ND
AQUACULTURE CRSP 21
22ST
ANNUAL TECHNICAL REPORT
A MIXED-INTEGER TRANSSHIPMENT MODEL FOR TILAPIA (OREOCHROMIS SP.) MARKETING IN HONDURAS
Tenth Work Plan, Marketing and Economic Analysis Research 1A (MEAR1A)
Final Report
Carlos M. Leyva and Carole R. Engle
Aquaculture/Fisheries Center
University of Arkansas at Pine Bluff, Pine Bluff, Arkansas
Yong-Suhk Wui
Department of Business
University of Arkansas at Pine Bluff
Printed as Submitted
ABSTRACT
Tilapia production in Honduras has increased in recent years. However, a lack of thorough understanding of domestic
markets and coordinated production efforts has hampered the development of a domestic market. This study quantified domestic Honduran marketing costs for tilapia and developed a mixed-integer transshipment mathematical
programming model to identify the most profitable marketing alternatives for small- and medium-scale farmers. Of
the total marketing costs of $0.07-$0.41/kg, 40-73% were for transportation and 13-30% for packaging, depending
upon farm size, location, and specific market targeted. Model results suggested restaurants as primary targets with
supplemental production delivered to supermarkets in relative proximity to the selected restaurants. The model
selected cities with sufficient restaurant demand to absorb the farm’s total production. Farms with high production
levels can take advantage of the reduced transport cost of larger trucks and sell excess product to alternative outlets,
whereas small-scale farm volumes were too low to supply markets on a weekly basis. Farms located in the East and
South regions had a marketing advantage over farms in other regions due to proximity to the most profitable Distrito
Central outlets. To successfully compete for Honduran markets other than the low-priced local open-air markets will
require farm sizes greater than 6 ha for a minimum weekly production of 900 kg.
INTRODUCTION
the ponds. Medium-scale tilapia farmers are commercial
producers using semi-intensive production techniques
(Green et al. 1994; Teichert-Coddington and Green 1997;
Green and Engle 2000).
World aquaculture production has increased dramatically in the last several decades. Tilapia is the third most
important finfish produced globally with 1,260,000 MT
of production reported in 2000 (FAO 2002b). Much of the
growth in tilapia production has occurred in developing
countries (Lutz 2002).
Limited marketing analyses have been done on aquaculture markets in Latin America, but domestic markets
for tilapia have developed in Colombia, Mexico, and
other countries (Green and Engle 2000; Engle et al. 2001;
Fitzsimmons 2000). Surveys of restaurant, supermarket,
and open-air market outlets have been conducted in
Honduras (Fúnez et al. 2003a, b; Monestime et al. 2003),
Nicaragua (Neira and Engle 2003; Engle and Neira 2003
a, b), and Peru (Engle and Neira 2004). Neira et al. (2003)
used the Nicaraguan restaurant survey data to identify
restaurant types most likely to add tilapia to their menu.
Honduras is a Central American country with potential for further development of aquaculture businesses.
Tilapia aquaculture in Honduras has experienced
remarkable growth due to the combination of its tropical
climate, abundant water, and proximity to large international markets. Honduras was the third leading exporter
of fresh tilapia fillets to the U.S. in 2003 (Harvey 2004).
In addition to the large export companies, there were
an estimated 69 small-scale and 12 medium-scale tilapia
farmers in Honduras in 2002 (Digepesca 2002). Smallscale farmers commonly use rudimentary production
and harvesting techniques to produce fish for home consumption and to sell to family and friends located near
Mathematical programming can be used to determine
the profit-maximizing combination of scarce resources
and to determine the best allocation of output among
geographic markets (Shang 1990). Programming refers
to problems in which decision makers seek to optimize
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MARKETING AND ECONOMIC ANALYSIS RESEARCH
measures of satisfaction (profit-maximization or cost
minimization) by selecting values for a set of variables
(McCarl and Spreen 1996). Mathematical programming
has been used to develop profit-maximizing stocking
and harvesting schedules for farm-raised shrimp (Hatch
and Atwood 1988; Dunning 1989; Valderrama and Engle
2002), compare single- and multiple-batch production
of channel catfish (Engle and Pounds 1993), estimate
on-farm costs of delayed harvest due to off-flavor (Engle
et al. 1995), and schedule flounder production to meet
market demand (Zucker and Anderson 1999).
The growth and development of the Honduran economy
in recent years may create potential for commercial
development of a domestic tilapia market. Additional
market development, particularly of higher-end market
outlets, could stimulate additional growth of tilapia
farm businesses. The objectives of this research were to
quantify domestic marketing costs for tilapia produced
in Honduras and develop a mathematical model to
determine the most profitable marketing alternatives for
small- and medium-scale tilapia farmers in Honduras.
METHODS AND MATERIALS
Scenarios
Five production regions were identified based on geographic location (Fig. 1). Two farm-size scenarios were
considered within each region: 1) small-scale farms,
operating less than 1 ha of ponds and 2) medium-scale
farms with 1 to 22 ha of water surface area. Table 1
presents the average farm size and total hectareage of
small- and medium-scale tilapia farms in each production region. Of the 12 medium-scale farms, the largest
were in the East region and were followed in descending order by those in the North, West, Central, and the
South. Small-scale farms in the North were much larger
than those in the other regions, with the smallest average
farm sizes being in the West region. Average yields were
5,780 kg/ha/yr for the small-scale farms (Green et al.
1994; Green and Engle 2000) and 9,256 kg/ha/yr for the
medium-scale farms (Green and Engle 2000).
Cities considered as potential markets were those with
populations greater than 23,000 inhabitants and the Lago
de Yojoa recreational area, where local restaurants offer
fried whole fish as a traditional specialty dish. Fourteen
cities1 were considered in all.
Marketing Costs
Marketing costs were calculated for each region to sell to
14 potential market cities. The analysis assumed that the
basic product to be sold is whole fish (in kg). Costs were
estimated for the following marketing functions: transportation, packaging/icing, promotion, and collection of
payment for fish delivered. Transportation alternatives
considered were: 1) small pick-up trucks with a loading
capacity of 750 kg weight; 2) medium trucks with capac-
351
ity of 2,000 kg weight; and 3) large trucks with a capacity
of transporting 6,000 kg weight.
Fixed transportation costs included: vehicle payments,
financing costs, maintenance and repair costs, taxes, insurance, and depreciation. Vehicle cost quotations were
obtained from Honduran car and truck dealerships.
Financing costs were estimated based on the 2003 interest rate of 20.8% for loans in Honduran Lempiras (Banco
Central de Honduras 2004). Maintenance and repair estimates were assumed to be 5% and insurance and taxes
4% of the total cost of the vehicle per year. Vehicles were
assumed to have a useful life of 5 years and calculated
using the straight-line method.
Variable transportation costs considered were: fuel cost
in $/L of diesel, average fuel consumption per km, oil
and lubricants, maintenance, cost of tires, and labor (cost
of driver). The cost of diesel in Honduras is regulated by
the federal government; the national average of the first
semester of 2003 ($0.45/L) was used for this analysis.
The fuel consumption per km for smaller pick-up trucks
was estimated at 10.5 kg/L, at 7.9 km/L for medium
trucks and 6.8 km/L for larger trucks. Cost of oil and
filters was estimated at $60 per 3,000 km, and tire costs
were calculated at $200 for every 40,000 km. Transportation costs were calculated as an average of the distance
from every region to each of the 14 market cities, 274 kg.
Labor was calculated based on a monthly salary of $350
to $450 for the truck driver, with the higher salary for
drivers of the larger trucks.
Packaging and refrigeration costs included: materials,
ice, labor, and containers/coolers. Polyethylene bags
that would hold 4.54 kg of whole fish were assumed to
be used for packaging. One kg of ice was used for every
4 kg of fish. Packaging labor was calculated based on
the size of the shipment and the truck size. Coolers and
refrigerated containers were depreciated over a 2-yr
period.
Financial costs were estimated for those market outlets that do not pay on delivery. Honduran restaurants
frequently pay in 7 days and supermarkets in 30 days;
open-air markets are the only outlets that pay on delivery. The costs of accounts receivable were estimated
based on the 2003 APR of 20.8% in Honduras (Banco
Central de Honduras 2004). Sales to restaurants require
more promotion expense. An additional 10% of the sales
price was charged for restaurant sales to account for the
additional visits to potential clients, sampling, or traveling expenses to make initial acquaintances required for
sales to restaurants.
The Model
A mixed-integer transshipment mathematical programming model was developed. Transshipment problems
often involve location of farms, truck and market
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TWENTY-SECOND ANNUAL TECHNICAL REPORT
alternatives and transportation systems with high
fixed costs. The basic decision in transshipment models
involves trade-offs between fixed transportation costs
and optimal price targeting (McCarl and Spreen 1997).
Integer variables were used to model fixed costs and
were combined with continuous, linear variables into the
mixed-integer model (Dantzig 1963).
Whole fish was selected as the product of analysis
because it is the basic unit of sale for tilapia farmers. In
a survey of supermarkets in Honduras, 68% of respondents preferred to consume tilapia as a whole fried product (Engle et al. 2001). Preferences for whole fish dishes
were described by Molina (2000) in cities in Honduras.
The top selling product form of tilapia was fresh wholedressed tilapia (74%) in open-air markets (Fúnez et al.
2003a).
Data
Engle et al. (2001) conducted national surveys of restaurants, supermarkets, and open-air markets in Honduras
(Fúnez et al. 2003 a,b, Monestime et al. 2003). These
surveys provided a database on prices and quantities
bought and sold in each type of market outlet in various cities and regions of Honduras. Additional data
were obtained from FHIA (2003) and from studies done
by the Escuela Agrícola Panamericana (Tanaka, 2003).
The price of live weight tilapia was obtained by dividing the whole-dressed price (from the surveys) by a
dressout yield of 90.13% (Green and Engle, 2000). Net
price was calculated by subtracting sales and promotion costs. Thus, whole-dressed prices were $2.20/kg
in restaurants, $1.78/kg in supermarkets, and $1.62/kg
in open-air markets, while net prices were $1.78/kg in
restaurants, $1.58/kg in supermarkets, and $1.46/kg in
open-air markets.
Per capita annual consumption of fish (FAO 2002a) and
survey estimates of the percentage of seafood sold that
was tilapia (Fúnez et al. 2003 a, b; Monestime et al. 2003;
Tanaka, 2003; and DIGEPESCA, 1999) were used to estimate the quantity demanded for each target market.
To estimate supply, the expected production capacity
of each region was estimated from the total hectares
under cultivation multiplied by the average production (kg/ha/yr) (Green et al. 1994; Green and Engle
2000) for small- and medium-scale farms. Feed cost was
calculated for nutritionally balanced floating tilapia feed
(28% protein) (Tanaka 2003) at an average feed conversion ratio of 1.8 (g feed/g live weight gain). The targeted
market size was a minimum of 250 g (Green and Engle
2000). Tilapia production cost was estimated at $1.13/kg
for small-scale farms and $1.32/kg for medium-scale
farms. Quality and size of fish were assumed to be consistent for small- and medium-scale farmers. Matrices or
patterns of possibilities were developed for all supply and
target market locations, prices, and shipping options.
Model Development
The model is based on five regions that supply 14 potential markets. The model calculates net returns systematically for every delivery or combination, considering all
possible values for the decision variables: source, volume, truck, city, and outlet type. The model was based
on weekly deliveries of fish to market outlets because
markets require consistent, stable supplies of product to
satisfy customers.
The objective function was to maximize profit. Each variable included in the objective function contributed to or
subtracted from profits. The profit-maximizing objective
function can be stated algebraically as:
Where: P is price of tilapia at outlet type (o), given in
$/kg;
Y is sale quantities to each outlet and market city (o),
given in kg;
C1 is the production cost of tilapia for farm scenario (f),
given in $/kg;
X is production quantities of farm (f) at region (r), given
in kg;
C2 is the transportation cost from farm (f), at region (r),
utilizing transportation alternative (t), to target city (m),
given in $/delivery; and
T is the number of deliveries from farm (f), at region (r),
utilizing transportation alternative (t), to target cities (m),
given in delivery.
The variables that the model can manipulate to maximize profit are the amount of kg of fish (kg) produced
on each farm (X), the amount of tilapia (kg) sold in each
target city and outlet (Y) and the number of deliveries
that every type of transportation alternative makes to
target markets. Variables must comply with technical
constraint limits that include demand, supply, and truck
capacity.
The model is subject to the following constraints:
Maximum supply (f,r)
Maximum demand (o,m)
Balance supply and demand
Transfer to markets
MARKETING AND ECONOMIC ANALYSIS RESEARCH
Integer variable:
T
Positive variables:
T, Y, X
Where: S is the supply from farms (f) and regions (r),
given in kg;
D is the demand at outlets (o) and target cities (m), given
in kg; and
K is truck maximum capacity given in kg.
The model was further restricted by other technical
constraints that included: maximum truck capacities (K),
deliveries as an integer variable, and a non-negativity
constraint that ensured that all decision variables would
be positive. The model was developed using the General
Algebraic Modeling System (GAMS) for solving mathematical programming problems (GAMS Developing
Corporation, Washington, D.C.).
The model simulated two basic scenarios: 1) regional
models that portrayed one average farmer from each of
the five regions of Honduras (small- and medium-scale
farms analyzed separately) to identify optimal outlets
and target cities without considering interactions with
other farms in other regions; and 2) a national model
that allowed for competition and interaction of supply from different regions. Given the underdeveloped
nature of the tilapia market in Honduras and the extent
of imperfect market information, most tilapia sold domestically is sold regionally. The regional models were
developed to evaluate the current situation. However, as
interest grows in targeting the domestic market, and as
more complete information becomes available, farmers will begin to search for the most profitable markets.
Thus, the competition and interaction allowed in the
national model are likely to emerge.
Each model run generated output on profit ($/kg) and
volumes sold in each market, the transportation alternative selected, and the average sales price ($/kg).
Sensitivity analyses were conducted on the variations in
demand, cost, and prices. Since most small-scale farmers (86%) have only a single pond that precludes weekly
harvests, an additional model was developed using a
combination of bi-annual deliveries from small-scale
farmers (6-month production cycle) and weekly deliveries from medium-scale farms.
RESULTS
Marketing Costs
Transportation costs ($/km) for the three truck alternatives are presented in Table 2. Costs per delivery ($/km)
increased with truck size, with the pickup truck being
the least expensive option. This is primarily due to the
lower fuel costs of the smaller truck and lower labor
costs because drivers for pickup trucks are less expensive than drivers of larger trucks. Annual depreciation
353
costs were highest for the large truck and decreased by
40% for the medium-sized truck and another 30% lower
for the pickup truck. Interest on investment and taxes
and insurance were also lower for the pickup than for
the other, larger trucks. Total costs ranged from $0.18
- $0.33/km for the smallest to the largest trucks, respectively.
However, the cost per kg of product was lowest for
the largest truck size (Table 2). The cost/kg of product
transported was $0.04/kg for the large truck, $0.08/kg
for the medium-sized truck, and $0.17/kg for the pickup
truck. Transportation costs were spread across the larger
amount of product transported by the larger trucks.
These estimates assumed that full loads were hauled;
transporting less than a full load will increase per-unit
transport costs.
Total marketing costs are presented in Table 3 for average distances of 274 km round-trip at full capacity. Results showed a wide range of marketing costs from $0.07
to $0.41/kg of fish sold. Regardless of truck size, sales
to open-air markets had the lowest marketing costs.
Restaurant sales incurred the highest marketing costs
and those of supermarkets were intermediate. The largest component of the marketing cost was transportation,
representing 67% of marketing costs for pickup trucks,
53% for medium-sized trucks, and 36% for large trucks.
Packaging and sales and collection costs represented
similar proportions of total marketing costs, increasing
to 35% in the large truck alternative.
Mathematical Programming Model
Regional Analysis
Medium-scale farms
The regional models for medium-scale tilapia farms
selected 1-3 target market cities for the average farm in
each region (Figure 2). The Distrito Central was the most
profitable market and was targeted by farms in all producing regions. The layout of the highways in Honduras
is such that the two main cities, Tegucigalpa (Distrito
Central) and San Pedro Sula, are located in the center of
the road network. This highway structure provides relatively easy access to the largest markets in the country
for nearly all farm regions. Thus, transportation costs
were reduced for most production regions, if the Distrito Central and San Pedro Sula markets were targeted.
Larger cities were selected by the model because the
transportation costs per kg were lower when hauling the
larger volumes demanded by larger markets. Production
supply volumes allowing use of larger trucks resulted in
lower overall marketing costs.
In the Central and South regions, the optimal solution
selected for medium-scale farms was to sell all of the
tilapia produced in the Distrito Central. Medium-scale
farms in the North and West regions also concentrated
sales on the Distrito Central, but targeted 28-36% of the
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TWENTY-SECOND ANNUAL TECHNICAL REPORT
tilapia produced towards San Pedro Sula. Farmers in the
East region looked to supply the Lago de Yojoa market
in addition to Distrito Central and San Pedro Sula markets.
Restaurant outlets were selected consistently as the
prime objective for every simulated transaction even
if it meant additional delivery to the next farthest city.
Restaurants offered the highest prices for the product
and resulted in greater net returns for the farms. Supermarkets were supplied if truck capacity allowed
for quantities of product to be transported in excess of
that demanded by restaurants. Open-air markets were
not selected as possible outlets due mainly to the lower
prices paid.
The greatest profits were obtained on farms located in
regions closer to the larger cities (Table 4). Thus, farms
in the North and Central regions were shown to have a
competitive marketing advantage and generated higher
profits. Growers in the Central region have a particular
advantage because three of the largest cities are located
in the Central region. Similarly, growers in the North
region have ready access to 7 of the 14 potential markets
in the country. The East region was the least profitable
region for medium-scale farms because average sales
price received was lower. It was more profitable for East
farms to target closer cities, but the closer cities were less
profitable than the Distrito Central and San Pedro Sula
markets. The South region had the highest transportation cost and the second lowest profit margin.
Truck sizes selected varied with the volume of output
from different farm sizes. Farms in the Central, North,
and West regions were large enough for medium-sized
trucks, while those in the South, the smallest of the
medium-sized farms, used only pickup trucks. Farms
in the East used a mix of truck sizes. However, once the
maximum capacity of any given truck is exceeded, it was
more feasible to hire the next larger size truck instead of
contracting two trips with a smaller vehicle.
Small-scale farms
Medium-scale farms had adequate production volumes to meet the weekly demand requirements of
restaurants and supermarkets as specified in the initial
models. However, low production volumes of smallscale farms prevented these farm sizes from capturing
markets if weekly deliveries were required. Small-scale
farms might supply part of the excess demand for fish
that occurs in the Lent season. Additional models were
formulated with bi-annual, instead of weekly, sales for
small-scale farms. Bi-annual sales correspond well with
the 6-month production cycle for 250-300 g tilapia in
Honduras.
The bi-annual sales models allowed small-scale farms
to sell product in one target market city in four of the
five regions (Central, East, South, and West (Figure
3)). Small-scale farmers in the Central regions targeted
all their production to the Distrito Central as did the
medium-scale farms. Farms in the South targeted their
production to Choluteca, while those in the West region
targeted all their production to Santa Rosa de Copán.
Production of tilapia from small-scale farms in the North
region targeted Lago de Yojoa (51%), San Pedro Sula
(36%) and El Progreso (13%).
Pickup trucks were selected for transportation by smallscale farms in the Central, East, South, and West regions,
while those in the North region chose a combination of
pickup (49%) and medium-sized trucks (51%). Farms
in the North region, while still classified as small-scale,
tended to be larger than those in other regions. The
larger production capacity allowed them to utilize medium-sized trucks in some situations.
Highest profits were obtained on small-scale farms located in the North region (Table 5). The higher profits in
the North region were due to the combination of proximity to the more profitable markets and the lower transportation costs of medium-sized trucks as compared to
pickup truck. Small-scale farms in the Central, South,
East, and West regions followed in order of declining
profitability. Those in the West region had the highest
transportation costs and the lowest profit margins.
Sensitivity Analysis
Economic growth and development may result in
increased demand for tilapia, while economic contraction would likely decrease demand. Analysis of a 30%
variation in the maximum demand limit in every town
had no effect on net returns per unit sold for small-scale
farms in the Central and East regions (Table 6). Smallscale farms in the North, South and West regions were
more sensitive to changes in demand because farms in
these three regions supply smaller cities. The smaller
populations in smaller target market cities result in
limited overall demand. Net returns decrease by $0.01$0.02/kg with a 30% decrease in demand.
Medium-scale farms located in the Central and South
regions showed no differences in net returns as demand
changed (Table 6). Farms in the East region showed a
±11% variation in profits as a result of a ±30% change
in the demand. Those in the North and West regions
showed slightly lower effects. Medium-scale farms were
less sensitive to demand changes than small-scale farms
because these larger farms had adequate capacity to
target large market cities. Overall demand exceeded supply; thus the quantity sold was not limited by the size of
these markets.
Variations in production costs of ±10% had large impacts on net returns for all farms (Table 7). Net returns
for small-scale farmers decreased by 26% to 40% with a
MARKETING AND ECONOMIC ANALYSIS RESEARCH
10% decrease in production costs and increased by 28%
to 38% with a 10% decrease in production cost for small
and medium-scale farms, respectively.
Price sensitivity analyses indicated that average net
returns decreased by 40% to 50% with a 10% decrease
in prices (Table 8). Net returns increased by 41% to 51%
when prices were increased by 10% for small-scale and
medium-scale farms, respectively.
National Model
In the national model medium-scale farms in the South
region continued to target only the Distrito Central
(Figure 4). East region farms re-directed sales from Lago
de Yojoa and San Pedro Sula to supply only the Distrito
Central. Farms in the North continued to sell to San
Pedro Sula but also targeted El Progreso. Western region
farms also targeted San Pedro Sula, but diverted more
supply from Distrito Central to San Pedro Sula. Farms
in the Central region did not supply Distrito Central and
switched to Lago de Yojoa, Comayagua, and Siguatepeque. The larger average farm size in the East allowed
them to capture the most profitable Distrito Central
market. The next largest average farm sizes in the North
and West made these farms competitive in the San Pedro
Sula market while the much smaller farms in the Central
region were forced to switch to much smaller market
cities.
Farm net returns in the national model were lower than
those obtained from the individual regional models
for the Central, East, North, and West regions (Table
9). Competition forced farms in the Central and West
regions to sell to open-air markets and supermarkets
because restaurant demand was quickly satisfied by
neighboring farmers. In contrast, farms in the South
region had higher net returns in the national model
($0.39/kg) than in the regional model ($0.32/kg) because
of the relative proximity to the most profitable market in
the Distrito Central.
No small-scale farmers from any of the five regions were
selected to supply any market in the national model.
This was due to the low production volumes (10 kg/wk)
and consequent higher marketing costs. To evaluate the
possibility of small-scale farms supplying part of the
increased demand for fish required during the Lent season, an additional national model was formulated based
on bi-annual deliveries from small-scale farmers and
weekly deliveries from medium-scale farms. The results
demonstrated how the additional supply of fish from
small-scale farms might affect the weekly Lent market.
Small-scale farms supplied only a single city. Farmers
from the Central region targeted Comayagua; those in
the East and North regions targeted Lago de Yojoa; those
in the South the Distrito Central; and small-scale farmers
from the West targeted Santa Rosa de Copán. The additional supply from small-scale farms during Lent forced
355
a few changes on medium-scale farms with some of the
East supply being diverted to Juticalpa (Figure 5).
Per-unit net returns for the national model including
bi-annual lent sales from small-scale farmers were lower
than the ones obtained from the individual regional
models for the Central and North regions (Table 10).
These two regions comprised 89% of the total production
from small-scale farms. Per-unit net returns for small-scale
farmers in the other region were 19%-62% lower than
those in the Central and North regions. For medium-scale
farmers, profits were lower than without the small-scale
farm supply. Small-scale farmers have lower production
costs than the medium-scale farms due to lower stocking
densities and the use of less expensive feeds. The bi-annual deliveries during lent from small-scale farms cut
into sales of medium-sized farms for that week.
DISCUSSION
Medium-scale farmers in all regions were able to harvest weekly to supply markets throughout the year
and have potential to develop and sustain long-lasting
business relationships. Small-scale farmers in Honduras
cannot supply weekly deliveries. The only option for
small-scale farms to operate commercially appears to
be bi-annual deliveries; otherwise, very local sales at
low prices may be the only viable market alternative.
Delivering only once every six months will not allow
small-scale farms to develop business relationships with
buyers. Supplying the additional demand during Lent
may be another option. Another alternative may be to
form marketing groups or cooperatives to combine production volumes in order to secure year-round weekly
supply. However, the failure rate of cooperatives is very
high. Strong skilled management is essential for success,
but is frequently lacking. In this case, supplying markets
in their own producing regions was generally the best
option. While restaurants were clearly the most profitable, competition with other farms will force small-scale
farms to also supply supermarkets and open-air markets, particularly in the Central and West regions.
The Distrito Central market was the most profitable market location in Honduras. Its location in the center of the
road network reduces transportation costs and provides
the largest, higher priced market segment. However,
restaurants may not be able to absorb the entire supply. To optimize transport cost, farmers must sell excess
volume to supermarkets, the second most profitable type
of market outlet.
Restaurants paid the highest prices for tilapia, but restaurant sales have the highest marketing costs largely
due to delivering samples and collecting payments from
these outlets. Open-air markets have the lowest marketing cost due to cash transactions but pay the lowest price
for tilapia.
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TWENTY-SECOND ANNUAL TECHNICAL REPORT
The only time that open-air markets were selected was at
minimal quantities in the national model that assumed
equally competitive farms in all regions of the country.
Open-air markets are important resale points for fishermen and farmers who cannot offer consistent volumes of
high quality fish or transport their product.
The national weekly model demonstrated that farms in
the East and South regions dominated sales to the most
profitable Distrito Central outlets and forced farms in
other regions to turn to other, smaller cities. The addition
of the total bi-annual supply from small-scale farms during Lent reduced profits somewhat of the larger farms
for that one week.
It is important to note that some potential markets were
not supplied in the analysis. These market inefficiencies
result from the low volumes of production on smallscale farms. Consolidating volumes from several farms
and promoting larger restaurant demand in remote
towns may be an option, but would require business
skill and acumen. The minimum commercial farm size to
compete in the domestic market is approximately 6 ha.
This size of farm can produce a volume of fish sufficient
to maintain marketing costs at a level to be economically
feasible and competitive. This farm size would produce
900 kg/wk and could supply restaurants in a number of
cities on a regular basis and for a total marketing cost of
$0.14/kg.
CONCLUSIONS
Major marketing costs of tilapia production in Honduras
include transportation (40-73%), promotion and financial
costs (13-30%) and packaging cost (14-30%). The optimal
market solution can yield net profits from $0.21 to $0.55
per kilogram of fish. The model consistently selected
restaurants as the first choice with supplemental sales to
supermarkets to minimize transport costs. The national
model that accounted for competition across regions
showed that farms in the East and South regions have a
marketing advantage over farms in other regions. Farms
located at large distances from major markets have limited market competitiveness.
Small-scale farmers have volumes too small to supply
markets on a consistent weekly basis. To be commercially competitive, tilapia farms in Honduras would need to
be at least 6 ha in size. Smaller farms likely can continue
to supply fish for household consumption with some
sales to local open-air markets to generate supplemental
income.
ACKNOWLEDGMENTS
The authors wish to express their gratitude to the Aquaculture Collaborative Research Support Program for
supporting this research, funded in part by United States
Agency for International Development (USAID) Grant
No.LAG-G-00-96-90015-00. The opinions expressed
herein are those of the authors and do not necessarily reflect the views of the US Agency of International
Development.
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TWENTY-SECOND ANNUAL TECHNICAL REPORT
358
Table 1. Average farm size of medium- and small-scale farms by region, Honduras.
Region
Medium-scale farms
No. farmers
Avg. farm size
Central
East
North
South
West
TOTAL
Small-scale farms
No. farmers Avg. farm size
(ha)
3.3
21.7
11.2
2.0
10.0
9.4
4
2
4
1
1
12
(ha)
0.096
0.065
0.430
0.050
0.019
0.09
45
11
2
2
9
69
Table 2. Estimated transportation costs for three truck sizes operating at full capacity.
Items
Units
Pick-upa
($/km)
Truck alternative
Medium truckb Large truckc
($/km)
($/km)
Variable costs d
Fuel
$/km
$0.04
$0.06
$0.07
Oil and filters
$/km
$0.02
$0.02
$0.02
Tires
$/km
$0.01
$0.01
$0.01
Maintenance and repair
$/km
$0.01
$0.01
$0.01
Labor (driver)
$/km
$0.03
$0.04
$0.04
Depreciation
$/km
$0.04
$0.06
$0.10
Interest on investment
$/km
$0.02
$0.03
$0.06
Taxes and insurance
$/km
$0.01
$0.01
$0.02
Total costs per delivery
$/km
$0.18
$0.24
$0.33
Total costs per unit of product
$/kg
$0.17
$0.08
$0.04
Fixed costsd
aPickup
truck maximum capacity is 750 kg, including weight of ice and packaging materials.
truck maximum capacity is 2,000 kg, including weight of ice and packaging materials.
cLarge truck maximum capacity is 6,000 kg, including weight of ice and packaging materials.
d Based on one round-trip to a market located at a distance of 274 km/day.
bMedium
MARKETING AND ECONOMIC ANALYSIS RESEARCH
Table 3.
359
Marketing costs a for tilapia farmers to open-air markets, supermarkets and restaurants
for one round-trip to a market located at an average distance of 274 km.
Transport
Packaging
cost
Sales-collection cost
Total marketing cost
($/kg)
($/kg)
($/kg)
($/kg)
Open-air markets
$0.17
$0.03
$0.00
$0.20
Supermarkets
$0.17
$0.03
$0.03
$0.23
Restaurants
$0.17
$0.03
$0.21
$0.41
Open-air markets
$0.08
$0.03
$0.00
$0.12
Supermarkets
$0.08
$0.03
$0.03
$0.14
Restaurants
$0.08
$0.03
$0.21
$0.32
Open-air markets
$0.04
$0.03
$0.00
$0.07
Supermarkets
$0.04
$0.03
$0.03
$0.09
Restaurants
$0.04
$0.03
$0.21
$0.27
Truck alternative and
outlet destination
cost
Pick-up truck
Medium-size truck
Large-size truck
a Estimated
Table 4.
at full capacity.
Net returns, average sales price and average transportation cost to sell to the optimal
target markets selected for medium-scale farmers, weekly deliveries, regional model,
Honduras.
Production region
Net returns
Average sales price
Transport cost
($/kg)
($/kg)
($/kg)
Central
$0.35
$1.78
$0.08
East
$0.31
$1.72
$0.06
North
$0.37
$1.78
$0.05
South
$0.32
$1.78
$0.11
West
$0.34
$1.78
$0.09
TWENTY-SECOND ANNUAL TECHNICAL REPORT
360
Table 5.
Net returns, average sales price and average transportation cost of sales to optimal target markets for small-scale farmers, bi-annual deliveries, regional model, Honduras.
Region
Transport cost
($/kg)
Average sales
price
($/kg)
Central
$0.52
$1.78
$0.10
East
$0.41
$1.78
$0.21
North
$0.55
$1.77
$0.07
South
$0.42
$1.72
$0.14
West
$0.21
$1.66
$0.29
Table 6.
Net returns
($/kg)
Sensitivity analysis of the effect on net returns of + 30% change in demand for tilapia on
net returns, small- and medium-scale tilapia farmers, regional model, Honduras.
Farms
Small-scale1
Mediumscale2
Base
Change in Demand
-30%
+30%
($/kg)
($/kg)
($/kg)
Central
East
North
South
West
$0.52
$0.41
$0.55
$0.42
$0.21
$0.52
$0.41
$0.54
$0.40
$0.19
$0.52
$0.41
$0.56
$0.46
$0.23
Central
$0.35
$0.35
$0.35
$0.31
$0.37
$0.32
$0.34
$0.27
$0.36
$0.32
$0.32
$0.35
$0.37
$0.32
$0.36
Region
East
North
South
West
1 Bi-annual delivery to target markets.
2 Weekly deliveries to target markets.
MARKETING AND ECONOMIC ANALYSIS RESEARCH
Table 7.
Sensitivity analysis of effect on net returns of + 10% change in production costs, smalland medium-scale tilapia farmers, regional model, Honduras.
Farms
Region
Small-scale1
Central
East
North
South
West
Central
East
North
South
West
Medium-scale2
1
2
361
Change in Production Cost
Base
-10%
+10%
($/kg)
$0.52
$0.41
$0.55
$0.42
$0.21
$0.35
$0.31
$0.37
$0.32
$0.34
($/kg)
$0.64
$0.53
$0.67
$0.54
$0.33
$0.48
$0.44
$0.50
$0.45
$0.47
($/kg)
$0.41
$0.30
$0.44
$0.31
$0.10
$0.21
$0.18
$0.23
$0.18
$0.21
Bi-annual delivery to target markets.
Weekly deliveries to target markets.
Table 8.
Sensitivity analysis of effect on net returns of a change of + 10% in price, small- and medium-scale tilapia farmers, regional model, Honduras.
Farms
Small-scale1
Region
Central
East
North
South
West
Medium-scale2 Central
East
North
South
West
1 Bi-annual delivery to target markets.
2 Weekly deliveries to target markets.
Base
Change in Price
-10%
+10%
($/kg)
$0.52
$0.41
$0.55
$0.42
$0.21
$0.35
$0.31
$0.37
$0.32
$0.34
($/kg)
$0.34
$0.24
$0.39
$0.25
$0.04
$0.19
$0.15
$0.20
$0.14
$0.17
($/kg)
$0.70
$0.59
$0.72
$0.59
$0.38
$0.53
$0.48
$0.54
$0.49
$0.52
TWENTY-SECOND ANNUAL TECHNICAL REPORT
362
Table 9.
Net returns, average sales price and average transportation cost of sales to optimal target markets for medium-scale1 farmers, national model, Honduras.
Region
Profit
Average sales price
Transport cost
($/kg)
($/kg)
($/kg)
Central
0.27
1.68
0.07
East
0.18
1.58
0.04
North
0.21
1.59
0.04
South
0.39
1.78
0.04
West
0.25
1.65
0.05
1No small-scale farms were selected to contribute supply.
Table 10. Net returns, average sales price and average transportation cost of sales to optimal target markets for national average-size small- and medium-scale farmers, national model,
Honduras.
Region
Small-scale
Medium-scale
Net returns
Central
East
North
South
West
Central
East
North
South
West
($/kg)
0.38
0.44
0.51
0.49
0.31
0.18
0.18
0.28
0.35
0.19
Average sales
price
($/kg)
1.62
1.78
1.78
1.78
1.55
1.58
1.58
1.67
1.73
1.58
Transport cost
($/kg)
0.09
0.18
0.11
0.13
0.09
0.04
0.05
0.04
0.04
0.04
Figure 1. Geographic areas in Honduras identified as producion and marketing regions for analysis.
MARKETING AND ECONOMIC ANALYSIS RESEARCH
363
Figure 2. Optimal target markets, medium-scale farms, weekly deliveries, regional model, Honduras.
Figure 3. Optimal target markets, small-scale farms, bi-annual deliveries, regional model, Honduras.
364
TWENTY-SECOND ANNUAL TECHNICAL REPORT
Figure 4. Optimal target markets, medium-scale farms, weekly deliveries, national model, Honduras.
Figure 5. Optimal target markets, medium-scale farms, weekly deliveries simultaneously with biannual deliveries from small-scale farms, national model, Honduras.
Cite as: [Author(s), 2005. Title.] In: J. Burright, C. Flemming, and H. Egna (Editors), Twenty-Second Annual Technical Report. Aquaculture CRSP,
Oregon State University, Corvallis, Oregon, [pp. ___.]