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Is Tilapia Farming Financially Profitable and Efficient? Policy Options for Sustainable Farming

Mezamun-Ara Mukta
Department of Agricultural Finance, Bangladesh Agricultural University, Mymensingh-2202, Bangladesh

Md. Akhtaruzzaman Khan
1Department of Agricultural Finance, Bangladesh Agricultural University, Mymensingh-2202, Bangladesh

Md. Rais Uddin Mian
Department of Agricultural Finance, Bangladesh Agricultural University, Mymensingh-2202, Bangladesh

Rahat Ahmed Juice
Department of Agricultural Economics, Bangladesh Agricultural University, Mymensingh-2202, Bangladesh

Abstract/ Executive Summary:

Tilapia (Oreochromis niloticus) is known as „fish for the poor' due to its low market price. However, the question remains about the sustainability of this species because of high production cost and lower market price. Therefore, this study examined the financial profitability, technical efficiency and tried to find out the policy options for increasing the financial benefit of fish farmers. A total of 250 tilapia fish farmers were selected from seven tilapia producing areas of Bangladesh. To fulfill the objectives of this study, profitability, stochastic frontier production function, and sensitivity analysis were employed. Considering all selected farmers, tilapia farming found a profitable business where undiscounted BCR was only1.11. Among all cost items, only feed consists of 70 percent of the total production cost. The mean technical efficiency level of tilapia fish farmers was 85 percent, implies that by operating at full technical efficiency levels, tilapia yield could be increased from the current level of 20.98 to 24.13 tons per hectare and efficient farmers found more productive than inefficient farmers. Farmer's financial benefit can be increased by reducing the feed price, decreasing FCR or increasing the output price. Feed price reduction or enhance the quality of feed could be effective policy options for sustaining the tilapia farming.

Keywords: Tilapia farming, Profitability, Technical efficiency, Sensitivity analysis

Location: Mymensingh, Cumilla, Bogura, Jashore, Bhola, Khulna, and Chattogram

Start Date: 00-03-2016

End Date: 00-06-2016

Program Area: Socio-economic and Policy

Non-commodity: Profitability

Objectives:

This study was conducted to know, how the financial benefit can be increased through new policy intervention in developing countries for sustaining the tilapia farming.

Methodology:

Study area and sample size Considering the intensity of tilapia fish production, seven (7) districts were purposively selected for this study, which are Mymensingh, Cumilla, Bogura, Jashore, Bhola, Khulna, and Chattogram. Afterward, 18 upazilas were selected as per production volume (on the basis of DoF statistics) from these seven districts. Finally, a total of 250 tilapia farmer were selected following the simple random sampling technique from this 18 upazilas. Data were collected through direct interviews of the respondents using a prescribed survey schedule during the months of March to June in 2016 considering the production year 2015. Each survey schedule was checked and verified to eliminate possible errors and inconsistency after the interview. Analytical technique Per hectare financial profitability of tilapia production from the viewpoint of individual farmers was measured in terms of net return, the benefit-cost ratio (undiscounted), gross profit margin, net profit margin, and break-even price. In addition, sensitivity analyses were performed to assess how farmers can earn financial benefit in different situations (reducing feed price and increasing output price). If the production process is not technically efficient, then resources become wasted. Therefore, it is important to know the level of technical efficiency and an optimal input combination of a farm. The Stochastic Frontier Analysis (SFA) and Data. Envelopment Analysis (DEA) are the two principal methods to measure farm efficiency. In this study, SFA was used to estimate the technical efficiency of tilapia fish farmers. Two types of functions, namely Cobb-Douglas and Translog dominate the technical efficiency literature. Both functional forms were tested where Cobb-Douglas found suitable for the data set.

Source of Information: J Bangladesh Agril Univ 17(1): 92–98, 2019

Article Link (Online Journal): https://doi.org/10.3329/jbau.v17i1.40669

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

Tilapia farming has expanded tremendously in Bangladesh over the last two decades. Throughout the country, commercial tilapia farms follow semi-intensive farming practices where the industrial feed is the main input of production and has become very expensive to the producer. Furthermore, the market price of tilapia is very low compared to other fish species which leads to less financial benefit from tilapia farming. In this study, tilapia farming found a financially profitable business where BCR was low compared to other fish species. Among all cost items, only feed cost was about 70% of the total production cost. Labor use, number of fingerlings per hectare, amount of feed, salt, and lime were contributed significantly to the production of tilapia. Age of farm operators, education, training, and experience were significant determinants of technical inefficiency. Per hectare yield could be increased by 15 percent with the existing technology if farmers could run at the frontier. Thus, given the levels of existing technologies and resource use, the sample farms could increase their average yield from the existing 20.98 to 24.13 tons/ha by using their existing resources more efficiently. Department of Fisheries and other relevant organization can play a vital role in improving the technical efficiency of tilapia farmers through better training on stocking, feeding and fertilizing ponds. In this case, leaflet distribution on scientific tilapia farming may be one of the best ways, which may help to improve fish production practices. Farmers in the study areas are not able to use inputs, especially feed at optimum level because of the higher price and also output price was very low as their expectation. Reduction of feed price, FCR reduction though increasing feed quality and the increase of tilapia price found effective ways for enhancing the financial benefit of tilapia farmers. But increases in output price depends on several factors such as demand, supply, and consumer preferences. In addition, increases in output prices hamper the consumer's welfare. Therefore, the reduction of feed price or enhance the quality of feed could be an effective policy for sustainable tilapia industry. Government can provide subsidy on fish feed or can introduce tax rebate policy in imported feed ingredient for reducing the feed price. Furthermore, the feed market is mainly controlled by very few companies and earn the supernormal profit that leads to increase the feed price. Therefore, the government's monitoring system in the feed industry is to be strengthened and new regulatory policy needs to be introduced for sustaining the industry.

Knowledge Management: Journal