An Application of an Investment Model to Channel Catfish Farming

A dynamic operations and investment simulation model was applied to catfish farming. The purpose was to identify some important aspects that should influence investment decisions in channel catfish farming enterprises. These results exhibited a number of economic relations of which the following were most important: (1) When initial average profits were $0.20 per pound and the initial price of land, buildings, and equipment was close to $800 per acre, the initial investment policy of the firm was one of continuous purchase of new capacity. (2) Higher initial average profits resulted in larger maximum capactities up to a limiting size, beyond further increases in profits resulted in increases in net worth, but not in capacity. (3) The investment policy of the firm was found to be very sensitive to initial prices of capacity higher than $800 per unit, and no new capacity was added if prices of capacity reached $1,500 per acre. (4) Profit accumulation and, thus, investment decisions were found to be sensitive to changes in the interest rate paid for financing new capacity.