Economics of the Horseshoe Crab Fishery

Economics of the Horseshoe Crab Fishery

The information below was taken from a 56 page report "Economic Assessment of the Atlantic Coast Horseshoe Crab Fishery" prepared in April 2000 for the Division of Economics of the U.S. Fish and Wildlife Service at 4401 N. Fairfax Drive, Arlington, VA 22203. The study was done by Michelle M. Manion, Rebecca A. West, and Robert E. Unsworth of Industrial Economics, Inc. located at 2067 Massachusetts Avenue, Cambridge, Massachusetts 02140.

Recently many people have been concerned about the management of the Atlantic Coast horseshoe crab. Are too many crabs being harvested, and if so, what will be the effects of people harvesting too many crabs? Up until April 2000 there was no information that gave reliable estimates of the economic value of this horseshoe crabs. So, in order for the U.S. Fish and Wildlife Service to gain a better understanding of the economic importance of the horseshoe crab population, the study listed above was done. Three different industries and user groups were examined – wildlife/birding enthusiasts, the biomedical industry, and the Atlantic Coast commercial eel and conch pot fisheries. Although the influence of any one of the industries on the economy at-large in the whole United States is very, very little, their contributions may be important to many local area economies that depend on these industries for jobs and local spending.

Economic Contribution of Wildlife Viewing/Birding

photo permission: Michael Oates

Each spring, thousands of migratory shorebirds stop in Delaware Bay during their annual flight from South America to their Arctic breeding ground to feed on the eggs of spawning horseshoe crabs. As a result, thousands of birders gather at beaches and viewing areas along the Delaware Bay to watch this event. The State of Delaware has only recently begun collecting data on birders visiting Delaware beaches, so very few statistics are available from Delaware. However, there is information about New Jersey’s Delaware Bay shore. About 10,000 – 15,000 persons visit this area during this time. They buy goods and services, like food, lodging, and equipment. Each of these businesses then hires employees and the multiplying effect continues. This generates money for the economy outside of the actual contribution from the birding event. This is called social welfare value in this report. In the Cape May area, about $7 million to $10 million is spent on horseshoe crab dependent eco-tourism. Of this total, the employees in the eco-tourism and related industries get about $2 million to $3 million in salaries. There are about 120 to 180 jobs associated with these industries. In 1999 there was survey of birders visiting the Cape May, N. J. region. Based on an estimate of birders’ average "willingness-to-pay" (i.e. the amount beyond what birders are actually required to spend to witness the event) and an estimate of the number of days spent by the birders at this event, the researchers calculated an annual social welfare value benefit of $3 to $4 million.

Economic Contribution of the Biomedical (LAL) Industry

photo permission: BioWhittaker

The biomedical industry produces a valuable substance known as limulus ameboecyte lysate (LAL) from the blood of horseshoe crabs. This substance is used to test a variety of biomedical products and injectable drugs (e.g. vaccines) for the presence of endotoxins. There are three U.S. firms that produce most of the LAL in the world. They generate annual revenues of $60 million.
These three companies located in Massachusetts, Maryland, and South Carolina contribute from $22 million to $35 million in their local region, or $73 to $96 million totally. There are between 145 to 195 jobs in each area, or about 440 to 540 jobs in total. The employees rent homes, buy food, go to the movies, etc. This creates an additional benefit to the economy. It was found that the LAL industry generates a substantial annual social welfare value benefit of at least $150 million. At the present the U.S. Food and Drug Administration requires that pharmaceutical and biomedical manufacturers use LAL to test end-products for endotoxins before releasing them to the market. Currently research is being done to find an alternative to LAL, but it will probably be five to ten years before it will be commercially available.

Economic Contribution of Commercial Fishing

photo permission: Michael Oates

Commercial whelk and American eel pot fishermen along the Atlantic coast use horseshoe crabs as one of their primary baits. Although there was very little reliable economic data describing these industries, the researchers relied on best industry judgment to develop estimates of market supply and demand in these fisheries.
The whelk pot fishery contributes about $11 million to $15 million in annual output and 270 to 370 jobs. The eel pot fishery creates about $2 million and 70 jobs. The watermen have to rent houses, buy food, clothing, etc. which creates an additional benefit to the economy. It was estimated the social value of the whelk pot fishery to be about $9 million. The estimated annual social value of the eel fishery is about $12 million. The total value of the conch and eel pot fisheries together is about $21 million.

The charts below are copied from the report mentioned above. They summarize the economic value of horseshoe crabs to the U.S. nationally, and to local regions.

Industry/User Group Summary

Industry/User group
Regional output (millions of dollars)
Jobs National Economic Welfare Contributions (millions of dollars
       Key Conclusions

Wildlife viewing/
Birding
      $7 to $10 120 to 180        $3 to $4+

Birders find the event to be unique and high in quality which is reflected by their relatively high willingness-to-pay ($65 per day).

Biomedical (LAL Industry

       $73 to $96

    440 to 540

         $150 +

Significant consumer surplus results from highly inelastic demand for LAL, due to FDA requirements, a lack of commercially viable substitutes, and growth from emerging overseas markets.

Whelk Pot Fishery

$11 to $15

270 to 370

$9

The whelk pot fishery uses the largest portion (almost 90%) of horseshoe crabs destined for fisheries bait markets.

Whelk has emerged as a commercial product only in the last ten years.

Whelk occupies the low-end of the shellfish market and has many substitutes, so demand is price-sensitive (i.e. elastic)

Market supply of whelk is believed to be similarly elastic.

Eel Pot Fishery

            $2

70
Striped bass bait market: $6+
Consumption market: less than $6

As eel pot fishers use other baits in addition to horseshoe crabs (e.g. surf clams), this fishery accounts for under 20% of total horseshoe crabs sold as bait.

Recreational striped bass fishery generates much of the derived demand for horseshoe crabs, as eel is a preferred bait in this fishery.

TOTALS      $93 to $123 900 to 1,160          $175 +

Regional Summary

Industry/
User group
Regional Economic Contributions

Wildlife Viewing
Birding

$6.8 million; 119 to 178 jobs (New Jersey)

Biomedical (LAL) Industry

$23.8 million to $31.8 million; 144 to 192 jobs; (Massachusetts)

$26.7 million to $34.9 million; 145 to 190 jobs; (Maryland)

$22.2 million to $29.3 million; about 150 jobs; (South Carolina)

Whelk Pot Fishery

$3.2 million to $4.3 million; 45 to 61 jobs; (Massachusetts)

$0.5 million to $0.7 million; 6 to 8 jobs; (Rhode Island & Connecticut)

$1.7 million to $2.2 million; 37 to 51 jobs; (New York)

$1.5 million to $2.1 million; 25 to 33 jobs; (New Jersey, Delaware, Maryland)

$4.0 million to $5.5 million; 160 to 217 jobs; (Virginia)

Eel Pot Fishery

$0.3 million; 4 jobs; (Massachusetts)

$0.1 million; 1 job; (Rhode Island & Connecticut)

$0.3 million; 6 jobs ; (New York)

$0.7 million; 22 jobs; (New Jersey, Delaware, Maryland)

$0.7 million; 30 jobs; (Virginia)

$0.2 million; 8 jobs; (Florida)

TOTALS

$92.7 million to $123.4 million; 900 to 1,150 jobs

return to index

Industry/User group	Regional output (millions of dollars)	Jobs	National Economic Welfare Contributions (millions of dollars	Key Conclusions
Wildlife viewing/ Birding	$7 to $10	120 to 180	$3 to $4+	Birders find the event to be unique and high in quality which is reflected by their relatively high willingness-to-pay ($65 per day).
Biomedical (LAL Industry	$73 to $96	440 to 540	$150 +	Significant consumer surplus results from highly inelastic demand for LAL, due to FDA requirements, a lack of commercially viable substitutes, and growth from emerging overseas markets.
Whelk Pot Fishery	$11 to $15	270 to 370	$9	The whelk pot fishery uses the largest portion (almost 90%) of horseshoe crabs destined for fisheries bait markets. Whelk has emerged as a commercial product only in the last ten years. Whelk occupies the low-end of the shellfish market and has many substitutes, so demand is price-sensitive (i.e. elastic) Market supply of whelk is believed to be similarly elastic.
Eel Pot Fishery	$2	70	Striped bass bait market: $6+ Consumption market: less than $6	As eel pot fishers use other baits in addition to horseshoe crabs (e.g. surf clams), this fishery accounts for under 20% of total horseshoe crabs sold as bait. Recreational striped bass fishery generates much of the derived demand for horseshoe crabs, as eel is a preferred bait in this fishery.
TOTALS	$93 to $123	900 to 1,160	$175 +

Industry/ User group	Regional Economic Contributions
Wildlife Viewing Birding	$6.8 million; 119 to 178 jobs (New Jersey)
Biomedical (LAL) Industry	$23.8 million to $31.8 million; 144 to 192 jobs; (Massachusetts) $26.7 million to $34.9 million; 145 to 190 jobs; (Maryland) $22.2 million to $29.3 million; about 150 jobs; (South Carolina)
Whelk Pot Fishery	$3.2 million to $4.3 million; 45 to 61 jobs; (Massachusetts) $0.5 million to $0.7 million; 6 to 8 jobs; (Rhode Island & Connecticut) $1.7 million to $2.2 million; 37 to 51 jobs; (New York) $1.5 million to $2.1 million; 25 to 33 jobs; (New Jersey, Delaware, Maryland) $4.0 million to $5.5 million; 160 to 217 jobs; (Virginia)
Eel Pot Fishery	$0.3 million; 4 jobs; (Massachusetts) $0.1 million; 1 job; (Rhode Island & Connecticut) $0.3 million; 6 jobs ; (New York) $0.7 million; 22 jobs; (New Jersey, Delaware, Maryland) $0.7 million; 30 jobs; (Virginia) $0.2 million; 8 jobs; (Florida)
TOTALS	$92.7 million to $123.4 million; 900 to 1,150 jobs