Fishery Income Diversification and Risk for West Coast Fishermen and Fishing Communities

Dan Holland – Northwest Fisheries Science CenterSteve Kasperski – Alaska Fisheries Science Center

2

Introduction• Catches and prices from many fisheries exhibit high inter-

annual variability leading to variability in the income derived by fishery participants.

• This financial risk may be mitigated in some cases if individuals participate in several different fisheries, particularly if revenues vary asynchronously

• We found that diversification of fishery revenue does decrease year-to-year variability of income for individuals and for ports.

• We found that diversification for individual fishermen, on average, has mostly declined the last few decades.

• Trends for ports are more variable but many ports have also seen decreases in diversification over time.

3

Methodology• Annual catch and revenue by vessel, species and port from 1981-2012 for

over 28,000 vessels with average revenues over $5,000• The port level analysis includes 166 ports with average fishing revenues

over $100,000 ( 79 West Coast and 87 Alaska). • Construct annual indices of diversification of gross revenue from fisheries

for individuals (in vessel categories) and for ports • Herfindahl Index

– where is the proportion of fishery revenues for the individual or port associated with the species or species group i and region j

• Evaluate trends in revenue diversification and how they have been impacted by regulatory changes

• Evaluate the relationship between variability of individuals’ or ports’ annual revenue and diversification

ijp

42

1 1

,jS

iji j

H p

4

Species Groupings For Diversification Indices

* Indices also separate out Bering Sea, Gulf of Alaska and Alaskan state waters

West Coast Alaska Pacific Whiting Pacific Cod Dover Sole, Thornyheads, Sablefish Flatfish Rockfish and Flatfish Rockfish Skate, Dogfish, Sharks Atka Mackerel Pacific Halibut Pollock California Halibut, Croaker Other Groundfish Pink Shrimp Sablefish Other Prawns and Shrimp Pacific Halibut Crab Herring Salmon Chinook Salmon Tuna Sockeye Salmon Herring Coho Salmon Coastal Pelagics Pink Salmon Echinoderms Chum Salmon Other Shellfish Other Salmon Squid Red King Crab Other Species Other King Crab

Opilio Crab

Other Snow Crab (Bairdi)

Other Crab

Scallops

Other Shellfish

Other Species

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Diversification Trends For Vessels Fishing on the West Coast

HHI declines from 10,000 toward zero when revenues are spread amongst more fisheries

HHI is erratic, but diversification has been mostly declining (HHI increasing) last two decades

Vessel that have been fishing longer tend to be more diversified

Higher earning and large vessels tend to be more diversified than smaller and lower revenue vessels

OR fleet more diversified than WA fleet which if more diversified than CA fleet

6,000

6,500

7,000

7,500

8,000

8,500

Aver

age

Her

finda

hl-H

irsch

man

Inde

x

West Coast and AK Vessels with >$5K Average Revenue

>$5K 2012 FLEET 1981-2012 FLEET

6,000

6,500

7,000

7,500

8,000

8,500

Vessels with 2012 West Coast Revenue >$5K

2012 WA >$5K 2012 OR >$5K 2012 CA >$5K

5000

5500

6000

6500

7000

7500

8000

8500

9000

9500

Year

Vessels with 2012 West Coast Revenue >$5K

<41 Feet 41-80 Feet 81-125 Feet

5500

6000

6500

7000

7500

8000

8500

9000

9500

Aver

age

Her

finda

hl-H

irsch

man

Inde

x

Year

Vessels with 2012 West Coast Revenue >$5K

$5K-$25K $25K-$100K >$100K

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Variation Diversification for Vessel Groupings

There is wide variation in the degree of diversification across vessels within each class.

The CA fleet is dominated by vessels with low diversification

Most higher revenue vessels are diversified while the distribution of smaller and low revenue vessels is concentrated at low diversification levels.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Herfindahl-Hirschman Index Range

<=40 ft 41-80 ft 81-125 ft

0%

5%

10%

15%

20%

25%

30%

35%

40%$5-25K $25-100K >$100K

0%

5%

10%

15%

20%

25%

30%

35%

40%

Vessels with 2012 West Coast Revenue >$5K

2012 WA >$5K 2012 OR >$5K 2012 CA >$5K

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Income Risk and Diversification?

- 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1

Vessels with 2012 West Coast Revenue >$5K

2012 WA REV >$5K 2012 OR REV >$5K 2012 CA REV >$5K

90-10 SplitHHI=8200

50-25-25 Split HHI=3750

50-50 Split HHI=5000

- 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1

$5-25K $25-100K >$100K

90-10 SplitHHI=8200

50-25-25 Split HHI=3750

50-50 Split HHI=5000

- 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1

Herfindahl-Hirschman Index

<=40 ft 41-80 ft 81-125 ft

90-10 SplitHHI=8200

50-25-25 Split HHI=3750

50-50 Split HHI=5000

• Quadratic Regressions (OLS) of CV of total annual revenue for individual vessels against their average Herfindahl (HI) diversification score.

• Separate regressions for different revenue and vessel length categories and the West Coast Groundfish fleet

• P-values on slope coefficients are all are nearly all significant at 1% level*

• More details on fit??

21 2* *iCV HI HI

*HI^2 coefficient for West Coast 80-125 feet p=.05

11

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Her

finda

hl-H

irsc

hman

Inde

x

Selected Washington Ports

SEATTLE ILWACO BELLINGHAM WESTPORT

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Her

finda

hl-H

irsc

hman

Inde

x

Oregon Ports

ASTORIA NEWPORT CHARLESTON BROOKINGS

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Her

finda

hl-H

irsc

hman

Inde

x

Selected Northern California Ports

CRESCENT CITY EUREKA FORT BRAGG SAN FRANCISCO -

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Her

finda

hl-H

irsc

hman

Inde

x

Selected Southern California Ports

MOSS LANDING SANTA BARBARA VENTURA SAN PEDRO

Diversification of Fishing Income For Fishing Ports

• Trends vary by port and can be highly variable for a given port

• Dungeness crab is responsible for higher and highly variable HHI in southern OR and northern CA

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Fitted relationships between the coefficient of variation (CV) of gross revenues for US West Coast and Alaskan fishing ports

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1000

0

9750

9500

9250

9000

8750

8500

8250

8000

7750

7500

7250

7000

6750

6500

6250

6000

5750

5500

5250

5000

4750

4500

4250

4000

3750

3500

3250

3000

2750

2500

2250

2000

CV o

f Ann

ual

Land

ed V

alue

Herfindahl-Hirschman Index

WC >$100K Rev AK >$100K Rev

90-10 Split HHI=8200

50-50 Split HHI=5000

50-25-25 Split HHI=3750

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Conclusions• Greater diversification does appear to reduce annual

variability of income• Greater diversification could provide additional benefits:

– Greater acceptance of trade-offs required by ecosystem-based fishery management

– Increased community resilience • The impact of fishery management plans and regulatory

actions and programs on diversification should be considered along with other performance objectives

• It is unclear whether catch shares will increase or decrease diversification. We are beginning a national study to look at this question.

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If Diversification Lowers Income RiskWhy isn’t Everyone Diversified?

• Additional costs for license, quota, gear, moving between fisheries, etc.

• Lower efficiency from lack of specialization???• Regulatory Pressures:

– Management systems have favored full time players and forced out or marginalized part-timers

– Longer seasons means less time available to fish in other fisheries