PROJECT PROPOSAL

1. BASIC INFORMATION

1.1 Title : EXPANSION OF ORGANIC FARMING IN LA

TRINIDAD THROUGH THE ENVIRONMENTAL
RECYLING SYSTEM
1.2 Location : Municipality of La Trinidad, Province of Benguet

1.3 Proponent : Municipal Government of La Trinidad

1.4 Project Cost : Total Cost = Php 69,198,115

Request for DA Funding = Php 64,000,000
LGU Counterpart = Php 5,198,115

2. BACKGROUND

2.1 La Trinidad: General Situationer

2.1.1 La Trinidad is located 256 kilometers north of Manila. Its land area is measured at
8,079.5152 hectares and population pegged at 97,810 as of the 2007 census, growing
at a rate of 5.12 percent annually. The municipality is the seat of provincial
government, educational center and trading hub of the province’s vegetable industry.
It has the biggest vegetable trading facility in the country, the La Trinidad Vegetable
Trading Post, where more than 1,000 tons of vegetables from all over Benguet are
traded daily and transported to Metro Manila and other urban areas of Luzon. It also
serves as the tourism gateway to the Cordillera and has made its name as the
“Strawberry Capital of the Philippines.”

2.1.2 Agriculture remains to be the main driving force of La Trinidad’s economy. It

supports much of its tourism, manufacturing and trading industries. The farming
population is estimated at 6,865 families, which is 35 percent of total families in the
municipality. Total agricultural land is about 1,350.8 hectares, equivalent to 17
percent of the total municipal land area. Irrigated farms account for 67 percent of the
total agricultural lands. The major crops being grown are vegetables, cutflowers and
strawberries.
2.2 Problems & Concerns to be Addressed By the Project

2.2.1 La Trinidad used to be known as the “Salad Bowl of the Philippines” because of the
significant volume of vegetables and strawberries that it supplies to the market.
However, through the years, the municipality has continuously suffered a decline in
its vegetable production. A major cause is the depletion of soil nutrients. Most
farmers in La Trinidad depend heavily on chemical fertilizers for their vegetable and
flower production. This is primarily because of the long tradition of chemical
fertilizer application that conditioned the minds of farmers to its use and also the
inadequate supply of organic fertilizers to serve as the alternative. (The Office of
Municipal Agriculturist or OMAG in La Trinidad estimated that only 84 farms in the
municipality are practicing organic farming, and these are not even practitioners of
pure organic farming). The massive application of inorganic fertilizers led to high
acidity and physical compaction of the soil, which in turn caused poor plant growth
and high susceptibility to pests and diseases. The decline in farm production directly
translated into less income for farmers.

2.2.2 The heavy dependence on chemical fertilizers made the farmers, especially the small
farmers, vulnerable to any rise in the prices of said inputs. In 2008, the prices of
chemical fertilizers and insecticides increased three-folds. This steeply increased the
production cost at the farm level. And with the selling prices of vegetables going on
erratic trend, the increase in cost can wipe out whatever profits the farmers expect to
make, and worse, lose a significant part of what they spent producing. According to
the OMAG, when the price of 14-14-14 fertilizer went up from Php 700 to Php 2,000
per sack, a vegetable farmer cultivating a 5,000 sq.m. farm incurred a net loss of Php
11,250.

2.2.3 Another problem besetting the municipality is related to solid waste management,
particularly on the treatment, processing and disposal of biodegradable wastes. Based
on the data from the Solid Waste Management Plan prepared for La Trinidad in 2004,
the volume of waste generated from all sources within the municipality is increasing
at a rate of more than 4 percent per annum. In 2009, the volume of waste is estimated
at 115 MT per day. Of this volume, about 37 percent or 42 MT are biodegradable.
Of the biodegradable wastes, only four percent went through composting, the rest

Project Proposal / EXPANSION OF ORGANIC FARMING IN LA TRINIDAD THRU ERS / La Trinidad, Benguet Page 2
 went straight to the dump site or discarded on road sides where they were left to
disintegrate and in the process emit carbon dioxide to the air and methane that can
contaminate the ground water.

2.2.4 The biggest source of bio-wastes is the La Trinidad Vegetable Trading Post that
generates an average of 30 tons of vegetable waste per day. The municipal
government, with grant assistance from JICA, is now commencing to implement a
composting project for the vegetable wastes at the trading post using the technology
of aeration and mixing. The capacity of the composting plant is 40 to 50 tons of
vegetable waste per week. This is only 23 percent of the bio-wastes generated at the
trading post, leaving 160 to 170 tons per week left without proper disposal.

2.2.5 The municipal government recognizes an opportunity in the huge volume of

biodegradable wastes generated within La Trinidad that can be used to improve the
socio-economic conditions of farmers and contribute as well to environmental
conservation. What is needed is the installation of a more efficient system to
transform these wastes into materials that can be plowed back to the farms, and to
ensure that more farmers recognize and experience its benefits.

2.3 Related Past & Present Undertakings & Programs of the Municipal Government

2.3.1 The solid waste management efforts of the Municipality started in the late 1990s
when the municipal government launched the “Dugad Mo, Shalosim” Program, a
local phrase which means, “clean your place.” Under this program, the government
acquired garbage collection trucks donated by JICA which it used to collect garbage
from households and the market. Wastes collected were dumped in an open dumpsite
in Wangal, La Trinidad. In 2001, with the increase in waste generation particularly
from the market and the Trading Post, the municipal government decided to secure a
bigger dumpsite. It acquired a 10 hectare lot in Barangay Alno, La Trinidad for this
purpose.

2.3.2 Through funding from the UNDP in 2002, particularly the Mainstreaming Sustainable
Development Program, the municipality was able to prepare a Solid Waste
Management Development Plan. This plan paved the way for the enactment in
2008 of a Comprehensive Solid Waste Management Ordinance in La Trinidad. It
further served as the basis for the construction, within the Alno dumpsite, of a
Controlled Dump Facility and Materials Recovery Facility as mandated under
Republic Act 2003 or the Ecological Solid Waste Management Act of 2000. The
construction of these facilities started in 2009. Parallel to this, the municipal
government has strengthened its information and education campaign especially on
waste segregation.

2.3.3 With the high increase of biodegradable wastes, the municipal government gave
emphasis to composting, which also supports its objective of promoting organic
farming within the municipality. In 2006, the municipal government installed a
Compost Center with three sets of bio-reactors within the 10 hectare Alno dump
area. The quality of produce turned out low because of high moisture content of the
wastes that prevented active fermentation in the bioreactor. In 2007, The Japan
Agricultural Exchange Council (JAEC) and Japan Agricultural Exchange Council
Alumni Association of the Philippines (JAECAAP) jointly implemented a project in

Project Proposal / EXPANSION OF ORGANIC FARMING IN LA TRINIDAD THRU ERS / La Trinidad, Benguet Page 3
 La Trinidad entitled, Pilot Project for Better Income by Organic-Based Vegetable
Production. Under this project, an experiment was conducted on the technology of
aeration and mixing to reduce moisture content of waste materials for composting.
This experiment yielded positive results and it became the basis for designing a
proposal to improve the capability of the Compost Center in Alno. In June 2009, the
LGU submitted to JICA a project proposal entitled, Waste Vegetable Composting
Project for Environmental Conservation and Farmland Soil Enrichment. In
February 2010, the Embassy of Japan approved the proposal with grant assistance of
up to US$89,993. The amount is earmarked for the improvement of the Compost
Center in Alno, specifically the installation of concrete compartments and aeration
facility and acquisition of equipment for mixing/turning of compost materials. As
earlier mentioned, the maximum input capacity of the facility is 50 tons of vegetable
waste materials, which is only 17 percent of the total biodegradable materials
generated per week. The maximum output is 35.1 tons of matured compost per week
which can supply the needs of 180 farmers, only six percent of the total farming
families in La Trinidad.

3. PROJECT OBJECTIVES

3.1 This project generally aims to contribute to the upliftment of the socio-economic
conditions of farmers in La Trinidad by increasing farm incomes through reduced
production cost and long-term improvement in the productivity of cultivated soils. In
the process, the project will also contribute to environmental conservation by reducing
carbon dioxide and methane emission into the environment.
3.2 The specific project objectives are as follows:
a) To increase the number of farmers practicing organic farming to at least 20
percent of the total farm households within the municipality
b) To improve the soil quality of at least 400 hectares of vegetable and cutflower
farms within La Trinidad
c) To produce a total of at least 240 tons of organic fertilizers per month
d) To reduce the municipality’s biodegradable wastes being openly dumped by at
least 59 percent.

Project Proposal / EXPANSION OF ORGANIC FARMING IN LA TRINIDAD THRU ERS / La Trinidad, Benguet Page 4
4. PROJECT COMPONENTS AND ACTIVITIES

4.1. Installation and operation of one unit of Environmental Recycling System (ERS)
machine
4.1.1 The ERS uses a combination of low-pressure drying fermentation system and micro-
organisms to convert organic wastes into fertilizers/animal feed ingredients. The
micro-organisms used in the system known as “Shimose 1, 2 and 3” are sourced
locally. The system works by mixing the organic wastes with the micro-organisms
into a reactor with the aid of a spiral rotator for 2-3 hours. This process is carried out
under vacuum at a controlled temperature of 60 0 centigrade, providing the most ideal
condition for the growth and multiplication of the micro-organisms. Heat is applied
to the reactor through steam supplied by a boiler. The evaporated gases from the
process, driven by a vacuum pump, first passes through a heat exchanger, where cool
water is drawn from a cooling tower. The gases then flow through a scrubber where
dusts are separated and clean air is released.
4.1.2 The ERS machine to be acquired by the project will be of the 24 tons input capacity
per day. This shall be installed in a 500 sq.m. space within the proposed New La
Trinidad Vegetable Trading Post. This is in barangay Buyagan, within the reservation
area of the Benguet State University. This location will reduce the cost of hauling
and handling of biodegradable waste materials that will be fed into the machine. This
will also make the end product very accessible to farmers from all over the
municipality.
4.1.3 The activities will include the construction of a structure to house the ERS machine,
installation of the required electrical and water utilities and the training of personnel
to operate the ERS machine.

4.2. Strengthening of farmer’s capabilities on organic farming

4.2.1 The project shall ensure that the beneficiaries are effectively oriented on the proper
application of the organic fertilizer that will be generated by the project.
4.2.2 This will involve the following activities:
• Farm trials and demonstration
• Training of farmers
• Strengthening of other advocacy activities on organic farming

4.3 Marketing /distribution of the final product, i.e., organic fertilizer

4.3.1 The final output will be 249.6 tons per month of organic fertilizer. This will be
bagged at 50 kgs per sack, for a total of 4,992 sacks per month that will be made
available to the farmers. Each bag will sell at no more than Php 600.00, which is
reasonable compared to chemical fertilizers, say 14-14-14 which now sells at Php
2,000 per sack. The organic fertilizers shall be stored and sold right at the new
trading post within the ERS area and some will be distributed through retailers or
distributors.

4.3.2 Appropriate packaging and labeling will be undertaken to make the product
competitive with similar products in the market. To further increase demand and
marketability, promotions and advertising will also be introduced. This shall

Project Proposal / EXPANSION OF ORGANIC FARMING IN LA TRINIDAD THRU ERS / La Trinidad, Benguet Page 5
 likewise be integrated into the farm trials and demonstrations that will be undertaken
under the component on capability building for farmers.

5. INVESTMENT COST & PROPOSED SOURCES OF FINANCING

The project is estimated to cost Php 69.20 million. The amount requested from the
Department of Agriculture is Php 64 million to cover the acquisition cost of the ERS
machine. The rest will be shouldered by the municipal government of La Trinidad.

Investment Cost Estimates

Proposed
No. of Unit Price Total Cost
Source of
Units (Php) (Php)
Funding
ERS Machine 1 unit (24 64,000,000 64,000,0
(includes construction of tons input (CNF 00 Department of
base-foundation, installation, capacity/ Manila Port) Agriculture
accessories and attachments, day)
training)
ERS structure to house the
machine including electrical 500 sq.m. 3,000 per 1,500,000 LGU
and water utility systems sq.m. counterpart
Farmer's training, farm trials LGU
300,00
and demonstration, advocacy counterpart
0
Other installation costs 25,00
(rental of equipment to 5 hours 5,000 per 0 LGU
unload & install ERS hour counterpart
machine)
Working Capital (2 months of O LGU
& M expenses) 3,373,115
counterpart
69,198,115
TOTAL PROJECT COST 64,000,000 DA (92%)
5,198,115 LGU (8%)

6. OPERATION AND MAINTENANCE

6.1 The municipal government will establish and maintain an ERS Management Office to
oversee and undertake the daily operation and maintenance of the facility. It will
employ a total of 21 people to man this office, 18 of which will be in direct
operations, three in packaging and marketing. This office will be created under the
Trading Post Management Office already established by the municipal government of
La Trinidad.

6.2 The cost of operation and maintenance is estimated at Php 1.69 million per month or
Php 20.45 million per year. This covers expenses for direct operations and packaging
and marketing/distribution. The details are in the table below.

Operation and Maintenance Cost Estimates (Php)

Item Basis of estimates Monthly Annual
Direct Operational
Expense (26 day operation)

Project Proposal / EXPANSION OF ORGANIC FARMING IN LA TRINIDAD THRU ERS / La Trinidad, Benguet Page 6
 Boiler fuel 794 liters x Php 42.00/li x 26 days 867,048 10,404,576
Electricity 209,910 2,518,916
Mixer 22 kw x 70% x 20hrs x Php11.65 =
Php3,388.20/day
Decompress 7.5 kw x 70% x 20hrs x Php11.65 = Php
1,223.25/day
Others 20 kw x 70% x 20 hrs x Php11.65 =
Php3,262.00/day
Manpower 18 x Php12,000 x 13 months 216,000 2,808,000
System Maintenance 20,000 240,000
Sub-total 1,312,958 15,971,492

Packaging and (based on a production of 249.6

Marketing/Distribution tons/month or 4,992 sacks/month at
Expenses 50 kg/sack)
Sacks Php17.00/pc x 4,992 pieces 84,864 1,018,368
Threads and others 5,000 60,000
Labelling Php30/sack 149,760 1,797,120
Manpower 3 persons x Php 12,000/month, 13 mos. 39,000 468,000
Handling Php3.00/sack 14,976 179,712
Delivery Php5,000/truckload 80,000 960,000
Sub-total 373,600 4,483,200

Total O & M Cost 1,686,558 20,454,692

6.3 The budget for operation and maintenance will all come from the earnings out of the
operation of the facility. (This is except for the first two months of operation when
earnings are yet to be realized to fully finance operational and maintenance
requirements. This is treated as working capital and included in the investment cost to
be financed by the municipal LGU). The projected financial statement, discussed in
the next section, shows that the facility can be financially self-liquidating. This can
qualify the project to be operated as a public economic enterprise of the LGU and its
management and financial operations shall then be governed by pertinent laws and
rules on LGU-operated economic enterprises.

7. PROJECTED FINANCIAL STATEMENT

7.1. The project is expected to generate a gross revenue of nearly Php 3 million per month
or Php 35.94 million per year. This is more than enough to cover the cost of
operation and maintenance

Production and Revenue Estimates

Monthly Annual
Volume of 24 tons x 40% recovery x
26days/month
249.60 tons 2,995 tons
production
selling price: Php12/kg or
Total Revenue Php600/sack of 50 kg content Php 2,995,200 Php 35,942,400

7.2 The project will be earning a net income of Php 1.3 million per month or Php 15.49
per year. With this earning, the project can fully recover all investment costs after
four and a half years of operation.

Project Proposal / EXPANSION OF ORGANIC FARMING IN LA TRINIDAD THRU ERS / La Trinidad, Benguet Page 7
 Summary Financial Statement
Monthly
(Php) Annual (Php)
Revenue 2,995,200 35,942,400
Less:
Direct operational expenses (1,312,958) (15,971,492)
Marketing/distribution expenses (373,600) (4,483,200)
Net Income 1,308,642 15,487,708

7.3 The financial internal rate of return over a 10 year period is 20 percent. This is
borderline viable given that market interest rates can go beyond the 20 percent mark.
However, it should be considered that the main goal of the project is to improve the
socio-economic conditions of farmers while helping to conserve the environment.
The benefits from these will far outweigh the financial investment for the project.
Moreover, the main financial objective is to ensure that the project can be financially
sustained from its own operations. This objective can be achieved as shown in the
analysis presented above. Finally, with a financial IRR of 20 percent, the project
may not be able to meet repayment obligations if it will be financed through loan,
hence the option to seek for grant assistance. Again, the assistance can be justified by
the socio-economic and environmental benefits that will result from the
implementation and operation of the project.

Financial Cash Flow

Investment O&M Gross Financial Net Financial
Year
Cost Cost Benefit Benefit
1 70,753,115 10,227,346 17,971,200 (61,454,262)
2 to10 (annuity) 20,454,692 35,942,400 15,487,708
Financial internal rate of return: 20%

8. BENEFITS FROM THE PROJECT

8.1 On top of achieving its expressed goal and objectives, this ERS project is highly
positive based on the totality of benefits to the society that will result, directly and
indirectly, from its operations. These benefits are generally outlined below:

Environment:
• Reduced carbon dioxide / monoxide emission
• Sanitary (proper) means of disposing bio-degradable wastes
• Prevention of disease outbreaks
• No underground water contamination (no lecheates)
• No need for dump site locations

Agriculture
• Helps farmers in organic production of crops
• Organic farm output fetch higher (premium) price in the market

Project Proposal / EXPANSION OF ORGANIC FARMING IN LA TRINIDAD THRU ERS / La Trinidad, Benguet Page 8
 • Cheaper farm input costs
• Better productivity

Economic
• Encourage farmers to plant more
• More job opportunities
• More allied services (trucking/retailers/distributors)
• More taxes for the local government

Social
• Better sanitation (less disease because of better water source)
• Cleaner atmosphere
• Better way of life

Other benefits
• Carbon credits (Clean Development Mechanism)
• Savings on hauling and handling
• Prestige for the municipality

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