p-ISSN 2094-4454

RESEARCH ARTICLE Economic Analysis of Milkfish Aquaculture in Southern ,

Geofrey A. Rivera Faculty, College of Business Administration CHMSC Campus

Abstract: Given the economic profitability of Milkfish in the 5th District of Negros Occidental, this study on economic analysis of milkfish aquaculture using financial performance; sensitivity analysis; and coping strategies to ascertain sustainability and production, conducted. Information on the profile of the respondents, problems they met and adaptive coping strategies, and other pertinent financial data needed were elicited from the three areas such as , Binalbagan, and using the researcher–made questionnaire. Financial performance was computed and analyzed and subjected to statistical analysis. Results showed that extensive aquaculture production system gained significantly highest return on investment (ROI) for about .34 and significantly lowest in payback period (PBP) for 2.92 production period; while, intensive production system gained the significantly lowest return on investment of .24 and significantly highest in payback period for 4.30 production period; and semi-intensive aquaculture production system gained a .28 ROI, lower than extensive but higher than intensive systems. In terms of PBP which was 3.58 production period, it was higher than extensive, but lower than intensive. The significant positive relationship on the financial performance signifies the positive effect of the variables on the capitalization of the milkfish growers. On the five stated problems met, most of them was environmental problem which was handled using adapted strategies, while the fluctuating change in the fish farm gate price, variable cost, fixed cost that affects milkfish production and sales was manageable. Milkfish aquaculture in the 5th District of Negros Occidental was operational and sustainable; hence, economically profitable and socially acceptable.

Keywords: economic analysis, Milkfish aquaculture, financial performance, coping strategies, payback period

INTRODUCTION

Aquaculture in the Philippines can be traced to fourteen centuries, starting with the traditional, low density culture of fish in earthen ponds evolving into more sophisticated technology-based systems such as pens and cages net structures installed in inland and marine waters (Lopez, 2005b: Abeto 2008). Even though it began early, it was only in the 1940’s that the aquaculture industry was recognized (Yap, 1999). Since then, the sector continued to improve from annual production of about 20, 000 tons a year in 1940’s to almost 4.16 million tons in 2005 (BFAR, 2006). Annual performance of Philippine fisheries is attributed to three subsectors – the small-scale fisheries, commercial fisheries, and aquaculture. Among the three, it is the aquaculture that has a greatest contribution to fish production (Teves and Ragaza, 2014).

The 8,500 metric tons in fish production per quarter makes Negros Occidental maintained its sufficiency in fish production (The Daily Guardian, 2015). Negros Occidental plays a vital role in the fishing industry by keeping up on demands and stabilizing prices of

Trident - Journal of Fisheries and Social Development (JOFSD). Volume 11, No. 1, JUNE 2019 www.tridentjournal.com Economic Analysis of Milkfish Aquaculture in Southern Negros Occidental, Philippines fish commodities in the market. The province has around 8,500 hectares of aquaculture areas for tilapia, bangus, shimp, prawn and other minor aquaculture products. Bangus top as the biggest aquaculture product in the province in terms of volume. The municipalities of Hinigaran and Binalbagan including the city of Himamaylan are the coastal areas in 5th Congressional District of Negros Occidental. Like other coastal cities and municipalities, this three LGU’s also plays a vital role in the economy of the province if aquaculture production is to talk about. Common fishery products produced were bangus, tilapia, oysters, mussels, shrimps and prawn. However, bangus is the most prominent cultured species and culture varies from earthen ponds to fish pens and cages. Customer’s preference, high market demand, easiness in production and high profitability are the common factors why most fish growers choose Milkfish as cultured species.

Statement of the Problem. Generally, this study sought to determine the Economic Analysis of Milkfish Aquaculture in the 5th District of Negros Occidental for the year 2012 - 2014. Specifically, it pursued to answer the following questions: (1) What is the profile of milkfish? (2) What is the financial performance of milkfish aquaculture in 5th District in terms of net profit margin, return on investment, payback period and break-even sales when grouped according to type of ownership and aquaculture production system? (3) What is the percentage change in cost of inputs and the percentage change of fish farm gate price among the type of aquaculture production system? (4) What are the problems met by the milkfish growers in terms of environmental factor, technical factor, social factor, disease occurrence, and economic factor? and (5) What are the strategies adapted by the milkfish aquaculture growers to answer the problems on environmental, technical, social, diseases and economic factor?

METHODOLOGY

Research Design. The descriptive-correlational method of research analyzing the economic efficiency of milkfish aquaculture operation and production in the 5th District of Negros Occidental for fiscal year 2012-2014 was used in this study.

Locale of the Study. The coastal municipalities and city in the 5th district namely Binalbagan, Hinigaran, and Himamaylan City were existence of the milkfish aquaculture industry is reported served as the locale of the study.

Respondents. The respondents of the study were the 28 milkfish growers who were fishers and operators of fish cage (net pen) and pond aquaculture identified in the selected areas. This was utilized since the characteristics of the total population was identified and determined, and can be managed according to the scope (time) of the study.

Research Instrument. The self-made research instrument was used in this study which was developed through literature readings and preliminary interviews. The instrument was composed of four parts: Part 1 was composed of the fish growers’ profile (age; sex; educational attainment; number of years in operation; capitalization; location of farms; size of the fish farm; types of aquaculture system; and types of ownership); Part 2 was composed

Trident - Journal of Fisheries and Social Development (JOFSD). Volume 11, No. 1 JUNE 2019 pISSN2094-445 2 www.tridentjournal.com Economic Analysis of Milkfish Aquaculture in Southern Negros Occidental, Philippines of an open-ended questions which ascertain the fish growers’ financial data in terms of Production in kg, Fish farm gate price/kg, Variable cost and fixed cost; Part 3 was a checklist that allows respondents to identify problems they met in terms of Environmental, Technical, Social, Disease and Economic; and, Part 4 was composed of open-ended questions that filled up with statements that identified the respondents’ measures adapted based on the specific problems met.

Validity and Reliability of the Instrument. To establish the validity of the researcher-made questionnaire, it was presented to four (4) selected panel of experts composed of competent fishery technology and business administration professors, and milkfish aquaculture practitioner. Comments and suggestions were considered. In addition, Good and Scates Validity Evaluation Instrument with a scale of 1 interpreted as very unsatisfactory and as 5 as outstanding, the mean value of 4.5 proved the instrument valid. To establish the reliability of the questionnaire, Chronbach’s Alpha used. Ten (10) dry-run respondents who were milkfish growers in City were asked to answer the questionnaire. Obtaining the value of 0.95 meant that the questionnaire got a good reliability index.

Data Gathering Procedure. Permission to conduct the study was approved by the 28 milkfish growers in the Municipality of Hinigaran and Binalbagan and the City of Himamaylan. The distribution of the questionnaires was personally administered by the researcher from last week of May up to July 2015. The data collected was encoded, tabulated and organized for statistical and financial analysis.

Data Analysis. For Problem 1, that determined the profile of milkfish growers, frequency and percentage distribution was used. For problem 2, that determined financial performance of milkfish aquaculture in the 5th District of Negros Occidental in terms of net profit margin, return on investment, payback period and break-even sales when grouped according to type of ownership and aquaculture production system, the sensitivity analysis was used. For problem 3, that identified the percentage change in cost of inputs and percentage change of fish farm gate price was determine by difference of current and previous value divide previous value and multiply to 100. A positive value indicates there was an increased while negative value justified a decreased and zero was stable. Significant difference in the return on investment and cost of inputs of milkfish aquaculture grouped according to to type of aquaculture production system, Kruskall Wallis Test (Pearson’s Chi- square) at 0.05 alpha level was used. The significant relationship between capitalization and return on investment according to type of aquaculture production system was determined using the Spearman Rho correlation at 0.05 alpha. For problem 4, that identified the problems met by the milkfish growers, the frequency rank distribution was used. For problem 5, that identifed the measures adapted by the milkfish aquaculture growers, the data transcription method for qualitative data using thematic approach was adopted.

RESULTS AND DISCUSSIONS

Profile of the Milkfish Growers. Of the 28 respondents, most of them were in the age bracket of 23-47 years old (17 or 39.3%) and the business is mostly dominated by males

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(26 or 92.9%). Educational attainment shows that the most of the milkfish growers where either high School level (13 or 46.4%) or college level (12 or 42.9%). Majority of them were in the business for 20 years and less (25 or 89.3%) with an investment of more than Php 80, 000.00 (25 or 89.3%), mostly located in Himamaylan City (16 or 57.1%), with farm area more than 5, 500 – 68, 000 square meters (25 or 89.3%), practice extensive form of farming (16 or 57.1%), mostly pond culture (25 or 89.3%), and mostly practice sole proprietorship (25 or 89.3%) type of business. Table 1 shows the profile of milkfish growers in the 5 th District of Negros Occidental.

Table 1. Profile of milkfish growers Profile Frequency Percent Higher age (48-62) 11 39.3 Age Lower age (23-47) 17 60.7 20 years and less 25 89.3 Years of operation more than 20 years 3 10.7 Female 2 7.2 Sex Male 26 92.9 College 12 42.9 Educ. attainment Elementary 3 10.7 High School 13 46.4 Binalbagan 2 7.1 Location of farm Himamaylan 16 57.1 Hinigaran 10 35.7 Extensive 16 57.1 Types of aquaculture Intensive 4 14.3 production system Semi-Intensive 8 28.6 Cage 2 7.1 Aquaculture environment Pond 25 89.3 Pen 1 3.6 Sole Proprietorship 25 89.3 Ownership Corporation 1 3.6 Public 2 7.1 Total 28 100.0

Financial performance of milkfish aquaculture. The milkfish growers in the 5th district is owned and operate by either corporation, sole proprietorship or public growers. Sole proprietorship practice three types of farming: the extensive, the semi-intensive and the intensive compare to public growers that practice semi-intensive and intensive while corporation practice only semi-intensive. Financial performance in terms of net profit margin, return on investment, payback period, and break-even sales were shown in Table 2.

Percentage change in cost of inputs and fish farm gate price. Under extensive production system, the cost of inputs was increased by 5.24% as well as the fish farm gate price by Php 3.84 in 2013 and 5.05% as well as Php 8.55 in 2014. The increase in cost of inputs was attributable to the increase in the cost of fry and fingerlings. Under intensive production system, the cost of inputs was increased by 9.75% as well as the fish farm gate price by Php 9.54 in 2013 and 12.60% as well as Php 15.64. The increase in cost of inputs was attributable in the increase in the cost of fry, fingerlings and commercial feeds. Meanwhile, under semi-intensive production system the cost of inputs increased by 8.74% as

Trident - Journal of Fisheries and Social Development (JOFSD). Volume 11, No. 1 JUNE 2019 pISSN2094-445 4 www.tridentjournal.com Economic Analysis of Milkfish Aquaculture in Southern Negros Occidental, Philippines well as the fish farm gate price by Php 7.18 in 2013 and 9.56% as well as Php 11.78 in 2014. The increase in cost of inputs was attributed to the increase in the cost of fry, fingerlings and commercial feeds. The data showed that there was an increase in the cost of inputs and fish farm gate price from 2012 up to 2014. The increase in fish farm gate price was higher than increase in cost of inputs. It shows that there was a positive effect or increase in net profit of the milkfish aquaculture in the different type of production system. Table 3 shows the percentage change in cost of inputs and percentage change of fish farm gate.

Table 2. The financial performance of milkfish aquaculture in 5th District of Negros Occidental Average production for 3 years (2012-2014) w/ 3 production cycle/year Corp Sole Proprietorship Public Semi- Semi- Semi- Financial Data Extensive Intensive Intensive Intensive Intensive Intensive Production (in kg) 17,052.89 4,502.78 6,311.04 4,990.81 857.78 700.11 Fish Farm Gate Price 77.67 71.06 86.22 80.33 106.67 103.33 (Php) 1,324,383.1 Sales (Php) 318,355.52 534,870.37 398,031.57 91,425.56 72,120.00 1 Variable Cost (Php) 720,663.60 66,093.31 163,908.96 153,906.63 40,039.31 21,178.36 Fixed Cost (Php) 240,525.00 156,436.46 195,111.11 135,805.56 32,400.00 32,400.00 Total Production Cost 961,188.60 222,529.77 359,020.07 288,989.96 72,439.31 53,578.36 (Php) 1,200,000.0 Capitalization (Php) 284,375.00 813,333.33 352,222.22 80,000.00 80,000.00 0 Profit/Crop (Php) 363,194.51 95,825.75 175,850.30 109,041.61 18,986.25 18,541.64 Return on Investment 0.30 0.34 0.22 0.31 0.24 0.23 Break-even Unit (kg) 6,799.73 2,794.45 3,270.16 2,765.19 541.27 445.10 Break-even Sales (Php) 527,719.03 197,569.45 278,616.44 220,311.36 57,660.15 45,864.29

PBP (production cycle) 3.30 2.97 4.63 3.23 4.21 4.31

Table 3. Percentage change in cost of inputs and the percentage change of fish farm gate price (FFGP) Productio Financial 2012 2013 Change 2014 Change n system variable from 2012 from 2013 (in (in %) (in (in %) amount) amount) Extensive Cost of inputs 62,788.64 66,078.77 3,290.12 5.74 69,412.52 3,333.75 5.05 FFGP 65.65 69.49 3.84 5.85 78.04 8.55 12.30 Intensive Cost of inputs 91,776.72 100,724.95 8,948.23 9.75 113,420.7 12,695.78 12.60 3 FFGP 84.87 94.41 9.54 11.24 110.05 15.64 16.57 Semi- Cost of inputs 274.,303.3 297,067.63 23,864.31 8.74 325,477.6 28,410.01 9.56 intensive FFGP 2 4 78.40 85.58 7.18 9.16 97.35 11.78 13.76 Significant difference on the return on investment and cost of inputs of milkfish aquaculture in the 5 th District of Negros Occidental when grouped according to type of aquaculture production system

Significant difference in return on investments and cost of inputs. The average return of investment of milkfish aquaculture in three different aquaculture systems was found

Trident - Journal of Fisheries and Social Development (JOFSD). Volume 11, No. 1 JUNE 2019 pISSN2094-445 5 www.tridentjournal.com Economic Analysis of Milkfish Aquaculture in Southern Negros Occidental, Philippines to have significant difference given x2 value of 126.31 respectively having 0.00 alpha values, while the average cost of inputs of milkfish aquaculture in three different aquaculture systems was also found to have significant difference given x2 value of 50.00 respectively having 0.00 alpha values. The result implies that the different aquaculture production system of milkfish aquaculture production significantly affects the average return on investment and the cost of inputs. Table 4 shows the significant difference on the return on investment and cost of inputs of milkfish aquaculture in the 5th District of Negros Occidental when grouped according to type of aquaculture production system.

Table 4. Significant difference on the return on investment and cost of inputs of milkfish aquaculture grouped according to type of aquaculture production system Aquaculture System Variables X2 p-value Remarks Average return on investment 126.31 0.00 Sig Average cost of inputs 50.00 0.00 Sig

Relationship between capitalization and return on investment according to type of aquaculture production system. The capitalization and the return on investment depend on the type of aquaculture production system adapted by milkfish growers. Return on investment for each type of culture system will varies the capitalization requirement. Return on investment for each culture system differs depending on the capital invested or level of input. Extensive culture attracts less capitalization, but often less productive and less profitable. On the other hand, semi-intensive culture system attracts more cost but better productivity and profit than extensive culture system. Meanwhile the intensive culture system, the investment or capitalization is comparatively higher than the other culture system but commensurate higher productivity and profit is certain. Therefore, the higher the capital invested the higher the return on investment in this type of business. Table 5 shows the relationship between capitalization and return on investment according to type of aquaculture production system.

Table 5. The relationship between capitalization and return on investment according to type of aquaculture production system

r2 -value p-value Remarks Financial performance Return on investment 0.841 .000 Significant

Problems met by the milkfish Growers. The problems met by milkfish growers were classified in to five factors: 1. Environmental factors; 2. Technical factors; 3. Social factors; 4. Diseases; and 5. Economic factors. Table 6 shows the specific problems and common constraints met by milkfish growers.

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Table 6. Specific problems met by the milkfish growers in the 5th District of Negros Occidental

Problems met f % Rank

Environmental problems: Pollution 1 4% 17 Dissolved oxygen 7 25% 1 Salinity 1 4% 17 Turbidity 1 4% 17 Flood 5 18% 2 Technical problems: Find difficulty in diagnosing disease outbreak 3 11% 4 Difficulty in monitoring water quality parameters 2 7% 10 Social problems: Theft 2 7% 10 Trespassing 3 11% 4 Disease occurrence: White spot, scale loss, tail and fin rot 2 7% 10 Leech infestation 2 7% 10 Ulceration red spot 2 7% 10 Exophthalmia cataract 2 7% 10 Ruptured gall bladder 2 7% 10 Economic problems: Shortage of fry or fingerlings 2 7% 10 Expensive fry or fingerlings 2 7% 10 Inadequate supply of feeds 1 4% 17 Inadequate capital or financing 1 4% 17 Unstable fish farm gate price 3 11% 4

Strategies adapted by the Milkfish growers to cope with problems met. Strategies adapted to cope with environmental issues include installation of water paddles to increase dissolved oxygen or water pumping from nearby sources. Also, securing pond water gates. Another strategy was the adequate provision of a compacted pond wall (clay), inflow and outflows, and spillway during flooding. On technical factors and disease occurrence, consultation from other milkfish growers, practitioners and aquarists were the strategies adapted. On economic factors, price determination and formulate pricing policy, conduct bidding for supplier of feeds and fingerlings; and, lending money to support capital were strategies adapted. On social factors, adequate security system by hiring personnel to serve as guard/security of the area was a strategy adapted. Table 7 shows the strategies adapted by the Milkfish growers based on problems met.

Table 7. Strategies adapted by the Milkfish to cope with the problems met Problems met Strategies adapted

Environmental factors Installation of water paddles to increase dissolved oxygen, water pumping from (fluctuating water quality and nearby source of brackish and sea water and securing ponds water gates. Adequate flooding) provision for a well compacted pond wall (clay), inflow and outflows, and spillway to take care of possible flood. Technical factors Consult with other milkfish growers, practitioners and aquaculturist. (non-availability of technical expertise) Social factors (poaching) Hiring security personnel and caretakers Disease occurrence Consult to other milkfish growers, practitioners and expert consultation with other aquaculturist Economic factors Price determination and formulate pricing policy. Conduct bidding for supplier of (fluctuating farm gate prices) feeds and fingerlings to lower cost. Lend money to support capital.

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CONCLUSIONS

In view of the findings of the study, the following conclusions were formulated: (1) Milkfish production system in the 5th District of Negros Occidental is dominantly operated by sole proprietorship, most growers were male and mostly adapting extensive system, (2) The extensive aquaculture production system gained the highest return on investment (ROI) and lowest in payback period (PBP), (3) Milkfish growers found out that the fish farm gate price is the most important factor that directs profitability even there is an increase of variable and fixed costs. Sales can prevail over the increase of production costs (variable and fixed costs) (4) Production system and type of ownership significantly differ in the in terms of average cost of inputs and ROI. There is a significant positive relationship in the capitalization and ROI. When capital is available, inputs can be procured and can be translated into efficient management and in turn produced higher outputs, (5) Milkfish aquaculture in the 5th District of Negros Occidental is considered sustainable, hence profitable as justified with the positive net profit margin, ROI and can recover the investment in short production cycle. Culture practices are somewhat socially acceptable. The fluctuating change in the fish farm gate price, variable cost, fixed cost which affects production and sales of the milkfish growers was manageable. Problems encountered were minimized if not prevented by adapting different coping mechanisms and strategies.

RECOMMENDATIONS

Based on the findings, conclusions, and implications, the following strategies are recommended for milkfish culture production sustainability: (1) To the publicly owned milkfish aquaculture, funds must be available all the time to procure inputs like feeds, fry and fingerlings. Establishment of hatcheries and fish nurseries are needed to possibly reduce the cost of these inputs, (2) To the prospective fish growers, pond preparation before stocking should be adequately done in order to minimize stress on the stock. Adequate monitoring and efficiency of feed management should be observed in order to prevent stress and maximize fish growth and survival, (3) To the prospective researcher, it is recommended that the research must be promoted based on the biotechnological development of fish to increase growth rates, improve the tolerance of fish to extreme low and high temperatures, and raise the disease resistance of milkfish, (4) To the academe, through extension services, it is recommended to conduct information drive to the public especially in the coastal area on how to minimize if not totally eliminate some causes of environmental problems usually met by milkfish growers such as pollution and floods, (5) Equally important are seminars, trainings and workshops that must be acquired by fish farmers, care takers and other personnel of aquaculture enterprise for more efficient and effective information dissemination.

Literature Cited:

Albarico1, F.P.J.B. & Pador, E.L. (2019). Chemical and Microbial Analyses of Organic Milkfish Farm in Negros Occidental, Philippines. Asia Pacific Journal of Multidisciplinary Research. 7(2) 41-46. Abeto, M. (2008). Grouper cage culture in Negros Occidental: Investment and production

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management strategies. Unpublished. Ardales, V. (2001) Basic concepts and methods in research. City: Concerns, Inc. BFAR. (2006). The Bureau of Fisheries and Aquatic Resources: Overview. Paper presented at the WorldFish Center and Philippine Partners meeting. Quezon City, Philippines.28 February 2006. Engle, C. & Neira, I. (2005). Tilapia Farm Business Management and Economics. Technical Report for Aquaculture CRSP, Oregon State University, 418 Snell Hall Corvallis, OR 97331-1643. Hambry, J. (2002). Financial analysis and risk assessment of selected aquaculture and fishery activities in Makong Basib. MRC Technical Paper No. 5, 67. Lopez, N.A. (2005a). “Sustainable Development and Trends in Philippine Aquaculture”. Country paper presented at the FFTC-RCA International Workshop on Innovative Technologies for Eco-friendly Fish Farm Management and Production of Safe Aquaculture Foods held in Denpasar, Bali, Indonesia. Lopez, NA. (2005b). Prioritizing Pro-Poor Aquaculture Technologies for Rural Development in Selected Regions of the Bureau of Fisheries and Aquatic Resources in the Philippines. ISCOF-DFT Dissertation. 178 pp. The Daily Guardian. (2015). Fish sufficiency through aquaculture. http://www.thedailyguardian.net/iloilo-business-news/56385-fish-sufficiency-through-aquaculture. Teves, J.F.C. & Ragaza, J.A. (2014). A farmer’s role in a sustainable aquaculture: An overview of Philippine aquaculture. https://www.was.org/articles/Sustainable-aquaculture-an-overview-of-philippine- aquaculture.aspx#.WGXkJ9IrKYg. Yap, WG. (1999). Rural Aquaculture in the Philippines. FAO RAP Publication 1999/20.

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