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Feasibility study on the establishment of achuete thresher and processing center in Abra
CHAPTER 1 INTRODUCTION
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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Feasibility study on the establishment of achuete thresher and processing center in Abra 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 Baos 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:
Feasibility study on the establishment of achuete thresher and processing center in Abra 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 Projects Net Present Value (NPV), Benefit Cost Ratio (BCR) and Financial Internal Rate of Return (FIRR) based on a tenyear 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-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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Feasibility study on the establishment of achuete thresher and processing center in Abra 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 assets o 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; and o Other support structures Operating and Pre-operating Expenses o 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, prepaid insurance. flow
Production costs and standard process diagrams; material balance, operating costs.
Feasibility study on the establishment of achuete thresher and processing center in Abra 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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CHAPTER 2 SITUATIONAL
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 6069 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.
Figure 2.2.1. Map of Abra showing the survey study areas.
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Feasibility study on the establishment of achuete thresher and processing center in Abra Table 2.2. Profile of respondents in the study areas.
No. of Barangays No. of Correspondents Age: 20-29 30-39 40-49 50-59 60-69 70-79 80 and Above No Answer Total Sex: Male Female Total 51.2 48.8 100.00 86.7 13.3 100.00 61.3 38.7 100.00 66.40 33.60 100.00 0.0 4.3 13.0 26.1 30.6 21.7 0.0 4.3 100.00 6.7 13.3 30.0 13.3 16.7 16.7 3.3 0.0 100.00 9.7 25.8 38.7 12.9 12.9 0.0 0.0 0.0 100.00 5.50 14.30 27.23 17.40 20.10 12.80 1.10 1.44 100.00 Municipality Bucloc Sallapadan Boliney 5 7 3 23 30 31 % Values Average 5 28
40-49
60-69
80 and up
Salapaddan
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 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
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Boliney
Bucloc
Mean
40 35 30 25 20 15 10 5 0
Bucloc Salapaddan Boliney Mean
20-29
Feasibility study on the establishment of achuete thresher and processing center in Abra 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.
Bucloc Performance of Farm a. Planting Season No Answer b. Owner of the land tiled Self Father Father-in law No Answer Total Total wet atchuete produce (kilograms) harvested per cropping season. 0 1-9 10-19 20-29 30 and Above No Answer Total d. Total wet atchuete produce (kilograms) sold per cropping season. 0 1-9 10-19 20-29 30 and Above No Answer Total e. Average seasonal sale wet atchuete, kg 0 1-24 25-49 50-74 75-99 100-124 125 and Above No Answer Total c. May-Dec. 0.0 100.00 0.00 0.00 0.00 100.00 82.65 0.00 0.00 4.35 13.00 0.00 100.00 95.65 0.00 0.00 4.35 0.00 0.00 100.00 95.65 0.00 0.00 0.00 0.00 4.35 0.00 0.00 100.00 Municipality Sallapadan Boliney % Values May-Aug. 6.70 100.00 0.00 0.00 0.00 100.00 96.67 0.00 0.00 0.00 3.33 0.00 100.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 00.00 100.00
May-Sept.
Average
16.13 95.60 3.20 1.20 0.00 100.00 100.00 0.00 0.00 0.00 0.00 0.00 100.00 100.00 0.00 0.00 0.00 0.00 100.00 100.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 00.00 100.00
7.61 98.52 1.08 0.40 0.00 100.00 93.11 0.00 0.00 1.45 5.44 0.00 100.00 98.55 0.00 0.00 1.45 0.00 0.00 100.00 98.55 0.00 0.00 0.00 0.00 1.45 0.00 0.00 100.00
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Feasibility study on the establishment of achuete thresher and processing center in Abra Table 2.3. Continued.
Bucloc f. Total dried atchuete produced (kilograms) per cropping season. 0 1-9 10-19 20-29 30 and Above No Answer Total g. Total dried atchuete sold (kilograms) per cropping season. 0 1-9 10-19 20-29 30 and Above No Answer Total h. Average seasonal sale of dried atchuete. 0 1-24 25-49 50-74 75-99 100-124 125 and Above No Answer Total 0.00 4.35 26.10 17.40 47.80 4.35 100.00 0.00 4.35 21.70 17.40 47.80 8.75 100.00 0.00 0.00 0.00 8.70 21.70 56.55 4.35 8.70 100.00 Municipality Sallapadan 0.00 10.00 10.00 10.00 66.70 3.30 100.00 0.00 10.00 10.00 10.00 66.70 3.30 100.00 0.00 0.00 6.67 20.00 53.32 13.34 0.00 6.67 100.00 Boliney 0.00 0.00 6.45 16.10 67.75 9.70 100.00 0.00 0.00 6.45 16.10 67.75 9.70 100.00 0.00 0.00 6.45 3.23 12.90 35.48 19.35 22.59 100.00 Average
0.00 4.78 14.18 14.50 60.75 5.79 100.00 0.00 4.78 12.71 14.50 60.75 7.26 100.00 0.00 0.00 4.37 10.64 29.30 35.12 7.90 12.67 100.00
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 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.
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Feasibility study on the establishment of achuete thresher and processing center in Abra 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 1.01.4 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 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%).
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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 prerequisite 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.

Bucloc 1. Area Planted (hectare) 0-0.4 0.5-0.9 1.0-1.4 1.5-1.9 2.0 and Above No Answer Total 2. Land Preparations Cost of Labor (Individual): 100 120 150 Total No. of Manpower Self or 1 2 3 or More Total Animal 1-Carabao 2-Carabao No Answer Total Equipment Used Hoe Sangkap Pick Mattock Sickle Bolo Scythe Crowbar Trowel Total No. of Units: 1 2 3 4 or More Total 43.48 26.08 21.74 0.00 8.70 0.00 100.00 Municipality Sallapadan Boliney % Values 46.66 10.00 16.66 3.33 23.35 0.00 100.00 19.35 12.90 38.72 6.45 12.90 9.68 100.00 Average
36.50 16.32 25.70 3.26 14.98 3.24 100.00
25.00 75.00 0.00 100.00 72.26 13.04 14.70 100.00 0.00 0.00 100.00 100.00 0.00 13.04 8.70 0.00 17.40 00.00 4.35 56.51 100.00 55.56 22.22 0.00 22.22 100.00
100.00 0.00 0.00 100.00 23.34 26.66 50.00 100.00 0.00 0.00 100.00 100.00 0.00 6.66 10.00 13.33 26.69 16.66 16.66 10.00 100.00 23.80 38.12 14.28 23.80 100.00
90.90 0.00 9.10 100.00 12.90 45.16 41.94 100.00 50.00 50.00 0.00 100.00 0.00 9.68 0.00 19.35 29.04 9.68 19.35 12.90 100.00 10.52 42.10 15.78 31.60 100.00
71.96 25.00 3.04 100.00 36.16 28.28 35.56 100.00 16.66 16.66 66.68 100.00 0.00 9.79 6.23 10.89 24.37 8.78 13.45 26.49 100.00 29.96 34.14 10.02 45.88 100.00
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Bucloc 3. Planting Cost of Labor (Individual): 100 120 150 No Answer Total No. of Manpower Self or 1 2 3 or More No answer Total Equipment Used Hoe Sangkap Pick Mattock Sickle Bolo Scythe Crowbar Trowel Barretta No Answer Total No. of Units: 1 2 3 4 or More No Answer Total 4. Irrigation (source of water) Gravity Pump Rainfed Combinations, Rainfed and Rivers Rainfed and Spring Total 5. Management practices in the farm None Integrated Nutrient Management (Organic Farming) Integrated Pest Management Others Total 6. Method of moisture content determination. None "Feel and Sound" Method Use of Moisture Meter Total 69.56 21.74 4.35 4.35 100.00 13.00 87.00 0.00 100.00 80.00 20.00 0.00 0.00 100.00 16.66 83.34 0.00 100.00 87.10 6.45 6.45 0.00 100.00 22.60 77.40 0.00 100.00 78.89 16.06 3.60 1.45 100.00 17.42 82.58 0.00 100.00 4.35 0.00 0.00 0.00 4.35 0.00 0.00 8.70 0.00 82.60 100.00 0.00 0.00 0.00 4.35 95.65 100.00 4.35 0.00 82.60 8.70 4.35 100.00 0.00 0.00 0.00 0.00 3.33 0.00 0.00 0.00 0.00 96.67 100.00 3.33 0.00 0.00 0.00 96.67 100.00 3.33 0.00 93.34 3.33 0.00 100.00 0.00 6.44 0.00 0.00 3.22 0.00 0.00 0.00 3.22 87.12 100.00 0.00 0.00 3.22 3.22 96.56 100.00 0.00 0.00 87.10 12.90 0.00 100.00 1.45 2.15 0.00 0.00 3.63 0.00 0.00 2.90 1.08 88.79 100.00 1.11 0.00 1.08 2.52 95.29 100.00 2.56 0.00 87.65 8.31 1.45 100.00 47.82 8.70 8.70 34.78 100.00 16.66 26.66 56.68 0.00 100.00 16.12 25.80 29.08 29.00 100.00 26.86 20.38 31.86 20.90 100.00 0.00 13.04 0.00 86.96 100.00 Municipality Sallapadan 20.00 0.00 0.00 80.00 100.00 Boliney 22.60 0.00 3.23 74.17 100.00 Average
14.20 4.35 3.80 77.65 100.00
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Feasibility study on the establishment of achuete thresher and processing center in Abra Table 2.5. PostProduction operations and management.
Bucloc 1. Harvesting Method Cost of Labor (Individual): 100 120 150 No Answer Total No. of Manpower Self or 1 2 3 4 or More No Answer Total Equipment Used Basket Sack Bilao "Kuribot" Bolo Sangkap No Answer Total 2. a. Place of stacking harvested atchuete before threshing. field plot road side others: Home Backyard Rice Granary Dry Farm Shade Total b. Got wet due to rain or night dew while stacked. Yes No Total 60.87 0.00 0.00 39.13 0.00 0.00 100.00 34.78 65.22 100.00 50.00 16.67 16.67 10.00 3.33 3.33 100.00 10.00 90.00 100.00 77.45 6.45 3.22 12.88 0.00 0.00 100.00 38.71 61.29 100.00 62.77 7.70 6.63 20.68 1.11 1.11 100.00 27.83 72.17 100.00 Municipality Sallapadan Boliney % Values 16.66 0.00 0.00 83.34 100.00 6.66 30.00 6.66 43.36 13.32 100.00 23.33 0.00 3.33 3.33 36.66 0.00 36.68 100.00 32.26 0.00 3.22 64.52 100.00 3.22 41.99 6.44 32.25 16.10 100.00 16.12 3.22 0.00 0.00 64.52 3.22 12.92 100.00 Average
4.35 0.00 0.00 95.65 100.00 13.04 12.74 0.00 8.70 65.52 100.00 26.00 0.00 4.35 0.00 26.00 0.00 43.65 100.00
17.56 0.00 1.08 81.36 100.00 7.64 28.24 4.36 28.12 31.64 100.00 21.82 1.08 2.56 1.11 42.40 1.08 29.95 100.00
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Feasibility study on the establishment of achuete thresher and processing center in Abra 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
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Feasibility study on the establishment of achuete thresher and processing center in Abra 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 price 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.
20
Bucloc 3. Threshing/Cleaning a. Method of Threshing Cost of Labor (Individual): 100 120 150 No Answer Total No. of Manpower Self or 1 2 3 4 or More No Answer Total Equipment Used Hand Feet Mortar and Pestle Bilao "Kuribot" Wood and Plastic Mat No Answer Total b. Type of storage for paddy . house/own storage warehouse sold immediately Total c. Distance from farm to storage area (km) 0-0.4 0.5-0.9 1.0-1.4 1.5-1.9 2.0 and Above Total d. Drying before threshing required with the threshing method use. Yes No Total If Yes: easily separate the seeds and skin easy threshing dont like to buy wet color will lose for the atchuete become lighter and easy to transport Total e. Cleaning method used: Winnowing basket or "bilao" Mechanical Winnowing Machine Others Total Municipality Sallapada Boliney n Average
0.00 0.00 0.00 100.00 100.00 0.00 4.35 0 0 95.35 100.00 0.00 4.35 26.00 4.35 0.00 0.00 65.30 100.00 86.96 0.00 13.04 100.00 17.65 26.00 26.00 4.35 26.00 100.00 95.65 4.35 100.00 56.52 17.39 0.00 4.35 0.00 100.00 100.00 0.00 0.00 100.00
6.67 0.00 0.00 93.33 100.00 0.00 16.66 3.33 0 80.01 100.00 13.33 3.33 50.00 0.00 33.34 0.00 0.00 100.00 93.33 0.00 6.67 100.00 30.00 0.00 22.58 10.00 37.42 100.00 100.00 0.00 100.00 40.00 16.66 0.00 26.66 0.00 100.00 100.00 0.00 0.00 100.00
19.35 0.00 0.00 81.65 100.00 0.00 6.45 3.22 12.90 77.43 100.00 9.68 0.00 50.00 3.22 3.22 3.22 30.66 100.00 80.65 0.00 19.35 100.00 6.45 19.35 38.70 6.45 29.05 100.00 90.32 9.68 100.00 29.03 22.58 6.45 6.45 3.22 100.00 100.00 0.00 0.00 100.00
6.67 0.00 0.00 93.33 100.00 0.00 9.15 2.18 4.30 84.37 100.00 7.67 2.56 42.00 2.52 12.19 1.08 31.98 100.00 86.98 0.00 13.02 100.00 18.03 15.12 29.09 6.93 30.83 100.00 95.32 4.68 100.00 41.85 18.88 2.15 12.49 1.08 100.00 100.00 0.00 0.00 100.00
21
Table 2.5. Continued.

Bucloc 4. Drying Practices a. Dry atchuete after threshing. for home use: Yes No No Answer Total for sell: Yes No No Answer 26.00 69.56 4.44 100.00 17.40 39.13 43.47 100.00 21.74 60.87 17.39 100.00 13.04 21.74 4.35 60.87 100.00 4.35 0.00 17.40 39.13 0.00 0.00 39.12 100.00 0.00 13.05 13.05 13.05 60.85 100.00 26.00 30.43 4.35 0.00 0.00 4.35 0.00 34.87 100.00 Municipality Sallapadan Boliney 53.33 46.67 0.00 100.00 46.67 36.66 16.67 100.00 46.67 36.66 16.67 100.00 36.67 20.00 0.00 43.33 100.00 10.00 0.00 13.32 46.68 0.00 0.00 30.00 100.00 3.33 3.33 0.00 46.66 46.68 100.00 23.33 16.66 6.66 3.33 0.00 13.33 0.00 36.69 100.00 32.26 67.74 0.00 100.00 32.26 67.74 0.00 100.00 9.68 56.84 33.48 100.00 16.13 13.9 3.22 66.75 100.00 0.00 0.00 6.44 38.70 0.00 9.66 45.20 100.00 0.00 0.00 6.44 19.35 74.21 100.00 6.44 6.44 9.68 0.00 3.22 0.00 0.00 74.22 100.00 Average
37.20 61.32 1.48 100.00 32.11 47.84 20.05 100.00 20.03 51.46 28.51 100.00 21.95 18.55 2.52 56.98 100.00 4.78 0.00 12.39 41.50 0.00 3.22 38.11 100.00 1.11 5.46 6.50 26.35 60.58 100.00 18.59 17.83 6.90 1.11 1.08 5.89 0.00 48.60 100.00
Total Reasons: Yes: Meet the best/required quality of seeds No: Dried already. No Answer Total b. No. of days after threshing to dry atchuete. Immediately after threshing 2-5 days after harvesting more than 5 days after harvesting No Answer Total c. Type of drying facilities used concrete pavements (own) concrete roads public plaza/playground mats/plastic/canvass sheets mechanical dryer others, specify screens No answer Total d. Volume dried per load, (kilograms) 0-9 10-19 20-29 = 3 30 and Above No Answer Total e. Number of hours to dry load. 0-8 9-16 17-24 25-32 33-40 41-48 49 and Above No Answer Total
22
Bucloc f. Cost of labor for drying, (/kilogram)
2.00 2.50 3.00 5.00 100/day No Answer
Municipality Sallapadan Boliney 6.66 0.00 0.00 3.33 0.00 90.01 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 100.00 0.00 6.44 3.22 0.00 6.44 83.90 100.00 3.22 0.00 12.90 0.00 0.00 0.00 0.00 83.88 100.00
Average
Total g. Man-hours required for drying. 0-8 9-16 17-24 25-32 30-40 41-48 49 and Above No Answer Total h. Problems in drying in relation to the type of drying facilities used: lack of space in drying No Answer Total 5. Storage Practices a. Respondents storing atchuete. Yes No Total b. Type of storage: Bag/Sack Storage House Rice Granary No Answer Total 6. Trading Practices a. Atchuete immediately sold after threshing. Yes No Total Days in storage before sale: If No: 0-5 days 6-10 11-15 16 and Above Total
0.00 0.00 0.00 0.00 0.00 100.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 100.00 100.00
3.22 2.14 1.08 1.11 3.22 89.23 100.00 1.08 0.00 4.30 0.00 0.00 0.00 0.00 94.62 100.00
0 100.00 100.00
6.66 93.34 100.00
0.00 100.00 100.00
2.33 97.67 100.00
85.95 14.35 100.00 69.57 13.04 0.00 17.39 100.00
96.66 3.34 100.00 90.00 6.67 3.33 0.00 100.00
87.01 12.99 100.00 87.10 0.00 0.00 12.90 100.00
89.87 10.13 100.00 82.22 6.57 1.11 10.10 100.00
69.57 30.43 100.00 0.00 28.57 57.14 14.29 100.00
63.33 36.67 100.00 63.63 36.37 0.00 0.00 100.00
70.97 29.03 100.00 22.22 55.56 22.22 0.00 100.00
67.96 32.04 100.00 28.62 40.17 26.45 4.76 100.00
23
Bucloc 7. Storage system for grains. None Bag storage Bulk storage Storage House Total 8. Method of selling crops. Direct selling (you mill and sell to retailer/consumers) By contract growing Through middlemen Through cooperatives Others Relatives Myself Neighbors Total 9. Form of selling crop: Wet Dry Total 10. Distance (kilometers) of farm from the market place: 0-0.99 1-1.99 2-2.99 3 and Above No Answer Total 11. Kind of farm to market road: Concrete road Asphalt road Dirt road Concrete and Asphalt road Asphalt and Dirt road Concrete and Dirt road Total 17.40 82.60 0.00 0.00 100.00 26.10 0.00 69.55 0.00 4.35 0.00 0.00 100.00 4.35 95.65 100.00 8.70 21.70 0.00 26.13 43.47 100.00 0.00 0.00 60.87 0.00 0.00 39.13 100.00 6.66 80.00 10.00 3.34 100.00 36.66 0.00 53.34 0.00 0.00 0.00 10.00 100.00 0.00 100.00 100.00 0.00 0.00 0.00 90.00 10.00 100.00 0.00 0.00 63.34 3.33 0.00 33.33 100.00 0.00 90.32 9.68 0.00 100.00 32.25 0.00 51.63 0.00 12.90 0.00 3.22 100.00 0.00 100.00 100.00 0.00 9.70 0.00 70.95 19.35 100.00 3.22 0.00 80.68 0.00 3.22 12.88 100.00 8.02 84.30 6.57 1.11 100.00 31.67 0.00 58.17 0.00 5.75 0.00 4.41 100.00 1.45 98.55 100.00 2.90 10.46 0.00 62.36 24.28 100.00 1.07 0.00 68.31 1.11 1.07 28.44 100.00 Municipality Sallapadan Boliney Average
24
Bucloc 12. Trading Practices a. Price differential for wet and dry: Yes No No Answer Total Differential:
10 20 50
Municipality Sallapadan
Boliney
Average
13.04 34.78 64.18 100.00 0.00 8.70 0 0 0 91.30 100.00 17.4 26.09 0.00 56.51 100.00 50.00 7.14 42.86 0.00 100.00
6.66 20.00 73.34 100.00 0 0 0 3.33 0 96.67 100.00 6.66 56.67 0.00 36.67 100.00 80.00 0.00 0.00 20.00 100.00
22.58 6.45 70.97 100.00 0 0 3.22 9.66 3.22 83.90 100.00 3.22 19.36 0.00 77.42 100.00 100.00 0.00 0.00 0.00 100.00
14.09 20.41 65.50 100.00 0.00 2.90 1.11 4.33 1.11 90.55 100.00 9.09 34.04 0.00 56.87 100.00 76.67 2.38 14.29 6.66 100.00
1/2 Price 30% Price No answer Total b. Most preferred buyer of atchuete:
agent "viajero" landlord wholesaler/retailer Total

others, neighbor friends relatives barter Total Methods of delivering atchuete to the buyer: buyer takes atchuete from the farm farmer delivers the atchuete to the buyer farmer takes atchuete to the buying station others Total d. Transport expenses shouldered by: Buyer Farmer Combination Total e. Common method of payment: cash on delivery installment paid in advance contract buying others Total
69.57 26.09 4.34 0.00 100.00 82.60 13.04 4.36 100.00 100.00 0.00 0.00 0.00 0.00 100.00
56.67 40.00 3.33 0.00 100.00 50.00 50.00 0.00 100.00 93.34 3.33 0.00 3.33 0.00 100.00
58.06 25.82 16.12 0.00 100.00 48.40 38.70 12.90 100.00 93.56 3.22 3.22 0.00 0.00 100.00
61.43 30.64 7.93 0.00 100.00 60.33 23.91 15.76 100.00 95.63 2.18 1.08 1.11 0.00 100.00
25
Feasibility study on the establishment of achuete thresher and processing center in Abra 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) Restaurant Atchuete Middleman Owner Processor 8 2 2 25.0 12.5 37.5 0.0 0.0 12.5 0.0 12.5 100.0 50.0 50.0 100.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 100.0 50.0 50.0 100.0 0.0 0.0 50.0 0.0 0.0 0.0 0.0 50.0 100.0 50.0 50.0 100.0
No. of Correspondents Age: 29and Below 30-39 40-49 50-59 60-69 70-79 80 and Above No Answer Total Sex: Male Female Total
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 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.
26
Feasibility study on the establishment of achuete thresher and processing center in Abra 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 76100 (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 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.
27
Feasibility study on the establishment of achuete thresher and processing center in Abra 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 farmers 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.
28
Table 2.6.2. Market performance of respondents in the study areas.

Classification of User(s) Restaurant Atchuete Middleman Owner Processor 1. Performance of Procurement a. Buying Season No Answer b. Total wet atchuete (kilograms) bought per cropping season: 0 1-25 26-50 51 and Above No Answer c. Total Average seasonal buying wet atchuete, kg 0 1-25 26-50 51-75 76-100 101 and Above No Answer d. Total dried atchuete bought kilograms) per cropping season. 0 1-25 26-50 51 and Above No Answer e. Average seasonal atchuete, kg 0 1-25 26-50 51-75 76-100 101 and Above No Answer sale of Total (in 0.0 0.0 0.0 100.0 0.0 100.0 0.0 0.0 25.0 75.0 0.0 0.0 0.0 100.0 0.0 0.0 50.0 50.0 0.0 100.0 0.0 0.0 0.0 50.0 0.0 50.0 0.0 100.0 0.0 0.0 0.0 100.0 0.0 100.0 0.0 0.0 50.0 0.0 50.0 0.0 0.0 100.0 87.5 0.0 12.5 0.0 0.0 100.0 87.5 0.0 12.5 0.0 0.0 0.0 0.0 100.0 100.0 0.0 0.0 0.0 0.0 100.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 100.0 0.0 0.0 0.0 0.0 100.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 Jan-Dec 0.0 Nov-Dec 0.0 Jan-Dec 0.0
Total dried
Total
29
Table 2.6.2. Continued.

Classification of User(s) Restaurant Atchuete Middleman Owner Processor 2. Method of moisture content determination. None "Feel and Sound" Method Use of Moisture Meter Total 3. Manner of buying atchuete. Direct selling (from farmers) By contract growing Through middlemen Through cooperatives Both Farmers and Middleman Total 4. Form of buying atchuete. Wet Dry Both Wet & Dry Total 5. Cleaning method used: Winnowing basket or "bilao" Mechanical Winnowing Machine Already Cleaned Total 6. Drying Practices a. Drying atchuete after buying/procuring. Yes No Total Reason for drying: Yes: Meet the best/required quality of seeds No: Dried already. Total b. No. of days to dry Immediately after buying 2-5 days after buying more than 5 days after buying Total 0.0 100.0 0.0 100.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 100.0 12.5 87.5 100.0 12.5 87.5 100.0 0.0 100.0 100.0 0.0 100.0 100.0 50.0 50.0 100.0 50.0 50.0 100.0 0.0 100.0 0.0 100.0 12.5 0.0 87.5 0.0 0.0 100.0 0.0 87.5 12.5 100.0 12.5 0.0 87.5 100.0 0.0 100.0 0.0 100.0 0.0 0.0 100.0 0.0 0.0 100.0 0.0 100.0 0.0 100.0 100.0 0.0 0.0 100.0 0.0 50.0 50.0 100.0 0.0 0.0 50.0 0.0 50.0 100.0 0.0 100.0 0.0 100.0 50.0 50.0 0.0 100.0
30
Table 2.6.2. Continued.

Classification of User(s) Restaurant Atchuete Middleman Owner Processor c. Type of drying facilities used: concrete pavements (own) concrete roads public plaza/playground mats/plastic/canvass sheets mechanical dryer others, specify screens corrugated roof metal Total d. Volume dried per load. (kilograms) 0-9 10-19 20-29 = 3 30 and Above No Answer Total e. Number of hours to dry load. 0-8 9-16 17-24 25-32 33-40 41-48 49 and Above No Answer Total f. Labor cost for drying, (/kilogram)
2.00 2.50 3.00 5.00 100/day
50.0 0.0 0.0 50.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 100.0 0.0 100.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 100.0 100.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 None
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 None
0.0 0.0 0.0 0.0 0.0 0.0 100.0 100.0 0.0 0.0 0.0 100.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 100.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 100.0 None 31
Total g. Man-hours required for drying 0-8 9-16 17-24 25-32 30-40 41-48 49 and Above No Answer Total h. Problems in drying in relation to the type of drying facilities used:
Feasibility study on the establishment of achuete thresher and processing center in Abra Table 2.6.3. Continued.
Classification of User(s) Restaurant Atchuete Middleman Owner Processor 7. Storage Practices a. Respondents storing harvest Yes No Total b. Type of storage: Bag/Sack Storage House Rice Granary No Answer Total 8. Distance of storage to market, km 0-0.99 1-1.99 2-2.99 3 and Above No Answer 9. Kind of road from storage to market Concrete road Asphalt road Dirt road Concrete and Asphalt road Asphalt and Dirt road Concrete and Dirt road Total Different towns Different towns Different towns 100.0 0.0 100.0 100.0 0.0 0.0 0.0 100.0 100.0 0.0 100.0 100.0 0.0 0.0 0.0 100.0 100.0 0.0 100.0 100.0 0.0 0.0 0.0 100.0
0.0 0.0 0.0 87.5 0.0 12.5 100.0
50.0 0.0 0.0 0.0 0.0 50.0 100.0
0.0 0.0 0.0 50.0 0.0 50.0 100.0
32
CHAPTER 3 MARKET STUDY

3.1 DESCRIPTION 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.
3.2 CURRENT 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. 3.3 SUPPLY 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
Table 3.3. Atchuete Volume Production by Region/Province, Philippines Calendar Year 1990-2001.
REGION/PROVINCE
PHILIPPINES
1990
62 8 7,500
1991
71 9 9,000
1992
72 8 7,800
1993
72 7 6,500
1994
77 8 7,800
1995
75 8 7,740
1996
75 8 7,750
1997
83 8 7,800
1998
96 8 7,800
1999
98 8 8,054
2000
102 8 8,376
2001
105 8 8,424
CAR Abra Apayao Benguet Ifugao Kalinga Mount Province ILOCOS REGION 7 7 7 7 9 9 10 10 Ilocos Norte 1,060 1,500 1,500 1,500 3,000 3,000 3,600 3,827 Ilocos Sur 3,000 3,400 3,500 3,640 4,000 4,160 4,200 3,500 La Union 2,150 1,600 1,300 1,590 1,290 1,350 1,570 1,830 Pangasinan 750 780 740 700 760 740 760 760 CAGAYAN REGION 2 2 2 2 2 2 2 2 Batanes Cagayan Isabela 1,580 1,600 1,575 1,650 1,300 1,280 1,100 1,000 Nueva Viscaya 500 500 500 500 500 500 510 Quirino 310 CENTRAL LUZON 1 1 1 1 1 1 1 1 Bataan Bulacan Nueva Ecija Pampanga 1,250 1,000 1,000 980 984 960 980 1,000 Tarlac Zambales SOUTHERN 1 2 2 2 2 2 3 6 TAGALOG Aurora Batangas 950 1,000 1,020 1,060 1,050 1,080 1,040 4,690 Cavite Laguna 230 230 231 231 229 224 229 Marinduque Mindoro Occidental Mindoro Oriental Palawan 110 140 140 170 170 170 980 990 Quezon Rizal Romblon 340 340 310 300 300 330 340 350 BICOL REGION 3 3 3 3 4 4 4 5 Albay Camarines Norte Camarines Sur Catanduanes 1,200 1,250 1,240 1,270 1,400 1,360 1,500 1,620 Masbate Sorsogon 1,670 2,000 2,080 2,200 2,664 2,800 2,846 2,900 WESTERN VISAYAS 20 22 22 22 23 21 19 24 Aklan 375 368 360 375 365 383 370 355 Antique 5,120 5,090 5,268 5,392 5,145 5,148 5,230 7,800 Capiz 550 480 490 490 510 500 490 450 Guimaras 3,716 3,497 3,518 3,523 3,325 3,160 1,125 1,000 IloIlo 8,660 9,586 9,886 9,230 10873 8,710 9,110 9,610 Negros Occidental 2,000 2,710 2,800 2,810 3,000 3,100 3,100 4,600 CENTRAL VISAYAS 1 1 1 1 1 1 1 1 Bohol Cebu Negros Oriental 830 856 900 915 950 968 1,000 960 Siquijor Note: National and regional data are in metric tons while provincial data are in kilograms. Year 2001 - Preliminary
12 4,400 4,600 1,830 736 1 600 250 485 3
12 4,512 4,660 1,793 750 1 675 219 450 3
11 4,500 4,700 1,524 640 1 668 223 450 4
12 5,150 4,747 1,509 640 1 670 245 250 4
3,350 6 4,563 228
3,450 5 4,049 227
3,750 6 4,074 220
3,850 6 4,850 220
853 322 4
850 328 4
845 363 4
820 370 4
1,327 3,023 21 374 6,213 350 1,050 9,261 3,870 1 925
1,348 3,136 21 364 6,217 353 1,100 9,499 3,619 1 906
1,437 2,990 22 365 6,208 356 1,150

10250
1,317 3,005 22 360 6,259 352 1,000

10248
3,690 1 930
3,723 1 920
34
Feasibility study on the establishment of achuete thresher and processing center in Abra Figure 3.3.1. Achuete production in the Philippines, regions 1, 2 and CAR, 19902001.
metric ton
120.00 y = 3.7483x + 57.97 R2 = 0.9031
100.00 Philippines 80.00 CAR Region 1 Region 2 60.00 Linear (Philippines) Poly. (Region 1) 40.00
y = -0.0062x + 0.6231x + 5.7045 R2 = 0.8964

y = -0.0007x + 0.0361x - 0.3179x + 8.3547 R2 = 0.24
3 2
Poly. (CAR) Poly. (Region 2)
20.00
y = 0.0511x 2 - 0.3763x + 1.5568 R2 = 0.8538 0.00
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.
19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01
35
Table 3.3. Continued.

REGION/PROVINCE 1990 1991 1992 1993 1994 1995 1996 1997 1998
2 2,473
1999
3 3,424
2000
0
2001
0
EASTERN VISAYAS 0 0 0 0 0 0 0 0 Biliran Eastern Samar Leyte Northern Samar Southern Leyte Western Samar WESTERN 0 0 0 0 0 0 0 0 MINDANAO Basilan Zamboanga City Zamboanga del Norte Zamboanga del Sur NORTHERN 3 3 3 3 3 3 3 3 MINDANAO Bukidnon 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 Camiguin 300 Misamis Occidental Misamis Oriental 320 340 350 310 310 312 312 300 5 5 6 6 6 5 5 6 SOUTHERN MINDANAO Compostela Valley 1,170 1,230 1,260 1,300 1,324 1,335 1,346 1,245 Davao City 2,078 2,200 2,262 2,325 2,370 2,452 2,462 2,581 Davao del Norte 230 260 260 282 302 315 328 324 Davao del Sur Davao Oriental 144 152 172 172 202 Sarangani 1,700 1,710 1,750 1,600 1,600 1,200 1,100 1,210 South Cotabato CENTRAL MINDANAO 10 15 16 18 18 18 18 18 Lanao del Norte 10000 15000 16250 17500 17500 17500 17500 17000 North Cotabato 200 186 200 485 525 640 750 580 Sultan Kudarat CARAGA 1 1 1 1 0 0 0 0 Agusan del Norte Agusan del Sur Surigao del Norte Surigao del Sur 540 540 540 540 480 480 480 480 ARMM 0 0 0 0 0 0 0 0 Lanao del Sur Maguindanao Sulu TawiTawi Note: National and regional data are in metric tons while provincial data are in kilograms. Year 2001 - Preliminary
13
13
14
14
13061
13191
14246
14331
3 2,500 270 300 5 1,293 2,500 329 191 1,115 15

14080
2 1,751 294 300 6 833 1,376 1,663 341 201 1,125 17

16123
2 1,830 158 300 10 1,646 1,396 2,144 418 2,790 324 1,137 17
16200
2 1,888 108 250 11 1,870 1,408 3,041 585 2,903 495 1,041 18
16700
700 0
750 0
1,000 1
1,200 1
480 0
480 0
510 0
520 0
3.4 PROJECTED 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
Feasibility study on the establishment of achuete thresher and processing center in Abra 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.
metric ton
160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 y = 3.7483x + 57.97 R2 = 0.9031
Philippines CAR Region 1 Region 2 Linear (Philippines) Poly. (Region 1)
y = -0.0062x2 + 0.6231x + 5.7045 R2 = 0.8964

3 2
Poly. (CAR) Poly. (Region 2)
y = -0.0007x + 0.0361x - 0.3179x + 8.3547 y = 0.0511x 2 - 0.3763x + 1.5568 R2 = 0.24 R2 = 0.8538
3.5 CURRENT 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.
19 90 19 92 19 94 19 96 19 98 20 00
37
Feasibility study on the establishment of achuete thresher and processing center in Abra Table 3.5. Area planted number of bearing and non-bearing trees, age of trees and estimated yield of achuete in Abra.
Area Planted, ha. 80-300 301-600 601-1 ha Total Yield, kg Year 1982 1987 1992 1997 2002 2003 2004 2005 2006 2007 Projected 177.75 474.00 592.50 833.70 1,111.60 1,667.40 4,446.40 256.20 0 0 0 0 0 449.20 0 0 0 0 Bearing Age, yr. 1-5 0 0 0 0 6-10 2,070.00 200.00 100.00 2,370.00 1,185.00 11-20 2,295.00 663.00 2,600.00 5,558.00 5,558.00 1-5 0 0 0 0 Non bearing Age, yr. 6-10 2,472.00 90.00 2,562.00 768.60 Estimated Yield, kg TOTAL 833.70 1,289.35 2,141.40 5,744.30 8,807.66 13,054.59 18,149.34 24,091.91 30,882.30 11-20 1,816.00 180.00 250.00 2,246.00 1,123.00 8653 1133 2950 12,736 8,634.6 Total
35,000.00 30,000.00 y= 423.91x

2
- 1263.9x+ 1130.3
R2 = 0.949
E stimated P . (Estimated) oly
Yield, kg
25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 -
82
87
92
97
02 0
Year
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.
The product users of atchuete are the food industries, confectionaries, cosmetics, and textile and paint industries. With the current clamor for the
38
Feasibility study on the establishment of achuete thresher and processing center in Abra 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.
3.6 FACTORS 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. 3.7 SUPPLY-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 Mexico 1,052 463 818 1,834 Italy 697 384 389 641 India 44 64 88 124 Netherlands 114 35 173 26 France 136 208 130 136 China 6 91 77 125 Morroco 95 160 84 56 Japan 31 40 44 62 Australia 40 9 4 Peru 5 73 107 91 Germany 308 121 39 181 Ireland 1 2 16 33 Others 223 49 67 144 Total 2,752 1,699 2,036 3,453
2 5 00
4 3 2 y = -65.667x+ 609.5x - 1543.3x + 759.5x + 1292 R2 = 1
1998 1,652 450 318 194 175 90 66 64 53 48 35 34 112 3,291
M ex ico Italy India
2 0 00
1 5 00
4 3 2 y = -11.875x+ 157.75x - 724.63x + 1319.8x - 605 R2 = 1
Netherlands France P oly . (M ex ic o) P oly . (Italy )
metric ton
1 0 00
4 3 2 y = -25.792x+ 246.08x - 672.71x + 369.42x + 780 R2 = 1
50 0
4 3 2 y = 5.75x - 56.167x + 195.25x - 258.83x + 158 R2 = 1
P oly . (India) P oly . (Netherlands )
0 1 9 94 1 99 5 1 99 6 19 97 1 99 8
4 3 2 y = 45.917x- 542.83x + 2217.6x - 3620.7x + 2014 R2 = 1
P oly . (France)
-50 0 Yea r
40
Supply of annatto and natural dyes to the US 15000 metric ton 10000 5000 0
19 94 19 96 19 98
y = 174x 2 - 765.8x + 2885.4 R2 = 0.6007
Poly. (Supply of annatto and natural dyes to the US)
Year
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. 3.8 COMPETITIVENESS 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
3.9 PLANNED 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. Mark-Up Processing/ Activity Price Selling Price Atchuete Processing Buying, Processing and Selling 8.77 40.77 18.00 120.00
42
CHAPTER 4 TECHNICAL STUDY

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: Option 2: Option 3: Operating processing facility with three threshers in each town; Operating a processing facility with procurement and selling processed achuete; and 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
Feasibility study on the establishment of achuete thresher and processing center in Abra 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 SOURCES FACILITY AND INPUT REQUIREMENTS AND
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 tenyear 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
Feasibility study on the establishment of achuete thresher and processing center in Abra Table 4.1. Projected production of the atchuete processing technology. Area for Working Capacity, 8hr Production, Year development Days operation Tons , ha 1 2004 90 1 ton/hr 360 720.0 2 2005 90 1 ton/hr 504 1008.0 3 2006 90 1 ton/hr 504 1008.0 4 2007 90 1 ton/hr 504 1008.0 5 2008 90 1 ton/hr 504 1008.0 6 2009 90 1 ton/hr 504 1008.0 7 2010 90 1 ton/hr 504 1008.0 8 2011 90 1 ton/hr 504 1008.0 9 2012 90 1 ton/hr 504 1008.0 10 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
Feasibility study on the establishment of achuete thresher and processing center in Abra Figure 4.1. Atchuete Postharvest Processing Technology.
Raw Materials
Atchuete Pods
CLEANING
Dirt Removed in the Machine
DRYING
MC final = 9+ 2 %
THRESHING
GRADING
QUALITY TESTING
BAGGING
Atchuete Seeds
STORAGE DISTRIBUTION And MARKETING
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 sack Small leaves less than 15 per 50-kg sack
48
Feasibility study on the establishment of achuete thresher and processing center in Abra Bark Fragments - less than 10 per 50-kg sack 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
50
Feasibility study on the establishment of achuete thresher and processing center in Abra Figure 4.5. Equipment Layout.
51
Feasibility study on the establishment of achuete thresher and processing center in Abra Figure 4.6. Building Layout.
CHAPTER 5 MANAGERIAL/ ADMINISTRATIVE STUDY

5.1 DESCRIPTION OF THE PROJECTS 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.
BOARD OF DIRECTORS
SUPERVISOR BOOKKEEPER
HELPER 1
HELPER 2
DRIVER
52
Feasibility study on the establishment of achuete thresher and processing center in Abra Position Supervisor Secretary/ bookkeeper Helper Driver Job Requirement 1 1 2 1 Salaries 10,000.00 / month 8,000.00 / month 7,000.00 / month 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
CHAPTER 6 FINANCIAL STUDY

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. Machinery and equipment are estimated to incur 10% of original costs as depreciation cost per annum over a ten-year period. Building is expected to have 5% of original cost as depreciation cost per year. Insurance for building and machinery is estimated to be about 2% of the original costs per year. Maintenance costs of machinery and building are estimated to be about 2% of original costs per year. 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. The net sales of product are deemed to increase by 10% per annum with allowances of about 2% for returns and spoilage. 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.
2. 3. 4. 5. 6.
7. 8.
54
Feasibility study on the establishment of achuete thresher and processing center in Abra 9. 10. 6.2 Interest rates on capital investments are estimated to be about 18% per year. All machinery and equipment shall be locally made.
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
55
Feasibility study on the establishment of achuete thresher and processing center in Abra 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). 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.
56
Feasibility study on the establishment of achuete thresher and processing center in Abra 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. 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 LBPs 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 agroindustrial 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.
57
Feasibility study on the establishment of achuete thresher and processing center in Abra 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 (ARCs) and the Comprehensive Agrarian Reform Program. The 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
58
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).
59
Table 6.4.1 Total Investment Requirement for Atchuete Processing Alone (Option 1)
Item A. Machines and Equipment 1. Atchuete Thresher 2. Flat bed dryer 3. Grader/Cleaner 4. Gasoline Engine, 5Hp 5. Platform balance 6. Water pump 7. Moisture meter 8. Bag sewer No. of units 3 1 1 1 1 1 1 1 Unit Cost, 180,000.00 70,000.00 50,000.00 10,000.00 20,000.00 80,000.00 25,000.00 25,000.00 Total Cost, 460,000.00
B. Building C. Land D. Transport 1. Elf light truck E. Office Equipment & fixtures G. Initial Operating Expenses (3 mos.) TOTAL INVESTMENT REQUIREMENT TOTAL AMOUNT TO BE LOANED, 80% COOPERATIVE EQUITY, 20%
80 m2 150 m2
5,000.00 400.00
400,000.00 60,000.00
1 1 lot
700,000.00
700,000.00 130,000.00 607,588.20 2,357,588.20 1,886,070.56 471,517.64
60
Table 6.4.2 Total Investment Requirement for Atchuete Buying, Processing and Marketing (Option 2)
Item A. Machines and Equipment 1. Atchuete Thresher 2. Flat bed dryer 3. Grader/Cleaner 4. Gasoline Engine, 5Hp 5. Platform balance 6. Water pump 7. Moisture meter 8. Bag sewer No. of units 3 1 1 1 1 1 1 1 Unit Cost, 180,000.00 70,000.00 50,000.00 10,000.00 20,000.00 80,000.00 25,000.00 25,000.00 Total Cost, 460,000.00
B. Building C. Land D. Transport 1. Elf light truck E. Office Equipment & fixtures G. Initial Operating Expenses (3 mos.) TOTAL INVESTMENT REQUIREMENT TOTAL AMOUNT TO BE LOANED, 80% COOPERATIVE EQUITY, 20%
80 m2 150 m2
5,000.00 400.00
400,000.00 60,000.00
1 1 lot
700,000.00
700,000.00 130,000.00 25,807,588.20 27,557,588.20 22,046,070.56 5,511,517.64
61
Table 6.4.3 Total Investment Requirement, Option 3

Item No. of units Unit Cost Total Cost
A. Machines and Equipment 1. Atchuete Thresher 2. Grader/Cleaner
230,000.00 3 1 180,000.00 50,000.00
TOTAL INVESTMENT REQUIREMENT TOTAL AMOUNT TO BE LOANED, 80% COOPERATIVE EQUITY, 20%
230,000.00 184,000.00 46,000.00
6.5
FINANCIAL PROJECTIONS 6.5.1 Atchuete Processing Alone 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. 6.5.2 Atchuete Buying, Processing and Marketing 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.
62
Feasibility study on the establishment of achuete thresher and processing center in Abra 6.6.1 Atchuete Processing Alone 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 90day. 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 ) 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. 6.6.2 Atchuete Buying, Processing and Marketing Discounted Cash Flow Analysis 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.
63
Feasibility study on the establishment of achuete thresher and processing center in Abra 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. Accounting Rate of Return Analysis The proposed facility is expected to generate enough cash within a period of seven and half (7 ) 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 Discounted Cash Flow Analysis 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). Accounting Rate of Return Analysis 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 6.7.1 Atchuete Processing Alone
64
Feasibility study on the establishment of achuete thresher and processing center in Abra 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. 6.7.2 Atchuete Buying, Processing and Marketing 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 90Day 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.
65
Table 6.5.1.1. Schedule of Depreciation for Atchuete Processing Alone, Option 1

Item DEPRECIABLE ASSETS ( ) 1. Machines and Equipment 2. Building 3. Elf light truck 4. Office equipment 460,000.00 400,000.00 700,000.00 130,000.00 TOTAL 1,690,000.00 ANNUAL DEPRECIATION EXPENSES () 1. Machines and Equipment 2. Building 3. Elf light truck 4. Office equipment TOTAL ANNUAL DEPRECIATION EXPENSE ACCUMULATED DEPRECIATION () 1. Machines and Equipment 2. Building 3. Elf light truck 4. Office equipment TOTAL ACCUMULATED DEPRECIATION 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 92,000.00 40,000.00 140,000.00 26,000.00 298,000.00 138,000.00 60,000.00 210,000.00 39,000.00 447,000.00 184,000.00 80,000.00 280,000.00 52,000.00 596,000.00 230,000.00 100,000.00 350,000.00 65,000.00 745,000.00 276,000.00 120,000.00 420,000.00 78,000.00 322,000.00 140,000.00 490,000.00 91,000.00 368,000.00 160,000.00 560,000.00 104,000.00 414,000.00 180,000.00 630,000.00 117,000.00 460,000.00 200,000.00 700,000.00 130,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 Year 1 Year 2 Year3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
894,000.00 1,043,000.00 1,192,000.00 1,341,000.00 1,490,000.00
NET FIXED ASSETS () 1. Machines and Equipment 2. Building 3. Elf light truck 4. Office equipment 5. Land TOTAL NET FIXED ASSETS 460,000.00 400,000.00 700,000.00 130,000.00 60,000.00 414,000.00 380,000.00 630,000.00 117,000.00 60,000.00 368,000.00 360,000.00 560,000.00 104,000.00 60,000.00 322,000.00 340,000.00 490,000.00 91,000.00 60,000.00 276,000.00 320,000.00 420,000.00 78,000.00 60,000.00 230,000.00 300,000.00 350,000.00 65,000.00 60,000.00 184,000.00 280,000.00 280,000.00 52,000.00 60,000.00 856,000.00 138,000.00 260,000.00 210,000.00 39,000.00 60,000.00 707,000.00 92,000.00 240,000.00 140,000.00 26,000.00 60,000.00 558,000.00 46,000.00 220,000.00 70,000.00 13,000.00 60,000.00 409,000.00
1,750,000.00 1,601,000.00 1,452,000.00 1,303,000.00 1,154,000.00 1,005,000.00
66
Table 6.5.1.2. Schedule of Amortization on Loaned Amount, Option 1

Year 1 2 3 4 5 6 7 8 9 10 Total Principal Paid, Interest Paid, Total Payment, Principal Remaining, 188,607.06 339,492.70 528,099.76 1,697,463.50 188,607.06 305,543.43 494,150.49 1,508,856.45 188,607.06 271,594.16 460,201.22 1,320,249.39 188,607.06 237,644.89 426,251.95 1,131,642.34 188,607.06 203,695.62 392,302.68 943,035.28 188,607.06 169,746.35 358,353.41 754,428.22 188,607.06 135,797.08 324,404.14 565,821.17 188,607.06 101,847.81 290,454.87 377,214.11 188,607.06 67,898.54 256,505.60 188,607.06 188,607.06 33,949.27 222,556.33 (0.00) 1,886,070.56 1,867,209.85 3,753,280.41
67
Table 6.5.1.3. Schedule of Costs () of Goods Manufactured, Option 1

Particular Direct Materials Sacks and threads Office Supplies 78,750.00 180,000.00 94,500.00 216,000.00 113,400.00 259,200.00 136,080.00 311,040.00 163,296.00 373,248.00 195,955.20 447,897.60 235,146.24 537,477.12 282,175.49 644,972.54 338,610.59 773,967.05 406,332.70 928,760.46 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Plant Overhead Salaries and wages Lubricants, repairs & maintenance Fuel Electricity Depreciation Other Supplies Others TOTAL COST OF GOODS ATCHUETE PROD. PRODUCE, kg. COST/kg PRODUCTS MFD 618,930.00 817,200.00 319,852.80 188,100.00 116,000.00 180,000.00 72,000.00 2,570,832.80 360,000.00 7.14 680,823.00 898,920.00 351,838.08 225,720.00 116,000.00 198,000.00 86,400.00 2,868,201.08 504,000.00 5.69 748,905.30 988,812.00 387,021.89 270,864.00 116,000.00 217,800.00 103,680.00 3,205,683.19 504,000.00 6.36 823,795.83 1,087,693.20 425,724.08 325,036.80 116,000.00 239,580.00 124,416.00 3,589,365.91 504,000.00 7.12 906,175.41 1,196,462.52 468,296.48 390,044.16 116,000.00 263,538.00 149,299.20 4,026,359.78 504,000.00 7.99 996,792.95 1,316,108.77 515,126.13 468,052.99 116,000.00 289,891.80 179,159.04 4,524,984.49 504,000.00 8.98 1,096,472.25 1,447,719.65 566,638.75 561,663.59 116,000.00 318,880.98 214,990.85 5,094,989.42 504,000.00 10.11 1,206,119.47 1,592,491.61 623,302.62 673,996.31 116,000.00 350,769.08 257,989.02 5,747,816.15 504,000.00 11.40 1,326,731.42 1,751,740.78 685,632.88 808,795.57 116,000.00 385,845.99 309,586.82 6,496,911.10 504,000.00 12.89 1,459,404.56 1,926,914.85 754,196.17 970,554.68 116,000.00 424,430.58 371,504.19 7,358,098.21 504,000.00 14.60
68
Table 6.5.1.4. Schedule of Operating Expenses (), Option 1

Year 1 Administrative Expenses Salaries and wages Traveling allowance Fuel and oil Repairs and Maintenance Supplies and materials Electricity Depreciation Total Administrative Expenses Processing Expenses Traveling Allowance Fuel Supplies and Materials Total Processing Expenses Insurance Interest on Capital Total Operating Expenses Operating Expenses/kg atchuete AT 20% INTEREST RATES Total Operating Expenses Operating Expenses/kg atchuete AT 25% INTEREST RATES Total Operating Expenses Operating Expenses/kg atchuete AT 30% INTEREST RATES Total Operating Expenses Operating Expenses/kg atchuete AT 35% INTEREST RATES Total Operating Expenses Operating Expenses/kg atchuete 72,000.00 108,000.00 78,750.00 258,750.00 33,800.00 79,200.00 129,600.00 94,500.00 303,300.00 37,180.00 87,120.00 155,520.00 113,400.00 356,040.00 40,898.00 95,832.00 186,624.00 136,080.00 418,536.00 44,987.80 105,415.20 223,948.80 163,296.00 492,660.00 49,486.58 115,956.72 268,738.56 195,955.20 580,650.48 54,435.24 127,552.39 322,486.27 235,146.24 685,184.90 59,878.76 140,307.63 386,983.53 282,175.49 809,466.65 65,866.64 154,338.39 464,380.23 338,610.59 957,329.21 72,453.30 67,898.54 6,208,868.70 12.32 75,442.82 6,216,412.98 12.33 94,303.53 6,235,273.69 12.37 113,164.23 6,254,134.39 12.41 132,024.94 6,272,995.10 12.45 169,772.23 557,256.28 406,332.70 1,133,361.21 79,698.63 33,949.27 6,938,595.08 13.77 37,721.41 6,942,367.22 13.77 47,151.76 6,951,797.57 13.79 56,582.12 6,961,227.93 13.81 66,012.47 6,970,658.28 13.83 618,930.00 125,000.00 237,052.80 792,000.00 180,000.00 188,100.00 116,000.00 2,257,082.80 680,823.00 137,500.00 260,758.08 871,200.00 198,000.00 225,720.00 116,000.00 2,490,001.08 748,905.30 151,250.00 286,833.89 958,320.00 217,800.00 270,864.00 116,000.00 2,749,973.19 823,795.83 166,375.00 315,517.28 1,054,152.00 239,580.00 325,036.80 116,000.00 3,040,456.91 906,175.41 183,012.50 347,069.00 1,159,567.20 263,538.00 390,044.16 116,000.00 3,365,406.28 996,792.95 201,313.75 381,775.90 1,275,523.92 289,891.80 468,052.99 116,000.00 3,729,351.32 1,096,472.25 221,445.13 419,953.50 1,403,076.31 318,880.98 561,663.59 116,000.00 4,137,491.75 1,206,119.47 243,589.64 461,948.84 1,543,383.94 350,769.08 673,996.31 116,000.00 4,595,807.29 1,326,731.42 267,948.60 508,143.73 1,697,722.34 385,845.99 808,795.57 116,000.00 5,111,187.65 1,459,404.56 294,743.46 558,958.10 1,867,494.57 424,430.58 970,554.68 116,000.00 5,691,585.97 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
339,492.70 305,543.43 271,594.16 237,644.89 203,695.62 169,746.35 135,797.08 101,847.81 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 8.03 377,214.11 2,926,846.91 8.13 471,517.64 3,021,150.44 8.39 565,821.17 3,115,453.97 8.65 660,124.70 3,209,757.50 8.92 6.22 339,492.70 3,169,973.78 6.29 424,365.88 3,254,846.96 6.46 509,239.05 3,339,720.13 6.63 594,112.23 3,424,593.31 6.79 6.78 301,771.29 3,448,682.48 6.84 377,214.11 3,524,125.30 6.99 452,656.93 3,599,568.12 7.14 528,099.76 3,675,010.95 7.29 7.42 264,049.88 3,768,030.59 7.48 330,062.35 3,834,043.06 7.61 396,074.82 3,900,055.53 7.74 462,087.29 3,966,068.00 7.87 8.16 226,328.47 4,133,881.33 8.20 282,910.58 4,190,463.44 8.31 339,492.70 4,247,045.56 8.43 396,074.82 4,303,627.68 8.54 9.00 188,607.06 4,553,044.10 9.03 235,758.82 4,600,195.86 9.13 282,910.58 4,647,347.62 9.22 330,062.35 4,694,499.39 9.31 9.96 150,885.64 5,033,441.06 9.99 188,607.06 5,071,162.48 10.06 226,328.47 5,108,883.89 10.14 264,049.88 5,146,605.30 10.21 11.06 113,164.23 5,584,304.80 11.08 141,455.29 5,612,595.86 11.14 169,746.35 5,640,886.92 11.19 198,037.41 5,669,177.98 11.25
69
Table 6.5.1.5. Projected Cash () Flow Statement, Option 1

Particulars Cash Inflows: Equity Investment Processing Fee Total Cash Inflows Cash Outflows: Machinery and equipment Land Acquisition and Development Building and Structures Office Equipment and Fixtures Transport Equipment Pre-operating Expenses Cost of Processing Other Operating Expenses Payment/Loan Amortization Insurance Corporate Income Tax Total Cash Outflows Net Cash Flow Cash Balance, Beginning Cash Balance, Ending 460,000.00 60,000.00 400,000.00 130,000.00 700,000.00 0.00 2,570,832.80 2,889,125.50 188,607.06 33,800.00 2,036,601.95 6,898,134.50 1,809,853.70 -8,707,988.20 1,809,853.70 2,868,201.08 3,136,024.51 188,607.06 37,180.00 2,014,087.42 5,375,898.99 3,514,661.01 1,809,853.70 5,324,514.71 3,205,683.19 3,418,505.35 188,607.06 40,898.00 2,226,388.73 5,874,399.13 3,905,216.87 5,324,514.71 3,589,365.91 3,741,625.60 188,607.06 44,987.80 2,455,583.20 6,430,803.66 4,326,773.94 4,026,359.78 4,111,248.48 188,607.06 49,486.58 2,702,730.41 7,052,072.52 4,781,262.84 4,524,984.49 4,534,183.39 188,607.06 54,435.24 2,968,869.93 7,746,095.61 5,270,573.28 5,094,989.42 5,018,352.50 188,607.06 59,878.76 3,254,994.15 8,521,832.47 5,796,503.32 5,747,816.15 5,572,988.38 188,607.06 65,866.64 3,562,013.34 6,360,693.95 6,496,911.10 6,208,868.70 188,607.06 72,453.30 3,890,711.16 6,964,546.08 7,358,098.21 6,938,595.08 188,607.06 79,698.63 4,241,688.45 7,609,115.71 2,357,588.20 6,350,400.00 8,707,988.20 9,072,000.00 8,890,560.00 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 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 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
9,389,475.42 10,360,640.22 11,448,589.22
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
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
70
Table 6.5.1.6. Net Present Value and Internal Rate of Return Calculations, Option 1
PARTICULARS A. Cash Inflow, Year 1 8,707,988.20 Year 2 8,890,560.00 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 19,057,704.93
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
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%
Table 6.5.1.7. Projected Income () Statement, Option 1
71
PARTICULARS Revenues Gross Sales Less: Sales Returns & allowances Net Sales Less: Cost of Processing Gross Margin Less: Other Operating Expenses Administrative Expenses Processing Expenses Insurance Interest on Investment Total Operating Expenses Payment/Loan Amortization Net Income Before Corporate Tax Corporate Tax, 35% Net Income After Tax Total Annual Net Income Average Annual Net Income Total Investment Total Return On Investments, % Average Annual ROI, % Payback period, years
Year 1 6,480,000.00 129,600.00 6,350,400.00 2,570,832.80 3,779,567.20
Year 2 9,072,000.00 181,440.00 8,890,560.00 2,868,201.08 6,022,358.92
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
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 19,446,637.68 199,584.00 219,542.40 241,496.64 265,646.30 292,210.93 321,432.03 353,575.23 388,932.75 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 3,205,683.19 6,573,932.81 3,589,365.91 7,168,211.69 4,026,359.78 7,806,975.58 4,524,984.49 8,491,684.41 5,094,989.42 5,747,816.15 6,496,911.10 7,358,098.21
9,223,346.37 10,002,353.21 10,828,275.20 11,699,606.72
2,257,082.80 258,750.00 33,800.00 339,492.70 2,889,125.50 188,607.06 701,834.64 245,642.13 456,192.52 22,191,470.64 2,219,147.06 2,357,588.20 941.28 94.13 5.2
2,490,001.08 303,300.00 37,180.00 305,543.43 3,136,024.51 188,607.06 2,697,727.35 944,204.57 1,753,522.78
2,749,973.19 356,040.00 40,898.00 271,594.16 3,418,505.35 188,607.06 2,966,820.40 1,038,387.14 1,928,433.26
3,040,456.91 418,536.00 44,987.80 237,644.89 3,741,625.60 188,607.06 3,237,979.03 1,133,292.66 2,104,686.37
3,365,406.28 492,660.00 49,486.58 203,695.62 4,111,248.48 188,607.06 3,507,120.04 1,227,492.02 2,279,628.03
3,729,351.32 580,650.48 54,435.24 169,746.35 4,534,183.39 188,607.06 3,768,893.96 1,319,112.89 2,449,781.08
4,137,491.75 685,184.90 59,878.76 135,797.08 5,018,352.49 188,607.06 4,016,386.82 1,405,735.39 2,610,651.43
4,595,807.29 809,466.65 65,866.64 101,847.81 5,572,988.39 188,607.06 4,240,757.77 1,484,265.22 2,756,492.55
5,111,187.65 957,329.21 72,453.30 67,898.54 6,208,868.70 188,607.06 4,430,799.44 1,550,779.80 2,880,019.64
5,691,585.97 1,133,361.21 79,698.63 33,949.27 6,938,595.08 188,607.06 4,572,404.58 1,600,341.60 2,972,062.98
72
Table 6.5.1.8. Sensitivity Analysis, Option 1

Sensitivity Measures PARAMETER Rental Fees, Increase per Year, % /kg Indicators of the Proposed Project's Soundness NPV Cash Payback Return on Period, yrs Investment, % Accumulated Income Average annual after 10th year, net income, million million
, million
IRR, %
1. Product Price Level Level 1 Level 2 Level 3 2. Cost of raw materials based on Level 2 prices
17.00 18.00 19.00
10 10 10
2.63 3.06 3.49
177 165 158
10.4 5.2 3.4
74.7 94.1 113.6
17.6 22.2 26.8
1.8 2.2 2.7
18.00
10 15 20 10 15 20
3.06 3.06 3.06 3.49 3.34 4.72
165 165 165 158 160 171
5.2 5.2 5.2 3.4 3.4 3.4
94.1 75.6 35.5 113.6 95.1 55.0
22.2 17.8 8.4 26.8 22.4 13.0
2.2 1.8 0.8 2.7 2.2 1.3
Based on Level 3 prices
19.00
3. Interest Rates based on Level 2 prices
18.00
18.0 20.0 25.0 30.0 35.0
3.06 3.04 2.99 2.94 2.89
165 167 170 174 160
5.2 5.5 6.4 7.6 9.5
94.1 93.6 92.1 90.7 89.3
22.2 22.1 21.7 21.4 21.0
2.2 2.2 2.2 2.1 2.1
73
Table 6.5.2.1. Schedule of Depreciation for Buying, Processing and Marketing of Atchuete, Option 2
Item DEPRECIABLE ASSETS () 1. Machines and Equipment 2. Building 3. Elf light truck 4. Office equipment 460,000.00 400,000.00 700,000.00 130,000.00 TOTAL 1,690,000.00 ANNUAL DEPRECIATION EXPENSES () 1. Machines and Equipment 2. Building 3. Elf light truck 4. Office equipment TOTAL ANNUAL DEPRECIATION EXPENSE ACCUMULATED DEPRECIATION () 1. Machines and Equipment 2. Building 3. Elf light truck 4. Office equipment TOTAL ACCUMULATED DEPRECIATION 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 92,000.00 40,000.00 140,000.00 26,000.00 298,000.00 138,000.00 60,000.00 210,000.00 39,000.00 447,000.00 184,000.00 80,000.00 280,000.00 52,000.00 596,000.00 230,000.00 100,000.00 350,000.00 65,000.00 745,000.00 276,000.00 120,000.00 420,000.00 78,000.00 322,000.00 140,000.00 490,000.00 91,000.00 368,000.00 160,000.00 560,000.00 104,000.00 414,000.00 180,000.00 630,000.00 117,000.00 460,000.00 200,000.00 700,000.00 130,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 46,000.00 20,000.00 70,000.00 13,000.00 149,000.00 Year 1 Year 2 Year3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
894,000.00 1,043,000.00 1,192,000.00 1,341,000.00 1,490,000.00
NET FIXED ASSETS () 1. Machines and Equipment 2. Building 3. Elf light truck 4. Office equipment 5. Land TOTAL NET FIXED ASSETS 460,000.00 400,000.00 700,000.00 130,000.00 60,000.00 414,000.00 380,000.00 630,000.00 117,000.00 60,000.00 368,000.00 360,000.00 560,000.00 104,000.00 60,000.00 322,000.00 340,000.00 490,000.00 91,000.00 60,000.00 276,000.00 320,000.00 420,000.00 78,000.00 60,000.00 230,000.00 300,000.00 350,000.00 65,000.00 60,000.00 184,000.00 280,000.00 280,000.00 52,000.00 60,000.00 856,000.00 138,000.00 260,000.00 210,000.00 39,000.00 60,000.00 707,000.00 92,000.00 240,000.00 140,000.00 26,000.00 60,000.00 558,000.00 46,000.00 220,000.00 70,000.00 13,000.00 60,000.00 409,000.00
1,750,000.00 1,601,000.00 1,452,000.00 1,303,000.00 1,154,000.00 1,005,000.00
74
Table 6.5.2.2. Schedule of Amortization on Loaned Amount, Option 2

Year 1 2 3 4 5 6 7 8 9 10 Total Principal Paid, Interest Paid, Total Payment, Principal Remaining, 2,204,607.06 3,968,292.70 6,172,899.76 19,841,463.50 2,204,607.06 3,571,463.43 5,776,070.49 17,636,856.45 2,204,607.06 3,174,634.16 5,379,241.22 15,432,249.39 2,204,607.06 2,777,804.89 4,982,411.95 13,227,642.34 2,204,607.06 2,380,975.62 4,585,582.68 11,023,035.28 2,204,607.06 1,984,146.35 4,188,753.41 8,818,428.22 2,204,607.06 1,587,317.08 3,791,924.14 6,613,821.17 2,204,607.06 1,190,487.81 3,395,094.87 4,409,214.11 2,204,607.06 793,658.54 2,998,265.60 2,204,607.06 2,204,607.06 396,829.27 2,601,436.33 (0.00) 22,046,070.56 21,825,609.85 43,871,680.41
75
Table 6.5.2.3. Schedule of Costs () of Goods Manufactured, Option 2

Particular Direct Materials Sacks and threads Atchuete Raw Materials Office Supplies 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 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
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 35,280,000.00 180,000.00 216,000.00 259,200.00 311,040.00 373,248.00 447,897.60 537,477.12 644,972.54 773,967.05 928,760.46
Plant Overhead Salaries and wages Lubricants, repairs & maintenance Fuel Electricity Depreciation Other Supplies Others TOTAL COST OF GOODS ATCHUETE PROD. PRODUCE, kg. COST/kg PRODUCTS MFD 618,930.00 817,200.00 319,852.80 188,100.00 116,000.00 180,000.00 72,000.00 680,823.00 898,920.00 351,838.08 225,720.00 116,000.00 198,000.00 86,400.00 748,905.30 988,812.00 387,021.89 270,864.00 116,000.00 217,800.00 103,680.00 823,795.83 1,087,693.20 425,724.08 325,036.80 116,000.00 239,580.00 124,416.00 906,175.41 1,196,462.52 468,296.48 390,044.16 116,000.00 263,538.00 149,299.20 996,792.95 1,316,108.77 515,126.13 468,052.99 116,000.00 289,891.80 179,159.04 1,096,472.25 1,447,719.65 566,638.75 561,663.59 116,000.00 318,880.98 214,990.85 1,206,119.47 1,592,491.61 623,302.62 673,996.31 116,000.00 350,769.08 257,989.02 1,326,731.42 1,751,740.78 685,632.88 808,795.57 116,000.00 385,845.99 309,586.82 1,459,404.56 1,926,914.85 754,196.17 970,554.68 116,000.00 424,430.58 371,504.19
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 42,638,098.21 360,000.00 77.14 504,000.00 75.69 504,000.00 76.36 504,000.00 77.12 504,000.00 77.99 504,000.00 78.98 504,000.00 80.11 504,000.00 81.40 504,000.00 82.89 504,000.00 84.60
76
Table 6.5.2.4. Schedule of Operating Expenses, Option 2

Year 1 Administrative Expenses Salaries and wages Traveling allowance Fuel and oil Repairs and Maintenance Supplies and materials Electricity Depreciation Total Administrative Expenses Processing Expenses Traveling Allowance Fuel Supplies and Materials Total Processing Expenses Insurance Interest on Capital Total Operating Expenses Operating Expenses/kg atchuete AT 20% INTEREST RATES Total Operating Expenses Operating Expenses/kg atchuete AT 25% INTEREST RATES Total Operating Expenses Operating Expenses/kg atchuete AT 30% INTEREST RATES Total Operating Expenses Operating Expenses/kg atchuete Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 1,459,404.56 294,743.46 558,958.10 1,867,494.57 424,430.58 970,554.68 116,000.00 5,691,585.97 169,772.23 557,256.28 406,332.70 1,133,361.21 79,698.63 396,829.27 7,301,475.08 14.49 440,921.41 7,345,567.22 14.57 551,151.76 7,455,797.57 14.79 661,382.12 7,566,027.93 15.01 771,612.47 7,676,258.28 15.23 618,930.00 680,823.00 748,905.30 823,795.83 906,175.41 996,792.95 1,096,472.25 125,000.00 137,500.00 151,250.00 166,375.00 183,012.50 201,313.75 221,445.13 237,052.80 260,758.08 286,833.89 315,517.28 347,069.00 381,775.90 419,953.50 792,000.00 871,200.00 958,320.00 1,054,152.00 1,159,567.20 1,275,523.92 1,403,076.31 180,000.00 198,000.00 217,800.00 239,580.00 263,538.00 289,891.80 318,880.98 188,100.00 225,720.00 270,864.00 325,036.80 390,044.16 468,052.99 561,663.59 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 116,000.00 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 72,000.00 108,000.00 78,750.00 258,750.00 79,200.00 129,600.00 94,500.00 303,300.00 87,120.00 155,520.00 113,400.00 356,040.00 95,832.00 186,624.00 136,080.00 418,536.00 105,415.20 223,948.80 163,296.00 492,660.00 115,956.72 268,738.56 195,955.20 580,650.48 127,552.39 322,486.27 235,146.24 685,184.90 1,206,119.47 1,326,731.42 243,589.64 267,948.60 461,948.84 508,143.73 1,543,383.94 1,697,722.34 350,769.08 385,845.99 673,996.31 808,795.57 116,000.00 116,000.00 4,595,807.29 5,111,187.65 140,307.63 386,983.53 282,175.49 809,466.65 65,866.64 1,190,487.81 154,338.39 464,380.23 338,610.59 957,329.21 72,453.30 793,658.54
33,800.00 37,180.00 40,898.00 44,987.80 49,486.58 54,435.24 59,878.76 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 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 18.11 12.70 12.54 12.46 12.48 12.60 12.84
6,661,628.38 6,934,628.70 13.22 13.76
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 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 19.33 13.49 13.24 13.08 13.00 13.03 13.19 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 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 22.39 15.46 14.99 14.61 14.31 14.13 14.06 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 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 25.45 17.43 16.74 16.14 15.63 15.22 14.94
1,322,764.23 881,842.82 6,793,904.80 7,022,812.98 13.48 13.93 1,653,455.29 1,102,303.53 7,124,595.86 7,243,273.69 14.14 14.37 1,984,146.35 1,322,764.23 7,455,286.92 7,463,734.39 14.79 14.81 2,314,837.41 1,543,224.94 7,785,977.98 7,684,195.10 15.45 15.25
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 Total 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 Operating Expenses/kg atchuete 28.52 19.39 18.49 17.67 16.94 16.31 15.81
77
Table 6.5.2.5. Projected Cash () Flow Statement. Option 2

Particulars Cash Inflows: Equity Investment Processing Fee Total Cash Inflows 27,557,588.20 17,640,000.00 45,197,588.20 60,480,000.00 60,480,000.00 59,270,400.00 65,197,440.00 60,480,000.00 71,717,184.00 60,480,000.00 78,888,902.40 60,480,000.00 86,777,792.64 60,480,000.00 60,480,000.00 60,480,000.00 60,480,000.00 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
95,455,571.90 105,001,129.09 115,501,242.00 127,051,366.20
Cash Outflows: Machinery and equipment Land Acquisition and Development Building and Structures Office Equipment and Fixtures Transport Equipment Pre-operating Expenses Cost of Processing Other Operating Expenses Payment/Loan Amortization Insurance Corporate Income Tax Total Cash Outflows Net Cash Flow 460,000.00 60,000.00 400,000.00 130,000.00 700,000.00 0.00 27,770,832.80 6,517,925.50 2,204,607.06 33,800.00 13,537,881.95 24,044,214.50 21,153,373.70 38,148,201.08 38,485,683.19 6,401,944.51 2,204,607.06 37,180.00 6,321,545.35 2,204,607.06 40,898.00 38,869,365.91 6,281,785.60 2,204,607.06 44,987.80 22,902,389.44 31,433,769.90 40,283,414.10 39,306,359.78 6,288,528.48 2,204,607.06 49,486.58 25,410,130.87 33,952,752.99 44,936,149.41 39,804,984.49 6,348,583.39 2,204,607.06 54,435.24 28,150,223.24 36,757,848.92 50,019,943.72 40,374,989.42 6,469,872.50 2,204,607.06 59,878.76 31,144,994.79 39,879,353.11 55,576,218.79 41,027,816.15 6,661,628.38 2,204,607.06 65,866.64 34,418,825.25 43,350,927.32 61,650,201.77 41,776,911.10 6,934,628.70 2,204,607.06 72,453.30 37,998,314.66 47,210,003.71 68,291,238.29 42,638,098.21 7,301,475.08 2,204,607.06 79,698.63 41,912,461.89 51,498,242.66 75,553,123.54
18,503,959.42 20,606,563.13 27,147,690.99 29,173,613.53 32,122,709.01 36,023,826.47
Cash Balance, Beginning Cash Balance, Ending
-45,197,588.20 21,153,373.70
21,153,373.70 53,276,082.71 53,276,082.71 89,299,909.18
89,299,909.18 129,583,323.28 174,519,472.69 224,539,416.41 280,115,635.21 341,765,836.98 410,057,075.27 129,583,323.28 174,519,472.69 224,539,416.41 280,115,635.21 341,765,836.98 410,057,075.27 485,610,198.81
78
Table 6.5.2.6. Net Present Value and Internal Rate of Return Calculations, Option 2
PARTICULARS A. Cash Inflow, Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 105,001,129.09 Year 9 115,501,242.00 Year 10 127,051,366.20 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
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% 2. Present Value of Benefits, 1.000 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284
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 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
16,299,948.67
15,437,671.21
14,625,500.92
23,180,475.87
22,331,234.92
21,457,087.09
129%
79
Table 6.5.2.7. Projected Income () Statement, Option 2

PARTICULARS Revenues Gross Sales Less: Sales Returns & allowances Net Sales 43,200,000.00 864,000.00 42,336,000.00 60,480,000.00 1,209,600.00 59,270,400.00 66,528,000.00 1,330,560.00 65,197,440.00 73,180,800.00 1,463,616.00 71,717,184.00 80,498,880.00 1,609,977.60 78,888,902.40 88,548,768.00 1,770,975.36 86,777,792.64 97,403,644.80 107,144,009.28 117,858,410.21 129,644,251.23 1,948,072.90 2,142,880.19 2,357,168.20 2,592,885.02 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
95,455,571.90 105,001,129.09 115,501,242.00 127,051,366.20
Less: Cost of Processing Gross Margin
27,770,832.80 14,565,167.20
38,148,201.08 21,122,198.92
38,485,683.19 26,711,756.81
38,869,365.91 32,847,818.09
39,306,359.78 39,582,542.62
39,804,984.49 46,972,808.15
40,374,989.42 55,080,582.48
41,027,816.15 63,973,312.94
41,776,911.10 73,724,330.90
42,638,098.21 84,413,267.99
Less: Other Operating Expenses Administrative Expenses Processing Expenses Insurance Interest on Investment Total Operating Expenses Payment/Loan Amortization 2,257,082.80 258,750.00 33,800.00 3,968,29 2.70 6,517,9 25.50 2,204,607.06 2,490,001.08 303,300.00 37,180.00 3,571,463.43 6,401,944.51 2,204,607.06 2,749,973.19 356,040.00 40,898.00 3,174,634.16 6,321,545.35 2,204,607.06 3,040,456.91 418,536.00 44,987.80 2,777,804.89 6,281,785.60 2,204,607.06 3,365,406.28 492,660.00 49,486.58 2,380,975.62 6,288,528.48 2,204,607.06 3,729,351.32 580,650.48 54,435.24 1,984,146.35 6,348,583.39 2,204,607.06 4,137,491.75 685,184.90 59,878.76 1,587,317.08 6,469,872.50 2,204,607.06 4,595,807.29 809,466.65 65,866.64 1,190,487.81 6,661,628.38 2,204,607.06 5,111,187.65 957,329.21 72,453.30 793,658.54 6,934,628.70 2,204,607.06 5,691,585.97 1,133,361.21 79,698.63 396,829.27 7,301,475.08 2,204,607.06
Net Income Before Corporate Tax Corporate Tax, 35% Net Income After Tax
5,842,634.64 2,044,922.13 3,797,712.52
12,515,647.35 4,380,476.57 8,135,170.78
18,185,604.40 6,364,961.54 11,820,642.86
24,361,425.43 8,526,498.90 15,834,926.53
31,089,407.08 10,881,292.48 20,208,114.60
38,419,617.70 13,446,866.20 24,972,751.51
46,406,102.93 16,242,136.02 30,163,966.90
55,107,077.51 19,287,477.13 35,819,600.38
64,585,095.15 22,604,783.30 41,980,311.85
74,907,185.86 26,217,515.05 48,689,670.81
Total Annual Net Income Average Annual Net Income Total Investment Total Return On Investments, % Average Annual ROI, % Payback period, years
241,422,868.74 24,142,286.87 27,557,588.20 876.07 87.61 7.3
80
Table 6.5.2.8. Sensitivity Analysis, Option 2

Sensitivity Measures PARAMETER Indicators of the Proposed Project's Soundness Accumulated Income Average annual after 10th year, net income, million million Rental Fees, Increase per NPV Cash Payback Return on IRR, % /kg Year, % , million Period, yrs Investment, %
1. Product Price Level Level 1 Level 2 Level 3 2. Cost of raw materials based on Level 2 prices
115.00 120.00 125.00
10 10 10
25.80 27.95 30.10
130 129 128
10.4 7.3 5.6
79.3 87.6 95.9
218.5 241.4 264.4
21.8 24.1 26.4
120.00
10 15 20 10 15 20
27.95 27.95 27.95 30.10 29.34 29.34
129 129 129 128 129 129
7.3 7.3 7.3 5.6 7.3 7.3
87.6 46.2 9.1 95.9 46.2 9.1
241.4 127.3 25.2 264.4 127.3 25.2
24.1 12.7 2.5 26.4 12.7 2.5
Based on Level 3 prices
125.00
3. Interest Rates based on Level 2 prices
120.00
18.0 20.0 25.0 30.0 35.0
27.95 27.72 27.16 26.60 26.04
129 130 133 135 123
7.3 7.8 9.9 13.3 20.2
87.6 87.0 85.6 84.2 82.7
241.4 239.8 235.9 232.0 228.0
24.1 24.0 23.6 23.2 22.8
81
Table 6.5.3.1 Schedule of Depreciation, Option 3

Item DEPRECIABLE ASSETS () 1. Machines and Equipment 230,000.0 0 230,000.0 0 Year 1 Year 2 Year3 Year 4 Year 5
TOTAL ANNUAL DEPRECIATION EXPENSES () 1. Machines and Equipment TOTAL ANNUAL DEPRECIATION EXPENSE
46,000.00 46,000.00
36,800.00 46,000.00
ACCUMULATED DEPRECIATION () 1. Machines and Equipment TOTAL ACCUMULATED DEPRECIATION 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00 46,000.00
NET FIXED ASSETS () 1. Machines and Equipment 230,000.0 0 230,000.0 0 184,000.0 0 184,000.0 0 138,000.00 92,000.00 46,000.00
TOTAL NET FIXED ASSETS
138,000.00
92,000.00
46,000.00
82
Table 6.5.3.2. Schedule of Costs of processed products.

Particular Year 1 Year 2
Option 3
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 Lubricants, repairs & maintenance Fuel Interest, 18% Depreciation Other Supplies 43,200.00 4,600.00 32,400.00 41,400.00 46,000.00 2,000.00 174,600.0 0 360,000.0 0 0.49 43,200.00 5,060.00 35,640.00 41,400.00 46,000.00 2,200.00 179,500.0 0 504,000.0 0 0.36 43,200.00 5,566.00 39,204.00 41,400.00 46,000.00 2,420.00 43,200.00 6,122.60 43,124.40 41,400.00 46,000.00 2,662.00 43,200.00 6,734.86 47,436.84 41,400.00 46,000.00 2,928.20
TOTAL COST OF GOODS
184,990.00
191,149.00
198,067.90
ATCHUETE PROD. PRODUCE, kg. COST/kg PRODUCTS MFD
504,000.00 0.37
504,000.00 0.38
504,000.00 0.39
83
Table 6.5.3.3. Projected Cash Flow Statement, Option 3

Particulars Cash Inflows: Equity Investment Processing Fee Total Cash Inflows Cash Outflows: Machinery and equipment Pre-operating Expenses Operating expenses Payment/Loan Amortization Insurance Corporate Income Tax Total Cash Outflows Net Cash Flow Cash Balance, Beginning Cash Balance, Ending 230,000.00 -46,000.00 -184,000.00 -46,000.00 211,400.00 148,600.00 -46,000.00 102,600.00 216,300.00 287,700.00 102,600.00 390,300.00 221,790.00 282,210.00 390,300.00 672,510.00 227949 276051 672510 948561 234,867.90 269,132.10 948,561.00 1,217,693.10 230,000.00 0.00 174,600.00 36,800.00 179,500.00 36,800.00 184,990.00 36,800.00 191149 36800 198,067.90 36,800.00 184,000.00 184,000.00 360,000.00 360,000.00 504,000.00 504,000.00 504,000.00 504,000.00 504000 504000 504,000.00 504,000.00 Year 0 Year 2 Year 3 Year 4 Year 5 Year 6
84
Table 6.5.3.4. Net Present Value and Internal Rate of Return Calculations, Option 3 PARTICULARS A. Cash Inflow B. Cash Outflow C. First Trial 1. Discount Factor, 15% 1.000 0.870 0.756 0.658 0.572 0.497 Year 1 184,000.00 230,000.00 Year 2 287,700.00 216,300.00 Year 3 282,210.00 221,790.00 Year 4 276,051.00 227,949.00 Year 5 269,132.10 234,867.90 Year 6 269,132.10 234,867.90
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
-46,000.00
62,118.00
45,677.52
31,651.12
19,599.12
17,029.31
106%
85
Table 6.5.3.5. PROJECTED INCOME STATEMENT Option 3 PARTICULARS Revenues Gross Sales Less: Sales Returns & allowances Net Sales Less: Cost of Processing Gross Margin Less: Other Operating Expenses 360,000.00 174,600.00 185,400.00 504,000.00 179,500.00 324,500.00 504,000.00 184,990.00 319,010.00 504,000.00 191,149.00 312,851.00 504,000.00 198,067.90 305,932.10 360,000.00 504,000.00 504,000.00 504,000.00 504,000.00 Year 1 Year 2 Year 3 Year 4 Year 5
41,400. Interest on Investment Total Operating Expenses Payment/Loan Amortization Net Income Before Corporate Tax Corporate Tax, 35% Net Income After Tax Total Annual Net Income Average Annual Net Income Total Investment Total Return On Investments, % Average Annual ROI, % Payback period, years 00 41,400.00 36,800.00 107,200.00 37,520.00 69,680.00 686,850.52 137,370.10 230,000.00 298.63 59.73 3.3 0
41,400.0 0 41,400.00 36,800.00 246,300.00 86,205.00 160,095.00
41,400.0 0 41,400.00 36,800.00 240,810.00 84,283.50 156,526.50
41,400.0 0 41,400.00 36,800.00 234,651.00 82,127.85 152,523.15
41,400.0 41,400.00 36,800.00 227,732.10 79,706.24 148,025.87
86
Table 6.5.3.5 Continued
AT 0.50/kg processing fee Revenues Gross Income Net Income Less: Cost of Processing Gross Margin Less: Other Operating Expenses 41,400.0 Interest on Investment Total Operating Expenses Payment/Loan Amortization Net Income Before Corporate Tax Corporate Tax, 35% Net Income After Tax 35,200.00 145,500.00 140,010.00 133,851.00 126,932.10 0 41,400.00 36,800.00 35,200.00 0 41,400.00 36,800.00 145,500.00 41,400.0 0 41,400.00 36,800.00 140,010.00 41,400.0 0 41,400.00 36,800.00 133,851.00 41,400.0 0 41,400.00 36,800.00 126,932.10 41,400.0 288,000.00 288,000.00 174,600.00 113,400.00 403,200.00 403,200.00 179,500.00 223,700.00 403,200.00 403,200.00 184,990.00 218,210.00 403,200.00 403,200.00 191,149.00 212,051.00 403,200.00 403,200.00 198,067.90 205,132.10
Total Annual Net Income Average Annual Net Income Total Investment Total Return On Investments, % Average Annual ROI, % Payback period, years
35,200.00 7,040.00 230,000.00 15.30 3.06 6.5
87
CHAPTER 7 SOCIAL AND ECONOMIC DESIRABILITY

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.
7.2 INCOME 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
Feasibility study on the establishment of achuete thresher and processing center in Abra cause respiratory ailments among farmers. With the thresher and cleaner, they are no longer exposed to these hazards. 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.
89
CHAPTER 8 ENVIRONMENTAL SPECTS

The proposed project will greatly compliment the agro-forestry program of CHARM contribute to the environmental conservation of the Province of Abra.
8.1 IMPACTS 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.
90
Feasibility study on the establishment of achuete thresher and processing center in Abra 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.
91
APPENDICES
92

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

PROFILE OF THE RESPONDENTS

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

Bucloc Salapaddan Boliney Mean

Table 2.4. Production performance.

36.50 16.32 25.70 3.26 14.98 3.24 100.00

14.20 4.35 3.80 77.65 100.00

Table 2.5. Continued.

6.66 93.34 100.00

0.00 100.00 100.00

2.33 97.67 100.00

85.95 14.35 100.00 69.57 13.04 0.00 17.39 100.00

96.66 3.34 100.00 90.00 6.67 3.33 0.00 100.00

87.01 12.99 100.00 87.10 0.00 0.00 12.90 100.00

89.87 10.13 100.00 82.22 6.57 1.11 10.10 100.00

69.57 30.43 100.00 0.00 28.57 57.14 14.29 100.00

63.33 36.67 100.00 63.63 36.37 0.00 0.00 100.00

70.97 29.03 100.00 22.22 55.56 22.22 0.00 100.00

67.96 32.04 100.00 28.62 40.17 26.45 4.76 100.00

agent "viajero" landlord wholesaler/retailer Total

Table 2.6.2. Market performance of respondents in the study areas.

Table 2.6.2. Continued.

Table 2.6.2. Continued.

0.0 0.0 0.0 87.5 0.0 12.5 100.0

50.0 0.0 0.0 0.0 0.0 50.0 100.0

0.0 0.0 0.0 50.0 0.0 50.0 100.0

CHAPTER 3 MARKET STUDY

12 4,400 4,600 1,830 736 1 600 250 485 3

12 4,512 4,660 1,793 750 1 675 219 450 3

11 4,500 4,700 1,524 640 1 668 223 450 4

12 5,150 4,747 1,509 640 1 670 245 250 4

3,350 6 4,563 228

3,450 5 4,049 227

3,750 6 4,074 220

3,850 6 4,850 220

1,327 3,023 21 374 6,213 350 1,050 9,261 3,870 1 925

1,348 3,136 21 364 6,217 353 1,100 9,499 3,619 1 906

1,437 2,990 22 365 6,208 356 1,150

1,317 3,005 22 360 6,259 352 1,000

y = -0.0062x + 0.6231x + 5.7045 R2 = 0.8964

Poly. (CAR) Poly. (Region 2)

y = 0.0511x 2 - 0.3763x + 1.5568 R2 = 0.8538 0.00

Table 3.3. Continued.

3 2,500 270 300 5 1,293 2,500 329 191 1,115 15

2 1,751 294 300 6 833 1,376 1,663 341 201 1,125 17

Philippines CAR Region 1 Region 2 Linear (Philippines) Poly. (Region 1)

y = -0.0062x2 + 0.6231x + 5.7045 R2 = 0.8964

Poly. (CAR) Poly. (Region 2)

y = -0.0007x + 0.0361x - 0.3179x + 8.3547 y = 0.0511x 2 - 0.3763x + 1.5568 R2 = 0.24 R2 = 0.8538

35,000.00 30,000.00 y= 423.91x

E stimated P . (Estimated) oly

25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 -

Source: DA CARFU, 2002.

1998 1,652 450 318 194 175 90 66 64 53 48 35 34 112 3,291

M ex ico Italy India

Netherlands France P oly . (M ex ic o) P oly . (Italy )

4 3 2 y = 5.75x - 56.167x + 195.25x - 258.83x + 158 R2 = 1

P oly . (India) P oly . (Netherlands )

y = 174x 2 - 765.8x + 2885.4 R2 = 0.6007

Poly. (Supply of annatto and natural dyes to the US)

CHAPTER 4 TECHNICAL STUDY

Dirt Removed in the Machine

STORAGE DISTRIBUTION And MARKETING