1.0.

Project Title: UPSCALING OF THE HOG PRODUCTION

BUSINESS OF NEW TUMAUINI
COOPERATIVE AMID THE IMPACT OF
GLOBALIZATION

2.0. Project Type: Adoption of Improved Production Facilities and

Technologies

3.0. Proponent:
3.1. Type: Farmer’s Cooperative
CDA Registration Number: TUG-2247-XL
3.2. Name: New Tumauini Cooperative (NTC)

3.3. Address: Brgy. Lingaling, Tumauini, Isabela, Region II

3325

4.0. Coverage:
4.1. Location:
Office/Marketing Center: Brgy. Lingaling, Tumauini, Isabela

Piggery Project: Barangay Lapogan, Tumauini, Isabela

Intended Market: Farmers, Meat Vendors and Meat Processors in

Northern Isabela

4.2. Product: Live Hog

5.0. Duration:
5.1. Pre-Implementation: 3 months

5.2. Implementation: 3 years

6.0. Funding Requirement:

LBP Loan Equity Total

Fixed Investment
Land 280,000.00 280,000.00
Buildings 1,700,000.00 1,700,000.00
Feedmilling Equipment,
Other facilities/tools 748,550.00 748,550.00
Breeder stocks
Existing stocks 857,886.00 857,886.00
Add’l stocks 410,000.00 410,000.00
Cost of producing feeds 641,450.00 298,550.00 940,000.00
Total 3,500,000.00 1,436,436.00 4,936,436.00
7.0. Contact Person:
7.1. Name Position: Domingo T. Bacud
Manager, NTC

7.2. Address: Maligaya, Tumauini, Isabela

7.3. Phone Number: 0908-3706023

7.4. E-mail Address: domingo.bacud@yahoo.com

8.0. The Project:

8.1. Justification

Region 02 is one of the top contributors in agriculture GDP especially for

rice, corn and livestock. For the year 2007 Cagayan Valley is the second largest
producer of rice next only to Central Luzon, the second largest raiser of carabao
and the top producer of corn (BAS). However, farmers in the region remain to be
poor and marginalized (16.9% poverty incidence for farmers in 2006- NSCB) due
to a very low price of their products and to a high cost of production.

Being the top producer of corn with 1.9M metric tons produced in 2008
(BAS), it is hard to rationalize why the region lags behind other regions in terms
of hog production (11th among the 16 regions, 4% contribution to the national hog
production, BAS) wherein corn is the major ingredient of hog feeds. With this
situation, the New Tumauini Cooperative (NTC) endeavors to lessen this gap and
tap the vast resources of the region especially its corn which are still being traded
to piggery and poultry farm to Bulacan and as far as Batangas and Bicol.

The primary business of NTC, a cooperative duly recognized by the CDA,

is hog raising. Currently they are operating a 100 sow level farm which is rented
from a businessman who has migrated abroad. The farm is on sale and already has
an outstanding offer. With the eventual selling of the farm, the cooperative would
be left out with no building for its stock, thus has purchased a land for where to
put up its own piggery farm. With funds exhausted from the buying of the land,
the coop is now trying to look for external funding to construct its building and
purchase the needed equipments.

With the pork market situation of the region, it is imperative for farms to
produce its own feeds and take advantage of the relatively cheaper corn in the
region. Establishing its own feedmill and artificial insemination in its farm
 operations would provide great advantage to NTC especially with the coming of
multinational competitors.

Having an efficient operation would not only benefit the cooperative but
the general customers as well. Efficient production of farms means better income
to meat processors, lower price to costumers and eventually a better local
economy. With local farms producing its own feeds, a new marketing option
would now be open to corn farmers, increasing their bargaining power and
ultimately increasing the price of their products.

8.2. Project Description

The project involves up-scaling of the piggery project of the New Tumauini
Cooperative (NTC) through establishment of state of the art building and facilities,
introduction of Purebred and use of Artificial Insemination (AI) in its breeding program,
and establishment of a feedmill.

8.3. Objectives
Generally the project aims to strengthen competitiveness of the New
Tumauini Cooperative (NTC) amid the effects of globalization to its operation.

Specifically it aims to:

1. provide NTC with state of the art facilities for efficiency and better product
quality;
2. provide NTC with starting working capital to fully operate the provided
facilities;
3. to empower NTC through capacity building activities such as training/seminar
on cooperative management, piggery management, and resource management;

8.4. Beneficiaries
The direct beneficiaries of the project will be the members of the
cooperative from the increased dividends and value of stocks while indirect
beneficiaries would be the immediate community where the cooperative market
its products because of better quality products at competitive prices. Backward
linkages such as input suppliers and forward linkages of the project such as
butchers and meat processors shall also benefit from the project.

8.5. Location
The project shall be located at Barangay Lapogan, Tumauini, Isabela.

8.6. Scope
The project shall cover a complete technology upscaling of the piggery
operations of the New Tumauini Cooperative that include upgrading of facilities and
equipments, upgrading of stocks, and capacity building through training and farm visit.
 8.7. Implementation Schedule

Starting Date: Completion Date: Duration:

Schedule of Activities 2 years
1st Year 2nd Year
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Remarks
Components Activities
1. Pre- Land Survey
implementation Architectural plan
preparation
Zoning and Building
Permit approval
Mayor’s permit, DTI and
environmental
compliance certificates
2. Building Construct Deepwell
Construction Present architectural plan
to prospective contractors
Selection of contractor
with the best price and
package offering
Commence building
construction
Monitoring building
construction
Install electricity
(ISELCO)
Purchase and install
water system
3. Installation Canvass lowest price of
of Equipment piggery equipment
Purchase equipment and
install equipment
Testing of equipment
4. Purchase of Canvass price of quality
Stocks stocks
Purchase of stocks and
delivery
Do GAP
5. Capacity Attend breeding,
Building artificial insemination
and feed formulation
training
Conduct training
Conduct farm visit
 8.8. Budgetary Requirements
Components Activities Budget
1. Pre- Land Survey
implementation Architectural plan preparation
Zoning and Building Permit
approval
Mayor’s permit, DTI and
environmental compliance
certificates
2. Building Deepwell
Construction Building
Breeder Unit
Farrowing Unit
Nursery Unit
Growing/Fattening Unit
Bunkhouse and storage room
AI House/ Feed mill House 1,700,000.00
Water system installation 25,000.00
Electricity installation 25,000.00
3. Installation of AI Equipments 10,000.00
Equipment Feedmill equipments 5,000.00
Production Equipments 10,000.00
4. Purchase of Boar 50,000.00
Stocks Gilt 360,000.00
5. Capacity Training on AI 2,500.00
Building Training on Feed formulation 2,500.00
Cooperative management and
resource management training 5,000.00
Farm Visit

8.9. Project Analysis

8.9.1. Competitive Aspect

As a cooperative of municipal-wide membership, the main competitive
advantage of the NTC is its captured local market. In its current operation, the
quantity produced is way low to the demand of the customers even though it can
already be considered as one of the biggest piggeries in the locality. Its customer
ranges from butchers/meat processors in Tumauini, Cabagan, and its products
reaches even the city of Tuguegarao. Although competitive marketwise, NTC
production operations still uses the traditional method thus in the aspect of
efficiency it still lags behind the competition. Most of the private piggeries in the
region with size of operation similar to that of NTC already are using new
technologies such as elevated plastic matting for furrowing pen, funnel fan, use of
pure breed, artificial insemination, self formulated feeds, and computerized record
keeping.
 One of the intrinsic competitive advantages of NTC is the support being
provided by the Local Government Unit. Being the banner program of the LGU
on cooperative development, NTC enjoys financial and structural support from
the LGU. Aside from this, NTC is also being managed by a group of competent
officers having a Manager with a background in banking being a retired Land
Bank of the Philippines (LBP) manager. The members of the Board of Directors
(BODs) are known to be successful in their own field ranging from politics to
business.

8.9.2. Market Aspect

a. Supply and Demand Analysis

1. Production
According to a report subtitled Philippine Hog Industry Uptake, in 2008,
Philippine hog production was valued at nearly 150 billion pesos, 11.29 higher
than the previous year despite the contraction of 1.60 per cent in the volume of
production. The detection of the Ebola Reston Virus (ERV) in two commercial
farms in Luzon and outbreak of other swine diseases – as well as the increase in
production and feed cost – is expected to affect the growth of the pig industry.
A production data from the Bureau of Agricultural Statistics reveal the
following information:

Production (‘000 2006 2007

metric tons 2006 2007 2008 vs. vs.
liveweight) 2007 2008

Hogs 1,836.14 1,886.01 1,855.74 2.72 -1.60

The local hog industry accounts for about 85 per cent of the total livestock
production and is equivalent to almost 15 per cent of the total value of agricultural
production. As of January 2009, the total number of pigs is about 13.6 million
head, of which 71 per cent are from backyard farms and 29 per cent are raised by
commercial farms. The higher number of pigs can be found in the province of
Bulacan with about 1.3 million head, followed by the province of Batangas (0.8
million) and Leyte (0.66 million).

2. Consumption
Total pork supply in 2007 reached almost 1.7 million metric tons, of which
97 per cent are produced locally and the remaining 3 per cent are imported.
Demand is mostly for domestic food consumption which is about 98 per cent, and
the balance is processed into canned or processed meats. The derived
consumption of pork (excluding offal and processed meats) in 2007 was 15.07 kg.
 Per Capita
Consumption 2005 2006 2007
Of Pork (kg per year)

Carcass 13.69 14.80 15.07

Offal 3.03 3.38 3.55

3. Prices
Average livestock prices were up by an average of 12.17 per cent, with
hog prices realizing the largest gain at 13.11 per cent. This was mainly due to the
drop in hog production and an increase in production cost, specifically feed and
fuel costs.

Farmgate 2006 2007

Prices (Php 2006 2007 2008 vs. Vs.
per kg 2007 2008

Hogs 69.23 71.27 80.61 2.95 13.11

The above data are taken from the Bureau of Agricultural Statistics. There
is no available official data for the years 2009 and 2010, however, our records
show a significant increase in prices in those years, ranging from Php85.00 to
Php90.00 in 2009 and Php95.00 to Php100.00 per kg live in 2010. In the early
part of 2011, the price even reached Php105.00 per kg liveweight. But it later
went down to as low as Php90.00.

c. Demand and Supply Gap Analysis

d. Marketing Strategy
The prevailing marketing practice of the New Tumauini Cooperative
(NTC) is through direct sales to order buyers (on-farm market sales). This
includes wholesale buyers from the municipalities of Ilagan and Cabagan, and
local butchers in Tumauini.
In view of the expected increase of production as a consequence of up-
scaling swine production operations, The NTC shall introduce marketing
strategies to include the following:
1. The NTC shall establish meat shops in strategic places, e.g., in densely
populated barangays or cluster of barangays to be managed by
interested and capable members.
2. Some members shall be trained in meat processing whose products
shall be sold in the established meat shops.
 3. Local butchers shall be encouraged to join the NTC by making them
aware of the benefits they will derive once they become members such
as patronage refund and other services that they can avail from the
cooperative.

8.9.3. Technical Aspect

a. Farm Site and Layout
The project shall be established in a landholding newly acquired by the
cooperative. The site is just about two kilometers away from the national highway
and about 100 meters away from the barangay road going to Bgy Lapogan. The
site shall be accessible to essential services such as feed suppliers, water, and
electricity and electricity sources. The surrounding is suitable for construction of
drainage and manure disposal and is amply distant from residential houses and
other farms. The NTC shall comply with local government policies on zoning and
environmental considerations.
Areas regularly visited by the outsiders shall be situated near the gate such
as offices, feed bodega or storage, and finisher pen. A farm road shall be
constructed with alleys connecting them.

b. Building Design
The project shall adopt a multi-site system consisting of four units
housing. These shall correspond to the stages of the pigs’ life cycle. First will be
the breeding gestating unit where gilts, sows and boars shall be housed. Bred
sows shall stay in this unit until three to seven days before the scheduled
farrowing date. Second will be the farrowing unit where the sows ready to give
birth are kept until they wean their piglets. Third will be the nursery unit where
pigs are raised until they are eight to nine weeks old or until they weigh 10 to 60
kilograms. Fourth will be a growing and finishing where pigs are raised from the
time they leave the nursery until they are marketed. In addition to this, another
building shall be constructed which shall serve as bunkhouse, storage for feeds
and supplies, AI room, feed-milling house.
In the construction of the breeder/gestating, farrowing, nursery and
fattener houses, proper building orientation shall be observed to ensure equal
distribution of sunlight and ample ventilation.
Housing units shall be open sided to ensure good ventilation, with a
monitor-type roofing.
c. Building Cost Estimates
1. Breeding/Gestating Unit 395,000.00
2. Farrowing Unit 395,000.00
3. Nursery Unit 395,000.00
4. Growing/Fattening Unit 395,000.00
5. Bunkhouse/storage/IA room/feedmilling house 120,000.00
1,700,000.00
d. Tools and equipments needed
1. Artificial Insemination - One of the features of this up-scaling project is
the adoption of hand mating through artificial insemination. This technique has
the following advantages: 1. more sows can serviced; 2. it eliminates injuries as a
result of mating small gilts or sows to large boars; 3. venereal diseases can be
controlled; and performance tested boars can still be used when they are
incapacitated to perform natural mating. Hence, tools and equipment for this
purpose shall be purchased.
2. Feed-milling – Another feature of this up-scaling project is the purchase
of feed-milling facilities and equipment to enable the cooperative to manufacture
its own feeds and thus reduce cost of production.
3. Production facilities and equipment – Important facilities and
equipment to provide protection to the pigs, save labor input and minimize feed
wastage and animal losses shall be installed. These shall include farrowing crates
and farrowing rails, heat lamp and brooders, creep, breeding crate, feed trough,
automatic drinkers (nipples), loading chute, fed cart and scoop and weighing
scales. A pressurized water system shall also be installed

b. Labor Costs – The existing labor cost in the locality is Ph150.00 per day.

c. Production Management Practices

Management covers all aspects of production, from the point of selection
and purchase of stocks onto marketing. As such, the following general
management practices shall be implemented:
1. Only healthy and vigorous stocks shall be purchased to replace aging
and culled breeders.
2. All newly acquired stocks shall be quarantined for not less than 30 days
and those showing signs of illness shall be isolated immediately. If after such time
the animals remain in good condition, allow them to join the resident herd.
3. A herd population which can be properly and effectively managed with
existing facilities and managerial skills on the farm.
4. Multi-site system shall be adopted wherein animals shall be grouped
according to size, age and function for ease in providing well-balanced rations
and to prevent spread of disease that are latent in older animals but are transmitted
to young pigs.
5. The animals shall be provided with well-ventilated and comfortable
houses. Too hot or too cold conditions, overcrowding and other forms of stress
shall be avoided. These conditions lower the resistance of the animals and render
them more susceptible to diseases.
6. Proper nutrition for all classes of swine shall be provided at all times to
maintain them in healthy condition. The feeding of wrong levels of feed nutrients
will seriously affect their performance and may even increase the cost of
production.
 7. A sound herd health program shall be implemented. An effective
immunization and parasitic control program shall be pursued to safeguard the
health of the herd.
8. A high level of sanitation shall be maintained. Manure and other wastes
shall be drained away from the living and feeding areas. Pens shall be kept
thoroughly clean daily and surroundings shall be disinfected after vacating the
pen before another batch of animals is brought in. Equipment and facilities that
are frequently and interchangeably used between herds/houses shall be properly
cleaned, sterilized or disinfected before use. Also, a regular disinfection program
shall be done to prevent the micro-organism build up of different diseases.
9. Systematic record-keeping shall be maintained. Aside from keen
observation, record keeping shall help in detecting and identifying animals to be
culled.
10. All marketable animals shall be disposed immediately. Keeping
animals longer than necessary will only decrease profit.
11. Dead animals shall be properly disposed. They may be source of
infectious diseases which may cause big losses in the piggery.
12. Caution shall be observed in allowing visitors in the production areas.
Disinfecting vats at the entrance of the farm shall be placed.

8.9.4. Financial and Economic Aspect

a. Cost Benefit Analysis

1. Cost of Operating a 100 Sow-fattener Project

Technical Starting Point:

Sow Level 100

Litter Index 2
Piglets born alive per litter 10
Mortality (piglets) 10
Weaning age 30 days
Weaning weight 6.5-8.0 kgs.
Culling rate 35%
Selection rate 80%
Reared piglets for fattening 1,800
Starting weight 15-20 kgs.
Market weight 85-90 kms.
No. of fattening days 110-120 days
Average daily gain 583

Feed consumption Volume Cost

Sow (breeder mash) 92,600 kgs. 2,055,720.00
Boar 3,600 79,920.00
Replacement stocks 1,056 23,443.00
 Piglets (pre-starter) 6,750 182,250.00
Weaners 25,829 529,494.00
Starter mash 48,240 1,249,416.00
Grower mash 183,960 4,451,832.00
Fattener 127,800 2,926,620.00

11,498,695.00
Financial Starting Points

Value of Land 280,000.00

Buildings
Acquisition Cost 1,700,000.00
Salvage Value 170,000.00
Lifespan 20 years
Farrowing pens 200,000.00
Feed-milling facilities 500,000.00
Equipment and farm tools
Weighing scale (1 unit) 25,000.00

Knapsack sprayer (1 pc) 3,000.00

Shovels (2 pcs.) 300.00

Brooder (4 pcs.) 6,000.00

Feed cart (1 pc.) 750.00

Refrigerator 10,000.00

Veterinary materials 2,000.00

Other tools 1,500.00
Total 2,728,550.00
Cost of Producing Feeds per/kg.
Pre-starter feed 27.00
Starter feed 25.00
Grower feed 24.20
Finisher feed 22.90
Breeder mash 22.20

Price per kgm. liveweight 90.00

Existing wage rate 150.00

b. Financial Analysis

Cost of Establishing a 100-Sow Level Fattener Production

Fixed investment
Land 280,000.00
 Building 1,700,000.00
Farrowing pens 200,000.00
Feedmilling facilities 500,000.00
Farm Equipment and tools 48,550.00
Breeder stocks
Existing Boars and sows 857,886.00
Add’l 2 Boars x 25,000.00/head 50,000.00
Add’l 20 Gilts x 18,000.00/head
360,000.00
Sub-total 3,996,436.00

Operating Expenses
Cost of Producing Feeds 11,498,695.00
Cost of Replacement Stocks 410,000.00
Veterinary drugs 115,000.00

Water and Electricity 100,000.00

Salaries and Wages 246,000.00

Repair and Maintenance 30,000.00
Sub-total
12,399,695.00
Total 16,396,131.00

c. Economic Analysis

Cost and Return Analysis

Total Return
Cash Return
Sales
Fatteners (1800x87x100) 15,660,000.00
Culled Sows (35x150x85) 446,250.00

Empty sacks 410,000.00

Total Returns
16,516,250.00

Total Cost Per Year

Cash Cost (Operating Expenses) 12,399,695.00
Non-Cash Cost (Depreciation expense)
Buildings 85,000.00
Tools and Equipment 75,000.00
Breeders 183,750.00
Interest on Loan 420,000.00
 Total Cost 13,163,445.00

Net Income Per Year 3,352,805.00

Rate of Return on Investment (ROI) 20.45%

d. Financial Statements

PROJECTED CASH FLOW STATEMENT

Particulars Year 0 Year 1 Year 2 Year 3

Cash Inflow

LBP Loan 3,500,000.00

Owners
Equity 298,550.00
Gross
Income 16,516,250.00 17,342,062.00 18,209,165.00
Total Cash
Inflow 3,500,000.00 16,814,800.00 17,342,062.00 18,209,165.00
Less: Cash
Outflow
Buildings/
Equipment 2,448,550.00
Operating
Capital 958,225.00 10,540,470.00 13,019,679.00 13,670,662.00
Breeding
stocks 410,000.00 378,000.00 430,500.00 378,000.00

Debt Service 1,423,537.50 1,423,537.50 1,423,537.50

Total Cash
Outflow 3,816,775.00 12,342,007.50 14,873,716.50 15,472,199.50

Net Cash Flow -316,775.00 4,472,792.50 2,468,345.50 2,736,965.50

Add:
Beginning Bal. -316,775.00 4,156,017.50 6,624,363.00
Cash
Balance -316,775.00 4,156,017.50 6,624,363.00 9,361,328.50
NPV=7,179,958.94
IRR=1368%

PROJECTED BALANCE SHEET

Particulars Year 1 Year 2 Year 3

Assets
Buildings, Furniture, 2,288,550 2,140,445.
Fixtures and Equipments 2,448,550.00 .00 00
Cash 3,527,985.40 7,364,049.80 11,413,327.21
Stocks 1,227,639.00 1,227,639.00 1,227,639.00
Total Assets 5,059,824.40 8,862,088.80 12,877,566.21
Liabilities
Land Bank Loan 1,263,885.40 999,437.05 703,254.90
Total Liabilities 1,263,885.40 999,437.05 703,254.90
Owner's Equity 526,220.00 526,220.00 526,220.00
plus Accumulated Net 3,269,719.0 7,336,431.7
Income 0 5 11,648,091.31
Total Owners Equity 3,795,939.00 7,862,651.75 12,174,311.31
Total Liabilities & 5,059,824.4 8,862,088.8
Owner's Equity 0 0 12,877,566.21

Amortization Schedule
Amount of Loan - 3,500,000.00
S.A. Amortization Interest Principal Balance
711,768.75 210,000.00 501,768.75 2,998,231.30
711,768.75 179,893.87 531,874.88 2,466,356.50
711,768.75 147,981.39 563,787.36 1,902,569.20
711,768.75 114,154.15 597,614.60 1,304,954.60
711,768.75 78,297.27 633,471.48 671,483.20
 711,772.19 40,288.99 671,483.20 -o-

8.9.5. Socio-Economic Aspect

The up-scaling of the business operations of the New Tumauini Cooperative is
envisioned to increase its profitability and income. Coupled with sound financial and
operational management, the NTC is expected to attain continuing growth and stability,
enabling it to give more benefits to members in the form of dividends and patronage
refund for those who shall purchase meat and meat products in meat shops proposed to be
established. This, in a way, will alleviate the economic status of the cooperative members.

8.9.6. Organization/Management Aspect

Like any other cooperative, the New Tumauini Cooperative has a three-tier
organization with the General Assembly at the top, followed by the Board of Directors
and officials, and the employees at the bottom. The organizational structure is presented
below:

GENERAL ASSEMBLY

Election Committee Board of Directors Audit & Inventory

Committee

Education & Management Staff Credit Committee

Training Committee

Manager

Bookkeeper Cashier Veterinarian Security Feedmill Caretakers

Guard Operator