MANAGING FISH AS A BUSINESS ASSET

For many of us, fishing is recreation, and fish are a critical public resource that we need in abundance to make that recreation worthwhile.

But for other people, fishing is a business, and whether that business involves catching fish to be sold for other folks to consume, or taking anglers out onto the water so that they can catch fish for themselves, there is one common thread:  If fish aren’t abundant and available, running a successful fishing business becomes a lot harder.

It’s not unreasonable to maintain that fish, although a public resource, are also a fishing business’ most important asset.

That being the case, it might be worthwhile to consider a fish stock from a business perspective.  From that perspective, fish are a lot like capital goods, such as airplanes or heavy machinery, in that the income received from today’s orders—or, from the fish produced in this year’s spawn—won’t generate profits until four, six, or more years from now. 

Thus, to assure that a fishing business remains healthy in the future, it’s not enough to look just at how many orders you’re filling—or how many fish you’re catching—today.  You have to look at developing trends, and figure out how they will translate into profits three, five or even ten years down the road.

Historically, the fishing business isn’t very good at that.  The industry tends to focus on maximizing their catch in the short term, and spend too little time worrying about how their short-term behavior will affect the long-term prospects of both the industry and the individual businesses that comprise it.

Probably no fishery provides a better example of that than the recreational black sea bass fishery in southern New England and the upper mid-Atlantic, both because the stock assessment was updated this year, providing a clear picture of the stock’s current status, and because management of the fishery has been embroiled in controversy for the past few years.

It’s probably best to begin with the fact that the stock produced an incredibly successful year class in 2011, which resulted in numbers of sea bass being caught in places, such as western Long Island Sound, where they had not been abundant for years, and in an explosion of fish on both natural and man-made structure in areas where they were more typically found (the management unit for the northern stock extends from Cape Hatteras, North Carolina to the Canadian border).

At the same time, the summer flounder population, which has traditionally supported a very large summer fishery, particularly in the New York/New Jersey/Connecticut region, has been steadily declining as a result of below-average spawning success, that began around 2011.  That has caused many anglers and for-hire vessels that once concentrated on summer flounder to shift effort onto black sea bass, either as part of a mixed-species fishery or in the course of directed black sea bass trips.

That combination of factors led to much higher black sea bass abundance, and also to much higher black sea bass landings, both because greater abundance made the fish easier to find and easier to catch, and because of the increased angler effort as recreational fishermen shifted out of the summer flounder fishery.

As a result, fishery managers have been forced into a no-win situation where, despite an extremely healthy and abundant stock, they have had to impose very restrictive regulations, particularly on anglers fishing in the region of peak sea bass abundance, the waters between New York and Massachusetts, in order to avoid overfishing.  Those restrictive regulations angered many anglers, and were particularly irksome to members of the recreational fishing industry, who are depending more and more upon black sea bass to get them through the year.

Because they were focused firmly on the present—and even on the recent past, when black sea bass abundance peaked--and not thinking much about the future, such persons didn’t treat the fish as an asset that would play a possibly critical role in the future health of their businesses, but insread treated them more like a feedstock that would always be readily available, and would never become scarce in the future.

A recent operational stock assessment, that included new data and updated a benchmark assessment released late in 2016, has now illustrated why such a short-term mindset could do future harm.

While the operational assessment informs us that

“Spawning stock biomass (retro adjusted SSB) was estimated to be 33,407 [metric tons] in 2018, about 2.4 times the updated biomass target reference point,”

which sounds like good news, a deeper review of the information contained therein reveals significant reasons for caution.  Again, from a business perspective, the biggest concern shouldn’t be the size of the sea bass stock today, when fish are unquestionably abundant, but whether that stock will remain anywhere near as abundant in the future.  

In that respect the news is hardly as good, as the stock has been declining steadily since 2014, and there is no reason to believe that abundance will increase again soon.

I suspect that some people will instantly challenge that assertion, and note that the benchmark stock assessment conducted in 2016, and released early the next year, also indicated that black sea bass abundance in 2014 was about 2.4 times target.  Based solely on that information, they would argue that stock abundance has remained virtually unchanged since 2014, and that there is no reason why regulations can’t be relaxed.

Of course, anyone claiming that would be dead wrong.

The estimates of spawning stock biomass made in the operational assessment were based, in part, on new information that was not available when the benchmark assessment was made in 2016.  That information helped fishery managers to understand that, in 2014, the spawning stock biomass in 2014 was bigger than originally thought, and was far more than 2.4 times the size of the target SSB.

Let’s look at some hard figures that demonstrate that fact—although I warn you before I begin that this may get more than a little confusing and more than a little wonky, just because of the way the calculations made in stock assessment sometimes work.

There is a table on p. 26 of the operational assessment that shows that the spawning stock biomass was 34,712 metric tons in 2014, but had fallen to 22,199 metric tons, just 64% of the 2018 figure, by the end of 2018.

I can already hear people wonder what I’m talking about.  

Didn’t I just say that the 2018 biomass was 33,407 metric tons in 2018?

The answer is yes—and no.

That’s because there sometimes are quirks that arise in stock assessment estimates, which are referred to as “retrospective bias,” which one biologist described as

“systematic changes in estimates of population size, or other assessment model-derived quantities, that occur as additional years of data are added to, or removed from, a stock assessment.”

Retrospective bias tends to be at its worst in what is called the “terminal year” of an assessment—in this case, in 2018—and skews estimates away from the true values for fishing mortality, spawning stock biomass, etc.  As additional years’ data are added to the calculation, that data begins to eliminate the bias that originally appeared in each year’s estimates, and brings those estimates closer to the actual values.

The black sea bass assessment shows significant retrospective bias.  The operational assessment advises that

“There remains a significant retrospective pattern in both the northern and southern assessment models.  The retrospective pattern in the north over-estimates [fishing mortality] by 44% over the last 5 terminal years and under-estimates SSB by 43%.  In the southern region, the opposite pattern prevails where [fishing mortality] is under-estimated by 22% and SSB is over-estimated by 22%.  The 2018 regional model estimates of [fishing mortality] and SSB were adjusted for internal retrospective error (north [fishing mortality] (0.46) adjusted for retrospective=0.32, north SSB (15,924 mt) adjusted for retrospective=28,063 mt; south [fishing mortality] (0.38) adjusted for retrospective=0.49, south SSB (6,539 mt) adjusted for retrospective=5,361.”

Thus, the SSB estimate for 2018 was both 22,199 metric tons (as calculated in the assessment) and 33,407 metric tons (after such calculation was corrected for retrospective bias).  But the important thing to remember is that the retrospective bias applied to all terminal years between 2014 and 2018; while corrections for such bias led to higher estimates of SSB, they did not impact the annual trends in SSB exhibited during those years.  So, while the SSB in 2018 was substantially higher than 22,199 metric tons, the SSB in 2014 was also proportionately higher than 34,712 metric tons, meaning that even if the absolute numbers changed, the SSB is still exhibiting a marked downward trend.

If all of that is confusing, here’s a chart from the operational assessment that will hopefully put it back into perspective.  Looking at the solid line that denotes the spawning stock biomass, it is clear that SSB has been steadily declining since 2014.

The operational assessment provides the answers for why that is true.  In order to have a big spawning stock biomass, black sea bass must also have high levels of recruitment—young fish to replace those removed from the stock—to keep the biomass high.  And as the assessment relates,

“The 2011 year class is estimated to be the largest in the time series at 144.7 million fish,”

which is why the spawning stock biomass reached such a high level in 2014,

“and the 2015 year class was the second largest at 79.4 million fish,”

which sounds like good news at first, but when one realizes that quite a few people originally thought that the 2015 year class was as large as the 2011, the fact that it was only a little more than half that size makes it pretty clear why the high spawning stock biomass level fueled by the 2011s had to decline as fish were removed from the stock.

But that’s not the worst news.  The operational assessment also reveals that

“Recruitment of the 2017 year class as age 1 in 2018 was estimated at 16 million, well below average.”

In fact, recruitment of the 2017 year class was the worst in the entire time series, which goes back 30 years.  And that recruitment, shown for 2018 in the chart provided above, was markedly worse than anything measured before; even the second-worst year saw recruitment that was at least 50% higher.

Thus, the current decline in the spawning stock biomass isn’t going to end at any time soon.  There aren’t enough fish being recruited into the population to fuel an increase in the foreseeable future.

That doesn’t mean that black sea bass are facing a crisis; at the current rate of decline, the spawning stock biomass might shrink to a size close to the target level in another four or five years, at which point it will still represent a perfectly healthy population.

Still, those fishing businesses that have become heavily dependent upon abundant black sea bass ought to start thinking about how they will cope as a shrinking black sea bass population inevitably results in lower annual catch limits and, if effort remains at current levels, additional restrictions on recreational and commercial landings.

The Mid-Atlantic Fishery Management Council, meeting jointly with the Atlantic States Marine Fishereis Commission’s Summer Flounder, Scup and Black Sea Bass Management Board, will address 2020 black sea bass specifications when it meets next Wednesday.  Although they won’t set recreational regulations at that point, and will wait until more data is available in December before doing so, the Council has already noted that, even though both the commercial and recreational harvest limits will be increased significantly in 2020,

“The revised estimates of [recreational] catch and landings are several times higher than the previous estimates for shore and private boat modes, substantially raising the overall black sea bass catch and harvest estimates.”

As a result,

“despite notable potential [recreational harvest limit] increases, recreational harvest will likely need to be restricted compared to recent levels.  For example, estimated 2018 recreational harvest using the revised [Marine Recreational Information Program] estimation methodology (7.92 million pounds/3,593 mt) was 22-31% higher than the potential revised [recreational harvest limit] (depending upon the [allowable biological catch] approach used.  If 2018 harvest is similar to 2019 harvest, the 2020-2021 [recreational harvest limits] under either [allowable biological catch] approach will require more restrictive bag limits, minimum fish sizes and open seasons compared to recent years to prevent [recreational harvest limit] overages.”

That’s not going to go over well with many fishing industry folks, who are completely focused on the current abundance and aren’t thinking about the future at all.  They want to increase their landings today, apparently believing that the current abundance willl continue forever.

That might work in the short term, but any competent businessman knows that when you're bucking a downtrend, it makes sense to conserve your assets and build up a reserve that will help you get through harder times.  It's never a good idea to mortgage tomorrow in order to spend more today,

For those who ignore that rule—and there are plenty who always do—there will still be a future.

But their businesses probably won’t be a part of it.