5.1 Marketing of fish - an overview
Shorter distribution channels characterize the marketing of fish in the country in contrast to those for agricultural products. The system was created to accord with the inherent characteristics of aquatic products that require urgent disposal (Salayo, 1989). In general, there are four types of middlemen engaged in marketing fish:
Tilapia is sold mainly to intermediaries, other buyers, restaurants and family members. Between 5% and 19% of Philippine farmers are able to sell their fish to restaurants. Operators of small tilapia ponds usually keep some of the fish for home consumption. Owners of medium and large ponds sell 100% of their harvests. The percentage of farmers who keep tilapia for home consumption shrinks as pond area increases indicating that larger pond-area is associated with increased entry into the cash market economy (Molnar et al. 1996). Operators of ponds for milkfish are generally also market-oriented. They sell as much as 98-99% of their production, and only 1-2% is intended for home-consumption. Operators of large ponds for milkfish usually sell their product directly to wholesalers, either by consignment or by contract sales. Only operators of small ponds engaged in direct retailing. This is also true for small-scale tilapia farmers.
Fish traders buy and sell all kinds of fish from freshwater, brackish-water and marine waters. The majority of traders (70%) obtain their supply directly from fish producers and only 30% from wholesalers (Regaspi et al., 1997). Thus, traders are exploring possibilities of increasing profits by dealing directly with fish producers. This confirms earlier findings that the marketing channel, especially for tilapia, is very short: from producers to wholesalers to retailers and finally to consumers (Torres and Navera, 1985).
Fish traders obtain their fish supply 4 to 55 km away from trading markets (Regaspi et al., 1997). As expected, fish traders obtain fish as close to markets as possible, which has implications for transport and marketing costs and, ultimately, for profits. When distances and travel times are relatively short, fish producers have the opportunity to sell their fish directly in the market to increase their income. The majority of fish traders (55%) use a jeepney to transport fish to market, as it is the most accessible mode of transportation in the Philippines.
Traders were buying a variety of fish at P 36-82/kg (Table 19) and selling them at P 41-102/kg. Thus, traders were realizing price margins of P 5-20/kg. Traders obtained price margins of P 9, 9, 5, 15, 20, 10 and 7 by marketing tilapia, milkfish, catfish, bisugo, crustaceans, other marine and freshwater fishes, respectively. With these kinds of price margins, fish trading is a lucrative business (Regaspi et al., 1997). Earlier studies arrived at similar conclusions, although they were specific for marketing tilapia (Aragon et al., 1985; Escover et al., 1985; Oliva, 1985; Torres and Navera, 1985).
On a monthly average, traders were buying and selling about 2 239 kg of fish, with gross sales amounting to P 113 345 and a total marketing cost of P 97 636 (Table 20). This allowed them to earn a net profit of P 15 706/month. At this level of profit, fish traders were realizing a net earning of P 7 per kilogram of fish they traded (Regaspi, 1997). Again, this figure supports an earlier assessment that trading in fish is a lucrative business in the Philippines.
5.2 Role of credit in marketing fish
Credit has been crucial in:
Credit, whether provided by non-institutional sources of finance such as fish traders, wholesalers or moneylenders or by financial institutions, fulfils the principal function of advancing capital, either in cash or in kind. Credit is needed to take advantage of economic opportunities such as buying, selling and processing fish or other aquatic organisms (Tietze, 1995).
However, credit programmes, which were available until the mid-1980s, were poorly managed, highly subsidized, and involved the use of government agencies. They faced the problem of low loan recoveries and imposed a huge budgetary burden on the government. Hence, in late 1986, the government adopted a new strategy to address issues of the fishery sector. It still recognized that credit was an important tool for arresting poverty, but credit had to be provided in a way that was least damaging to the financial intermediation process. Currently, the bulk of credit extended for marketing and processing fish comes from marketing intermediaries in the form of short-term advances of working capital to suppliers and small-scale processors of fish. The thrust is on moving away from previous government-sponsored, highly subsidized and commodity-oriented credit programmes. Government intervenes minimally and only by way of guaranteeing cover, infrastructure and support services. The aim is to create a hospitable climate for private initiatives. A clear-cut distinction exists between income-generating and welfare activities. Credit supports the former activities, and the government sustains the latter activities. Present credit programmes are geared to channel funds at rates dictated by the market with efficiency and with a minimum of bureaucracy (FAO, 1990).
Only during the last few years have financial institutions been involved in financing domestic retail marketing and small-scale processing of fish in the context of rural development and anti-poverty programmes, often in cooperation with foreign development agencies and international financial institutions (Tietze, 1995). These programmes are expected to eventually improve consumers' access to fish products due to an increased supply of fish in the market. In many countries in Asia, loans have regularly been extended to women who play a major role in marketing and processing of fish, particularly in rural areas of the country. Financial institutions, rather than the informal sector, usually provide credit for capital investments in fish marketing and processing, for establishing, upgrading or purchasing processing and storage plants or transportation facilities.
5.3 Practice in retailing
In general, we distinguish between two systems of retail selling of fish: a) itinerant selling; and b) fixed sales point (Eddie 1983). Itinerant selling was the earliest method of trading in fish. This practice developed when a fisherman, who had caught more than enough fish to satisfy his immediate needs and more than he could conveniently preserve for future times of scarcity, attempted to exchange, barter or sell his surplus in a nearby community of hunters and farmers. Fish hawkers operated mainly on foot. The itinerant fish peddler would sell his or her wares at public markets or other fixed sites, or else hawk his or her goods around the houses of prospective customers. Later, itinerant sellers began to use pack animals and carts drawn by animals to increase their load of fish to sell, reduce time spent in travelling, reduce fatigue and extend their radius of operation. The use of pedal bicycles and tricycles followed. In recent years, fish traders have adopted motor vehicles such as the “jeepney” and pick-up or van. Motorized transportation grants added range and carrying capacity and saves time at the expense of greater outlay of capital, maintenance and fuel costs. Fish hawkers operating on foot can still be found in most rural areas of the country.
The most common type of fixed point of sale for fresh fish is the market, offering traders a fixed place for their business with the least amount of financial outlay and commitment. This point of sale can be in the form of a specialized fish market, a food market or a general market. Local government authorities manage and supervise the fish markets in the country. In developed towns and municipalities, local authorities have covered sales areas or operate within a building. But in many rural areas, facilities available to fish traders consist of no more than a space, an area of ground, of street or of the market floor. Markets are open for business every day in urban areas, whereas markets in rural areas are open only every other working day or only one or two days a week. In rural areas, fish traders can be considered semi-itinerant, operating in different markets on different days. Speciality shops for fish are few and are found mainly in metropolitan areas of the country (e.g. Metro Manila, Cebu City and Davao City). These shops are usually owned and operated by an individual trader or a unit belonging to a large company in the fish industry (e.g. Alsons Aqua Technologies, Inc.). Traders control the facilities, layout of the sales areas and display the fish in the most effective manner to attract buyers. Consequently, setting up a speciality shop requires considerable capital investment. The most recent development in the retail market for fish has taken place in supermarkets and self-service stores. These stores have the advantage of being one-stop shopping centres with a greater variety of foods for sale.
5.4 Obstacles to market access
In general, there are four types of middlemen engaged in the marketing of aquatic products in the country: Brokers, wholesalers, wholesaler-retailers and retailers. Metro Manila in Luzon is the biggest market for products from aquaculture. A high percentage of products from the three major island areas of Luzon, Visayas and Mindanao are channelled to brokers. In the process, substantial trading within the same level of the marketing channel takes place, especially among brokers, wholesalers and retailers, resulting in higher landed prices of aquatic products that place them beyond the reach of urban poor consumers, even those in Metro Manila.
In most major markets in Luzon (e.g. Navotas market, Metro Manila and Lucena City), Visayas (e.g. Iloilo and Cebu City) and Mindanao (General Santos and Davao City), the existing custom and tradition for selling fish is through secret auction. Apparently, no transparency exists in the negotiation of fish prices among fish buyers. Market participants, who are tied to this system, cannot readily adjust to changes in market conditions, because they lack comprehensive information about the market. Also, prices of aquatic products vary from one geographical location to another. Prices in Luzon are higher than in the Visayas and Mindanao. These fluctuations in prices among different markets can be attributed to the limited flow of information among producers and traders, as well as to the common practice of setting prices through secret auctions.
The market for products from aquaculture can be considered oligopolistic on all levels based on the way the market is structured. A large share of the market is in the hands of a few brokers operating in big fish market centres in Luzon, Visayas and Mindanao. As early as the mid-1970s, surveys documented that brokers were important market intermediaries and not just facilitating agents because of their control of the market (Navera, 1974). Large fish buyers (brokers) in Roxas City and Manila have been great obstacles to the development of a market for operators of mid-range-sized ponds in Capiz province in the Visayas. Currently, this situation continues, as large fish buyers (brokers) still have considerable control of the market.
Consumers prefer fish and other perishable fishery products to be as fresh as possible. Acceptable compromises vary from species to species, from community to community and from one consumer to another, depending on his or her economic status. Fish becomes unacceptable for consumption depending upon the time elapsed since harvest - which can be a few hours or at most a week or two - environmental conditions and handling of the fish. (Eddie, 1983).
Producers and small-scale farmers, who consume most of the fish they harvest or sell them locally, have less of a need for extensive market information. However, as the percentage rate of home consumption of fish decreases and distances to final consumers increase, marketing channels become more important. Specific information on consumers and product characteristics is crucial to expand markets and to maintain favourable prices (Molnar et al., 1996). Furthermore, insufficient and inadequate support facilities in production centres limit producers' access to fish markets. In view of the perishable nature of aquatic products, port facilities, ice plants, cold storage facilities and processing plants are important factors in the marketing of fish. Some of these facilities are not even strategically located, exacerbating the problem of distributing fish to geographically dispersed markets in the country. Hence, fish farmers have to contend with low prices in view of limited market options. Apparently, there is a wide disparity in prices between markets in Metro Manila and markets elsewhere in the country.
5.5 Impact of changes in production centres and methods of production
Philippine aquaculture has been dominated by brackish-water pond culture, primarily of milkfish and secondarily of penaeid shrimps (Rabanal, 1986). In the early days, shrimps from brackish-water ponds were merely an incidental crop. However, in the mid 1970s a shift took place in favour of raising shrimps together with milkfish or culturing shrimps only. This shift was attributed mainly to high prices and a great demand from foreign markets. Thus, domestic demand for shrimps is filled with inferior products (e.g. soft-shelled, small species, oversized and improperly processed) that are below the standards set by foreign markets.
Currently, tilapia is the most widely cultured freshwater species in the country. Although tilapia farming started in the 1950s, it did not gain the interest of farmers until the 1970s when Nile tilapia (Oreochromis niloticus) was introduced, an exotic species. Since then, tilapia has gained a high degree of acceptance among producers and consumers alike (Guerrero, 1985, 1986, 1987, 1997; Bimbao and Smith, 1988; Bimbao and Ahmed, 1990; Bimbao et al., 1994; Pullin et al., 1994; Bimbao and Ahmed, 1996; Del Mundo et al., 1997). Acceptance of tilapia led to the rapid growth and development of tilapia farming, which brought about changes in the landscape of rural areas in the country. Among the major three-island groups, i.e. Luzon, Visayas and Mindanao, it is Luzon that has the largest developed areas of freshwater and brackish-water ponds and is the number one producer of tilapia in the Philippines. Over 90% of farmed tilapias come from Luzon, where demand for the species is very high. Areas outside of Luzon, regions in the Visayas and Mindanao, except Central Mindanao, have extensive marine resources (Bimbao and Ahmed, 1996). Therefore, little incentive exists to culture tilapia. Thus, tilapia farming is a highly profitable venture in aquaculture, especially in Luzon, where farmers and fish traders have low transportation and marketing costs due to markets located nearby.
While tilapia production in brackish-water fish ponds, freshwater fish ponds and fish pens has declined since 1993-97 at a yearly rate of 13%, 4%, and 13%, respectively, tilapia production in freshwater fish cages has increased 3% during the same period (see earlier discussion). In fact, the production of tilapia from freshwater fish cages was higher compared to production from freshwater fish ponds, indicating that fewer fish ponds are being developed. More farmers are encouraged to set up fish cages for farming tilapia. We can expect to see more tilapia raised in freshwater fish cages in the market in the near future. This has considerable consequences for the market, as tilapia produced in fish cages demand a premium price, usually 10% above the price of tilapia from other culture systems. Tilapia meat from fish cages is known to be of superior quality.
Based on the quantity of commercial feed used as an index of intensity of culture, freshwater aquaculture in fish cages can generally be considered an intensive system, fish pens a semi-intensive to intensive system and fish ponds mainly a semi-intensive culture system. An estimated 67% of the total cash cost of cage-culturing tilapia can be attributed to the cost of commercial feed, whereas feed cost in fish pond culture is only 49% (ICLARM, 1998). Tilapia cage-culture is highly dependent on commercial feeds. The success of producing tilapia in cages is one of the major factors that made cage-culturing the preferred method for raising tilapia and has led to tilapia being the premier fish in the market.
So far, the conversion of some areas in Luzon into industrial sites has had no apparent effect on the availability of products from freshwater aquaculture in the market, such as tilapia and carps. It must be noted that industrial development in most of the areas in the countryside, such as, for example, the CALABARZON industrial zone (which derived its name from the five provinces it covered: Cavite, Laguna, Batangas, Rizal and Quezon), has affected mainly rice farming areas. Most of the housing, commercial and industrial developments in the country have not yet encroached on areas devoted to freshwater aquaculture.
