I analyze costs, break-even prices, and profits for beginning small-to-medium off-bottom oyster farm operations ranging from as few as 27,000 oysters planted on 0.5 acre to as many as 1.28 million oysters planted on four acres. An Excel spreadsheet-based tool was developed as part of this work to allow users to estimate cost and profit under alternative assumptions and scenarios. For the purpose of analysis, I use Southeast Louisiana, USA, as the representative location of farm operations.
R esults are meant to represent an operation under a range of reasonable assumptions on production, environmental conditions, and markets likely to hold during the first five years of operation. Results are provided in two forms: “Full Accounting” results that include all relevant costs (explicit costs and opportunity costs), consistent with economic theory and practice; and “Partial Accounting” results that exclude owner labor costs and depreciation on boat, motor, and vehicle . The latter results are included because they are deemed by some in the industry to be the type of analysis on which growers actually make decisions. Because these latter results ignore certain major cost components, their results appear much more favorable.
Under reasonable assumptions of a farm start-up period and moderate crop losses due to periodic adverse environmental conditions, the five-year average break-even price under Full Accounting is estimated to range from $2.57 per oyster for 40,000 oysters planted on half an acre to $0.52 per oyster for 960,000 oysters planted on four acres. Average annual profit under Full Accounting is estimated to be negative for production levels at or below 480,000 oysters planted on two acres , and positive at production levels at or above 720,000 oysters planted on three acres. Sensitivity analysis indicates that none of the production levels considered are fully robust to the variety of conditions that an oyster farm in this region is likely to face.
Farming for the high-end half-shell oyster market is dependent upon a small set of buyers willing to pay high prices. I estimate that there are a very limited number of establishments in the region that feature off-bottom half-shell oysters. P rices received by growers vary widely. Although prices at or above $1 per oyster have been observed, the average price is in the $0.40-0.59 per oyster range. Data from some states indicate that nearly half of farmed oysters end up in lower-value market s where prices are below $0.25 per oyster. Some farms are located distant from markets and do not have access to an established distributor, requiring them to market and deliver oysters directly , which can yield higher prices, but also requires added effort that can erode much of the gains associated with higher prices. There is also currently a shortage of hatchery-reared seed across the entire US Gulf Coast. Farm gear and infrastructure are susceptible to storms. It has not been demonstrated that gear can be sunk and retrieved cost-effectively or relocated in time to avoid damage and loss of both gear and crop.