3323-AgbayaniRF2002

Chapter 8: Economics of Feeding

Introduction

  • Increase in aquaculture farmers adopting higher stocking densities and supplementary feeds due to:

    • Increased production

    • Improved profits

  • Example in shrimp culture:

    • Natural productivity: 100 to 300 kg/ha/yr

    • With fertilization: 600 to 1,000 kg/ha/yr (Philippines)

    • With feeds: 20,000 kg/ha/yr (Taiwan) and 30,000 kg/ha/yr (Japan)

  • Shrimp farming in the Philippines costs:

    • Feeds: 54-63% of operating costs

    • Mudcrab culture: 50-57% of operating expenses

    • Milkfish culture: 10-77% of total costs

  • The chapter introduces Economic Analysis in Aquaculture focusing on:

    • Cost of producing feeds

    • Production function

    • Economic efficiency indices of feeds

    • Least-cost combination

    • Linear programming for resource allocation

Cost of Producing Feeds

  • Classification of Costs:

    • Direct Costs:

      • Raw materials (fishmeal, minerals, vitamins)

      • Direct labor (wages and manufacturing costs)

    • Indirect Costs:

      1. Supervisory costs

      2. Electricity

      3. Miscellaneous supplies (gasoline, machine oil)

      4. Repair and maintenance costs

      5. Depreciation of fixed assets (calculated as the annual cost of feeding machinery)

  • Example of computation: A feed mill costs P1,000,000 and has a useful life of 10 years = P100,000 depreciation/year

  • Total feed production example: 1 ton shrimp feed costs P25,293.83 (costs per kg: P25.29)

Single-input and Single-output Production Function

  • Production Function:

    • Technical relationship between farm inputs and outputs at a certain time

    • Equation: Y = f(X1, X2, ... , Xn) where Y = output (total yield) and Xn = various resource inputs

  • Input variables:

    • Amount of feed (X1)

    • Stocking size of fingerlings (X2)

    • Amount of fertilizer (X3)

    • Stocking density (X4)

    • Amount of labor (X5)

  • Maximum Sustainable Yield (MSY): point where increasing feed beyond this level does not benefit production.

Marginal Analysis in Production

  • Average Physical Product (APP): Amount of fish produced per input unit

  • Marginal Physical Product (MPP): Change in output from an additional input unit

  • Stages of Production:

    1. Stage I: Increasing returns - TPP increases at an increasing rate

    2. Stage II: Diminishing returns - TPP still rises but at a declining rate

    3. Stage III: Decreasing returns - Additional feeding reduces output

Economic Analysis in Production

  • Profit Maximization: Maximizing profit, not merely production.

  • Total Value of Production (TVP), Average Physical Product (VAP), and Marginal Physical Product (VMP) help guide decisions on input usage.

  • Maximum Economic Yield (MEY): Where profit is maximized, often before MSY is reached.

Economic Efficiency of Feeds

  • Feed Conversion Ratio (FCR): Total weight of feed used divided by fish yield; lower FCR indicates higher efficiency.

  • Incidence Cost: Cost of producing a unit of fish = Total feed cost / Weight of fish produced – lower indicates greater efficiency.

  • Profit Index: Total value of fish produced minus total feed cost divided by total feed cost helps determine economic efficiency.

Least-cost Combination of Feeds

  • Cost Minimization Techniques: Find the lowest cost combination of feeds for production consistency.

  • Marginal Rate of Substitution (MRS): Indicates substitution ratios between different feeds to control costs.

  • Least-cost combination occurs when MRS equals the inverse of the price ratio of feeds.

Linear Programming for Feed Formulation

  • Method used to allocate scarce resources to optimize feeding cost or maximize profit:

    • Objective: Maximize profits or minimize cost

    • Constraints: Limited resource availability

    • Example dealing with nutrients and required amounts with specified costs.

Summary

  • Discusses costs involved in producing aquaculture feeds (direct/indirect).

  • Introduces production function for evaluating input-output relationships.

  • Explains concepts of MSY, MEY, economic efficiency, and cost minimization.

  • Reviews linear programming for determining feed composition to maximize nutrient delivery while minimizing costs.

Guide Questions

  1. What are the items that comprise direct costs in shrimp feed production?

  2. What constitutes indirect costs in shrimp feed production?

  3. When is additional feeding of fish no longer beneficial, and what is the most profitable feeding level?

  4. How can economic efficiencies of different fish feeds be measured?

  5. Define linear programming in the context of feed formulation.

  6. What are the key concepts and requirements in linear programming and feed analysis?