Cassava Service Center Strategy

LANGON CASSAVA SERVICE CENTER
A Joint Venture of
Langon Agrarian Reform Beneficiaries Multi-Purpose Cooperative and Kasanyangan-Mindanao Foundation, Inc.


The objective of this project is to build and operate the LANGON CASSAVA SERVICE CENTER,in Barangay Langon, Municipality of Tungawan, Zamboanga Sibugay.

The center will provide support services for the development of 200 hectares of cassava field planting for agrarian reform beneficiaries belonging to the LANGON AGRARIAN REFORM BENIFICIARIES MULTI-PURPOSE COOPERATIVE and operate post harvest facilities for the production and marketing of 2,500 tons of cassava dried chips and granules a year starting on the third year, with gross revenue of P26,000,000, per year.

The Langon Cassava Service Center will be a joint venture project of the Langon Agrarian Reform Beneficiaries Multi-purpose Cooperative and the Kasannyangan Mindanao Foundation, Inc.

The start up service center for 200 hectares of new cassava production area will require the following facilities, with the corresponding investment cost:

l. tractor for land preparation (1) P 3,000,000

2. post-harvest facilities 3,600,000

¬- building/Waehouse 400,000
- dryer(solar/flatbed) 1,300,000
- chipping machines 150,000
- granulating machine 100,000
- hauling trucks (3) 1,500,000
- machine shop equipt 150,000


3. credit for cassava production
200 ha x P25,000 5,000,000

4. working capital (buying fresh
tubers, processing, transport,
management overhead) 1,500,000

5. Pre-operating expenses 150,000
- project development
- securing permits and clearances
- design, supervision of construction
of building and facilities

6. Technical assistance to farmers 1,000,000
- social preparation
- training
- field trials

TOTAL P14,250,000
The initial capital investment of P14,250,000 for the establishment of a cassava service center and one year’s operating expenses before any sales is generated can be financed through a combination of grants and loans and equity contribution by the project proponent. It is suggested that the cost of acquiring a farm tractor, the pre-operating expense and technical assistance to farmers be covered by grants. The land can also be treated as equity of the proponent. The cost of acquisition and fabrication of the chipping machines and granulator, motorcycles, trucks and the funds for Agri-Credit Facility be accessed through the Small & Medium Enterprise loaning program of either government financing or private financing institutions.

The cassava service center is expected to generate a total sales on the second year of P4,122,500 worth of granulated chips from a 50 hectares of production area. At the price of P8.50 per kilo of cassava granules, the service center can make a gross margin of P3.00 per kilo, or a total of P1,455,000 on 485 tons of granules. The service production area can be expanded to 200 hectares on the 2nd year up to the 5th year of cassava production.

The project consisting of the service center and 200 hectares cassava plantings can generate a sales of P26,000,000 and a gross margin of P10,000,000 on the 3rd year and thereafter up to the 6th year. The gross margin can cover the interest payment, overheads, taxes and provide a profit margin to finance possible expansion.

One hectare of cassava is expected to yield an average of 30 tons of fresh tubers. The farmer has the option to sell the fresh tuber to the center at P2.00 per kilo or deliver dried chips at P6.50 per kilo, or a combination of both. Farmers will earn a gross income of P60,000-P80,000 per hectare or a net income that includes their own farm labor amounting to P40,000-P50,000 per hectare per year.

The Cassava Service Center will operate as a social enterprise earning income margins from tractor services for land preparation, processing and trading of cassava granulated chips. Production Loans will be initially handled by the service center, but this can be assigned later to a microfinance institution.

The Cassava Service Center can be operated initially by an NGO. Later the ownership and management can be turned over to a farmers’ cooperative.

This model can accelerate cassava development in Zamboanga Sibugay and ensure that the farmers will benefit most from the commercialization of this subsistence crop. Considering the extent of rural poor in Tungawan, Zamboanga Sibugay and the availability of large tracts of marginally cultivated lands, a cassava development project along the lines indicated in this concept paper can serve as a model intervention strategy for poverty reduction and peace building in this area.

Attached herewith are the projected income statement and cash flow statement with supporting schedules:

Schedule “A” – Production Projection
Schedule “B” – Development Cost Per hectare
Schedule “C” – Overhead Cost
Schedule “D” – Depreciation Cost
Schedule “E’ – Other Income
Schedule “F” – Principal & Interest payment
Schedule “G” – Capital Expenditures