A comparison of risk exposure in aquaculture and agricultural businesses Ola Flaten, Gudbrand Lien and Ragnar Tveterås Norwegian Agricultural Economics Research Institute (NILF) P.O. Box 8024 Dep, NO–0030 Oslo, Norway www.nilf.no Correspondence to:
[email protected]
Background
Price variability
• The biological nature affects risk exposure of the businesses. • Fish farming only recently has become a specialised business. • Different institutional environments (government involvement, co-
Enterprise
Mean prices
CV within farms
Compare risk exposure in salmon farming and agricultural enterprises in Norway. • Compute and compare the variability of yields, prices and economic returns at the farm level. • Compare cumulative distribution functions of economic returns of the businesses.
Barley, NOK/kg Oats, NOK/kg Wheat, NOK/kg Potato, NOK/kg Milk, NOK/L Lamb, NOK/kg Goat milk, NOK/L Hogs, NOK/kg Salmon, NOK/kg
2.27 2.08 2.77 2.36 4.24 47.96 6.77 25.36 37.93
0.16 0.16 0.18 0.68 0.15 0.17 0.11 0.15 0.40
Materials and methods
All prices were converted to 2004 real Norwegian kroner (NOK, €1≈NOK 8.00) using the Norwegian consumer price index as price deflator
operatives, global or national markets, etc.) • Small family-based firms dominate in agriculture. Aquaculture has converted into a mix of medium-sized and large firms.
Aims of the study
• An error component procedure that implicitly removes any common
Results Yield variability
Enterprise Barley, kg/ha Oats, kg/ha Wheat, kg/ha Potato, kg/ha Forage, feed units/ha Milk, litres sold/cow Sheep meat, kg/winter fed sheep Goat milk, litres sold/goat Finisher-hog, kg slaughter weight Salmon, kg/m3 cage volume a Coefficient of variation
Variability in economic returns 1,00
0,75
C u m u la tiv e p ro b a b ility
regional trend from the farm-level series were used to examine variability in yields, prices and economic returns between years on a farm. • Stochastic efficiency analysis of empirical distributions of financial outcomes. • Agricultural data: NILFs Farm Accountancy Survey, 1000 farms annually, 13000 observations from 1992 through 2004. • Aquaculture data: The Norwegian Directorate of Fisheries profitability survey of fish farms, 200-300 salmon farms annually, 3600 observations from 1985 through 1998.
0,50
0,25
a
Average yield
CV within farmsb
3859 4083 4569 18572 3720 5686 26.4 499 75.9 27.6
0.27 0.28 0.25 0.51 0.38 0.09 0.27 0.14 0.08 0.58
0,00 -100
-80
-60
-40
-20
0
20
40
60
Grain/potato
Salmon
80
R e tu rn o n a s s e ts , %
Dairy
Sheep
Goat
Grain
Grain/hog
Cumulative distribution functions for return on assets in salmon farming and agricultural businesses
Return on assets (ROA) was highest in salmon farming (9.2% in average). All of the agricultural farm types showed a negative average ROA. Even though salmon farming offered more volatile economic returns than agricultural enterprises, stochastic dominance tests showed salmon farming to be the most risk efficient alternative.
b Means of the farms
Conclusions • Higher year-to-year variability in yields, prices and economic returns in salmon farming than in agricultural enterprises. • Variability in livestock enterprises was generally lower than for crop enterprises. • Average economic returns were higher in salmon farming, upside gains. • The distribution of economic returns in salmon farming has been preferable (normatively) to that of agricultural businesses.
