Trader Talk

Shrimp Fishing: A Good Sign For The Broad Economy


The economics of shrimp fishing: lower diesel fuel prices compared to last year make the business viable - but just barely. Just back from a week in Charleston, South Carolina, where I spent several days in the company of shrimp fisherman on James Island.

Shrimp fishing is a good stand-in for the broad economy. Its profits are under assault due to: fuel costs, parts inflation, and the changing face of globalization.

Here's the stats:


1) Diesel fuel: $600 for fuel for a single 12-hour run (calculated at about $3 a gallon, for 200 gallons)

2) Ice: about $180 per run

Total expenses: about $780

Sales: $1,300

(200 pounds of shrimp in a single run (heads off), sold at about $6.50 a pound)

Profit in a single run: about $520 (about a 40 percent profit). This may not sound bad, but it assumes that there are no breakdowns; parts are getting more expensive and can destroy any profit immediately.

So can fuel inflation: when diesel went to $4.50 last year, the diesel cost for a single run went to $900, from $600, so profit margin went down to 17 percent without parts costs. That is going out of business numbers.

The downside of globalization. Here's the strange part: local fisherman sell their product on-site and to local restaurants, but increasingly not to local food stores. Fishermen bitterly complained that the large food stores were increasingly turning to selling frozen shrimp imported from (gasp!) places like Thailand.

Why import frozen shrimp when you are surrounded by some of the largest shrimp beds in the world? Because the local fisherman do not have the gigantic boats that enable them to flash-freeze on the boat; and that's what large buyers want.




Questions?  Comments?