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III. The transformation sub-system: cultivation to market size in fishponds

1. Overview
2. The physical environment
3. The socio-economic/cultural environment
4. Tenure patterns
5. Alternatives for increasing
6. Size of operations
7. Technique of production and average yields
8. Input use
9. Measures of efficiency
10. Insignificant variables and measurement problems

1. Overview

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

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

Fig. 32. Map of the Philippines Showing the Types of Climate of the Seven Provinces Selected for Survey, 1979.

Development Council (FIDC) (fig. 32). This survey, hereafter referred to as "our survey," covered farms that are intensively operated (i.e., use supplementary inputs).

2. The physical environment

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.

3. The socio-economic/cultural environment

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.

4. Tenure patterns

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.

5. Alternatives for increasing

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)

Hectarage Expansion

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

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.

6. Size of operations

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.

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