Feasibility study establishing a lettuce( Lactuca sativa) farm under simple nutrient addition program hydroponics by IPB-UPLB in Nagcarlan, Laguna

Date

2010

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

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Abstract

Lettuce (Lactuca sativa Linn.), the most popular of all the salad vegetables is a temperate annual plant belonging to the Asteraceae family. Often cultivated as a leaf vegetable, it is usually served raw in salads, burgers and sandwiches, tacos and in many other food preparations. Considering that the country is a net importer of lettuce, and that it is considered as a high-value crop in the country, a feasibility study on establishing a lettuce farm under Simple Nutrient Addition Program (SNAP) Hydroponics by IPB-UPLB was conducted. Generally, the study aimed to assess the feasibility and profitability of establishing a lettuce farm under SNAP Hydroponics in Brgy., Manaol, Nagcarlan, Laguna. Specifically, it aimed: (1) to introduce the lettuce farm under SNAP Hydroponics and its proposed operations in Nagcarlan, Laguna; (2) to determine the viability of the project in terms of the market, production, organizational, and financial aspect; (3) to identify the potential risks and problems that can be faced by an individual in pursuing such business enterprise; and (4) to recommend specific courses of action based on the findings of the study. Primary data about the technical aspect of the Simple Nutrient Addition Program (SNAP) Hydroponics by IPB-UPLB as well as about the crop were collected through key informant interviews with resource persons from different institutions. Secondary data were gathered from various publications and up-to-date internet articles. The descriptive research design was used to analyze the sourced data. The farm will be established in a 2.5 hectare farm land in Brgy. Manaol Nagcarlan, Laguna which is owned and managed by Mr. Rodolfo Almendral. Five greenhouse structures measuring 50m x 10.5m x 4m will be built, each one to be planted with different varieties of lettuce. The product of the farm will be fresh cut lettuce to be sold to a trader in the first three years of operations, afterwhich the company will be distributing their own products to the institutional buyers such as hotels, restaurants, country clubs and others. The produce will be priced at P60/ kilogram while for the institutional buyers, lettuce will be priced according to the buying price of the specific institutional buyers. The farm will operate as a single proprietorship for ten years, consisting of one farm manager, one farm technician, one caretaker and 3 laborers. An initial investment of P1,874,637.25 will be needed to start the business. The project will be financed by 40% owner’s equity and 60% debt equity which will be sourced in LandBank at 12% interest rate.

Financial tools and sensitivity analyses were done to evaluate the project’s viability and profitability. The results showed that the project is indeed feasible and profitable. The computed NPV for the base case scenario was P1, 771,877.00, and the IRR was 31.46%. Also, the payback period yielded a good figure which is 3.95 years to be able to gain back the initial investments. The project was subjected to different scenarios as part of the sensitivity analysis. Given a 4.5% increase in input prices as well 4.5% increases in all expenses, the project still yielded a positive NPV equal to P1,531,215.00 and an IRR equal to 29.79%, still way higher than the cost of capital. A decrease in sales by 10% due to infestation and diseases plus 4.5%increase in input prices was assumed to assess the project in a second scenario. The project still produced an NPV that is positive, equal to P972,093.00, and an IRR equal to 24.73%. The third scenario was a 15% decrease in sales due to harsh environmental conditions, increase in input prices to 4.5% and 4.5% increase in all expenses rendered the project to still have a positive NPV, but in a very low value as compared to that of the base scenario. The computed NPV was P586,918.00 and an IRR equal to 21.08% The findings of the analyses suggest that the project is feasible and profitable. There are still, however, potential risks and problems in the business such as influx of cheaper imports, high cost of production compared to open-field farmers, increasing prices of farm inputs, high incidence of pests and diseases, and high requirements for technical know-how were identified. It is highly recommended to address these problems to be able to fully maximize the profits. It is also recommended, for the farm to maximize potential profits to venture into value adding activities such as offering ready-to-eat salad packs with salad dressing. In this manner, they can price their products at a premium. Also, it is recommended that the management should provide experience for their laborers

such as attending to seminars for SNAP Hydroponics users sponsored by IPB- UPLB to increase their knowledge about the system.

Future plans for the farm to increase the project’s profitability include expansion of operation in terms of distribution, diversification, and value- addition. Forward integration through establishing the farms own restaurant and shop is considered to be a future plan for the farm. Also, concentric diversification of the farm can be done by producing other high-value crops such as bell pepper, tomatoes and high-value herbs and spices is also considered to be a future expansion for the farm. Value-addition in terms of transforming the fresh produce into more salable forms such as ready-to-eat salad mixes and frozen-dried vegetables for exports can be adopted by the farm.

Language

English

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2010 M17 C37

Document Type

Thesis

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