Chesapeake Bay Oyster Economics

1
Chesapeake Bay Oyster Economics

• Presented to
• Committee on Non-native Oysters in the Chesapeake
  Bay
• October 8, 2002
• Fredericksburg, VA
• Douglas Lipton
• Department of Agricultural Resource Economics
• Sea Grant Extension Program
• University of Maryland College Park

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Outline

• Review Of Recent Studies
• Some Updated Data
• New Studies
• Final Thoughts

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2 Relevant Recent Studies

• Economics of Molluscan Introductions and
  Transfers The Chesapeake Bay Dilemma. D.W.
  Lipton, E.F. Lavan and I.E. Strand. J. of
  Shellfish Research 11(2)511-519. 1992.

• A Profile of the Oyster Industry Northeastern
  United States. D. Lipton and J. Kirkley (eds.)
  University of Maryland Sea Grant Marine Extension
  UMSGMAP-94-02 Virginia Sea Grant Marine Resource
  Advisory No. 54, VSG-94-08. 72 pp. 1994.

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Molluscan Introductions Summary

• Historical Perspective
• 1950-1981 Period
• Period began with Maryland industry relying on
  state fresh shell planting on oyster bars and
  steadily declining harvests
• Discovery of dredge shell helped revitalize
  industry in 1960s MSX confined to lower Maryland
  waters. Harvest target of 2.5 million bushels
  for economic reasons
• 1981-1988 Period
• MSX moves into more northern Maryland waters,
  harvest drops from 2.5 million bu. to 400
  thousand
• 40 decline in harvesters, but effort (man-days)
  remain same, price more than doubles

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Molluscan Introductions Summary

• Review of Mollusc Introductions
• Literature is selective only hear about successes
  or disasters, not about failed introductions
• Poor decision processes, but generally good
  outcomes, a few exceptions
• Framework for Benefit/Cost Analysis
• Measuring external costs and benefits
• Uncertainty
• Risk
• Discounting

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Major Findings A Profile of the Oyster Industry
- Harvest

• Historically, Chesapeake produced high volume,
  low price with most oysters destined for shucking
  market as opposed to higher value halfshell
  market

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Major Findings A Profile of the Oyster Industry
- Processing

• Plants processing oysters declined in number from
  345 in 1974 to 167 in 1990.
• In 1990 Virginia had 28 oyster processing plants
  and Maryland 20, down from 80 and 58,
  respectively in 1974.
• Probably only a handful today in each state.
• In the 1970s about 15 distinct products were
  made from oysters, by 1990 there were only 6.
• Fresh shucked oysters made up 76 of the product
  mix in 1970 and 92 by 1991.

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Major Findings A Profile of the Oyster Industry
- Marketing

• Industry survey revealed concerns about
• Negative publicity regarding consumption of raw
  oysters
• Chesapeake Bay oyster diseases being confused
  with human health effects
• Changing tastes Younger consumers are not
  eating oysters

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Major Findings A Profile of the Oyster Industry
Trends in Demand

• Analyzed three food expenditure surveys
• USDA 1977/78, NMFS 1980/81, USDA 1987/88
• At Home Consumption
• Age significant, income significant in early
  surveys, but not later ones
• Away From Home Consumption
• Income, rural residence, male, southern state
  residence all had influence

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U.S. Supply of Oysters, 1980-2001
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Index of U.S. Per Capita Oyster Consumption
(1980100)
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Nominal Oyster Prices by Origin
13
Eastern Oyster Prices in Current (2002) Dollars
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Current Research

• Non-Market Benefits of Oyster Reefs
• R. Hicks, T. Haab and (D. Lipton)
• Recreational Fishermen revealed preference -
  value of improved catch from fishing on oyster
  reefs
• Recreational Fishermen contingent valuation
  -willingness-to-pay for improvement in oyster
  reefs that will lead to general improved water
  quality

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Very Preliminary Results from CV

• The average respondent (recreational angler) is
  willing to pay 13.45 per year to create an
  average of 4,625 acres of oyster reef.
• Willingness to pay for oyster reef restoration
  increases with the amount of oyster reef created.
  On average, respondents are willing to pay 7.53
  per year for each additional 1,000 acres of reef
  created.
• Willingness to pay for oyster reef creation is
  higher for those anglers that
• Consume more oysters
• Have a lower perception of current water quality
• Support restoration projects
• Feel restoration projects have been effective in
  the past.

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Its An Investment

• The intentional introduction of C. ariakensis is
  an investment and should be analyzed to determine
  whether the return on the investment is
  sufficient to justify making it.

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Public Benefits (Positive Externalities)

• Will introduction of C. ariakensis lead to
  improved water quality and/or habitat in
  Chesapeake Bay?
• Beneficiaries
• Watermen
• Recreational Fishermen
• Boaters, Swimmers
• Bay Users
• Reduced Costs to Achieve WQ standards

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Costs What Counts

• Public Negative Externalities
• What impacts will the introduction of C.
  ariakensis have on the production of other
  seafood products, recreational fisheries and the
  health of the Chesapeake Bay ecosystem?
• Lost profits from seafood production
• Lost net benefits from recreational fishing
• Lost net benefits from other ecosystem goods and
  services
• Irreversible loss of ability to restore
• native oysters