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I. Introduction

1. Purpose
2. Overview of the resource system
3. Methodologies

1. Purpose

The dual purpose of this paper is to synthesize available information on the milkfish (Chanos chinos) resource system of the Philippines and to evaluate its economic efficiency. Improvements in efficiency of food resource systems are important because, by reducing the average cost of production and distribution, increases in consumer prices of food items such as milkfish can be minimized.

Why analyse the milkfish resource system, rather than that of another species? Culture of milkfish is extensive in the Philippines, Taiwan, and Indonesia (table 1). In these three countries, 365,000 ha of brackish-water ponds and 7,000 ha of fishpens produce approximately 230,000 tonnes of milkfish annually. In fact, in the Philippines, milkfish from ponds and pens represents approximately 10 per cent of total fisheries production' and 18 per cent of the total fresh and frozen fish consumed.2 Other countries in the Indo-Pacific region, where milkfish is not yet a popular food fish, are also introducing milkfish husbandry to their people. Milkfish has become one of the major cultured species in the Indo-Pacific region.

Beyond its importance, the Philippine milkfish resource system is of interest because it is alleged to be inefficient in numerous ways. Fry mortalities during catching and transport are alleged to be high. Extensively operated fishfarms that use no supplementary inputs, because their productivity per hectare is much lower than intensively operated fishfarms, are alleged to be inefficient. Even the intensively operated farms are reportedly inefficient. Annual fry catch is believed to be inadequate to meet annual fishpond and fishpen stocking requirements. Finally, the marketing activities of middlemen are thought to result in excessively high price mark-ups, both between fry grounds and fishponds and between fishponds and consumers.

These and other questions will be addressed in this paper. Not all allegations of inefficiency can be definitively resolved with available data, but at the least this paper will provide the first consolidated economic analysis of the entire Philippine milkfish resource system from fry gathering to consumer.

TABLE 1.Milkfish Production in the Philippines, Taiwan, and Indonesia

Sources: See note 3.
a. Authors' estimate.

2. Overview of the resource system

Ruddle and Grandstaff4 define a resource system as the entire chain of events via which a resource passes from its source, through technological transformation, to the creation and delivery of an end-product that satisfies a human need. A typical resource system has sub-systems of procurement, transformation, and delivery. Each of these sub-systems is well represented in the milkfish resource system of the Philippines (fig. 1). In fact, aquacultural systems such as that for milkfish provide excellent illustrations of how such systems provide the space, form, and time utilities necessary to satisfy consumers. Aquacultural systems are so illustrative because analysis can concentrate on the fish itself as the major input to the transformation sub-system, since the purpose of the whole system is to grow (transform) fry to market size for consumers in a managed, controlled environment. A similar focus on "seed" for an agricultural crop system would not be so illustrative because "seed" is only a minor input in that transformation sub-system. In the milkfish resource system, in contrast, "seed"-or fry in this case-is a major input, and seasonal price fluctuations for fry have a major influence on producer decision-making and production practices.

Fig. 1. The Milkfish Resource System. All elements except hatcheries are at present operational.

TABLE 2. Development of the Milkfish

The various stages of growth through which milkfish pass from egg to adult are shown in figure 2. Important distinctions are made among fry, fingerling, marketable size, and adult milkfish (table 2). Although there is disagreement as to the exact age at which fry are caught, their anatomical structure at catch is roughly equivalent to stage D in figure 2. Transported in containers of oxygenated water for distances of up to 1,200 km, the fry pass through a network of buyers and sellers before reaching the fishponds in which they are stocked.

Milkfish is one of the fishes best suited to brackish-water pond culture. It is euryhaline, that is, adaptive to varying salinity levels ranging from saltwater to freshwater, is disease resistant, feeds near the bottom of the food chain, mostly on algae, grows rapidly, and is of high quality as a food fish. Large numbers of fish can be supported in a restricted area. A major disadvantage, however, that sets it apart from some other fish such as tilapia, is that it will not reproduce naturally in brackish-water grow-out ponds.

Fig. 2. Stages of Milkfish Development (not drawn to scale). Sources: See note 5,

Fig. 3. Annual Productivities of Fishponds.Source: See note 8.

Bardach6 states that milkfish farming probably originated in Indonesia, where saltwater farming has been practiced for more than 500 years. Herre and Mendoza7 claim that extensive nipa swamps, which at first were exploited for the nipa thatch and for the alcoholic beverage made from nipa sap, were walled off by dikes to form natural enclosures at high tide. These enclosures were initially stocked by free entrance of fry, but later stocking was done deliberately with fry caught along the coasts.

After the initial development of fishponds in Java, the business probably spread to Taiwan and to the Philippines. Early fishponds in the Philippines were concentrated around Manila Bay. In 1929, Herre and Mendoza7 report 3,193 ha in Rizal Province, 16,700 ha in Bulacan, 14,200 ha in Pampanga, and 4,000 ha in Bataan, totals that are not so different from those of today. The rapid growth in hectares of fishponds in recent years (28 per cent in the past decade) has occurred as fishponds have spread to other areas of the country, particularly the Visayas and Mindanao areas. However, wide variations in productivity still exist (fig. 3).

The various producers, intermediaries, and consumers in the milkfish resource system must be identified. The system has numerous interacting components. Since fry and fingerlings are, under certain conditions, substitutable as stocking materials for rearing ponds, and fry demand is, in part, derived from fingerling demand, both fry and fingerling activities will be viewed as part of the procurement subsystem. The procurement sub-system consists, first, of fry gatherers as "producers" of fry and of the various middlemen that link these producers to nursery- and rearingor grow-out pond operators. An important component in the fry distribution network is the concessionaire, who has exclusive rights to purchase all fry from a particular fry ground under a licence awarded by the local municipality. Secondly, nurserypond operators who rear fry to fingerling size for sale to fishpen and fishpond operators are also part of the procurement subsystem in that they provide stocking materials in the form of fingerlings. Nursery-pond operators are thus a key element as consumers of fry and as producers of fingerlings.

The fishpen and fishpond operators who transform fry or fingerlings to market-size milkfish make up the transformation sub-system. The delivery sub-system consists of marketing intermediaries and the final consumers, both domestic and foreign.

Figures 4-19 depict the various activities in the resource system. Important functionaries are defined in the Appendix.

As milkfish do not spawn in captivity, the entire resource system described in the preceding paragraphs is dependent upon wild stocks of milkfish, the fry of which are gathered along the coastline. Milkfish are well known throughout the Indo-Pacific region, being distributed from the east coast of Africa to California and from southern Japan to New Zealand.9 Despite its widespread distribution, however, very little is known about the biology or possible migratory habits of this fish.

3. Methodologies

While providing a broad overview of the Philippine milkfishresource system, this paper will examine questions of technical and economic efficiency on the one hand, and of equity on the other. Each of the sub-systems of procurement, transformation, and delivery will be examined in turn, with the emphasis on efficiency considerations. A common element will be to examine to what extent the system's efficiency departs from the predictions of certain behavioural assumptions and economic models of perfect competition, whereby factors of production (and other "creators" of utility) are rewarded according to their contribution to the total value of output. The model is useful because it allows predictions as to the expected relationship among costs and prices in all these sub-systems. The analysis that follows contains examination of both technical and price formation efficiencies in the subsystems.The milkfish resource system presents interesting and challenging avenues for analysis. Elements of fisheries resource economics, microeconomic analysis of production, and spatial economic theory are all drawn on to complete the evaluation of the resource system.Data for this study are taken primarily from cross-sectional data collected by the authors in various field surveys beginning in 1977. Time-series and secondary data on the milkfish resource system are almost non-existent, except for that on brackish-water pond area, production, and wholesale and retail market prices. Consequently many interesting questions related to supply-and-demand elasticities have not been addressed.

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