Notes From the Field

The Laak Multi-Purpose Cooperative (LAMPCO) in the Southern Philippines is an agricultural multipurpose cooperative that promotes integration of economic activities to enhance the revenues of their members. LAMPCO currently assists its members (primarily coconut farmers) through trading operations aimed at getting the best prices in the market. These trading operations are currently divided evenly between whole-nut and conventional copra sales. Whole-nut sales are mostly younger coconuts used to produce desiccated coconut. Copra production uses mature coconuts sold to a local coconut oil refinery. The co-op currently produces conventional copra that uses an open fire drying process. The conventional drying process introduces impurities and, for this reason, sells at a discount to white copra, which is dried under controlled conditions using a special dryer (a Kukum Dryer). In partnership with an international chocolate manufacturer, LAMPCO seeks to enhance economics for the farmers by purchasing a Kukum Dryer and sharing the market premium for white copra. Before doing this, however, LAMPCO required an assessment of the Kukum Dryer economics to determine if the white copra premium would generate sufficient cash to provide a return on LAMPCO’s investment, while sharing the premium with the local farmers.

Since much of my background in engineering and finance deals with, in one way or another, these sorts of questions, I was glad to sign-on as a volunteer and assist LAMPCO in assessing the economic viability of the project. LAMPCO had already established a deal team for the project consisting of staff with expertise in project development, finance and the coconut market. I met with the deal team over the span of several days, discussing and quantifying the project business plan. The deal team provided the commercial and operational information such as projected sales prices and processing expenses for white copra, conventional copra, and whole-nuts. I worked with them to develop and incorporate this information into a financial framework. Such an exchange is a key part of the business development process, as it further clarifies and structures the development and operations plans.

While the project is not without risks (particularly market risk), the resulting cash flow projections indicated that the Kukum Dryer could indeed provide a premium to the local farmers for their crops, while also providing LAMPCO a return on their investment (making the project self-sustaining). From a personal perspective, it was great to work with such dedicated staff and be part of a public-private partnership that would benefit the local community. It was good to see a self-sustaining investment that provides economic opportunity for the local farmers through engagement higher in the supply chain.