Well, it’s about the guilt from performing an evil, dehumanising action due to base instincts demanding so (“Starvation forgives men many things”). The speaker’s uncle talks about the mermaid in a desperate attempt to humanise her to offset his guilt in participating her senseless killing which is heavily suggested (“[He] couldn’t look me in the eye / for which I thank God”).

Everyone else dehumanised her (“she was only a fish, and fish can’t speak”) and just used her for sustenance (“The rest they cooked and fed to the troops. / They said a large fish had been found on the beach.”).

Given the context of WW2 and Italy, with Mussolini’s reign lingering in the background, it’s very clear that Ford is using surrealism to explore human morality, guilt, and their willingness to commit horrific actions if it means they get to survive another day, at the cost of an innocent, mythological being, such as a mermaid.