SAN ROQUE WOMEN’S ASSOCIATION (SWA)

Rice Milling / Warehousing Project

Business Plan

I. General Description of the Enterprise

Proponent Description

Name: Forest and Community United Services

(FOCUS), Inc.

Office Address: Lot 35, Block 17, Phase I, Emenvil

Subd., Ambago, Butuan City

Type of Organization: Non-Government Organization (NGO)

Beneficiaries Description

Name: San Roque Women’s Association

Address: Sitio San Roque, Brgy. Causwagan,

Talacogon, Agusan del Sur

Type of Organization: Association

Date of Registration: September 2008

Number of Members: 28 Households

Service Description

Sitio San Roque, like the other communities in Barangay Causwagan,

Talacogon, Agusan del Sur is also dependent on rice farming for the livelihood of its
inhabitants. The community has about 100 has. of fully cultivated rain-fed lowland
rice area but do not have adequate post-harvest facilities particularly rice milling and
warehousing. Their farm produce is either immediately sold out to rice traders upon
harvest or dried before these are sold out. A certain portion for home consumption is
reserved and milled at establishments some 3 kilometers away following rough and
rugged roads which are hardly maintained.
This scenario, coupled with the desire of the farmers to take advantage of
value added benefits in rice processing, resulted to a proposal to engage in rice
milling and warehousing business.
___________________________________________________________________________
Leave Everything Better Than You Found It
Page 1 of 10
 Market Description

Most of the locally produced palay in the community will consist of the main
market of the enterprise. The 100-ha. Rice area of the community has a potential of
producing a minimum of 300 tons of palay every crop season (– at the conservative
production yield of 60 bags per ha.).. However, since most of the farmers are financed
by traders to whom they are obliged to sell their produce, the enterprise assumes
conservatively to process only about 30% of the local production – a conservative
estimate of 100 tons or about 1,800 bags per cropping period.

Technical Description

The post harvest facility will consist of a rice mill and a warehouse. The rice
mill has a capacity to process 12 bags per hour or about 600 kgs., with a recovery of
65% of milled rice and 7% of rice bran.

Palay will be dried to a maximum of 14% moisture content before milling, in

order to optimize milling recovery and milled rice quality.

The warehousing unit will serve as a component support for rice milling
operations. Under this proposal, it is not considered an income-generating outfit but
will serve as a incentive for the farmers to store their palay in the warehouse which
will be solely processed by their rice mill.

The community has an extensive solar rice drying facility that can adequately
support local rice milling operations.

Expected Financial Performance

At the current milling fee of P1.75 per kilogram of palay, the project will be
able to generate P525,000 every cropping season if all of the locally produced palay is
milled in the community rice mill. However, the project will target only 30% of this,
which will enable them to generate a gross revenue of about P157,500 per cropping
period or roughly P315,000 a year.

Management

The San Roque Women’s Association (SWA), a duly registered association of

the women folks in the community and which has undergone several capacity
building trainings in the previous past, will manage the project. The farmer-husbands
of the women will concentrate in farm production, threshing and drying while the
women will undertake the management of the milling & warehousing operations.

The association will be assisted in the formulation of their project’s Policies,

Systems and Procedures (PSP) in order to streamline and simplify management
schemes.
___________________________________________________________________________
Leave Everything Better Than You Found It
Page 2 of 10
 Management performance will be closely monitored so as to determine further
interventions that might be needed to fine-tune the management aspect.

Ownership

The project will be funded by the Philippine Australia Community Assistance

Program through its Agusan Marsh FOCAS. The equipment and accompanying
facilities will be turned over to the San Roque Women’s Association that will own
and manage the Rice Milling / warehousing complex in the Sitio. An Operating
Guidelines and Procedures will be promulgated to promote understanding and support
of all members and inhabitants of the community.

II. Market Consideration

Target Market

The main market of the business will be the local palay production of the
residents who are mostly rice farmers. At the conservative production yield of 60 bags
per hectare, the local rice production area of about 100 has. will produce no less than
6,000 bags per cropping season. The project will however target a minimum of only
30% of this or roughly 1,800 bags per cropping season.

Market Analysis

Rice production in the community is mostly financed by the local traders who
also purchase the farm product during harvest of the crop. And those who are not
beholden in this manner are considered captive market of the project, due to the
distance to, difficulty in reaching and expenses involved in transporting their palay to,
the nearest rice mill establishment which is no less than 3 kilometers away.

Competitive Position

The sitio has no other rice mill. The nearest rice mill is located no less than 2
kilometers away. The local production will therefore be captive market for the mill,
except those that are obligated to traders. In addition, the association will operate a
warehouse which will serve as storage for palay owned by the farmers and which
will be solely process by the local rice mill.

Projected Revenue

Table below shows the projected revenue of the business for a 3-year period:

Year 1 Year 2 Year 3

Revenue 157,500.00 315,000.00 315,000.00
___________________________________________________________________________
Leave Everything Better Than You Found It
Page 3 of 10
Marketing Scheme

Selling Price/Milling Fee

Milling fee is pegged at the current local rate at P1.75 per kilogram of palay to
be milled. It is assumed that this rate of milling fee will be maintained in the next 3
years, during which time, there will be no price escalation.

Marketing Arrangement
Payment of milling fee will be made on cash basis. To remedy the lack of cash
for payment of services which is prevalent in the community, the association will
formulate a scheme that will allow payment in kind – in the form of milled rice which
will be sold by the association at a certain margin of profit.

III. Technical Considerations

Scheme of Implementation
The association members will be given priority in the services of the enterprise
particularly in the warehousing facility because of the probability of its limited
capacity. However, customers of the rice mill can all be accommodated readily since
its operating hours can be extended indefinitely depending on the availability of palay
to be processed.
A milling operations schedule will be determined and posted for adequate
dissemination.
A rice mill operator will be trained and will be compensated on percentage
basis as the rice mill will operate only upon availability of palay stocks and can not be
operated regularly.

Facility
A warehouse and rice mill building complex will be constructed. This will be
a single unit where the rice mill will be installed at one end of the building with the
remaining larger space or portion, to be utilized as warehouse within which, a small
portion will be used as office space.
The rice mill will be provided with an exhaust facility that will deliver rice
hull to a storage area from which it will be transported to a separate facility where this
is re-cycled or processed for the organic farming project of the association.

Maintenance
This item will be included in the PSP that will be formulated by the
association. Maintenance check up will done on a regular schedule to upkeep and
optimized performance of the equipments and to prolong its service life. Emphasis

___________________________________________________________________________
Leave Everything Better Than You Found It
Page 4 of 10
 will be given to the maintenance of the facility to optimize or improve milling
recovery.
In addition, to ensure the availability of funds for equipment maintenance, a
certain percentage of the gross income will be allocated and reserved for this purpose.

Capacity of Equipment
The proposed rice mill will have a capacity of milling 12 bags of 50 kilograms
each every hour of operation. And will have a milling recovery of no less than 65% of
milled rice.

Labor Requirements
The rice milling outfit will be manned by an operator who will be solely in
charge of ensuring normal operations of the equipment. He will be assisted by an
assistant. Both personnel will do the manual tasks like loading and unloading,
weighing, hauling, cleaning and other related activities.
The President and the Treasurer of the association will be responsible for the
management of the project. The President will be in charged of overall supervision
while the Treasurer will be assigned to handle the financial aspect of operations.

Technical Support
San Roque Women’s Association have undergone several capability trainings
to include Leadership, Value Formation, Decision Making, Team Building,
Organizational/Business Management, Bookkeeping, Control System, and
Maintenance of the water facility project that was turned over to the community in the
previous quarter. Their association’s capability will be further improved with
additional trainings that will give emphasis on the management and technical aspects
in the rice milling/warehousing project.

Projected Schedule of Operation

Start-up Activities
Table below shows the activities before the enterprise can start its operation. It
will take about 5 months for the project to be realized.

# of Months
Activities
1 2 3 4 5
Proposal and Business Plan Preparation
Processing, Evaluation and Approval of Grant
Application
Construction of Warehouse and Rice Mill
Building
Purchase and Installation of Rice Mill
Component
Capability Building
Hiring of Personnel
Start of Operation
___________________________________________________________________________
Leave Everything Better Than You Found It
Page 5 of 10
 The main activity in project implementation will start with the construction of
the warehouse and rice mill building. Before the completion of the building, the rice
mill equipment will then be purchased and installed. Simultaneous with the
installation will be the training of concerned personnel and officers of the association
and the hiring of personnel. A dry run will be executed to test the equipment
performance before actual operation will start.

IV. Financial Assumptions

A. Capital and Start up Cost

Construction of warehouse and rice mill building 120,000.00

Purchase & Installation of Rice Milling Equipment 287,000.00
Initial Capital 20,000.00
Land and Improvements 80,000.00
Post Harvest Technical Training 36,166.67
PSP Formulation 14,375.00
Farm Equipment Maintenance 11,250.00
Project Management Share 102,600.00
Admin Expenses Share 64,800.00
TOTAL 736,191.67

B. Fixed Cost (Per Year)

Particulars Cost
Depreciation Expense 81,400.00

V. Financial Statements

Assumptions Used:
• The sitio has about 100 has. of rain-fed rice land that is regularly cultivated at
2 cropping seasons per year;
• Average farm production yield is assumed at a conservative estimate of 60
bags of 50 kilograms each per cropping;
• During the first year, only 30% of the farm yield is assumed to be milled by
the project on account of traders who finance farm production and purchase
the farm produce – about 1800 bags of 50 kg each – a total of 90,000 kg. per
cropping season;
On the second year, this will be increased to 40%;
On the 3rd Year this is further increased to 50%.
___________________________________________________________________________
Leave Everything Better Than You Found It
Page 6 of 10
 • Milled Rice recovery is assumed at 65%.
• Milling fee is assumed at P1.50 per kilogram, P0.25 lower than the local
current rate of P1.75 per kilogram of palay;
• 10% of net income before other expenses will be allocated for maintenance
reserve fund for the equipment;
• 10% of net income before other expenses will be allocated for the President
and Treasurer of the Association as incentive for their services;
• Operating Cost will consist of the following:
- The Mill Operator and his assistant will be compensated on a
contractual basis at 10% of the milling fee or gross proceeds (60% for
the Operator and 40% for the assistant);
- Cost of fuel, oil and lubricants is assumed P0.20 per kilogram of palay
milled.
- Other Operating Expenses which consist of office supplies,
communications, travel expenses, etc. is assumed at P2,000 per
cropping season or P4,000 per year;
• Depreciation of fixed assets is computed at straight line method over a 5-year
period.

Projected Income Statement:

Year 1 Year 2 Year 3
Sales 270,000.00 360,000.00 450,000.00
Less: Operating Expenses
Wages of Operator & Assistant 27,000.00 36,000.00 45,000.00
36,000. 48,000. 60,000.
Fuel, oil & lubricants 00 00 00
Admin Expenses 4,000.00 4,000.00 4,000.00
Depreciation Expense 81,400.00 81,400.00 81,400.00
Sub-Total 148,400.00 169,400.00 190,400.00
Net Income before other expenses 121,600.00 190,600.00 259,600.00
Less: other expenses:
Maintenance reserve fjund 12,160.00 19,060.00 25,960.00
Incentive for President & Treasurer 12,160.00 19,060.00 25,960.00
Sub-total 26,802.33 45,552.33 64,302.33
Net Income 94,797.67 145,047.67 195,297.67

Projected Cash Flow Statement:

___________________________________________________________________________
Leave Everything Better Than You Found It
Page 7 of 10
 Pre-Operations Year 1 Year 2 Year 3
Cash Inflows 270,000.00 360000 450000
Sales -
Grant from PACAP 523,608.33 - - -
Counterpart of FOCUS 71,483.33 - - -
Counterpart of LGU/PO 61,100.00 - - -
Total Cash Inflows 656,191.66 270,000.00 360,000.00 450,000.00
Cash Outflows
Construction of warehouse and rice mill
building 120,000.00
Purchase & Installation of Rice Milling
Equipment 287,000.00 - - -
Initial Capital 20,000.00 - -
Post Harvest Technical Training 36,166.66 - - -
PSP Formulation 14,375.00
Farm Equipment Maintenance 11,250.00
Project Management Share 102,600.00
Admin Expenses Share 64,800.00
Operating Expenses 91,320.00 126,120.00 160,920.00
Total Cash Outflows 636,191.66 111,320.00 126,120.00 160,920.00

Net Cash Flows 20,000.00 158,680.00 233,880.00 289,080.00

Add: Cash Balance Beginning - 20,000.00 178,680.00 412,560.00
Cash Balance, End 20,000.00 178,680.00 412,560.00 701,640.00

Financial Ratio Analysis

Profitability Ratios Year 1 Year 2 Year 3

Net Income
Net Profit Margin 35.11% 40.29% 43.40%
Sales

The table shows that there is an increase in the net profit margin by 35.11% in
first year of operation. Despite the assumption that there will be no escalation on
selling price, still the business can earn 40.29% and 43.40% respectively in the 2nd and
3rd years of operation.

Average Net Income

Return on Investment 19.70%
TPC

The total project cost of Php 736,191.67 has a Return on Investment of

19.70% by taking into account the average net income it has generated from its
projected three (3) years result of operation and the life of the critical assets.

V. Management and Social Considerations

___________________________________________________________________________
Leave Everything Better Than You Found It
Page 8 of 10
 Project Management Team Structure
• The officers of the association who are involved
in the project implementation will be trained in the
documentation processes involved, such as the recording of
sales and expenses and other related management functions..
• As proposed, the project will be managed by the
women folks through their association. They will manage the
post-harvest facilities while their husband will concentrate in
farm production.
• As proposed, this project has no environment threat as
the milling waste (rice hull) will be processed into organic
fertilizer for the organic farming scheme of the local farmers.

Form of Business Enterprise

The San Roque Women’s Association is duly registered with DOLE. The
officers and members will be trained in handling the project since they will manage
the operation of the business with the guidance of FOCUS.

Utilization of Projected Income

Income generated will be saved by the association and used as fund for
community development. Ten (20%) will be allocated for Environment and General
Fund, Twenty (20%) for Patronage Refund and the remaining Sixty (60%) will be for
Investment Fund which they can use to finance farm production so that they will be
assured of palay input for the rice mill.

Socio Economic Benefits

The project will significantly enhance livelihood in the community as they
will be able to enjoy the value added benefits in rice post-harvest processing which
could otherwise go to traders and outside millers. In addition, the local farmers will
also save on transport cost that they will otherwise spend if they mill their palay in
rice mill establishments some 3 kilometers away.

Ownership of Project Inputs

The women’s association shall ultimately be the owners of the project inputs
including those that will be funded by PACAP.

o O o

___________________________________________________________________________
Leave Everything Better Than You Found It
Page 9 of 10
___________________________________________________________________________
Leave Everything Better Than You Found It
Page 10 of 10