Looks like corrosion from inside out. I think it's just an extension but not sure. 2005 motor.
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Corrosion on extension F250 TURD
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I'd take a knife or pick type tool and lift that to see what's underneath....could be an old crack or damage that was repaired with JB Weld or similar epoxy filler and it's coming off....in any event you can repair with JB Weld, file, sand and spray paint...
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It is an extension to make the engine a long shaft.
Part #53; 2005 F250TURD Yamaha Outboard UPPER CASING Diagram and PartsScott
1997 Angler 204, Center Console powered by a 2006 Yamaha F150TXR
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