). 

 Fixed charges for insurance and overhead are re- 

 ported data. Charges relating directly to invest- 

 ment — depreciation, interest, required return on 

 equity capital for costs and returns, and principal 

 and interest for cash flow budgets — were stan- 

 dardized in terms of 1973 dollars in order to make 

 valid comparisons. Since most of the vessels in- 

 cluded in the sample were purchased new, vessel 

 owners (some of which were shipbuilders) were 

 asked to estimate the replacement value of their 



■The effort index is defined as the amount of fishing power 

 that a vessel can exert in a day fished relative to that of a 

 standard vessel. The value for the effort index for each vessel 

 was calculated using the formula: 



EI, = 



(HP), 01385 (LFR), 0-4064 

 (38)0.1385 (14.6)0.4064 



where EI, = effort index for vessel i, (HP), = horsepower for 

 vessel /, (LFR), = sum of the lengths of the footropes 

 measured in yards for vessel (, (38) = average horsepower of 

 the smallest class of vessels operating in the Gulf from 1962 to 

 1971, and 14.6 = average net size measured in yards of 

 footrope used by the smallest class of vessels for the same 

 period [Griffin, W. L., M. L. Cross, R. D. Lacewell, and J. P. 

 Nichols. 1973. Effort index for vessels in the Gulf of Mexico 

 shrimp fleet. (Unpubl. rep. to NMFS, contract no. 03-3-042-19 

 with the Tex. Agric. Exp. Stn., Tex. A&M Univ.]. 



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