4. Distribution of fry

The foregoing discussion implies that the gatherers concessionaire arrangement works as the concession regulations require. However, this is far from the case. Although concessionaires are granted a legal monopsony, fry gatherers can circumvent concessionaires and thereby undermine the concession system, by selling their catch to fry smugglers, known locally as runners, or by smuggling fry themselves. (Runners are smugglers of fry who act either as dealers or as commissionmen financed by a particular buyer.) Because in some locations the price received for smuggled fry is 50 to 100 per cent higher than the price paid by concessionaires, smuggling is an attractive alternative for fry gatherers. Smuggling has its risks, however, ranging from confiscation of the smuggled catch by the Philippine Constabulary or the Army, to being shot by guards hired by concessionaires to enforce their monopsony rights to the fry catch.

During 1977, concessionaires in southern Mindanao, though all publicly claiming that smuggling was their biggest problem, were all actively engaged in smuggling from each other. All concessionaire-respondents in this region employed runners to whom cash advances were given to purchase fry from gatherers in other fry grounds. The result was that a staggering 50 per cent of concessionaire purchases in southern Mindanao were smuggled fry. It was estimated that individual fry grounds lost up to 80 per cent of their total catch to this extra-legal channel. In Western Visayas, concessionaire smuggling was not so prevalent, with only 6 per cent of concessionaire purchases coming from runners; however, the total estimate of fry smuggled from concessionaire fry grounds in Antique and lloilo provinces was 16 per cent. In the Bicol region and in llocos Sur and llocos Norte, concessionaires estimated that they lost 26, 7, and 30 per cent, respectively, of their fry smuggled to dealers. These estimates of losses made by concessionaires are only rough approximations. However, it does appear that a large portion of the 1976 fry catch was smuggled.

A second smuggling category involves the shipment of fry between regions without the necessary auxiliary invoices. In 1976, more than 50 per cent of interregional shipments were estimated to be smuggled this way, either without the necessary papers or, more commonly, in the form of understatements in the invoices. To estimate total interregional trade in that year, records were adjusted upwards, based on smuggling estimates provided by sh ippers.

Finally, there is smuggling of fry from the Philippines to other countries in South - East Asia, particularly Taiwan and Hong Kong, as evidenced by occasional confiscation of fry at Manila International Airport. Alternative routes are by air through Singapore, and by boat through Sabah, or north from llocos Province in the northern Philippines. Private milkfish fry dealers in Tainan, Taiwan, estimate that 50-60 million fry are illegally imported from the Philippines each year.23

Although a small quantity of fry are transported interregionally by sea and overland, the vast majority are transported by air. Over short distances the fry are carried by hand in buckets or clay pots called palayok. For longer trips, the fry are packed in oxygenated water in plastic bags measuring 50 cm wide, 83 cm long, and with a thickness of 0.0075 cm. Using double bags as a precaution against inadvertent rupture and leaks, the fry are then packed inside a bayong or bag of woven palm leaves for transportation by land or water, or styrofoam boxes for transportation by air. The capacity of each bag is 4,0006,000 fry, depending upon the time to be spent in transit. Twenty-four hours without reoxygenation is the maximum period without risking mortality of the entire batch.

Timing is important and unscheduled delays, diverted flights, or off-loadings present serious problems to shippers. Close cooperation between shippers, commissionmen, and consignees is essential and telegraphic communications are extensively used. Large shipments of more than 500,000 fry are often accompanied by the shipper himself or consignee's agent to ensure the delivery. Interregional fry shipments within Luzon are primarily handled overland. Jeeps, with a capacity of 100 woven pandan bags (500,000 fry), can be hired on a daily basis to transport fry.

The fry-trading regions in the Philippines shown in table 3 are based essentially upon the country's 12 administrative regions. However, two modifications were made to bring the number of fry-trading regions to 15. First, the provinces of Bulacan and Rizal were combined into a single trading region, and second the islands of Palawan and Mindoro were established as trading regions in their own right.^12a

Discounting the re-exports from Bulacan and Rizal to other trading regions, it is estimated that the total number of fry involved in interregional trade in 1976 was 745.0 million. This represented approximately 65 per cent of the total catch in that year, the 35 per cent balance moving only intraregionally. The first quarter of that year accounted for 79.9 million (10.7 per cent); the second, 492.1 million (66.1 per cent); the third, 111.3 million (14.9 per cent); and the last 61.9 million (8.3 per cent). These interregional trade flows are summarized in table 3 and are graphically shown in figures 24 - 27 (without discounting Bulacan and Rizal re-exports). Major observations that can be drawn from these figures are:
- Mindanao is the major fry exporter, accounting for 62.3 per cent of 1976 interregional trade; Bulacan and Rizal are the major importers, accounting for 82.1 per cent.
- Fry are available throughout the year from one area or another (table 4). Fry are caught in large quantities first in Mindanao and then in more northerly locations as the year progresses. By the end of the year, Mindanao is again the major source of supply.

Concessionaires and the dealers who buy from them are, theoretically, free to exploit market opportunities based on prevailing prices throughout the country. However, three major factors-fry perishability, mistrust, and financial obligations-limit the extent to which this is possible or desirable.

TABLE 3. Interregional Fry Trade, 1976

Receiving regions (imports in thousands)
Region	Ilocos	Cagayan Valley	Central Luzon	Rizal and Bulacan	South Tagalog	Mindoro	Palawan	Bicol	Western Visayas	Central Visayas	Eastern Visayas	Western Mindanao	Northern Mindanao	Southern Mindanao	Central Mindanao	Export subtotals	Percentage including re-exports
Ilocos	-	-	1,363.2	26,647.8	-	-	-	-	-	-	-	-	-	-	-	28,011,0	3.55
Cagayan Valley	1,722.0	-	438.0	-	-	-	-	-	-	-	-		-	-	-	2,160,0	0.27
Central Luzon	5,000.0	-	-	-	-	-	-	-	-	-	-	215.2	-	-	58.7	5,000.0	0.63
Rizal and Bulacan	-	-	42,026.7a	-	1,187.3a	-	-	508.6a	-	-	-	-	-	-	-	44,996.5	5.70
South Tagalog	-	-	-	6,924.0	-	497.4	-	-	399.6	-	-	-	-	-	-	7,821.0	0.99
Mindoro	-	-	-	14,975.2	-	-	-	-	-	-	-	-	-	-	-	14,975.2	1.90
Palawan	-	-	-	12,545.1	-	-	-	-	11,935.0	-	-	-	-	-	-	24,480.1	3.10
Bicol	245.5	-	-	1,584.4	14,946,0	133.0	-	-	5,000.0	-	-	-	-	-	-	21,908.9	2.78
Western Visayas	-	-	-	89,562.2	-	-	-	-	-	304.3	275.3	-	-	-	-	90,141.8	11.42
Central Visayas	-	-	-	29,835.9	-	-	-	768.0	18,888,5	-	989.9	7.2	731.6	114.5	-	51,335.6	6.50
Eastern Visayas	-	-	-	342.4	-	-	-	-	-	6,098.3	-	-	-	-	-	6,440.7	0.82
Western Mindanao	-	-	-	43,440.5	-	-	-	-	1,664.1	790.3	-	-	3,146.0	-	45.0	49,086.5	6.22
Northern Mindanao	-	-	-	1,934.9	-	-	-	-	-	-	-	-	-	-	-	1,394.9	0.25
Southern Mindanao	-	-	7,082.4	302,486.4	860.8	-	-	-	10,599.9	-	-	-	1,594.8	-	-	322,624.3	40.88
Central Mindanao	-	-	-	117,439.8	-	-	-	-	887.6	-	-	-	-	-	-	118,827.4	14.99
Import subtotals	6,967.5	-	51,472.3	648,156.6	16,994.1	630.4	-	768.0	49,883.3	7,192.9	1,265.2	222.4	5,472.4	114.5	104.3	789,243.9	Total fry traded (1976)
Percentage including re-exports	0.86	-	6.52	82.12	2.15	0.06	-	0.10	6.32	0.91	0.16	0.03	0.69	0.02	0.01

Source: See note 12 (a).
a. Re-exports by permittees in Bulacan and Rizal.

Fig. 24. Total Interregional Trade of 84,821,100 Milkfish Fry, January-March 1976. Source: See note 12(a).

Fig. 25. Total Interregional Trade of 521,592,800 Milkfish Fry, April-June 1976.Source: See note 12(a).

Fig. 26. Total Interregional Trade of 117,021,400 Milkfish Fry,July-September 1976. Source: See note 12(a).

Fig. 27.Total Interregional Trade of 65,808,600 Milkfish Fry, October-December 1976. Source: See note 12(a).

The likelihood that fry will die during storage is a continuous threat to the concessionaires and dealers. Fry fed with the yolk of hardboiled eggs can be maintained with minimal loss only for periods up to two weeks, at the end of which they need the natural feeds obtainable in fishponds. Increasing fry mortality, therefore, restricts the opportunities to sell selectively, and ten-day-old stock is often sold to the first available buyer regardless of price.

The lack of a method of counting accurately large numbers of fry creates, not surprisingly, mistrust between buyers and sellers at all levels in the marketing channels. The small transparent fry or kawag are counted individually by the fry gatherers for sale to concessionaires, but this is impractical as the number accumulates. Consequently, the less precise comparative-density technique is used. The widespread belief in the opportunistic behaviour of others (especially overcounting the number of fry actually supplied) leads to marketing decisions greatly influenced by the degree of trust between buyer and seller. This is particularly true for unaccompanied shipments by air where the seller must accept the word of the buyer regarding mortality in transit, and the actual number delivered. Similar difficulties occur when shipping fry and fingerlings in the United States,24 so the Philippines is far from being alone in this regard. Partnerships or associations with relatives alleviate some of the risks of marketing due to this difficulty in counting fry. The result of such action by buyers to avoid opportunists is to concentrate the fry procurement subsystem in the hands of fewer individuals with a higher degree of vertical integration.

TABLE 4. Monthly Interregional Fry Trade, 1976 (Including Re-exports)

Month	Quantity (thousands)	Percentage of annual trade
January	1,596.2	0.2
Februarya	802.6	0.1
March	82,422.3	10.4
April	155,788.5	19.7
May	227,927.9	28.9
June	137,876.4	17.5
July	66,370.8	8.4
August	27,027.1	3.4
September	23,623.5	3,0
October	29,200.7	3.7
November	28,332.4	3.6
December	8,275.5	1.0
Total	789,243.9	100.0

a. This is an understatement of February trade. Unfortunately, the auxiliary invoice records from southern Mindanao for that month were incomplete and provided no basis for an estimate of exports.

Fig.28. Fry Marketing Channels, Indicating Percentage Exchange. Source: See note 12(b).

Financing is a third limiting factor of marketing. Buyers, particularly nursery-pond operators in Bulacan and Rizal, use cash advances and partnerships to ensure continuous deliveries of fry and receive priority from sellers. Cash advances are required by concessionaires who pay their concession fee early in the fry season. These financing arrangements, though mutually beneficial to buyers and sellers, narrow the choice of marketing outlets.

The net result of these factors is a fry procurement subsystem that is highly efficient with a small average number of transactions in the marketing chain. The length of the marketing chain (defined as the average number of title exchanges) is estimated to be 2.7 only; 0.7 more than the minimum 2.0 (gatherer-concessionaire-pond operator) required by law. These 0.7 transactions are, for the most part, legitimate bulking operations performed by dealers, who buy from concessionaires (legally), and on occasion from fry gatherers and runners (illegally). The involvement of runners, for example, can be seen as lengthening the fry marketing chain, on the one hand, but also tempering the potential monopsony power of the concessionaires, on the other.

The fry-marketing channels, indicating the functionaries involved and the percentage of the total fry catch handled by each, are depicted in figure 28. An important economic distinction is made among title exchanges, simple physical exchanges (e.g., by commissionmen), and facilitating exchanges where no change of title and no physical handling of the fry occur (e.g., brokers). The distinction is important because inclusion of physical and facilitating exchanges, while lengthening the marketing chain to an average of 3.4 transactions, overstates the prospects for success in shortening the chain, as often espoused by marketing critics. In fact, the involvement of commissionmen and brokers adds little to the costs of

TABLE 5. Summary of 1976 Fry Gathering and Marketing Costs per Thousand Fry. Net return is defined as return to the functionary's labour, capital, management, and risk marketing while bringing benefits of added market outlets and exposure to more sources of price information to buyers and sellers alike.

Item	P	Percentage of total
Gatherers
Net return to gatherers	19.0	32.7
Depreciation on gathering gear	2.1	3.8
Miscellaneous gathering expenses	0.8	1.3
Runners
Net return to runners (dealers)	1.2	2.0
Net return to runners (commissionmen)	1.0	1.7
Concessionaires
Net return to concessionaires	1.6	2.7
Concession fee	10.5	18.1
Miscellaneous gathering expenses	1.0	1.7
Storage	0 3	0 5
Transport	2.5	4.3
Labour	3.6	6.2
Bad debts	1.3	2.3
Depreciation	0.9	1.6
Dealers
Net return to dealers	4.6	8.0
Net return to manager/labourers	2.1	3.6
Storage	0.1	0.1
Transport	1.6	2.8
Labour	0.6	1.1
Bad debts	0.7	1.2
Depreciation	0.5	0.8
Others
Net return to brokers	0.2	0.4
Net return to commissionmen	1.0	1.7
Pond operators' transport expense	0.8	1.3
Totals	58.0	100.0

In 1976, the average cost to pond operators was P58 per thousand fry. Of that total, P32.9 (57 per cent) can be attributed to gathering costs and P25.1 (43 per cent) to storage and transport related costs. The marketing bill thus represents a 76 per cent mark-up over the costs of gathering (table 5). The various net returns (incomes) to market functionaries have been shown separately. in 1976 the total net return to all entrepreneurs in the fry procurement sub-system, including gatherers, was P28.6 per thousand, or 49.3 per cent of the cost of fry to rearing and nursery-pond operators. Not including gatherers, total net return to entrepreneurs was P9.5 per thousand, or 16.4 per cent of the fry retail price. Since 1976, fry prices have increased to P70 - 90 per thousand, but there is no recent information on marketing costs.

In contrast to the fry procurement sub-system, the fingerling sub-system is quite straightforward (fig. 29). Specialist nursery-pond operators, located primarily in the provinces of Bulacan, Rizal, and Pampanga just north of Metro Manila, supply most of their fingerlings (62 per cent in 1976) to fishpen operators in nearby Laguna de Bay and the remainder to fishpond operators. Commissionmen play a minor role.

Fig. 29. Fingerling Marketing Channels, Indicating Percentage Exchange. Source: See note 1 2(b).

Fishpond operators in the vicinity of Bulacan thus have a choice of stocking fry and growing their own fingerlings, or stocking fingerlings grown by specialist nursery-pond operators.

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