IMPLICATIONS OF INVESTING UNDER DIFFERENT ECONOMIC 



CONDITIONS ON THE PROFITABILITY OF GULF OF MEXICO 



SHRIMP VESSELS OPERATING OUT OF TEXAS 1 



Ernest Tettey, Christopher Pardy, Wade Griffin, 

 and A. Nelson Swartz 2 



ABSTRACT 



Due to the inflationary trend in recent years coupled with fluctuating shrimp prices, the shrimp 

 business has become a highly uncertain undertaking. The financial performance of a sample of the Gulf 

 of Mexico shrimping fleet, operating out of the Texas coast, was examined over a 10-year period 

 (1971-80). The results indicate that investments made in the early part of the 1970s performed better 

 than those made in the latter part. Periods of low inflationary levels appeared to be more favorable to 

 investments in the shrimp fishery than periods of high inflationary levels. 



In terms of economic profits, steel vessels generally did better than wooden ones. Medium-sized 

 vessels (18.6-20.0 m in overall length) were the most efficient vessels to operate in the Gulf of Mexico. 



The Gulf of Mexico supplies a major share of the 

 shrimp landed by commercial shrimp producers in 

 the United States. From 1977 to 1981, Gulf shrimp 

 landings accounted for 62% of the U.S. total. In 

 1981, 161 million kg of commercial shrimp valued 

 at $463.4 million are landed in the United States. 

 The Gulf of Mexico accounted for 76% of these 

 landings and 87% of the value. Although the Gulf 

 shrimp fishery is the most valuable in the United 

 States, individual harvesters within the industry 

 are not without their financial problems. 



Of late, the high variability in shrimp landings 

 and prices has created short-run uncertainty 

 among shrimp producers (Caillouet and Patella 

 1978; Warren and Griffin 1980). Coupled with this, 

 operating costs have been significantly increasing 

 over the years, to the extent that, it has become 

 quite difficult for fishermen to stay in business 

 (Griffin et al. 1978). 



There have been several costs and returns 

 and/or investment analyses conducted on fishing 

 vessels in recent years (Gates and D'Eugenio 1975; 

 Noetzel 1977; Jones et al. 1979; Roberts and Saas 

 1979; Prochaska and Cato 1981); however, none 

 have been concerned with the effect of inflation on 

 investing in a fishing vessel. This paper uses the 

 period 1971-80 to draw conclusions about the effect 

 of low, medium, and high inflationary periods on 

 return to investment. The study further examines 



'Technical Article No. 18678 of the Texas Agricultural Exper- 

 iment Station, Texas A&M University, College Station, Tex. 



2 Department of Agricultural Economics, Texas A&M Univer- 

 sity, College Station, TX 77843. 



Manuscript accepted October 1983. 

 FISHERY BULLETIN: VOL. 82, NO. 2, 1984. 



the implication of unstable shrimp prices and ris- 

 ing costs of operations on the profitability of the 

 shrimp industry in the Gulf of Mexico. Finally, the 

 performance of wooden and steel hulled vessels in 

 various size classes is compared. 



METHODS 

 Data Description 



The data used in this study are an accumulation 

 of 5 yr of data collection, which have been reported 

 in previous publications (U.S. Department of 

 Commerce 1971-1980, 1971-1981; Griffin et al. 

 1974, 1976; Griffin and Nichols 1976; Warren and 

 Griffin 1978). Although data were collected for 

 other Gulf states, only data for vessels operating 

 out of Texas are used in this study, since it is the 

 only state for which data were available for all 5 yr 

 that data were collected. 



In the original studies, data were collected by 

 personal interview in ports from Galveston to Port 

 Isabel for 1971, 1973, 1974, 1975, and 1977 and 

 estimated for the remaining years. Additional in- 

 formation was obtained from officials of various 

 lending institutions which engage in shrimp ves- 

 sel financing, from boat builders, and from the 

 National Marine Fisheries Service. 



Cost 



The variable cost items for which data were 

 gathered included ice, fuel, nets, supplies, repairs 



365 



