[page 54↓]

4.  The Study Phase

4.1. Assumptions and sensitivity analysis from a theoretical point view

Assumptions and the models

The three models of sericulture production with different farm sizes, starting from: 0.30 ha (small size of farm); 0.50-0.90 ha (middle size of farm) and 1.00-3.00 ha (larger size of farm) were assumed for the present study.
The tropical climate in Central Java allows the mulberry to grow during the whole year so that sericulture production is practicle every month. Five sericulture period cycles were assumed in the first production year due to the growing phase of mulberry trees which takes six months. For the 2nd to 10th production year a number of ten period cycles were assumed. The project models were also calculated for ten years.
The summary of the investments for these three farm sizes is shown in table 7.

Table 7: Investments of sericulture production (in USD)

No

Description

Mulberry section

Silkworm section

Total

1

Small (0.30 ha)

120.86

283.33

404.19

2

Middle (0.50-0.90 ha)

201.44

398.51

599.95

3

Larger (1.00-3.00 ha)

400.00

422.94

822.94

The mulberry section includes costs for land preparation, fertiliser, mulberry cuttings and mulberry planting, grass pruning and labour costs.
The silkworm section includes the shed building and accessories for rearing. The details of the calculations of investments will be discussed in the following chapter.

Revenue of sericulture is presented in table 8.

Table 8: Revenue of sericulture production per year (in USD)

No

Description

1 st year

2 nd year

3 rd year

4 to 10 th year

1

Small (0.30 ha)

85.00

367.00

420.00

595.00

2

Middle (0.50 – 0.90 ha)

128.00

441.00

562.00

952.00

3

Larger (1.00 – 3.00 ha)

235.00

734.00

1,244.00

1,785.00


[page 55↓]

Sensitivity analysis

Sensitivity analysis is the study of how the variation in the output of model (numerical or otherwise) can be apportioned, qualitatively or quantitatively, to different sources of variation, and of how the given model responds to upon the information fed into it. Sensitivity analysis was created to deal simply with uncertainties in the input variables and model parameters (Saltelli, A, et al. 2000).

Marshall. (1999)stated that sensitivity analysis measures the economic impact resulting from alternative values of uncertain variables that affect the economics of the project. When computing measures of project worth for example, sensitivity analysis shows just how sensitive the economic pay-off is towards uncertain values of a critical input, such as the discount rate or project maintenance costs expected to be incurred over the project's study period. Sensitivity analysis reveals how profitable or unprofitable the project might be if input values to the analysis turn out to be different from what is assumed in a single-answer approach to measuring project worth.

In this study, sensitivity of cocoon production is simulated and real variability of these important attributes is examined.
Sensitivity analyses have been carried out on four of variables: income variables. The current values of variables are shown in table 9.

Table 9: Current value of variables

No.

Variables

Unit

Value

1

2

3

4

Frequency of production cycles per year

Fresh cocoon production per box

Total of grownup worm boxes per production cycle

Price of fresh cocoons per kg

Period

Kg

Box

USD

10

25

3

2.35

4.2. Sensitivity and criticality in practical terms

The variables within the presented sensitivity analysis it was assumed at twenty percents of variation. The results are shown in table 10.


[page 56↓]

Table 10: Results of income with sensitivity analysis at 20% decrease of values (USD)

Year

Without project

With project

sensitivity analysis at 20% lower income

  

Small

(0.30 ha)

Middle

(0.50-0.90 ha)

Larger

(1.00-3.00 ha)

1

500

68

128

188

2

500

294

441

587

3

500

336

562

995

4 to 10

500

476

952

1,428

Table 10 shows the new Income of the three models of the project in USD for 10 (ten) years of 20% lowering of incomes.
There still was a marked increase in the medium and larger size groups after joining the project.
The middle increased from 500 USD to 562 USD or by 12.40% in the third year and 952 USD or 90% up in fourth to tenth year and the larger improved to 587 USD or 17.40% in the second year 995 or 99.00% in third year and 1,428USD or 185.00% up in the fourth to tenth year. Unfortunately, no increase in income for small size of farms was found.
It can be seen that larger size of farms has an increase in income, even starting in the second year. However, large size of farms require more labour. There is a need for family labourers to be available, otherwise labourers have to be hired and the income will decrease.

4.3. Challenges and limitations in this planning phase.

Challenges in this phase:

As presented in the above sensitivity scenarios the project might be confronted with challenges as how to deal with changes in factors influencing the income of Sericulturists.
Thus, on the one hand it can be seen that changes in production costs can take a great influence on income figures. The case of an increase of input costs required for sericulture will lead to a decreased income in the starting years. The challenge will be to determine and operationalise as to handle the single aspects that have influence on the costs.

On the other hand, a great impact is detected in the aspect of decrease of income. It has to be paid attention to production factors that have an impact on income figures of small land
sizes of rural farm households joining the project. In the above calculations it was explored [page 57↓]that particularly the small ones need support in cases of income changes. Consequently, aspects that influence the income for those, thus, the small size sericultural harvests require a close and intensive consultation for farmers in their first years.

Limitations in this phase:

"Worst case scenario"
In this following part a sensitivity scenario of lower income was explored again with a decrease of 50% income. The results are shown in table 11.

Table 11: Results of income for sensitivity analysis at 50% decrease of income (USD).

Year

Without project

With project

sensitivity analysis of 50% lower income

  

Small

(0.30 ha)

Middle

(0.50-0.90 ha)

Larger

(1.00-3.00 ha)

1

500

43

80

118

2

500

184

275

367

3

500

210

351

622

4 to 10

500

298

595

893

As presented in the scenario for the critical cases, a limitation can appear in times of decreasing income down to 50%. The project's success is then limited for a larger size of farms until the third production year, for a middle size farm it would be until the fourth year and for the small size farm one there is no legitimation for sericulture in that case.

Environmental issues:

An environmental impact analysis report was completed by consultants in May 1997. The report concluded that no significant environmental concerns were present. Mulberry cultivation rather supports soil conservation and the pruning reduces unsustainable harvesting of fuel wood (World Bank, 2001).


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