Fishery Income Diversification and Risk for West Coast Fishermen and Fishing Communities Dan Holland – Northwest Fisheries Science Center Steve Kasperski – Alaska Fisheries Science Center

2 Introduction Catches and prices from many fisheries exhibit high inter- annual variability leading to variability in the income derived by fishery participants. This financial risk may be mitigated in some cases if individuals participate in several different fisheries, particularly if revenues vary asynchronously We found that diversification of fishery revenue does decrease year-to-year variability of income for individuals and for ports. We found that diversification for individual fishermen, on average, has mostly declined the last few decades. Trends for ports are more variable but many ports have also seen decreases in diversification over time.

3 Methodology Annual catch and revenue by vessel, species and port from for over 28,000 vessels with average revenues over $5,000 The port level analysis includes 166 ports with average fishing revenues over $100,000 ( 79 West Coast and 87 Alaska). Construct annual indices of diversification of gross revenue from fisheries for individuals (in vessel categories) and for ports Herfindahl Index – where is the proportion of fishery revenues for the individual or port associated with the species or species group i and region j Evaluate trends in revenue diversification and how they have been impacted by regulatory changes Evaluate the relationship between variability of individuals’ or ports’ annual revenue and diversification

4 Species Groupings For Diversification Indices * Indices also separate out Bering Sea, Gulf of Alaska and Alaskan state waters

5 Diversification Trends For Vessels Fishing on the West Coast  HHI declines from 10,000 toward zero when revenues are spread amongst more fisheries  HHI is erratic, but diversification has been mostly declining (HHI increasing) last two decades  Vessel that have been fishing longer tend to be more diversified  Higher earning and large vessels tend to be more diversified than smaller and lower revenue vessels  OR fleet more diversified than WA fleet which if more diversified than CA fleet

6 Variation Diversification for Vessel Groupings  There is wide variation in the degree of diversification across vessels within each class.  The CA fleet is dominated by vessels with low diversification  Most higher revenue vessels are diversified while the distribution of smaller and low revenue vessels is concentrated at low diversification levels.

7 Income Risk and Diversification? Quadratic Regressions (OLS) of CV of total annual revenue for individual vessels against their average Herfindahl (HI) diversification score. Separate regressions for different revenue and vessel length categories and the West Coast Groundfish fleet P-values on slope coefficients are all are nearly all significant at 1% level* More details on fit?? *HI^2 coefficient for West Coast feet p=.05

8 Income Diversification and CV of Revenue

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10 Predicted Minimum/Mean Annual Revenue vs. Herfindal Indices for Quadratic Regressions for Different Vessel Classes

11 Diversification of Fishing Income For Fishing Ports Trends vary by port and can be highly variable for a given port Dungeness crab is responsible for higher and highly variable HHI in southern OR and northern CA

12 Fitted relationships between the coefficient of variation (CV) of gross revenues for US West Coast and Alaskan fishing ports

13 Conclusions Greater diversification does appear to reduce annual variability of income Greater diversification could provide additional benefits: – Greater acceptance of trade-offs required by ecosystem- based fishery management – Increased community resilience The impact of fishery management plans and regulatory actions and programs on diversification should be considered along with other performance objectives It is unclear whether catch shares will increase or decrease diversification. We are beginning a national study to look at this question.

14 If Diversification Lowers Income Risk Why isn’t Everyone Diversified? Additional costs for license, quota, gear, moving between fisheries, etc. Lower efficiency from lack of specialization??? Regulatory Pressures: – Management systems have favored full time players and forced out or marginalized part-timers – Longer seasons means less time available to fish in other fisheries