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Noticing that traditional copra production was yielding only meager returns, an association of small coconut farmers in Negros Oriental, Philippines ventured into virgin coconut oil (VCO) production. The primary goal was to raise members’ incomes amid volatile copra oil prices in the world market. However, the venture had never fully taken off because operation had remained below full capacity. If production were maximized, the association could easily pocket at least Php 1.5 million (US$35,714.29) in net income per year which was 34 times more than it had been earning. A study of the VCO supply chain was conducted to determine the factors constraining the association’s operational efficiency. The chain characteristics were mapped out to describe among others, the flow of product, information and payments. The results indicated that the lack of raw materials for VCO production was the primarily constraint to operational efficiency. Specifically, the production of organic VCO promised substantial and regular demand for association’s product. Research and development must, therefore, focus on how to increase incentives for coconut farmers so that they would produce top quality coconuts without the use of chemical fertilizers and allow the association to produce organic VCO that commands a price premium over industrial coconut oil.


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