The dilemma between imported versus domestic trout egg: Roles of vertical integration and input prices

Abstract

The use of imported versus domestic trout eggs has been a major challenge for trout farming in Iran. Imported trout species have a lower feed conversion ratio (FCR) which reduces the feeding costs of such trout, compared to Iranian trout. There is also an import subsidy on foreign eggs, which are imported exclusively by private firms in Iran. Despite the subsidy, the average cost for an imported egg is more than a domestic egg. Foreign eggs have become an essential input for Iranian hatcheries, but some propagation farms cannot obtain them because of sanctions. These import problems are a threat to food security and farm production of fish. Therefore, the true cost of using imported eggs is unknown.The present study investigates the economic costs of the import subsidy on the trout supply chain. The concept of ‘economic efficiency’ was employed in an analysis of the trout supply chain in Mazandaran Province, one of Iran's largest trout farming centers. Data were collected from five supply chains in the province, a dependent supply chain of domestic and imported trout egg users and four independent supply chains of domestic trout egg users. Network data envelopment analysis (NDEA) was employed to analyze the data. The findings revealed that the identified chains were near the maximum use of their inputs; hence, they were documented to be technically efficient. However, allocative efficiency was the main distractive factor in the chains. Thus, the independent chains had higher economic efficiency than the dependent chain. Allocative efficiency in the independent chains arose from vertical integration (forward and backward in the supply of trout eggs). The government should consider replacing the subsidy on imported eggs with financial assistance to improve technology in hatchery and propagation farms in Mazandaran. Moreover, the reduction of feed prices and wages along with vertical integration in the supply chain of domestic trout eggs was identified and analyzed as another solution to ensure economic efficiency and sustainable food security.