38
The land profitability in Figure 19 does not accurately measure the economic return to land use in seaweed farming, especially when the value of other productive factors
e.g. family labour is not excluded from the profit. However, the indicator could provide useful information for spatial planning to determine the allocation of coastal
areas among different economic activities.
Profit margin As indicated in Figure 20, the profit margin i.e. the ratio of profit to farm revenue of
most of the 19 cases exceeded 50 percent. This implies that even if their farm revenues were reduced by half e.g. by a 50 percent drop in price or loss of half of the crops or
their total costs doubled, these farms would still break even.
14
Generally speaking, a case with lower profit tends to have a lower profit margin. However, the cases from the United Republic of Tanzania Cases 19 and 20 and Cases 21
and 23 of Solomon Islands had relatively low profits but relatively high profit margins.
3.4 Cash flow and pay-back period
Figure 21 summarizes the cash flow situations of 17 cases in Table 6.
15
The evidence indicates that most cases had positive net cash inflow in the first year, which means that
these farms were able to recover their initial investments within one year. Case 22 of Solomon Islands and Case 17 of the Philippines had net cash outflows i.e.
negative net cash inflows in the first year because of their investments in motorized boats. However, their positive net cash inflows in the second year were more than
enough to cover the outflows in the first year, which implies that the pay-back periods of their investment were less than two years.
14
Usually, break-even means a profit greater than zero. The zero-profit threshold is used here for simplicity, but it should be noted that for cases where profit does not exclude family labour, break-even
profit should at least be enough to cover the opportunity cost of family labour.
15
Cases 1 and 2 from India are combined because they represent the first- and second-year situations of the same farm. The initial investments in drying facilities and boats in the Solomon Islands cases are
estimated from the amortized annual capital cost based on the assumption of a five-year lifespan. FIGURE 19
Profitability of land use in carrageenan seaweed farming: evidence from the case studies
Notes: “km” measures the total length of the cultivation lines of a farming system; “ha” gauges the area of a farm site; the farming area of Cases 7 and 8 farms located in South Sulawesi, Indonesia estimated based on the technical efficiency parameter for Case 3 in Figure 7; “ty
= tonnesyear” measures the farm’s annual production of dried seaweed; “USDtonne” indicates the price of dried seaweed Figure 18. Source: Calculated, based on cases listed in Table 6.
17. Philippines, Zamboanga [MRLL, 0.05 ha, 2.85 ty, USD1074t] 10. Mexico [off-bottom, 1 ha 100-g seed, 54 ty, USD1000t]
12. Mexico [raft, 1 ha 100-g seed, 54 ty, USD1000t] 2. India [raft, 1 ha, 54 km, 6 cyclesyear, 108 ty, USD331t]
18. Philippines, Zamboanga [SW, 0.27 ha, 8.5 ty, USD1074t] 1. India [raft, 1 ha, 54 km, 4 cyclesyear, 72 ty, USD850t]
7. Indonesia [raft, 6 km, 0.55 ha, 6.6 ty, USD850t] 8. Indonesia [raft, 30 km, 2.75 ha, 33 tty, USD850t]
9. Mexico [off-bottom, 1 ha 50-g seed, 27 ty, USD1000t] 11. Mexico [raft, 1 ha 50-g seed, 27 ty, USD1000t]
Annual profit per unit of farming area USDhayear
2 391 3 076
7591 8 467
16 228 17 121
17 806 22100
16 163 9 460
Off-bottom Floating raft
Floating line
FIGURE 20
Cost structure and profit margin in carrageenan seaweed farming: evidence from the case studies
Notes: “km” measures the total length of the cultivation lines of a farming system; “ha” gauges the area of a farm site; “ty = tonnesyear” measures the farm’s annual production of dried seaweed; “USDtonne” indicates the value of profit Figure 18; “Capital cost” includes
amortized annual capital cost i.e. depreciation of physical investments and financial cost interest and insurance premiums; “Operating expense” indicates total cash operating expense excluding seed materials and family labour same as Figure 17; “Profit” is equal to price
minus capital cost and operating expense discrepancy due to rounding. Source: Calculated, based on cases listed in Table 6.
20 40
60 80
100 15. Philippines, Palawan [HLL, 2.7 km , 8.57 ty, USD842t]
21. Solomon Islands [off-bottom, 4 km, 17.4 ty, USD331t] 7. Indonesia [raft, 6 km, 6.6 ty, USD706t]
16. Philippines, Tawi-Tawi [HLL, 1.8 km , 2.75 ty, USD808t] 23. Solomon Islands [off-bottom, 2.4 km, 9.2 ty, USD291t]
8. Indonesia [raft, 30 km, 33 ty, USD633t] 20. United Republic of Tanzania [line, 0.324 km, 0.806 ty, USD154t]
19. United Republic of Tanzania [off-bottom, 0.3 km, 0.662 ty, USD148t] 14. Philippines, Tawi-Tawi [FOB, 1.62 km , 0.9 ty, USD736t]
13. Philippines, Zamboanga [FOB, 1.8 km, 2.143 ty, USD636t] 18. Philippines, Zamboanga [SW, 0.27 ha, 8.5 ty, USD514t]
2. India [raft, 1 ha, 54 km, 6 cyclesyear, 108 ty, USD150t] 1. India [raft, 1 ha, 54 km, 4 cyclesyear, 72 ty, USD131t]
17. Philippines, Zamboanga [MRLL, 0.05 ha, 2.85 ty, USD388t] 10. Mexico [off-bottom, 1 ha 100-g seed, 54 ty, USD334t]
12. Mexico [raft, 1 ha 100-g seed, 54 ty, USD321t] 22. Solomon Islands [off-bottom, 4 km, 21.7 ty, USD114t]
9. Mexico [off-bottom, 1 ha 50-g seed, 27 ty, USD114t] 11. Mexico [raft, 1 ha 50-g seed, 27 ty, USD89t
Ratio to farm revenue
22 58
69 57
57 43
40 26
9 11
8 8
9 19
17 8
36 43
52 69
9
89 85
83 75
74 74
69 74
71 58
48 36
40 45
32 29
11 33
20 13
11 11
10 11
17 6
12 20
17 15
9 6
8 2
9 6
Capital cost Operating expense
Profit
FIGURE 21
Cash flows in carrageenan seaweed farming: evidence from the case studies
Notes: “km” measures the total length of the cultivation lines of a farming system; “ha” gauges the area of a farm site; “tonnesyear” measures the farm’s annual production of dried seaweed; “USDtonne” indicates average annual net cash inflow in the first two years.
Source: Calculated, based on cases listed in Table 6.
Second year First year
15. Philippines, Palawan [HLL, 2.7 km , 8.57 ty, USD789t] 16. Philippines, Tawi-Tawi [HLL, 1.8 km , 2.75 ty, USD698t]
14. Philippines, Tawi-Tawi [FOB, 1.62 km , 0.9 ty, USD695t] 7. Indonesia [raft, 6 km, 6.6 ty, USD631t]
8. Indonesia [raft, 30 km, 33 ty, USD592t] 13. Philippines, Zamboanga [FOB, 1.8 km, 2.143 ty, USD521t]
18. Philippines, Zamboanga [SW, 0.27 ha, 8.5 ty, USD371t] 21. Solomon Islands [off-bottom, 4 km, 17.4 ty, USD286t]
10. Mexico [off-bottom, 1 ha 100-g seed, 54 ty, USD272t] 12. Mexico [raft, 1 ha 100-g seed, 54tyr, USD240t]
17. Philippines, Zamboanga [MRLL, 0.05 ha, 2.85 ty, USD223t] 23. Solomon Islands [off-bottom, 2.4 km, 9.2 ty, USD206t]
19. United Republic of Tanzania [off-bottom, 0.3 km, 0.662 ty, USD153t] 20. United Republic of Tanzania [line, 0.324 km, 0.806 ty, USD141t]
1 2. India [raft, 1 ha, 54 km, 1st yr 4 cy., 72 t, 2nd yr 6 cy., 108 t, USD135t] 22. Solomon Islands [off-bottom, 4 km, 21.7 ty, USD38t]
9. Mexico [off-bottom, 1 ha 50-g seed, 27 ty USD-2t] 11. Mexico [raft, 1 ha 50-g seed, 27 ty, USD-66t]
Net cash inflow per tonne of dried seaweed production USDtonne
642 700
700 757
871 859
191 191
165 3
268 92
190 117
189 61
111 175
369 362
341 485
505 591
799 720
526 209
101 369
510 350
-323 -196
-88
-65
The off-bottom and floating raft farms in Mexico would be able to recover their initial investments within one year with 100 g seeds Cases 10 and 12, respectively
but not with 50 g seeds Cases 9 and 11, respectively. Indeed, it would take more than two years for the understocking off-bottom and floating raft farms to recover their
investment Robledo, Gasca-Leyva and Fraga, 2013.
40
3.5 Summary
