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09078952 a Feasibility Assessment of The DFOraly 09078952 A FEASIBILITY ASSESSMENT OF THE COMMERCIAL HARVESTING OF ICELAND SCALLOP ON THE ST. PIERRE BANK SH 380.62 C3 A57 49 iiisbaks ARFEASIBILITY ASSESSMENT OF THE COMMERCIAL HARVESTING OF ICELAND SCALLOP ON THE ST. PIERRE BANK WORK REPORT SUBMITTED TO: Dr. LANITA CARTER FACULTY OF BUSINESS ADMINISTRATION MEMORIAL UNIVERSITY OF NEWFOUNDLAND BY: SCOTT LANTLE WORK TERM I APRIL 16, 1990 125 Pennywell Road, St. John's, NF A1C 2L3 Dr. Lanita Carter, Faculty of Business Administration, Memorial University of Newfoundland. Dear Dr. Carter: I am pleased to submit this work report as required for completion of my first work term. My proposal has remained basically the same. As you will notice the table of contents has been changed slightly. Some topics are presented in a different order to improve presentation and headings have been added in some sections to better clarify certain aspects. The scope of the report, however, has remained in tact. Through completing this report I have learned a great deal about the scallop fishery. As well, aspects of report preparation and writing I have studied became much clearer through practice. This research has been challenging, enjoyable and a worthwhile learning experience. I look forward to your comments and suggestions for improvement. Yours truly, Scott Antle. TABLE OF CONTENTS PAGE LETTER OF TRANSMITTAL ii LIST OF FIGURES iv ABSTRACT INTRODUCTION 1 Purpose 1 Background Information 1 Scope 2 Methodology 2 Limitations 3 Significance of the Report 3 OVERVIEW OF THE ST. PIERRE BANK SCALLOP FISHERY 5 History of the Fishery 5 Resource Availability 8 Sea Scallop 8 Iceland Scallop 9 1985 report findings 10 SCALLOP MARKET ASSESSMENT 13 Consumer Markets 13 Market Threats 14 Market Opportunities 14 Processing Operations 15 Processing Potential 16 ANALYSIS OF THE EXPERIMENTAL SCALLOP FISHERY 18 Area of Operation 18 Landing And Catch Rates 19 Cost of Operations 19 Operating Revenues 21 Net Revenues 23 Breakeven Analysis 23 Future Projections 28 Supplementary Fishery 28 Full-Time Fishery 29 RECOMMENDATIONS 31 CONCLUSIONS 32 WORKS CITED 35 APPENDICES 36 Appendix I: Glossary Appendix II: Iceland Scallop Distribution Appendix Distribution of age groups of sea and iceland scallop on the St. Pierre Bank. Appendix IV: Map of scallop beds Appendix V: Description of vessels Appendix VI: Area of operation Appendix VII: Summary of scallop landings Appendix VIII: Detailed vessel logs Appendix IX: Work report proposal. LIST OF FIGURES PAGE Figure 1: Landings from St. Pierre and Georges Banks 6 from 1951 - 1983. Figure 2: Average selected costs for 38' - 44' vessels in 22 division 3Ps. Figure 3: Net operating revenues for 1989 scallop fishing 24 experiment. Figure 4: Estimated net revenue from scallop fishing. 25 Figure 5: Breakeven model. 27 Figure 6: Breakeven analysis. 27 V ABSTRACT Secondary sources were consulted in order to present a history of the St. Pierre Bank scallop fishery. Sea scallop resources on the Bank are fully utilized but the Iceland scallop resource is underutilized. The Iceland scallop resource was found to be abundant and stable enough to support commercial activity. In September 1989, NIFDA initiated a project, involving two fishermen and a processor, to experimentally harvest Iceland scallop on the St. Pierre Bank. This project was desirable in light of declining cod stocks in NAFO sub-division 3Ps, and the abundance and under utilization of the Iceland scallop resource. Fen Bungay, President of G&F Seafoods. and Michael Handrigan, Marketing Manager of the Fishing Industry Advisory Board were interviewed to obtain information on the markets for Iceland scallop. It was determined that the main market for Iceland scallop is in the food service industry in the United States. Mr. Bungay confirmed that he has arranged buyers for the 1990 fishing season and will be able to sell all production possible at the Grand Bank plant. The two vessels involved in the experiment, the Kealy Agnes and the Beulah & Patricia, fished from September 18 to December 2, 1989 completing a total of 23 fishing days each during that period. The Kealy Agnes landed 570 lbs. of scallop meats and 41,550 lbs. of round scallop with an average catch rate of approximately 135 lbs. per tow. The Beulah & Patricia landed 542 vi lbs. of scallop meats and 18,300 lbs. of round scallop with an average catch rate of approximately 96 lbs. per tow. Calculation of operating revenues for the two vessels revealed $1,312.00 operating profit for the Kealy Agnes and a $580.93 operating loss for the Beulah & Patricia. It was concluded that the St. Pierre Bank could sustain a supplementary fishery at present. It was noticed that the Kealy Agnes, a newer vessel, was significantly more successful than the Beulah & Patricia leading to the conclusion that newer more stable vessels would be preferable for this fishery. Projections for a full year of operation for a "typical vessel" on the basis of the three month experiment yielded a net loss of $5,115.53. Breakeven landings for a full season were calculated to be 213,160 lbs. per year or 2,665 lbs. per day. It was found that a price of 0.351 per pound would be needed to breakeven assuming the catch rate of the Kealy Agnes for a full season. The intent of these findings are not meant to be a definite statement for the future of this fishery. The costs presented here were based on two vessels only for the most part and other situations may vary greatly from these. As well, different vessel size and stability, experience in the fishery, and type of operation may affect the conclusions made here. Thus it is hoped that fishermen will compare the costs, vessels, gear etc. presented here to their own in determining the viability of this fishery in each particular situation. vii Considering the large number of assumptions made here it is evident that further research would be desirable to better assess the future viability of this fishery. It is recommended that a vessel should be observed for a full season and also a survey should be done to determine the number of fishermen who will be entering the fishery in the future. Upon completion of this research a more definite statement may be made on the long term feasibility of a full-time Iceland scallop fishery on the St. Pierre Bank. 1 INTRODUCTION Purpose To assess the economic feasibility of commercially harvesting Iceland scallop on the St. Pierre Bank. Background Information The St. Pierre Bank is a westward extension of the shelf extending off the Avalon and Burin peninsulas commonly called the Grand Banks. Scallop beds are located throughout the St. Pierre Bank containing both Sea and Iceland scallops. The Sea scallop is the most widely sought after by commercial fishermen. This resource has been commercially harvested since 1953. The Sea scallop resource is presently fully utilized by Maritimes-based vessels. Presently, the Iceland scallop resource on the St. Pierre Bank is underutilized but has been getting increased attention with the depletion of other fish stocks (mainly cod) in the area. Attempts are now being made to utilize the Iceland scallop resource and make its harvesting a viable operation for Newfoundland fishermen. For example, the Canada/Newfoundland Inshore Fisheries Development Agreement (NIFDA) provided assistance to two fishermen and a processor to take part in an experimental Iceland scallop fishery on the St. Pierre Bank in 1989. NIFDA is a $60 million sub-agreement funded jointly by the Federal and Provincial governments under the Economic Regional Development Agreement. The sub-agreement provides funding in 2 three main areas; harvesting, processing and resource development (Department, 1988). Scope In order to assess the economic feasibility of harvesting Iceland scallop on the St. Pierre Bank, two projects funded by NIFDA, were extensively studied. To supplement those findings previous studies on Iceland scallop on the St. Pierre Bank were referred to in order to give an accurate picture of the potential for that area and the resource. Revenues, costs, break even points and future projections are extensively covered in the analysis of the experimental scallop fishery as well as comments on vessels and equipment and areas of operation. The processing of Iceland scallop is addressed, but with much less detail than the harvesting. The developments in the processing area in terms of manual and mechanical methods could constitute an entire report in itself. Thus due to time constraints and in order to give adequate coverage of harvesting the processing section is limited to a discussion of quality and feasibility in the processors opinion. Methodology Secondary sources include literature on the Iceland scallop, previous reports on the St. Pierre Bank and Iceland scallops, and vessel logs provided by the fishermen funded through NIFDA. 3 Primary sources include personal (or telephone) interviews with the two fishermen and the processor who participated in the experimental fishery and an employee of the Department of Fisheries Marketing Branch. Discussions with NIFDA employees provided familiarity with the topic as well as useful insight and information. Limitations Due to the lack of attention paid to Iceland scallops in the past a vast amount of time is needed to adequately prepare a complete assessment of an Iceland scallop Fishery. Therefore, only one side of the fishery, namely harvesting, is dealt with in adequate depth. Another report dealing with the processing aspect would be desirable in the future to complete this analysis. The analysis is based mostly on two vessels thus requiring generalizations and assumptions to be made. Therefore, the report should serve as a basis for comparison to each fisherman's own individual situation. Certain financial information, regarding the two participating fishermen, was withheld due to confidentiality.
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