|Economics of the Philippine Milkfish Resource System (UNU, 1982, 66 pages)|
|III. The transformation sub-system: cultivation to market size in fishponds|
The majority of tidal flats in the coastal zone of the Philippines have been developed for milkfish aquaculture. Three different methods can be used to rear milkfish in brackish-water ponds. The deep-water method, which basically depends on plankton is not common because most fishponds in the Philippines are 70 cm or less deep. The basis of production of the remaining two methods is either blue green microbenthic algae (late-lab in Pilipino) or filamentous green algae (Iumut in Pilipino). A combination of these two methods is usually practiced during a season, in spite of the ecological incompatibility of the benthic and filamentous algae in a onepond environment.36 During the dry season from February to May, when pond salinity is higher, benthic algae thrive. In the rainy season, however, benthic algae die off due to the lower salinity, and filamentous algae become established.
Milkfish culture in the Philippines is largely traditional, with most producers using very few supplemental inputs, such as fertilizers. There are basically two systems of production, those which use no supplemental inputs at all (traditional or extensive) and those which use supplemental inputs (either semi-intensive or intensive}. Productivity per unit area is relatively higher in semi-intensive or intensive systems.
Pond operators stock fry or fingerlings or some combination of these. In many cases where fry are used, the farm is divided into nursery, transition, and rearing ponds through which the stock is progressively moved until it reaches market size four to six months later. The average sizes of each type of pond in seven selected provinces are shown in table 9. For purposes of this discussion, operators of these ponds that rear marketsize milkfish are referred to as rearing-pond operators to distinguish them from the nursery-pond operators who specialize in growing fingerlings.
In addition to using tidal flats, large water bodies (usually fresh rather than marine or brackish) can also be used to grow milkfish in bamboo and net enclosures called fishpens, but so far this has been limited to Laguna de Bay, near Manila. Yields per hectare from fishpens are five to six times higher than those from ponds (see chapter IV).
TABLE 9. Size Distribution of Milkfish Ponds in Seven Selected Provinces
|Average size (ha)a|
|Province||Farm||Nursery pond||Transition pond||Rearing pond (all farms)|
|(those having nursery and transition ponds)|
|Zamboanga del Sur||14.60||0.60||2.30||13.10|
Source: See note 28.
a. Note that average area of nursery and transition ponds is reported only for those farms using this type of devout.
Consequently, farm size by province does not necessarily equal the sum of nursery, transition, and rearing ponds.
There are at present about 176,000 ha of brackish-water ponds devoted to milkfish husbandry in the Philippines. The 1973-1979 average milkfish production from ponds per year was about 115,000 tonnes37 or 650 kg per hectare. In Taiwan, the average is 1,500- 2,000 kg per hectare per year. In the preceding section it was pointed out that the milkfish yields in the two countries per 1 million fry caught are approximately the same. The different yields per hectare, therefore, reflect the more intensive use of land in Taiwan. The low national average yield has been a major concern of the Philippine government agencies responsible for aquaculture development.
Although yields comparable to those of Taiwan have been duplicated by Philippine research facilities and a few private producers, one must be careful not to generalize claims of higher yields to the whole industry. Claims of three- or fourfold increases over the national average yield of 625 kg per hectare per year are misleading, because they reflect the accomplishments of a very small group of successful and innovative farmers. For example, the views of the officers of the Philippine Federation of Fishfarm Producers (renamed the Philippine Federation of Aquaculturists in 1981) are often looked upon as representative of all pro" ducers. Although they do play the role of spokesmen for their industry, one should be cautious in generalizing their public statements to the whole industry. Most milkfish producers have a long way to go before they can produce 2 tonnes per hectare per year from milkfish ponds.
In the past two decades, opening up new lands and production intensification from existing ponds have added equally to increased annual milkfish production. However, recent satellite imagery has shown that there are few areas left which can be brought into production without adverse effects upon other activities in the coastal zone. Contrary to previous estimates made by much less sophisticated means, which indicated that about 500,000 ha of swampland and mangrove are still available for development, the satellite results indicate only 125,000 ha remain. Consequently, measures have been taken to limit the conversion of mangrove areas.
Past government programmes for aquaculture have tended to be predicated upon the assumption of readily available area for expansion. Because of this early emphasis, production intensification methods have only recently been actively promoted by the government, much less adopted by the milkfish farmers. In fact, a close examination of the various credit programmes by the government through the Development Bank of the Philippines and other institutions reveals the almost exclusive emphasis on loans for pond construction, development, and improvement, and little for operating costs, such as the purchase of supplemental inputs.
Because of this heavy infrastructure emphasis, it is not surprising to find studies by various investigators such as Librero27 and Chong38 showing that Philippine milkfish ponds are still largely underutilized. Given the recent satellite finding, the necessity for a shift in the pattern of production and resource use is indicated. Output- or yield-increasing techniques of production from the existing pond area will be needed to boost production.37 _41 This essentially means the adoption of production intensification methods such as the greater use and application of fertilizers. To achieve higher production fertilizers can, within limits, substitute for land. The problem is, therefore, one of attempting to increase the production of milkfish from a more or less fixed land base.
Production intensification methods are basically knowledgeintensive methods of production and these are needed on a global scale if present population trends continue. The production function analysis reported at the end of this section is an attempt to provide timely information on the most profitable input combinations and the corresponding output level. This information would facilitate improvement in resource-allocation efficiency at both the farm and national level, resulting in higher output.
Shang41 reports that the rapid increase in the cost of fry and fertilizers has imposed a problem on Philippine milkfish producers. Because of this, it is likely to discourage fishpond operators from adopting intensive farming techniques. However, he argues that although the use of inputs can be expensive, their use, if properly carried out can be profitable.
Although supplemental inputs have to be used to improve the productivity of milkfish ponds, the uncertainty of output response due to additional inputs affects a producer's decision on the use, and rates of use, of such inputs. As a result, the producer is naturally interested to know the risks, costs, and benefits involved in using inputs and the possible pay-offs he can expect. In this section, we demonstrate the responses of milkfish output to the various inputs applied.
Note, however, that although inputs are used, they are not uniformly applied throughout the country. Because of this, there is considerable variation in output from province to province. The focus of this section is to explain output variability in terms of the use of inputs. An attempt will also be made to identify the factors which limit the use of inputs. Other possible causes of output variability, which are not discussed in detail here, are differences in environmental conditions such soil type, climate, and pH. This section is based primarily on a survey of 324 milkfish producers in seven provinces conducted in 1979 by the International Center for Living Aquatic Resources Management (ICLARM), the Bureau of Agricultural Economics (BAECON), and the Fishery Industry
Development Council (FIDC) (fig. 32). This survey, hereafter referred to as "our survey," covered farms that are intensively operated (i.e., use supplementary inputs).
Physically, most conditions of climate (with the exception of periodic typhoons), soils (with the exception of acid sulphate soils), water, and other natural environmental conditions in the Philippines are generally favourable for the development and growth of the local milkfish industry. But institutionally and socio-economically, conditions have not permitted the attainment of such development and growth.
The milkfish industry is characterized by the existence of well-established ponds and newly developed ponds. Newly developed ponds are reportedly less productive than well established ponds because they suffer from acid sulphate soil conditions, whereas soils in older ponds are more stabilized.
Scattered throughout the Philippine Islands are flat coastal and alluvial plains, where brackish-water ponds are found. The soils of brackish-water ponds are mostly hydrosol, either of clay, peaty clay, or silty clay. In general, these ponds are adequately supplied with seawater and freshwater. Annual rainfall ranges from a low of 89 cm to a high of 549 cm, the average being 305 cm. The average annual temperature is about 30 C. The Philippines has a year round growing season However, many of the ponds, particularly in Luzon and other islands in the Visayas, are occasionally subjected to flooding during adverse weather. Most of these ponds are excavated to a depth of 50 cm and their embankments are not substantial, making them vulnerable to flooding.
A further physical disadvantage which the Philippines suffers from is the intermittent setbacks from the occurrence of typhoons each year, beginning in June and continuing through September. Typhoons are very destructive to milkfish culture. Not only are valuable stocks of milkfish lost but algal beds and other natural fishfood are also destroyed. Milkfish farmers report that certain algae and other natural fishfood do not thrive after a heavy rain. On the average, the Philippines experiences about 19 typhoons each year, with the northern and eastern parts of the country being most affected. Typhoons in Mindanao are rare.
Although Taiwan and Indonesia are also affected by typhoons, milkfish production in the Philippines is relatively more precarious. The total loss of milkfish in 1978 from 324 farms due to typhoons and floods is estimated at P2,065,626 or an average loss of P6,375 per farm or P400 per hectare. The average loss per farm of the 97 (30 per cent) farms that reported losses is much higher, at P21,295.
Besides the loss of milkfish, costly damage is inflicted upon pond embankments, dikes, and sluice gates. Because of the weather-related damage to the ponds, repair and maintenance have to be done more often. It is, however, difficult to separate the annual repair and maintenance costs arising from normal wear and tear, which is part of the normal costs of milkfish production, from the costs of repair and maintenance incurred due to typhoons. Producers often try to reduce losses by harvesting early before the flooding begins. The cost of raising the height of embankments, according to producers, is probably more than the added benefit, given that their loss is the difference between the price they receive when harvesting early, and the price they would have received had they waited until the full rearing period was over.
The occurrence of acid sulphate soils is a further complication. Acid sulphate soils are characterized by a high content of sulphur-based compounds that produce acidity on oxidation. The chronic, sublethal effects of acidity that inhibit pond biota can result in low output of milkfish.42 Although remedial measures have been worked out, much of this information is not reaching the milkfish farmers. Apparently, many milkfish farmers do not recognize their low output as linked to an acid sulphate soil problem, because liming, to counteract acidity, is not a widely accepted practice. Some milkfish farmers interviewed realized that there is something wrong with their pond water but did not know the causes.
Not all Philippine milkfish farms are endowed with the same set of natural conditions, and certainly not all suffer from the problems itemized above. Differences in topography, soil and climate among farms give rise to differences in yields even if the same set of inputs is applied.
In the milkfish industry a balance must, therefore, be fostered among the prevailing physical and socio-economic conditions. On the one hand, the favourable environmental conditions must be capitalized upon; on the other hand, the institutional and socio-economic constraints confronting milkfish farmers must be overcome so that the available technology can be more widely adopted. Once the nature of these constraints is documented it is possible to legislate or introduce changes within the system.
Culturally, fish is important in the diet of the Filipino. Fishing and fish farming are, therefore, important activities in their way of life. Fish farming in the Philippines as it is practiced today has evolved over time under essentially laissez-faire conditions. In general, it is observed that most of the brackish-water ponds in the country have been developed haphazardly without the benefit of sound technical planning or engineering advice. Any person having access to a suitable piece of land can develop it into a fishpond. Because ponds are often haphazardly designed, production costs are high and yields and net returns are low. This economically "fragile" picture of milkfish production is further exacerbated by the periodic occurrence of typhoons, as discussed earlier.
Although it does not involve large areas, milkfish farmers commonly squat on government land. Another form of squatting which is common is the extension of milkfish ponds on to government property by construction of dams across small rivers, creeks, and waterways. This illegal encroachment on waterways which are under government jurisdiction often causes flooding in the vicinity. The lack of law enforcement in the past and misunderstanding as to which government body is responsible for administering government land for milkfish production have partly contributed to this illegal diking and squatting. Measures to remedy the situation have now been instituted.
Philippine milkfish ponds are in various stages of development, which due to the acid sulphate soil problem cited earlier, greatly influence yields. A useful categorization distinguishes established ponds which are more than 20 years old, developed ponds which are between 5 and 20 years old, and newly developed ponds which are less than 5 years old. In Indonesia, tambaks or milkfish ponds are not stocked with milkfish for the first 3 to 4 years.43 However, according to Liang and Huang,44 tidal land can evolve to become very productive, with annual yields reaching 2,000 kg per hectare per year within about 5 years.
Another feature of the local milkfish industry is that very few of the milkfish farmers keep any semblance of records on inputs used and production activities performed. Those few that keep records only have information on the total costs of inputs purchased. Without properly kept records, it is not easy to evaluate the performance of the production operations. Because records are an invaluable aid for sound management, it is obvious that a large percentage of Philippine milkfish farmers are not aware of the value of management in production.45 As a result, most of them do not have any idea whether or not it pays to use inputs such as fertilizers in milkfish culture. Low levels of supplementary input use are corroborated by Shang's finding41 that stocking materials, interest, labour, and marketing were the most important cost items, and accounted for about 82 per cent of the total production cost, leaving only 18 per cent for other items such as supplementary inputs.
Although the Philippine milkfish industry has been generally characterized as largely stagnant with perennial low yields, nonetheless, several of the milkfish producers contacted for interview are among the relatively well-to-do members of their communities. A similar observation was also made by Villaluz 27 years ago.46 In iloilo, it is said that the fishpond industry is a rich man's business.8 There is no doubt that Philippine milkfish producers are also among the more educated group of fish farmers in the Asian region. In fact, many fishpond operators are either engineers or legal or medical practitioners; less than 2 per cent have no education. More than a third are college educated, but these tend to be concentrated in lloilo Province. In the other provinces, milkfish farmers are mostly elementary and high school graduates.
There are more than 30 fishfarm producer associations federated at the national level, whose membership is drawn largely from the more successful and educated fishpond operators. Membership in the association is voluntary. Benefits of membership are varied depending on the degree of member participation and leadership. For the most part these associations make representation to the government and serve as a source of information and meeting place for their members. Buying and selling on behalf of members is only practiced in a few associations. The most common service is bulk purchase of inputs such as fertilizers.
There are two major tenurial systems for milkfish ponds: private ownership and government lease. Farm ownership is predominantly private among intensively operated farms; just over 70 per cent own their farms. A large segment of the government leased ponds is not operational yet. There are also those whose applications for government lands have not been approved. In fact, these applicants for government lands constitute a large number of milkfish farmers listed as being in production. Because of this, the reported total pond area under production (176,000 ha) may be an over-estimate. At the same time, there are also those whose ponds are already in production but because of the fear of land reform similar to paddy land reform, the owners are not revealing the real size of their farms.
Prior to 1980, government ponds were covered by two types of lease: Fishpond Lease Agreement (FLA) which is for a period of ten years, and Ordinary Fishpond Permit (OFP) which is good for one year, both of which were renewable. However, after 1980, both the FLA and OFP were consolidated into a single scheme of government leased ponds with leases valid for 25 years and renewable.
The nature of the lease arrangement, whether it is for private or government land, short- or long-term, renewable or non-renewable, affects the lessee's decision on the utilization of inputs. If it is short term and non-renewable, lessee operators seldom would invest in inputs whose expected benefits span a longer period. Under such circumstances they expect the owners to pay for the inputs unless an arrangement has been made for equitable sharing of benefits between owner and lessee. Milkfish producers agree that privately owned milkfish ponds are better developed and have higher yields than leased ponds.
Because the 324 milkfish farms chosen for the survey purposely excluded those that used no inputs, the results are indicative of the extent of input use between private and government-leased farms. Inputs are more widely used on private farms than on government-leased farms. More privately owned farms are found in the three leading milkfish production centres of lloilo, Bulacan, and Pangasinan than in provinces with lower average production per hectare (table 10). Occasional uncertainty surrounding the legitimate lessees of government-leased land can also contribute to the reluctance of lessees to use inputs. It is reported that a piece of government land can have more than one applicant because application papers may have beer filed with either the same government bureau in different localities or with different government agencies. Because of the uncertainty regarding the legitimate lessees of the land, farmers are understandably reluctant to incur expenses for production purposes. Additionally, the inability of many farmers to show the proper papers and documentation to support their tenure on government lands has also led to low participation rates in government credit programmes.
Production Increases in milkfish production can result from both expansion in area and intensification of production methods in a given pond. However, in the short run, the area available to each producer for growing milkfish is fixed. In the long run, individual producers can add to their area under production. While at the national level since 1952, hectarage expansion and production intensification have each contributed about 3 per cent growth annually to the industry (table 11), future growth will have to come from intensification because land area for expansion is limited.
TABLE 10. Tenure Status of Intensively Operated Milkfish Farms, 1978 (Percentages)
|Zamboanga del Sur||55||45|
Although milkfish farmers cited several problems they face at present (e.g., inadequate capital, lack of technical assistance, and high fry mortality rate), more than half (56 per cent) showed strong inclinations to expand their present production area. Of the 56 per cent who were inclined to expand their operations, half had definite plans to do so.47 The other half stated that their plans for expansion would greatly depend on the availability of land, capital, time to attend to the milkfish operations, and technical know-how. About 34 per cent of the milkfish farmers intended to maintain their present level of operations, due primarily to the lack of land to expand and lack of capital; the remaining 10 per cent were either undecided or had no response.
TABLE 11. Total Area and Production of Milkfish in the Philippines, 1952-1979
|Area (ha)||Production (tonnes)||Average yield/ha kg/ha/yr|
Source: See note 1.
Production Intensification Methods
Besides expanding the physical size of operations (farm) which is becoming increasingly difficult to do, milkfish farmers can increase their output by means of production intensification methods; that is, substituting non-land inputs such as fertilizers and feeds for land.45 About 5 per cent of the country's milkfish farmers are interested in expanding their operations by this production intensification method. This revelation has disturbing implications. First, it reveals that not only are milkfish farmers at present using low levels of inputs, they are, by and large, not aware that production and profits can be increased by intensifying the use of inputs. Even in lloilo where milkfish producers are more progressive and innovative, only 12 per cent would adopt the use of more inputs. Note that the sample for this study included only those milkfish producers who use inputs. Based on the observed low levels of input use, one might be tempted to conclude that, given the prevailing prices of inputs and output, Philippine producers are already optimizing their returns. However, the production function analysis reported later in this chapter, indicates that milkfish producers could increase their profits by increasing input use. There is clearly an educational role for the extension service to play in contrasting the difference between increasing production through hectarage expansion or through intensification of input use.
A combination of factors appears to be at play here. Until the recent moratorium on conversion of mangrove areas to fishponds, land rental values were relatively low. With capital, not land, the limiting factor, it is hardly surprising that milkfish producers would favour hectarage expansion over production intensification. With the moratorium, however, land values can be expected to rise as it becomes relatively more scarce, thus encouraging producers to favour production intensification instead. Sociological factors also play a role in the producer's decision to favour hectarage expansion, as can be seen by the observed tendency to value highly visible or tangible attributes, such as expanse of land, over less tangible or less visible quantities such as gains in productivity per unit area.
Operators of small farms with low productivity, though evaluated as economically inefficient, are also guided in their production decisions by strong sociological factors.
The security and subsistence that is derived from land ownership, the family nature of many of these small farms, and the festivities that characterize Filipino family gatherings at harvest time all temper the goal of profit maximization. For example, it is not uncommon to find family-owned farms being managed on a rotational basis, or cases where absentee owners leave the management of the farms to relatives.
Milkfish farms vary in size from 100 sq m to 200 ha and more. The average farm size in the whole country is 16 ha (table 9), with the largest average size farm found in lloilo Province. According to the results of the survey, the smallest farm is 0.1 ha while the largest is 250 ha.
For purposes of this paper, size of farm operations is defined as follows: below 6 ha is small; 6-50 ha is medium; and more than 50 ha is large.49 On the basis of these definitions, most milkfish farms in the country are of either small or medium size, constituting 43 per cent and 50 per cent of all farms in the sample respectively. Only 7 per cent of the farms are classified as large farms. These size distinctions are important to keep in mind because there are significant differences in yields (productivity per hectare) among farm sizes.
It should be noted that in some parts of the country such as Bulacan which was one of the first provinces in the Philippines to be affected by land reform in 1962, it is not too surprising that, by and large, milkfish farmers are hesitant to reveal their true farm sizes. It is quite common to find that ownership of large farms is "disguised" under several names.
Although the basic techniques of milkfish production which rely on lab- lab and lumut as feed rather than plankton, have remained essentially unchanged over the years, relative intensities of inputs used have changed. These changes are sometimes incorrectly perceived as different techniques when they are really only differences in input combinations. For example, the more progressive farmers, who move their fish at regular intervals from one rearing compartment to another as they grow so as to more closely align stocking densities with pond-carrying capacity, depend on labdab or lumut. Moving enriched water to rearing ponds from "kitchen" ponds, where natural feeds are grown, also does not represent a change in technique.
In this paper, only the conventional technique which relies on lab-lab or lumut, and which is common to most farms, is examined. Homogeneity of husbandry practices for the sample is required in order to specify a theoretically meaningful input-output relationship from the various input and output data collected from each farm.
The conventional technique of milkfish production in the Philippines involves the application of inputs such as organic fertilizers to the pond bottom before stocking to increase the nutrient content of the pond to encourage the growth of algae. In contrast, Taiwanese techniques rely primarily on supplementary feeding instead of growing fishfood in the pond. Producers there are also beginning to experiment with two to three metre-deep ponds in hopes of increasing production per unit of land area, which is more scarce than in the Philippines.
In the Philippines, pesticides are sometimes used to eradicate pests and predators. Pond preparation including soil conditioning and fertilization takes about one to two weeks, followed by regular maintenance of the dikes, embankments, and gates. The success of Philippine milkfish culture is heavily dependent on the growth of various algae since direct feeding is not widely practiced. These algae can be either filamentous green, blue-green microbenthic or planktonic. The three types of algae are depth-dependent: Planktonic forms require deep water; filamentous green and blue-green microbenthic forms can grow in shallow ponds. Tang,50 has shown that ponds with average depths of less than 70 cm (typical of most Philippine ponds) can only be managed profitably by using filamentous green or blue green microbenthic algae as fishfood, because the quantity of plankton produced is insufficient to support a high level of fish production. Thus, either filamentous green or bluegreen microbenthic algae is the biological basis of milkfish production in the Philippines, here referred to as the conventional technique.
TABLE 12. Per-Hectare Yield of Milkfish Farms by Province, the Philippines, 1978
|Province||Average yield kg/ha/year (all farms)||Average yield kg/ha/year (high-yielding farms)||Average yield kg/ha/year (low-yielding farms)|
|Zamboanga del Sur||204||427||116|
|Philippines||761 (n=324)||1,429 (n=97)||266 (n=227)|
Note: High yields and low yields have been defined relative to the average yield. Those farms with aboveaverage yield are grouped as high-yielding farms and those with below-average yield are grouped as low-yielding farms.
TABLE 13. Per-Hectare Yield of Milkfish Farms by Size and by Province, 1978
|Province||Small farms (< 6 ha) kg/ha/year||Medium farms (6-50 ha) kg/ha/year||Large farms (> 50 ha) kg/ha/year|
|Zamboanga del Sur||163||207||-|
TABLE 14. Farm Yields per Hectare by Province, as a Percentage of the Total, 1978
|Province||Number of respondents||Percentage of farms kg/ha/year|
|< 500||500-1,000||> 1,000|
|Zamboanga del Sur||38||90||8||2|
Our survey data show that average annual milkfish production per hectare from intensively operated farms is approximately 760 kg. This estimated yield is higher than the reported national average of 650 kg per hectare per year because the survey data consists of production data only from farms using inputs. With proper husbandry and management, milkfish yield can be increased to at least two tonnes, about three times higher than the present average. It can be inferred that if increases in output are to come from hectarage expansion, it will require two additional hectares of land to produce the additional 1.4 tonnes of milkfish which could be produced in one hectare with proper management and husbandry techniques. Which of the two alternatives would be more profitable depends upon the relative costs of land vis-a-vis other supplementary inputs. In this connection, the low leasehold fees for government land may have partly contributed to the observed bias of producers to favour hectarage expansion over production intensification. This question is not definitively answered in this paper; however, available data are used to determine if existing farms could increase their profits by increasing the input quantities applied.
Geographical differences in yield can provide a picture of variations among milkfish farms in the Philippines. To estimate the annual milkfish production per hectare, the total reported production is divided by the total active farm size; undeveloped area within the farm is excluded.51 Of the seven provinces, the lowest average per hectare yield was found in Masbate Province and the highest averages found in lloilo and Bulacan provinces (table 12). The contrast between the yields of high-yielding and low yielding farms is significant. The average yield of highyielding farms in three of the seven provinces (Cagayan, Masbate, and Zamboanga del Sur) is even lower than the average yield of the lowyielding farms in Bulacan and lloilo. Note also that the average yields in the low-yielding farms in Cagayan, Masbate, Bohol, and Zamboanga del Sur do not even reach 200 kg.
Yield differences among small, medium, and large farms are also significant (table 13). In general, there is a trend of yield increases with an increase in farm size. Wide variations in productivity of individual milkfish farms are also noticeable. For example, the highest yield recorded for any one farm among the high-yielding farms in each province ranges from 1,111 kg per hectare per year in Masbate to 3,472 kg per hectare per year in Bulacan.
Increasing productivity per hectare as farm size increases was evident in the major production centres of Pangasinan, Bulacan, lloilo, and Zamboanga del Sur; however, there was a levelling off beyond medium-sized farms in Bulacan. In Cagayan and Masbate, productivity declined with size.
At the national level, about 60 per cent of the milkfish farmers interviewed produce less than 500 kg per hectare per year; 21 per cent produce between 500 to 1,000 kg per hectare per year while only 19 per cent produce more than 1,000 kg per hectare per year (table 14). As expected, Bulacan and lloilo provinces have the highest proportion of producers who produce 500 or more kg per hectare per year. However, even in these two provinces, almost one third of the producers still fall into the lowest category.
Almost half of the producers in Pangasinan have yields over 500 kg per hectare per year. It is also important to bear in mind that the distribution reported here is for the sample which, by design, was skewed in favour of intensive systems. For the country as a whole, an even higher proportion than shown here would have productivity less than 500 kg per hectare per year.
In the other four provinces surveyed, the picture is a very discouraging one. In fact, the average producer using inputs in these four provinces is operating at a loss (table 15). Masbate, Zamboanga del Sur, and Bohol have large proportions of milkfish farmers (exceeding 85 per cent) who are still producing less than 500 kg per hectare per year. In Cagayan and Pangasinan the figures are 63 per cent and 51 per cent, respectively. It is apparent, therefore, that a potential exists to tap this unused capacity to produce higher output.
Producer's decisions regarding selection and combination of inputs are influenced by: knowledge of what inputs to use, the expected contribution of inputs to total output and profits; availability of inputs; prices of inputs and output; and the liquidity position of the producer.
Although some milkfish producers recognize the important role of supplementary inputs such as fertilizers in the production of milkfish, the majority only apply minimal quantities. Input utilization also varies among provinces and among farms within the same province. Iloilo is one of the few provinces where all milkfish producers surveyed use inputs. This is in contrast to Cagayan where large numbers of producers who do not use any inputs, above and beyond the labour and fry or fingerlings needed, were, consequently, not included in the sample. In Pangasinan, milkfish producers claim that their ponds are still fertile and inputs are, therefore, not required. However, lumut or filamentous green algae are purchased from suppliers (fig. 14) to increase the available food supply in the ponds. The most commonly used inputs are chicken manure, all-ammonium sulphate (18-46-0), monoammonium sulphate (16-20-0), urea (45-0-0), rice bran, and pesticides such as Aquatin, Gusathion, and Brestan.
Input price variations are inevitable due to market differences of supply and demand from province to province (table 16). For example, while the national average price of organic fertilizers (primarily chicken manure) is 40.29 per kg, the average cost by province displays wide variation. In lloilo, where milkfish farmers are paying the highest price for organic fertilizer (40.57 per kg), they also complain of a shortage of chicken manure.
TABLE 15. Average Per-Hectare Costs and Returns of Milkfish Production in Seven Provinces, 1978
|Zamboanga del Sur||1,203||1,732||(529)|
Note: Milkfish production costs comprise material inputs, labour, and miscellaneous operating costs. However, an imputed cost for land has not been included for owner operated farms.
TABLE 16. Input Price Variations by Province (P/kg)
|Province||Organic fertilizera||Inorganic fertilizerb||Supplementary feedsc|
|Zamboanga del Sur||0.10||1.71||0.57|
a. Primarily chicken manure.
b. Primarily 18 46-0.
c. Primarily rice bran.
Price differences are smaller in the case of inorganic fertilizers, ranging from P1.48 to P1.71 per kg, with an average price of P1.66.
There are many different kinds of supplementary feeds used in milkfish production. These are rice bran, breadcrumbs, broken ice-cream cones, booster feeds, and hog mash. Because of this, an average price for supplementary feed was estimated based on their individual prices Milkfish farmers pay an average price ranging from P0.50 to P1.47 per kg. The high costs in Pangasinan could be attributed to the inclusion of lumut as a form of supplementary feed.
Aquatin, Endrin, Gusathion, and Brestan are commonly used pesticides most often applied to the pond bottom before stocking. In the case of Brestan, price variations among the seven provinces are minimal, the average price being about P120 per kg. However, Zamboanga del Sur is an exception where the price is P249 per kg. Tobacco dust, used in only two provinces, has an average price of P0.28 per kg (Bulacan) and P0.50 per kg (Zamboanga del Sur). Costs of liquid chemicals such as Gusathion, Aquatin, and Endrin vary from P31.40 (Pangasinan) to P66.00 per liter (lloilo). The national average price is P56.30 per litre. The Zamboanga del Sur, Bohol, Masbate, and Cagayan prices for liquid pesticides are close to the national average price, while the Bulacan price is higher.
Philippine milkfish producers cited several problems in connection with the use of inputs. Except in Cagayan, milkfish producers complained of high input costs, especially of fertilizers and pesticides. Unlike agricultural farmers, milkfish producers receive no preferential treatment to encourage the use of supplementary inputs, and government price subsidy for inputs was cited by producers as a possible solution to this problem.
Because of input-output price variations from province to province, producers will make differing decisions regarding added input use, because it will be profitable to use an input only if the value of its marginal product exceeds its cost. For example, if the hypothetical value of the marginal output from an added kilogram of chicken manure is P0. 30, it will be profitable for producers in Zamboanga del Sur to apply this added kilogram at a cost of P0. 10 per kg while in lloilo where the cost is P0.57 per kg it would not pay to do so. In the final subsection of this chapter, the value of the marginal product for the various inputs is determined, in order that they can be compared with input price, thus indicating the degree of economic efficiency in the transformation sub-system.
Theoretically, the capital and liquidity position of a producer can be classified as either unlimited or limited. With two different capital positions, there are two solutions to the problem of determining the most profitable combinations of inputs and level of output. The producer with unlimited capital would produce at the point where his marginal product is equal to the input-output price ratio, that is where marginal revenue equals marginal cost. However, the producer with limited capital maximizes his profits if he allocates inputs such that the return on the last peso spent on each input is equal. In the case of the Philippine milkfish industry, the latter condition is widespread.
It is for this reason that past and present government programmes for aquaculture development have emphasized credit. However, credit to purchase inputs has not been given emphasis because loans have generally been restricted to capital improvements only. Surprisingly, even though a large number of milkfish farmers are short on capital, the rate of participation in the government-sponsored credit programmes is poor. Two possible explanations are that either these farmers are not under economic pressure to obtain higher output, or the procedures for loan application inhibit participation.
The relationship between inputs and output in fishponds can be described mathematically through a production function of the following generalized form:
Y = f (X1,....................... Xn)
where Y = output
Various specifications of the functional form could be used, including linear, polynomial, or power functions. For this paper, a Cobb-Douglas form was specified for the input/output relationship:
It was hypothesized that variation in output could be explained by 11 explanatory variables (inputs) as follows:
X1 = age of pond (years)
X2 = quantity of milkfish fry stocked (pieces)
X3 = quantity of milkfish fingerlings stocked (pieces)
X4 = acclimatization time before stocking (hours)
X5 = hired labour (man-hours)
X6 = miscellaneous operating costs (P)
X7 = milkfish culture experience of operator (years)
X8 = pesticides,(P)
X9 = organic fertilizers (kg)
X10 = inorganic fertilizers (kg)
X11 = farm size (land in ha)
The absolute values of the production coefficients (Sbi) can be interpreted as the respective elasticities of production. The sum of the coefficients (Sbi) indicates returns to scale. Finally, the value of the marginal product (VMPj) for each input can be compared with the input price (Pi) to determine the efficiency of the transformation sub-system. If VMPj <> Pi, the sub-system is not efficient; that is, additional profits could be earned if the quantities of input are changed. If VMPj = Pj, the level of use of input i is optimal.
Based on data collected from 324 producers in seven selected provinces, production functions were estimated on a per-farm and per-hectare basis, first for each of the seven provinces, and second, for the whole country. The latter national production functions are summarized in tables 17 and 18. Both the per-farm and per-hectare production functions are reported here to demonstrate that they are equally valid and have similar coefficients.
Before discussing the individual explanatory variables, their respective production coefficients, and their significance or insignificance, it is helpful to examine the nature of the estimated production functions. The predictive value of the estimated production functions is satisfactory (given they are based on cross-sectional data), as measured by the R2 values, which range from 0.39 to 0.77. The overall "fit" of the model, judged by the F-values, is also very good. The absolute values of the estimated production coefficients (not to be confused with their significance level) are low, implying that the response of milkfish output to the application of supplemental inputs is low.
Of the 11 explanatory variables hypothesized to explain variation in milkfish output, six are significant in the per hectare specification and seven in the per-farm specification. These are age of pond, milkfish fry, and fingerlings, miscellaneous operating costs, and organic and inorganic fertilizers. The seventh is farm size (land). The following discussion will focus on the two national functions estimated on a perfarm and per-hectare basis. Each of the significant explanatory variables will be first discussed in turn.
Age of Pond (X1):
Age of pond is a significant variable in explaining variations in milkfish output. Based on the national production functions, it contributes 0.27-0.28 per cent to output for every 1 per cent increase in the age of pond, assuming that other inputs are held constant. The positive value of the coefficient is consistent with the general experience of milkfish producers. According to them, the older the ponds, the more productive they become. They attribute this to the organic matter build-up on the pond bottom, and the gradual reduction in the acidsulphate soil problem through pond draining, drying, and leaching. Some producers have even attempted to shorten the ageing period for the pond by incorporating mud press from sugar mills into their ponds, and claim that their milkfish ponds are positively affected. Mud press is the dirt accumulated from washing and processing the sugar-cane brought in from the fields, If this tendency as observed is useful, as claimed, one would then expect that as the pond becomes older, the need for fertilizers may level off to a certain extent with proper management of the pond system. It is only necessary to replenish the nutrients which have been removed from the pond in the process of rearing and harvesting fish.
Milkfish Fry (X2):
Milkfish stocking rates of fry are highly significant in explaining milkfish output. This is to be expected since milkfish fry are the primary inputs in the production of milkfish. The estimated production coefficients for milkfish fry are 0.18 and 0.14 for the per-hectare and per-farm functions respectively. Again, this implies that for every 1 per cent increase in the milkfish-fry stocking rate, a 0.140.18 per cent increase in milkfish production can be expected, ceteris paribus.
Milkfish Fingerling (X3):
Similarly, milkfish fingerlings as stocking materials are found to be significant in explaining milkfish output, For every 1 per cent increase in stocking rate, an increase of 0,10-0.14 per cent in output can be expected.
Miscellaneous Operating Costs (X6 ):
On the basis of the estimated production coefficient for miscellaneous operating costs, an increase of 1 per cent in expenditure of miscellaneous operating cost will increase milkfish output by 0.16-0.17 per cent. Because miscellaneous operating costs cover a wide variety of items such as repair and maintenance costs, food for labourers (but not labourer wages), depreciation, interest, rental, taxes, and other fees, it is not easy to pin-point the profitable use of additional expenditure on this input category, that is, which of the seven items to single out for additional expenditure. Miscellaneous operating costs as an input is, however, important in the production model because it represents 22 per cent of the production costs of milkfish. Stated differently, if this expenditure is reduced by 1 per cent, it means that output will be reduced by 0.160.17 per cent. The importance of this input category is, therefore, immediately apparent.
Organic and Inorganic Fertilizers ( X9, X10 ):
To some extent, organic fertilizers can be used in place of inorganic fertilizers in milkfish production. In general, the absolute values of the estimated production coefficients for organic and inorganic fertilizers are small, though significant, implying that the application of fertilizers is not only not widely practiced but they are not generally being used in large enough quantities to affect yield in a big way. The estimated values for the two inputs range from 0.030.04 for organic and 0.09-0.12 for inorganic fertiIizers.
TABLE 17. Estimated Per-Hectare Production Function (Cobb-Douglas), Sample Means, and Estimated Output for the Philippines
|Explanatory variables||Production coefficients||Standard error||t-value||Significance level||Input Mean ( |
|X1||Age of pond||0.27*||0.05||4.56||0.0001||12.84||21.57|
|X5||Hired labour||-0,01||0.02||- 0.35||0.72||123.26||228.71|
|X6||Misc. operating costs||0.17*||0.05||3.36||0.0009||639.56||1,033.1|
|X11||Farm size||-0.02||0.04||- 0.57||0.57||6.16||16.20|
|Sbi||Returns to scale||1.00|
|R2||Coeff. Of determination||0.39|
|Estimated output at
F-value = 18.3.
Note: GM is the geometric mean AM is the arithmetic mean,
* Significant at 1 per cent.
** Significant at 5 per cent.
TABLE 18. Estimated Per-Farm Production Function (Cobb-Douglas), Sample Means, and Estimated Output for the Philippines
|Explanatory variables||Production coefficients||Standard error||t-value||Significance level||Input Mean ( |
|a||Intercept (antilog ?)||10.91|
|X1||Age of pond||0.28*||0.05||4 70||0.0001||1 2.84||21.57|
|X5||Hired labour||-0.01||0.02||- 0.29||0.77||123.26||228.71|
|X6||Misc. operating costs||0.16*||0.05||3.21||0.001||639.56||1,033.1|
|X7||Culture experience||0.04||0.06||0.65||0.51||10.28||1 5.72|
|X9||Organic fertilizer||0 03**||0.01||1.96||0.05||630.44||2,178.83|
|Sbi||Returns to scale||1.47|
|R2 Coeff. of determination||0.77|
Estimated output at
Farm Size (X11):
In the per-farm model, farm size contributes 0.57 per cent to total output for each 1.0 per cent increase in land area. This coefficient is significantly different from zero. However, as discussed earlier, fertilizers can be made to substitute for land to a certain extent. Since Landsat imageries have shown that the scope for hectarage expansion is limited, the application of larger quantities of fertilizers is, therefore, suggested instead of bringing new areas under production.
Both dummy variables and independent specifications stratified by group were used to explain differences in productivity by province, climate type, ownership patterns, and farm size.
For comparisons among provinces, lloilo Province was used as the bench-mark. Productivity was lowest in Cagayan Province (37 per cent of lloilo's productivity). Milkfish producers in Pangasinan, Bulacan, Masbate, Bohol, and Zamboanga del Sur produce, respectively, 14, 4, 28, 43, and 34 per cent less than milkfish producers in lloilo. Although each province has its own inherent advantages or disadvantages, scope is available for milkfish producers in these six provinces to increase materially their per. hectare yields by using larger quantities of inputs. The above interprovincial output variations have conclusively shown that lloilo is the premier province in the country with the highest per hectare productivity. Interestingly, Bulacan milkfish farmers, contrary to some expectations that they would be more productive, produce slightly less than lloilo milkfish producers.
As expected, due to favourable climate, technical efficiency of milkfish producers in climate I is higher than that in climates III and IV (fig. 32). Technical efficiency in this case is interpreted as the difference in antilog of intercept (a) values for the production functions in each climate zone. In other words, the same level of input application in all three climate zones results in higher productivity per hectare in climate 1, due to inherent physical advantages of the climatic zone and/or to better management by producers Based on the antilog values of the intercepts, the inherent advantage (that is without supplementary inputs) of climate I over climates III and IV is approximately 50 kg and 48 kg per hectare respectively.
Milkfish producers owning private farms are also more technically efficient than producers leasing farms from the government. In addition, while a 1 per cent increase in farm size of privately-owned farms would increase output by 0.65 per cent, a 1 per cent increase in farm size of governmentleased farms would only increase output by 0.42 per cent. Besides, diminishing returns occur sooner on governmentleased farms than on privately-owned farms.
The difference in technical efficiency in terms of productivity per hectare between small farms (<6 ha) and large farms (> 50 ha) is substantial. However, further expansion of farm size in the latter category results in diseconomies of scale while expansion of small farms is economically desirable. Overall, using the national per farm specification, economies of scale are definitely positive (Sbi= 1.47). This means that the average size farm (16.3 ha) can achieve economies of scale and increased profits by expanding the level of input use.
While technical efficiency can be determined by a comparison among the intercepts of the various production functions specified, economic efficiency is determined for a given production function by comparing the marginal product with the input-output price ratio. At the point of optimum input combination, which maximizes net return, given a capital constraint, the ratio of the input output prices to marginal product must be the same for each of the inputs used. If capital is not a constraint, the value of the marginal product must be equated to the input price. This is written algebraically as follows:
or Mpi x P0 =Pj
MPj= marginal product of input i
Pj = price of input i (e.g., milkfish fry)
P0 = price of output (milkfish)
VMPi = value of marginal product
Both the prices of inputs and output are known and the marginal products are obtained by taking the first partial derivative of the estimated production function with respect to the input i. If the value of the marginal product (VMPj) is greater than the input price (Pi), then the use of that input should be increased. If VMPi < Pi, the use of input i should be decreased. If VMPi = Pi, producers are economically efficient.
In the case of three of the four inputs for which prices are readily available (milkfish fry, organic fertilizer, and inorganic fertilizer), the value of marginal product is greater than the input price (table 19). For the country as a whole, application rates of these three inputs should be increased to raise the efficiency and profits of producers. The stocking rate of fingerlings is found to be optimum because the MVP of fingerlings and price of fingerlings is nearly equal. However, in the case where capital is limited, the above results show that the producer obtains a higher return from using inorganic fertilizer first and then organic fertilizer. This is because the use of P1 worth of inorganic fertilizer provides a higher return than a peso worth of organic fertilizer.
TABLE 19. Value of Marginal Products and Input Prices for Selected Inputs
|Milkfish fry||0.69||0.36*||6,790 pieces|
|Organic fertilizer||0.82||0.29||1,750 kg|
|Inorganic fertilizer||20.20||1.66||1,124 kg|
|Milkfish fingerling||0.69||0.72*||2,154 pieces|
* To be comparable with VMPi, which is based on output price per kg (4 pieces/kg), fry and fingerling prices shown are for 4 pieces. Individual fry and fingerling prices are P0.09 and P0.18 respectively.
The empirical analysis of the performance of the fishpond transformation sub-system using the input-output methodology, therefore, points to a general conclusion: Milkfish production in the Philippines can be more efficient and yields can be substantially increased. Present production methods with limited use of supplemental inputs grossly under-utilize the milkfish ponds under cultivation at present.
At the present low rates and levels of input application, the use of supplemental inputs show low marginal products for each of the inputs applied. The input-output relationship described, therefore, represents a lower production frontier than if the rates of input application were increased. In other words, if the use of all the inputs is increased at the same time (in either fixed or variable proportions), higher marginal products can be obtained. This is because, with the higher levels of input use, a higher input-output relationship is described. So instead of moving along the same production frontier there is a shift upwards to a new production frontier.
Diminishing marginal returns set in only when one input is increased without a simultaneous increase in all the other inputs, that is, a movement along the same production function. The implication is that if the milkfish producers in the country switch to the use of larger quantities of all supplemental inputs, output will likewise increase as they move up to a new production frontier.
Having discussed the significant explanatory variables found in the model, we now turn to a discussion of the insignificant variables. An insignificant variable is one for which the coefficient is not significantly different from zero. Increases in these inputs will, therefore, have no significant impact on output. In some cases, however, these results may be due to difficulties in measuring accurately the inputs in question.
Take, for instance, the process of acclimatizing the seed stock (X4) which is found to be insignificant in explaining variations in milkfish output. Discussions with experienced farmers revealed that milkfish fry and fingerlings are very sensitive to changes in their environment. Small differences in temperature, pH, salinity, and other water conditions result in shock and lead to unnecessary stress to the young milkfish. From the above, we would expect that the number of hours of acclimatization would help to explain output variation. However, the insignificance of the coefficient implies that number of hours may not measure the required process of acclimatization adequately. Also, the purpose and process of acclimatization is not clearly understood by the farmers who practice it. If properly carried out, acclimatization can affect yields.
Another variable which is found to be insignificant is hired labour (X5 ) because it has been narrowly defined, and does not include all the labour employed on the farm. For example, it does not include the operator's labour, family labour, and caretaker's labour, because it was not possible to determine the number of hours of work actually performed on the farm by these three categories of labour. Respondents were only able to provide information on the available labour hours. Hired labour is, thus, not a satisfactory measure of the total labour input. Total labour may, in fact, have a significant effect on output if there were a way to measure it accurately.
It is not altogether surprising to find that years of milkfish culture experience (X7) is not significant in the model. Experience was chosen as a proxy variable for management. Although technical know-how is known to affect milkfish production, years of experience is apparently not an adequate measure of technical knowledge or management ability. To an extent this finding reveals that producers' experience is based primarily on knowledge of traditional methods of culture, and not on the more recent technology. Recent information on improved methods of production is, apparently, either not reaching the majority of milkfish producers, or not being adopted by them. Field observations show that information dissemination in the country could be improved to update producers' knowledge of improved techniques based on the increased use of supplementary inputs.
Lastly, the application of pesticides (X8) to protect the milkfish stocked from predators and pests competing for the same food has no significant effect on the final harvest. The incorrect and low levels of pesticide application have partly contributed to its insignificance. Predation on milkfish is reported as a common problem, yet necessary measures taken to rid the ponds of these predators are apparently not adequate.
In summary, of the 11 explanatory variables hypothesized to explain variation in milkfish output the following are significant: age of pond, milkfish-fry and fingerlings stocking rate, miscellaneous operating costs, organic and inorganic fertilizers, and farm size. Pesticides, milkfish culture experience, acclimatization, and hired labour, as we measured them, are not significant in explaining output.
All but three production coefficients (milkfish fry, farm size, and miscellaneous operating costs) have values less than 0.50 in every case. The estimated production coefficients in the two national production functions are consistent with respect to the magnitudes, signs, and significance levels. Profits of the average producer can be increased if fry stocking rate and use of organic and inorganic fertilizers are increased.