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Feasibility study on the establishment of achuete thresher and processing center in Abra

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1.1 RATIONALE

Agriculture is considered as one of the main strands that would make a stable society. Increased production of agricultural crops will ensure that Filipinos will be sufficiently fed in the future. To do so, appropriate technological know-how in terms of crops to grow and farm mechanization is needed. But technological transfer from developed countries to the Philippines is not feasible because problems under Philippine conditions require different solutions than those from the developed nations. Mostly, Southeast Asian nations have small farms that need modified farming methods than those developed countries. What is needed now is a unique agricultural program that will help promote the living standards of Filipino farm families.

Farm mechanization provides the means to achieving that end because the advantage of utilizing more power for farming is timeliness of operations and the short turn around time in cropping. In turn, this cropping system permits the efficient use of land resulting to more production for every unit of land per person at one time.

However, agricultural production cannot be the sole purpose of rural development. The timing and pace of introduction should also contribute to objective of employment and income distribution. Therefore, farm mechanization was given minor attention for fear of unemployment and cause economic dislocation in the rural areas. As a result mechanizing the small and medium sized farms is influenced by the agro-economic conditions. Efficiency and sufficiency therefore are sacrifice.

The impact of mechanization on agricultural employment and income distribution is a critical issue in the choice of technology for Philippine agricultural development. Mechanization in the threshing activity for example is labor displacing. The agricultural labor force continues to increase at about one percent per year because population grows at 2.5% and labor demand in the non-agricultural sector has been limited by the capital-intensive bias of industrialization policies. The proportion of landless households in the rural areas has risen over the past two decades and farm wage have at best remained relatively constant.

Moreover, employing mechanized technique for the postproduction operation involves a significant increase in cash over traditional manual methods because a large amount of investment is required.

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CHAPTER 1INTRODUCTION


The shift from traditional manual threshing to mechanical threshing outweighed the evident odds. Threshers are needed to reduce the drudgery associated with traditional methods of threshing. The level of man-hour spent is reduced with the introduction of mechanical threshers.

The introduction of threshers in many Filipinos, for example in palay, can be considered as significant contribution to the agricultural sector of the economy. Inefficiency and drudgery using traditional methods of manually threshing palay has been reduced in the farm post harvest operations. But until now, ownership is limited to families with capital due to the high initial cost of threshers. Very few low cost threshers have found acceptance by farmers. The costs of operating threshers are very high that custom hiring costs between nine to ten percent of farmers’ produce. In spite of the high cost, the farmers opted to use and obtain the mechanical thresher.

In view of the above, consultants and staff of the Agribusiness Unit of the Department of Agriculture-Cordillera Administrative Region have undertaken an assessment study on the current and potential agro processing opportunities in the Project Area and identified achuete as one of the crops with great economic potential. The results indicated the potentials for atchuete thresher and processing facilities. However, individual farmer or farmer groups’ decisions to invest in these new economic activities must be based on their technical, social, financial, marketing and environmental soundness.

Thus, DA-CARFU Agribusiness Unit through the CHARM Project funding provision had contracted Engr. Leonell P. Lijauco of the Agricultural and BioProcess Division, Institute of Agricultural Engineering, College of Engineering and Agro-Industrial Technology, UP Los Baños for the conduct of a feasibility study on establishing atchuete thresher and processing center.

1.2 OBJECTIVES

1.2.1 General

The study made a technical, institutional, financial, market and environmental feasibility of establishing atchuete thresher and processing facilities in Abra.

1.2.2 Specific

Specifically, this undertaking attempted to:

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1. Describe the general profile of the various sectors of the study areas;

2. Describe the detailed agricultural profile of the study area at the provincial, municipal and barangay levels;

3. Provide technical description of the proposed post harvest and agro-processing facilities including the general design, rated capacity, energy requirements, raw material requirements, etc.

4. Determine the costs of capital investments and operation and maintenance of the facilities at various capacities;

5. Analyze the institutional requirements of the proposed project to include the source of funding, willingness and capabilities of the farmer groups/associations/cooperatives and skills training requirements of the project proponent;

6. Determine the volume, sources of raw materials of the proposed facilities;

7. Quantify a ten-year income cash flow statements of the proposed project;

8. Estimate the Project’s Net Present Value (NPV), Benefit Cost Ratio (BCR) and Financial Internal Rate of Return (FIRR) based on a ten-year period;

9. Provide assessment of the general situation for the final products of the proposed project;

10. Identify potential negative environmental impacts of the project and their possible solutions/mitigating measures; and

11. Identify possible issues and risks in implementing the proposed project.

1.3 METHODOLOGY

The conduct of this feasibility study consisted of two (2) phases:

1.3.1 Phase I: Situational Analysis

In this stage, the study team conducted an inventory of the existing data on the production, handling, processing, post harvest equipment, and marketing of atchuete at the provincial, municipal and barangay levels in Abra. Available information were reviewed, assessed and analyzed vis-à-vis the possible operational problems, constraints and potentials or prospects.

1.3.2 Phase II: Project Formulation and Feasibility Analysis

Based on the findings in Phase I, activities in the preparation of the feasibility study included the following aspects:

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Market Aspect

A rapid market survey was determined the potentials of marketing processed atchuete in the Project Areas, within the major markets in the region and those of the surrounding areas and export markets.

Specifically, considerations focused on:

Strategies for Marketing of Processed Products Description of the Target Market Current Producers and Capacities Catering to the Target

Market Supply Growth Rate Based on Historical Data Projected Supply Increases/Decreases Current Product Users and Consumption Levels in the

Target Market Factors Contributing to the Projected Demand

Increases/Decreases Supply-Demand Gap Analysis and Market Shares

Estimates Competitiveness of the Product in the Target Market Planned Product Packaging, Pricing and Distribution

Strategy

Technical Aspects

Location. This involved the development of the criteria for the selection of the site for the processing center that considered the accessibility of the raw materials and market; transport system; utilities like water, electricity and communication; drainage and sanitary facilities; and development requirements of the site.

Scale of the Project. Based on the design parameters established for the Project, the magnitude and extent of the development activities were determined. In identifying the processing facilities, the size of the target market and support facilities were given due consideration.

Technology. The existing technology of handling and processing atchuete available on commercial scale were studied. This involved identifying the specifications of the processing equipment required, estimates of the raw material requirements, target production

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volumes of the products, expertise and manpower needs, and quality control measures to be adopted.

Design/Layout of Facilities. The physical arrangements of the processing facilities were defined and presented. The Study Team l prepared a schematic plan showing the development of the Project Site and layout of the facilities. The plans included the space allocations, arrangements of the support facilities; services, materials, and process flow including the required infrastructure facilities.

Economic Aspects

In particular, the economic aspect of the study looked into but not limited to the following:

Fixed assetso Machinery and equipment-local and imported;o Buildings and structures;o Location plan;o Building plan;o Land and land improvements;o Central processing center;o Access road;o Parking and security posts;o Power and utilities; ando Other support structures

Operating and Pre-operating Expenseso Organizational expenses-market survey and technical

investigations, Pre-investment feasibility studies, management and professional services;

o Pre-operating expenses- travel, salaries and wages, professional fees, rentals and utilities, mobilization, insurance, market promotions and advertising, inauguration costs, miscellaneous expenses; and

o Working fund- cash requirement before operations, inventories of materials and supplies, pre-paid insurance.

Production costs and standard process flow diagrams; material balance, operating costs.

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Organization and Management Structures

A system study on the appropriate organizational and management structure of the operation was pursued. The design of the structure focused on the efficiency of the operation and cost effectiveness including the required personnel and their compensation packages.

Financial Aspects

Detailed estimates of the budgetary requirements of the Proposed Project will be drawn to include the provisions for pre-operating expenses, physical and price contingencies. This included the recurrent costs (operating, maintenance and repairs of facilities) and the cash flow schedules to match the target activities.

A financial and economic evaluation was carried out to test the viability and profitability of the Proposed Project. This part of the study included but not limited to the following:

Financial projections, including cash flows and income statements over a 10-year period;

Estimates of financial and economic rates of return (FIRR & EIRR), sensitivity analysis for major variables, market, and technical assumptions;

Notes and assumptions; Organizational chart- manpower requirements, salaries and

wages, schedule of personnel deployment; Machinery and equipment- service life and replacement

program, depreciation schedules; Materials and supplies; Cost of utilities; Sources of Funding.

Social Aspects

Detailed assessments of the qualitative and quantitative social benefits of the Projects were presented. This focused on the employment generation; increase demand for local materials, revenues, and supply of commodities among others.

Environmental Aspects

The effects of the Proposed Project considered the potential adverse impacts on the environment and their corresponding mitigating measures on air, land, water, animals and human beings.

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2.1 STUDY AREA

Three (3) municipalities of Abra were selected as project sites (survey areas) for the atchuete thresher and processing center study. These were Sallapadan, Bucloc and Boliney. These municipalities were the top producing areas of atchuete in the province (Figure 1) and covered by the DA CHARM Project.

2.2 PROFILE OF THE RESPONDENTS

Fifteen (15) barangays were surveyed consisting of five (5) in the town of Bucloc, seven (7) in Sallapadan and three (3) in Boliney (Table 2.2). Eighty-four respondents were interviewed composed of sixty six (66) percent male and thirty four (34) percent female. The age of respondents ranged from 20 to over 80 years old with most coming from age brackets of 40-49 years old (27%) and 60-69 years (20%), about six (6) percent belonged to the age group of 20-29 years with 1% not indicating their ages.

Respondents in Boliney relatively belonged to the younger age groups (20-69 years) compared to the those in Bucloc and Sallapadan with 30-79 years and 20 - >80 years old, respectively. The highest group of respondents from the three (3) towns surveyed belonged to 40-49 years old (39% in Boliney and 30% in Sallapadan) and 60-69 years old in Bucloc at 31 percent of the total respondents. Nearly four (4%) percent of the respondents did not specify their ages in Bucloc in contrast to none in Boliney and Sallapadan. Majority of those interviewed in Sallapadan were males (81%) as they were available at home resting from their respective work (11 am to 2pm); those in Bucloc and Boliney were not available as the interviews were conducted from 8 to 10 am with 51 and 61 percent males, respectively.

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CHAPTER 2SITUATIONAL


Figure 2.2.1. Map of Abra showing the survey study areas.

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Table 2.2. Profile of respondents in the study areas.

MunicipalityAverage

Bucloc Sallapadan BolineyNo. of Barangays 5 7 3 5No. of Correspondents 23 30 31 28

% ValuesAge: 20-29 30-39 40-49 50-59 60-69 70-79 80 and Above No Answer

Total

0.04.3

13.026.130.621.7

0.04.3

100.00

6.713.330.013.316.716.7

3.30.0

100.00

9.725.838.712.912.9

0.00.00.0

100.00

5.5014.3027.2317.4020.1012.80

1.101.44

100.00Sex: Male Female Total

51.248.8

100.00

86.713.3

100.00

61.338.7

100.00

66.4033.60

100.00

0

51015

20253035

40

20-2

9

40-4

9

60-6

9

80 a

nd u

p

Buc

loc

Sal

apad

dan

Bol

iney

Mea

n

Bucloc

Salapaddan

Boliney

Mean

2.3 PRODUCTION POTENTIAL

Table 2.3 shows the production areas and yields in Boliney, Bucloc and Sallapadan that exemplifies atchuete production potential.

Atchuete is planted in all areas from May to September of the year with the respondents owning the farm except in Boliney with 96% as owners and 4% owned by their parents. Almost all farmers (93%) in the study areas have no idea of how much they harvest in their farms. A few farmers recalled that they harvested 30 kg and above in Bucloc (13%) and Sallapadan (3%) with 4% harvesting 20-29 kg in Bucloc. More so, farmers do not recall how much they sell

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wet atchuete per cropping season except for 4% respondents in Bucloc that sold 20-29 kg. This can be due to the low production of the crop that farmers tend to forget exact figures of how much is produced and sold. Only four (4) percent of the respondents recalled selling about 100 kg in a season.

Table 2.3. Production potential of respondents in the study areas.

MunicipalityAverage

Bucloc Sallapadan Boliney% Values

Performance of Farma. Planting Season

No Answer

b. Owner of the land tiledSelfFatherFather-in lawNo Answer

Totalc. Total wet atchuete produce (kilograms)

harvested per cropping season.01-910-1920-2930 and AboveNo Answer

Totald. Total wet atchuete produce (kilograms)

sold per cropping season.01-910-1920-2930 and AboveNo Answer

Totale. Average seasonal sale wet atchuete, kg

01-2425-4950-7475-99100-124125 and AboveNo Answer

Total

May-Dec.0.0

100.000.000.000.00

100.00

82.650.000.004.35

13.000.00

100.00

95.650.000.004.350.000.00

100.00

95.650.000.000.000.004.350.000.00

100.00

May-Aug.6.70

100.000.000.000.00

100.00

96.670.000.000.003.330.00

100.00

100.000.000.000.000.000.00

100.00

100.000.000.000.000.000.000.00

00.00100.00

May-Sept.16.13

95.603.201.200.00

100.00

100.000.000.000.000.000.00

100.00

100.000.000.000.000.00

100.00100.00

100.000.000.000.000.000.000.00

00.00100.00

7.61

98.521.080.400.00

100.00

93.110.000.001.455.440.00

100.00

98.550.000.001.450.000.00

100.00

98.550.000.000.000.001.450.000.00

100.00

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Table 2.3. Continued.Municipality

AverageBucloc Sallapadan Boliney

f. Total dried atchuete produced (kilograms) per cropping season.

01-910-1920-2930 and AboveNo Answer

Totalg. Total dried atchuete sold (kilograms) per

cropping season.01-910-1920-2930 and AboveNo Answer

Totalh. Average seasonal sale of dried atchuete.

01-2425-4950-7475-99100-124125 and AboveNo Answer

Total

0.004.35

26.1017.4047.80

4.35100.00

0.004.35

21.7017.4047.80

8.75100.00

0.000.000.008.70

21.7056.55

4.358.70

100.00

0.0010.0010.0010.0066.70

3.30100.00

0.0010.0010.0010.0066.70

3.30100.00

0.000.006.67

20.0053.3213.34

0.006.67

100.00

0.000.006.45

16.1067.75

9.70100.00

0.000.006.45

16.1067.75

9.70100.00

0.000.006.453.23

12.9035.4819.3522.59

100.00

0.004.78

14.1814.5060.75

5.79100.00

0.004.78

12.7114.5060.75

7.26100.00

0.000.004.37

10.6429.3035.12

7.9012.67

100.00

Over thirty (30) kg were dried and sold in all towns as indicated by majority (61%) of the respondents, while about 5% of them reported 0-9 kg. More farmers in Sallapadan and Boliney were producing and selling dried atchuete higher than 30 kg (67 and 68%, respectively) than farmers in Bucloc selling with 48% responding. No farmers in Boliney produced atchuete lower than 10 kg per cropping season.

Sales of the product in all areas ranged from ₧ 25 to over ₧ 125 in one cropping season as reported by the respondents at 4 and 8%, respectively. More farmers in Boliney are having gross sales over ₧ 125 as reported by 19% respondents compared to 4% in Bucloc and none in Sallapadan that can be due to the higher

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production in the former. Most of the farmers (56%) in Bucloc were having gross sales of dried atchuete at ₧ 100 -124 per cropping season while those Sallapadan (53%) were having ₧ 75-79 per cropping season. This also shows that more farmers are exposed to producing and selling atchuete in Boliney than those in Bucloc and Sallapadan.2.4 PRODUCTION PERFORMANCE

Respondents in all towns revealed that atchuete is planted at 0 -.4 hectare farms according to 37%, followed by 26% respondents with 1.0–1.4 hectares planted to atchuete (Table 2.4). Nearly fifteen (15%) of the total respondents have 2.0 and above hectares planted to atchuete, with 16% and 3% have 0.5-0.9 and 1.5-1.9 hectares, respectively. Twenty-three (23) percent of the farmers in Sallapadan have 2.0 hectares or above are devoted to atchuete compared to Bucloc and Boliney with 9 and 13%, respectively. However, farmers in Bucloc and Sallapadan have lesser landholdings of 0-0.4 hectare per farmer as signified by almost 50% compared to only 19% in Boliney. More of the farmers (39%) have 1.0-1.4 hectares of land devoted to growing atchuete.

Land Preparations

Most land preparations are handled manually with labor costing from ₧100 to 150 per day. Seventy-two (72) percent among respondents indicated paying labor at ₧ 100 per day, 25% at ₧ 120 and 3% at ₧ 150 per day paid by 9% farmers in Boliney. Respondents in Sallapadan paid labor for land preparations at ₧ 100 per day only while majority in Bucloc (75%) paid ₧120. Thirty-six percent of all respondents have one, three, or more labor force while 28% employed 2-labor force. Most farms in Bucloc (73%) are managed by farmers themselves. Farmers in Boliney used one or two carabaos in their farms while those in other towns solely depended on manual labor.

In all towns farmers also used (25%) and trowel (27%) in preparing the land. Others used sangkap, pick mattock, sickle and crowbar to till land.

Planting

Most of the respondents (78%) indicated no cost of labor for planting primarily due to the fact most plantations are handled by the owners. On the other hand, labor for planting most agricultural crops costs ₧ 100 per day in Sallapadan and Boliney lower than in Bucloc at ₧ 120 per day. Most farms used 1 to 3 laborers during planting with rarely using hoe, sangkap, bolo, trowel and barreta. Most farms in all areas are rain fed (88%) with some relying on gravity flow from rivers and springs.

Management Practices

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Farmers do not employ intensive management practices in most atchuete farms (79%) in the study area. Integrated nutrient management (organic farming) was expressed by 16% of the farmers while 4% practiced integrated pest management though not sure if applied in atchuete plantations. No respondents use or have knowledge of moisture meter for determining moisture content of the product but practiced “feel and sound” method (83%), or none at all (17%).

2.5 POSTPRODUCTION PERFORMANCE

Postproduction operations employed in the farms are shown (Table 2.5). These operations consist of harvesting, threshing and cleaning, drying and storage.

Among the respondents, 28% indicated using 2 or 4 or more manpower in harvesting that used bolo (42%) and basket (22%); bilao (3%) and “kuribot (1%) and sacks (1%) are also used for cleaning and bagging and transporting the harvests. Harvested crops are normally stacked prior to threshing in the field plots (63%), backyard (21%), and roadside (8%) or at home, granary and dry farm shade. In Bucloc, most farmers stacked atchuete before threshing on field plots (61%) and backyard (39%). Seventy-two (72%) percent of the respondents indicated that their harvests are not rewetted although stacked in the fields prior to threshing.

Threshing and Cleaning

Almost all respondents had no idea of the labor cost for harvesting except for about 7% that indicated ₧ 100 per day using 2 or more labor in their farms (15%) with the rest not knowing how many are used.

Eight (8%) of the farmers signified that hand harvests atchuete and threshed by feet (3%) or pound in a mortar and pestle (42%) and then cleaned using bilao (3%) and “kuribot” (12%). Additional equipment for handling rarely considered wood and plastic mats. Threshed grains (87%) are either stored in house/storage in Figure 2 or sold immediately by 13% of the respondents. Most farms are 1 km or more as shown by about 65% of the total respondents.

Ninety five (95) percent of the farmer respondents agree that drying is a pre-requisite of threshing for easy separation of skin and seeds (42%); easy threshing (19%) and buyers preferred dry (2%). Some are also aware that drying before threshing will have the consequence of losing color (13%) and seeds become lighter in weight (1%) for easier transport. Buyer reimburses the expenses for transport farmer pays (24%) or combination (18%).

Common method of payment includes cash on delivery (96%), installment (2%), and contract buying (1%). Farmers in Bucloc preferred only cash on delivery while some in Boliney (3%) wanted paid in advance.

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Table 2.4. Production performance.Municipality


% Values1. Area Planted (hectare)

0-0.40.5-0.91.0-1.41.5-1.92.0 and AboveNo Answer

Total

43.4826.0821.74

0.008.700.00

100.00

46.6610.0016.66

3.3323.35

0.00100.00

19.3512.9038.72

6.4512.90

9.68100.00

36.5016.3225.70

3.2614.98

3.24100.00

2. Land PreparationsCost of Labor (Individual):

₧ 100₧120₧150

Total

No. of ManpowerSelf or 123 or More

TotalAnimal

1-Carabao2-Carabao

No AnswerTotal

Equipment UsedHoeSangkap

Pick MattockSickleBoloScytheCrowbarTrowel

Total

No. of Units: 1234 or More

Total

25.0075.00

0.00100.00

72.2613.0414.70

100.00

0.000.00

100.00100.00

0.0013.04

8.700.00

17.4000.00

4.3556.51

100.00

55.5622.22

0.0022.22

100.00

100.000.000.00

100.00

23.3426.6650.00

100.00

0.000.00

100.00100.00

0.006.66

10.0013.3326.6916.6616.6610.00

100.00

23.8038.1214.2823.80

100.00

90.900.009.10

100.00

12.9045.1641.94

100.00

50.0050.00

0.00100.00

0.009.680.00

19.3529.04

9.6819.3512.90

100.00

10.5242.1015.7831.60

100.00

71.9625.00

3.04100.00

36.1628.2835.56

100.00

16.6616.6666.68

100.00

0.009.796.23

10.8924.37

8.7813.4526.49

100.00

29.9634.1410.0245.88

100.00

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3. PlantingCost of Labor (Individual):

₧ 100₧ 120₧150 No Answer

TotalNo. of Manpower

Self or 123 or MoreNo answer

TotalEquipment Used

HoeSangkapPick MattockSickleBoloScytheCrowbarTrowelBarrettaNo Answer

Total

No. of Units: 1234 or MoreNo Answer

Total

0.0013.04

0.0086.96

100.00

47.828.708.70

34.78100.00

4.350.000.000.004.350.000.008.700.00

82.60100.00

0.000.000.004.35

95.65100.00

20.000.000.00

80.00100.00

16.6626.6656.68

0.00100.00

0.000.000.000.003.330.000.000.000.00

96.67100.00

3.330.000.000.00

96.67100.00

22.600.003.23

74.17100.00

16.1225.8029.0829.00

100.00

0.006.440.000.003.220.000.000.003.22

87.12100.00

0.000.003.223.22

96.56100.00

14.204.353.80

77.65100.00

26.8620.3831.8620.90

100.00

1.452.150.000.003.630.000.002.901.08

88.79100.00

1.110.001.082.52

95.29100.00

4. Irrigation (source of water)GravityPumpRainfedCombinations,

Rainfed and RiversRainfed and Spring

Total

4.350.00

82.60

8.70

4.35

100.00

3.330.00

93.34

3.33

0.00

100.00

0.000.00

87.10

12.90

0.00

100.00

2.560.00

87.65

8.31

1.45

100.005. Management practices in the farm

NoneIntegrated Nutrient Management (Organic Farming)Integrated Pest ManagementOthers

Total

69.5621.74

4.354.35

100.00

80.0020.00

0.000.00

100.00

87.106.45

6.450.00

100.00

78.8916.06

3.601.45

100.006. Method of moisture content

determination.None"Feel and Sound" MethodUse of Moisture Meter

Total

13.0087.00

0.00100.00

16.6683.34

0.00100.00

22.6077.40

0.00100.00

17.4282.58

0.00100.00

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Table 2.5. PostProduction operations and management.

MunicipalityAverage

Bucloc Sallapadan Boliney% Values

1. Harvesting MethodCost of Labor (Individual):

₧100₧ 120₧150No Answer


Self or 1234 or MoreNo Answer

TotalEquipment Used

BasketSackBilao"Kuribot"BoloSangkapNo Answer

Total

4.350.000.00

95.65100.00

13.0412.74

0.008.70

65.52100.00

26.000.004.350.00

26.000.00

43.65100.00

16.660.000.00

83.34100.00

6.6630.00

6.6643.3613.32

100.00

23.330.003.333.33

36.660.00

36.68100.00

32.260.003.22

64.52100.00

3.2241.99

6.4432.2516.10

100.00

16.123.220.000.00

64.523.22

12.92100.00

17.560.001.08

81.36100.00

7.6428.24

4.3628.1231.64

100.00

21.821.082.561.11

42.401.08

29.95100.00

2.a. Place of stacking harvested atchuete before threshing.

field plotroad sideothers:

HomeBackyardRice GranaryDry Farm Shade

Totalb. Got wet due to rain or nightdew while stacked.

YesNo

Total

60.870.00

0.0039.13

0.000.00

100.00

34.7865.22

100.00

50.0016.67

16.6710.00

3.333.33

100.00

10.0090.00

100.00

77.456.45

3.2212.88

0.000.00

100.00

38.7161.29

100.00

62.777.70

6.6320.68

1.111.11

100.00

27.8372.17

100.00

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Drying Practices

After threshing, drying atchuete is practiced (37%) if the product is for home use or for selling (32%). Those who did not signify probably believe that pre-threshing drying is enough to lower the moisture content of the seeds. Drying is done immediately after threshing (22%) or within 2 to 5 days after harvesting (19%). Sixty (60) percent provided without answer.

Drying is done on concrete pavements by nearly 5% of the total respondents; public plaza/playground (12%); mats/plastic/canvass sheets (42%) and screens (3%) while the rest provided no answers. Drying per load is about 30 kg or more as described by 26% of the total respondents with the rest varying from 29 kg or less. Sixty one (61) percent had no idea of how much they dry per load. Drying period lasts from 9-16 hours (18%) or 0-8 hours as expressed by 19% respondents. Almost half of them had no idea how long drying takes place.

Drying cost is not fully estimated by the respondents (89%) though some indicated ₧ 2.00 per kg of dried atchuete and ₧ 100 per day. Similarly, the total man-hours spent for drying is not fully known by the farmers (95%) with some estimating 17-24 man-hours. The lack of space for drying is one problem, though 98% gave no definite answers.

Storage

Most of the farmers use bag storage (84%), bulk storage system (7%) used for most grains (Figure 2) or none at all (9%). Dried products are largely sold to middlemen going into areas (58%) with about 32% of the respondents selling directly by themselves to retailers/consumers that are mostly concentrated in Bangued, the capital town of Abra. No selling occurred through the cooperatives or contractors of contract growing.

Market outlets of the atchuete products are normally 3 km or more from the farmers’ location as expressed by 62% of the total respondents. Middlemen and most buyers are coming from Bangued. Transport means are by jeepneys using dirt (68%) and spots of asphalt and concrete roads (23%). Among the three (3) towns under study, Boliney has the poorest road conditions that most of the products are transported by the river systems during rainy season of the year.

Trading Practices

Majority of the respondents indicated that atchuete is immediately sold after threshing (68%).If not, the harvest stay in storage for 0-5 days (29% of the total respondents), 6-10 days (40%), 11-15 days (27%) or more than 16 days by 5% of the respondents. Farmers in Sallapadan hold their harvests after threshing shortest at 0-5 days (64%) and 6-10 days 936%). More farmers are holding on

18


their harvests longer than those in Sallapadan and Boliney for 16 days or more as reported by 14% of the respondents in the barangays studied.

Figure 2.5.1. Typical storage house for grains.

Price differentials for wet and dry atchuete

Respondents in all sites rarely think that price differentials between wet and dry atchuete exist (14%), with the rest thinking other wise or no answer (66%). Farmers (9%) in Bucloc think prices differ by about ₧ 20 or ½price among 10% of the respondents in Boliney.

The most preferred buyers are wholesaler/retailer (57%), viajero (34%) and agent (9%). The rest preferred neighbor, friends, relatives and barter trade.

Methods of delivery to buyer

Majority of the respondents indicated that the buyer takes products from the farm (61%) while in some areas farmer delivers the atchuete to the buyer (31%) or farmer takes it to the buying station (8%). In most cases (60%), the buyer reimburses the expenses for transport farmer pays (24%) or combination (18%).

Common method of payment includes cash on delivery (96%), installment (2%), and contract buying (1%). Farmers in Bucloc preferred only cash on delivery while some in Boliney (3%) wanted paid in advance.

19



AverageBucloc

Sallapadan

Boliney

3. Threshing/Cleaninga. Method of Threshing

Cost of Labor (Individual):₧ 100₧120₧150 No Answer


Self or 1234 or MoreNo Answer

TotalEquipment Used

HandFeetMortar and PestleBilao"Kuribot"

Wood and Plastic MatNo Answer

Totalb. Type of storage for paddy.

house/own storagewarehousesold immediately

Totalc. Distance from farm to storage area (km)

0-0.40.5-0.91.0-1.41.5-1.92.0 and Above

Totald. Drying before threshing required with the threshing method use.

YesNo

TotalIf Yes:easily separate the seeds and skineasy threshingdon’t like to buy wetcolor will losefor the atchuete become lighter and easy to transport

Totale. Cleaning method used:

Winnowing basket or "bilao"Mechanical Winnowing MachineOthers

Total

0.000.000.00

100.00100.00

0.004.35

00

95.35100.00

0.004.35

26.004.350.000.00

65.30100.00

86.960.00

13.04100.00

17.6526.0026.00

4.3526.00

100.00

95.654.35

100.00

56.5217.39

0.004.350.00

100.00

100.000.000.00

100.00

6.670.000.00

93.33100.00

0.0016.66

3.330

80.01100.00

13.333.33

50.000.00

33.340.000.00

100.00

93.330.006.67

100.00

30.000.00

22.5810.0037.42

100.00

100.000.00

100.00

40.0016.66

0.0026.66

0.00

100.00

100.000.000.00

100.00

19.350.000.00

81.65100.00

0.006.453.22

12.9077.43

100.00

9.680.00

50.003.223.223.22

30.66100.00

80.650.00

19.35100.00

6.4519.3538.70

6.4529.05

100.00

90.329.68

100.00

29.0322.58

6.456.453.22

100.00

100.000.000.00

100.00

6.670.000.00

93.33100.00

0.009.152.184.30

84.37100.00

7.672.56

42.002.52

12.191.08

31.98100.00

86.980.00

13.02100.00

18.0315.1229.09

6.9330.83

100.00

95.324.68

100.00

41.8518.88

2.1512.49

1.08

100.00

100.000.000.00

100.00

20




4. Drying Practicesa. Dry atchuete after threshing.

for home use: YesNoNo Answer

Total

for sell: YesNoNo Answer

TotalReasons:Yes: Meet the best/required quality of seedsNo: Dried already.

No AnswerTotal

b. No. of days after threshing to dry atchuete.

Immediately after threshing2-5 days after harvestingmore than 5 days after harvestingNo Answer

Totalc. Type of drying facilities used

concrete pavements (own)concrete roadspublic plaza/playgroundmats/plastic/canvass sheetsmechanical dryerothers, specify screensNo answer

Totald. Volume dried per load, (kilograms)

0-910-1920-29 = 330 and AboveNo Answer

Totale. Number of hours to dry load.

0-89-1617-2425-3233-4041-4849 and AboveNo Answer

Total

26.0069.56

4.44100.00

17.4039.1343.47

100.00

21.7460.8717.39

100.00

13.0421.74

4.3560.87

100.00

4.350.00

17.4039.13

0.000.00

39.12100.00

0.0013.0513.0513.0560.85

100.00

26.0030.43

4.350.000.004.350.00

34.87100.00

53.3346.67

0.00100.00

46.6736.6616.67

100.00

46.6736.6616.67

100.00

36.6720.00

0.0043.33

100.00

10.000.00

13.3246.68

0.000.00

30.00100.00

3.333.330.00

46.6646.68

100.00

23.3316.66

6.663.330.00

13.330.00

36.69100.00

32.2667.74

0.00100.00

32.2667.74

0.00100.00

9.6856.8433.48

100.00

16.1313.93.22

66.75100.00

0.000.006.44

38.700.009.66

45.20100.00

0.000.006.44

19.3574.21

100.00

6.446.449.680.003.220.000.00

74.22100.00

37.2061.32

1.48100.00

32.1147.8420.05

100.00

20.0351.4628.51

100.00

21.9518.55

2.5256.98

100.00

4.780.00

12.3941.50

0.003.22

38.11100.00

1.115.466.50

26.3560.58

100.00

18.5917.83

6.901.111.085.890.00

48.60100.00

21




f. Cost of labor for drying, (₧/kilogram)

₧ 2.00₧ 2.50₧ 3.00₧ 5.00₧100/dayNo Answer

Totalg. Man-hours required for drying.


Total

h. Problems in drying in relation to the type of drying facilities used:

lack of space in drying No Answer

Total

0.000.000.000.000.00

100.00100.00

0.000.000.000.000.000.000.00

100.00100.00

0100.00100.00

6.660.000.003.330.00

90.01100.00

0.000.000.000.000.000.000.00

100.00100.00

6.6693.34

100.00

0.006.443.220.006.44

83.90100.00

3.220.00

12.900.000.000.000.00

83.88100.00

0.00100.00100.00

3.222.141.081.113.22

89.23100.00

1.080.004.300.000.000.000.00

94.62100.00

2.3397.67

100.005. Storage Practices

a. Respondents storing atchuete.YesNo

Totalb. Type of storage:

Bag/SackStorage HouseRice GranaryNo Answer

Total

85.9514.35

100.00

69.5713.04

0.0017.39

100.00

96.663.34

100.00

90.006.673.330.00

100.00

87.0112.99

100.00

87.100.000.00

12.90100.00

89.8710.13

100.00

82.226.571.11

10.10100.00

6. Trading Practicesa. Atchuete immediately sold after

threshing.

YesNo

TotalDays in storage before sale:If No: 0-5 days 6-10 11-15 16 and Above

Total

69.5730.43

100.00

0.0028.5757.1414.29

100.00

63.3336.67

100.00

63.6336.37

0.000.00

100.00

70.9729.03

100.00

22.2255.5622.22

0.00100.00

67.9632.04

100.00

28.6240.1726.45

4.76100.00

22


Table 2.5. Continued.

MunicipalityAverage

Bucloc Sallapadan Boliney7. Storage system for grains.

NoneBag storageBulk storageStorage House

Total

17.4082.60

0.000.00

100.00

6.6680.0010.00

3.34100.00

0.0090.32

9.680.00

100.00

8.0284.30

6.571.11

100.008. Method of selling crops.

Direct selling (you mill and sell to retailer/consumers)By contract growingThrough middlemenThrough cooperativesOthers Relatives

MyselfNeighbors

Total

26.10

0.0069.55

0.004.350.000.00

100.00

36.66

0.0053.34

0.000.000.00

10.00100.00

32.25

0.0051.63

0.0012.90

0.003.22

100.00

31.67

0.0058.17

0.005.750.004.41

100.009. Form of selling crop:

WetDry

Total

4.3595.65

100.00

0.00100.00100.00

0.00100.00100.00

1.4598.55

100.0010. Distance (kilometers) of farm from the market

place:0-0.991-1.992-2.993 and AboveNo Answer

Total

8.7021.70

0.0026.1343.47

100.00

0.000.000.00

90.0010.00

100.00

0.009.700.00

70.9519.35

100.00

2.9010.46

0.0062.3624.28

100.0011. Kind of farm to market road:

Concrete roadAsphalt roadDirt roadConcrete and Asphalt roadAsphalt and Dirt roadConcrete and Dirt road

Total

0.000.00

60.870.000.00

39.13100.00

0.000.00

63.343.330.00

33.33100.00

3.220.00

80.680.003.22

12.88100.00

1.070.00

68.311.111.07

28.44100.00

23




12. Trading Practicesa. Price differential for wet and dry:

YesNoNo Answer

Total

Differential:₧ 10₧ 20₧ 501/2 Price30% PriceNo answer

Totalb. Most preferred buyer of atchuete:

agent"viajero"landlordwholesaler/retailer

Total

others, neighborfriendsrelativesbarter

Total

b. Methods of delivering atchuete to the buyer:

buyer takes atchuete from the farmfarmer delivers the atchuete to the buyerfarmer takes atchuete to the buying stationothers

Total

d. Transport expenses shouldered by:BuyerFarmerCombination

Total

e. Common method of payment:cash on deliveryinstallmentpaid in advancecontract buyingothers

Total

13.0434.7864.18

100.00

0.008.70

000

91.30100.00

17.426.09

0.0056.51

100.00

50.007.14

42.860.00

100.00

69.57

26.094.34

0.00100.00

82.6013.04

4.36100.00

100.000.000.000.000.00

100.00

6.6620.0073.34

100.00

000

3.330

96.67100.00

6.6656.67

0.0036.67

100.00

80.000.000.00

20.00100.00

56.67

40.00

3.330.00

100.00

50.0050.00

0.00100.00

93.343.330.003.330.00

100.00

22.586.45

70.97100.00

00

3.229.663.22

83.90100.00

3.2219.36

0.0077.42

100.00

100.000.000.000.00

100.00

58.06

25.82

16.120.00

100.00

48.4038.7012.90

100.00

93.563.223.220.000.00

100.00

14.0920.4165.50

100.00

0.002.901.114.331.11

90.55100.00

9.0934.04

0.0056.87

100.00

76.672.38

14.296.66

100.00

61.43

30.64

7.930.00

100.00

60.3323.9115.76

100.00

95.632.181.081.110.00

100.00

24


2.6 MARKET OF ATCHUETE

Profile of the Buyers and Users of Atchuete

Six (6) barangays were surveyed consisting of two (2) in the town of Bangued, Abra, one (1) in Tayum, Abra, one (1) in City of Manila, one (1) in Quezon City and one (1) in Pasig City (Table 2.6.1). Twelve respondents were interviewed composed of fifty percent (50%) male and fifty percent (50%) female. The average age of respondents ranged from 29 and below to over 80 years old with most coming from age brackets of 40-49 years old.

Respondents in restaurant owner and atchuete processor belonged to the younger age groups (40-49 years) compared to the middleman. The highest group of respondents from the surveyed belonged to 40-49 years old.

Table 2.6.1. Profile of respondents in the study areas.

Classification of User(s)

MiddlemanRestaurant

OwnerAtchuete

ProcessorNo. of Correspondents 8 2 2Age: 29and Below 30-39 40-49 50-59 60-69 70-79 80 and Above No Answer

Total

25.012.537.5

0.00.0

12.50.0

12.5100.0

0.00.0

100.00.00.00.00.00.0

100.0

0.00.0

50.00.00.00.00.0

50.0100.0

Sex: Male Female

Total

50.050.0

100.0

50.050.0

100.0

50.050.0

100.0

Atchuete Market Performance

Table 2.6.2 exemplifies atchuete market performance in the project area.

Atchuete is mostly sold in Bangued and Tayum from November to March while in the cities, atchuete is sold for the whole season. Restaurant owners and atchuete processor in the study areas do not buy wet atchuete from the farmers. One respondent (12.5%) buys from the middleman who bought 26-50 kilogram (kg) of wet atchuete for ₧ 26-50 per kilogram. More so, businessmen do not recall how much bought wet atchuete bought per cropping season except for a middleman

25


respondent that procured 26-50 kg. This can be due to the low production of the crop that farmers produced wet atchuete and scarcity of supply.

Over fifty one (51) kg were dried and bought in all towns as reported by majority of the respondents while one of them reported 26-50 kg (50% of restaurant owners). Middleman, restaurant owners and atchuete processors were buying dried atchuete higher than 51 kg than one restaurant owner with 1 responding.

Sales of the product in all areas ranged from ₧ 26 to over ₧ 101 in one cropping season as reported by the twelve (12) respondents. A restaurant owner has having gross sales over ₧ 101 compared to the middleman, other restaurant owners and atchuete processors. Respondents from the middleman have gross sales of dried atchuete at ₧26-50 and ₧ 51-75 per cropping season (25% and 75%, respectively). Atchuete processors sell at ₧ 26-50 and ₧ 76-100 (both 50%) per cropping season. This shows that more farmers are exposed to producing and selling atchuete to middleman and restaurant owners than other buyers are.

Price Differentials for Wet and Dry Atchuete

Respondents in all sites rarely think that price differentials between wet and dry atchuete exist with the rest thinking other wise or no answer. One respondent thinks price differs by about ₧ 25 per kilo. The most preferred sellers are farmers and middleman.

Methods of Delivery to Buyer

Majority of the respondents indicated that the farmer takes products from the farm to the middleman while in some areas; middleman buys the atchuete from the farmers and sells to the atchuete processor and restaurant owners.

The usual or common method of payment is cash on delivery.

Cleaning

All restaurant owners (100%) and one atchuete processor (50%) signified that cleaning used winnowing basket or “bilao” whether cleaned or not to ensure removal of foreign materials. An atchuete processor (50%) reported using a mechanical winnowing machine to ease their work. Middleman respondents indicted buying only cleaned grains from most of their “suki” farmers’.

Drying Practices

26


After buying/procuring, drying atchuete is practiced if the product is slightly wet or wet. Others indicated that the moisture content of the seeds is low enough for storage.

Drying is done immediately after threshing among 50% of the processor, or dried within 2 to 5 days after harvesting (25% middleman respondent). None of the respondent provided without answer.

Drying atchuete on concrete pavements was reported 12% of the total respondents; mats/plastic/canvass sheets used by middleman (12.5%) and corrugated galvanized iron sheet among processors (50%). Drying per load is 30 kg or more as described by 15% of the respondents with the rest varying from 29 kg or less. Drying period lasts from 9-16 hours (the middleman respondent). The atchuete processor had no idea how long drying takes place.

Middleman (12.5%) and atchuete processor (50%) spent ₧ 100 per day for drying cost. Similarly, the total man-hours spent for drying is not clearly revealed by the atchuete processor with some estimating 9-16 man-hours. Fifteen percent (15%) of respondents gave no definite answers on problems in drying in relation to the type of drying facilities.

Storage and Marketing System

Most middlemen, restaurant owners and atchuete processor use bag storage. The middleman normally sells dried atchuete products to restaurant owners with the farmers as main source. Atchuete processor procured dried atchuete from the middleman and farmers. No selling occurred through the cooperatives or contractors of contract growing.

Market outlets of the atchuete products are normally 3 km or more from the farmer’s location as expressed by the twelve respondents. Middlemen and farmers are coming from Bucloc, Sallapadan and Boliney. Transport means are by jeepneys using dirt and concrete roads. Among the three (3) towns under study, Boliney has the poorest road conditions that most of the products are transported by the river systems during rainy season of the year.

27


Table 2.6.2. Market performance of respondents in the study areas.Classification of User(s)

MiddlemanRestaurant

OwnerAtchuete

Processor1. Performance of Procurement

a. Buying SeasonNo Answer

b. Total wet atchuete (kilograms) bought per cropping season:

01-2526-5051 and AboveNo Answer

Totalc. Average seasonal buying wet atchuete,

kg

01-2526-5051-7576-100101 and AboveNo Answer

Totald. Total dried atchuete bought (in

kilograms) per cropping season.01-2526-5051 and AboveNo Answer

Totale. Average seasonal sale of dried

atchuete, kg01-2526-5051-7576-100101 and AboveNo Answer

Total

Jan-Dec0.0

87.50.0

12.50.00.0

100.0

87.50.0

12.50.00.00.00.0

100.0

0.00.00.0

100.00.0

100.0

0.00.0

25.075.0

0.00.00.0

100.0

Nov-Dec0.0

100.00.00.00.00.0

100.0

100.00.00.00.00.00.00.0

100.0

0.00.0

50.050.0

0.0100.0

0.00.00.0

50.00.0

50.00.0

100.0

Jan-Dec0.0

100.00.00.00.00.0

100.0

100.00.00.00.00.00.00.0

100.0

0.00.00.0

100.00.0

100.0

0.00.0

50.00.0

50.00.00.0

100.0

28


Table 2.6.2. Continued.Classification of User(s)

MiddlemanRestaurant

OwnerAtchuete

Processor2. Method of moisture content determination.

None"Feel and Sound" MethodUse of Moisture Meter

Total

0.0100.0

0.0100.0

0.0100.0

0.0100.0

0.050.050.0

100.03. Manner of buying atchuete.

Direct selling (from farmers)By contract growingThrough middlemenThrough cooperativesBoth Farmers and Middleman

Total

12.50.0

87.50.00.0

100.0

0.00.0

100.00.00.0

100.0

0.00.0

50.00.0

50.0100.0

4. Form of buying atchuete.WetDryBoth Wet & Dry

Total

0.087.512.5

100.0

0.0100.0

0.0100.0

0.0100.0

0.0100.0

5. Cleaning method used:Winnowing basket or "bilao"Mechanical Winnowing MachineAlready Cleaned

Total

12.50.0

87.5100.0

100.00.0

0.0100.0

50.050.0

0.0100.0

6. Drying Practicesa. Drying atchuete after buying/procuring.

YesNo

TotalReason for drying:

Yes: Meet the best/required quality of seedsNo: Dried already.

Total

b. No. of days to dry

Immediately after buying2-5 days after buyingmore than 5 days after buying

Total

12.587.5

100.0

12.5

87.5100.0

0.0100.0

0.0100.0

0.0100.0100.0

0.0

100.0100.0

0.00.00.00.0

50.050.0

100.0

50.0

50.0100.0

100.00.00.0

100.0

29



MiddlemanRestaurant

OwnerAtchuete

Processorc. Type of drying facilities used:

concrete pavements (own)concrete roadspublic plaza/playgroundmats/plastic/canvass sheetsmechanical dryerothers, specify screens

corrugated roof metalTotal

d. Volume dried per load. (kilograms)0-910-1920-29 = 330 and AboveNo Answer

Total

e. Number of hours to dry load.0-89-1617-2425-3233-4041-4849 and AboveNo Answer

Total

f. Labor cost for drying, (₧/kilogram)

₧ 2.00₧ 2.50₧ 3.00₧ 5.00₧100/day

Totalg. Man-hours required for drying


Total

h. Problems in drying in relation to the type

50.00.00.0

50.00.00.00.0

100.0

0.00.00.0

100.00.0

100.0

0.0100.0

0.00.00.00.00.00.0

100.0

0.00.00.00.0

100.0100.0

0.0100.0

0.00.00.00.00.00.0

100.0

0.00.00.00.00.00.00.00.0

0.00.00.00.00.00.0

0.00.00.00.00.00.00.00.00.0

0.00.00.00.00.00.0

0.00.00.00.00.00.00.00.00.0

0.00.00.00.00.00.0

100.0100.0

0.00.00.0

100.00.0

100.0

0.00.00.00.00.00.00.0

100.00.0

0.00.00.00.0

100.0100.0

0.00.00.00.00.00.00.0

100.0100.0

30


of drying facilities used: None None None

31



MiddlemanRestaurant

OwnerAtchuete

Processor7. Storage Practices

a. Respondents storing harvestYesNo

Total

b. Type of storage:Bag/SackStorage HouseRice GranaryNo Answer

Total

100.00.0

100.0

100.00.00.00.0

100.0

100.00.0

100.0

100.00.00.00.0

100.0

100.00.0

100.0

100.00.00.00.0

100.08. Distance of storage to market, km

0-0.991-1.992-2.993 and AboveNo Answer

Different towns

Different towns

Different towns

9. Kind of road from storage to market

Concrete roadAsphalt roadDirt roadConcrete and Asphalt roadAsphalt and Dirt roadConcrete and Dirt road

Total

0.00.00.0

87.50.0

12.5100.0

50.00.00.00.00.0

50.0100.0

0.00.00.0

50.00.0

50.0100.0

32


3.1DESCRIPTION OF THE TARGET MARKET

The processing center shall cater the atchuete farmers and members of the cooperative. However, to ensure the profitability of the operation, the processing center shall accept atchuete growers in the other towns of Abra and possibly the whole of Luzon Area.

3.2CURRENT PRODUCERS AND CAPACITIES CATERING TO THE TARGET MARKET

At present, there is no existing data that will show atchuete processing center in Abra exists specifically in Abra province. A unit of atchuete thresher was fabricated and installed in Boliney in 2000 for farmers use. Likewise, a 1 ton per hour dye processing plant was proposed for establishment in Tayum funded by National Agriculture and Fishery Council (NAFC) in 2001 but not operational yet.

Boliney, Bucloc and Sallapadan towns are the current top producers of achuete in Abra.

3.3SUPPLY GROWTH RATE BASED ON HISTORICAL DATA

The current producers of atchuete in the Philippines are the Cordillera Autonomous Region, Ilocos, Cagayan, Central Luzon, Southern Tagalog, Bicol, Western Visayas, Eastern Visayas, Central Visayas, Western Mindanao, Northern Mindanao, Southern Mindanao, Central Mindanao and CARAGA (Table 3.3). A large part of the total production comes from Western Visayas.

The major producing countries of atchuete are from South America. Peru is by far the world leader with Guatemala and Ecuador coming next. Among the African countries, Kenya seems to be the biggest with Ivory Coast being mentioned next by the importers. India and Spain are also emerging as important exporters to the European market. India has, however, had problems with the microbiological quality of its atchuete exports but is eventually overcoming these problems.

33

CHAPTER 3MARKET STUDY


Table 3.3. Atchuete Volume Production by Region/Province, Philippines Calendar Year 1990-2001.REGION/PROVINCE 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

PHILIPPINES 62 71 72 72 77 75 75 83 96 98 102 105CAR Abra Apayao Benguet Ifugao Kalinga Mount Province

87,500

99,000

87,800

76,500

87,800

87,740

87,750

87,800

87,800

88,054

88,376

88,424

ILOCOS REGION Ilocos Norte Ilocos Sur La Union Pangasinan

71,0603,0002,150

750

71,5003,4001,600

780

71,5003,5001,300

740

71,5003,6401,590

700

93,0004,0001,290

760

93,0004,1601,350

740

103,6004,2001,570

760

103,8273,5001,830

760

124,4004,6001,830

736

124,5124,6601,793

750

114,5004,7001,524

640

125,1504,7471,509

640CAGAYAN REGION Batanes Cagayan Isabela Nueva Viscaya Quirino

2

1,580

2

1,600500

2

1,575500

2

1,650500

2

1,300500

2

1,280500

2

1,100500

2

1,000510310

1

600250485

1

675219450

1

668223450

1

670245250

CENTRAL LUZON Bataan Bulacan Nueva Ecija Pampanga Tarlac Zambales

1

1,250

1

1,000

1

1,000

1

980

1

984

1

960

1

980

1

1,000

3

3,350

3

3,450

4

3,750

4

3,850

SOUTHERN TAGALOG Aurora Batangas Cavite Laguna Marinduque Mindoro Occidental Mindoro Oriental Palawan Quezon Rizal Romblon

1

950

110

340

2

1,000

230

140

340

2

1,020

230

140

310

2

1,060

231

170

300

2

1,050

231

170

300

2

1,080

229

170

330

3

1,040

224

980

340

6

4,690

229

990

350

6

4,563

228

853

322

5

4,049

227

850

328

6

4,074

220

845

363

6

4,850

220

820

370BICOL REGION Albay Camarines Norte Camarines Sur Catanduanes Masbate Sorsogon

3

1,200

1,670

3

1,250

2,000

3

1,240

2,080

3

1,270

2,200

4

1,400

2,664

4

1,360

2,800

4

1,500

2,846

5

1,620

2,900

4

1,327

3,023

4

1,348

3,136

4

1,437

2,990

4

1,317

3,005WESTERN VISAYAS Aklan Antique Capiz Guimaras IloIlo Negros Occidental

20375

5,120550

3,7168,6602,000

22368

5,090480

3,4979,5862,710

22360

5,268490

3,5189,8862,800

22375

5,392490

3,5239,2302,810

23365

5,145510

3,325108733,000

21383

5,148500

3,1608,7103,100

19370

5,230490

1,1259,1103,100

24355

7,800450

1,0009,6104,600

21374

6,213350

1,0509,2613,870

21364

6,217353

1,1009,4993,619

22365

6,208356

1,150102503,690

22360

6,259352

1,000102483,723

CENTRAL VISAYAS Bohol Cebu Negros Oriental Siquijor

1

830

1

856

1

900

1

915

1

950

1

968

1

1,000

1

960

1

925

1

906

1

930

1

920

Note: National and regional data are in metric tons while provincial data are in kilograms.Year 2001 - Preliminary

34


Figure 3.3.1. Achuete production in the Philippines, regions 1, 2 and CAR, 1990-2001.

y = 3.7483x + 57.97

R2 = 0.9031

y = -0.0062x2 + 0.6231x + 5.7045

R2 = 0.8964y = -0.0007x3 + 0.0361x2 - 0.3179x + 8.3547

R2 = 0.24

y = 0.0511x2 - 0.3763x + 1.5568

R2 = 0.85380.00

20.00

40.00

60.00

80.00

100.00

120.00

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Philippines

CAR

Region 1

Region 2

Linear (Philippines)

Poly. (Region 1)

Poly. (CAR)

Poly. (Region 2)

metric ton

Total production of achuete in the Philippines ranged from 62 tons in 1990 to about 105 metric tons in 2001. Aside from Abra, the crop is grown in the provinces of Ilocos Sur, Ilocos Norte, Pangasinan, La Union, Isabela, Nueva Vizcaya, Pampanga, Batangas, Laguna, Palawan, Romblon, Sorsogon, Catanduanes and provinces of Visayas and Mindanao regions. Top producing provinces in the Visayas are Antique and Iloilo while North Cotabato and Bukidnon topped other provinces and Mindanao.

In all areas, production increased towards the year 2000.

35


Table 3.3. Continued.REGION/PROVINCE 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001EASTERN VISAYAS Biliran Eastern Samar Leyte Northern Samar Southern Leyte Western Samar

0 0 0 0 0 0 0 0 22,473

33,424

0 0

WESTERN MINDANAO Basilan Zamboanga City Zamboanga del Norte Zamboanga del Sur

0 0 0 0 0 0 0 0 13

13061

13

13191

14

14246

14

14331

NORTHERN MINDANAO Bukidnon Camiguin Misamis Occidental Misamis Oriental

3

2,500

320

3

2,500

340

3

2,500

350

3

2,500

310

3

2,500

310

3

2,500

312

3

2,500

312

3

2,500300

300

3

2,500270

300

2

1,751294

300

2

1,830158

300

2

1,888108

250SOUTHERN MINDANAO

Compostela Valley Davao City Davao del Norte Davao del Sur Davao Oriental Sarangani South Cotabato

5

1,1702,078

230

1,700

5

1,2302,200

260

1,710

6

1,2602,262

260

1,750

6

1,3002,325

282

1441,600

6

1,3242,370

302

1521,600

5

1,3352,452

315

1721,200

5

1,3462,462

328

1721,100

6

1,2452,581

324

2021,210

5

1,2932,500

329

1911,115

6833

1,3761,663

341

2011,125

101,6461,3962,144

4182,790

3241,137

111,8701,4083,041

5852,903

4951,041

CENTRAL MINDANAO Lanao del Norte North Cotabato Sultan Kudarat

10

10000200

15

15000186

16

16250200

18

17500485

18

17500525

18

17500640

18

17500750

18

17000580

15

14080700

17

16123750

17

162001,000

18

167001,200

CARAGA Agusan del Norte Agusan del Sur Surigao del Norte Surigao del Sur

1

540

1

540

1

540

1

540

0

480

0

480

0

480

0

480

0

480

0

480

1

510

1

520ARMM Lanao del Sur Maguindanao Sulu TawiTawi

0 0 0 0 0 0 0 0 0 0 0 0

Note: National and regional data are in metric tons while provincial data are in kilograms.Year 2001 - Preliminary

3.4PROJECTED INCREASE IN SUPPLY

Recent forecast of the demand for atchuete in the US indicates to increase by 5% while the European markets will increase demand by about 4%. Similarly, local demand will follow the same trend or an expected increase of 5 – 10%.

There has been a global agitation for the coloring industry to shift from chemical to natural dyes to protect the environment and prevent impacts to human beings. Thus, this will result in a dramatic 20 to 30% increase in demand by 2003.

36


The projection of the total production for 10 years results in about 140 metric tons by year 2011 as shown in Figure 3.4.1, showing a 40% increase in production.

Figure 3.4.1. Projected production of achuete by 2011 in the Philippines.

y = 3.7483x + 57.97

R2 = 0.9031

y = -0.0062x2 + 0.6231x + 5.7045

R2 = 0.8964y = -0.0007x3 + 0.0361x2 - 0.3179x + 8.3547

R2 = 0.24 y = 0.0511x2 - 0.3763x + 1.5568

R2 = 0.8538

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

1990

1992

1994

1996

1998

2000

Philippines

CAR

Region 1

Region 2

Linear (Philippines)

Poly. (Region 1)

Poly. (CAR)

Poly. (Region 2)

metric ton

3.5CURRENT PRODUCT USERS AND CONSUMPTION LEVELS IN THE TARGET MARKET

The current users of the proposed atchuete processing center are the atchuete farmers in Abra province and nearby regions like Ilocos and Cagayan.

A recent study by DA CARFU (2002) of achuete production in Abra shows that there are about 2,370 trees aged 6-10 years and 5,558 trees aged 11-20 years that are fruit bearing. Non-bearing fruit trees totaled to about 4,808 comprised of 2,562 aged 6-10 year trees and 2,246 aged 11-20 year trees (Table 3.5).

The total production is about six (6) tons and expected to reach 9.0 tons by 2003.

37


Table 3.5. Area planted number of bearing and non-bearing trees, age of trees and estimated yield of achuete in Abra. Bearing

Age, yr.Non bearing

Age, yr. TotalArea Planted,

ha. 1-5 6-10 11-20 1-5 6-10 11-20

80-300 0 2,070.00 2,295.00 0 2,472.00 1,816.00 8653

301-600 0 200.00 663.00 0 90.00 180.00 1133

601-1 ha 0 100.00 2,600.00 0 - 250.00 2950

Total 0 2,370.00 5,558.00 0 2,562.00 2,246.00 12,736

Yield, kg 1,185.00 5,558.00 768.60 1,123.00 8,634.6

Estimated Yield, kg

Year TOTAL

1982 - 0 0 0 -

1987 - 833.70 0 0 833.70

1992 177.75 1,111.60 0 0 1,289.35

1997 474.00 1,667.40 0 0 2,141.40

2002 592.50 4,446.40 256.20 449.20 5,744.30

2003

Projected

8,807.66

2004 13,054.59

2005 18,149.34

2006 24,091.91 2007 30,882.30

Source: DA CARFU, 2002.

Regression analysis of the projected yield shows that by year 2007, Abra shall have a total production of 30,000 kg or 30 tons. Thus, there is a need to increase the area devoted to achuete production.

38

y = 423.91x2 - 1263.9x + 1130.3

R2 = 0.949

-

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

Year

Yie

ld,

kg

Estimated

Poly. (Estimated)


The product users of atchuete are the food industries, confectionaries, cosmetics, and textile and paint industries. With the current clamor for the protection of environment and health of inhabitants worldwide, the consumption of the raw and processed atchuete products will dramatically increase in the coming years.

One of the atchuete product users in the Philippine food industries is Marigold Industries, Inc. They estimated that they need and consume atchuete product of about 30 metric tons per year that is about 30% of the total production.

3.6FACTORS CONTRIBUTING TO PROJECTED DEMAND INCREASE/ DECREASE

By enlarge the demand for atchuete and atchuete products will continue to increase due to the following:

Local and worldwide population will continue to increase, though every nation is trying to control population growth;

Agro-industries will continue to grow to augment gross national product;

The shift from chemical and synthetic dyes will dramatically be enforced worldwide due to global demands for the protection of the environment and reduction of health hazards; and

Search for agro-forestry alternatives will continue to grow as means of environmental protection and source of livelihood.

Consumers in industrialized countries, and increasingly in developing countries, are health-conscious and have developed an aversion to artificial ingredients in their foodstuffs. The main reason for growth is the health consciousness of consumers and legislative restrictions on the use of artificial and synthetic food colors. Food producers can take advantage of the 'natural' image of food colors such as annatto in their marketing.

3.7SUPPLY-DEMAND GAP ANALYSIS AND MARKET SHARES ESTIMATES

The supply and demand gap can be analyzed in terms of the exports to the US and European countries. Tale 3.7 indicates the imports of annatto by US from 1994 to 1998.

39


Table 3.7. Supply of annatto and natural dyes to US, 1994-98, metric tons.Source 1994 1995 1996 1997 1998

Mexico 1,052 463 818 1,834 1,652Italy 697 384 389 641 450India 44 64 88 124 318Netherlands

114 35 173 26 194

France 136 208 130 136 175China 6 91 77 125 90Morroco 95 160 84 56 66Japan 31 40 44 62 64Australia 40 9 4 - 53Peru 5 73 107 91 48Germany 308 121 39 181 35Ireland 1 2 16 33 34Others 223 49 67 144 112Total 2,752 1,699 2,036 3,453 3,291

y = -65.667x4 + 609.5x3 - 1543.3x2 + 759.5x + 1292R2 = 1

y = -25.792x4 + 246.08x3 - 672.71x2 + 369.42x + 780R2 = 1

y = 5.75x4 - 56.167x3 + 195.25x2 - 258.83x + 158R2 = 1

y = 45.917x4 - 542.83x3 + 2217.6x2 - 3620.7x + 2014R2 = 1

y = -11.875x4 + 157.75x3 - 724.63x2 + 1319.8x - 605

R2 = 1

-500

0

500

1000

1500

2000

2500

1994 1995 1996 1997 1998

Year

met

ric

ton

Mexico

Italy

India

Netherlands

France

Poly. (Mexico)

Poly. (Italy)

Poly. (India)

Poly. (Netherlands)

Poly. (France)

40


Supply of annatto and natural dyes to the US

y = 174x2 - 765.8x + 2885.4

R2 = 0.6007

0

5000

10000

15000

1994

1996

1998

Year

met

ric

ton

Poly. (Supply ofannatto and naturaldyes to the US)

Clearly, our present production is barely 5% of the total produce exported to the US without considering those supplied to the European Union.

FAO estimated world annual consumption of annatto products about five mg per capita per body weight. Assuming that average Filipino adults weigh 45 kg, the 28 million populations (40% of the total Philippine population) will consume about 630 metric tons of atchuete per year. This shows that we are importing about 70% of this amount to supply the annual demand in the Philippines that will increase tremendously as demand by the paint and textile industries increase due to shift from chemical to natural coloring.

Therefore, to meet this projected demand for natural coloring, our atchuete production has to increase by 140% annually.

3.8COMPETITIVENESS OF THE PRODUCT IN THE TARGET MARKET

Producing and processing of high quality atchuete products in the Philippines is highly favorable due to existing weather conditions and level of technology that can be applied in the production aspects. Atchuete processing centers can be established anywhere to protect the harvests. However, for our products to be competitive the farmers or producers must be assisted by the government to put up the necessary infrastructure and marketing needs.

In this manner, the quality of products produced by farmers can be competitive in the target markets and more benefits will be accrued to the producers and not to the intermediaries or processors. The key quality factors to observe in the products shall include moisture content (12-13% for export), color, free from foreign matters and purity.

41


3.9PLANNED PRODUCT PACKAGING, PRICING AND DISTRIBUTION STRATEGY

The proposed project for atchuete postharvest processing plant shall produce good quality atchuete seeds. Eight tons per day, (8 tons/day) shall be scheme of production.

The atchuete products shall be packed in plastic sacks. A processing fee of ₧ 18.00 per kilogram shall be charged if the farmer for processing only brings atchuete. In addition, ₧ 120.00 per kilogram if atchuete is bought processed and marketed by the cooperative.

Table 3.9. Atchuete activities and corresponding fees.

ActivityMark-Up

PriceProcessing/Selling Price

Atchuete Processing

8.77 18.00

Buying, Processing and Selling

40.77 120.00

42


4.1 LOCATION OF THE PROJECT

The target sites of the proposed atchuete thresher and processing center shall be CHARM Project areas in the municipalities of Boliney, Bucloc and Sallapadan in the Province of Abra. The location shall cater all municipalities that produce atchuete.

The study shall explore the feasibility of:

Option 1: Operating processing facility with three threshers in each town;

Option 2: Operating a processing facility with procurement and selling processed achuete; and

Option 3: Thresher and grader in each town.

A cooperative shall be formed in any of the towns of Boliney, Bucloc or Sallapadan that shall operate and manage the facilities.

4.2 DESCRIPTION OF THE PRODUCTION PROCESS/TECHNOLOGY

Figure 1 shows the process flow diagram of the atchuete postharvest processing technology that resulting in a lower total investment requirement.

Depending on the degree of sophistication, the system ideally consists a flatbed dryer, thresher and a grader/cleaner. The simplest but functional system may only have a thresher and grader. These machinery and accessories are developed using locally available materials and require low-level skills for the operation and maintenance.

1. The flatbed dryer shall dry the atchuete pods for achieving the desired moisture content and preventing microbial activity, nutrient loss and color (Figure 2). It essentially consists of a blower, burner and drying bin. The air, heated by a kerosene burner with heat exchanger, is forcefully blown into the drying chamber and move through the atchuete pods that absorbs the moisture. The blower and burner are left to operate until drying is complete after 2-3 hours. Then the atchuete pods are removed and the dryer is ready for another batch.

43

CHAPTER 4TECHNICAL STUDY


2. The thresher shall separate pod or capsule from pellet-sized seeds, atchuete grains/seeds (Figure 3). It consists essentially of a rotating beater and a heavy perforated screen. The material is introduced into the hopper, with the beaters or hammers, pounding the materials until they are small enough to pass through the screen at the bottom. Fineness of division is controlled mainly by the size of holes in the screen.

3. The grader/cleaner shall clean and separate the atchuete seeds from pods (Figure 4). This equipment consists of an oscillating sieve, screen and frame. The atchuete are introduced in the hopper and move through the oscillating sieve. During oscillation, the atchuete seeds travel from one end to another and make them separate from pods due to the different sizes of the screens. The atchuete seeds are bagged and ready for commercial consumption.

4.3 PRODUCTION FACILITY AND INPUT REQUIREMENTS AND SOURCES

The proposed processing center (80 sq. meter) for establishment shall comprise of the basic machinery described in section 4.2 to be built in a 150 sq. meter lot owned (Figures 5-6). In addition, transport equipment for hauling raw material ingredients and delivering the finished products to the end-users, a 2 Hp water pump to supply the water requirement of the plant and office equipment for the daily monitoring of the operations.

4.4 PRODUCTION SCHEDULING AND QUANTITY PROJECTIONS

The proposed processing center shall process atchuete. The equipment is expected to run for 8 hours a day to process 8 tons of atchuete grains. It is expected that the equipments will only operate at 50% capacity for the first year of operation and at 70% capacity at the second year of operation and onwards.

Table 4.1 shows the projected production of the atchuete processing over a ten-year period, operating 90 days per year. For the plant to be sustainable, the production area be expanded as indicated in the last column. Expansion areas of production shall be divided equally among the 3 project areas.

If Option 3 is chosen, a set of thresher and grader shall be operated in the towns of Boliney, Bucloc and Sallapadan and the production are must also be increased.

44


Table 4.1. Projected production of the atchuete processing technology.

YearWorking

DaysCapacity, 8hr

operationProduction,

Tons

Area for development

, ha1 2004 90 1 ton/hr 360 720.02 2005 90 1 ton/hr 504 1008.03 2006 90 1 ton/hr 504 1008.04 2007 90 1 ton/hr 504 1008.05 2008 90 1 ton/hr 504 1008.06 2009 90 1 ton/hr 504 1008.07 2010 90 1 ton/hr 504 1008.08 2011 90 1 ton/hr 504 1008.09 2012 90 1 ton/hr 504 1008.010 2013 90 1 ton/hr 504 1008.0

At the initial year of the project, about 240 ha. shall be allotted in each town of Boliney, Bucloc and Sallapadan for achuete production expansion to meet the required capacity, though in reality, this can be attained after 3 years of development. On the 2nd year and onwards, 336 ha. shall be devoted for full development of the production areas.

Development of the production area will entail growing of planting materials in nursery. Spacing of hills shall be at 5m x 5m that is predicted to have no problems are the towns have sloping lands suited for atchuete propagation.

45

Raw Materials

CLEANING

DRYING

THRESHING

GRADING

QUALITY TESTING

BAGGING

STORAGE DISTRIBUTIONAnd

MARKETING

MC final = 9+ 2 %

Atchuete Seeds

Atchuete Pods

Dirt Removed in the Machine


Figure 4.1. Atchuete Postharvest Processing Technology.

46


Figure 4.2. Flatbed Dryer.

Figure 4.3. Atchuete Threshing Machine.

47


Figure 4.4. Atchuete Grading Machine.

4.5 PRODUCTION STRATEGY TO ENSURE THAT QUANTITY AND QUALITY REQUIREMENTS ARE MET AT REASONABLE COSTS

All harvested atchuete shall be obtained from farmers in the area. However, to ensure the quality of the raw materials, all products must be received at right maturity and 99% purity. Thus, suppliers of raw materials shall be encouraged to dry and clean first their ingredients prior to reception at the mill.

4.6 PRODUCT SPECIFICATIONS

Product Description

A solid, heart-shaped seed taken from mature, freshly harvested atchuete pulp. It must be brick red in color, smells tree-like and has no flavor. The seeds must be free from pests, foreign matter as well as admixtures of any kind.

Limits for Possible Contaminants Small Stones – must not be higher than 20% of the delivered seeds

Insects – less than 10 per 50-kg sackSmall leaves – less than 15 per 50-kg sackBark Fragments - less than 10 per 50-kg sack

48


The moisture content must be 9 + 2%.

The seeds must be fit for human consumption, not treated with any harmful chemicals. A Phytosanitary Permit is required.

Packaging Specification

The seeds must be packed in a clean jute sack or polylined sack, properly labeled with item name, name of manufacturer, harvest season, etc.

49


Figure 4.5. Equipment Layout.

50


Figure 4.6. Building Layout.

51

BOARD OF DIRECTORS

BOOKKEEPER

DRIVERHELPER 2HELPER 1

SUPERVISOR


5.1 DESCRIPTION OF THE PROJECT’S ORGANIZATIONAL STRUCTURE

The Board of Directors of the Atchuete Cooperative shall manage the proposed atchuete thresher and processing center. The Supervisor and Bookkeeper shall assist the Board in managing the center.

5.2 JOB REQUIREMENTS OF THE TASKS TO BE PERFORMED, PERSONNEL PLANTILLA, SALARIES AND BENEFITS

The operation of the system will require the following work force: one supervisor, one bookkeeper/clerk, one driver, and two (2) laborers/helpers depending on the degree of sophistication of operation. The supervisor has the responsible of planning, organizing, leading and controlling the organization's members.

Position Job Requirement SalariesSupervisor 1 10,000.00 / month

52

CHAPTER 5MANAGERIAL/

ADMINISTRATIVE STUDY


Secretary/bookkeeper

1 8,000.00 / month

Helper 2 7,000.00 / monthDriver 1 7,000.00 / month

Under Option 3, 1 supervisor shall manage and supervise the operations of the three threshers and graders that shall be operated by three technicians. The supervisor shall be paid at ₧ 180/day while the operators at ₧ 100/day. Operations shall be on 8-hour per day basis for a total of 90 days per year.

5.3 ANALYSIS OF MANPOWER AVAILABILITY

The rate of unemployment is very high; hence, it is not expected to have problems on the availability of the work force requirements of the proposed project. In addition, the level of education is high so that the operators will not have trouble in understanding the technology.

However, for the smooth operation, it is recommended that both the supervisor and secretary must be degree holder, preferably in the fields of management and accounting, respectively. Prospective operators must be at least high school graduates, with at least one operator having some experiences on running and maintaining engines and machinery.

Local residents of the area where the processing facility is established shall be given top priority in hiring the personnel requirement.

53


6.1 BASIC ASSUMPTIONS

Price of sacks is pegged at ₧ 5.00 per piece. Threshing fee is ₧ 1/kg of threshed achuete under Option 3.

1. Processed atchuete products shall be charged initially at ₧ 18.00 per kilogram. If the atchuete shall be bought, processed and marketed by the cooperative then the price shall be ₧ 120.00 per kilogram.

2. Machinery and equipment are estimated to incur 10% of original costs as depreciation cost per annum over a ten-year period.

3. Building is expected to have 5% of original cost as depreciation cost per year.

4. Insurance for building and machinery is estimated to be about 2% of the original costs per year.

5. Maintenance costs of machinery and building are estimated to be about 2% of original costs per year.

6. The cooperator shall not be charged real estate tax by the local government until the 11th year of operation as incentive for engaging and providing services to the poor farmers.

7. The net sales of product are deemed to increase by 10% per annum with allowances of about 2% for returns and spoilage.

8. The equipment shall operate only at about 50% of the capacity for the 1st

year of operation and attain 70% capacity on the 2nd year of operation onwards.

9. Interest rates on capital investments are estimated to be about 18% per year.

10. All machinery and equipment shall be locally made.

54

CHAPTER 6FINANCIAL STUDY


6.2 MAJOR ASSUMPTIONS

Existing Business Practices in the Agro-Industry Sector of the Philippine Economy

a. Credit Terms

A capable financial institution or bank shall finance 80% of the total investment requirement of the Project. The loan shall have an effective interest rate of 18% per annum and assumed to be constant for the whole project life.

b. Credit Extension

Payment for the loan amortization shall be ten years (10). Similarly, a grace period of one year (1) for the initial payment of loans is usually extended to borrowers agreeable to the terms and conditions of the creditors.

c. Bad Debt Allocations

Bad debt shall only be allowed and resorted to when receivables are exceptionally high and long term.

d. Bad Debt Right Off

This practice shall only be resorted by the cooperator when collectibles are extended over ten years uncollected.

e. Quality Control Costs

Strict quality control in all stages of operation shall be observed in the proposed technology so as not to sacrifice the final products.

f. Labor and Management Compensation

Allocations for labor and management costs shall be strictly in accordance with the Philippine Labor Code.

g. Overhead Accounts

Overhead accounts for all aspects of the operations shall be made at the discretion of the management.

h. Inventory Costing

Costs of inventor shall be made according to the market value of the product(s).

55


i. Operating Accounts

Operating accounts are considered as per business requirements.

j. Fixed Asset Requirements

As per requirement of the business.

k. Method of Depreciation and Amortization

Straight-line method is used for depreciation calculations while the uniform annual amortization is used for loan repayment.

Conformations or Contradictions

a. Processing Price

Atchuete products shall be charged at ₧ 18.00 per kg.

b. Price when Atchuete will be bought, processed and marketed

Atchuete products shall be charged at ₧ 120.00 per kg.

c. Sales Forecast

Sales of products are estimated to increase by at least 10% per annum.

It is assumed that the consumers leave no inventory of finished products during each year of operation due to the high demand. However, a 2% allotment for returns and spoilage is assumed but can be reprocessed later.

d. Unforeseen Costs

Price increases in energy bills, inflation, etc. are expected to be unpredictable but allocated with 10% increases per year.

6.3 INVESTMENT FINANCING

Eighty percent (80%) of the total investment requirement shall be obtained from authorized lending institution or any local or foreign bank, while the remaining 20% shall be borne by the Cooperative.

56


The possible sources of financing for the proposed project are the following:

Department Of Agriculture and National Food Authority

The DA AND NFA post harvest facility assistance program provides funds for multi-purpose dryers, mechanical dryers; farm level grains centers and working capital; and program administration and institutional development to farmer cooperatives or associations/organizations. The program started 1994 with an initial budget of ₧ 700 million where ₧ 600 million comes from the proceeds of the RP-Thailand counter trade agreement and ₧ 108 million from the General Appropriations Act. This can be augmented by grants from the Japanese government under the RP-Japan Increased Food Production Program.

The program is designed to cater to qualified farmer associations or groups that have the capabilities and level of operation.

Land Bank of the Philippines

Under the special financing for cooperatives, the LBP’s special credit assistance program utilizes farmer cooperatives as conditions of its credit programs and as partners in ensuring that development assistance goes to the individual beneficiary.

Through its Countryside Loan Fund (CLF) credit facility, LBP extends financial assistance to countryside business enterprises engaged in agricultural and agro-industrial projects. Development loans (₧ 26.835 billion) are allotted to small farmers/fisher folks, small and medium enterprises, agribusiness and countryside loans.

LBP has specific programs to support the agrarian reform programs thru its 5-25-70 Countryside Partnership Scheme (5% equity by farmers; 25% from DAR and 70% from LBP). The loans can be used for purchasing tractors, threshers, irrigation pumps, hauling trucks and to construct mills and warehouses.

LBP has also organized the Local Cooperative Assistance Team (LCAT) to strengthen cooperatives in areas of bookkeeping, operations management, and capital build-up and savings mobilization among others.

Department of Agrarian Reform

Under the programmed appropriations in support of Agrarian Reform Communities (ARC’s) and the Comprehensive Agrarian Reform Program. The

57


government has allotted funds for the implementation of the CARP including necessary support services.

Rural Banks

Most of the rural banking institutions in the countryside has opened windows for financing farmers’ cooperative projects but requires stringent requirements for the acquisition of the loans.

6.4 TOTAL INVESTMENT REQUIREMENT

6.4.1 Atchuete Processing Alone

The proposed project shall require a total investment of about ₧ 2,357,588.20 for the purchase of machinery, land, transport equipment, laboratory and office supplies, office equipment and fixtures and operating capital for at least 3 months (Table 6.4.1).

Nearly about 19% of the total investment shall be allotted for the purchase of machinery and equipment, 3% shall be used to purchase land, 17% for the erection of the required building, 30% for the purchase of transport equipment and 26% of the total investment shall allotted for the initial operating expenses. About 5% shall be used in acquiring office equipment and fixtures and preparation of feasibility studies.

6.4.2 Atchuete Buying, Processing and Marketing

The proposed project shall require a total investment of about ₧ 27,557,588.20 for the purchase of atchuete raw materials, machinery, land, transport equipment, laboratory and office supplies, office equipment and fixtures and operating capital for at least 3 months (Table 6.4.2).

6.4.3 Threshing and grading operation

Under Option 3, the equipment a total investment of ₧ 230,000.00 for 3 threshers (₧180,000) and 1 grader (₧50,000). Equity investment (20%) of the cooperative is ₧ 46,000.00 (Table 6.4.3).

58


Table 6.4.1 Total Investment Requirement for Atchuete Processing Alone (Option 1)

ItemNo. ofunits

UnitCost, ₧

Total Cost, ₧

A. Machines and Equipment 460,000.00

1. Atchuete Thresher 3 180,000.00

2. Flat bed dryer 1 70,000.00

3. Grader/Cleaner 1 50,000.00

4. Gasoline Engine, 5Hp 1 10,000.00

5. Platform balance 1 20,000.00

6. Water pump 1 80,000.00

7. Moisture meter 1 25,000.00

8. Bag sewer 1 25,000.00

B. Building 80 m2 5,000.00 400,000.00

C. Land 150 m2 400.00 60,000.00

D. Transport

1. Elf light truck 1 700,000.00 700,000.00

E. Office Equipment & fixtures 1 lot 130,000.00

G. Initial Operating Expenses (3 mos.) 607,588.20

TOTAL INVESTMENT REQUIREMENT 2,357,588.20

TOTAL AMOUNT TO BE LOANED, 80% 1,886,070.56

COOPERATIVE EQUITY, 20% 471,517.64

59


Table 6.4.2 Total Investment Requirement for Atchuete Buying, Processing and Marketing (Option 2)

ItemNo. ofunits

UnitCost, ₧

Total Cost,₧

A. Machines and Equipment 460,000.00

1. Atchuete Thresher 3 180,000.00

2. Flat bed dryer 1 70,000.00

3. Grader/Cleaner 1 50,000.00

4. Gasoline Engine, 5Hp 1 10,000.00

5. Platform balance 1 20,000.00

6. Water pump 1 80,000.00

7. Moisture meter 1 25,000.00

8. Bag sewer 1 25,000.00

B. Building 80 m2 5,000.00 400,000.00

C. Land 150 m2 400.00 60,000.00

D. Transport

1. Elf light truck 1 700,000.00 700,000.00

E. Office Equipment & fixtures 1 lot 130,000.00

G. Initial Operating Expenses (3 mos.) 25,807,588.20

TOTAL INVESTMENT REQUIREMENT 27,557,588.20

TOTAL AMOUNT TO BE LOANED, 80% 22,046,070.56

COOPERATIVE EQUITY, 20% 5,511,517.64

60


Table 6.4.3 Total Investment Requirement, Option 3

Item No. of Unit Total Cost units Cost A. Machines and Equipment 230,000.00

1. Atchuete Thresher 3 180,000.00 2. Grader/Cleaner 1 50,000.00

TOTAL INVESTMENT REQUIREMENT 230,000.00TOTAL AMOUNT TO BE LOANED, 80% 184,000.00COOPERATIVE EQUITY, 20% 46,000.00

6.5 FINANCIAL PROJECTIONS


The outputs of the marketing, technical and management studies were used as inputs in the preparation of the various facets and calculations for the financial projection and analyses. These are shown in Tables 6.5.1.1 to 6.5.1.8.


For atchuete buying, processing and marketing, the various facets and calculations for the financial projection and analyses are shown in Tables 6.5.2.1 to 6.5.2.8.

6.5.3 Threshing and grading operations

Tables 6.5.3.1 to 6.5.3.5 indicate the calculations for financial projection and analysis.

6.6 FINANCIAL ANALYSIS

The potential financial viability of the proposed Project is evaluated in terms of three (3) methods: the discounted Rate of Return or Internal Rate of Return (IRR), the accounting rate of return or Return on Investment (ROI), and the cash payback period.

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Discounted Cash Flow Analysis

The Internal Rate of Return of the proposed project is 165 percent (Table 6.5.1.6). This value is very much higher (ten times) than the required rates of return r of 17 percent, the current yield of risk-free investment for 90-day.

Treasury Bills. Since IRR is >> r, it is therefore recommended that the cooperative should pursue the proposed Project. Similarly, the Net Present Value (NPV) calculations indicated a value of ₧ 3.06 million. This shows that the present value of the future streams of cash flows can be more than to cover the present value of the investment by this amount.

Accounting Rate of Return Analysis

The proposed processing facility is expected to generate or accumulate enough cash within a period of five and half (5 ½) years to recover all costs of investments.

The Return on Investment, though as a measure of the Project financial soundness does not take into account the time value of cash inflows unlike the IRR. Nevertheless, the value obtained from the analysis indicated very high value of 94.1 percent (Table 6.5.1.7).

Unit Cost or Price Analysis

The unit cost (per kilogram) of processed atchuete products is ₧ 18.00.

More importantly, the atchuete products using the processing technology are most acceptable because it will meet the desired quality of the consumers.



For atchuete buying, processing and marketing, the Internal Rate of Return is 106 percent (Table 6.5.2.6). This value is very much higher (eight times) than the required rates of return r of 17 percent, the current yield of risk-free investment for 90-day.

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Since IRR is >> r, it is therefore recommended that the cooperative should pursue the project. The Net Present Value (NPV) calculations indicated a value of ₧ 27.95 million. This shows that the present value of the future streams of cash flows can be more than to cover the present value of the investment by this amount.


The proposed facility is expected to generate enough cash within a period of seven and half (7 ½) years to recover all costs of investments.

The Return on Investment, though as a measure of the Project financial soundness does not take into account the time value of cash inflows unlike the IRR. Nevertheless, the value obtained from the analysis indicated very high value of 87.6 percent (Table 6.5.2.7).

Unit Cost or Price Analysis

The unit cost (per kilogram) of selling atchuete products is ₧ 120.00. This includes the costs of buying and processing.

The atchuete products using the processing technology are most acceptable because it will meet the desired quality of the consumers.

6.6.3 Threshing and grading operations


Operating a thresher and grader will result in Internal Rate of Return of 106% with a NPV of ₧ 21,600 showing that the cooperative may opt this only since IRR is >> r. However, it should be noted that projections are made based on 5 year period only as this may be the life of the machine and new units are well preferred than keeping the old units (Table 6.5.3.4).


Operating the thresher and grader only will generate enough cash to recover initial investments in 3.5 years (Table 6.3.5.4).

6.7 SENSITIVITY ANALYSIS


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A price sensitivity analysis was conducted throughout the financial projections to determine the viability of the project at different price levels of the products and raw materials, as well as different levels of interest rates on capital investment. Aside from the project viability considerations, the analysis will be useful for the management in terms of setting the final market introduction price and formulating the market strategies against potential new market competitors.

Table 6.5.1.8 shows that the project is still financially sound at Level 3 prices where the price is set at ₧ 18.00. The project will still have a modest Internal Rate of Return of 177 percent that is about eleven times the basic rate of 17% return for 90-Day Treasury Bills or the assumed interest rate of 18% for the use of investment.

For economic considerations, the price Level 1 should not be implemented unless increases in prices of raw materials will not warrant economical returns for the proposed project.


For atchuete buying, processing and marketing, Table 6.5.2.8 shows that the project is still financially sound at Level 3 prices where the price is set at ₧ 125.00. The project will still have a modest Internal Rate of Return of 128 percent that is about eight times the basic rate of 17% return for 90-Day Treasury Bills or the assumed interest rate of 18% for the use of investment.

For economic considerations, the price Level 1 should not be implemented unless increases in prices of raw materials will not warrant economical returns for the project.

6.7.3 Thresher and grader operations

Considering that the thresher and grader are of great importance to producing quality atchuete, rigid sensitivity analysis is not recommended. Nevertheless, an analysis was performed to determine if the processing fee can be lower than ₧ 1.00 per kg of processed seeds.

Results showed that lowering the fee to ₧ 0.80 per kg resulted in payback period of 6 years longer than the expected useful life of the thresher and grader. Thus, for viability and sustainability reasons, the assumed price of ₧ 1.00 per kg shall be adopted.

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Table 6.5.1.1. Schedule of Depreciation for Atchuete Processing Alone, Option 1Item Year 1 Year 2 Year3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

DEPRECIABLE ASSETS (₧ )

1. Machines and Equipment 460,000.00

2. Building 400,000.00

3. Elf light truck 700,000.00

4. Office equipment 130,000.00

TOTAL 1,690,000.00

ANNUAL DEPRECIATION EXPENSES (₧)

1. Machines and Equipment 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00

2. Building 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00

3. Elf light truck 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00

4. Office equipment 13,000.00 13,000.00 13,000.00 13,000.00 13,000.00 13,000.00 13,000.00 13,000.00 13,000.00 13,000.00

TOTAL ANNUAL DEPRECIATION EXPENSE 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00

ACCUMULATED DEPRECIATION (₧)


2. Building 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 140,000.00 160,000.00 180,000.00 200,000.00

3. Elf light truck 70,000.00 140,000.00 210,000.00 280,000.00 350,000.00 420,000.00 490,000.00 560,000.00 630,000.00 700,000.00


TOTAL ACCUMULATED DEPRECIATION 149,000.00 298,000.00 447,000.00 596,000.00 745,000.00 894,000.00 1,043,000.00 1,192,000.00 1,341,000.00 1,490,000.00

NET FIXED ASSETS (₧)


2. Building 400,000.00 380,000.00 360,000.00 340,000.00 320,000.00 300,000.00 280,000.00 260,000.00 240,000.00 220,000.00

3. Elf light truck 700,000.00 630,000.00 560,000.00 490,000.00 420,000.00 350,000.00 280,000.00 210,000.00 140,000.00 70,000.00


5. Land 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00

TOTAL NET FIXED ASSETS 1,750,000.00 1,601,000.00 1,452,000.00 1,303,000.00 1,154,000.00 1,005,000.00 856,000.00 707,000.00 558,000.00 409,000.00

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Table 6.5.1.2. Schedule of Amortization on Loaned Amount, Option 1

Year Principal Paid, ₧ Interest Paid, ₧ Total Payment, ₧ Principal Remaining, ₧ 1 188,607.06 339,492.70 528,099.76 1,697,463.50 2 188,607.06 305,543.43 494,150.49 1,508,856.45 3 188,607.06 271,594.16 460,201.22 1,320,249.39 4 188,607.06 237,644.89 426,251.95 1,131,642.34 5 188,607.06 203,695.62 392,302.68 943,035.28 6 188,607.06 169,746.35 358,353.41 754,428.22 7 188,607.06 135,797.08 324,404.14 565,821.17 8 188,607.06 101,847.81 290,454.87 377,214.11 9 188,607.06 67,898.54 256,505.60 188,607.06

10 188,607.06 33,949.27 222,556.33 (0.00)Total 1,886,070.56 1,867,209.85 3,753,280.41

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Table 6.5.1.3. Schedule of Costs (₧) of Goods Manufactured, Option 1

Particular Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Direct Materials

Sacks and threads 78,750.00 94,500.00 113,400.00 136,080.00 163,296.00 195,955.20 235,146.24 282,175.49 338,610.59 406,332.70

Office Supplies 180,000.00 216,000.00 259,200.00 311,040.00 373,248.00 447,897.60 537,477.12 644,972.54 773,967.05 928,760.46

Plant Overhead

Salaries and wages 618,930.00 680,823.00 748,905.30 823,795.83 906,175.41 996,792.95 1,096,472.25 1,206,119.47 1,326,731.42 1,459,404.56

Lubricants, repairs & maintenance 817,200.00 898,920.00 988,812.00 1,087,693.20 1,196,462.52 1,316,108.77 1,447,719.65 1,592,491.61 1,751,740.78 1,926,914.85

Fuel 319,852.80 351,838.08 387,021.89 425,724.08 468,296.48 515,126.13 566,638.75 623,302.62 685,632.88 754,196.17

Electricity 188,100.00 225,720.00 270,864.00 325,036.80 390,044.16 468,052.99 561,663.59 673,996.31 808,795.57 970,554.68

Depreciation 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00

Other Supplies 180,000.00 198,000.00 217,800.00 239,580.00 263,538.00 289,891.80 318,880.98 350,769.08 385,845.99 424,430.58

Others 72,000.00 86,400.00 103,680.00 124,416.00 149,299.20 179,159.04 214,990.85 257,989.02 309,586.82 371,504.19

TOTAL COST OF GOODS 2,570,832.80 2,868,201.08 3,205,683.19 3,589,365.91 4,026,359.78 4,524,984.49 5,094,989.42 5,747,816.15 6,496,911.10 7,358,098.21

ATCHUETE PROD. PRODUCE, kg. 360,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00

COST/kg PRODUCTS MFD 7.14 5.69 6.36 7.12 7.99 8.98 10.11 11.40 12.89 14.60

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Table 6.5.1.4. Schedule of Operating Expenses (₧), Option 1Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Administrative Expenses


Traveling allowance 125,000.00 137,500.00 151,250.00 166,375.00 183,012.50 201,313.75 221,445.13 243,589.64 267,948.60 294,743.46

Fuel and oil 237,052.80 260,758.08 286,833.89 315,517.28 347,069.00 381,775.90 419,953.50 461,948.84 508,143.73 558,958.10

Repairs and Maintenance 792,000.00 871,200.00 958,320.00 1,054,152.00 1,159,567.20 1,275,523.92 1,403,076.31 1,543,383.94 1,697,722.34 1,867,494.57

Supplies and materials 180,000.00 198,000.00 217,800.00 239,580.00 263,538.00 289,891.80 318,880.98 350,769.08 385,845.99 424,430.58

Electricity 188,100.00 225,720.00 270,864.00 325,036.80 390,044.16 468,052.99 561,663.59 673,996.31 808,795.57 970,554.68

Depreciation 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00

Total Administrative Expenses 2,257,082.80 2,490,001.08 2,749,973.19 3,040,456.91 3,365,406.28 3,729,351.32 4,137,491.75 4,595,807.29 5,111,187.65 5,691,585.97

Processing Expenses

Traveling Allowance 72,000.00 79,200.00 87,120.00 95,832.00 105,415.20 115,956.72 127,552.39 140,307.63 154,338.39 169,772.23

Fuel 108,000.00 129,600.00 155,520.00 186,624.00 223,948.80 268,738.56 322,486.27 386,983.53 464,380.23 557,256.28

Supplies and Materials 78,750.00 94,500.00 113,400.00 136,080.00 163,296.00 195,955.20 235,146.24 282,175.49 338,610.59 406,332.70

Total Processing Expenses 258,750.00 303,300.00 356,040.00 418,536.00 492,660.00 580,650.48 685,184.90 809,466.65 957,329.21 1,133,361.21

Insurance 33,800.00 37,180.00 40,898.00 44,987.80 49,486.58 54,435.24 59,878.76 65,866.64 72,453.30 79,698.63

Interest on Capital 339,492.70 305,543.43 271,594.16 237,644.89 203,695.62 169,746.35 135,797.08 101,847.81 67,898.54 33,949.27

Total Operating Expenses 2,889,125.50 3,136,024.51 3,418,505.35 3,741,625.60 4,111,248.48 4,534,183.39 5,018,352.50 5,572,988.38 6,208,868.70 6,938,595.08

Operating Expenses/kg atchuete 8.03 6.22 6.78 7.42 8.16 9.00 9.96 11.06 12.32 13.77

AT 20% INTEREST RATES 377,214.11 339,492.70 301,771.29 264,049.88 226,328.47 188,607.06 150,885.64 113,164.23 75,442.82 37,721.41












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Table 6.5.1.5. Projected Cash (₧) Flow Statement, Option 1

Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Cash Inflows:

Equity Investment 2,357,588.20

Processing Fee 6,350,400.00 9,072,000.00 2,520,000.00 2,520,000.00 2,520,000.00 2,520,000.00 2,520,000.00 2,520,000.00 2,520,000.00 2,520,000.00

Total Cash Inflows 8,707,988.20 8,890,560.00 9,779,616.00 10,757,577.60 11,833,335.36 13,016,668.90 14,318,335.79 15,750,169.36 17,325,186.30 19,057,704.93

Cash Outflows:

Machinery and equipment 460,000.00

Land Acquisition and Development 60,000.00

Building and Structures 400,000.00

Office Equipment and Fixtures 130,000.00

Transport Equipment 700,000.00

Pre-operating Expenses 0.00

Cost of Processing 2,570,832.80 2,868,201.08 3,205,683.19 3,589,365.91 4,026,359.78 4,524,984.49 5,094,989.42 5,747,816.15 6,496,911.10 7,358,098.21

Other Operating Expenses 2,889,125.50 3,136,024.51 3,418,505.35 3,741,625.60 4,111,248.48 4,534,183.39 5,018,352.50 5,572,988.38 6,208,868.70 6,938,595.08

Payment/Loan Amortization 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06

Insurance 33,800.00 37,180.00 40,898.00 44,987.80 49,486.58 54,435.24 59,878.76 65,866.64 72,453.30 79,698.63

Corporate Income Tax 2,036,601.95 2,014,087.42 2,226,388.73 2,455,583.20 2,702,730.41 2,968,869.93 3,254,994.15 3,562,013.34 3,890,711.16 4,241,688.45

Total Cash Outflows 6,898,134.50 5,375,898.99 5,874,399.13 6,430,803.66 7,052,072.52 7,746,095.61 8,521,832.47 9,389,475.42 10,360,640.22 11,448,589.22

Net Cash Flow 1,809,853.70 3,514,661.01 3,905,216.87 4,326,773.94 4,781,262.84 5,270,573.28 5,796,503.32 6,360,693.95 6,964,546.08 7,609,115.71

Cash Balance, Beginning -8,707,988.20 1,809,853.70 5,324,514.71 9,229,731.58 13,556,505.52 18,337,768.36 23,608,341.64 29,404,844.96 35,765,538.91 42,730,084.99

Cash Balance, Ending 1,809,853.70 5,324,514.71 9,229,731.58 13,556,505.52 18,337,768.36 23,608,341.64 29,404,844.96 35,765,538.91 42,730,084.99 50,339,200.70

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Table 6.5.1.6. Net Present Value and Internal Rate of Return Calculations, Option 1

PARTICULARS Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

A. Cash Inflow, ₧ 8,707,988.20 8,890,560.00 9,779,616.00 10,757,577.60 11,833,335.36 13,016,668.90 14,318,335.79 15,750,169.36 17,325,186.30 19,057,704.93

B. Cash Outflow, ₧ 6,898,134.50 5,375,898.99 5,874,399.13 6,430,803.66 7,052,072.52 7,746,095.61 8,521,832.47 9,389,475.42 10,360,640.22 11,448,589.22

C. First Trial

1. Discount Factor, 15% 1.000 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284

2. Present Value of Benefits, ₧ 8,707,988.20 7,734,787.20 7,393,389.70 7,078,486.06 6,768,667.83 6,469,284.44 6,185,521.06 5,922,063.68 5,665,335.92 5,412,388.20

3. Present Value of Costs, ₧ 6,898,134.50 4,677,032.12 4,441,045.74 4,231,468.81 4,033,785.48 3,849,809.52 3,681,431.63 3,530,442.76 3,387,929.35 3,251,399.34

D. Net Present Value -1,809,853.70 3,057,755.08 2,952,343.95 2,847,017.26 2,734,882.34 2,619,474.92 2,504,089.43 2,391,620.92 2,277,406.57 2,160,988.86

E. Internal Rate of Return 165%

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Table 6.5.1.7. Projected Income (₧) Statement, Option 1


Revenues

Gross Sales 6,480,000.00 9,072,000.00 9,979,200.00 10,977,120.00 12,074,832.00 13,282,315.20 14,610,546.72 16,071,601.39 17,678,761.53 19,446,637.68

Less: Sales Returns & allowances 129,600.00 181,440.00 199,584.00 219,542.40 241,496.64 265,646.30 292,210.93 321,432.03 353,575.23 388,932.75

Net Sales 6,350,400.00 8,890,560.00 9,779,616.00 10,757,577.60 11,833,335.36 13,016,668.90 14,318,335.79 15,750,169.36 17,325,186.30 19,057,704.93

Less: Cost of Processing 2,570,832.80 2,868,201.08 3,205,683.19 3,589,365.91 4,026,359.78 4,524,984.49 5,094,989.42 5,747,816.15 6,496,911.10 7,358,098.21

Gross Margin 3,779,567.20 6,022,358.92 6,573,932.81 7,168,211.69 7,806,975.58 8,491,684.41 9,223,346.37 10,002,353.21 10,828,275.20 11,699,606.72

Less: Other Operating Expenses

Administrative Expenses 2,257,082.80 2,490,001.08 2,749,973.19 3,040,456.91 3,365,406.28 3,729,351.32 4,137,491.75 4,595,807.29 5,111,187.65 5,691,585.97

Processing Expenses 258,750.00 303,300.00 356,040.00 418,536.00 492,660.00 580,650.48 685,184.90 809,466.65 957,329.21 1,133,361.21

Insurance 33,800.00 37,180.00 40,898.00 44,987.80 49,486.58 54,435.24 59,878.76 65,866.64 72,453.30 79,698.63

Interest on Investment 339,492.70 305,543.43 271,594.16 237,644.89 203,695.62 169,746.35 135,797.08 101,847.81 67,898.54 33,949.27


Payment/Loan Amortization 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06 188,607.06

Net Income Before Corporate Tax 701,834.64 2,697,727.35 2,966,820.40 3,237,979.03 3,507,120.04 3,768,893.96 4,016,386.82 4,240,757.77 4,430,799.44 4,572,404.58

Corporate Tax, 35% 245,642.13 944,204.57 1,038,387.14 1,133,292.66 1,227,492.02 1,319,112.89 1,405,735.39 1,484,265.22 1,550,779.80 1,600,341.60

Net Income After Tax 456,192.52 1,753,522.78 1,928,433.26 2,104,686.37 2,279,628.03 2,449,781.08 2,610,651.43 2,756,492.55 2,880,019.64 2,972,062.98

Total Annual Net Income 22,191,470.64

Average Annual Net Income 2,219,147.06

Total Investment 2,357,588.20

Total Return On Investments, % 941.28

Average Annual ROI, % 94.13

Payback period, years 5.2

73


Table 6.5.1.8. Sensitivity Analysis, Option 1

PARAMETER

Sensitivity Measures Indicators of the Proposed Project's Soundness

Rental Fees,

₧ /kgIncrease per

Year, %

NPV

₧ , millionIRR, %

Cash PaybackPeriod, yrs

Return onInvestment, %

Accumulated Incomeafter 10th year,

million ₧

Average annualnet income,

million ₧

1. Product Price Level

Level 1 17.00 10 2.63 177 10.4 74.7 17.6 1.8Level 2 18.00 10 3.06 165 5.2 94.1 22.2 2.2Level 3 19.00 10 3.49 158 3.4 113.6 26.8 2.7

2. Cost of raw materials based

on Level 2 prices 18.00 10 3.06 165 5.2 94.1 22.2 2.215 3.06 165 5.2 75.6 17.8 1.820 3.06 165 5.2 35.5 8.4 0.8

Based on Level 3 prices 19.00 10 3.49 158 3.4 113.6 26.8 2.715 3.34 160 3.4 95.1 22.4 2.220 4.72 171 3.4 55.0 13.0 1.3

3. Interest Rates

based on Level 2 prices 18.00 18.0 3.06 165 5.2 94.1 22.2 2.220.0 3.04 167 5.5 93.6 22.1 2.225.0 2.99 170 6.4 92.1 21.7 2.230.0 2.94 174 7.6 90.7 21.4 2.135.0 2.89 160 9.5 89.3 21.0 2.1

74


Table 6.5.2.1. Schedule of Depreciation for Buying, Processing and Marketing of Atchuete, Option 2Item Year 1 Year 2 Year3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

DEPRECIABLE ASSETS (₧)


2. Building 400,000.00

3. Elf light truck 700,000.00

4. Office equipment 130,000.00

TOTAL 1,690,000.00



2. Building 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00

3. Elf light truck 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00 70,000.00


TOTAL ANNUAL DEPRECIATION EXPENSE 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00 149,000.00

ACCUMULATED DEPRECIATION ( )₧


2. Building 20,000.00 40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 140,000.00 160,000.00 180,000.00 200,000.00

3. Elf light truck 70,000.00 140,000.00 210,000.00 280,000.00 350,000.00 420,000.00 490,000.00 560,000.00 630,000.00 700,000.00


TOTAL ACCUMULATED DEPRECIATION 149,000.00 298,000.00 447,000.00 596,000.00 745,000.00 894,000.00 1,043,000.00 1,192,000.00 1,341,000.00 1,490,000.00



2. Building 400,000.00 380,000.00 360,000.00 340,000.00 320,000.00 300,000.00 280,000.00 260,000.00 240,000.00 220,000.00

3. Elf light truck 700,000.00 630,000.00 560,000.00 490,000.00 420,000.00 350,000.00 280,000.00 210,000.00 140,000.00 70,000.00


5. Land 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00

TOTAL NET FIXED ASSETS 1,750,000.00 1,601,000.00 1,452,000.00 1,303,000.00 1,154,000.00 1,005,000.00 856,000.00 707,000.00 558,000.00 409,000.00

75


Table 6.5.2.2. Schedule of Amortization on Loaned Amount, Option 2

Year Principal Paid, ₧ Interest Paid, ₧ Total Payment, ₧ Principal Remaining, ₧1 2,204,607.06 3,968,292.70 6,172,899.76 19,841,463.50 2 2,204,607.06 3,571,463.43 5,776,070.49 17,636,856.45 3 2,204,607.06 3,174,634.16 5,379,241.22 15,432,249.39 4 2,204,607.06 2,777,804.89 4,982,411.95 13,227,642.34 5 2,204,607.06 2,380,975.62 4,585,582.68 11,023,035.28 6 2,204,607.06 1,984,146.35 4,188,753.41 8,818,428.22 7 2,204,607.06 1,587,317.08 3,791,924.14 6,613,821.17 8 2,204,607.06 1,190,487.81 3,395,094.87 4,409,214.11 9 2,204,607.06 793,658.54 2,998,265.60 2,204,607.06

10 2,204,607.06 396,829.27 2,601,436.33 (0.00)Total 22,046,070.56 21,825,609.85 43,871,680.41

76


Table 6.5.2.3. Schedule of Costs (₧) of Goods Manufactured, Option 2

Particular Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Direct Materials

Sacks and threads 78,750.00 94,500.00 113,400.00 136,080.00 163,296.00 195,955.20 235,146.24 282,175.49 338,610.59 406,332.70

Atchuete Raw Materials 25,200,000.00 35,280,000.00 35,280,000.00 35,280,000.00 35,280,000.00 35,280,000.00 35,280,000.00 35,280,000.00 35,280,000.00 35,280,000.00

Office Supplies 180,000.00 216,000.00 259,200.00 311,040.00 373,248.00 447,897.60 537,477.12 644,972.54 773,967.05 928,760.46

Plant Overhead


Lubricants, repairs & maintenance 817,200.00 898,920.00 988,812.00 1,087,693.20 1,196,462.52 1,316,108.77 1,447,719.65 1,592,491.61 1,751,740.78 1,926,914.85

Fuel 319,852.80 351,838.08 387,021.89 425,724.08 468,296.48 515,126.13 566,638.75 623,302.62 685,632.88 754,196.17

Electricity 188,100.00 225,720.00 270,864.00 325,036.80 390,044.16 468,052.99 561,663.59 673,996.31 808,795.57 970,554.68

Depreciation 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00

Other Supplies 180,000.00 198,000.00 217,800.00 239,580.00 263,538.00 289,891.80 318,880.98 350,769.08 385,845.99 424,430.58

Others 72,000.00 86,400.00 103,680.00 124,416.00 149,299.20 179,159.04 214,990.85 257,989.02 309,586.82 371,504.19

TOTAL COST OF GOODS 27,770,832.80 38,148,201.08 38,485,683.19 38,869,365.91 39,306,359.78 39,804,984.49 40,374,989.42 41,027,816.15 41,776,911.10 42,638,098.21

ATCHUETE PROD. PRODUCE, kg. 360,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504,000.00

COST/kg PRODUCTS MFD 77.14 75.69 76.36 77.12 77.99 78.98 80.11 81.40 82.89 84.60

77


Table 6.5.2.4. Schedule of Operating Expenses, ₧ Option 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Administrative Expenses

Salaries and wages 618,930.00 680,823.00 748,905.30 823,795.83 906,175.41 996,792.95 1,096,472.25 1,206,119.47 1,326,731.42 1,459,404.56Traveling allowance 125,000.00 137,500.00 151,250.00 166,375.00 183,012.50 201,313.75 221,445.13 243,589.64 267,948.60 294,743.46Fuel and oil 237,052.80 260,758.08 286,833.89 315,517.28 347,069.00 381,775.90 419,953.50 461,948.84 508,143.73 558,958.10Repairs and Maintenance 792,000.00 871,200.00 958,320.00 1,054,152.00 1,159,567.20 1,275,523.92 1,403,076.31 1,543,383.94 1,697,722.34 1,867,494.57Supplies and materials 180,000.00 198,000.00 217,800.00 239,580.00 263,538.00 289,891.80 318,880.98 350,769.08 385,845.99 424,430.58Electricity 188,100.00 225,720.00 270,864.00 325,036.80 390,044.16 468,052.99 561,663.59 673,996.31 808,795.57 970,554.68Depreciation 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00

Total Administrative Expenses 2,257,082.80 2,490,001.08 2,749,973.19 3,040,456.91 3,365,406.28 3,729,351.32 4,137,491.75 4,595,807.29 5,111,187.65 5,691,585.97 Processing Expenses

Traveling Allowance 72,000.00 79,200.00 87,120.00 95,832.00 105,415.20 115,956.72 127,552.39 140,307.63 154,338.39 169,772.23Fuel 108,000.00 129,600.00 155,520.00 186,624.00 223,948.80 268,738.56 322,486.27 386,983.53 464,380.23 557,256.28Supplies and Materials 78,750.00 94,500.00 113,400.00 136,080.00 163,296.00 195,955.20 235,146.24 282,175.49 338,610.59 406,332.70

Total Processing Expenses 258,750.00 303,300.00 356,040.00 418,536.00 492,660.00 580,650.48 685,184.90 809,466.65 957,329.21 1,133,361.21 Insurance 33,800.00 37,180.00 40,898.00 44,987.80 49,486.58 54,435.24 59,878.76 65,866.64 72,453.30 79,698.63Interest on Capital 3,968,292.70 3,571,463.43 3,174,634.16 2,777,804.89 2,380,975.62 1,984,146.35 1,587,317.08 1,190,487.81 793,658.54 396,829.27 Total Operating Expenses 6,517,925.50 6,401,944.51 6,321,545.35 6,281,785.60 6,288,528.48 6,348,583.39 6,469,872.50 6,661,628.38 6,934,628.70 7,301,475.08 Operating Expenses/kg atchuete 18.11 12.70 12.54 12.46 12.48 12.60 12.84 13.22 13.76 14.49 AT 20% INTEREST RATES 4,409,214.11 3,968,292.70 3,527,371.29 3,086,449.88 2,645,528.47 2,204,607.06 1,763,685.64 1,322,764.23 881,842.82 440,921.41Total Operating Expenses 6,958,846.91 6,798,773.78 6,674,282.48 6,590,430.59 6,553,081.33 6,569,044.10 6,646,241.06 6,793,904.80 7,022,812.98 7,345,567.22Operating Expenses/kg atchuete 19.33 13.49 13.24 13.08 13.00 13.03 13.19 13.48 13.93 14.57 AT 25% INTEREST RATES 5,511,517.64 4,960,365.88 4,409,214.11 3,858,062.35 3,306,910.58 2,755,758.82 2,204,607.06 1,653,455.29 1,102,303.53 551,151.76Total Operating Expenses 8,061,150.44 7,790,846.96 7,556,125.30 7,362,043.06 7,214,463.44 7,120,195.86 7,087,162.48 7,124,595.86 7,243,273.69 7,455,797.57Operating Expenses/kg atchuete 22.39 15.46 14.99 14.61 14.31 14.13 14.06 14.14 14.37 14.79 AT 30% INTEREST RATES 6,613,821.17 5,952,439.05 5,291,056.93 4,629,674.82 3,968,292.70 3,306,910.58 2,645,528.47 1,984,146.35 1,322,764.23 661,382.12Total Operating Expenses 9,163,453.97 8,782,920.13 8,437,968.12 8,133,655.53 7,875,845.56 7,671,347.62 7,528,083.89 7,455,286.92 7,463,734.39 7,566,027.93Operating Expenses/kg atchuete 25.45 17.43 16.74 16.14 15.63 15.22 14.94 14.79 14.81 15.01 AT 35% INTEREST RATES 7,716,124.70 6,944,512.23 6,172,899.76 5,401,287.29 4,629,674.82 3,858,062.35 3,086,449.88 2,314,837.41 1,543,224.94 771,612.47Total Operating Expenses 10,265,757.50 9,774,993.31 9,319,810.95 8,905,268.00 8,537,227.68 8,222,499.39 7,969,005.30 7,785,977.98 7,684,195.10 7,676,258.28Operating Expenses/kg atchuete 28.52 19.39 18.49 17.67 16.94 16.31 15.81 15.45 15.25 15.23

78


Table 6.5.2.5. Projected Cash (₧) Flow Statement. Option 2

Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Cash Inflows:

Equity Investment 27,557,588.20

Processing Fee 17,640,000.00 60,480,000.00 60,480,000.00 60,480,000.00 60,480,000.00 60,480,000.00 60,480,000.00 60,480,000.00 60,480,000.00 60,480,000.00

Total Cash Inflows 45,197,588.20 59,270,400.00 65,197,440.00 71,717,184.00 78,888,902.40 86,777,792.64 95,455,571.90 105,001,129.09 115,501,242.00 127,051,366.20

Cash Outflows:


Land Acquisition and Development 60,000.00

Building and Structures 400,000.00

Office Equipment and Fixtures 130,000.00

Transport Equipment 700,000.00


Cost of Processing 27,770,832.80 38,148,201.08 38,485,683.19 38,869,365.91 39,306,359.78 39,804,984.49 40,374,989.42 41,027,816.15 41,776,911.10 42,638,098.21

Other Operating Expenses 6,517,925.50 6,401,944.51 6,321,545.35 6,281,785.60 6,288,528.48 6,348,583.39 6,469,872.50 6,661,628.38 6,934,628.70 7,301,475.08

Payment/Loan Amortization 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06

Insurance 33,800.00 37,180.00 40,898.00 44,987.80 49,486.58 54,435.24 59,878.76 65,866.64 72,453.30 79,698.63

Corporate Income Tax 13,537,881.95 18,503,959.42 20,606,563.13 22,902,389.44 25,410,130.87 28,150,223.24 31,144,994.79 34,418,825.25 37,998,314.66 41,912,461.89

Total Cash Outflows 24,044,214.50 27,147,690.99 29,173,613.53 31,433,769.90 33,952,752.99 36,757,848.92 39,879,353.11 43,350,927.32 47,210,003.71 51,498,242.66

Net Cash Flow 21,153,373.70 32,122,709.01 36,023,826.47 40,283,414.10 44,936,149.41 50,019,943.72 55,576,218.79 61,650,201.77 68,291,238.29 75,553,123.54

Cash Balance, Beginning -45,197,588.20 21,153,373.70 53,276,082.71 89,299,909.18 129,583,323.28 174,519,472.69 224,539,416.41 280,115,635.21 341,765,836.98 410,057,075.27

Cash Balance, Ending 21,153,373.70 53,276,082.71 89,299,909.18 129,583,323.28 174,519,472.69 224,539,416.41 280,115,635.21 341,765,836.98 410,057,075.27 485,610,198.81

79




A. Cash Inflow, ₧ 45,197,588.20 59,270,400.00 65,197,440.00 71,717,184.00 78,888,902.40 86,777,792.64 95,455,571.90 105,001,129.09 115,501,242.00 127,051,366.20

B. Cash Outflow, ₧ 24,044,214.50 27,147,690.99 29,173,613.53 31,433,769.90 33,952,752.99 36,757,848.92 39,879,353.11 43,350,927.32 47,210,003.71 51,498,242.66

C. First Trial

1. Discount Factor, 15% 1.000 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284

2. Present Value of Benefits, ₧ 45,197,588.20 51,565,248.00 49,289,264.64 47,189,907.07 45,124,452.17 43,128,562.94 41,236,807.06 39,480,424.54 37,768,906.14 36,082,588.00

3. Present Value of Costs, ₧ 24,044,214.50 23,618,491.16 22,055,251.83 20,683,420.59 19,420,974.71 18,268,650.91 17,227,880.54 16,299,948.67 15,437,671.21 14,625,500.92

D. Net Present Value-

21,153,373.70 27,946,756.84 27,234,012.81 26,506,486.48 25,703,477.46 24,859,912.03 24,008,926.52 23,180,475.87 22,331,234.92 21,457,087.09


80


Table 6.5.2.7. Projected Income (₧) Statement, Option 2


Revenues

Gross Sales 43,200,000.00 60,480,000.00 66,528,000.00 73,180,800.00 80,498,880.00 88,548,768.00 97,403,644.80 107,144,009.28 117,858,410.21 129,644,251.23

Less: Sales Returns & allowances 864,000.00 1,209,600.00 1,330,560.00 1,463,616.00 1,609,977.60 1,770,975.36 1,948,072.90 2,142,880.19 2,357,168.20 2,592,885.02

Net Sales 42,336,000.00 59,270,400.00 65,197,440.00 71,717,184.00 78,888,902.40 86,777,792.64 95,455,571.90 105,001,129.09 115,501,242.00 127,051,366.20

Less: Cost of Processing 27,770,832.80 38,148,201.08 38,485,683.19 38,869,365.91 39,306,359.78 39,804,984.49 40,374,989.42 41,027,816.15 41,776,911.10 42,638,098.21

Gross Margin 14,565,167.20 21,122,198.92 26,711,756.81 32,847,818.09 39,582,542.62 46,972,808.15 55,080,582.48 63,973,312.94 73,724,330.90 84,413,267.99


Administrative Expenses 2,257,082.80 2,490,001.08 2,749,973.19 3,040,456.91 3,365,406.28 3,729,351.32 4,137,491.75 4,595,807.29 5,111,187.65 5,691,585.97

Processing Expenses 258,750.00 303,300.00 356,040.00 418,536.00 492,660.00 580,650.48 685,184.90 809,466.65 957,329.21 1,133,361.21

Insurance 33,800.00 37,180.00 40,898.00 44,987.80 49,486.58 54,435.24 59,878.76 65,866.64 72,453.30 79,698.63

Interest on Investment 3,968,29

2.70 3,571,463.43 3,174,634.16 2,777,804.89 2,380,975.62 1,984,146.35 1,587,317.08 1,190,487.81 793,658.54 396,829.27

Total Operating Expenses 6,517,9

25.50 6,401,944.51 6,321,545.35 6,281,785.60 6,288,528.48 6,348,583.39 6,469,872.50 6,661,628.38 6,934,628.70 7,301,475.08

Payment/Loan Amortization 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06 2,204,607.06

Net Income Before Corporate Tax 5,842,634.64 12,515,647.35 18,185,604.40 24,361,425.43 31,089,407.08 38,419,617.70 46,406,102.93 55,107,077.51 64,585,095.15 74,907,185.86

Corporate Tax, 35% 2,044,922.13 4,380,476.57 6,364,961.54 8,526,498.90 10,881,292.48 13,446,866.20 16,242,136.02 19,287,477.13 22,604,783.30 26,217,515.05

Net Income After Tax 3,797,712.52 8,135,170.78 11,820,642.86 15,834,926.53 20,208,114.60 24,972,751.51 30,163,966.90 35,819,600.38 41,980,311.85 48,689,670.81

Total Annual Net Income 241,422,868.74

Average Annual Net Income 24,142,286.87

Total Investment 27,557,588.20




81


Table 6.5.2.8. Sensitivity Analysis, Option 2

PARAMETER

Sensitivity Measures Indicators of the Proposed Project's Soundness

Rental Fees,₧/kg

Increase perYear, %

NPV₧, million

IRR, %Cash Payback

Period, yrsReturn on

Investment, %

Accumulated Incomeafter 10th year,

million ₧

Average annualnet income,

million ₧

1. Product Price Level

Level 1 115.00 10 25.80 130 10.4 79.3 218.5 21.8Level 2 120.00 10 27.95 129 7.3 87.6 241.4 24.1Level 3 125.00 10 30.10 128 5.6 95.9 264.4 26.4

2. Cost of raw materials based

on Level 2 prices 120.00 10 27.95 129 7.3 87.6 241.4 24.115 27.95 129 7.3 46.2 127.3 12.720 27.95 129 7.3 9.1 25.2 2.5

Based on Level 3 prices 125.00 10 30.10 128 5.6 95.9 264.4 26.415 29.34 129 7.3 46.2 127.3 12.720 29.34 129 7.3 9.1 25.2 2.5

3. Interest Rates

based on Level 2 prices 120.00 18.0 27.95 129 7.3 87.6 241.4 24.120.0 27.72 130 7.8 87.0 239.8 24.025.0 27.16 133 9.9 85.6 235.9 23.630.0 26.60 135 13.3 84.2 232.0 23.235.0 26.04 123 20.2 82.7 228.0 22.8

82


Table 6.5.3.1 Schedule of Depreciation, Option 3

Item Year 1 Year 2 Year3 Year 4 Year 5

DEPRECIABLE ASSETS (₧)


TOTAL 230,000.00


1. Machines and Equipment 46,000.00 36,800.00

TOTAL ANNUAL DEPRECIATION EXPENSE 46,000.00 46,000.00

ACCUMULATED DEPRECIATION (₧)

1. Machines and Equipment 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00

TOTAL ACCUMULATED DEPRECIATION 46,000.00


1. Machines and Equipment 230,000.00 184,000.00 138,000.00 92,000.00 46,000.00

TOTAL NET FIXED ASSETS 230,000.00 184,000.00 138,000.00 92,000.00 46,000.00

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Table 6.5.3.2. Schedule of Costs of processed products. Option 3

Particular Year 1 Year 2 Year 3 Year 4 Year 5

Direct Materials

Office Supplies 5,000.00 6,000.00 7,200.00 8,640.00 10,368.00

Plant Overhead

Salaries and wages 43,200.00 43,200.00 43,200.00 43,200.00 43,200.00

Lubricants, repairs & maintenance 4,600.00 5,060.00 5,566.00 6,122.60 6,734.86

Fuel 32,400.00 35,640.00 39,204.00 43,124.40 47,436.84

Interest, 18% 41,400.00 41,400.00 41,400.00 41,400.00 41,400.00

Depreciation 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00

Other Supplies 2,000.00 2,200.00 2,420.00 2,662.00 2,928.20

TOTAL COST OF GOODS 174,600.00 179,500.00 184,990.00 191,149.00 198,067.90

ATCHUETE PROD. PRODUCE, kg. 360,000.00 504,000.00 504,000.00 504,000.00 504,000.00

COST/kg PRODUCTS MFD 0.49 0.36 0.37 0.38 0.39

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Table 6.5.3.3. Projected Cash Flow Statement, Option 3

Particulars Year 0 Year 2 Year 3 Year 4 Year 5 Year 6

Cash Inflows:

Equity Investment 184,000.00

Processing Fee 360,000.00 504,000.00 504,000.00 504000 504,000.00

Total Cash Inflows 184,000.00 360,000.00 504,000.00 504,000.00 504000 504,000.00

Cash Outflows:



Operating expenses 174,600.00 179,500.00 184,990.00 191149 198,067.90

Payment/Loan Amortization 36,800.00 36,800.00 36,800.00 36800 36,800.00

Insurance

Corporate Income Tax

Total Cash Outflows 230,000.00 211,400.00 216,300.00 221,790.00 227949 234,867.90

Net Cash Flow -46,000.00 148,600.00 287,700.00 282,210.00 276051 269,132.10

Cash Balance, Beginning -184,000.00 -46,000.00 102,600.00 390,300.00 672510 948,561.00

Cash Balance, Ending -46,000.00 102,600.00 390,300.00 672,510.00 948561 1,217,693.10

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PARTICULARS Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

A. Cash Inflow 184,000.00 287,700.00 282,210.00 276,051.00 269,132.10 269,132.10

B. Cash Outflow 230,000.00 216,300.00 221,790.00 227,949.00 234,867.90 234,867.90

C. First Trial

1. Discount Factor, 15% 1.000 0.870 0.756 0.658 0.572 0.497

2. Present Value of Benefits 184,000.00 250,299.00 213,350.76 181,641.56 153,943.56 133,758.65

3. Present Value of Costs 230,000.00 188,181.00 167,673.24 149,990.44 134,344.44 116,729.35

D. Net Present Value -46,000.00 62,118.00 45,677.52 31,651.12 19,599.12 17,029.31


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Table 6.5.3.5. PROJECTED INCOME STATEMENT Option 3

PARTICULARS Year 1 Year 2 Year 3 Year 4 Year 5

Revenues

Gross Sales 360,000.00 504,000.00 504,000.00 504,000.00 504,000.00

Less: Sales Returns & allowances

Net Sales 360,000.00 504,000.00 504,000.00 504,000.00 504,000.00

Less: Cost of Processing 174,600.00 179,500.00 184,990.00 191,149.00 198,067.90

Gross Margin 185,400.00 324,500.00 319,010.00 312,851.00 305,932.10


Interest on Investment 41,400.00

41,400.00

41,400.00

41,400.00

41,400.00

Total Operating Expenses 41,400.00 41,400.00 41,400.00 41,400.00 41,400.00

Payment/Loan Amortization 36,800.00 36,800.00 36,800.00 36,800.00 36,800.00

Net Income Before Corporate Tax 107,200.00 246,300.00 240,810.00 234,651.00 227,732.10

Corporate Tax, 35% 37,520.00 86,205.00 84,283.50 82,127.85 79,706.24

Net Income After Tax 69,680.00 160,095.00 156,526.50 152,523.15 148,025.87

Total Annual Net Income 686,850.52

Average Annual Net Income 137,370.10

Total Investment 230,000.00




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Table 6.5.3.5 Continued

AT 0.50/kg processing fee

Revenues

Gross Income 288,000.00 403,200.00 403,200.00 403,200.00 403,200.00

Net Income 288,000.00 403,200.00 403,200.00 403,200.00 403,200.00

Less: Cost of Processing 174,600.00 179,500.00 184,990.00 191,149.00 198,067.90

Gross Margin 113,400.00 223,700.00 218,210.00 212,051.00 205,132.10


Interest on Investment 41,400.00

41,400.00

41,400.00

41,400.00

41,400.00

Total Operating Expenses 41,400.00 41,400.00 41,400.00 41,400.00 41,400.00

Payment/Loan Amortization 36,800.00 36,800.00 36,800.00 36,800.00 36,800.00

Net Income Before Corporate Tax 35,200.00 145,500.00 140,010.00 133,851.00 126,932.10

Corporate Tax, 35%

Net Income After Tax 35,200.00 145,500.00 140,010.00 133,851.00 126,932.10

Total Annual Net Income 35,200.00

Average Annual Net Income 7,040.00

Total Investment 230,000.00




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7.1 EMPLOYMENT GENERATION

The proposed atchuete thresher and processing center will contribute considerably to the employment generation in the area. Depending on the management decision, the plant shall require a labor force for the atchuete processing operations, selling and delivering the finished products to the food processors, household users, cosmetic and textile companies.

A minimum of five (5)-labor force shall be required for a single shift of 8 hours operation per day for processing and distributing the finished atchuete products.

Under Option 3, four laborers shall be employed and can expand to seven when the operations become tedious. One operator can operate the thresher as long as it is mounted on a sled or stationary at a central point of delivery of the farmers’ harvest.

7.2INCOME GENERATION TO THE COMMUNITY

The project will provide income to the members of the community resulting in development and improvement of life. The population can realize livelihood options, as the project becomes a revelation for the rest of the community.

The local government of Abra, as payment for corporate taxes, can generate ₧ 2 million annually for processing atchuete alone. Moreover, for buying, processing and marketing of atchuete, the government can generate ₧ 13 million and above annually. This is in case the local government does not grant tax exception to the cooperator.

7.3 BENEFITS TO BE OFFERED TO THE ATCHUETE USER(s)

The facilities will shorten the processing time by farmers and assure them of better quality achieve products. The dusts of the fruit pulps are very fine that can cause respiratory ailments among farmers. With the thresher and cleaner, they are no longer exposed to these hazards.

CHAPTER 7SOCIAL AND ECONOMIC

DESIRABILITY


The proposed processing center shall produce high quality atchuete products that are more acceptable than the existing atchuete products in the market, and can result in faster selling out of the products.

The availability of the thresher and grader will be an advantage to the farmers as their harvests can be processed in short time possible, leaving the drying operation for them to worry. Moreover, farmers can quickly convert their harvest to cash, availing of the high prices.

7.4 CONTRIBUTION TO THE NATIONAL ECONOMY

The development of the achieve industry can offer benefits to the country and national economy. Surplus production can be exported to other countries that help increase the needed dollar reserves. If local demands can be assured, this will also help conserve our monetary reserves, as no foreign currencies will use in importation.

Assuming the atchuete growers can produce the minimum required amount of 360 metric tons of atchuete annually, this can result in the savings of about US$ 0.5 million ( ₧ 25.2 million) spend for importing this material from other foreign countries.

7.5 ATCHUETE AS TRADITIONAL MEDICINE

All parts of the atchuete tree have medicinal value. For instance, roots and seeds can be concocted and taken as drink to cure fever, diarrhea and urinary infections. Fresh leaves of atchuete can be dipped in oil, heated and applied to burnt skins for fast and economical healing.

7.6 RELATED INDUSTRIES

The proposed project will compliment the planned processing facilities for production of dyes with atchuete as raw material in Tayum, Abra funded by NAFC. Farmers will have an assured market for their products once it becomes operational.

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The proposed project will greatly compliment the agro-forestry program of CHARM contribute to the environmental conservation of the Province of Abra.

8.1IMPACTS ON THE SOIL

The proposed project will have significant positive impact on the soil in the Project Area. The development of growing areas will stabilize the slopes of the hilly and mountainous topography of the towns of Boliney, Bucloc and Sallapadan as the atchuete trees are deep rooted. Moreover, most farmers plant the trees along the roads where the soil conditions have been disturbed by road development work, thereby preventing soil erosion upon establishment of the orchards.

8.2 IMPACTS ON WATER

Conservation of water resources can be enhanced by the project by the development of atchuete plantations in Abra as the roots will hold water and prevent soil erosion. Most of the towns in the project areas have high slopes making them prone to high surface runoff during rainy season, and the only way to conserve this water is planting more trees on the hills and mountains. Thus, growing more atchuete trees will contribute to water conservation and prevent excessive drought during dry season.

8.3 IMPACTS ON THE INHABITANTS AND ANIMALS

With the Project, more and more grasses will be available to animals that can thrive well in between rows of planted atchuete trees; more water will also be available especially during dry season.

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CHAPTER 8ENVIRONMENTAL SPECTS


In addition, aside from the potential income that can be derived by the community from growing atchuete, the project will enhance the production of more fresh air as more and more plants will grow that produce oxygen. Flooding during the rainy days will also be prevented, as more trees will hold runoff water.

The only potential negative impact of the project is when the community tries to increase production by using inorganic fertilizers that will affect the soil, water and the inhabitants as well. To prevent this to happen, it is highly recommended that organic fertilizers be used to enhance production practice integrated pest management when pests and diseases become prevalent.

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