Contending with risk in the seafood processing industry : a bioeconomic portfolio analysis of the Pacific whiting fishery

Since harvest levels of many of the world's fisheries are not likely to increase in the foreseeable future, resource managers and seafood processors need to develop improved strategies to maximize the utilization and benefits of current catches. In addition to increasing utilization and benefits, seafood processors are subject to the risks associated with variation in harvest levels and market prices of seafood product forms. While bioeconomic models have been developed to attempt to determine more efficient processing and management strategies, little research has attempted to address the issue of processor risk. Portfolio theory is one methodology that can be used to analyze the trade-off between the benefits and risks of producing alternative proportions of product forms. Furthermore, improved utilization of catches can be incorporated through the integration of portfolio and bioeconomic models. Pacific whiting (Merluccius productus) is used as a case study in which to show the potential benefits of portfolio diversification while attempting to maximize the utilization and benefits of the fishery. Whiting is one of the most important fisheries along the Pacific Coast of the United States in terms of its ecological and commercial value. While the domestic fishery has only been in existence since the early 1990's, a significant number of ecological, biological, management, and market development studies have been conducted. The objective of this research is to use the information provided by these studies in the development of a bioeconomic portfolio model in order to provide insight into more efficient processing and management strategies. The study results indicate that the industry may be able to reduce its exposure to risk while sacrificing relatively little in benefits by changing its production mix. However, the majority of efficient portfolios were dominated by relatively few product forms, indicating that broad diversification is not essential. The bioeconomic portfolio model also provided information concerning the order in which to process product forms during the harvesting season. Lastly, processing late, rather than early, in the harvest season was found to increase the overall benefits