A Feasibility Study of Establishing a One-Hectare Cassava (Manihot esculenta) Farm in Brgy. Sumucab, Cavinti, Laguna

Date

5-2024

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Arlene C. Gutierrez

Committee Member

Eliza C. Aquino, Fitz D. Jimenez, Camille Anne E. Mendoza, Melodee Marciana E. De Castro

Restrictions

Restricted: Not available to the general public and for consultation with the author/thesis adviser. Access is available only to those bound by the confidentiality agreement.

Request Access

For non-UP researchers, requests for access to this material may be directed to the CEM Library at cemlibrary.uplb@up.edu.ph or to the UKDR administrator at uscs-mainlib.uplb@up.edu.ph

Abstract

Cassava (Manihot esculenta) is a root crop extensively cultivated in tropical regions for its tuberous roots. The roots of cassava contain high levels of carbohydrates and essential nutrients, making it a staple food crop across the globe. Cassava has several desirable characteristics, including its adaptability, resiliency, and productivity, making it an ideal crop for farmers in marginal lands. Strong global demand for cassava, combined with the increasing market for cassava-based products, offers a favorable opportunity for establishing a cassava farm.

The general objective of this study was to determine the viability and profitability of establishing a one-hectare cassava farm in Brgy. Sumucab, Cavinti, Laguna. Specifically, it aimed to: a.) present an overview of establishing a cassava farm and its planned area of operation; b.) determine the market, technical, organizational, and financial viability of cassava farming in Cavinti, Laguna; c.) identify the potential risks and challenges associated with cassava production; and d.) recommend specific courses of action based on the findings of the study.

A mixed-method research design was used to determine the feasibility of the proposed cassava farm. Data were collected from primary and secondary sources. Primary data were obtained through interviews with cassava processors and retailers, a cassava expert, and other key informants. The secondary data includes online journals, articles, reports from government and private institutions, and undergraduate special problem reports from the Department of Agribusiness Management and Entrepreneurship. The collected data were proven useful in assessing the overall feasibility of establishing a cassava farm.

The one-hectare land in Brgy. Sumucab is owned by A. Nocon Realty and Development Corporation. The project site is a part of their 40-ha land, which is considered an economic zone in Cavinti. Thus, agricultural farming and forestry are encouraged in the area, emphasizing the suitability of establishing a cassava farm in the area.

The main potential buyer of the cassava roots that will be produced on the farm is Global Food Solutions Inc., located in San Pablo City, Laguna. Among the identified processors and retailers, GFSI presents the largest market demand of 3,500 kg of peeled cassava roots per day. Among the interviewed processors and retailers of cassava roots, GFSI is the sole buyer who revealed that they are currently having issues with their existing suppliers, who are mostly located in Isabela and Batangas. The closer proximity of the proposed farm to the plant facility of GFSI further presents an opportunity for the business to become a supplier of GFSI.

In accordance with the daily demand of GFSI, the farm will implement staggered cropping. This practice will allow the farm to harvest cassava roots per week and perform post-harvesting and distribution daily. The one-hectare land will be divided into ten plots. Each plot will be planted with cassava at an interval of one month during the first year of the establishment of the farm. Planting of cassava will begin by the onset of the rainy season in Cavinti, which is in May. 10 months after planting, 118.18 kg of peeled cassava priced at PhP 30.00 can be delivered and sold to GFSI per day using a rented tricycle. The expected daily production of the one-hectare farm only supplies 3.28% of the total daily demand of GFSI.

The business will employ a manager, supervisor, accountant, and laborers. The manager and supervisor will be paid a monthly salary rate of PhP 15,000.00 and PhP5,000.00, respectively. In addition, regular employees will be granted government- mandated benefits. As for the accountant, he/she will be paid PhP 20,000.00 per year for his/her services. Finally, laborers will be paid PhP 500/day/8 hours of work.

In determining the feasibility of the proposed business, financial statements were created based on prevailing market prices to estimate the costs and revenues. Furthermore, capital budgeting tools were computed to objectively evaluate the viability of establishing a one-hectare cassava farm. The initial investment required for the proposed business would be PhP 879,541.33. The majority (56.27%) of the total investment is allotted to covering the working capital, while 34.07% would be for the fixed asset investments, 9.09% as contingency, and the remaining 0.57% would be funded for pre- operating expenses. A contingency amount was added to the initial investment requirements in case other expenses shall be accounted for but not indicated in this report.

Aside from the base scenario, four scenarios were evaluated through sensitivity analysis. In these scenarios, inflation rates on materials, utilities, labor, transportation, and food were considered. Ultimately, reductions in potential yield and selling price were tested. While some scenarios have incurred positive NPVs and IRRs greater than the discount rate set by banks, all scenarios have generated payback periods longer than the investor's desired payback period. Thus, the proposed project could not satisfy all three criteria, making each scenario unfeasible.

While the project was proven unfeasible, issues and risks can be addressed in order to still pursue this investment. Primarily, the farm's production can only supply 3.28% of the total volume needed by GFSI daily, hence, GFSI may not be willing to accept the farm produce. Additionally, product rejections may also be caused by failing to meet the product size and quality standards imposed by the buyer. These risks further highlight the greater risk of having no alternative markets. On the technical side, continuous cultivation of cassava in the same plots would pose a risk in terms of reduction in yield. As plants continuously take nutrients, the soil may not be able to provide the necessary nutrients for the succeeding cropping cycles. Therefore, optimal yield may not be achieved in the long run. Continuous planting also encourages soil erosion, which has negative environmental impacts. Hired laborers may lack the skills and knowledge in commercial cassava farming. Thus, the productivity of the farm is significantly at risk, given that the farm will rely mostly on the maintenance and performance of hired laborers. Other risks identified in this study include rapid spoilage of cassava, soil degradation, vulnerability to pests, and diseases, extreme weather, and high operating expenses.

Risks associated with the proposed farm can be addressed by ensuring that GFSI and ANRDC arrive at an agreement that will ensure that the buyer accepts the farm's daily produce. The agreement shall also cover compromises on GFSI's quality standards. In preventing negative environmental impacts, intercropping with existing coconut trees and utilizing cassava wastes as compost are suggested. Furthermore, proper training and development programs must be provided for the laborers to ensure proper farming practices and appropriate pest and disease control methods. Ultimately, scaling up production and diversifying buyers are the strategies emphasized to achieve economies of scale and reduce overall business risk.

Language

English

LC Subject

Cassava industry

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2024 M17 L39

Notes

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Document Type

Thesis

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