1. Marketing practices and structure

The bulk of the milkfish produced in the Philippines is consumed fresh, although small amounts of canned milkfish are now appearing on the market. As they do for most fishery products, brokers play a key role in the disposition of milkfish. They provide the crucial link between producers and fish buyers, performing important facilitating functions such as selling, pricing, and, often, supplying credit. About 60 per cent of milkfish farmers in the country use brokers. Nevertheless, the husbandry of milkfish calls for the producer to assume some marketing functions also, before the milkfish reach the brokers. For example, at the farm level, some sorting and grading take place, as many farmers believe these practices attract buyers and allow producers to take advantage of price differentials by size and grade. Consequently, some value is being added to the product before it leaves the farm.

To protect fish from fast deterioration or spoilage, proper packing and storage in ice are necessary. When milkfish are brought to landing centres in the provinces with bancas (small outrigger boats), packaging the fish in containers like tubs and boxes is seldom practiced. However, transport by land from these landing centres usually entails icing. In Manila, it is the practice to ice fishpen harvest as it is loaded into the petuya (boat} for shipment to the Navotas fishport.

When fish are not picked up by buyers, the milkfish producers take charge of transporting the fish from their ponds to the trading centre or landing area. Milkfish producers present their product to the brokers in the latter's respective areas of operations where bidding takes place. In general, exchange is finalized through outright cash payments, but the practice does not hold true for all transactions. Fourteen per cent of producers indicated that their harvests are committed to particular buyers. Such obligations occur due to advance payments received by the producer, or more often because the buyer provided stocking materials on credit. Personal factors, such as compadre relationships, also influence the producer's marketing decision. The practice of giving and/or receiving advanced payments is less common than that of consignment with delayed payment to producers. Usually, terms of consignment range from one day to a week, but the grace period could be as long as 10 to 15 days.

The value of the fish received by the farmer is a product of the market process where the forces of supply and demand interact. Two-thirds of the producers rely entirely upon the broker (for whose services they pay a 5-7 per cent commission of the value of the sale), and they do not attempt to participate in the pricing process themselves. Price received is determined by supply-and-demand conditions (the prevailing price) and the size of the fish and its degree of freshness.

Awareness of the market condition by both buyers and sellers is a prerequisite for efficient marketing. The majority of the milkfish farmers (89 per cent) are cognizant of prevailing market prices. Their almost exclusive sources of this information are, however, the brokers and the buyers. Because producers come in contact with these marketing intermediaries only during the times when they harvest and sell their milkfish, there is the potential here for prices to be biased in favour of buyers. This would be particularly true for those transactions that take place at the farm gate.

Selling of milkfish through brokers is characterized by a system of bidding, most often of the "whisper" type rather than open. This traditional Filipino method of conducting transactions, known as bulungan, is alleged to provide leeway for cheating and chicanery.⁶⁸ It takes some time for the prevailing prices to be known, and producers complain that in many cases they are left ignorant of the actual price at which their harvest is sold. However, no thorough evaluation of the bulungan bidding practice has been conducted, and until such time as a study of this type emerges, it is impossible to resolve the allegations that brokers manipulate the system to their advantage.

Wholesalers, wholesaler-retailers, and retailers, offering bids to the brokers, are at the next stage in the marketing chain. The majority of retailers who bid with brokers are operating in the nearby public markets. The wholesalers and whole-salerre-tailers are mostly doing business in other provinces. The retailers who make transactions with either the wholesalers or wholesaler-retailers do not usually bid for their purchases through brokers. Instead, bargaining takes place directly between buyer and seller until a mutual agreement on price and quantity is reached.

Among fish traders, the practice of consignment with delayed payment is widespread. Payment could be within the day after the buyer has resold the fish or, on occasion, could take up to a week. Payment must, of course, be made before the next consignment of fish is secured. This system is commonly known as suki and involves favoured treatment of particular buyers or sellers. Often, credit is the basis of the suki system, but a more important benefit to seller and buyer alike is the assured outlet and source of supply that the suki relationship makes possible.⁶⁹

Although marketing channels differ somewhat from one region of the country to another (figs. 35-37), brokers play a prominent role in all cases.2 Although only 61 per cent of producers provide their milkfish harvest to brokers, because numerous wholesalers also use these intermediaries, the percentage of total volume handled by brokers ranges from 65 per cent in Mindanao to 89 per cent in the Visayas. A negligible quantity moves directly from producer to consumer. With fishponds geographically dispersed throughout the country, this prominent role for middlemen in the delivery sub-system is not at all surprising.

The delivery sub-system, except at the retail level, can be characterized as oligopolistic: that is, characterized by a small number of buyers and sellers. Typically, the number of brokers (and thus outlets available to producers) at any one location is low. Barriers to entry are high. For example, Navotas fish landing in Metro Manila, which handles approximately 30 per cent of the country's commercial catch, has 26 brokers. In contrast, the number of producers supplying these markets and the number of retailers and consumers buying from them are very large.

However, there is also concentration of market shares at the producer level. The preceding section has referred to the existence of a relatively small number of very successful producers. Our 1979 survey indicates that the top 10 milkfish producers in the sample of 324 producers have garnered 44 per cent of the sample's total market. The top 20 producers share 60 per cent of the sample's market. Nevertheless, while the industry may be considered concentrated due to the large market shares of few producers, these producers do not have a strong hold over the prices and quantity of the product in the market place. Milkfish is a highly perishable commodity, and while there may be some impact on prices at the local level by the actions of the large producers, the availability of supply from throughout the country dampens these effects. Furthermore, there exist other goods that are highly substitutable for milkfish, such as marine species and tilapia. Consequently, the market power of producers is rather limited.

The milkfish market is also characterized by the existence of some degree of product differentiation; producers, brokers, the various middlemen, and consumers differentiate between milkfish as they are traded in the market. The majority (70 per cent) of producers in the sample, however, contend that their product is similar to the product of other producers. The minority (30 per cent) were divided almost equally between those who thought their product was superior and those who thought their product was inferior. Judgements were principally based on such criteria as size, degree of freshness, and locality differences. (Milkfish produced in some areas, such as Pangasinan Province, are reportedly better than those produced in other places.) Producers attribute the differences in product quality to effective fertilizer application, type of lumut (feed), advanced technology, and proximity of farm to trading centres.

The primary criterion by which milkfish are differentiated is size, and there is a price premium outside Metro Manila for smaller fish (table 21). This consumer preference for smaller fish (125-200 grams) applies to other species in the Philippines also, and is often attributed to the desire of consuming households for each individual serving to contain a whole fish, rather than only a part of a fish. In Manila, however, this relationship between size and price per kilogram is reversed for fish over one kilogram, where the export market begins.

Aside from supplying the trading centres in their respective areas, fishpond producers also provide milkfish to trading centres in neighbouring provinces and even to provinces in other regions of the country. The bulk of the produce is brought to local markets. In our survey of seven provinces in the country, 59 per cent of the producers claimed that their fish, either partly or wholly, go to local markets. This implies, however, that large volumes are shipped to the various regions of the country. Metro Manila markets are popular outlets for milkfish being raised from almost all the fishpondproducing provinces in the country.

TABLE 21. Average Price of Milkfish by Average Weight, the Philippines, 1978

Metro Manila, with more than 15 per cent of the country's population and the major market in the country, also serves as a redistribution centre from which milkfish are shipped to other inland provinces in Luzon where milkfish are not grown, and to export markets in Guam, Hawaii, and California. Manila is also the major market for milkfish produced by fishpen operators in Laguna de Bay.