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• Conversely, given that other factors remain the same, if the overseas processors wanted to reduce the cost of RDS from USD1 257tonne to USD674tonne a
46 percent decline, the farmgate price of semi-dry seaweed would need to drop by half from USD1 000 to USD500.
• Suppose an increase in fuel price doubles the cost of transportation including the cost of transport to market [USD13] and that of export shipment [USD30];
and the shock be shouldered entirely by seaweed farmers, who tend to be price- takers, then the farmgate price would need to go down from USD500 to USD461
a decline by 7.7 percent.
The production cost of carrageenan includes the cost of RDS and the processing cost. An example of the cost of SRC produced in Indonesia is presented in Table 5. The
results indicate that, generally speaking, RDS is the main component of the production cost of SRC in Indonesia;
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the share of processing cost is only 36 percent in the case of a low seaweed price and 23 percent in the case of a high price.
• Given that other factors remain the same, if the price of farmgate seaweed doubled from USD500tonne to USD1 000tonne, the cost of SRC produced in Indonesia
would rise by 56 percent from USD4 196tonne to USD6 529tonne. The 56 percent reflects the shares of farmgate seaweed and collector and trader fees in
the cost of SRC 53 and 2.6 percent, respectively, which are under the influence of the farmgate price.
In addition to the production cost, the value of carrageenan products when reaching end users may also reflect the expenses on research and development RD,
formulation, marketing, etc. Specific information on these aspects is lacking, but industrial experts have pointed out that tailor-making carrageenan products to suit
the needs of end users tends to be a high-value-added business Panlibuton, Porse and Nadela, 2007; Bixler and Porse, 2011.
Generally speaking, the global seaweed-carrageenan value chains have changed from a highly integrated structure in the 1970s to a much more diverse, market-oriented
structure in the 2000s Bixler and Porse, 2011; Neish, 2013. The advent of SRC in the mid-1980s and its increasing popularity especially after food-grade SRC was
accepted by western markets are deemed a key factor driving the transformation. The less demanding in terms of capital and technical aspects SRC processing technology
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The indicative numbers in Table 5 may underestimate the share of RDS in the cost of SRC, which could be increased because of costly local shipping, quantity andor quality losses during trading, local
taxation, and rent-seeking activities Neish, 2013. TABLE 5
An example of the estimated cost of SRC exported by Indonesia
Item No.
Cost items for one tonne of SRC Low farmgate price
for semi-dry seaweed USD500tonne
High farmgate price for semi-dry seaweed
USD1 000tonne Value
of the cost of SRC
Value of the
cost of SRC 1
Cost of RDS USD 2 696
64.2 5 029
77.0
2 - Cost of farmgate seaweed USD
2 222 53.0
4 444 68.1
3 - Collector and trader fees
111 2.6
222 3.4
4 - Other trading cost
362 8.6
362 5.5
5 Cost of processing USD
1 500 35.8
1 500 23.0
6 Cost of SRC USDtonne
4 196 100.0
6 529 100.0
Notes: 1 Take the cost of exported RDS Item 10 in Table 4 as a proxy of the cost of RDS for local processors; multiply it by four assuming 25 percent of gum yield; i.e. 4 tonnes of RDS needed to produce 1 tonne of SRC. 2 Item 3 in
Table 4 multiplied by four. 3 Item 8 in Table 4 multiplied by four. 4 = 1 – 2 – 3. 5 Assume that the processing cost for one tonne of SRC is USD1 500 Neish, 2013. 6 = 1 + 5.
Source: Based on information and assumptions in Neish 2013.
allowed many small carrageenan processors to enter the business and disrupt the traditional direct and stable relationships between seaweed farmers and a few dominant
carrageenan processors Neish, 2013. Other factors, such as the rapid expansion of carrageenan seaweed cultivation in Indonesia and the fast-growing carrageenan
industry in China, also contributed to the loss of cohesion in the seaweed-carrageenan value chains. With more and more newcomers joining both ends of the value chains,
direct and stable business relationships between farmers and processors have been gradually replaced by a market mechanism dictated by price and mediated through
traders sometimes multiple layers of them. Under this “market governance” structure Neish, 2013, the industry has become more competitive yet volatile. The sudden
and large demand shock from China in 2008 caused severe price fluctuations that destabilized the industry to the extent that some experts called it a “seaweed crisis”
Neish, 2008a, 2013.
Given time, the competitive market mechanism is expected to help the industry gradually regain its order through consolidation andor integration. However, the
process can be facilitated by more proactive actions, such as promoting collective actions of farmers through farmers organizations and providing more reliable and
timely market intelligence to reduce premature harvest, speculation andor other irrational behaviour Neish, 2013.
3. ECONOMIC PERFORMANCE OF CARRAGEENAN SEAWEED FARMING
The economic performance of seaweed farming is determined by its economic costs and benefits. The main economic costs include capital, material inputs and labour. The
economic benefits can be measured by the revenue and cash flow generated by seaweed production. Profit is an indicator of the net benefit, which measures trade-offs between
benefits and costs. A synthesis of the technical and economic performance of 23 cases of Kappaphycus farming examined in the six case studies Table 6 is provided overleaf.
3.1 Investment and capital cost
The physical capital needed for carrageenan seaweed farming usually includes farming systems, vessels, shelters, drying facilities, and miscellaneous equipment or tools.
Farming system A variety of farming systems have been used in carrageenan seaweed farming Neish,
2008b; Hayashi et al., 2010. The most widely used are “off-bottom” and “floating” systems. In both systems, cultivars or propagules are tied to polypropylene lines as
the substrate. Off-bottom systems are usually used in near-shore, shallow waters with the substrate placed near the sea floor. Floating systems are usually used in deeper
waters with the substrate floating near the sea surface.
Off-bottom is the traditional system widely used in carrageenan seaweed farming. A typical off-bottom system hangs cultivation lines between stakes pegged to the ocean
floor. Off-bottom systems located at near-shore farming sites could be constructed and managed by family labour also women. However, an off-bottom system may
face high risks of fish grazing and rope breaking and, hence, need more-intensive plot maintenance Krishnan and Narayanakumar, 2013.
Near-shore areas are limited and subject to the competition of other sectors e.g. tourism and urban development. In the United Republic of Tanzania, suitable farming
sites for off-bottom systems have largely been utilized Msuya, 2013. In India, near- shore water quality has been threatened by industrial and urban effluent Krishnan and
Narayanakumar, 2013.
A floating system uses ropes, floats, weights and other materials e.g. bamboo to build a floating structure to suspend cultivation lines. Floating systems expand seaweed
farming to deeper waters that provide more abundant farming sites.
