Effects on the Shrimp Processing Industry of Meeting the Requirements of Wholesome Fishery Products Legislation

Governments are increasingly taking responsibility to provide for the safety of consumers in the products they eat and use. in regulating production practices to insure this safety., there are almost always effects on producers in terms of added costs. There may also be added benefits to producers because the higher standards result in higher dollar sales either because more of the product is suitable for sale or a higher price is obtained for improved quality. This paper analyzes Federal legislative proposals on fish inspection in the United States and how these might affect frozen shrimp processing plants. Costs are detailed for meeting minimum quality and sanitation standards likely to be enacted by the legislation. These are put in a time frame of 25 years, since some costs occur annually while investment costs occur only at those times when an equipment item must be replaced.. The added sales value and the added costs are used to compute• the net cash flaw for each year of the analysis. This flow is discounted so that it is expressed in current market value. The rate of return on investment is then computed which shows the earnings which would occur from these expenditures. This analysis showed that if a firm, which was assumed for the analysis, could expect to save 2 percent of the total amount processed from spoilage that the rate of return would be 30 percent. This would probably be high enough to attract most firms to install sanitary practices without mandatory inspection legislation. Many shrimp processors may have in fact already done so. Therefore, frozen shrimp processors pr. obably will not be greatly affected economically by mandatory inspection. Nevertheless, the initial investment to install sanitary equipment and practices is quite large and consideration should be given by the Government to . establish a loan fund to bring plants not now meeting acceptable standards up to minimum sanitation requirements.