According to a subsequent analysis, whose primary purpose was to analyze the impacts of the recent changes in TED regulations (NMFS 2002), the large vessel component of the fishery was profitable to highly profitable between 1998 and 2000. Nominal shrimp prices were relatively stable and fuel prices were relatively low by historical standards, and abundance tended to be higher than historical averages. Undoubtedly, strong conditions at the macroeconomic level created relatively high levels of consumer demand for shrimp, which in turn engendered strong economic performance in the shrimp industry.
However, economic conditions took an abrupt change in the latter half of 2001. Evidence indicates that as imports surged, macroeconomic conditions deteriorated, and when the post September 11, 2001, era began, the industry was hit by sharply declining prices and higher insurance premiums.13 At least for the large vessel sector, profits turned into losses by the end of 2001. The deteriorating trend appears to have continued through 2002 and 2003, exacerbated by increases in fuel prices that began in the latter part of 2002 and continued through 2003. According to average price data reported by the Bureau of Labor Statistics (BLS), from 2002 to 2003, fuel prices increased between 21% and 29%, depending on the selected fuel price index.14 Regardless of which index used, fuel prices increased significantly which, in turn, significantly increased shrimp vessels’ operating costs.
By 2002, as indicated in the economic analysis of the 2003 Texas Closure policy (Travis and Griffin, 2003) and the supplemental economic analysis of Amendment 10 to the Shrimp Fishery Management Plan (NMFS 2003), economic conditions deteriorated to the point where all sectors of the Gulf shrimp fishery, regardless of vessel size, state, or gear, were facing negative profits (losses), on average, by the end of 2002. According to the Texas Closure analysis, for the fishery as a whole in 2002, the average rate of return (profits or losses as a percentage of revenue) was expected to be approximately -41%, with lower loss rates being experienced for the small vessel sector (-30%) relative to the large vessel sector (-45%). Regardless of whether the Texas Closure policy was continued or not, projections for 2003 indicated that these economic losses would persist under current conditions.
The analyses clearly indicate that rapidly declining prices have been the primary source of the recent deterioration in the industry’s economic condition. In the aggregate, the average nominal price of shrimp in the Gulf decreased by approximately 28% between 2000 and 2002. Revenues decreased even more as a result of relatively lower shrimp abundance and, therefore, landings in 2001 and 2002 relative to 2000. The magnitude of the price decline has varied by shrimp size category, with the under 15 count (“jumbo”) and 68 and over count (“small”) size categories seeing the smallest declines (approximately 23%) and the 31-40 and 41-50 count (“large” and “medium”) size categories seeing the largest declines (approximately 35%). Due to inflation, these price declines are even larger in real terms.
13Increases in vessel insurance premiums are documented in a article, a reprint of which can be found at http://www.fishresearch.org/Articles/2002/10/insurance.asp.
14According to information posted to on February 17, 2004, the Consumer Price Index’s average price data for fuel oil, Series APU00007251, indicates that fuel prices increased by 21% between 2002 and 2003. However, the PPI’s data on average prices for #2 diesel fuel, Series WPU057303, indicates that fuel prices increased by 29% during this time.