Impact Hub Manila Fellowship

FUEL FARMING

The use of second generation bio-ethanol is one of the most efficient ways to power local manufacturing MSMEs without sacrificing the quality of energy generated. If maximized, utilization of this renewable energy can strengthen national industrialization initiatives in the countryside and provide a more stable income to farmers undermining seasonality of crop harvest cycles.


The most abundant raw materials which can be converted into second-generation bio-ethanol can be agricultural by-products. Unfortunately, both farmers and local manufacturing MSMEs just discard these unused agricultural waste. Farmers that have tried making briquettes out of biomass find it labor-intensive, time-consuming and and impractical, and considering that there is only a trial market for briquettes the compensation was not commensurate to their efforts.  


An even greater threat is the fact that over the years, farmers have grown disinterested in farming. If the trend continues, sooner or later there will not be enough supply of the right agricultural by-product to support any efforts for a bio-ethanol initiative. Even worse, there will not be enough productive farmlands to harvest farm produce as well as more farmers sell their lands and give up farming altogether. 


It is disheartening that no one wants to farm anymore. Despite being fertile, the majority of lands in the Philippines largely remain uncultivated. Despite having skilled farmers in the labor force, they prefer to be idle or engage in other employment. Why should farmers farm when they can barely make ends meet with the meager income generated by their farmlands?


Thus, there is a need to maximize farmlands through FUEL FARMING.


The FUEL FARMING model of Diwang Adhika Enterprises (DAE)  will provide adequate sources of raw materials for the production of second generation bio-ethanol, which can be used as an alternative source of energy to minimize the production cost of local industries and to increase profitability of farming communities in the countryside.

Who faces this problem?

FUEL FARMING will benefit farmers. There are 10.93 million people in the Philippines that compose the agricultural sector of the total labor workforce. This is the biggest sector, amounting to 30% of Philippine labor workforce, but only contributes 14% to the GDP. With 9.67 million hectares classified as for agricultural use, a Filipino farmer is reported to earn an average of only Php2,000 per month or Php20,000 per year. Given the government-led move towards increased importation of produce to augment the local food supply, instead of providing infrastructure and promoting technology to improve farming conditions as well as alternate income generation for seasons of low harvest and lack of implementation of fair trade policies favorable to farmers, it is no wonder there is disinterest in farming. Maximizing the productivity of each farm land thru FUEL FARMING may increase the contribution of this sector to the country’s overall GDP. More importantly, FUEL FARMING has the potential to provide a more stable livelihood to the farmers, many of whom live below the poverty line, and other marginalized populations in the country.

FUEL FARMING will also benefit local manufacturing MSMEs. Expensive fuel or electricity cost is one of the main obstacles to the profitability of 7,313 manufacturing establishments in the Philippines. Among these, 908 are food manufacturing companies that also create volumes of agricultural by-products along with foodstuff. As fuel and electricity costs continue to rise, these companies experience higher production costs, leading them to increase their prices. To be more competitive, many of these businesses often reduce other costs, such as labor and the purchase of raw materials. Finally, many of them do not have the resources and know-how to explore or generate alternate fuel sources.

FUEL FARMING provides an optimal supply network of raw materials needed for sufficient bio-ethanol production. It will also make available the technology and build the post-harvest facilities that will enable this process especially in the countryside. Besides legitimizing the banana industry as a bio-ethanol resource, its other direct positive impact to manufacturing businesses is to reduce energy costs. At the same time, there will be indirect impact to their employees of these companies, since these businesses will no longer need to reduce the costs of labor or raw materials acquisition to stay competitive.

How does your idea address this problem?

FUEL FARMING will provide a vertically integrated supply chain model from farm to factory which aims for optimal generation of second generation bio-ethanol. More abundant supply will support the minimization of energy costs among local manufacturing MSMEs as well as maximization of farmers’ profitability. 

FUEL FARMING will use biological hydrolysis to pre-treat lignocellulosic biomass extracted from banana by-products in bio-ethanol production. The method reduces the sugar yield by 18.37mg/ml and saccharification percentage of 71.8%, producing an ethanol yield of 67.0%. Pre-treatment facilities to extract and process second generation bioethanol from banana by-products will be done by DAE in collaboration with the municipal agriculturists of Rizal province. DAE has set up the FUEL FARMING supply network through a farming community in a one-hectare pilot banana plantation situated in Wawa, Morong, Rizal province. It is standardizing the collection of agricultural by-products through the projection of weekly targets for the volumes will be harvested from each farm. Each member farm will follow its respective target to maximize the loading capacities of the trucks that will be used for harvest. Quantitative data on production, harvest, delivery, receipt and payment will be stored through a mobile app solution customized by DAE. DAE will then consolidate and sell these harvests to local manufacturers: fruits for foodstuff that will be distributed both overseas and locally, and pseudostems as bio-ethanol fuel sources to power their manufacturing plants.

What’s new and unique about your idea?

FUEL FARMING is the UBER or AIRBnb of farming. The initiative uses land and workforce resources that it does not necessarily own. Assets will be skewed towards cash and receivables which will make the business more liquid. Farmers will be responsible for their own land and will provide the necessary labor. 

FUEL FARMING also provides an agriculturally sustainable supply chain to meet the demand for foodstuff and bio-ethanol resources. This supply network solution will benefit Philippine brands that are being distributed both in strategic local accounts as well as overseas. No single group in the Philippines currently has a significant banana supply network, hence DAE’s goal is to be the pioneering social enterprise that will network various banana farming communities.

Lastly, FUEL FARMING seeks to change the concept of having an asset, from something which is possessed into something which can be shared. It aims to help farmers kickstart inclusive economic development by turning them into the primary stakeholders in improving the banana production supply chain, with the support of quantitative analysis and linear programming principles for optimization purposes. It envisions that farming communities will act as social organizations that advocate the ownership and regulation of the means of production, distribution and exchange. This will create a huge impact considering that almost 70% of the total Philippine workforce comes from the agriculture sector.

How are you going to earn money?

FUEL FARMING will maximize farmland productivity. With the pilot one-hectare farm created in Morong, Rizal as an example, supply consolidation of banana produce on its own is projected to provide an initial monthly income of Php14,175.00 (Php170,100.00 yearly) per farming family. This is expected to rise to Php26,578.00 per month (Php318,936.00 yearly) once DAE moves into the next phase of the plan, which is to set up banana chips plant in a joint partnership. DAE will profit from its commission from supply consolidation for the fruit harvest, projected at Php270,000.00 retained earnings monthly at 20% share of profit at full capacity.Fruit harvests will be sold at the minimum price of Php1.25 and maximum price of Php2.00. At 12,000 bananas per day maximum capacity computed at Php1.25, FUEL FARMING will generate Php15,000.00 per day or Php7,500 at 50% capacity. It has the potential to generate a minimum of Php450,000.00 at full capacity or Php225,000 at 50% capacity. At 50% capacity the monthly share of profit will be as follows: Php157,500 for farmers (70% of all profits), Php45,000 as retained earnings, for use in business model refinement and expansion  Php22,500 for management cost. Considering that DAE plans to build two additional plants built in two years’ time, this will imply a maximum potential of Php1,350,000 at full capacity, Php945,000 of which will go to farmers at Php9,450 per family. Once purchase price per fruit harvest rises to Php4.00, this will grow to Php37,800 per family.

DAE will also profit from its commission from the sale of bio-ethanol to its partner local manufacturing MSMEs. The cost component associated with bio-ethanol production as well as the purchase price for banana-based bio-ethanol needs further study, but DAE aims to stay competitive by keeping the price of the bio-ethanol lower than existing fuel prices while producing the quality and amount of electric energy as fossil fuels. In developing the price structure for bio-ethanol, it is important to understand the prevailing market price of both existing and alternative fuel sources. The cost of electricity in the Philippines ranges from a low of Php6.00 to a high of Php17.00, with a median price of Php11.50 per kwH. In relation to this, petroleum products produce 13.76 kwH per gallon or 3.64 kwH per liter, with diesel priced at Php28.20 per liter and gasoline priced at Php46.06 per liter as of July 20, 2016. Meanwhile, first generation bio-ethanol production is priced in the market at Php56.33 per liter. This implies that in comparison to the median electricity price of Php11.50 per kwH, first generation bio-ethanol costs Php15.47 per kwH, while diesel costs Php7.74 per kwH and gasoline costs Php12.65 per kwH. To make second generation bio-ethanol more competitive, its selling price per kwH should be lower than Php11.50 but should be higher than pre-treatment cost. 

Do you already have customers?

Villa Socorro Farms, a local manufacturing MSME located in Pagsanjan, Laguna, is the first customer both for the food produce harvest as well as the bio-ethanol supply.

For the fruit harvest, the customer has already agreed to purchase a maximum of 12,000 pieces of banana fruit bunches per day. These will be used for Villa Socorro Farms’ SABANANA brand of premium-grade banana chips, which are exported to North America and distributed in key strategic accounts across the Philippines.

For the bio-ethanol supply, the price will still have to be studied and presented later on for evaluation. For this, DAE will create a small-scale post-harvest facility that will process output from the said plantation, which will also serve as a model for future expansion of the FUEL FARMING project. DAE will start processing and supplying bio-ethanol fuel from its pilot one-hectare plantation in Morong, Rizal to the Villa Socorro Farm manufacturing plant located in Pagsanjan, Laguna by 2017.

Who is in your team?

The Diwang Adhika Management team is comprised of:

  • Engr. Oscar Bernardo - President
  • Ma. Jocelyn Bordador - Communication Manager
  • Anthony "Bong" Villanueva - Area Manager (Rizal)
  • Dr. Maria Yna Pereyra, Rph, MBA - Product Registration Officer
  • Michelle Diaz - Marketing Manager
  • Pauline Allarcio - Marketing Assistant
  • Darius Bernardo - Operations Head
  • Alline Menorca - Accounting Officer

Engr. Oscar Bernardo, is an experienced agricultural engineer and recipient of the Presidential Medal for his invention of alternative energy sources recognized by DOST. Engr. Bernardo also worked in Philippine National Oil Company (PNOC) and Department of Energy focusing on development of alternative fuel sources particularly biomass.

He will be supported by Ms. Jocelyn Bordador, who has experience in marketing, market research and public relations. She will be in charge of handling internal communication and management of the bio-ethanol project. In coordinating with the farmers groups in Rizal province, she will be supported by Mr. Anthony Villanueva who has a background in sales.

Together they will lead the core DAE marketing team, with their combined experience handling consumer products and services. This marketing team will provide added support in terms of the branding of the bio-ethanol product down the line. Accounting controls are placed and managed by Ms. Alline Menorca who is an experienced accounting practitioner.

DAE is also supported by Mr. Mars Aaron, former President of Unilever Philippines and owner of Villa Socorro Farms. Mr. Aaron has a strong background in the corporate and operational sectors of the manufacturing industry. Through a joint venture between DAE and Villa Socorro Farms, a production plant will be built in Morong, Rizal as well as Antipolo City. 

Have you already founded/incorporated your company?

Yes

What is the intended positive impact on the environment and/or society of your venture?

FUEL FARMING benefits the environment with bio-ethanol producing lower levels of carbon dioxide (CO2) and farmlands absorbing CO2 concentration from the air. Carbon dioxide released in bio-ethanol consumption is negated since CO2 is absorbed by the same plants where the agricultural by-products used to make bio-ethanol are sourced from. Bio-ethanol produces fewer sulfur oxides, less particulate matter, less carbon monoxide, and fewer unburned and other hydrocarbons.FUEL FARMING benefits local manufacturing MSMEs by minimizing the cost of energy Production of second generation bio-ethanol from banana plants will have a lower cost compared to the production of first generation bio-ethanol. FUEL FARMING benefits the farmers by maximizing farmers’ profitability per farmland. Food harvest alone benefits farming communities. With DAE managing the production, harvest, delivery and collection from farm to factory, an average family engaged in farming can earn a minimum of Php9,450 per month, and with the setup of the own manufacturing plant has the potential to earn up to Php37,800 per month.

How will the Fellowship Program enable you to achieve your ambitions?

Diwang Adhika Enterprises can benefit from the Fellowship Program by using the grant as seed money. The FUEL FARMING project will need a total of Php850,000 to cover transferring 40,000 banana seedling from Morong, Rizal to the municipalities of Antipolo, Baras and Tanay. The breakdown of the Php850,000 is: Php600,000 payment to farmers, Php200,000 payment for delivery and Php50,000 for the management cost of operation.

Are you living in the Philippines?

Yes

edited on 26th July 2016, 15:07 by Jocelyn Bordador

Jocelyn Bordador Jul 25, 2016

Diwang Adika Enterprises acknowledge the express of support from Mr. Michael Bautista from Tanay, Rizal and a member of this community. The team will coordinate with you and see ways on how to support each other in promotiong the extraction of bio-ethanol starting in Rizal province.

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