FIGURE 16
Expenses on fuel and boat maintenance: 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; “USD” measures the fuel and boat maintenance expense per tonne of dried
seaweed production. Farm revenues of the cases in Indonesia calculated based on the price of dried seaweed being USD850. Source: Calculated, based on cases listed in Table 6.
22. Solomon Islands [off-bottom, 4 km, 21.7 ty, USD52] 16. Philippines, Tawi-Tawi [HLL, 1.8 km , 2.75 ty USD138]
17. Philippines, Zamboanga [MRLL, 0.05 ha, 2.85 ty, USD116] 23. Solomon Islands [off-bottom, 2.4 km, 9.2 ty, USD25, fuel only]
15. Philippines, Palawan [HLL, 2.7 km , 8.57 ty, USD48] 18. Philippines, Zamboanga [SW, 0.27 ha, 8.5 ty, USD39]
21. Solomon Islands [off-bottom, 4 km, 17.4 ty, USD11, fuel only] 7. Indonesia [raft, 6 km, 6.6 ty, USD11]
8. Indonesia [raft, 30 km, 33 ty, USD4.5]
Ratio of fuels and boat maintenance expense to farm revenue
6.3 12.9
10.8 5.1
0.5 1.3
2.8 3.6
13.4 Indonesia
Solomon Islands Philippines
FIGURE 17
Total cash operating expense excluding seed materials 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; “USD” measures total cash operating expense; “Farm management” includes
expenses on hired labour excluding hired service for transportation and maintenance of farming system as well as seed materials for the cases of Mexico; “Transportation and marketing” includes expense on fuel and boat maintenance, hired service for transportation the
United Republic of Tanzania, and marketing Mexico. Source: Calculated, based on cases listed in Table 6.
100 200 300 400 500 600 700 800
Transportation and marketing
Farm management
23. Solomon Islands [off-bottom, 2.4 km, 9.2 ty, USD43] 22. Solomon Islands [off-bottom, 4 km, 21.7 ty, USD227]
21. Solomon Islands [off-bottom, 4 km, 17.4 ty, USD30] 20. United Republic of Tanzania [line, 0.324 km, 0.806 ty, USD17]
19. United Republic of Tanzania [off-bottom, 0.3 km, 0.662 ty, USD18] 18. Philippines, Zamboanga [SW, 0.27 ha, 8.5 ty, USD432]
17. Philippines, Zamboanga [MRLL, 0.05 ha, 2.85 ty, USD564] 16. Philippines, Tawi-Tawi [HLL, 1.8 km , 2.75 ty, USD203]
15. Philippines, Palawan [HLL, 2.7 km , 8.57 ty, USD89] 14. Philippines, Tawi-Tawi [FOB, 1.62 km , 0.9 ty, USD274]
13. Philippines, Zamboanga [FOB, 1.8 km, 2.143 ty, USD395] 12. Mexico [raft, 1 ha 100-g seed, 54 ty, USD568]
11. Mexico [raft, 1 ha 50-g seed, 27 ty, USD689] 10. Mexico [off-bottom, 1 ha 100-g seed, 54 ty, USD568]
9. Mexico [off-bottom, 1 ha 50-g seed, 27 ty, USD689] 8. Indonesia [raft, 30 km, 33 ty, USD145]
7. Indonesia [raft, 6 km, 6.6 ty, USD64] 2. India [raft, 1 ha, 54 km, 6 cyclesyear, 108 ty, USD143]
1. India [raft, 1 ha, 54 km, 4 cyclesyear, 72 ty USD143]
Total operating expense per unit of dried seaweed production USDtonne
116 116
27 140
53
5
11 551
431 551
395 431
137 137
137 137
448 138
65 116
393 39
18 17
19 11 52
174 25
18 274
40 48
27
IND IND
MEX
PHL
SLB TZA
Philippines Cases 17 and 18 and the completely commercial operations in Mexico Cases 9–12.
3.3 Revenue and profit
Revenue Farm revenue is determined by production and price. Besides the growth rate of
36
cultivar, seaweed production also depends on the number of cycles or days available for farming during a year. In the Indonesia cases Cases 7 and 8, seaweed farming
was conducted all throughout the year in eight cycles 45 days per cycle and 360 days in total. For the United Republic of Tanzania, the floating-line case Case 20 also
had eight 45-day cycles, while the off-bottom system Case 19 lost one crop because of disease and, hence, had only seven 45-day cycles 315 days in total of successful
production.
The number of cycles or days is lower for countries in higher-latitude zones with winters being too cold to conduct carrageenan seaweed farming. For the India cases,
the first-year operation Case 1 had only four 45-day cycles 180 days in total, while the operations afterwards Case 2 had six cycles 270 days in total. The Mexico cases
had four 60-day cycles 240 days in total, while those of the Philippines had five 45-day cycles 225 days in total.
Given production, farm revenue is determined by the price of dried seaweed, which essentially measures revenue per unit of production. The prices of dried seaweed are
between USD947tonne and USD1 093tonne in the Philippines cases, USD1 000 tonne for Mexico, USD391tonne for Solomon Islands, USD331tonne for India, and
USD207tonne for the United Republic of Tanzania. Three price scenarios USD500 tonne, USD850tonne and USD1 200tonne were examined in the Indonesia cases;
the average i.e. USD850tonne is used in the analysis here. Low prices may partly reflect the poor quality of seaweeds andor price discounts given to trader that provide
farming materials andor extension services Msuya, 2013.
Profit Profit is equal to farm revenue minus total cost capital cost plus operating expense.
Figure 18 summarizes the profits of 19 cases in Table 6. The operating expenses in Figure 18 do not include expenditures on initial seed materials by farms relying on self-
FIGURE 18
Profitability of 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 = tonnes year” measures the farm’s annual production of dried seaweed; “USDtonne” indicates the price of dried seaweed assuming USD850 as
the price of dried seaweed in the Indonesia cases; “Capital cost” includes amortized annual capital cost i.e. depreciation of physical investments and financial cost interests and insurance premiums; “Operating expense” indicates total cash operating expense excluding
seed materials except for the cases for Mexico and family labour same as Figure 17; “Profit” is equal to price minus capital cost and operating expense discrepancy due to rounding; i.e., Price = Profit + Capital cost + Operating expense.
Source: Calculated, based on cases listed in Table 6.
200 400
600 800 1000 1200
Proit Operating expense
Capital cost
15. Philippines, Palawan [HLL, 2.7 km , 8.57 ty, USD947t] 16. Philippines, Tawi-Tawi [HLL, 1.8 km , 2.75 ty, USD1075t]
14. Philippines, Tawi-Tawi [FOB, 1.62 km , 0.9 ty, USD1072t] 7. Indonesia [raft, 6 km, 6.6 ty, USD850t]
13. Philippines, Zamboanga [FOB, 1.8 km, 2.143 ty, USD1093t] 8. Indonesia [raft, 30 km, 33 ty, USD850t]
18. Philippines, Zamboanga [SW, 0.27 ha, 8.5 ty USD1074t] 17. Philippines, Zamboanga [MRLL, 0.05 ha, 2.85 ty, USD1074t]
10. Mexico [off-bottom, 1 ha 100-g seed, 54 ty, USD1000t] 21. Solomon Islands [off-bottom, 4 km, 17.4 ty, USD391t]
12. Mexico [raft, 1 ha 100-g seed, 54 ty, USD1000t] 23. Solomon Islands [off-bottom, 2.4 km, 9.2 ty, USD391t]
20.United Republic of Tanzania [line, 0.324 km, 0.806 ty, USD207t] 2. India [raft, 1 ha, 54 km, 6 cyclesyear, 108 ty, USD331t]
19.United Republic of Tanzania [off-bottom,0.3 km, 0.662 ty, USD207t] 1. India [raft, 1 ha, 54 km, 4 cyclesyear, 72 ty, USD331t]
22. Solomon Islands [off-bottom, 4 km, 21.7 ty USD391t] 9. Mexico [off-bottom, 1 ha 50-g seed, 27 ty, USD1000t]
11. Mexico [raft, 1 ha 50-g seed, 27 ty, USD1000t]
USD per tonne of dried seaweed production
564 432
122 80
395 203
145 63
128 223
689 689
89 114
227 197
51 57
114 143 131
41 150
148 18
38 143 154
43 58
111 291
321 568
331 30
99 568
334 388
514 633
636 706
736 808
842 31
17 36
64 61
274 64
89 73
16
propagated cultivars the Mexico cases being the only exceptions or the imputed value of family labour; thus, the profits here may not be exactly the same as those calculated
in the case study papers. All the 19 cases in Figure 18 had positive profits, ranging from USD89 per tonne of
dried seaweed Case 11 to USD842tonne Case 15. Points to note are: • Seaweed price as a key factor affecting profit. Because of low seaweed prices,
the cases from India, Solomon Islands and the United Republic of Tanzania had relatively low profits even though they had low capital costs and operating
expenses. Indeed, given the price in the United Republic of Tanzania USD207 tonne, which is the lowest among all the cases, only 8 cases out of the total of
19 cases would be able to break even Cases 19 and 20 of the United Republic of Tanzania; Cases 21 and 23 of Solomon Islands; Case 15 of the Philippines; Case 7
of Indonesia; and Cases 1 and 2 of India.
• High break-even price for sophisticated andor commercialized farms. In the Philippines, the seaweed price would need to be at least USD686tonne to cover
the total cost of the sophisticated MRLL system Case 17; whereas the break-even price is USD560tonne for the SW system Case 18. In Mexico, the break-even
prices for the commercial off-bottom farm Case 10, 100 g seed and floating raft farm Case 12, 100 g seed are USD666tonne and USD679tonne, respectively.
• More cost-effective floating line systems. In the Philippines, the two HLL systems Cases 15 and 16 had lower total costs per tonne of dried seaweed production
than other farming systems in the country; the two cases had the highest profits among all the cases. Being sophisticated systems used in deeper waters, the
floating line system SW in Case 18 had a lower total cost than the floating raft system MRLL in Case 17. In the United Republic of Tanzania, the floating line
system Case 20 had a lower total cost than the off-bottom system Case 19.
• Economies of scale in stocking density. The use of small cultivar cuttings 50 g in Cases 9 and 11 result in underutilization of the production capacity and, hence,
a relatively high capital cost as well as operating expense per unit of production. The two cases have the lowest profits among all the cases.
• Small vs large operations. In Indonesia, the small nuclear farm that used relatively less hired labour Figure 15 had a slightly higher capital cost but a much lower
operating expense than the large leader farm. In Solomon Islands, the large farm Case 21 had a lower capital cost as well as operating expense than the smaller
farm Case 23.
Profit per unit of family labour Profit that does not exclude the value of family labour can measure the “net income” of
family labour. In Solomon Islands, the net income of family labour was USD1.14hour, USD0.68hour and USD0.58 for cases 21, 22 and 23, respectively; all the three were
higher than the average hourly wage of unskilled labour USD0.47hour in Honiara, the capital of the country Kronen, 2013.
In the United Republic of Tanzania, the net income for family labour was USD0.19 hour for the off-bottom system Case 19 and USD0.24hour for the floating line
system Case 20; both were higher than the hourly wage paid to hired labour for tying cultivars USD0.03hour Msuya, 2013. Further discussion on the low income of
seaweed farming in the United Republic of Tanzania is given in Section 4.1.
Profit per unit of farming area Figure 19 presents profit per unit of farming area for some cases in Table 6; the measure
provides an indicator of the profitability of land use in carrageenan seaweed farming. In Figure 19, the land profitability ranges from less than USD2 500ha to more than
USD20 000ha.
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