Aquaculture Economics & Management, 19:251277, 2015Copyright
# Taylor & Francis Group, LLCISSN: 1365-7305 print/1551-8663
onlineDOI: 10.1080/13657305.2015.1024348THE ECONOMICS OF
KAPPAPHYCUS SEAWEED CULTIVATION INDEVELOPING COUNTRIES: A
COMPARATIVE ANALYSIS OFFARMING SYSTEMSDiego Valderrama,1Junning
Cai,2Nathanael Hishamunda,2Neil Ridler,3Iain C. Neish,4Anicia Q.
Hurtado,5Flower E. Msuya,6M. Krishnan,7R. Narayanakumar,8Mechthild
Kronen,9Daniel Robledo,10Eucario Gasca-Leyva,10and Julia
Fraga111Food and Resource Economics Department, University of
Florida, Gainesville, Florida, USA2Fisheries and Aquaculture
Department, Food and Agriculture Organization of the UnitedNations,
Rome, Italy3Consultant, Food and Agriculture Organization of the
United Nations, New Brunswick,Canada4C.V. Evadian, Makassar,
Indonesia5Integrated Services for the Development of Aquaculture
and Fisheries, Iloilo City, Philippines6Seaweed Cluster Initiative,
Institute of Marine Sciences, University of Dar es Salaam,Zanzibar,
Tanzania7Social Sciences Division, Central Institute of Fisheries
Education, Mumbai, India8Socioeconomic Evaluation and Technology
Transfer Division, Central Marine FisheriesResearch Institute,
Kochi, India9Office of the European Commission for the Pacific
Overseas Countries and Territories,Noumea, New Caledonia10Marine
Resources Department, Centro de Investigacin y de Estudios
Avanzados delInstituto Politcnico Nacional (CINVESTAV), Mrida,
Mexico11Human Ecology Department, Centro de Investigacin y de
Estudios Avanzados del InstitutoPolitcnico Nacional (CINVESTAV),
Mrida, Mexico&The farming of the red seaweed Kappaphycus
alvarezii and related species as raw materialfor the hydrocolloid
carrageenan rapidly spread from the Philippines in the late 1960s
to Indonesia,Tanzania, andother tropical countries aroundthe world.
Althoughnumerous studies havedocumentedpositive socioeconomic
impacts for seaweedfarming, factors suchas diseases
anddistancetoexportmarketshaveledtoanunevendevelopmentoftheindustry.Usingstandardbudgetingtechniques,
this studyadaptedproductionandmarket datafromaFAO-ledglobalreview
of seaweed farming to develop comparative enterprise budgets for
eight farming systems insix countries (Indonesia, the Philippines,
Tanzania, India, SolomonIslands, andMexico).Address
correspondencetoDiegoValderrama, FoodandResourceDepartment,
UniversityofFlorida, P.O. Box 110240, Gainesville, FL 32611-0240,
USA. E-mail: [email protected] by [Cinvestav del IPN]
at 14:02 11 May 2015 Althoughthe basic technology package is the
same across countries, the study revealedlargedifferences in the
economic performance of systems due to wide variations in farm
prices and
thescaleofoperations.Althoughseaweedfarmingisasuitableactivityforsmall-scaleproducers,aminimumof
2,000 mof cultureslinesarestill
necessarytoensureadequateeconomicreturns.Greaterfarmingplotsmaybeneedediffarmpricesarewell
belowtheaveragefarmpricespaidinIndonesiaandthe Philippines.
Policyrecommendations are made toimprove the economicpotential of
underperforming systems.Keywords Kappaphycus alvarezii, production
economics, seaweedINTRODUCTIONSeaweedsareharvestedthroughout
theworld(eithercollectedfromthe wild or cultivated in farms) and
used in a large number of applications,including food for human
consumption or as a source of hydrocolloids pro-cessed into food
additives, pet food, feeds, fertilizers, biofuel, cosmetics
andmedicines, among others (McHugh, 2003). The growing
commercialimportanceof two hydrocolloids, in particularagar and
carrageenan, hasdrivensubstantial development of
redseaweedcultivationaroundtheworld in the last two decades.1Major
red seaweed species under cultivationincludeKappaphycus
andEucheuma, whichareprimaryrawmaterials forcarrageenan, and
Gracilaria, the primary raw material for agar.2Carrageenanisa
gellingagent
usedasanemulsifier,abinder,orforsuspensionandstabilizationinaremarkablywiderangeof
products inthefoodprocessing, pharmaceutical andcosmetic industries
(Bixler &Porse, 2011). Demand for carrageenan rose
substantially after World WarII, withsupplies
limitedbytheavailabilityof natural stocks of Chondruscrispus
(Irishmoss) fromCanada, Ireland, Portugal,
SpainandFranceandGigartina/IridaeafromSouthAmericaandSouthernEurope(Trono,1993).
Bythelate1960s, dwindlingwildstocksdroveproducerstoscoutthe world
coastlines in order to diversify seaweed supplies; at the same
time,seaweed ecology research unveiled the potential of cultivation
as an alterna-tive source of raw material supply (Naylor, 1976).
These efforts finally metsuccess insouthernPhilippines, where
native Eucheuma seaweeds werefound to produce high-quality
carrageenan and ecological conditions madecultivation possible. The
first seaweed farm was established jointly in
1969byU.S.-basedMarineColloids, Inc. (MCI)andUniversityofHawaii
Pro-fessor Maxwell Doty inthesouthernPhilippines provinceof
Tawi-Tawi(Trono, 1990). The two species originally cultivated were
named Eucheumacottonii and Eucheuma spinosum, commercially referred
to ascottonii andspinosum. However,botanists renamed
Eucheumacottonii as Kappaphycusalvarezii while Eucheuma spinosum is
now Eucheuma denticulatum. Thecommercial names cottonii
andspinosumarestill inuse, nevertheless(McHugh, 2003).252 D.
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2015 Production of Kappaphycus and Eucheuma spread rapidly in
thePhilippines, which soon displaced Canada as the top supplier of
carragee-nanseaweeds.ThelowercostoflaborinthePhilippinesfurtherincenti-vizedcompaniestosourcesuppliesfromtheAsiannation.
AlthoughthesamecorporationsthatdominatedtheCanadianmarkettriedtocontrolproduction
in the Philippines through plantation-style seaweed farms,
theysoonrealizedtheycouldnot competewithsmall, family-runfarms.
Thereasons were two-fold: 1) the labor for seaweed cultivation must
be highlyflexible to work on the cyclical time scales of tides and
the moon, makingit difficult topayworkersstablewages;
and2)seaweedfarminghaslowcapital and technological requirements for
entry (Blanchetti-Revelli, 1995).The success of carrageenan seaweed
aquaculture in the Philippines wasrapidlyreplicatedinIndonesia.
Kappaphycus alvarezii andE. denticulatumhave also been introduced
to more than 20 countries over the past 35 yearsto spur farm
development around the world (Bindu & Levine, 2011); how-ever,
significant production for export markets has only been achieved
inTanzania, Malaysia, and more recently Vietnam. Industry analysts
estimatethatglobal
aquacultureproductionhadreached183thousandtons(dryweight) by 2009
(Bixler & Porse, 2011), with around 90% of total
outputcomingfromIndonesiaandthePhilippines.
Hamperedbydiseaseout-breaks and political unrest in farming areas,
the Philippines were surpassedby Indonesiaas theleadingproducer of
carrageenanseaweeds around2008. AccordingtoUNexportstatistics,
Indonesiasoutputcontinuestoincreaseat afasterratethanothercountries
(UNCOMTRADE, 2014),reachingaround230thousandtons of dry seaweedby
2013(I. Neish,personal communication, June17, 2014). Bycomparison,
Tanzania(thelargest producer outside Asia) produced less than 16
thousand tons (mostlyE. denticulatum) in 2012 (FAO, 2014).Fromits
beginnings, carrageenanseaweedfarmingprovedtobe aprofitable
commercial proposition for many coastal communities. Forexample,
Naylor (1976) demonstratedthat for plots of
approximatelyonehectare,
netincomefromseaweedfarmingwasfivetosixtimestheminimum average wage
of an agricultural worker. Recognizing its potentialto improve the
socioeconomic conditions of marginalized coastal popula-tions,
international development agencies began promoting seaweed farm-ing
in Indonesia and neighboring countries since the 1980s (Trono et
al.,1980). Seaweedfarmingis arelatively simpletechnology
requiringlowinitial capital investment; inaddition, withgrowout
cycles as short assixweeks andfavorableprices, it provides
arapidandhighreturnoninvestment.Anumber of studies
havecorroboratedthepositivesocioeconomicimpacts of
seaweedfarmingincountries as diverseas thePhilippines,Indonesia,
Tanzania, India, Vietnamand the Pacific Islands (Arnold,The
Economics of Carrageenan Seaweed Farming in Developing Countries
253Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 2008;
Bindu, 2011; Msuya, 2006; My, 2011; Namudu&Pickering,
2006;Pettersson-Lfquist, 1995; Sievanen et al., 2005; Zamroni &
Yamao,2011). Althoughcarrageenophytesarenotadirectsourceoffood,
theirculture has been shown to increase food security in farming
villagesbecause their revenue-earning potential is greater than
that of alternativeagricultural enterprises (Beveridge et al.,
2010; Espaldonet al., 2010;Gupta, 2010). Many of thesecommunities
lacksufficient infrastructure(e.g., hatcheries, feed mills,
extension services) to support other forms ofaquaculture.
Facingdeclininglandings fromcapturefisheries, seaweedfarming
represent the most efficient and sustainable use of marineresources
in these communities.Despite its many advantages, seaweed farming
can also be a challengingactivity. In addition to disease
outbreaks, predation by herbivorous fish andinfrastructure damages
resulting from tropical storms, farmers also have todeal with
volatility in seaweed prices. Seaweed farming is particularly
proneto boom-and-bust cycles given the large number of small-scale
price-takersintheindustry.
Pricevolatilityisfurthercompoundedbytheabsenceofrelevant, reliable
and timely production statistics and market intelligence.In
contrast to agricultural commodities such as coffee, copra or tea,
thereare no organized markets to provide benchmarking international
prices forseaweed (Tinne et al., 2006).Seaweedfarmers, traders,
andprocessors frequently makedecisionsbased on speculations or
misinformation, resulting in market
fluctuations.Arecentanddramaticexamplewastheseaweedpricebubbleof2008,whenprices
reachedexorbitant levels fueledby apparent increases
indemandfromChineseprocessors,withpricescollapsinginthecourseofafewmonths.
InIndonesia, for example, K. alvarezii prices
morethantripled,fromaboutUSD0.60toasmuchasUSD1.80perkgofdrysea-weed.
Giventhesuddenpriceincrease,
manyfarmersrushedtoharvestimmatureorlow-qualityseaweed,
floodingthemarket andprecipitatingthe subsequent price crash
(Barta, 2008).Giventheabsenceof aworldmarket priceandthefact that
mostseaweed is marketed through direct bilateral contracts
(suppliers/producers and processors/users), substantial
differentials arise in the pricesfarmers
receivedependingonwherethefarmgate is located(Tinneet al., 2006).
As a result, farmers in Philippines and Indonesia receive onaverage
higher prices (normally between USD 0.60 and USD 1.40/kg)
thanfarmers in more remote locations such as Tanzania and the
Pacific Islands(less than USD 0.50/kg) due to the former countries
improved logisticalcapabilities and proximity to processing
centers. The oligopsonistic natureof the industry (whereby a large
number of raw material producers supplyrelatively few processors3)
also puts farmers in Africa and the Pacific Islandsat
adisadvantage, givingthemlittlemarket power tonegotiatehigher254 D.
Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May
2015 prices. Risingfuel costs for shippinghavealsoreducedthemargins
ofexporters, and therefore the farm gate prices they can
offer.Alongwithotherfactorssuchasfarmproductivityandeconomiesofscale,
differences infarmprices goalongway towards
explainingwhycarrageenanseaweedfarmingseemstohaveahigherpotential
inAsiancountries (Indonesia, Philippines) as
comparedtoAfricanandPacificIsland nations. Given the positive
results achieved in eastern Indonesia overthe last decade, the
Indonesian government has embraced the industry as akey driver of
economic development and has set ambitious production tar-gets for
the next few years (The Economist, 2013). In contrast,
productioninAfricancountriesis eitherstableordecliningas farmprofit
marginsshrink due to the spread of seaweed die-offs and the impact
of lower prices(BBC News, 2014; Msuya, 2011a).Given this backdrop,
the goal of this article is to develop a
comparativeanalysisoftheproductioneconomicsofcarrageenanseaweedfarmingtobetterunderstandthedifferencesinperformanceofproductionsystemsacrossworldfarmingregions.Thecomparativeanalysisisbasedoneightfarming
systems in six developing countries (Indonesia,
Philippines,Tanzania, India, SolomonIslands, andMexico)
selectedfromarecentFAO global review on the socioeconomic impacts
of carrageenan seaweedfarming(Valderramaetal., 2013).
Thesystemswerespecificallyselectedin order to facilitate
comparisons of farming technologies, cost structuresandmarket
conditions across countries. The primary objective of thisanalysis
is to highlight and contrast those factors leading to improved
per-formance of the Indonesian and Philippine systems. Another
objective is
toidentifyspecificstrategiestoimprovetheprofitabilityoffarmingsystemsinthosecountriesfartherawayfromexport
markets(i.e., TanzaniaandSolomon Islands).The article is organized
as follows: the following section provides a briefdescription of
the farming systems selected for the analysis;
subsequently,investment costs for each production system are
detailed in separate tables.Next, comparative enterprise budgets
are developed to contrast theeconomic performance of the different
systems. Finally, the article discussesthepolicyimplicationsof
theanalysisandoutlinesrecommendationstoenhancethepotential of
seaweedfarmingasaneconomicdevelopmentstrategy for coastal
communities.THE FARMING SYSTEMSTheFAOreviewexamined23casestudies of
carrageenanseaweedfarmingproductioninsixdevelopingcountries:
Indonesia, Philippines,Tanzania, India (Tamil Nadu), SolomonIslands
andMexico(YucatanThe Economics of Carrageenan Seaweed Farming in
Developing Countries 255Downloaded by [Cinvestav del IPN] at 14:02
11 May 2015 Peninsula). The study covered countries with
established commercialproduction(Indonesia, Philippines,
Tanzania)andwithnascentfarmingsectors (India, SolomonIslands).
Althoughnocommercial aquacultureproductionis
currentlytakingplaceinMexico,
thecorrespondingcasestudiesupdatedtheoutcomesofexperimental
trialsledbyanacademicinstitutioninthecommunityof
DzilamdeBravo(Yucatan)intheearly2000s(Muozet al., 2004).
Despitethelackof commercial production,there continues to be an
interest in the tropical Gulf of Mexico as a prom-ising area for
Kappaphycus farming development in Latin America (Hayashietal.,
2014). AlongwithArgentina, Brazil, andVenezuela,
Mexicooffersthebest prospects for thedevelopment of
seaweed-basedindustries intheWesternHemisphere(McHugh, 2002),
whichfurthermotivatedtheinclusion of Mexican-based case studies.All
economic models reflect production and market conditions
prevail-ing in 2009 and assume that seaweed farming is the primary
occupation ofparticipating households (Valderrama et al., 2013).
Local currency valuesinall
caseswereconvertedtoUSDusing2009exchangerates(Feenstraet al.,
2013).Thefarmingtechnologiesinthecasestudiesarevariantsof
thetwomost popular cultivation methods: the fixed, off-bottom line
and the float-ing lines techniques. In the off-bottom method,
monofilament nylon linesor polypropylene ropes are stretched
(usually 1 m apart) between woodenstakes pounded into the
substrate. Small pieces of seaweed (50100 g) arethen tied to the
lines (Figure 1a). If the site is suitable and proper
mainte-nanceisprovided,
seaweedshouldreach10timesitsoriginalsizeinsix-eight weeks, when it
can be harvested. The seaweed is then sun dried awayfrom sand and
dirt, then packed into bales ready for shipping. The floatinglines
method is suitable in protected areas where water current is weak
orthe water is too deep for fixed bottom lines. Normally, a
floating construc-tionorraft (typicallya3 3
msquaretimberframewithpolypropyleneropesstretchedparallelinonedirectionbetweenthetimbers)isusedtosuspend
the seaweed about 50-cm below the surface. The seedlings are tiedto
the ropes and the raft is anchored to the bottom. Plastic bottles
attachedto the lines can also be used as floatation devices instead
of a wooden raft(Figure1b). Theoff-bottomlinemethodallows easier
access sincethefarmercanwalkaroundthelinesatlowtide,
butthefloatinglineshavethe advantage of being easily moved to
another position if necessary, andremoved from the water altogether
in bad weather (McHugh, 2003).Tomakemeaningful comparisons across
casestudies andfacilitateunderstanding of the different farming
contexts, eight
representativesystemswereselectedforthecomparativeanalysis.Becausethesesystemsvariedinscaleandfarmingmethod,
standardizedmetrics suchas pro-ductivitypermof
lineandproductioncost perkgof dryseaweedwere256 D. Valderrama et
al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 computed.
The culture species in all systems is Kappaphycus alvarezii
(withtheexceptionof Tanzaniawherelarger amounts of E.
denticulatumarefarmed, K. alvarezii is thepredominant species
aroundtheworld). Toaccount for the contribution of unpaid family
labor (which is used in manyseaweed farms around the world), all
systems assume the use of hired labor.The opportunity cost of
family labor was computed in those cases for whichdata on labor
costs were not available. The most important features of eachsystem
are discussed next.IndonesiaThe selectedIndonesianfarmconsistedof a
floating lines habitatsystemusing sandbags as anchors and plastic
bottles as floaters, withFIGURE 1Culture techniques used in seaweed
farming: a) off-bottom method; b) floating system. Thedimensions
shown are for illustration purposes only and may vary in the
field.The Economics of Carrageenan Seaweed Farming in Developing
Countries 257Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015
30 km of planted lines. Eight 45-day cycles per year were assumed,
resultingin an annual production of 33 tons of dry seaweed. The
systemwasmodeledafter the leader farms (i.e., farms
relyingonhiredlabor asopposed to family labor) in the province of
South Sulawesi (Neish,2013).PhilippinesThe selectedPhilippine
systemwas a multiple raft long line farm(MRLL)occupyinganareaof10
50 m(around2 kmofplantedlines).The MRLL is an innovative approach
to seaweed farming used in areas withdeep water ranges (>5 m) in
Zamboanga Peninsula and Basilan (southernPhilippines). Given the
complexity of the farming structures, MRLLrequires
asubstantiallyhighercapital investment relativetothesimplerfixed
off-bottom method (Hurtado, 2013).TanzaniaTwo systems were
considered for Tanzania: a 30 10-m off-bottom plotand a 27 12-m
floating lines habitat. Because seaweed die-offs tend to
beavoidedinthedeeperfloating-linesystem, it is assumedthat eight
pro-duction cycles per year are completed in the floating-line plot
as comparedto only seven in the off-bottom farm (i.e., a crop is
lost in the latter system).ThebudgetedfarmpriceforK. alvarezii of
TZS350(USD0.27at
2009exchangerates)perkgofdryseaweedisanapproximateaverageoftheprices
received by independent farmers (i.e., not reliant on
exporters/tra-dersforthesupplyofculturematerials)inZanzibar.Dependentfarmersnormally
receive lower prices (Msuya, 2013).IndiaA floating system
consisting of 45 3 3 m rafts was considered for India.Production
takes place during six 45-day cycles for a total of 270
productiondays per year (farms do not operate during the northeast
monsoon, whichlastsapproximately 95 days).The system wasmodeled
aftertheSelf-HelpGroup(SHG)seaweedfarmsoperatingontheshoresofPalkBay,
TamilNadu. SHGs are organized farmers groups that may receive
start-upgovernment subsidies to support their agricultural
activities. The modeledseaweed farmwas assumed to operate without
subsidies, nevertheless.BecauseSHGsrelyheavilyonfamilylabor,
anopportunitycostwascom-putedbasedontheaveragewages earnedby
fishermenintheregion(Krishnan & Narayanakumar, 2013).258 D.
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2015 Solomon IslandsThe representative farm was modeled based on
interviews with farmersin Wagina Island, South Choiseul province, a
rural area with few livelihoodalternatives besides seaweedfarming.
Theoperationassumes anannualyield of 21,700 kg using a floating
system with 4 km of lines, with all laborbeing hired (Kronen,
2013).MexicoOff-bottom and floating-lines systems were modeled
based on the resultsfromexperimental trials conducted by the Center
for Research and AdvancedStudies of the National Polytechnic
Institute (CINVESTAV Unidad Mrida,for its acronym in Spanish) in
the community of Dzilam de Bravo, Yucatan(Muoz et al., 2004). Each
system consisted of 10 20-m modules scaled upto one hectare.
Culture takes place during four two-month cultivation cyclesas
climatological conditions in Yucatan are unsuitable for farming
during thelate and early months of the year (Robledo et al.,
2013).INVESTMENT COSTSTables 1 through 6 present detailed
investment costs for the eight
farm-ingsystems.Thescaleofinvestmentvariedwidelyacrosssystems,
rangingfromUSD42fora30
10-moff-bottomplotinTanzaniatoUSD13,625foraone-hafarmconsistingof10
20-mfloatingmodulesinMexico. Interms of total farminvestment,
thesystems couldberankedbycountryas Mexico>Indonesia >Solomon
Islands >Philippines >India >Tanzania.In terms of the
total length of culture lines, the systems ranged from 270
mto30kmandwererankedinthefollowingorder: Indonesia
>Mexico>Solomon Islands >India >Philippines
>Tanzania (Table 7). Although farminfrastructure costs varied
across systems, boats were often the most expens-ive item,
particularly if they were equippedwithoutboardengines:
inSolomonIslands,
a6.4-mfiberglassboatwithoutboardengineaccountedfor 97%of the total
farm investment (Table 5). Ropes and stakes (the latterin
off-bottom plots) were the other major investment items across
systems.Aninitial investment
onpropagulesforthefirstproductioncyclewasaccounted for in the
Indonesian, Philippine and Indian systems (Tables 1, 2and 4). This
cost was considered negligible in the Tanzanian and SolomonIslands
systems. With the exception of Mexico, all systems assume that a
por-tion of the harvested biomass in each cycle is set apart as
planting biomass forthe subsequent cycle. Propagules (100 g)
planted in each cycle are assumed tobe purchased from a CINVESTAV
phycology lab in the Mexican systems; thiscost is therefore treated
as an annual operating cost in Table 7.4The Economics of
Carrageenan Seaweed Farming in Developing Countries 259Downloaded
by [Cinvestav del IPN] at 14:02 11 May 2015 Despite the differences
in the scale of operations, the total
investmentpermoflinewasapproximatelythesameinIndonesia,
Tanzania(float-ing), and India, at approximately USD 0.27/m. The
Philippine and
off-bot-tomMexicansystemswerealsocomparable(aroundUSD1.00/m).
Themost economical investment
correspondedtotheoff-bottomsysteminTABLE1 Investment
onCultureLines, InfrastructureandEquipment
fora30-kmFloatingLinesSeaweed Farm in Indonesia, 2009Item Units
Quantity USD/unitTotal cost(USD)Useful life(Years)Investment per km
of line1 km (13.6 kg) of 5-mm PP line km 1 34.00 34.00 20.2 km (11
kg) of 10-mm PP line km 0.2 136.00 27.20 20.2 km (9 kg) of 8-mm PP
line km 0.2 114.00 22.80 21 km of 1-mm PP line (for loops) km 1
1.00 1.00 2Sandbag anchors piece 50 0.15 7.50 2Plastic bottles as
floats piece 500 0.03 15.00 2Total investment for 1 km of line
107.50Farm equipment and facilities9-m canoe with 5.5-hp motor unit
2 500.00 1,000.00 56-m canoe with no motor unit 2 150.00 300.00
5Miscellaneous tools and equipment set 2 150.00 300.00 5Drying
structures set 4 150.00 600.00 5Shelters for shade set 2 800.00
1,600.00 5Sacks pieces 800 0.08 64.00 2Total farm equipment and
facilities 3,864.00Propagules for initial planting 960.00 10Total
farm investment 8,049.00PPPolypropylene.Source: Neish (2013).TABLE
2 Investment on Culture Lines, Infrastructure and Equipment for a
10 50-m Multiple RaftLong Line Seaweed Farm (MRLL) in the
Philippines, 2009Item Units Quantity USD/unitTotal cost(USD)Useful
life(Years)Motorized boat unit 1 526.32 526.32 5Dug-out boat unit 1
120.00 120.00 3Cultivation rope, flat binder roll 25 3.00 75.00
3Anchor rope, polypropylene roll 3 78.58 235.75 5Tying rope for
floater, split flat binder roll 5 3.22 16.10 2Iron bars piece 22
7.84 172.50 3Floats piece 90 0.52 47.15 1Whole bamboo unit 6 2.68
16.10 1Fish net for drying, double width roll 1 9.20 9.20 3Plastic
strips soft tie-tie kg 204 2.53 515.37 1Total farm infrastructure
1,733.49Propagules for initial planting 421.00 10Total farm
investment 2,154.49Source: Hurtado (2013).260 D. Valderrama et
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Tanzania(USD0.15/m), andthemostexpensivesystemswerefoundinMexico
(floating) and the Solomon Islands, at around USD
1.40/m.COMPARATIVE ENTERPRISE BUDGETSAnnual
enterprisebudgetsforeachsystemarepresentedinTable7.Production in
most cases takes place throughout the year with the excep-tion of
India and Mexico, which have shortened production seasons
(lessthan300daysayear)duetoclimatological factors. Annual
productivityTABLE3 Investment Costs for Off-bottomandFloating
SeaweedFarming Systems inZanzibar,Tanzania, 2009Item Units Quantity
USD/unit Total cost (USD) Useful life (Years)30 10-m off-bottom
systemRopes m 300 0.02 6.32 1Tie-tie roll 10 0.21 2.08 1Floaters
piece 60 0.02 1.36 0.33Skates (pegs) piece 60 0.02 1.14 0.50Boat
construction unit 1 5.62 5.62 10Boat maintenance unit 1 0.07 0.07
1Tarps unit 10 0.76 7.57 4Drying rack frame unit 1 5.30 5.30 5Palm
fronds for rack unit 30 0.04 1.14 1Storage containers unit 10 0.11
1.14 1Diving masks unit 1 7.57 7.57 2Knife unit 1 0.76 0.76
2Machete unit 1 1.51 1.51 2Total 41.5727 12-m floating lines
systemRopes for raft12 mm (frame line) m 1 14.01 14.01 1010 mm
(anchor line) m 1 10.60 10.60 108 mm m 1 6.06 6.06 104 mm (lines) m
3 1.89 5.68 1Tie tie roll 11 0.21 2.29 1Anchors (rocks) unit 16
0.15 2.42 4Floaters (plastic bottles) unit 25 0.02 0.57 0.5Knife
unit 1 0.76 0.76 2Machete unit 1 1.51 1.51 2Frame construction unit
1 2.42 2.42 10Boat construction unit 1 5.62 5.62 10Boat maintenance
unit 1 0.07 0.07 1Tarps unit 10 0.76 7.57 4Drying rack frame unit 1
5.30 5.30 5Palm fronds for rack unit 30 0.04 1.14 1Storage
containers unit 10 0.11 1.14 1Diving masks unit 1 7.57 7.57 2Total
74.74Source: Msuya (2013).The Economics of Carrageenan Seaweed
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ofdryseaweedrangedfrom1.10(Indonesia)to5.38(Mexico)and5.43(SolomonIslands)
kgper mof cultivationline. Thehighproductivityachieved in the
Mexican systems is remarkable given the shortened length(240 days)
of the growout season. In addition to the favorable environmen-tal
conditionsfoundintheYucatanarea, highgrowthratescanalsobeattributed
to the use of large (100 g), high quality propagules. It should
alsobe reminded that these productivity levels were achieved in
experimentaltrials, which are assumed to be replicated at a
commercial scale.The relatively low productivity reported by the
Indonesian farm may
beinfluencedbythechallengesassociatedwithmanagingalargeoperation(30
km of culture lines); higher yields per m of line may therefore be
easiertoachieveinthesmallerTanzanianandIndiansystems(between2and3
kg/m/year). Productivity is also relatively low in the Philippine
raft systemTABLE 4 Investment Costs for One Floating Raft (3 3 m)
for Seaweed Farming in Tamil Nadu, IndiaItem Units Quantity
USD/unitTotal cost(USD)Useful life(Years)Farming system (3 3 m
raft)Bamboo raft foot 64 0.07 4.36 2Cornered anchors kg 1.50 0.87
1.30 2Floats set 1.00 0.52 0.52 13-mm nylon rope kg 0.45 2.39 1.07
26-mm nylon rope kg 0.65 2.39 1.55 2Ropes for seaweed cuttings kg
0.165 2.60 0.43 13.5 3.5 m nets (to prevent grazing) kg 1.13 1.63
1.84 12-mm ropes (to tie nets to raft bottoms) kg 0.09 2.39 0.21
2Nylon rope (to tie rafts together) kg 0.10 2.39 0.24 210-mm anchor
ropes kg 0.09 2.39 0.21 2Mats, ladders, baskets, knives, etc. set 1
0.83 0.83 2Propagules for initial plantingPropagules kg 60 0.04
2.17 10Transportation unit 1 0.52 0.52 10Total investment per raft
15.25Total farm investment (45 rafts) 686.25Source: Krishnan &
Narayanakumar (2013).TABLE 5 Investment Costs for a Floating Lines
Seaweed Farm in Solomon Islands (4,000 m of CultureLines)Item Units
Quantity USD/unitTotal cost(USD)Useful life(Years)6.4-m fiberglass
boat with outboard engine unit 1 5,372.75 5,372.75 5Drying table
unit 1 10.00 10.00 5Ropes, netting, floaters, tools set 1 160.92
160.92 2Total 5,543.67Source: Kronen (2013).262 D. Valderrama et
al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 (1.43
kg/m/year), whichmayreflect alargerimpact of
diseasessuchasice-ice5in this country.Average farm-gate prices
varied widely across studies, from USD 0.27/kg (Tanzania)
toUSD1.09/kg (Philippines). As
explainedpreviously,distancetoprocessingcenters is
thekeyfactorinfluencingfarmprices:thelowest prices
werereportedinthemost
remoteproducingregions(TanzaniaandSolomonIslands)whileseaweedproducedinIndonesia,Philippines
andMexicofetchedhigher prices. It shouldbenotedthatIndian farmers
reported relatively low prices (USD 0.33) despite the prox-imity of
processing plants in Tamil Nadu and neighboring
provinces.Reflecting the labor-intensive nature of seaweed farming,
laboraccounted for the greatest share of variable costs across most
budgets, nor-mally representing around 50%of total costs of
production. For illustrationpurposes,
Tables8and9itemizelaboractivitiesandcostsforthe30-kmfloatingfarminIndonesiaandthe27
12-mfloatingfarminTanzania.Total labor cost per kg of dry seaweed
was lower in Tanzania (USD
0.03/kg)ascomparedtoIndonesia(USD0.13/kg),
whichistosomedegreeexpected given Tanzanias lower level of economic
development. At aroundUSD 0.18/kg, labor costs per kg were similar
in India, Solomon Islands andMexico (Table 7). The highest labor
cost was reported in the Philippines(USD 0.27/kg).TABLE 6
Investment Costs for One-ha Off-Bottom and Floating Seaweed Farming
Systems in Yucatan,Mexico, 2009Item Units Quantity USD/unitTotal
cost(USD)Useful life(Years)10 20-m off-bottom modules scaled up to
one haStakes set 1 3,834.20 3,834.20 5Monofilament set 1 481.87
481.87 5Raffia and strings set 1 261.14 261.14 1Protective netting
set 1 3,070.15 3,070.15 5Boat unit 1 1,036.27 1,036.27 5Land
equipment (knives, crates, scales,drying structures)set 1 1,641.56
1,641.56 5Total 10,325.1810 20-m floating modules scaled up to one
haPolypropylene rope set 1 1,046.74 1,046.74 5Raffia and strings
set 1 261.14 261.14 1Flotation buoys set 1 3,264.25 3,264.25
5Weights set 1 2,932.29 2,932.29 5Protective netting set 1 3,070.15
3,070.15 5Bamboo set 1 373.06 373.06 5Boat unit 1 1,036.27 1,036.27
5Land equipment (knives, crates, scales,drying structures)set 1
1,641.56 1,641.56 5Total 13,625.45Source: Robledo et al. (2013).The
Economics of Carrageenan Seaweed Farming in Developing Countries
263Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015
TABLE7ComparativeEnterpriseBudgetsforKappaphycusSeaweedFarmingSystemsinSixDevelopingCountries,2009ItemUnitIndonesiaPhilippinesTanzaniaIndiaSolomonIslandsMexicoFloatingFloatingOff-bottomFloatingFloatingFloatingOff-bottomFloatingProductionParametersTotallengthoflinesm30,0002,0002702882,5654,00010,00010,000Numberofcyclesperyearcycles8578644Lengthofacycledays45634545456060Annualyieldofdryseaweedkg33,0002,8506628065,40021,70053,77853,778Annualproductivitykg/m/year1.101.432.452.802.115.435.385.38Cycleproductivitykg/m/cycle0.140.290.350.350.351.341.34Farm-gatepriceUSD/kg0.851.090.270.270.330.381.001.00GrossReceiptsUSD28,0503,1071792181,7858,24653,77853,778VariableCostsPropagulesUSD13,26413,264LaborUSD4,32075926281,0413,5568,8538,853FuelUSD293321,117MaintenanceandrepairsUSD420SalesandmarketingUSD6007,1157,115TotalVariableCostsUSD5,3691,09126281,0414,67229,23229,232FixedCostsDepreciationUSD2,50190626244321,1572,2742,934AdministrativecostsUSD900UtilitiesUSD120FeesforcoastallandusageUSD3,1093,109TotalFixedCostsUSD3,52190626244321,1575,3836,043TotalCostsUSD8,8901,99752521,4735,82934,61535,275NetReturnsUSD19,1601,1091271663122,41719,16318,503ProductionCostUSD/kg0.270.700.080.060.270.270.640.66264Downloaded
by [Cinvestav del IPN] at 14:02 11 May 2015
Depreciationcostswerecomputedbasedontheinvestmentamountsand useful
life of investment items listed in Tables 1 through 6, using
thestraight-linemethod.
Ausefullifeof10yearswasassumedfortheinitialinvestment onpropagules
reportedinthe Indonesian, Philippine andIndiansystems. For
simplicity andgiventhat local conditions canvarywidely, the
enterprise budgets omit financial expenses (interest on operat-ing
capital and long-term loans).Total production cost per kg of dry
seaweed ranged from USD 0.06/kgin Tanzania (floating) to USD
0.70/kg in the Philippines (Table 7). Mostsystems achieved
production costs below USD 0.30/kg with the exceptionof Mexico and
the Philippines. Tanzania is the lowest-cost producer regard-less
of the production method; the floating farm is nevertheless the
mostprofitable alternative as die-offs are minimized in this
system. The relativelyhigh costs in the Philippines were driven by
its low productivity (1.43 kg/m/year) whereas highcosts
inMexicoresultedfromthepurchases ofpropagules froman outside
source. Despite a productivity of only1.10 kg/m/year, the
Indonesian floating system had the largest profit mar-gin (USD
0.58) due to the relatively high farm-gate prices. The lowest
profitmarginwas computedfor theIndianfloatingrafts (USD0.06),
whichTABLE 8 Annual Labor Costs for a 30-km Floating Lines Seaweed
Farm in Indonesia, 2009Item USD/km/cycle USD/km/yearAttachment of
propagules to lines 6 48Placement of lines 4 32Harvesting of lines
4 32Drying of seaweed 4 144Total cost per km 144Total cost per farm
4,320Total cost per kg of dry seaweed 0.13Source: Neish
(2013).TABLE 9 Annual Labor Costs for a 27 12-m Floating Lines Farm
in Zanzibar, Tanzania, 2009Activity Man hoursper
cycleWage(USD/hour)Number ofcyclesTotal cost(USD)Tying propagules
32.00 0.03 8 7.27Planting 2.00 0.03 8 0.45Farm management 3.00 0.03
8 0.68Harvesting 12.00 0.03 8 2.73Transporting seaweed to drying
Location 2.00 0.76 8 12.12Packing 0.25 0.03 8 0.06Transportation to
market 0.50 0.23 8 0.91Tie-tie separation 15.00 0.03 8 3.41Total
cost 27.63Total cost per kg of dry seaweed 0.03Source: Msuya
(2013).The Economics of Carrageenan Seaweed Farming in Developing
Countries 265Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015
resultedfromthelowfarm-gateprices(USD0.33)andthehighopport-unity
cost of labor. The profit margin was also relatively low in the
SolomonIslands (USD 0.11).Measuring Net Returns against
International and NationalPoverty LinesThenet returns
listedinTable7canbeinterpretedas net returnstofarmoperators labor
andmanagement, wherethefarmoperator
isunderstoodtobethepersonresponsiblefortheday-to-daymanagementdecisions
in the farm (i.e., the farm owner). An instructive way to
comparethe economic performance of the farming systems inthis study
is tomeasurethelevel of net returns against aninternational
benchmarkofminimumwelfare for households in developing countries.
The inter-national poverty line (IPL) as defined by the World Bank
in 2008 (Ravallionet al., 2009), that is, USD 1.25 per capita per
day at 2005 Purchasing PowerParity (PPP), was deemed an appropriate
benchmark.Figure 2 compares the annual net returns from the six
floating
systemsinTable7totheannualIPLadjustedforafive-personhousehold(USD2,281at
2005PPP). Net returns(in2009current USD)wereconvertedtoUSDat
2005PPP(chainedinternational dollars)
usingthechainedPPPconversionfactors providedbythePennWorldTable,
Version8.0(Feenstra et al., 2013).6The goal of this analysis is to
make a valid compari-son among net returns to farm operators labor
and management in Table 7intermsof
therelativelivingstandardsaffordedbytheseincomelevelsacrosscountries.
Theanalysisassumesthatthefarmoperatorsupportsafive-person household
using his income from the seaweed
farm.FIGURE2Annualnetreturnstooperatorslaborandmanagementinsixfloatingseaweedfarmingsystems(USDat
2005PPP). Total
lengthoflinesundercultivationisenclosedinparenthesesnexttothecountries
names. Theinternational povertylineandtheMexicannational
povertylineforfive-person households are added for comparison
purposes.266 D. Valderrama et al.Downloaded by [Cinvestav del IPN]
at 14:02 11 May 2015 A salient feature of Figure 2 is the large
differences in economic perfor-mance across systems and relative to
the IPL. Even disregarding the impactoffarm-gateprices,
itisclearthatthescaleofoperationsmattergreatly.Despite its low
productivity (1.1 kg/m/year), the 30-km Indonesian
floatingfarmcanpotentiallygenerateanannual
incomestreamexceedingUSD30,000 (at 2005PPP), whichis nearly 16
times greater thanthe IPL.Boostedbyitshighproductivity,
theMexicanfarm(10
kmoflines)alsogeneratesarelativelyhighincome(closetoUSD30,000),
exceedingtheIPLbya factor of 12.With 4 km of culturelines, the
performanceof theSolomonIslandsfarmislessimpressivebutstill
capableofdeliveringanincome level in excess of the IPL (USD
4,862).The smaller Philippine, Tanzanian and Indian systems fail to
generateenoughincometosurpasstheIPL.Asexplainedbefore,theMRLLfarmexamined
in the Philippines is a relatively expensive system to set up;
thescaleofoperationsshouldthereforebesignificantlygreaterthantwokmoflinesinordertogenerateasubstantiallevelofincome.
BecausefarmpricesarerelativelyhighinthePhilippines,
otherlower-costsystemsarebound to have an economic performance
similar to the Indonesian systems,nevertheless. The Tanzanian and
Indian farms are hampered by both thesmall scale of the operations
and the low farm prices.Inadditiontothe IPL, most governments have
alsodefinedtheirownnationalpovertylines(NPLs).7TheNPLsofIndonesia,
Philippines,Tanzania, India, andtheSolomonIslandsareinthevicinityof
theIPL(USD1.14, 1.73, 0.95, 1.37, and1.87per capitaper day at
2005PPP,respectively).8Mexicois nevertheless amiddleincomecountry;
at USD4.63, its NPL is substantially higher than the IPL (CONEVAL,
2013). TheMexicanNPL(forrural
areas)isalsoshowninFigure2forcomparisonpurposes. Clearly, the 10-km
floating farm generates sufficient revenue tobring a five-person
household in rural Mexico over the higher NPL.As
explainedpreviously, hiredlaborcosts wereassumedintheesti-mationof
net returns inTable7.
Aplausiblealternativeassumptionistherelianceonfamily labor
inthesmaller Philippine, Tanzanian, andIndiansystems. Figure 3
re-estimates net returns for these systems ontheassumptionthat all
laborisprovidedbymembersof thefive-personhouseholdandnot chargedas
anoperatingcost (thesewouldbethennet returns to households labor
and management). In this new
scenario,thePhilippineandIndiansystemsgenerateenoughincome(USD3,323and3,377at2005PPPs,
respectively)toovercometheirrespectiveNPLs.In contrast, the net
returns from the 288-m Tanzanian floating plot accountfor only 25%
of the income needed to reach the lower Tanzanias NPL ofUSD 1,736
per household per year (USD 0.95 per capita per day). Incomefrom
this system would fail to reach the NPL even if farm prices were
raisedfrom USD 0.27 to USD 1.00/kg (current 2009 USD).The Economics
of Carrageenan Seaweed Farming in Developing Countries
267Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Risk
AnalysisGiven the large variability in seaweed prices that has been
observed inrecent years, a risk analysis was carried out to examine
the impact of pricefluctuations on the economic performance of the
six floating farm scenar-ios presented in Table 7. Using the Excel
add-on program Oracle CrystalBall (Oracle Corporation, 2012),
farm-gate prices were modeled as randomvariables following
triangular distributions: likeliest values were those listedin
Table 7 while prices 40%below and 40%above were used as minimumand
maximum values, respectively. These intervals roughly approximate
therangeof
pricefluctuationsobservedoverthelasttenyears(Valderramaet al.,
2013). Table 10 summarizes the parameters of the triangular
distribu-tionsforeachfarmscenario.
Montecarlosimulationsconsistingof1,000trials were run for each
case.Theresultingfrequency distributions of annual net returns
aredis-playedinFigure4. ThePhilippine, Tanzanian,
andIndiansystemswereassumed to rely on family labor while the cost
of labor was accounted forintheothersystems. As indicatedinTable10,
theprobabilityof losseswas zeroinall systems withtheexceptionof
theSolomonIslands andMexico(3.8%
and1.2%,respectively):productioncostsinthelattertwocountries
(USD0.27and0.66/kg, respectively)exceededtheminimumprice
assumedinthe Montecarlosimulations
(USD0.23and0.60/kg,respectively), giving rise to a small potential
for losses.National
povertylinesforfive-personhouseholds(dashed)werealsoadded to Figure
4: the Indonesian floating farm was the only system capableof
generating net returns exceeding its own NPL with 100%certainty.
Therisk of not reaching the NPL was also low in the Indian and
Mexican
sys-tems(Table10).Incontrast,theTanzanianfarmfailedtoreachitsNPLFIGURE
3Annual net returns (USD at 2005 PPP) for floating seaweed farming
systems in Philippines,Tanzania, and India relying on family labor.
Total length of lines under cultivation is enclosed in par-entheses
next to the countries names. National poverty lines are added for
comparison purposes.268 D. Valderrama et al.Downloaded by
[Cinvestav del IPN] at 14:02 11 May 2015 evenifpricesare40%
aboveaverage(USD0.38/kg).
NetreturnsinthePhilippineandSolomonIslandssystemsalsofailedtoreachNPLswhenprices
fell substantially below the average levels assumed in Table
7.POLICY IMPLICATIONSWithfeatures suchas lowcapital
andoperatingrequirements, shortproduction cycles and a growing
international market for carrageenan pro-ducts, seaweed farming is
a particularly appealing enterprise for inclusioninto the
integrated coastal management projects and fisheries
managementinitiatives led by international development agencies,
governmentsfisheries departments, andNGOs intropical
developingcountries
(e.g.,ACDI/VOCA,2010;ADB,2014;BlueVentures,2013;ConservationInter-national,
2008; Sievanen et al., 2005). The dramatic increases in
productionin the Philippines and Indonesia since the late 1960s are
frequently takenas evidence of the profitability of seaweed farming
for households in
coastalregions.Animportantlessonfromthisstudy,nevertheless,isthatcertainmarket
and production conditions need to be satisfied for seaweed
farmingto fulfill its potential as a sustainable source of
employment and livelihoods.In this regard, seaweed farming is no
different from most other aquacultureenterprises with higher
capital and technological requirements.Thefirst aspect
tobediscussedis farmprices. Lowprices seriouslyhamper the
revenue-generating potential of seaweed farming in the
mostremoteproducingregions(Tanzania, SolomonIslands).
Reportedpricesinthe Indonesian, Philippine and Mexicancase studies
ranged fromTABLE 10 Risk Analysis Measuring Sensitivity of Annual
Net Returns (USD at 2005 PPP) to Variationsin Farm-Gate Prices for
Six Floating Seaweed Farming SystemsParameters of triangular
distributions forfarm-gate price (USD/kg)Certainty levels
(percent)Minimum Likeliest Maximum Probability oflossesProbability
of notreaching NPLIndonesia 0.51 0.85 1.19 0.0 0.0Philippines 0.65
1.09 1.53 0.0 43.1Tanzania 0.16 0.27 0.38 0.0 100.0India 0.20 0.33
0.46 0.0 6.1Solomon Islands 0.23 0.38 0.53 3.8 30.8Mexico 0.60 1.00
1.40 1.2 7.6Triangular distributions were used to characterize
variability in farm-gate prices: likeliest values werethose listed
in Table 7, while prices 40% below and 40% above were used as
minimum and maximumvalues, respectively. The Philippine, Tanzanian,
and Indian systems relied on family labor, while the costof labor
was accounted for in the other systems. Montecarlo simulations
consisting of 1,000 trials wereconducted in each case. NPLNational
Poverty Line.The Economics of Carrageenan Seaweed Farming in
Developing Countries 269Downloaded by [Cinvestav del IPN] at 14:02
11 May 2015 USD 0.60 through USD 1.40/kg. In contrast, prices in
Tanzania, India, andthe Solomon Islands never exceeded USD 0.40/kg.
Low prices in Tanzaniahave led some farmers (mostly males) to quit
seaweed farming altogether inrecent years (Msuya, 2013).As
explained before, the problem of low prices is mostly one of
reducedaccess to markets. The high shipping costs from the
relatively remote farm-ing locations in eastern Africa and the
Pacific Islands constrain the abilityof purchasers/exporters to
offer the much higher prices received
byIndonesianandPhilippinefarmers. TheproblemiscompoundedbytheFIGURE
4Risk analysis measuring sensitivity of annual net returns (USD at
2005 PPP) to variations infarm-gateprices for
sixfloatingseaweedfarmingsystems. ThePhilippine, Tanzanian,
andIndiansystems relied on family labor while cost of labor was
accounted for in the other systems. National pov-erty lines for
five-person households (dashed) are added for comparison.270 D.
Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May
2015 inability of some farmers to supply their own farming
materials: in placessuchas Tanzania many farmers are highly
dependent onprocessors/tradersforthe sourcing of materials(stakes,
culture lines, etc.). Thecostof thesematerials is
discountedfromthepricepaidtofarmers at theendoftheproductioncycle.
Aslongasfarmerscontinuetodependonprocessors/tradersfortheprocurementoftheirfarmingmaterials,
theirleveragetonegotiatehigherpriceswill becompromised.
Inthisregard,microfinance could provide a viable means for
dependent farmers to breakfree from disadvantageous arrangements
with suppliers. Depending on thelocal contextandgiventhattheinitial
capital requirementsarenotveryhigh, microloans might
beavailablefromcredit institutions orthroughorganizations suchas
Kiva.org.9Seaweedfarmers inthePhilippines
arealreadytakingadvantageofKivatoraiseinvestmentcapitaltofundtheiroperations
(Kiva.org, 2012).Diseases (ice-ice in particular) have had a severe
impact on the farming ofthe higher-priced K. alvarezii in places
such as Tanzania and the Philippines.Many farmers in Tanzania have
turned to the farming of the more resistantEucheuma denticulatum in
an attempt to maintain farm yields but some havebeen discouraged by
its lower price, normally around 50%of the price
paidforK.alvarezii.Furtherresearchondisease-resistantstrainsofK.alvareziiand
deep-water farming methods (which reduce the impact of diseases
onK. alvarezii) is warranted. Some important steps inthis
directionhavealready been taken in Tanzania (Msuya et al.,
2007).Diminished economic returns resulting from low farm prices
can alsobe enhancedby introducing value-added processes aimedat the
pro-ductionof seaweed-basedsoaps, lotions, powder, etc. InTanzania,
theZanzibar Seaweed Cluster Initiative has been leading the efforts
to createvalue-added seaweed products with some positive results
(Msuya,
2011b).Theotheraspecttoconsideristhescaleoffarmingoperations.
Thebestperformingsysteminthisreviewwasthe30-kmfloatingIndonesianfarm
despite its moderate productivity (1.43 kg/m/year). The
second-bestperforming operation was the second largest, the Mexican
off-bottom farm. Annual net returns were even higher in the Solomon
Islandsfarm(4 km)thaninthePhilippinesystem(2 km)inspiteof
themuchhigher prices in the latter country (USD 1.09 vs USD 0.38).
Although theTanzanian systemswere relatively productive(2.45-2.80
kg/m/year), theirreducedscale(lessthan0.3
km)precludedthemfromachievingincomelevelsexceedingtheNPL. Thepoor
performanceof thesesystemswas ofcoursecompoundedbythelowfarmprices.
Itisclearthatfamilyopera-tions of this type are not sustainable in
the long term, especially if seaweedfarming is approached as the
primary means of livelihood support.Data from a four-year USAID
project examining the viability of maricul-ture enterprises in
Tanzania provide an indication of the minimum scale ofThe Economics
of Carrageenan Seaweed Farming in Developing Countries
271Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015
operations neededtorunaviablefarminthis country
(ACDI/VOCA,2010).Thetechnicalprojectadvisedfarmerstoplantaminimumof200lines
of 10 m each (2,000 m). After the initial 1012 weeks of farm
expan-sion, anindividual producer wouldbeabletoharvest 500 kgof
driedseaweedper month(3 kg/m/year). Assumingapriceof
USD0.27forK.alvareziiandaproductioncostofUSD0.06/kg(Table7),netreturnsfrom
this system would reach USD 1,260. At 2005 PPP, this would
amounttoUSD2,777,
surpassingtheNPLofUSD1,736forafive-personhouse-hold. This is of
course a much more acceptable level of income than whatis shown in
Figures 2, 3 and 4. Other technical advisors recommend familyfarms
in eastern Africa to handle at least three km of lines (de San,
2012).Having farms to operate two or three km of seaweed lines may
require asubstantial increase in the managerial abilities of many
family operations ineastern Africa. Nevertheless, it is essential
that farmers as well governmentsfisheries departments and
international development agencies understandthe importance of
achieving these economies of scale prior to promotingseaweed
farming as a sustainable livelihood activity in coastal areas.
Scalingup acquires even more importance given the low seaweed
prices prevailingin the region.CONCLUSIONSStandard budgeting
techniques were used to develop comparativeenterprise budgets for
eight carrageenan seaweed farming systems inIndonesia, the
Philippines, Tanzania, India, Solomon Islands and Mexico.The
systems were selected to illustrate a variety of production and
marketscenarioscurrentlyfoundinseaweedfarmsaroundtheworld.
Thestudyreviewedsmall-scale, village-based operations inTanzania;
large-scale,industrial Indonesian farms, as well as intermediate
systems in thePhilippines, India, Solomon Islands, and Mexico.In
addition to the scale of operations and range of farming
techniques,otherbiological
andeconomicparametersvariedsignificantlyacrosssys-tems.
Productivity ranged from 1.10 kg/m/year in the Indonesian
floatingfarmto5.43 kg/m/year intheSolomonIslands operation.
Farmpricesweresignificantlyhigher(>USD0.80/kgof
dryseaweed)inIndonesia,thePhilippines
andMexicoduetotheirproximitytomarkets. At USD0.06/kg, Tanzania
achieved the lowest cost of production while the
highestcostsperkgwerecomputedforthePhilippines(anMRLLsystem)andMexicoatUSD0.70andUSD0.65,respectively.ProductioncostsfortheothersystemswerearoundUSD0.27/kg.
EstimatedproductioncostsforIndonesia and the Philippines are not to
be interpreted as representativecosts giventhe large variety of
farming systems and local productionconditions found in these
countries.272 D. Valderrama et al.Downloaded by [Cinvestav del IPN]
at 14:02 11 May 2015
Althoughseaweedfarmingisrepeatedlyportrayedasacoastal enter-prise
suitable for small-scale family farms, the analysis
highlightedtheimportanceofachievingeconomiesofscaleasindicatedbythesuperioreconomicperformanceoftheIndonesianindustrial-scalefarmsrelativeto
the family-run operations in Tanzania and India. In the case of
Tanzania,thesmall300-mfarmingplotsgeneratedalevelofincomethatfellshortfrom
the international and national poverty lines.Under conditions
suchas those described inthe Tanzaniancase,seaweedfarmingcanstill
provideimportantsocioeconomicbenefitsasasupplemental
livelihoodactivity, but itsimpact will belimited. However,if the
right market, production and environmental conditions are
present,seaweed farming holds the potential to enhance
substantially the
socioeco-nomicwellbeingofcoastalcommunitiestraditionallydependentontheirsurroundingmarineresources.
Assumingafarmpriceof at least USD0.80/kg, productioncosts of
aroundUSD0.25/kg, andaminimumof2,000 m of production lines, seaweed
farms can generate enough revenueto bring a five-family household
over the national poverty line. Thiseconomicpotential
acquiresevengreaterimportanceinplaceswithfewadditional employment
opportunities for coastal inhabitants. Even
inunderperformingregions suchas Tanzania, seaweedfarminghas
beeninstrumental inraisingthesocioeconomicstatusoffemalevillagers,
whotraditionally have access to fewer employment alternatives than
males.ACKNOWLEDGMENTSAcknowledgments are due to all seaweed farmers
who contributed datafor this study. All errors, omissions and views
remain the sole responsibilityof the authors.FUNDINGThe authors are
indebted to the Food and Agriculture Organization ofthe United
Nations for their financial support for this research.NOTES1.
Seaweeds can be classified into three broad groups based on
pigmentation: brown, redand green. Botanists refer to these broad
groups as Phaeophyceae, Rhodophyceae andChlorophyceae,
respectively.
Redandgreenseaweedsareusuallysmallerthanbrownseaweeds, ranging from
a few cm to about a meter in length (McHugh, 2003).2.
Nori(Porphyraspp.)isanotherredseaweedwithsignificantaquacultureproductioninEast
Asian countries but it is mainly used for direct human
consumption.The Economics of Carrageenan Seaweed Farming in
Developing Countries 273Downloaded by [Cinvestav del IPN] at 14:02
11 May 2015 3. Theinternational
carrageenanindustryisdominatedbyfiveorsixmultinational
con-glomerates, mainly based in the U.S. and Europe. China has also
emerged in recent yearsas a major purchased of raw seaweed (McHugh,
2003; Tinne et al., 2006).4. Unliketerrestrialplants,
seaweedsdonotpropagateviaseeds;
theyreproduceinsteadthroughacomplexmechanisminvolvingzoospores.
Theproductionof zoospores isnot possible under laboratory
conditions; tissue culture and micropropagation methodsare thus the
best alternatives for seedling production in labs. Although much
researchhas been conducted in this area, lab production of
seedlings is still not cost efficient fromthe point of view of
farmers, most of whom rely on repeated vegetative propagation
ofharvested seaweed. Nevertheless, vegetative propagation does not
augment genetic varia-bility which may contribute to the decrease
in growth rates and carrageenan yield and
theincreasedsusceptibility todiseases observedinsomelocations
(Hurtado&Cheney,2003). Current researchis aimedat optimizing
culture conditions for the massiveproduction of high-quality lab
seedlings (Yong et al., 2014). If these efforts are successful,the
industry couldeventually turnaway fromrepeatedvegetative
propagationandexperience overall increases in productivity.5.
Ice-ice is caused when changes in salinity, ocean temperature, and
light intensity inflictstress on seaweeds, making them produce a
moist organic substance that attracts
bacteriainthewaterandinducesthecharacteristicwhiteningandhardeningoftheseaweedstissues
(McHugh, 2003).6.
PurchasingPowerParity(PPP)isatechniqueusedtodeterminetherelativevalueofdifferentcurrencies.
ThePPPconceptallowsonetoestimatewhattheexchangeratebetweentwocurrencieswouldhavetobeinorderfortheexchangetobeatparwiththe
purchasing power of the two countries currencies. This is the
appropriate method-ology to use when comparing living standards
across countries and over time (Cheung,2009).7. In fact, the USD
$1.25 IPL is computed as the average of the national poverty lines
of thepoorest 15 countries for which data are available (Chen &
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