Economic feasibility of trout production in West Virginia : a mixed integer and quadratic-programming analysis /

by Fidler, Frank H.

Economic Feasibility of Trout Production in West Virginia: A Mixed Integer and Quadratic-Programming Analysis Frank H. Fidler, IV The objective of this study was to determine the profitability and risk-return characteristics of trout production in West Virginia. A combination of primary data (from a producer survey) and secondary data (from published sources and expert opinion) was used. Two sets of models (mixed-integer and quadratic-programming/portfolio) were estimated. Raceways and tanks were the two types of systems analyzed, for three different production capacities. The alternatives for the portfolio analysis included investment in a CD (to represent opportunity cost), food-fish production for sale to processors, and recreational or fee fishing. Results show that as production levels increase, raceway systems are generally more profitable than tanks under the conditions assumed. Economies of size were found to exist for the three capacities investigated. In terms of risk characteristics, specializing in fee fishing not only results in the greatest potential profitability, but also is the riskiest alternative. A risk-reducing strategy is to sell some fish to processors; the more risk-averse the producer, the larger the proportion that should be sold to processors rather than through fee fishing. Finally, sensitivity analyses were conducted to evaluate the impacts on profitability (i.e., NPV) and risk-return characteristics due to changes in parameters such as input and output prices, feed type and interest rate. The results should be useful to the industry and to policy makers; when combined with results from other on-going studies investigating mine water sources, waste management, processing economics, and economic development, should help in the development of a sustainable aquaculture industry in Appalachia.