Aquaculture Economics & Management, 19:251277, 2015Copyright # Taylor & Francis Group, LLCISSN: 1365-7305 print/1551-8663 onlineDOI: 10.1080/13657305.2015.1024348THE ECONOMICS OF KAPPAPHYCUS SEAWEED CULTIVATION INDEVELOPING COUNTRIES: A COMPARATIVE ANALYSIS OFFARMING SYSTEMSDiego Valderrama,1Junning Cai,2Nathanael Hishamunda,2Neil Ridler,3Iain C. Neish,4Anicia Q. Hurtado,5Flower E. Msuya,6M. Krishnan,7R. Narayanakumar,8Mechthild Kronen,9Daniel Robledo,10Eucario Gasca-Leyva,10and Julia Fraga111Food and Resource Economics Department, University of Florida, Gainesville, Florida, USA2Fisheries and Aquaculture Department, Food and Agriculture Organization of the UnitedNations, Rome, Italy3Consultant, Food and Agriculture Organization of the United Nations, New Brunswick,Canada4C.V. Evadian, Makassar, Indonesia5Integrated Services for the Development of Aquaculture and Fisheries, Iloilo City, Philippines6Seaweed Cluster Initiative, Institute of Marine Sciences, University of Dar es Salaam,Zanzibar, Tanzania7Social Sciences Division, Central Institute of Fisheries Education, Mumbai, India8Socioeconomic Evaluation and Technology Transfer Division, Central Marine FisheriesResearch Institute, Kochi, India9Office of the European Commission for the Pacific Overseas Countries and Territories,Noumea, New Caledonia10Marine Resources Department, Centro de Investigacin y de Estudios Avanzados delInstituto Politcnico Nacional (CINVESTAV), Mrida, Mexico11Human Ecology Department, Centro de Investigacin y de Estudios Avanzados del InstitutoPolitcnico Nacional (CINVESTAV), Mrida, Mexico&The farming of the red seaweed Kappaphycus alvarezii and related species as raw materialfor the hydrocolloid carrageenan rapidly spread from the Philippines in the late 1960s to Indonesia,Tanzania, andother tropical countries aroundthe world. Althoughnumerous studies havedocumentedpositive socioeconomic impacts for seaweedfarming, factors suchas diseases anddistancetoexportmarketshaveledtoanunevendevelopmentoftheindustry.Usingstandardbudgetingtechniques, this studyadaptedproductionandmarket datafromaFAO-ledglobalreview of seaweed farming to develop comparative enterprise budgets for eight farming systems insix countries (Indonesia, the Philippines, Tanzania, India, SolomonIslands, andMexico).Address correspondencetoDiegoValderrama, FoodandResourceDepartment, UniversityofFlorida, P.O. Box 110240, Gainesville, FL 32611-0240, USA. E-mail: dvalderrama@ufl.eduDownloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Althoughthe basic technology package is the same across countries, the study revealedlargedifferences in the economic performance of systems due to wide variations in farm prices and thescaleofoperations.Althoughseaweedfarmingisasuitableactivityforsmall-scaleproducers,aminimumof 2,000 mof cultureslinesarestill necessarytoensureadequateeconomicreturns.Greaterfarmingplotsmaybeneedediffarmpricesarewell belowtheaveragefarmpricespaidinIndonesiaandthe Philippines. Policyrecommendations are made toimprove the economicpotential of underperforming systems.Keywords Kappaphycus alvarezii, production economics, seaweedINTRODUCTIONSeaweedsareharvestedthroughout theworld(eithercollectedfromthe wild or cultivated in farms) and used in a large number of applications,including food for human consumption or as a source of hydrocolloids pro-cessed into food additives, pet food, feeds, fertilizers, biofuel, cosmetics andmedicines, among others (McHugh, 2003). The growing commercialimportanceof two hydrocolloids, in particularagar and carrageenan, hasdrivensubstantial development of redseaweedcultivationaroundtheworld in the last two decades.1Major red seaweed species under cultivationincludeKappaphycus andEucheuma, whichareprimaryrawmaterials forcarrageenan, and Gracilaria, the primary raw material for agar.2Carrageenanisa gellingagent usedasanemulsifier,abinder,orforsuspensionandstabilizationinaremarkablywiderangeof products inthefoodprocessing, pharmaceutical andcosmetic industries (Bixler &Porse, 2011). Demand for carrageenan rose substantially after World WarII, withsupplies limitedbytheavailabilityof natural stocks of Chondruscrispus (Irishmoss) fromCanada, Ireland, Portugal, SpainandFranceandGigartina/IridaeafromSouthAmericaandSouthernEurope(Trono,1993). Bythelate1960s, dwindlingwildstocksdroveproducerstoscoutthe world coastlines in order to diversify seaweed supplies; at the same time,seaweed ecology research unveiled the potential of cultivation as an alterna-tive source of raw material supply (Naylor, 1976). These efforts finally metsuccess insouthernPhilippines, where native Eucheuma seaweeds werefound to produce high-quality carrageenan and ecological conditions madecultivation possible. The first seaweed farm was established jointly in 1969byU.S.-basedMarineColloids, Inc. (MCI)andUniversityofHawaii Pro-fessor Maxwell Doty inthesouthernPhilippines provinceof Tawi-Tawi(Trono, 1990). The two species originally cultivated were named Eucheumacottonii and Eucheuma spinosum, commercially referred to ascottonii andspinosum. However,botanists renamed Eucheumacottonii as Kappaphycusalvarezii while Eucheuma spinosum is now Eucheuma denticulatum. Thecommercial names cottonii andspinosumarestill inuse, nevertheless(McHugh, 2003).252 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Production of Kappaphycus and Eucheuma spread rapidly in thePhilippines, which soon displaced Canada as the top supplier of carragee-nanseaweeds.ThelowercostoflaborinthePhilippinesfurtherincenti-vizedcompaniestosourcesuppliesfromtheAsiannation. AlthoughthesamecorporationsthatdominatedtheCanadianmarkettriedtocontrolproduction in the Philippines through plantation-style seaweed farms, theysoonrealizedtheycouldnot competewithsmall, family-runfarms. Thereasons were two-fold: 1) the labor for seaweed cultivation must be highlyflexible to work on the cyclical time scales of tides and the moon, makingit difficult topayworkersstablewages; and2)seaweedfarminghaslowcapital and technological requirements for entry (Blanchetti-Revelli, 1995).The success of carrageenan seaweed aquaculture in the Philippines wasrapidlyreplicatedinIndonesia. Kappaphycus alvarezii andE. denticulatumhave also been introduced to more than 20 countries over the past 35 yearsto spur farm development around the world (Bindu & Levine, 2011); how-ever, significant production for export markets has only been achieved inTanzania, Malaysia, and more recently Vietnam. Industry analysts estimatethatglobal aquacultureproductionhadreached183thousandtons(dryweight) by 2009 (Bixler & Porse, 2011), with around 90% of total outputcomingfromIndonesiaandthePhilippines. Hamperedbydiseaseout-breaks and political unrest in farming areas, the Philippines were surpassedby Indonesiaas theleadingproducer of carrageenanseaweeds around2008. AccordingtoUNexportstatistics, Indonesiasoutputcontinuestoincreaseat afasterratethanothercountries (UNCOMTRADE, 2014),reachingaround230thousandtons of dry seaweedby 2013(I. Neish,personal communication, June17, 2014). Bycomparison, Tanzania(thelargest producer outside Asia) produced less than 16 thousand tons (mostlyE. denticulatum) in 2012 (FAO, 2014).Fromits beginnings, carrageenanseaweedfarmingprovedtobe aprofitable commercial proposition for many coastal communities. Forexample, Naylor (1976) demonstratedthat for plots of approximatelyonehectare, netincomefromseaweedfarmingwasfivetosixtimestheminimum average wage of an agricultural worker. Recognizing its potentialto improve the socioeconomic conditions of marginalized coastal popula-tions, international development agencies began promoting seaweed farm-ing in Indonesia and neighboring countries since the 1980s (Trono et al.,1980). Seaweedfarmingis arelatively simpletechnology requiringlowinitial capital investment; inaddition, withgrowout cycles as short assixweeks andfavorableprices, it provides arapidandhighreturnoninvestment.Anumber of studies havecorroboratedthepositivesocioeconomicimpacts of seaweedfarmingincountries as diverseas thePhilippines,Indonesia, Tanzania, India, Vietnamand the Pacific Islands (Arnold,The Economics of Carrageenan Seaweed Farming in Developing Countries 253Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 2008; Bindu, 2011; Msuya, 2006; My, 2011; Namudu&Pickering, 2006;Pettersson-Lfquist, 1995; Sievanen et al., 2005; Zamroni & Yamao,2011). Althoughcarrageenophytesarenotadirectsourceoffood, theirculture has been shown to increase food security in farming villagesbecause their revenue-earning potential is greater than that of alternativeagricultural enterprises (Beveridge et al., 2010; Espaldonet al., 2010;Gupta, 2010). Many of thesecommunities lacksufficient infrastructure(e.g., hatcheries, feed mills, extension services) to support other forms ofaquaculture. Facingdeclininglandings fromcapturefisheries, seaweedfarming represent the most efficient and sustainable use of marineresources in these communities.Despite its many advantages, seaweed farming can also be a challengingactivity. In addition to disease outbreaks, predation by herbivorous fish andinfrastructure damages resulting from tropical storms, farmers also have todeal with volatility in seaweed prices. Seaweed farming is particularly proneto boom-and-bust cycles given the large number of small-scale price-takersintheindustry. Pricevolatilityisfurthercompoundedbytheabsenceofrelevant, reliable and timely production statistics and market intelligence.In contrast to agricultural commodities such as coffee, copra or tea, thereare no organized markets to provide benchmarking international prices forseaweed (Tinne et al., 2006).Seaweedfarmers, traders, andprocessors frequently makedecisionsbased on speculations or misinformation, resulting in market fluctuations.Arecentanddramaticexamplewastheseaweedpricebubbleof2008,whenprices reachedexorbitant levels fueledby apparent increases indemandfromChineseprocessors,withpricescollapsinginthecourseofafewmonths. InIndonesia, for example, K. alvarezii prices morethantripled,fromaboutUSD0.60toasmuchasUSD1.80perkgofdrysea-weed. Giventhesuddenpriceincrease, manyfarmersrushedtoharvestimmatureorlow-qualityseaweed, floodingthemarket andprecipitatingthe subsequent price crash (Barta, 2008).Giventheabsenceof aworldmarket priceandthefact that mostseaweed is marketed through direct bilateral contracts (suppliers/producers and processors/users), substantial differentials arise in the pricesfarmers receivedependingonwherethefarmgate is located(Tinneet al., 2006). As a result, farmers in Philippines and Indonesia receive onaverage higher prices (normally between USD 0.60 and USD 1.40/kg) thanfarmers in more remote locations such as Tanzania and the Pacific Islands(less than USD 0.50/kg) due to the former countries improved logisticalcapabilities and proximity to processing centers. The oligopsonistic natureof the industry (whereby a large number of raw material producers supplyrelatively few processors3) also puts farmers in Africa and the Pacific Islandsat adisadvantage, givingthemlittlemarket power tonegotiatehigher254 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 prices. Risingfuel costs for shippinghavealsoreducedthemargins ofexporters, and therefore the farm gate prices they can offer.Alongwithotherfactorssuchasfarmproductivityandeconomiesofscale, differences infarmprices goalongway towards explainingwhycarrageenanseaweedfarmingseemstohaveahigherpotential inAsiancountries (Indonesia, Philippines) as comparedtoAfricanandPacificIsland nations. Given the positive results achieved in eastern Indonesia overthe last decade, the Indonesian government has embraced the industry as akey driver of economic development and has set ambitious production tar-gets for the next few years (The Economist, 2013). In contrast, productioninAfricancountriesis eitherstableordecliningas farmprofit marginsshrink due to the spread of seaweed die-offs and the impact of lower prices(BBC News, 2014; Msuya, 2011a).Given this backdrop, the goal of this article is to develop a comparativeanalysisoftheproductioneconomicsofcarrageenanseaweedfarmingtobetterunderstandthedifferencesinperformanceofproductionsystemsacrossworldfarmingregions.Thecomparativeanalysisisbasedoneightfarming systems in six developing countries (Indonesia, Philippines,Tanzania, India, SolomonIslands, andMexico) selectedfromarecentFAO global review on the socioeconomic impacts of carrageenan seaweedfarming(Valderramaetal., 2013). Thesystemswerespecificallyselectedin order to facilitate comparisons of farming technologies, cost structuresandmarket conditions across countries. The primary objective of thisanalysis is to highlight and contrast those factors leading to improved per-formance of the Indonesian and Philippine systems. Another objective is toidentifyspecificstrategiestoimprovetheprofitabilityoffarmingsystemsinthosecountriesfartherawayfromexport markets(i.e., TanzaniaandSolomon Islands).The article is organized as follows: the following section provides a briefdescription of the farming systems selected for the analysis; subsequently,investment costs for each production system are detailed in separate tables.Next, comparative enterprise budgets are developed to contrast theeconomic performance of the different systems. Finally, the article discussesthepolicyimplicationsof theanalysisandoutlinesrecommendationstoenhancethepotential of seaweedfarmingasaneconomicdevelopmentstrategy for coastal communities.THE FARMING SYSTEMSTheFAOreviewexamined23casestudies of carrageenanseaweedfarmingproductioninsixdevelopingcountries: Indonesia, Philippines,Tanzania, India (Tamil Nadu), SolomonIslands andMexico(YucatanThe Economics of Carrageenan Seaweed Farming in Developing Countries 255Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Peninsula). The study covered countries with established commercialproduction(Indonesia, Philippines, Tanzania)andwithnascentfarmingsectors (India, SolomonIslands). Althoughnocommercial aquacultureproductionis currentlytakingplaceinMexico, thecorrespondingcasestudiesupdatedtheoutcomesofexperimental trialsledbyanacademicinstitutioninthecommunityof DzilamdeBravo(Yucatan)intheearly2000s(Muozet al., 2004). Despitethelackof commercial production,there continues to be an interest in the tropical Gulf of Mexico as a prom-ising area for Kappaphycus farming development in Latin America (Hayashietal., 2014). AlongwithArgentina, Brazil, andVenezuela, Mexicooffersthebest prospects for thedevelopment of seaweed-basedindustries intheWesternHemisphere(McHugh, 2002), whichfurthermotivatedtheinclusion of Mexican-based case studies.All economic models reflect production and market conditions prevail-ing in 2009 and assume that seaweed farming is the primary occupation ofparticipating households (Valderrama et al., 2013). Local currency valuesinall caseswereconvertedtoUSDusing2009exchangerates(Feenstraet al., 2013).Thefarmingtechnologiesinthecasestudiesarevariantsof thetwomost popular cultivation methods: the fixed, off-bottom line and the float-ing lines techniques. In the off-bottom method, monofilament nylon linesor polypropylene ropes are stretched (usually 1 m apart) between woodenstakes pounded into the substrate. Small pieces of seaweed (50100 g) arethen tied to the lines (Figure 1a). If the site is suitable and proper mainte-nanceisprovided, seaweedshouldreach10timesitsoriginalsizeinsix-eight weeks, when it can be harvested. The seaweed is then sun dried awayfrom sand and dirt, then packed into bales ready for shipping. The floatinglines method is suitable in protected areas where water current is weak orthe water is too deep for fixed bottom lines. Normally, a floating construc-tionorraft (typicallya3 3 msquaretimberframewithpolypropyleneropesstretchedparallelinonedirectionbetweenthetimbers)isusedtosuspend the seaweed about 50-cm below the surface. The seedlings are tiedto the ropes and the raft is anchored to the bottom. Plastic bottles attachedto the lines can also be used as floatation devices instead of a wooden raft(Figure1b). Theoff-bottomlinemethodallows easier access sincethefarmercanwalkaroundthelinesatlowtide, butthefloatinglineshavethe advantage of being easily moved to another position if necessary, andremoved from the water altogether in bad weather (McHugh, 2003).Tomakemeaningful comparisons across casestudies andfacilitateunderstanding of the different farming contexts, eight representativesystemswereselectedforthecomparativeanalysis.Becausethesesystemsvariedinscaleandfarmingmethod, standardizedmetrics suchas pro-ductivitypermof lineandproductioncost perkgof dryseaweedwere256 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 computed. The culture species in all systems is Kappaphycus alvarezii (withtheexceptionof Tanzaniawherelarger amounts of E. denticulatumarefarmed, K. alvarezii is thepredominant species aroundtheworld). Toaccount for the contribution of unpaid family labor (which is used in manyseaweed farms around the world), all systems assume the use of hired labor.The opportunity cost of family labor was computed in those cases for whichdata on labor costs were not available. The most important features of eachsystem are discussed next.IndonesiaThe selectedIndonesianfarmconsistedof a floating lines habitatsystemusing sandbags as anchors and plastic bottles as floaters, withFIGURE 1Culture techniques used in seaweed farming: a) off-bottom method; b) floating system. Thedimensions shown are for illustration purposes only and may vary in the field.The Economics of Carrageenan Seaweed Farming in Developing Countries 257Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 30 km of planted lines. Eight 45-day cycles per year were assumed, resultingin an annual production of 33 tons of dry seaweed. The systemwasmodeledafter the leader farms (i.e., farms relyingonhiredlabor asopposed to family labor) in the province of South Sulawesi (Neish,2013).PhilippinesThe selectedPhilippine systemwas a multiple raft long line farm(MRLL)occupyinganareaof10 50 m(around2 kmofplantedlines).The MRLL is an innovative approach to seaweed farming used in areas withdeep water ranges (>5 m) in Zamboanga Peninsula and Basilan (southernPhilippines). Given the complexity of the farming structures, MRLLrequires asubstantiallyhighercapital investment relativetothesimplerfixed off-bottom method (Hurtado, 2013).TanzaniaTwo systems were considered for Tanzania: a 30 10-m off-bottom plotand a 27 12-m floating lines habitat. Because seaweed die-offs tend to beavoidedinthedeeperfloating-linesystem, it is assumedthat eight pro-duction cycles per year are completed in the floating-line plot as comparedto only seven in the off-bottom farm (i.e., a crop is lost in the latter system).ThebudgetedfarmpriceforK. alvarezii of TZS350(USD0.27at 2009exchangerates)perkgofdryseaweedisanapproximateaverageoftheprices received by independent farmers (i.e., not reliant on exporters/tra-dersforthesupplyofculturematerials)inZanzibar.Dependentfarmersnormally receive lower prices (Msuya, 2013).IndiaA floating system consisting of 45 3 3 m rafts was considered for India.Production takes place during six 45-day cycles for a total of 270 productiondays per year (farms do not operate during the northeast monsoon, whichlastsapproximately 95 days).The system wasmodeled aftertheSelf-HelpGroup(SHG)seaweedfarmsoperatingontheshoresofPalkBay, TamilNadu. SHGs are organized farmers groups that may receive start-upgovernment subsidies to support their agricultural activities. The modeledseaweed farmwas assumed to operate without subsidies, nevertheless.BecauseSHGsrelyheavilyonfamilylabor, anopportunitycostwascom-putedbasedontheaveragewages earnedby fishermenintheregion(Krishnan & Narayanakumar, 2013).258 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Solomon IslandsThe representative farm was modeled based on interviews with farmersin Wagina Island, South Choiseul province, a rural area with few livelihoodalternatives besides seaweedfarming. Theoperationassumes anannualyield of 21,700 kg using a floating system with 4 km of lines, with all laborbeing hired (Kronen, 2013).MexicoOff-bottom and floating-lines systems were modeled based on the resultsfromexperimental trials conducted by the Center for Research and AdvancedStudies of the National Polytechnic Institute (CINVESTAV Unidad Mrida,for its acronym in Spanish) in the community of Dzilam de Bravo, Yucatan(Muoz et al., 2004). Each system consisted of 10 20-m modules scaled upto one hectare. Culture takes place during four two-month cultivation cyclesas climatological conditions in Yucatan are unsuitable for farming during thelate and early months of the year (Robledo et al., 2013).INVESTMENT COSTSTables 1 through 6 present detailed investment costs for the eight farm-ingsystems.Thescaleofinvestmentvariedwidelyacrosssystems, rangingfromUSD42fora30 10-moff-bottomplotinTanzaniatoUSD13,625foraone-hafarmconsistingof10 20-mfloatingmodulesinMexico. Interms of total farminvestment, thesystems couldberankedbycountryas Mexico>Indonesia >Solomon Islands >Philippines >India >Tanzania.In terms of the total length of culture lines, the systems ranged from 270 mto30kmandwererankedinthefollowingorder: Indonesia >Mexico>Solomon Islands >India >Philippines >Tanzania (Table 7). Although farminfrastructure costs varied across systems, boats were often the most expens-ive item, particularly if they were equippedwithoutboardengines: inSolomonIslands, a6.4-mfiberglassboatwithoutboardengineaccountedfor 97%of the total farm investment (Table 5). Ropes and stakes (the latterin off-bottom plots) were the other major investment items across systems.Aninitial investment onpropagulesforthefirstproductioncyclewasaccounted for in the Indonesian, Philippine and Indian systems (Tables 1, 2and 4). This cost was considered negligible in the Tanzanian and SolomonIslands systems. With the exception of Mexico, all systems assume that a por-tion of the harvested biomass in each cycle is set apart as planting biomass forthe subsequent cycle. Propagules (100 g) planted in each cycle are assumed tobe purchased from a CINVESTAV phycology lab in the Mexican systems; thiscost is therefore treated as an annual operating cost in Table 7.4The Economics of Carrageenan Seaweed Farming in Developing Countries 259Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Despite the differences in the scale of operations, the total investmentpermoflinewasapproximatelythesameinIndonesia, Tanzania(float-ing), and India, at approximately USD 0.27/m. The Philippine and off-bot-tomMexicansystemswerealsocomparable(aroundUSD1.00/m). Themost economical investment correspondedtotheoff-bottomsysteminTABLE1 Investment onCultureLines, InfrastructureandEquipment fora30-kmFloatingLinesSeaweed Farm in Indonesia, 2009Item Units Quantity USD/unitTotal cost(USD)Useful life(Years)Investment per km of line1 km (13.6 kg) of 5-mm PP line km 1 34.00 34.00 20.2 km (11 kg) of 10-mm PP line km 0.2 136.00 27.20 20.2 km (9 kg) of 8-mm PP line km 0.2 114.00 22.80 21 km of 1-mm PP line (for loops) km 1 1.00 1.00 2Sandbag anchors piece 50 0.15 7.50 2Plastic bottles as floats piece 500 0.03 15.00 2Total investment for 1 km of line 107.50Farm equipment and facilities9-m canoe with 5.5-hp motor unit 2 500.00 1,000.00 56-m canoe with no motor unit 2 150.00 300.00 5Miscellaneous tools and equipment set 2 150.00 300.00 5Drying structures set 4 150.00 600.00 5Shelters for shade set 2 800.00 1,600.00 5Sacks pieces 800 0.08 64.00 2Total farm equipment and facilities 3,864.00Propagules for initial planting 960.00 10Total farm investment 8,049.00PPPolypropylene.Source: Neish (2013).TABLE 2 Investment on Culture Lines, Infrastructure and Equipment for a 10 50-m Multiple RaftLong Line Seaweed Farm (MRLL) in the Philippines, 2009Item Units Quantity USD/unitTotal cost(USD)Useful life(Years)Motorized boat unit 1 526.32 526.32 5Dug-out boat unit 1 120.00 120.00 3Cultivation rope, flat binder roll 25 3.00 75.00 3Anchor rope, polypropylene roll 3 78.58 235.75 5Tying rope for floater, split flat binder roll 5 3.22 16.10 2Iron bars piece 22 7.84 172.50 3Floats piece 90 0.52 47.15 1Whole bamboo unit 6 2.68 16.10 1Fish net for drying, double width roll 1 9.20 9.20 3Plastic strips soft tie-tie kg 204 2.53 515.37 1Total farm infrastructure 1,733.49Propagules for initial planting 421.00 10Total farm investment 2,154.49Source: Hurtado (2013).260 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Tanzania(USD0.15/m), andthemostexpensivesystemswerefoundinMexico (floating) and the Solomon Islands, at around USD 1.40/m.COMPARATIVE ENTERPRISE BUDGETSAnnual enterprisebudgetsforeachsystemarepresentedinTable7.Production in most cases takes place throughout the year with the excep-tion of India and Mexico, which have shortened production seasons (lessthan300daysayear)duetoclimatological factors. Annual productivityTABLE3 Investment Costs for Off-bottomandFloating SeaweedFarming Systems inZanzibar,Tanzania, 2009Item Units Quantity USD/unit Total cost (USD) Useful life (Years)30 10-m off-bottom systemRopes m 300 0.02 6.32 1Tie-tie roll 10 0.21 2.08 1Floaters piece 60 0.02 1.36 0.33Skates (pegs) piece 60 0.02 1.14 0.50Boat construction unit 1 5.62 5.62 10Boat maintenance unit 1 0.07 0.07 1Tarps unit 10 0.76 7.57 4Drying rack frame unit 1 5.30 5.30 5Palm fronds for rack unit 30 0.04 1.14 1Storage containers unit 10 0.11 1.14 1Diving masks unit 1 7.57 7.57 2Knife unit 1 0.76 0.76 2Machete unit 1 1.51 1.51 2Total 41.5727 12-m floating lines systemRopes for raft12 mm (frame line) m 1 14.01 14.01 1010 mm (anchor line) m 1 10.60 10.60 108 mm m 1 6.06 6.06 104 mm (lines) m 3 1.89 5.68 1Tie tie roll 11 0.21 2.29 1Anchors (rocks) unit 16 0.15 2.42 4Floaters (plastic bottles) unit 25 0.02 0.57 0.5Knife unit 1 0.76 0.76 2Machete unit 1 1.51 1.51 2Frame construction unit 1 2.42 2.42 10Boat construction unit 1 5.62 5.62 10Boat maintenance unit 1 0.07 0.07 1Tarps unit 10 0.76 7.57 4Drying rack frame unit 1 5.30 5.30 5Palm fronds for rack unit 30 0.04 1.14 1Storage containers unit 10 0.11 1.14 1Diving masks unit 1 7.57 7.57 2Total 74.74Source: Msuya (2013).The Economics of Carrageenan Seaweed Farming in Developing Countries 261Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 ofdryseaweedrangedfrom1.10(Indonesia)to5.38(Mexico)and5.43(SolomonIslands) kgper mof cultivationline. Thehighproductivityachieved in the Mexican systems is remarkable given the shortened length(240 days) of the growout season. In addition to the favorable environmen-tal conditionsfoundintheYucatanarea, highgrowthratescanalsobeattributed to the use of large (100 g), high quality propagules. It should alsobe reminded that these productivity levels were achieved in experimentaltrials, which are assumed to be replicated at a commercial scale.The relatively low productivity reported by the Indonesian farm may beinfluencedbythechallengesassociatedwithmanagingalargeoperation(30 km of culture lines); higher yields per m of line may therefore be easiertoachieveinthesmallerTanzanianandIndiansystems(between2and3 kg/m/year). Productivity is also relatively low in the Philippine raft systemTABLE 4 Investment Costs for One Floating Raft (3 3 m) for Seaweed Farming in Tamil Nadu, IndiaItem Units Quantity USD/unitTotal cost(USD)Useful life(Years)Farming system (3 3 m raft)Bamboo raft foot 64 0.07 4.36 2Cornered anchors kg 1.50 0.87 1.30 2Floats set 1.00 0.52 0.52 13-mm nylon rope kg 0.45 2.39 1.07 26-mm nylon rope kg 0.65 2.39 1.55 2Ropes for seaweed cuttings kg 0.165 2.60 0.43 13.5 3.5 m nets (to prevent grazing) kg 1.13 1.63 1.84 12-mm ropes (to tie nets to raft bottoms) kg 0.09 2.39 0.21 2Nylon rope (to tie rafts together) kg 0.10 2.39 0.24 210-mm anchor ropes kg 0.09 2.39 0.21 2Mats, ladders, baskets, knives, etc. set 1 0.83 0.83 2Propagules for initial plantingPropagules kg 60 0.04 2.17 10Transportation unit 1 0.52 0.52 10Total investment per raft 15.25Total farm investment (45 rafts) 686.25Source: Krishnan & Narayanakumar (2013).TABLE 5 Investment Costs for a Floating Lines Seaweed Farm in Solomon Islands (4,000 m of CultureLines)Item Units Quantity USD/unitTotal cost(USD)Useful life(Years)6.4-m fiberglass boat with outboard engine unit 1 5,372.75 5,372.75 5Drying table unit 1 10.00 10.00 5Ropes, netting, floaters, tools set 1 160.92 160.92 2Total 5,543.67Source: Kronen (2013).262 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 (1.43 kg/m/year), whichmayreflect alargerimpact of diseasessuchasice-ice5in this country.Average farm-gate prices varied widely across studies, from USD 0.27/kg (Tanzania) toUSD1.09/kg (Philippines). As explainedpreviously,distancetoprocessingcenters is thekeyfactorinfluencingfarmprices:thelowest prices werereportedinthemost remoteproducingregions(TanzaniaandSolomonIslands)whileseaweedproducedinIndonesia,Philippines andMexicofetchedhigher prices. It shouldbenotedthatIndian farmers reported relatively low prices (USD 0.33) despite the prox-imity of processing plants in Tamil Nadu and neighboring provinces.Reflecting the labor-intensive nature of seaweed farming, laboraccounted for the greatest share of variable costs across most budgets, nor-mally representing around 50%of total costs of production. For illustrationpurposes, Tables8and9itemizelaboractivitiesandcostsforthe30-kmfloatingfarminIndonesiaandthe27 12-mfloatingfarminTanzania.Total labor cost per kg of dry seaweed was lower in Tanzania (USD 0.03/kg)ascomparedtoIndonesia(USD0.13/kg), whichistosomedegreeexpected given Tanzanias lower level of economic development. At aroundUSD 0.18/kg, labor costs per kg were similar in India, Solomon Islands andMexico (Table 7). The highest labor cost was reported in the Philippines(USD 0.27/kg).TABLE 6 Investment Costs for One-ha Off-Bottom and Floating Seaweed Farming Systems in Yucatan,Mexico, 2009Item Units Quantity USD/unitTotal cost(USD)Useful life(Years)10 20-m off-bottom modules scaled up to one haStakes set 1 3,834.20 3,834.20 5Monofilament set 1 481.87 481.87 5Raffia and strings set 1 261.14 261.14 1Protective netting set 1 3,070.15 3,070.15 5Boat unit 1 1,036.27 1,036.27 5Land equipment (knives, crates, scales,drying structures)set 1 1,641.56 1,641.56 5Total 10,325.1810 20-m floating modules scaled up to one haPolypropylene rope set 1 1,046.74 1,046.74 5Raffia and strings set 1 261.14 261.14 1Flotation buoys set 1 3,264.25 3,264.25 5Weights set 1 2,932.29 2,932.29 5Protective netting set 1 3,070.15 3,070.15 5Bamboo set 1 373.06 373.06 5Boat unit 1 1,036.27 1,036.27 5Land equipment (knives, crates, scales,drying structures)set 1 1,641.56 1,641.56 5Total 13,625.45Source: Robledo et al. (2013).The Economics of Carrageenan Seaweed Farming in Developing Countries 263Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 TABLE7ComparativeEnterpriseBudgetsforKappaphycusSeaweedFarmingSystemsinSixDevelopingCountries,2009ItemUnitIndonesiaPhilippinesTanzaniaIndiaSolomonIslandsMexicoFloatingFloatingOff-bottomFloatingFloatingFloatingOff-bottomFloatingProductionParametersTotallengthoflinesm30,0002,0002702882,5654,00010,00010,000Numberofcyclesperyearcycles8578644Lengthofacycledays45634545456060Annualyieldofdryseaweedkg33,0002,8506628065,40021,70053,77853,778Annualproductivitykg/m/year1.101.432.452.802.115.435.385.38Cycleproductivitykg/m/cycle0.140.290.350.350.351.341.34Farm-gatepriceUSD/kg0.851.090.270.270.330.381.001.00GrossReceiptsUSD28,0503,1071792181,7858,24653,77853,778VariableCostsPropagulesUSD13,26413,264LaborUSD4,32075926281,0413,5568,8538,853FuelUSD293321,117MaintenanceandrepairsUSD420SalesandmarketingUSD6007,1157,115TotalVariableCostsUSD5,3691,09126281,0414,67229,23229,232FixedCostsDepreciationUSD2,50190626244321,1572,2742,934AdministrativecostsUSD900UtilitiesUSD120FeesforcoastallandusageUSD3,1093,109TotalFixedCostsUSD3,52190626244321,1575,3836,043TotalCostsUSD8,8901,99752521,4735,82934,61535,275NetReturnsUSD19,1601,1091271663122,41719,16318,503ProductionCostUSD/kg0.270.700.080.060.270.270.640.66264Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Depreciationcostswerecomputedbasedontheinvestmentamountsand useful life of investment items listed in Tables 1 through 6, using thestraight-linemethod. Ausefullifeof10yearswasassumedfortheinitialinvestment onpropagules reportedinthe Indonesian, Philippine andIndiansystems. For simplicity andgiventhat local conditions canvarywidely, the enterprise budgets omit financial expenses (interest on operat-ing capital and long-term loans).Total production cost per kg of dry seaweed ranged from USD 0.06/kgin Tanzania (floating) to USD 0.70/kg in the Philippines (Table 7). Mostsystems achieved production costs below USD 0.30/kg with the exceptionof Mexico and the Philippines. Tanzania is the lowest-cost producer regard-less of the production method; the floating farm is nevertheless the mostprofitable alternative as die-offs are minimized in this system. The relativelyhigh costs in the Philippines were driven by its low productivity (1.43 kg/m/year) whereas highcosts inMexicoresultedfromthepurchases ofpropagules froman outside source. Despite a productivity of only1.10 kg/m/year, the Indonesian floating system had the largest profit mar-gin (USD 0.58) due to the relatively high farm-gate prices. The lowest profitmarginwas computedfor theIndianfloatingrafts (USD0.06), whichTABLE 8 Annual Labor Costs for a 30-km Floating Lines Seaweed Farm in Indonesia, 2009Item USD/km/cycle USD/km/yearAttachment of propagules to lines 6 48Placement of lines 4 32Harvesting of lines 4 32Drying of seaweed 4 144Total cost per km 144Total cost per farm 4,320Total cost per kg of dry seaweed 0.13Source: Neish (2013).TABLE 9 Annual Labor Costs for a 27 12-m Floating Lines Farm in Zanzibar, Tanzania, 2009Activity Man hoursper cycleWage(USD/hour)Number ofcyclesTotal cost(USD)Tying propagules 32.00 0.03 8 7.27Planting 2.00 0.03 8 0.45Farm management 3.00 0.03 8 0.68Harvesting 12.00 0.03 8 2.73Transporting seaweed to drying Location 2.00 0.76 8 12.12Packing 0.25 0.03 8 0.06Transportation to market 0.50 0.23 8 0.91Tie-tie separation 15.00 0.03 8 3.41Total cost 27.63Total cost per kg of dry seaweed 0.03Source: Msuya (2013).The Economics of Carrageenan Seaweed Farming in Developing Countries 265Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 resultedfromthelowfarm-gateprices(USD0.33)andthehighopport-unity cost of labor. The profit margin was also relatively low in the SolomonIslands (USD 0.11).Measuring Net Returns against International and NationalPoverty LinesThenet returns listedinTable7canbeinterpretedas net returnstofarmoperators labor andmanagement, wherethefarmoperator isunderstoodtobethepersonresponsiblefortheday-to-daymanagementdecisions in the farm (i.e., the farm owner). An instructive way to comparethe economic performance of the farming systems inthis study is tomeasurethelevel of net returns against aninternational benchmarkofminimumwelfare for households in developing countries. The inter-national poverty line (IPL) as defined by the World Bank in 2008 (Ravallionet al., 2009), that is, USD 1.25 per capita per day at 2005 Purchasing PowerParity (PPP), was deemed an appropriate benchmark.Figure 2 compares the annual net returns from the six floating systemsinTable7totheannualIPLadjustedforafive-personhousehold(USD2,281at 2005PPP). Net returns(in2009current USD)wereconvertedtoUSDat 2005PPP(chainedinternational dollars) usingthechainedPPPconversionfactors providedbythePennWorldTable, Version8.0(Feenstra et al., 2013).6The goal of this analysis is to make a valid compari-son among net returns to farm operators labor and management in Table 7intermsof therelativelivingstandardsaffordedbytheseincomelevelsacrosscountries. Theanalysisassumesthatthefarmoperatorsupportsafive-person household using his income from the seaweed farm.FIGURE2Annualnetreturnstooperatorslaborandmanagementinsixfloatingseaweedfarmingsystems(USDat 2005PPP). Total lengthoflinesundercultivationisenclosedinparenthesesnexttothecountries names. Theinternational povertylineandtheMexicannational povertylineforfive-person households are added for comparison purposes.266 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 A salient feature of Figure 2 is the large differences in economic perfor-mance across systems and relative to the IPL. Even disregarding the impactoffarm-gateprices, itisclearthatthescaleofoperationsmattergreatly.Despite its low productivity (1.1 kg/m/year), the 30-km Indonesian floatingfarmcanpotentiallygenerateanannual incomestreamexceedingUSD30,000 (at 2005PPP), whichis nearly 16 times greater thanthe IPL.Boostedbyitshighproductivity, theMexicanfarm(10 kmoflines)alsogeneratesarelativelyhighincome(closetoUSD30,000), exceedingtheIPLbya factor of 12.With 4 km of culturelines, the performanceof theSolomonIslandsfarmislessimpressivebutstill capableofdeliveringanincome level in excess of the IPL (USD 4,862).The smaller Philippine, Tanzanian and Indian systems fail to generateenoughincometosurpasstheIPL.Asexplainedbefore,theMRLLfarmexamined in the Philippines is a relatively expensive system to set up; thescaleofoperationsshouldthereforebesignificantlygreaterthantwokmoflinesinordertogenerateasubstantiallevelofincome. BecausefarmpricesarerelativelyhighinthePhilippines, otherlower-costsystemsarebound to have an economic performance similar to the Indonesian systems,nevertheless. The Tanzanian and Indian farms are hampered by both thesmall scale of the operations and the low farm prices.Inadditiontothe IPL, most governments have alsodefinedtheirownnationalpovertylines(NPLs).7TheNPLsofIndonesia, Philippines,Tanzania, India, andtheSolomonIslandsareinthevicinityof theIPL(USD1.14, 1.73, 0.95, 1.37, and1.87per capitaper day at 2005PPP,respectively).8Mexicois nevertheless amiddleincomecountry; at USD4.63, its NPL is substantially higher than the IPL (CONEVAL, 2013). TheMexicanNPL(forrural areas)isalsoshowninFigure2forcomparisonpurposes. Clearly, the 10-km floating farm generates sufficient revenue tobring a five-person household in rural Mexico over the higher NPL.As explainedpreviously, hiredlaborcosts wereassumedintheesti-mationof net returns inTable7. Aplausiblealternativeassumptionistherelianceonfamily labor inthesmaller Philippine, Tanzanian, andIndiansystems. Figure 3 re-estimates net returns for these systems ontheassumptionthat all laborisprovidedbymembersof thefive-personhouseholdandnot chargedas anoperatingcost (thesewouldbethennet returns to households labor and management). In this new scenario,thePhilippineandIndiansystemsgenerateenoughincome(USD3,323and3,377at2005PPPs, respectively)toovercometheirrespectiveNPLs.In contrast, the net returns from the 288-m Tanzanian floating plot accountfor only 25% of the income needed to reach the lower Tanzanias NPL ofUSD 1,736 per household per year (USD 0.95 per capita per day). Incomefrom this system would fail to reach the NPL even if farm prices were raisedfrom USD 0.27 to USD 1.00/kg (current 2009 USD).The Economics of Carrageenan Seaweed Farming in Developing Countries 267Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Risk AnalysisGiven the large variability in seaweed prices that has been observed inrecent years, a risk analysis was carried out to examine the impact of pricefluctuations on the economic performance of the six floating farm scenar-ios presented in Table 7. Using the Excel add-on program Oracle CrystalBall (Oracle Corporation, 2012), farm-gate prices were modeled as randomvariables following triangular distributions: likeliest values were those listedin Table 7 while prices 40%below and 40%above were used as minimumand maximum values, respectively. These intervals roughly approximate therangeof pricefluctuationsobservedoverthelasttenyears(Valderramaet al., 2013). Table 10 summarizes the parameters of the triangular distribu-tionsforeachfarmscenario. Montecarlosimulationsconsistingof1,000trials were run for each case.Theresultingfrequency distributions of annual net returns aredis-playedinFigure4. ThePhilippine, Tanzanian, andIndiansystemswereassumed to rely on family labor while the cost of labor was accounted forintheothersystems. As indicatedinTable10, theprobabilityof losseswas zeroinall systems withtheexceptionof theSolomonIslands andMexico(3.8% and1.2%,respectively):productioncostsinthelattertwocountries (USD0.27and0.66/kg, respectively)exceededtheminimumprice assumedinthe Montecarlosimulations (USD0.23and0.60/kg,respectively), giving rise to a small potential for losses.National povertylinesforfive-personhouseholds(dashed)werealsoadded to Figure 4: the Indonesian floating farm was the only system capableof generating net returns exceeding its own NPL with 100%certainty. Therisk of not reaching the NPL was also low in the Indian and Mexican sys-tems(Table10).Incontrast,theTanzanianfarmfailedtoreachitsNPLFIGURE 3Annual net returns (USD at 2005 PPP) for floating seaweed farming systems in Philippines,Tanzania, and India relying on family labor. Total length of lines under cultivation is enclosed in par-entheses next to the countries names. National poverty lines are added for comparison purposes.268 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 evenifpricesare40% aboveaverage(USD0.38/kg). NetreturnsinthePhilippineandSolomonIslandssystemsalsofailedtoreachNPLswhenprices fell substantially below the average levels assumed in Table 7.POLICY IMPLICATIONSWithfeatures suchas lowcapital andoperatingrequirements, shortproduction cycles and a growing international market for carrageenan pro-ducts, seaweed farming is a particularly appealing enterprise for inclusioninto the integrated coastal management projects and fisheries managementinitiatives led by international development agencies, governmentsfisheries departments, andNGOs intropical developingcountries (e.g.,ACDI/VOCA,2010;ADB,2014;BlueVentures,2013;ConservationInter-national, 2008; Sievanen et al., 2005). The dramatic increases in productionin the Philippines and Indonesia since the late 1960s are frequently takenas evidence of the profitability of seaweed farming for households in coastalregions.Animportantlessonfromthisstudy,nevertheless,isthatcertainmarket and production conditions need to be satisfied for seaweed farmingto fulfill its potential as a sustainable source of employment and livelihoods.In this regard, seaweed farming is no different from most other aquacultureenterprises with higher capital and technological requirements.Thefirst aspect tobediscussedis farmprices. Lowprices seriouslyhamper the revenue-generating potential of seaweed farming in the mostremoteproducingregions(Tanzania, SolomonIslands). Reportedpricesinthe Indonesian, Philippine and Mexicancase studies ranged fromTABLE 10 Risk Analysis Measuring Sensitivity of Annual Net Returns (USD at 2005 PPP) to Variationsin Farm-Gate Prices for Six Floating Seaweed Farming SystemsParameters of triangular distributions forfarm-gate price (USD/kg)Certainty levels (percent)Minimum Likeliest Maximum Probability oflossesProbability of notreaching NPLIndonesia 0.51 0.85 1.19 0.0 0.0Philippines 0.65 1.09 1.53 0.0 43.1Tanzania 0.16 0.27 0.38 0.0 100.0India 0.20 0.33 0.46 0.0 6.1Solomon Islands 0.23 0.38 0.53 3.8 30.8Mexico 0.60 1.00 1.40 1.2 7.6Triangular distributions were used to characterize variability in farm-gate prices: likeliest values werethose listed in Table 7, while prices 40% below and 40% above were used as minimum and maximumvalues, respectively. The Philippine, Tanzanian, and Indian systems relied on family labor, while the costof labor was accounted for in the other systems. Montecarlo simulations consisting of 1,000 trials wereconducted in each case. NPLNational Poverty Line.The Economics of Carrageenan Seaweed Farming in Developing Countries 269Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 USD 0.60 through USD 1.40/kg. In contrast, prices in Tanzania, India, andthe Solomon Islands never exceeded USD 0.40/kg. Low prices in Tanzaniahave led some farmers (mostly males) to quit seaweed farming altogether inrecent years (Msuya, 2013).As explained before, the problem of low prices is mostly one of reducedaccess to markets. The high shipping costs from the relatively remote farm-ing locations in eastern Africa and the Pacific Islands constrain the abilityof purchasers/exporters to offer the much higher prices received byIndonesianandPhilippinefarmers. TheproblemiscompoundedbytheFIGURE 4Risk analysis measuring sensitivity of annual net returns (USD at 2005 PPP) to variations infarm-gateprices for sixfloatingseaweedfarmingsystems. ThePhilippine, Tanzanian, andIndiansystems relied on family labor while cost of labor was accounted for in the other systems. National pov-erty lines for five-person households (dashed) are added for comparison.270 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 inability of some farmers to supply their own farming materials: in placessuchas Tanzania many farmers are highly dependent onprocessors/tradersforthe sourcing of materials(stakes, culture lines, etc.). Thecostof thesematerials is discountedfromthepricepaidtofarmers at theendoftheproductioncycle. Aslongasfarmerscontinuetodependonprocessors/tradersfortheprocurementoftheirfarmingmaterials, theirleveragetonegotiatehigherpriceswill becompromised. Inthisregard,microfinance could provide a viable means for dependent farmers to breakfree from disadvantageous arrangements with suppliers. Depending on thelocal contextandgiventhattheinitial capital requirementsarenotveryhigh, microloans might beavailablefromcredit institutions orthroughorganizations suchas Kiva.org.9Seaweedfarmers inthePhilippines arealreadytakingadvantageofKivatoraiseinvestmentcapitaltofundtheiroperations (Kiva.org, 2012).Diseases (ice-ice in particular) have had a severe impact on the farming ofthe higher-priced K. alvarezii in places such as Tanzania and the Philippines.Many farmers in Tanzania have turned to the farming of the more resistantEucheuma denticulatum in an attempt to maintain farm yields but some havebeen discouraged by its lower price, normally around 50%of the price paidforK.alvarezii.Furtherresearchondisease-resistantstrainsofK.alvareziiand deep-water farming methods (which reduce the impact of diseases onK. alvarezii) is warranted. Some important steps inthis directionhavealready been taken in Tanzania (Msuya et al., 2007).Diminished economic returns resulting from low farm prices can alsobe enhancedby introducing value-added processes aimedat the pro-ductionof seaweed-basedsoaps, lotions, powder, etc. InTanzania, theZanzibar Seaweed Cluster Initiative has been leading the efforts to createvalue-added seaweed products with some positive results (Msuya, 2011b).Theotheraspecttoconsideristhescaleoffarmingoperations. Thebestperformingsysteminthisreviewwasthe30-kmfloatingIndonesianfarm despite its moderate productivity (1.43 kg/m/year). The second-bestperforming operation was the second largest, the Mexican off-bottom farm. Annual net returns were even higher in the Solomon Islandsfarm(4 km)thaninthePhilippinesystem(2 km)inspiteof themuchhigher prices in the latter country (USD 1.09 vs USD 0.38). Although theTanzanian systemswere relatively productive(2.45-2.80 kg/m/year), theirreducedscale(lessthan0.3 km)precludedthemfromachievingincomelevelsexceedingtheNPL. Thepoor performanceof thesesystemswas ofcoursecompoundedbythelowfarmprices. Itisclearthatfamilyopera-tions of this type are not sustainable in the long term, especially if seaweedfarming is approached as the primary means of livelihood support.Data from a four-year USAID project examining the viability of maricul-ture enterprises in Tanzania provide an indication of the minimum scale ofThe Economics of Carrageenan Seaweed Farming in Developing Countries 271Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 operations neededtorunaviablefarminthis country (ACDI/VOCA,2010).Thetechnicalprojectadvisedfarmerstoplantaminimumof200lines of 10 m each (2,000 m). After the initial 1012 weeks of farm expan-sion, anindividual producer wouldbeabletoharvest 500 kgof driedseaweedper month(3 kg/m/year). Assumingapriceof USD0.27forK.alvareziiandaproductioncostofUSD0.06/kg(Table7),netreturnsfrom this system would reach USD 1,260. At 2005 PPP, this would amounttoUSD2,777, surpassingtheNPLofUSD1,736forafive-personhouse-hold. This is of course a much more acceptable level of income than whatis shown in Figures 2, 3 and 4. Other technical advisors recommend familyfarms in eastern Africa to handle at least three km of lines (de San, 2012).Having farms to operate two or three km of seaweed lines may require asubstantial increase in the managerial abilities of many family operations ineastern Africa. Nevertheless, it is essential that farmers as well governmentsfisheries departments and international development agencies understandthe importance of achieving these economies of scale prior to promotingseaweed farming as a sustainable livelihood activity in coastal areas. Scalingup acquires even more importance given the low seaweed prices prevailingin the region.CONCLUSIONSStandard budgeting techniques were used to develop comparativeenterprise budgets for eight carrageenan seaweed farming systems inIndonesia, the Philippines, Tanzania, India, Solomon Islands and Mexico.The systems were selected to illustrate a variety of production and marketscenarioscurrentlyfoundinseaweedfarmsaroundtheworld. Thestudyreviewedsmall-scale, village-based operations inTanzania; large-scale,industrial Indonesian farms, as well as intermediate systems in thePhilippines, India, Solomon Islands, and Mexico.In addition to the scale of operations and range of farming techniques,otherbiological andeconomicparametersvariedsignificantlyacrosssys-tems. Productivity ranged from 1.10 kg/m/year in the Indonesian floatingfarmto5.43 kg/m/year intheSolomonIslands operation. Farmpricesweresignificantlyhigher(>USD0.80/kgof dryseaweed)inIndonesia,thePhilippines andMexicoduetotheirproximitytomarkets. At USD0.06/kg, Tanzania achieved the lowest cost of production while the highestcostsperkgwerecomputedforthePhilippines(anMRLLsystem)andMexicoatUSD0.70andUSD0.65,respectively.ProductioncostsfortheothersystemswerearoundUSD0.27/kg. EstimatedproductioncostsforIndonesia and the Philippines are not to be interpreted as representativecosts giventhe large variety of farming systems and local productionconditions found in these countries.272 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Althoughseaweedfarmingisrepeatedlyportrayedasacoastal enter-prise suitable for small-scale family farms, the analysis highlightedtheimportanceofachievingeconomiesofscaleasindicatedbythesuperioreconomicperformanceoftheIndonesianindustrial-scalefarmsrelativeto the family-run operations in Tanzania and India. In the case of Tanzania,thesmall300-mfarmingplotsgeneratedalevelofincomethatfellshortfrom the international and national poverty lines.Under conditions suchas those described inthe Tanzaniancase,seaweedfarmingcanstill provideimportantsocioeconomicbenefitsasasupplemental livelihoodactivity, but itsimpact will belimited. However,if the right market, production and environmental conditions are present,seaweed farming holds the potential to enhance substantially the socioeco-nomicwellbeingofcoastalcommunitiestraditionallydependentontheirsurroundingmarineresources. Assumingafarmpriceof at least USD0.80/kg, productioncosts of aroundUSD0.25/kg, andaminimumof2,000 m of production lines, seaweed farms can generate enough revenueto bring a five-family household over the national poverty line. Thiseconomicpotential acquiresevengreaterimportanceinplaceswithfewadditional employment opportunities for coastal inhabitants. Even inunderperformingregions suchas Tanzania, seaweedfarminghas beeninstrumental inraisingthesocioeconomicstatusoffemalevillagers, whotraditionally have access to fewer employment alternatives than males.ACKNOWLEDGMENTSAcknowledgments are due to all seaweed farmers who contributed datafor this study. All errors, omissions and views remain the sole responsibilityof the authors.FUNDINGThe authors are indebted to the Food and Agriculture Organization ofthe United Nations for their financial support for this research.NOTES1. Seaweeds can be classified into three broad groups based on pigmentation: brown, redand green. Botanists refer to these broad groups as Phaeophyceae, Rhodophyceae andChlorophyceae, respectively. Redandgreenseaweedsareusuallysmallerthanbrownseaweeds, ranging from a few cm to about a meter in length (McHugh, 2003).2. Nori(Porphyraspp.)isanotherredseaweedwithsignificantaquacultureproductioninEast Asian countries but it is mainly used for direct human consumption.The Economics of Carrageenan Seaweed Farming in Developing Countries 273Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 3. Theinternational carrageenanindustryisdominatedbyfiveorsixmultinational con-glomerates, mainly based in the U.S. and Europe. China has also emerged in recent yearsas a major purchased of raw seaweed (McHugh, 2003; Tinne et al., 2006).4. Unliketerrestrialplants, seaweedsdonotpropagateviaseeds; theyreproduceinsteadthroughacomplexmechanisminvolvingzoospores. Theproductionof zoospores isnot possible under laboratory conditions; tissue culture and micropropagation methodsare thus the best alternatives for seedling production in labs. Although much researchhas been conducted in this area, lab production of seedlings is still not cost efficient fromthe point of view of farmers, most of whom rely on repeated vegetative propagation ofharvested seaweed. Nevertheless, vegetative propagation does not augment genetic varia-bility which may contribute to the decrease in growth rates and carrageenan yield and theincreasedsusceptibility todiseases observedinsomelocations (Hurtado&Cheney,2003). Current researchis aimedat optimizing culture conditions for the massiveproduction of high-quality lab seedlings (Yong et al., 2014). If these efforts are successful,the industry couldeventually turnaway fromrepeatedvegetative propagationandexperience overall increases in productivity.5. Ice-ice is caused when changes in salinity, ocean temperature, and light intensity inflictstress on seaweeds, making them produce a moist organic substance that attracts bacteriainthewaterandinducesthecharacteristicwhiteningandhardeningoftheseaweedstissues (McHugh, 2003).6. PurchasingPowerParity(PPP)isatechniqueusedtodeterminetherelativevalueofdifferentcurrencies. ThePPPconceptallowsonetoestimatewhattheexchangeratebetweentwocurrencieswouldhavetobeinorderfortheexchangetobeatparwiththe purchasing power of the two countries currencies. This is the appropriate method-ology to use when comparing living standards across countries and over time (Cheung,2009).7. In fact, the USD $1.25 IPL is computed as the average of the national poverty lines of thepoorest 15 countries for which data are available (Chen & Ravallion, 2008).8. The following were the sources consultedfor the NPLs of Indonesia, Philippines,Tanzania, India, Solomon Islands, and Mexico, in respective order: Iriana et al.(2012); Philippine Statistics Authority (2014); Policy Forum (2012); Government of India(2013), SINSO/UNDP(2008), andCONEVAL(2013). The NPLs for the SolomonIslands (2008) and Mexico correspond to rural areas.9. Kiva.org is a non-profit organization that allows people to lend money via the internet topeople in developing countries through partner microfinance institutions.REFERENCESACDI/VOCA(2010) Sustainable Environmental Management through Mariculture Activities. FinalQuarterlyReportandFinal Report. ACDI/VOCA, Washington, DC, USA. Retrievedfromhttp://pdf.usaid.gov/pdf_docs/PDACQ150.pdfArnold, S. (2008)Seaweed, power, andmarkets: apolitical ecologyof the CaluyaIslands, Philippines(Major paper). York University, Toronto, Ontario, Canada.Asian Development Bank [ADB] (2014, May 30) Abalone and seaweed farming sustain better future forFilipino fishermen. Asian Development Bank, Manila, Philippines. Retrieved from http://www.adb.org/features/abalone-and-seaweed-farming-sustain-better-future-filipino-fishermenBarta, P. (2008, October 21) Indonesia got soaked when the seaweed bubble burst. The Wall StreetJournal. Retrieved from http://online.wsj.com/news/articles/SB122454073909251775BBCNews(2014, March27)SeaweedZanzibars giftfromtheocean. BBCNews. Retrievedfrom http://www.bbc.com/news/world-africa-26770151Beveridge, M., M. Phillips, P. Dugan, & R. Brummett (2010) Barriers to aquaculture development as apathway to poverty alleviation and food security: policy coherence and the roles and responsibilities of274 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 development agencies [PowerPoint slides]. OECD Workshop, Paris, 1216 April 2010. Retrievedfrom http://www.oecd.org/greengrowth/fisheries/45035203.pdfBindu, M.S. (2011) Empowerment of coastal communities incultivationandprocessing ofKappaphycus alvarezii acasestudyat Vizhinjamvillage, Kerala, India. Journal of AppliedPhycology, 23(2), 157163.Bindu, M.S. & I.A. Levine (2011) The commercial red seaweed Kappaphycus alvarezii an overviewon farming and environment. Journal of Applied Phycology, 23(4), 789796.Bixler, H.J. & H. Porse (2011) A decade of change in the seaweed hydrocolloids industry. Journalof Applied Phycology, 23(3), 321335.Blanchetti-Revelli, L. (1995) Canadianmisfortunes and Filipino fortunes: the inventionofseaweed mariculture and the geographical reorganization of seaweed production. InP. McMichael (Ed.), FoodandAgrarianOrdersintheWorldEconomy(pp. 97112). PraegerPublishers, Westport, CT, USA.Blue Ventures (2013). Community-based seaweed aquaculture: a sustainable alternative to fishingfor southwest Madagascar. Retrieved from http://www.blueventures.org/conservation/aquaculture.htmlChen, S. & M. Ravallion (2008) The developing world is poorer than we thought, but no less successful inthe fight against poverty. Policy Research Working Paper 4703. The World Bank, Washington,DC, USA. Retrievedfromhttp://www-wds.worldbank.org/external/default/WDSContent-Server/IW3P/IB/2010/01/21/000158349_20100121133109/Rendered/PDF/WPS4703.pdfCheung, Y.-W. (2009) Purchasing power parity. In The Princeton Encyclopedia of the World Economy.(Vol. 1, pp. 942). Princeton University Press, Princeton, New Jersey, USA.Consejo Nacional de Evaluacin de la Poltica de Desarrollo Social [CONEVAL] (2013) Informe dePobreza en Mexico, 2012. Mexico, D.F., Mexico. Retrieved from http://www.coneval.gob.mx/Informes/Pobreza/Informe%20de%20Pobreza%20en%20Mexico%202012/Informe%20de%20pobreza%20en%20Mexico%202012_131025.pdfConservation International (2008, November 26) Farming in the Seas. Retrieved from http://www.conservation.org/global/philippines/fmg/articles/Pages/FarmingintheSeas2.aspxde San, M. (2012) The Farming of Seaweeds. Report SF/2012/28. Indian Ocean Commission/EUSmartFish Programme. Retrieved from http://commissionoceanindien.org/fileadmin/projets/smartfish/Rapport/SF28.pdfEspaldon, M.V.O., Z.M. Sumalde, C.M. Rebancos, J.D. Villanueva, & M.T. Mercene-Mutia (2010)Sustainable livelihood and seaweed farming in Calatagan, Batangas, Philippines. IIFET 2010MontpellierProceedings. Retrievedfromhttps://ir.library.oregonstate.edu/xmlui/bitstream/handle/1957/38664/445.pdf?sequence=1Feenstra, R.C., R. Inklaar &M.P. Timmer (2013) PennWorld Table, Version8.0. Center forInternational ComparisonsofProduction, IncomeandPrices, UniversityofPennsylvania,Philadelphia, PA, USA. Retrieved from http://www.ggdc.net/pwtFoodandAgricultureOrganizationoftheUnitedNations(2014)FishStatJ SoftwareforFisheryStatistical Time Series. Retrieved from http://www.fao.org/fishery/statistics/software/fishstatj/enGovernment of India (2013) Press Note onPoverty Estimates, 201112. Government of India,PlanningCommission, NewDelhi, India. Retrievedfromhttp://planningcommission.nic.in/news/pre_pov2307.pdfGupta, M. (2010, September24)Enhancingthecontributionofaquaculturetopovertyallevi-ation, foodsecurityandrural development. Global ConferenceonAquaculture2010Podcasts.FoodandAgricultureOrganizationoftheUnitedNations, ThaiDepartmentofFisheries,andNetworkof AquacultureCentresinAsia-Pacific. Podcast retrievedfromhttp://www.enaca.org/modules/podcast/soundtrack.php?soundtrack_id=43Hayashi, L., C. Bulboa, P. Kradolfer, G. Soriano, & D. Robledo (2014) Cultivation of red seaweeds:a Latin American perspective. Journal of Applied Phycology, 26, 719727.Hurtado, A.Q. (2013) Social and economic dimensions of carrageenan seaweed farming in thePhilippines. InD. Valderrama, J. Cai, N. Hishamunda, &N. Reidler (Eds.), Social andEconomic Dimensions of Carrageenan Seaweed Farming (pp. 91113). Fisheries and AquacultureTechnical Paper No. 580. FAO, Rome, Italy.The Economics of Carrageenan Seaweed Farming in Developing Countries 275Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Hurtado, A.Q. & D.P. Cheney (2003) Propagule production of Eucheuma denticulatum (Burman)Collins et Harvey by tissue culture. Botanica Marina, 46(4), 338341.Iriana, N., A. Avenzora, & J. Abidin (2012) Indonesia: poverty data governance [PowerPoint slides].Effective Policies and Experiences for Poverty Reduction in Asia, Kunming, China. Retrievedfrom http://www.adbi.org/conf-seminar-papers/2012/12/10/5381.indonesia.poverty.data.gov/Kiva.org. (2012) Glorias loan page. Retrieved from http://www.kiva.org/lend/427486Krishnan, M. & R. Narayanakumar (2013) Social and economic dimensions of carrageenan sea-weed farming in India. In D. Valderrama, J. Cai N. Hishamunda, & N. Reidler (Eds.), Socialand Economic Dimensions of Carrageenan Seaweed Farming (pp. 63184). Fisheries andAquaculture Technical Paper No. 580. FAO, Rome, Italy.Kronen, M. (2013) Social and economic dimensions of carrageenan seaweed farming in SolomonIslands. In D. Valderrama, J. Cai, N. Hishamunda, & N. Reidler (Eds.), Social and EconomicDimensions of Carrageenan Seaweed Farming (pp. 147161). Fisheries and Aquaculture Techni-cal Paper No. 580. FAO, Rome, Italy.McHugh, D.J. (2002) Prospects for Seaweed Production in Developing Countries. FAO Fisheries CircularNo. 968 FIIU/C968. Food and Agriculture Organization of the United Nations, Rome, Italy.Retrieved from http://www.fao.org/docrep/004/y3550e/y3550e00.HTMMcHugh, D.J. (2003) A Guide to the Seaweed Industry. FAO Fisheries Technical Paper No. 441. Foodand Agriculture Organization of the United Nations, Rome, Italy.Msuya, F.E. (2006)Theimpact of seaweedfarmingonthesocial andeconomicstructureofseaweedfarmingcommunitiesinZanzibar, Tanzania. InA.T. Critchley, M. Ohno, &D.B.Largo (Eds.), World Seaweed Resources. ETI Information Services, Wokingham, UK.Msuya, F.E. (2013)Social andeconomicdimensions of carrageenanseaweedfarmingintheUnitedRepublic of Tanzania. InD. Valderrama, J. Cai, N. Hishamunda, &N. Reidler(Eds.), Social and Economic Dimensions of Carrageenan Seaweed Farming (pp. 115146). Fisheriesand Aquaculture Technical Paper No. 580. FAO, Rome, Italy.Msuya, F.E. (2011a)Theimpact of seaweedfarmingonthesocio-economicstatus of coastalcommunities in Zanzibar, Tanzania. World Aquaculture, 42(3), 4549.Msuya, F.E. (2011b) Zanzibar Seaweed Cluster Initiative [PowerPoint slides]. Cluster InitiativePresentations, 3rd PACF Conference, Entebbe, Uganda. Retrieved from http://www.pacfnet-work.org/pacf/wp-content/uploads/2013/09/Zanzibar-Seaweed-Cluster-Initiativen.pdfMsuya, F.E., M.S. Shalli, K. Sullivan, B. Crawford, J. Tobey, and A.J. Mmochi (2007) A ComparativeEconomic Analysis of Two Seaweed Farming Methods in Tanzania. The Sustainable Coastal Com-munities and Ecosystems Program. Coastal Resources Center, University of Rhode Island andtheWesternIndianOceanMarineScienceAssociation. Retrievedfromhttp://pdf.usaid.gov/pdf_docs/Pnadk663.pdfMuoz, J., Y. Freile-Pelegrn, & D. Robledo (2004) Mariculture of Kappaphycus alvarezii(Rhodophyta,Solieriaceae)colorstrainsintopicalwatersofYucatn,Mxico.Aquaculture,30, 161177.My, Q. (2011) Poverty reduction fromseaweed Kappaphycus alvarezii cultivation. VietFishInternational, 8(3), 7072.Namudu, M.T. & T.D. Pickering (2006) Rapid survey technique using socio-economic indicatorsto assess the suitability of Pacific island rural communities for Kappaphycus seaweed farmingdevelopment. Journal of Applied Phycology, 18(35), 241249.Naylor, J. (1976) Production, Trade and Utilizationof Seaweeds and Seaweed Products. FisheriesTechnical Paper No. 159. FAO, Rome, Italy.Neish, I.C. (2013) Social and economic dimensions of carrageenan seaweed farming inIndonesia. In D. Valderrama, J. Cai, N. Hishamunda, & N. Reidler (Eds.), Social and EconomicDimensions of Carrageenan Seaweed Farming (pp. 6189). Fisheries and Aquaculture TechnicalPaper No. 580. FAO, Rome, Italy.OracleCorporation(2012)OracleCrystal Ball (Release11.1.2.2)[Software]. Retrievedfromhttp://www.oracle.com/us/products/applications/crystalball/overview/index.htmlPettersson-Lfquist, P. (1995) The development of open-water algae farming in Zanzibar:reflections on the socio-economic impact. Ambio, 24(7/8), 487491.276 D. Valderrama et al.Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015 Philippine Statistics Authority (2014, April 29) Poverty incidence among Filipinos registered at 24.9%,as of first semester of2013.National StatisticalBoard, Republic of the Philippines.Retrievedfrom http://www.nscb.gov.ph/pressreleases/2014/PSA-NSCB-PR-201404-SS2-09_povertyincidence.aspPolicy Forum (2012) Growth in Tanzania: Is it Reducing Poverty? Policy Forum and Twaweza, Dar esSalaam, Tanzania. Retrieved fromhttp://www.twaweza.org/uploads/files/Groth%20in%20Tanzania_Policy%20Forum.pdfRavallion, M., S. Chen, & P. Sangraula (2009) Dollar a day. The World Bank Economic Review, 23(2),163184.Robledo, D., E. Gasca-Leyva, & J. Fraga (2013) Social and economic dimensions of carrageenanseaweed farming in Mexico. In D. Valderrama, J. Cai, N. Hishamunda, & N. Reidler (Eds.),Social andEconomicDimensionsofCarrageenanSeaweedFarming(pp. 185204). FisheriesandAquaculture Technical Paper No. 580. FAO, Rome, Italy.Solomon Islands National Statistics Office/United Nations Development Program Pacific Centre[SINSO/UNDP] (2008) Solomon Islands: Analysis of the 2005/06 Household Income and Expendi-ture Survey. National StatisticsOffice, Department of Finance, Honiara, SolomonIslands.Retrieved from http://phtpacific.org/sites/default/files/surveys_dev_reports/90/files/SLB_HIES-2005-06_AnalyticalReport_2008-07.pdfSievanen, L., B. Crawford, R. Pollnac, & C. Lowe (2005) Weeding through assumptions of liveli-hood approaches in ICM: seaweed farming in the Philippines and Indonesia. Ocean & CoastalManagement, 48(36), 297313.The Economist (2013, December 18) Farming the Alor islands: One mans weed. The Economist.Retrieved from http://www.economist.com/blogs/banyan/2013/12/farming-alor-islandsTinne, M., G.L. Preston, & G. Tiroba (2006) Development of seaweed marketing and licensingarrangements. Project ST 98/009: Commercialisation of Seaweed Production in the Solomon Islands.Technical Report 1. Gillet, PrestonandAssociates, Inc., PortVila, Vanuatu. Retrievedfromhttp://bluesquid.net/COSPSI/CoSPSI%20Market%20Licence%20Report.pdfTrono, G.C. (1990) Seaweed resources in the developing countries of Asia: production and socio-economic implications. In I.J. Dogma, G.C. Trono, & R.A. Tabbada (Eds.), Culture and Use ofAlgae in Southeast Asia: Proceedings of a Symposium on Culture and Utilization of Algae in SoutheastAsia (pp. 18). Southeast Asia Fisheries Development Center, Tigbauan, Iloilo, Philippines.Trono, G.C. (1993)EucheumaandKappaphycus: taxonomyandcultivation. InM. no&A.T.Critchley (Eds.), Seaweed Cultivationand Marine Ranching (pp. 7588). Kanagawa Inter-national Fisheries Training Center, JapanInternational Cooperative Agency, Yokosuka,Japan.Trono,G.C.,H.R.Rabanal,&I.Santika(1980)SeaweedFarming.FAO/UNDPSouthChinaSeaFisheries Development and Coordinating Programme. SCS/80/WP/91. Manila, Philippines.UN COMTRADE (2014) United NationsCommodityTrade Statistics Database. United NationsStatistics Division, New York, NY, USA. Retrieved fromhttp://comtrade.un.org/db/default.aspxValderrama, D., J. Cai, N. Hishamunda & N. Ridler (Eds.). (2013) Social and Economic Dimensions ofCarrageenanSeaweedFarming. Fisheries andAquacultureTechnical Paper No. 580. FAO,Rome, Italy.Yong, W.T.L., S.H. Ting, Y.S. Yong, V.Y. Thien, S.H. Wong, W.L. Chin, K.F. Rodrigues, & A. Anton(2014) Optimizationof culture conditions for the direct regenerationof Kappaphycusalvarezii (Rhodophyta, Solieriaceae). Journal of Applied Phycology, 26, 15971606.Zamroni, A. & M. Yamao (2011) Coastal resource management: fishermens perceptions of sea-weed farming in Indonesia. World Academy of Science, Engineering and Technology, 60, 3238.The Economics of Carrageenan Seaweed Farming in Developing Countries 277Downloaded by [Cinvestav del IPN] at 14:02 11 May 2015