Optimal harvesting of farmed salmon during harmful algal blooms*

This paper studies the optimal harvesting decisions of a salmon farmer that faces the risk of harmful algal bloom as well as market uncertainty. The salmon farmer seeks to maximize the financial value of the fish farm by determining the optimal course of actions during the algal bloom, and the optimal time to harvest after the bloom. Specifically, we compare the options to perform an early harvest and to wait in order to learn about the true algal risk. We extend this framework by taking into account the option to move the salmon to an algal free location. To illustrate the results and investigate the robustness of our model, we present two case studies with realistic industry parameters from Norway and Chile. We find that there is a significant value associated with the ability of salmon farmers to actively learn about the true risk of losing the biomass. This value is strongly affected by the availability of frequent and reliable information about the algal risk emphasizing the importance of communication between industry actors, as well as facilitation of effective information flow by policy makers and research organizations.

Automated summary

This paper examines the optimal harvesting decisions of a salmon farmer facing the risks of harmful algal blooms and market uncertainties. The ability of salmon farmers to actively learn about the true risk of biomass loss has significant value and is influenced by the availability of frequent and reliable information.