46 March 2012 An economic analysis of oyster aquaculture on the Patuxent River, Maryland using AQUASIM David Farkas1, Kelton Clark1and Asif Dowla2 Problem Historically the Chesapeake Bay has been a vital part of the regional ecosystem and resource to the human inhabitants of the region. Oysters have been the single-most valuable commodity humans have harvested from the Bay. In its heyday in the 1880s, annual catches were around 12 million bushels, with a peak of 15 million bushels, supporting a many jobs in multiple industries. In addition to providing a living for watermen catching oysters, shipbuilders, shucking houses, transportation lines, and restaurants were also needed to sell products of the bay (Locke 1993). Today the oyster industry is a faint glimmer of what it once was. The annual catch in 2006 was 154,436 bushels, supporting around 700 watermen (Maryland Department of Natural Resources 2006). The collapse of the oyster fishery is an economic and ecological problem. Oysters are a vital part of the ecosystem of the Bay, providing habitat on their reefs for shellfish—such as crabs—and small fish that shy away from open water. They act as the Bay’s filtration system; an adult oyster can filter approximately 189 L of water each day. The collapse of the oyster fishery has contributed to the overall decline in the health of the Chesapeake Bay. Solution In response to the current situation, the Morgan State University Estuarine Research Center (MSUERC) established a demonstration project to examine the viability of oyster aquaculture in the Patuxent River region of the Bay. If successful, aquaculture can provide an alternative livelihood for watermen on the Bay and a mechanism to enhance the oyster population. Two watermen have agreed to work on this project and their reasons for participating are easily understood. Many traditional activities of watermen, such as shaft-tonging for oysters, are now unprofitable. The decline of the oyster fishery means fewer watermen can find work, putting more pressure on other struggling fisheries in the Bay. Study Methods We examined the business model of oyster aquaculture as an alternative to the wild harvest fishery. We estimated costs of establishment and operation of a small-scale part-time oyster aquaculture farm. The farm must be a part-time endeavor to be acceptable to watermen. Watermen typically work in multiple fisheries, inasmuch as many of them are seasonal. Doing aquaculture part time provides watermen with a source of income from oysters and time to work in other fisheries. The farm started with 150,000 seed oysters purchased from the Virginia Institute of Marine Sciences hatchery for $0.03 per oyster. Seed oysters were 20 mm at the time of purchase and from a disease-resistant strain. This larger seed size has a lower mortality rate but a greater cost. Because the MSUERC was supplying the oysters and had adequate funds in the project budget, the project team made the judgment that it was worth reducing the expected mortality rate given the high degree of uncertainty in the project. The estimated start-up cost for the business was $19,223. A breakdown of the cost is provided in Table 1. For the economic analysis, we used the AQUASIM model developed by C.M. Gempesaw and colleagues to predict the project outcome. AQUASIM requires a user to enter data for operating assumptions, variable costs and prices, and other financial information. The model provides the mean, range and coefficient of variation of the cash flow, balance sheet, and other financial indicators. Based on discussions with growers and wholesalers in the area, we selected a baseline sales price of $0.25 per oyster. The model allows the user to adjust price by $0.04 in either direction around the $0.25 average. Other key variables include survival rate, grow-out period, and labor cost. The survival rate increases over three years to an average of 82 percent. Survival rates fluctuate in model iterations, reflecting good years and bad years. The grow-out period was set to 15 months. Annual labor cost was estimated to be $14,750. Based on observations of time cleaning and sorting cages,
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