Australian fisheries - outlook and economic indicators

11.09

Australian fisheries - outlook and economic indicators Authors: Robert Curtotti, Mary Hormis, Kristin McGill, Thuy Pham, Simon Vieira, Christopher Perks, Daniel George and Kasia Mazur

Abstract

• The growth in global aquaculture, particularly in the Asian region, has been a major global trend that has increased. There is competition in global markets for Australian fishers, and import competition in local markets.

• Australia’s fisheries production in 2010–11 is forecast to decline by 4.5 per cent to $2.1 billion. The decline largely reflects the significant appreciation of the Australian dollar in 2010–11.

• The assumed steady depreciation of the Australian dollar over the medium term should result in favourable price movements for Australian fishers, increasing the gross value of fisheries production.

• Given the declining trend in gross value of production, there is a need to remain focused on achieving maximum economic returns from the use of fishery resources. In order to assess the success of management against this objective, a range of indicators are available such as net economic returns, productivity analysis, profit decomposition, latency, and quota values.

ABARES project: 43000 ISSN: 1141-4215

ABARES Outlook conference paper 11.09 2

World fisheries production, consumption and trade World production World fisheries production increased in 2008, by 1.8 per cent to a record level of 142 million tonnes. Most of this growth is attributed to continued strong growth in aquaculture production, which increased by 5 per cent in 2008. Aquaculture production almost doubled over the decade to 2008—rising from 28 million tonnes in 1998 to 53 million tonnes in 2008 (figure 1). Aquaculture production accounted for around 37 per cent of the volume of world fisheries production in 2008 and was valued at around US$99 billion, accounting for 51 per cent of the gross value of world fisheries production, which reached $192 billion in 2008 (FAO 2010b). In contrast to the strong growth in global aquaculture production since the late 1980s, wild catch production has been relatively stable. The current stable production trend for wild caught production supports the Food and Agriculture Organization’s (FAO’s) view that, globally, wild catch fisheries have reached their potential. According to the FAO (2010a), the proportion of overexploited, depleted or recovering stocks increased from 10 per cent in 1974 to 32 per cent in 2008; indicating that more than half of the world’s main fish stocks are overexploited and 20 per cent are moderately exploited. Over a quarter of the world capture production each year is supplied by Asian countries, with the principal producers in this region including China (15 million tonnes), Indonesia (5 million tonnes) and Japan (4 million tonnes). Outside the Asian region, leading countries in wild catch fisheries production are Peru (7 million tonnes) and the United States (5 million tonnes) (FAO 2010a).

The Asian region is the largest aquaculture producer. In 2008 this region accounted for 88 per cent of world aquaculture production in volume terms and 77 per cent in value terms. Most production in the region occurs in China, which accounts for 71 per cent by volume and 67 per cent by value of regional production. The main products produced in the region include carp, oysters, clams and prawns. World seafood consumption Globally, seafood provides an estimated 15 per cent of the average annual human protein intake (FAO 2010b). Outpacing global population growth, global annual growth in seafood


consumption has averaged 2.9 per cent since the 1960s. From 2005 to 2007, 111 million tonnes of seafood was consumed (live weight equivalent), an average of 16.8 kg per person (table 1) (FAO 2010b). Significant variations in the contribution of fisheries products to diets in developed and developing countries are influenced by differences in regional income levels, eating habits and traditions, availability of fish and substitutes, prices, socioeconomic status and seasonality. Seafood consumption per person is generally higher in developed regions (24.1 kg per person) than in developing regions (14.9 kg per person). Table 1: Average fishery products production, trade and per person supply (2005–2007)

Source: FAO 2010b.

The FAO (2010a) estimates that by 2030 an additional 27 million tonnes of fish a year will be needed to maintain current per person levels of fish food consumption. Given the limited room for expansion in wild catch fisheries, the majority of this additional supply, if it is required, will need to be sourced from aquaculture. Further growth of the global aquaculture sector over the period to 2030 is likely to be constrained by a number of factors, including access to suitable land, clean water and capital, particularly in developing countries (FAO 2010a). Overcoming these constraints will be important if aquaculture is to continue to meet most of the growth in world seafood demand. World trade Fisheries products trade represented 53 per cent of the value of global production in 2008 (FAO 2010b). Fisheries products trade is growing rapidly, driven by the rise in global seafood consumption and the use of fisheries product feedstock in aquaculture production. In the decade leading up to 2008, the real value of fisheries exports increased at an average annual rate of 4.1 per cent to an estimated US$103 billion (FAO 2010b) (figure 2). This growth has been moderated by a fall in the price of crustacean species, which fell at an average annual rate of 3.6 per cent since the start of the decade, largely as a result of a rapid rise in the production of shrimps from aquaculture farms (figure 3).

Area/countries Production Non-food uses

Imports Exports Food supply

Population Annual per person supply (live weight)

Million tonnes in live weight million Kg/person

World 137.9 27.5 36.6 38.6 110.8 6,591 16.8

Developed countries

29.1 5.7 26.1 17.2 32.5 1,351 24.1

Developing countries

108.7 21.7 10.5 21.4 78.3 5241 14.9

Canada 1.2 0.1 0.6 1.0 0.8 33 23.7

US 5.4 0.7 4.6 1.8 7.4 306 24.2

Australia 0.3 0.05 0.4 0.07 0.5 21 26.0

NZ 0.6 0.1 0.04 0.5 0.1 4 26.7

EU 6.9 1.1 13.3 8.0 11.2 492 23.0

Japan 5.1 1.2 4.2 0.6 7.5 127 58.6

China 44.4 6.3 2.7 6.7 34.1 1,298 26.3


A range of species were exported in 2008. More than half the value of world trade in fisheries products in 2008 was for marine fishes. Crustacean exports accounted for 21 per cent of the value of fishery exports in 2008, with shrimp exports being the single largest commodity export in this category, accounting for 15 per cent of fishery product trade in 2008. The other main exported species were salmon, trouts and smelts (12.4 per cent); squids, cuttlefishes and octopuses (4 per cent); and herrings, sardines and anchovies (4 per cent). China is the world’s largest exporter of fisheries products, accounting for around 11 per cent of global trade. In 2008, China’s exports were valued at US$10.1 billion. Over the past few years there has been a considerable expansion of China’s exports of fisheries products, driven by a rapid growth in production and the expansion of its fish-processing industry (FAO 2010b). Other major exporters include Norway (US$6.9 billion), Thailand (US$6.5 billion), Denmark ($6.5 billion), Vietnam (US$4.5 billion) and the United States (US$4.5 billion).


Japan is the largest importer of fisheries products, importing $US14.9 billion in 2008, accounting for 14 per cent of global imports. Japan’s principal imports include tuna, frozen squid and cuttlefish, frozen prawns and shrimps and fresh or chilled salmon (FAO 2010b). Other major importers in 2008 included the United States (US$14.1 billion), Spain (US7.1 billion), France (US$5.8 billion), Italy (US$5.5 billion) and China (US5.1 billion).

Australian fisheries production and trade Production The gross value of Australian fisheries production is estimated to have declined by 4.3 per cent in 2009–10 to $2.1 billion (table 3). Large falls in the value of tuna production (34 per cent), rock lobster production (9 per cent) and abalone (5 per cent) were offset by rises in the production value of salmonids (3 per cent) and prawns (10 per cent). Australia’s fishery production remained focused on producing high-value products of rock lobster, salmon, prawns, tuna, and abalone. Together, these species were valued at $1.4 billion in 2009–10, accounting for 64 per cent of total Australian fisheries production. In recent years, the volume and value of production in Australian fisheries have been affected by unfavourable movements for a number of variables. Fishing effort and catches have been influenced by fuel price increases, and by the appreciating Australian dollar, which makes Australian exports less competitive and overseas imports more attractive to consumers. Reflecting these changes, the gross value of production (GVP) of Australia’s fisheries production has declined by 21 per cent, in real terms, from AU$2.9 billion in 1998–99 to AU$2.3 billion in 2008–09 (figure 4). Most of the decline is attributable to the decline of the wild catch sector GVP, which fell by 35 per cent over the decade, from AU$2.2 billion in 1998–99 to AU$1.4 billion in 2008–09, in real terms (ABARE–BRS 2010). The main drivers of this decline are reductions in prices of key wild caught species such as rock lobster, prawns, abalone and wild caught tuna (figures e and f). Together, these species contribute at least half of Australia’s GVP of fisheries production. The real value of production of these species has dropped by 53 per cent since 1998–99.


In 2009–10, Australia’s fishery production is estimated to have fallen by 1 per cent to 240 000 tonnes. This was driven by falls in production volumes of rock lobster (17 per cent), tuna (17 per cent) and abalone (15 per cent). The strong declines in production of these species were moderated by increased production of farmed salmonids, which are estimated to have increased by 7 per cent. Prawns, oyster and other mollusc production is also estimated to have increased in 2009–10, by an average of 6.7 per cent (ABARES 2011). After reaching a peak of 279 000 tonnes in 2004–05, Australian fisheries production has steadily declined. Most of the decline in production since 2004–05 has been shared across a wide range of species, including most fish, crustacean and mollusc species. Lower production volumes of fish—excluding salmon and tuna—drove most of this decline, falling by 23 per cent over the period to 2008–09. Salmon and tuna production contribute 18 per cent of Australian fisheries production, and have increased their production by 76 and 21 per cent, respectively, since 2004–05. Other key species that


have increased their production volume since 2004–05 are prawns (2 per cent) and oysters (20 per cent). The composition of fisheries production has also changed since 2004–05. The volume of aquaculture production has continued to rise as a result of expansion of Australia’s salmonid and tuna growing industry, reaching a total of 70 000 tonnes in 2008–09. In contrast, over the past several years there has been a declining trend in wild catch production, from 236 300 tonnes in 2004–05 to 171 000 tonnes in 2008–09. As a result, aquaculture’s share of production has grown from 17 per cent in 2004–05 to just under 29 per cent in 2008–09. The growth of the aquaculture sector in Australia has been driven by a strong increase in the production of salmonids. Over the decade to 2008–09, salmonid production almost tripled in volume terms, to 30 000 tonnes, and almost quadrupled in value, reaching $326 million in 2008–09. This accounted for 37 per cent of the total value of Australian aquaculture production. The second most valuable aquaculture species is southern bluefin tuna. In 2008–09, this sector produced 8800 tonnes of tuna for a value of $158 million. Trade Australia is a net importer of fisheries products in both volume and value terms. However, the composition of fishery product exports is different to imports. Australia mostly exports high–value products, while importing lower valued products (figure 7).

During the past 10 years there has been a significant decline in the export value of Australian fisheries products. This resulted in Australia becoming a net importer in value terms in 2007–08 (figure 8). After peaking in 2000–01, the real value of Australian exports has declined by 55 per cent to $1247 million in 2009–10, driven by large declines in the volume and unit prices of major edible export species, particularly prawns, tuna and abalone (table 2, figure 9). Falls in unit prices since 2000–01 reflect the strong appreciation of the Australian dollar against the Japanese yen and US dollar.


Table 2: Volume and value of Australian fisheries products exports. Volume (tonnes) Value (millions in 2009–10

dollars)

2000–01 2009–10 %change 2000–01 2009–10 %change

Rock Lobster 13 345 7 730 –42%

686 400 –42%

Prawns 12 124 4 659 –62% 375 61 –84%

Abalone 3 543 3 638 3% 321 216 –33%

Tuna 12 171 9 322 –23%

341

117 –66%

Pearls - - - 540 244 –55%


In contrast to the lower prices for tuna, prawns, abalone and scallops over the period 2000–01 to 2009–10, rock lobster prices have been increasing since 2003–04, owing to reduced supply and continued strong demand from Asian markets. Higher prices for rock lobster have provided some support to the value of Australian fisheries product exports. Lower supply of rock lobster in recent years is a result of management responses to concerns about stock abundance in the Western Australian Rock Lobster Fishery. In 2009–10, the main Australian fisheries export destinations in terms of export value were Hong Kong, Japan, the United States and Chinese Taipei (figure 10). These countries accounted for 86 per cent of total Australian seafood exports in 2009–10. Over the past 10 years, the value of fishery products exported to Hong Kong and China has almost doubled, showing the emergence of these countries as strong export markets. In 2009–10, approximately 40 per cent of fishery products were exported to Hong Kong and China. The growth in Hong Kong’s and China’s share of exports is largely due to their consumption of rock lobster and abalone. These species account for 61 per cent and 26 per cent, respectively, of the total fisheries export value to Hong Kong and China. The species also account for almost 70 per cent of the total Australian export value.

In 2009–10, the volume of Australian imports of edible fisheries products continued to grow, by 7 per cent to 207 000 tonnes. However, the appreciation of the Australian dollar has meant that the value of these imports has fallen, by 3 per cent to $1.2 billion. The main edible fisheries products imported are canned products ($446 million), contributing 36 per cent of the value of edible fisheries products. Fresh, chilled or frozen prawns also contribute significantly (13 per cent) to the total value of edible fishery product imports, and were valued at $159 million in 2009–10. The major sources of Australian fish and fisheries products imports are Thailand, New Zealand, Vietnam and China. Together, these countries accounted for 70 per cent of the total fishery product imports in 2009–10. Although they are still smaller sources of imports than both Thailand and New Zealand (in terms of value), the past decade has seen the emergence of China and Vietnam as sources of fisheries products imports (figure 11).


Australian fisheries medium-term outlook (major products) The real value of Australia’s fisheries production in 2010–11 is forecast to decline by 4.5 per cent to $2.1 billion (table 3). The decline largely reflects the significant appreciation of the Australian dollar in 2010–11. Over the medium term, fisheries production and value will continue to be affected by movements in fuel prices, labour constraints and exchange rate movements, as well as management responses aimed at rebuilding stock levels. The assumed steady depreciation of the Australian dollar over the medium term (ABARES 2011) should result in favourable price movements for fishers, particularly for the major production species, which are generally export oriented. Any reduction in the value of total production in the wild catch sector is likely to be offset to some extent by increases in the value of aquaculture production, particularly for abalone, salmonids and tuna. The appreciation of the Australian dollar against the currencies of major trading partners in 2010–11 will most likely keep the value of Australia’s fishery product export value stable, at around $1.3 billion. Over the medium term, the assumed depreciation of the Australian dollar and expected growth in production of high-value species are likely to result in an increase in the value of fisheries exports through to 2015–16, reaching $1.9 billion in that year. Prawns More than half of Australia’s prawns are wild catch from northern waters off Queensland and the Northern Territory. However, aquaculture is contributing a growing share of prawn production. In 2009–10, 20 per cent of Australian prawn production was farmed. The majority of prawn aquaculture occurs in Queensland, which produced 5200 tonnes in 2009–10, with a value of $75 million. Total prawn production is estimated to have decreased by 8 per cent in 2010–11, to 24 500 tonnes (ABARES 2011). Lower production in 2010–11 is largely a result of lower


production of wild caught and aquaculture prawn production from Queensland, following floods and Tropical Cyclone Yasi in early 2011. The real value of production is also estimated to decline in 2010–11, by 6 per cent to $309 million, In the outlook period, it is expected that wild caught prawn production will remain stable but will continue to be influenced by both biological and economic factors. External economic factors such as the price of fuel and the Australian exchange rate will influence the quantity and value of prawn production. The assumed depreciation of the Australian dollar over the medium term will improve both the domestic and export prices received for Australian prawns. It is expected that aquaculture production of prawns will continue to increase at a consistent rate through to 2015–16. Rock lobster Approximately two-thirds of Australia’s production of rock lobster is from Western Australia. The other two main rock lobster fisheries are located in South Australia and Tasmania, which accounted for 15 per cent and 13 per cent of total catch in 2009–10, respectively. In 2009–10, Western Australia, South Australia and Tasmania accounted for 48, 23 and 17 per cent of Australia’s gross value of rock lobster production, respectively. In recent years, total Australian rock lobster production has dropped considerably relative to the 2003–04 peak production of approximately 19 000 tonnes. The main driving factor behind the decline in production has been a large reduction in the catch in Western Australia, where the 2010–11 catch has been capped at 5500 tonnes with the introduction of Individual Transferable Quotas (ITQs). This compares to a peak catch of 14 000 tonnes in 2003–04 in Western Australia. Production in the medium term is expected to stabilise relative to historical changes in lobster production, with the three major lobster producing states now being managed under a system of Total Allowable Catch (TAC) and ITQs. Prices in Western Australia are expected to increase slightly with the new ITQ system, with fishers likely to be making production decisions that allow maximum prices to be achieved for their catch in a given year. Overall domestic prices are expected to increase slightly over the medium term in line with the assumed depreciation of the Australian dollar. As a result, production value is forecast to rise to $538 million in 2015–16. The majority of the Australian rock lobster production is exported. In late 2010, action by Chinese authorities was taken to ensure all Australian lobster imports into that country are subject to established tariffs. This had an immediate negative impact on prices. However, the overall effect in annual terms is minimal, given that record high prices prevailed in the first quarter of the 2010–11 financial year. Despite price falls in October–November, prices in December 2010–11 were at levels similar to those in December 2009–10. Total rock lobster exports are forecast to remain relatively constant because of the production limitations enforced in the major rock lobster producing states. Export prices are also expected to increase in the latter part of the outlook period, as a result of the assumed depreciation of the Australian dollar. As a result, exports are forecasted to rise to $582 million in 2015–16. Abalone Around 87 per cent of Australia’s abalone production has been harvested from wild catch fisheries in Tasmania, Victoria and South Australia. While the majority of abalone comes from wild catch, there has been a growing trend in the aquaculture production. The


abalone aquaculture sector has grown by 20 per cent over the past five years (compared with a 10 per cent drop in wild catch production), although it still accounts for only a fraction of the total industry. It is expected that farmed abalone production will rise at a slightly faster rate to 2015–16, while farmed abalone prices remain stable. The outbreak of an abalone virus detected in 2005 negatively affected the production growth in the wild catch sector. By 2009–10, the sector had reduced to half its 2004–05 production size. Efforts from government and industry to restore abalone health in the area have resulted in lower TAC limits, with full but very gradual recovery expected. Late in 2010, the virus was also discovered in parts of the Tasmanian wild catch sector, although it does not appear to have any negative effect on production in that state. It is estimated that Australia will produce 5400 tonnes of abalone in 2010–11 (ABARES 2011). It is expected that Australian abalone production will increase by 13 per cent over the medium term to around 6100 tonnes. This growth will continue to be driven by the strength of export demand. Australia continues to export around 60 per cent of its abalone harvest. As a result, the GVP has been moving with the exchange rate, and has therefore been volatile. Over the medium term, it is expected that prices will recover, in line with an assumed depreciation of the Australian dollar exchange rate and support export returns, forecast to reach $228 million in 2015–16. Most abalone exports are destined for China and Hong Kong. Tuna Approximately three-quarters of Australia’s tuna production is exported, mostly to Japan and the United States, but increasingly to Thailand and the South Pacific. The principal tuna species in value and volume terms is southern bluefin tuna (SBT), which is caught using purse seine methods from Commonwealth waters and then fattened in farms near Port Lincoln, South Australia. Other important export species are yellowfin, bigeye and, more recently, albacore tuna, caught predominantly in the Commonwealth Eastern Tuna and Billfish Fishery (ETBF). In 2009–10, the SBT Fishery and the ETBF accounted for 64 per cent and 29 per cent, respectively, of the total production volume of tuna. In the same year, the value of tuna production decreased by 34 per cent to $124 million. Of this, just over $100 million, or 83 per cent, of the total value of tuna production was attributable to SBT. In the same year, 16 per cent of the total value of production was produced by the ETBF. Yellowfin tuna was the prime species caught in the ETBF, accounting for 55 per cent of the total value of production in the fishery. The 2009–10 year was the first year affected by the recent cuts in the global TAC for SBT. Farm production decreased as a result of these cuts. An estimated 17 per cent decrease in the volume of farm production between 2008–09 and 2009–10 is broadly consistent with the 18 per cent decrease in the volume of SBT wild caught for farm inputs. The production volume of the ETBF also decreased, by 14 per cent, mainly as a result of poor catch conditions. In 2009–10, the high exchange rate affected the trade of Australian tuna products on foreign markets. From 2008–09 to 2009–10, in Australian dollar terms, the price of SBT decreased by 23 per cent and the prices of species caught in the ETBF decreased by 16 per cent. An overall decrease in tuna prices of 21 per cent was also influenced by the build up of cold store inventories in key export markets, which put downward pressure on prices.


In the longer term, world production of bluefin tuna will be constrained by international quota limits. Given the current TACs and the projected reductions in the supply of northern bluefin tuna, prices of tuna are expected to strengthen moderately over time. Given the Australian quota cut for SBT, technological improvements in yield and longer fattening periods in aquaculture production are expected to partially compensate for the reduction in wild catch inputs. Little growth in the value of production is anticipated in Australia’s wild catch tuna sector over the next five years. Salmonid Salmonids remain a key species of Australian fisheries, producing 32 000 tonnes in 2009–10 and contributing 18 per cent to the total value of fisheries production. Although there is a strong upward trend, changes in salmonid production growth in Tasmania have varied from 1 per cent to more than 20 per cent a year since 2005–06. Over 95 per cent of Australia’s salmonids production occurs in Tasmania. The remainder of salmonids production occurs in New South Wales and Victoria. In 2009–10, Tasmania produced 30 950 tonnes, while New South Wales and Victoria produced a combined total of 1000 tonnes. The value of salmonids production rose by 6 per cent in 2009–10, by $43.3 million to $369.5 million. This increase was mainly driven by a 6 per cent increase in Tasmanian production, combined with a 6 per cent increase in the average Australian price. Tasmanian producers sell the majority of their salmonids on the domestic market and, as such, the industry is relatively unaffected by the exchange rate. A key factor contributing to past growth has been a strong focus on marketing salmon to Australian consumers and investment in research and development. Over the period to 2015–16, it is expected that production will rise by more than 10 000 tonnes, reflecting an anticipated production expansion of 50 per cent in the Tasmanian sector. It is also expected that Chilean salmon will return to the international market within the next five years, after disease significantly reduced production in recent years. However, given the small proportion of salmonids that are exported, this will have only a minor effect on total production in Australia.


Table 3: fisheries products outlook

Indicators of economic performance GVP is a useful economic indicator for measuring economic activity in fisheries. Importantly, this activity underpins employment in the sector. However, this indicator cannot provide any information about the underlying economic returns being generated in the sector—the so called economic objective of fishery management. Since the early 2000s, the incorporation of an economic objective of maximising economic returns to the community from the management of fishery resources has become more important, with

fis heries products outlook

2008 2009 2010 2011 2012 2013 2014 2015–09 –10 –11 f –12 f –13 z –14 z –15 z –16

Gros s value of $m $m $m $m $m $m $m $mFis heries production

Tuna b 187 124 152 160 157 174 212 229– real c 197 127 152 155 148 160 190 201S almonids 326 370 414 443 466 477 501 531– real c 343 380 414 430 440 439 450 466Other fis h 390 402 370 374 377 381 385 389– real c 410 414 370 363 356 351 346 341Praw ns c 290 321 309 295 298 306 316 325– real c 306 330 309 286 282 282 284 285Rock lobs ter 415 375 419 429 441 477 512 538– real c 437 386 419 416 417 440 460 471Abalone 188 178 175 188 200 212 224 238– real c 198 183 175 183 189 195 201 208S callops 26 26 21 21 22 23 24 24– real c 28 27 21 21 20 22 21 21Other 398 329 213 190 175 170 153 131– real c 419 338 213 185 166 157 137 115Total 2 221 2 124 2 073 2 100 2 137 2 221 2 326 2 404– real c 2 337 2 185 2 073 2 038 2 019 2 046 2 091 2 109

Export value Tuna b 177 118 142 147 145 161 198 216– real c 186 122 142 143 137 148 178 189Other fis h 157 140 130 118 115 115 116 120– real b 165 144 130 114 109 106 104 105Praw ns d headles s 8 5 4 4 5 5 5 5 – real c 8 5 4 4 4 4 5 5 w hole 71 53 50 51 53 55 58 61 – real c 74 55 50 49 50 51 52 54Rock lobs ter tails 53 35 30 31 32 35 37 39 – real c 55 36 30 30 30 32 33 34 w hole 405 363 421 431 444 480 514 540 – real c 426 373 421 418 419 442 463 474Abalone fres h, chilled or frozen 119 133 126 130 144 158 168 187 – real c 125 137 126 126 136 145 151 164 prepared or pres erved 89 83 79 77 74 74 73 73 – real c 94 85 79 75 69 68 66 64S callops 33 30 30 33 33 32 32 31– real c 35 30 30 32 31 30 29 27Other fis heries products 52 43 51 67 70 72 72 74– real c 54 44 51 65 66 67 64 65

Total (excluding pearls ) 1 163 1 003 1 065 1 090 1 113 1 187 1 273 1 347– real c 1 224 1 031 1 065 1 058 1 051 1 094 1 145 1 181Pearls 366 244 222 222 222 227 232 239– real c 386 251 222 215 210 209 208 210

Total (including pearls ) 1 529 1 247 1 287 1 312 1 335 1 414 1 505 1 586– real c 1 609 1 282 1 287 1 273 1 261 1 303 1 353 1 391 b Exports of tuna landed in Australia. Excludes tuna transhipped at sea or captured under joint venture or bilateral agreements. cIn 2010–11 Australian dollars. d Includes headless and whole prawns only. f ABARES forecast. z ABARES projection.Sources: ABARES; Australian Bureau of Statistics.


fisheries management becoming increasingly focused on this area, particularly at the Commonwealth level. Measuring achievement against such an economic objective is difficult, requiring significant economic data to be collected and sometimes complex economic analysis to be undertaken. Such data collection and analysis is not always justified, especially where the fishery of interest has a low GVP. Given this, it is important to seek out cost-effective indicators of economic performance that, while not directly measuring success against the economic objective, can still provide some indication of success against this objective. In recent years ABARES has developed a suite of these types of indicators that give some information about how economic returns are trending in Commonwealth fisheries. Together, these indicators provide an indication of whether or not the economic objective of the Australian Fisheries Management Authority (AFMA) in the management of Commonwealth fisheries is being met. Each indicator is explained below in the context of the Commonwealth Trawl Sector of the Southern and Eastern Scalefish and Shark Fishery (SESSF), with some results from recent analysis provided. A range of performance indicators are available for assessing how close a fishery is to achieving its stated goal of economic efficiency or, in other terms, maximum economic yield (MEY). Some key indicators that have a strong underlying correlation to fishery profitability include net returns, fleet-level efficiency; total factor productivity measures; and profit decompositions. Other indicators that are indirectly related to fishery-level profitability—but typically require less information to estimate—include fishery-level latency and quota values. These indicators help in assessing whether or not fisheries are being managed in a way that generates MEY from the fishery resource. They also give fisheries managers a basis for the evaluation of outcomes, and provide a trigger for further investigation (Mayston 1985). Net economic returns Since 1992, ABARE (now ABARES) has conducted annual economic surveys of large key Commonwealth fisheries: the Northern Prawn Fishery; the Torres Strait Prawn Fishery; the Eastern Tuna and Billfish Fishery; and the Commonwealth Trawl and Gillnet Hook and Trap Sectors of the Southern and Eastern Scalefish and Shark Fishery. These surveys provide a measure of the economic performance based on the net economic returns for a sample of surveyed vessels, which can be weighted and aggregated for an average vessel and the surveyed fishery as a whole. Net economic returns are the profits from a fishery after all costs have been met, including fuel, crew costs, repairs and maintenance, opportunity cost of capital, depreciation and opportunity cost of family and owner labour. Although they do not provide an indication of the potential returns available from a fishery in the long run, a time series of net returns may indicate in which direction net returns in a fishery are heading, relative to returns at different effort levels associated with MEY. For instance, a fishery in which estimated net returns are regularly close to zero or negative is probably not being managed effectively from an economic perspective. A positive trend may suggest a fishery is approaching the point of MEY. For example, in the Commonwealth Trawl Sector, net economic returns were generally close to zero or negative between 1998–99 and 2005–06. The most recent survey-based estimates of net economic returns for the sector are available for 2008–09 (Perks and Vieira 2010). Given the size of the sector in terms of vessel numbers, net economic returns have been low. The highest estimate before 2007–08 was $6.1 million (in 2009–10 dollars), recorded in 1997–98 (figure 12). In contrast, negative net economic


returns were experienced in 2002–03 to 2004–05. More recently, however, net economic returns have been positive. This positive trend has continued through to 2009–10, with net economic returns increasing to $6.8 million. These recent improvements can largely be attributed to a decline in fishery-level operating costs, which occurred at the same time as a sharp fall in the number of active vessels operating in the fishery. The number of vessels decreased from 91 in 2004–05 to 52 in 2007–08, as a result of the Securing our Fishing Future structural adjustment package (Vieira et al. 2010). Although TAC reductions have resulted in lower fishery revenues, costs have fallen by a greater amount with these reductions in vessel numbers.

If the key drivers of change in net economic returns are understood, it may be possible to infer whether or not a fishery is moving towards or away from MEY. Perks and Vieira (2010) provide different scenarios for trends in net economic returns, and how to interpret these trends against the MEY objective. However, estimates of net economic returns cannot be used in isolation to reveal how a fishery has performed relative to MEY. To better assess a fishery’s performance in the absence of a bioeconomic model, the analysis of net economic returns can be undertaken in conjunction with other economic indicators. In particular, economic indicators such as productivity indices and profit decompositions can provide greater clarity. For example, if biological indicators suggest that harvests are sustainable, a positive trend in both net economic returns and total factor productivity (the ratio of outputs produced to inputs used) over time would generally indicate that a fishery is moving towards MEY. Gooday and Galeano (2003) and Kompas et al. (2009) provide further information on the concept of MEY and assessing fishery performance against the MEY objective. Productivity analysis Productivity is a measure of how effectively inputs are used to produce outputs. An increase in productivity implies that a firm can increase their production while using the same inputs, or they can choose to produce the same output with fewer inputs. For fisheries that are fully developed, it is generally the latter option that applies, as binding controls used by management are generally designed to restrict harvests to sustainable levels. Given this, productivity growth cannot increase the total quantity of outputs


produced. The producer’s decision is effectively constrained to producing similar amounts with fewer inputs. Analysis of trends in productivity offers important new information to decision-makers. Changes in the way in which fishers organise the transformation of inputs into outputs have a direct effect on firm-level economic performance. Changes in productivity at the vessel level illustrate the response of the fleet to policy settings in the fishery and, more broadly, to environmental factors. This is of particular value for fishery managers when considering the use of policy instruments that may affect the drivers of productivity growth in fisheries such as fish stocks, technology and fleet structure. Measures of productivity performance are typically expressed as indices over extended periods. Productivity indices can be broadly expressed as a partial measure of productivity growth (relating a measure of output to a single measure of input), multifactor productivity measures (relating a measure of output to a selection of inputs) or total factor productivity (relating a measure of output to all inputs). Total factor productivity, is a measure of the productivity of all inputs or factors of production, in terms of their combined effect on output, and is often accounted for by technological change or more efficient methods of producing output. Total factor productivity measures are preferred over partial productivity measures to obtain a complete picture of productivity in the fishery. Perks et al. (2011) estimated the total factor productivity of the Commonwealth Trawl Sector for the period 1996–97 to 2009–10 using vessel level financial and catch data collected by ABARES in its biennial survey of the fishery. Between 1996–97 and 2004–05, total factor productivity in the sector fell by 19 per cent (figure 13). This equated to a decline of 1.9 per cent a year. Since 2004–05, however, the trend has been reversed and it is estimated that productivity has increased. Between 2004–05 and 2008–09, productivity increased by 20 per cent in total and at an average of 6.6 per cent a year. Since changes in total factor productivity are driven by relative changes in the outputs produced by the set of inputs, analysis of input and output indices illustrates the drivers of change in total factor productivity. In this case, the slight declines in the input index since 2005–06, in combination with the considerable improvements in output, have resulted in a convergence of the two indices, increasing productivity in the sector in recent years.


Productivity indices should be carefully interpreted and their limitations recognised. The indices cannot, for example, offer a benchmark of optimal performance. Rather, in the case of boat-level indices, they gauge the performance of vessels relative to an arbitrary standard. This standard is generally set at either the most profitable boat or the average boat. Interpretations of productivity trends are usually best done over relatively long periods of time. Short-term influences such as the effect of climate variability on fishery production and deferring input expenditure in low-income years have an effect on the productivity estimates produced using index number approaches, and are not accounted for explicitly in the total factor productivity measurements. Profit decomposition analysis Changes in net economic returns in a fishery over time can provide some indication of which direction a fishery's economic performance is moving. However, without information on the causes of those movements, it is difficult to say if a fishery is moving closer to or further away from a point associated with MEY. Profit decomposition analysis is an extension of productivity analysis. It is used to decompose profits and productivity changes of a fishing vessel relative to a ‘reference vessel’ and is described in detail in Fox et al. (2006). The approach allows the relative contributions of the key drivers of profit changes at the vessel level to be decomposed into its separate elements, including the effect of fish stock abundance. The methodology offers important advantages over traditional measures of productivity in that it provides individual firm-level measures and quantifies the contribution of productivity, inputs and outputs, to relative profits. It provides an easy way to assess both firm and industry performance. Profit decompositions are able to show key drivers of fishery profitability, which include productivity, input prices, output prices and quantities. Vieira (2011) provides an index number profit decomposition analysis of the Commonwealth Trawl Sector. The results reveal how historical changes in profit have occurred because of changes in variables that fishery managers have indirect influence over (fish stocks and productivity) and variables that fishery managers don't have control over (output and input prices). It is shown that two key factors that have influenced recent profitability changes are the government restructuring package and previous adjustments to TAC settings for key species. Figure 14 illustrates the change in profit over the period of analysis and the relative importance of the different drivers of profit reported in Vieira (2011). Trends are shown relative to a reference firm, the most profitable vessel in 2008–09. The figure shows that, in all years, the input price indices for labour (PL) and fuel (PF) are close to 1 while the output price indices (PO) vary substantially. This reflects less variation in input prices, particularly for labour, and more importantly, the larger contribution of outputs to variable profit relative to inputs. Further, stock adjusted profit (θs) for the average vessel moves closer to that of the reference firm between 2005–06 and 2008–09. This is consistent with ABARES survey-based estimates of net economic returns to the sector. While both of the input indices for the average vessel are close to that of the reference vessel, the fuel input index moves from being greater than 1 to less than 1 post 2005–06. This suggests that, relative to the fuel prices experienced by the reference firm in 2008–09, lower fuel prices were more favourable and made a positive contribution to vessel profitability prior to 2005–06.


The two key factors behind the low stock adjusted profits (θs) of all firms relative to the reference firm are the price of output (PO) and the productivity index (R). These two indices are the furthest from 1 and show the greatest variability. The productivity index follows a slightly declining trend from 1998–99 to 2002–03, then follows a slightly increasing trend in 2007–08, before declining slightly in 2008–09. These changes correspond with two periods for the fishery. The first was a period in which TACs in the fishery were largely non-binding, which promotes lower efficiency in a fishery managed with ITQs. At the same time, and partly as a consequence of the latter, stocks were relatively low and catches were more difficult and costly to make. The second period corresponds with significant regulatory and structural change, associated with reductions in the TACs for key species in the sector (see Vieira et al. (2010) for further details) and the government structural adjustment package, which concluded in 2006–07. Indeed, a key change in the productivity index is the immediate jump in the index after the buyback in 2006–07 to 2007–08. However, the primary driver of the increase in the profit index is the change in the output price index. After the output price index declined in 2004–05, the index followed a strong increasing trend and peaked in 2008–09. Given that 2008–09 is the same year that the reference firm occurs in, it suggests that most firms benefited to some degree from higher prices in 2008–09. Latency An indicator that is particularly important in smaller fisheries, where other economic information is commonly lacking, is the level of latent effort. This is a measure of the amount of inactive rights that could be used in the fishery at relatively short notice. Generally, a permit is left inactive only when the holder determines that the profits available in the fishery are low. A fishery operating at or near MEY will be generating positive returns and be attractive to permit/quota holders to enter. Therefore, latent effort reveals permit holders’ assessment of a fishery’s profitability. However, latent effort is more than a sign of low profits; it is also an impediment to achieving above average profits in the long run. As profits start to appear, idle effort is drawn into the fishery over time and profits are competed away again, only this time at a higher level of catch. Stocks could be fished down relatively quickly if enough inactive effort is triggered. In a limited entry fishery, latent effort is indicated by inactive permits. In a quota managed fishery it manifests as unfilled quota. Both guises are common in Commonwealth


fisheries. As would be expected, estimates of net economic returns and latent effort are highly correlated—low net economic returns are associated with high levels of latency, and these conditions generally suggest that effort in a fishery is at a point associated with open-access equilibrium. For species caught in the Commonwealth Trawl Sector, high levels of latent or unused quota have typically prevailed. Evidence suggests that this has been an issue in the Commonwealth Trawl Sector in the past (Elliston et al. 2004; FERM 2004). Recent TAC reductions may be addressing such issues. For the 2009–10 fishing season, more than 80 per cent of TACs were caught for five species: pink ling, flathead, orange roughy (Cascade Plateau), gemfish (eastern) and jackass morwong (figure 15).

Quota values The traded value of quota is regarded as a market indicator of the economic value of a fishery managed by output controls. Given reasonable certainty of title and a competitive market, quota value should reflect the present value of all future expected net returns from the fishery (Rose et al. 2000). However, prices of permanent quota not only reflect expected net returns in the current period, but also perceived uncertainties by market participants about the path of returns. For an estimate of net returns in the current period, these uncertainties are reduced when the seasonal lease price of quota is used, as the lease price only relates to expected returns in the current period, not future periods. Also, in fisheries for which quota constraints are only intermittently binding, the market value of quota may not represent the full value expected from the catch. While there may be some questions about the accuracy of estimates of current net returns based on quota values, these estimates provide some confidence about the order of magnitude of these returns, at least where they apply to quota that is always binding. Although rough, estimates of net returns to a fishery that can be derived from quota values may provide an indication of whether or not a fishery has a positive net return, and whether that return is increasing or decreasing over time.


Measuring the value of recreational fisheries The indicators discussed above are suitable for assessing trends in the economic returns of commercial fisheries. They are not suited to measuring the value of recreational fisheries, and how these values change over time. While the benefits and costs of the use of fishery resources for commercial fishing are market values and can be readily quantified in monetary terms, the predominantly non-market use value of recreational fishing activities is more difficult to quantify. Owing to the lack of clear market signals associated with the activity—recreational fishing——benefits and costs are not readily expressed in dollar terms and non–market valuation approaches to estimating these benefits and costs are required. Different techniques can be applied, depending on whether the ‘use’ value, or ‘non use’ value of the recreational fishery resource is being assessed. The economic non-use value associated with using Australian fisheries resources reflects the benefit that individuals derive from knowing that the resources are maintained (Perman et al. 1999). These values are more difficult to measure quantitatively than ‘use’ values and are always non-market in nature. Non-use values are described in environmental economics literature and embodied in the concept of total economic value (TEV), which includes both use and non-use values in determining economic value of a natural resource (Perman et al. 2003 OECD 1995). The methods used to estimate non-market use and non-use values associated with using fishery resources for recreational purposes are broadly classified into ‘revealed preference’ and ‘stated preference’ methods. Frequently used revealed preference techniques include methods such as the Hedonic Pricing method and Travel Cost Method (TCM). These methods are suited to calculating the non-market use value associated with the use of a resource. Both methods value non-market benefits and costs by observing consumers’ behaviour in markets for related goods and services. Revealed preference methods remain a popular choice with analysts because they are relatively inexpensive, are straightforward, are easier to analyse and are based on actual market behaviour. Stated preference methods are able to estimate both the use and non-use values associated with the use or existence of a resource. Popular techniques include choice modelling and contingent valuation techniques. These methods rely on asking people to state their preference for non-market effects using hypothetical contexts. Summary The growth of aquaculture in the Asian region has been a major global trend affecting on Australian fisheries production, and has in general meant that global prices have either been stable or falling. The value of Australian fisheries production has also been affected by the appreciation of the Australian dollar, which has made exports of fisheries products less competitive in overseas markets and imports more attractive to consumers in the local market. These changes are reflected in the declining trend in Australia’s GVP and exports of fisheries products. Given the declining trend in GVP, there is a need to remain focused on achieving maximum economic returns from the use of fishery resources. Fisheries managers in many Australian jurisdictions are increasingly pursuing the economic objective of maximising economic returns in managing their fisheries. In order to assess the success of management against this objective, a range of indicators are required. Indicators such as net economic returns, productivity analysis, profit decomposition, latency, and quota values are useful in helping to assess trends in economic returns from fisheries. Techniques also exist for measuring the value of recreational fishing.


References ABARES 2011, Australian Commodities, Volume 11.01, March quarter, Canberra. FAO, 2010a, The state of world fisheries and aquaculture. Rome. FAO, 2010b, Fishery and Aquaculture Statistics, Rome. Fox, K J, RQ Grafton, T Kompas and N Che 2006, 'Capacity Reduction, Quota Trading and Productivity: The Case of a Fishery'. The Australian Journal of Agricultural and Resource Economics, 50, pp. 189–206. Gooday, P and Galeano, D 2003, Fisheries management: a framework for assessing economic performance, ABARE eReport 03.7, Prepared for the Fisheries Resources Research Fund, Canberra, April. Kompas, T, Che, N and Grafton, Q 2008, ‘Fisheries Instrument Choice under Uncertainty’, Land Economics, vol. 84, pp. 652–666. Kompas, T, Grafton, RQ, Che, N and Gooday, P 2009, Development of methods and information to support the assessment of economic performance in Commonwealth fisheries, ABARE research report 09.5, Canberra, March. Mayston, DJ 1985, Non-profit performance indicators in the public sector, Financial Accountability and Management, vol. 1, no. 1, pp. 51–74 OECD (1995) The economic appraisal of environmental projects and policies. Paris. Perks, C and Vieira, S 2010, Australian fisheries surveys report 2010, Results for selected fisheries, 2007–08 and 2008–09, Preliminary estimates for 2009–10, ABARES report prepared for the Fisheries Resources Research Fund, Canberra, December. Perks, C McGill, K, and Curtotti, R 2011, Vessel-level productivity in Commonwealth fisheries, ABARES conference paper presented at the Australian Agricultural and Resource Economics Society Conference, 9–11 February, Melbourne. Perman, P, Ma, Y, McGilvray, J and Common, M 1999 Natural Resource and Environmental Economics, London, Prentice Hall. Perman, R, Ma, Y, McGilvray, J. and Common, M 2003 Natural resources and environmental economics, Essex, Pearson Educational, Ltd. Rose, R Stubbs, M, Gooday, P, Cox A and Shafron, W 2000, Indicators of the Economic Performance of Australian Fisheries, ABARE Report to the Fisheries Research Resource Fund, Canberra, October. Vieira, S 2011, An index number decomposition of profit change in two fishing sectors, ABARES conference paper presented at the Australian Agricultural and Resource Economics Society Conference, 9–11 February, Melbourne.


Vieira, S, Perks, C, Mazur, K, Curtotti, R and Li, M 2010, Impact of the structural adjustment package on the profitability of Commonwealth fisheries, ABARE research report 10.01, Canberra, February.

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Australian fisheries - outlook and economic indicators