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HON. EDMUND BARTLETT, CD, MP MINISTER OF TOURISM
It is an honour for the Ministry of Tourism, through our dynamic Tourism Linkages Network, to share viable investment opportunities in locally produced fresh produce, which are in high demand. Like many other initiatives of the Network, the findings in these crop profiles, create a unique opportunity to bring us another step closer to bridging the gap between our hospitality and agriculture sectors. We have long since recognized that tourism and agriculture are intimately linked and are of the firm belief that our farmers have the ability and the potential to supply our tourism sector. If a linkages approach is not explicitly encouraged, it is too easy for our hotels, restaurants and attractions to purchase only the basics locally while continuing to source goods and services from already-familiar overseas suppliers. Therefore, as part of our ongoing efforts to bridge this gap, the Network has been actively researching and creating opportunities for our local suppliers to Hon Edmund Bartlett, Minister of Tourism better meet the increased demands of our sector. It is this belief, coupled with the knowledge of potential earnings from supplying the sector that my Ministry I am very proud of this new initiative, which highlights has been on a drive to build capacity for our suppliers findings of six key crops in high demand within the tourism sector include strawberries, onions, to capitalize on these earnings. tomatoes, pineapples, sweet peppers and Irish In 2015, we completed the first Tourism Demand potatoes. Study, which revealed that there was a high percentage of leakages, in products that we are either able to I must commend the entire team who worked tirelessly produce or are already producing. Buyers stated that to make these crop profiles a reality. I would like to the high imports of particular produce, that are specially praise the Linkages Network’s Technical grown locally, are because of the poor frequency of Working Group on Agriculture, which commissioned this initiative. I additionally want to thank our supply and the quality were deemed inconsistent. partnering Ministries and key stakeholders who will We have been working very closely with the Ministry be helping us to facilitate the build-out of this currently of Industry, Commerce, Agriculture and Fisheries to scarce commodity. combat this issue by providing renewed support to our farmers and by sharing the findings of our studies to guide the crop selection for the sector.
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ADAM STEWART, CD CHAIRMAN, TOURISM LINKAGES NETWORK
With arrivals to Jamaica at an all-time high, the tourism industry’s ability to continue being the pipeline for the growth and advancement of other sectors is tremendous. One such mutually beneficial and exemplary relationship exists with the agricultural sector; even more so as we continue to work assiduously to further reduce the country’s import gap by contracting the marketing space between local demand and supply. Over the years, the Tourism Linkages Council has developed strategies and implemented tactical reform aimed at contracting said marketing space, bringing together tourism stakeholders and local farmers. This interconnectivity is critical to the long-term viability and sustainability of not just Jamaica’s tourism industry but the country’s economic Adam Stewart, Chairman, Tourism Linkages Network development as a whole. Today’s opportunities were unheard of yesterday and the tourism platform is now set for even greater explosion, taking other sectors The six investment crop profiles being presented – onions, strawberries, irish potatoes, tomatoes, along with it. pineapples and sweet peppers - are essential to the When the Tourism Demand Study in 2015 highlighted growth of agriculture in our country as it will open the loss of revenue due to an import bill which could doors to increasing opportunities for these crops. We be offset by local production, the Tourism Linkages therefore encourage our stakeholders to embrace Council accelerated its efforts to foster new strategies these opportunities as there are huge potential for all for agricultural expansion to plug this gap. Compared parties. to many other countries in the region, Jamaica’s climate and soil is rich for multi-crop cultivation and This is an awesome initiative for Jamaica! Our Island with the right support, cohesive relations and never ceases to amaze me; we are truly the land of alignment, we now find ourselves at a crucial juncture opportunities. Let us re-commit, keep the focus and with the impetus to charge full-speed ahead. get it done!
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DR DERRICK DESLANDES CHAIRMAN, AGRICULTURE TECHNICAL WORKING GROUP
The Tourism Linkages Council continues to positively impact the relationship between Tourism and other critical sectors of the Jamaican Economy through its various activities geared at improving the participation of Jamaicans within the sector ultimately improving their lives and livelihood. The latest of these activities is the production by the Agriculture subcommittee of investment profiles to assist existing farmers and other potential investors to better understand the opportunities associated with supplying and meeting the demands of the tourism industry. We believe at linkages that a critical building block to long-term sustainable relationships between these critical sectors is the provision of information and data to increase knowledge among our farmers, hoteliers and other critical stakeholders in the Dr Derrick Deslandes, Chairman, Agriculture Technical Working Group agriculture tourism supply chain. This is the first in a series of publications aimed at products of economic importance to the tourism industry. time as we strive to improve our service and the quality of the information provided to you our The products selected are guided by the research valuable stakeholders. findings from our tourism demand studies. These investment guides will also be updated from time to
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CONTENTS MESSAGES............................................................................................................................................. 3 Minister Of Tourism...................................................................................................................................... 3 Chairman, Tourism Linkages Network............................................................................................................ 4 Chairman, Agriculture Technical Working Group.............................................................................................. 5 INTRODUCTION....................................................................................................................................... 8 Background................................................................................................................................................. 8 History........................................................................................................................................................ 8 WHY INVEST IN BELL PEPPERS............................................................................................................. 9 Local Investment Opportunity........................................................................................................................ 9 Cost of Production........................................................................................................................................ 11 INVESTMENT ANALYSIS......................................................................................................................... 14 Climate........................................................................................................................................................ 14 Fertilizers..................................................................................................................................................... 15 Marketing.................................................................................................................................................... 15 FINANCIAL VIABILITY AND BANKABILITY............................................................................................. 16 Project Cost................................................................................................................................................. 16 Financial Analysis......................................................................................................................................... 16 ANNEXES................................................................................................................................................ 17
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AN INVESTMENT PROFILE OF THE BELL PEPPER INDUSTRY IN JAMAICA
A Tourism Linkages Project
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BACKGROUND The bell pepper also known as sweet pepper is a cultivar of the group Capsicum annum. Cultivars of the group produces fruit of varying colours including red, yellow, green, orange and purple. They are native to Mexico, Central America, and northern South America. It has been reported that pepper seeds were imported to Spain in 1493, and from there moved to Europe and Asia. The bell pepper cultivar was developed in 1902 in Szeged, Hungary. In Jamaica bell/sweet peppers are grown in open field as well as in protected environments (green house). The introduction of an import substitution policy in 2007 has contributed significantly to the increases in domestic production and a decline imports. Although some farmers are cultivating sweet peppers in greenhouses the bulk of the production comes from open field operations. The reliance on rain-fed irrigation for open field operations creates inconsistency in annual production levels. The role of greenhouse farmers was to target the market segment for coloured bell peppers but due to increased cost of production some have been unwilling at times to allow the sweet peppers to ripe. Greenhouse farmers are also selling in the same market segment of the open field farmers thereby contributing to existing market inefficiencies. Sweet pepper is low on the Scoville scale for hotness/spiciness compared to jalapenos, Jamaica’s local scotch bonnet or red peppers. This characteristic has caused sweet peppers to be used widely in cuisines across the world particularly for their flavor as well as for enhancing the presentation of meals when used as garnish. Paprika, a very popular dry seasoning is made from dried red bell peppers. Bell peppers contain 94% water, 5% carbohydrates, and negligible fat and protein. They are rich in vitamins C, containing 97% of the Daily Value (DV) in a 100 gram reference amount. According to Healthy Eating, A diet rich in vegetables such as sweet peppers reduces the risk of certain chronic illnesses. Antioxidants found in vegetables reduce free radical damage. Free radicals are compounds that cause damage to cells that can lead to inflammation, heart problems and cancer. Coloured bell peppers contains larger amounts of antioxidants, green bell peppers are a significant source as well. Green bell peppers also contain zeaxanthin, which keeps your eyes healthy and might reduce the risk of age-related eye disorders. Red bell peppers contain more vitamin content that green peppers. HISTORY Sweet peppers grow all year-round in Jamaica aided by the tropical climatic conditions experienced the island. The crop is produced both in open field operations as well as under protected structures. This was intentionally planned through government policy to ensure that there was consistency in the supply of the commodity in the market. This is displayed in Table 1 below which shows over 100% increase in production levels over the by the increase in production over the 10-year period 2007-2016. Between 2010 and 2011 production spiked by near 50% moving from 10, 017 tonnes to 14,998. This can be explained partially by the impact of the Canadian/GOJ greenhouse project. There was a noticeable decline of 14% for the period 2013-2014, this was erased by significant upward movements of 23% in 2016.
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Introduction
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LOCAL INVESTMENT OPPORTUNITY Cost estimates (Table 1) from the MICAF Databank Division has informed that at year 2017 sweet pepper production in Jamaica was valued at J$3.2 billion. There was a 132% growth in production from 7,869 tonnes to 18,282 in 2017 with an annual average of 14, 340 tonnes. Farmgate prices for the period averaged J$178/kg and a significant upward movement of 80%. Prices seem to dip every two years and this can be explained partially by over supply issues which dampen the farmer’s enthusiasm to produce after coming out of a loss and this cyclical phenomena seem to continue bi-annually. A review of import data from the Statistical Institute of Jamaica (STATIN) for fresh or chilled sweet peppers over the period in question has revealed that the United States of America and the Dominica Republic are the only two recorded suppliers. Average import quantity from the USA over the period was recorded at 7,273kgs with an average value of US$9,496. Eighty-six kilograms were exported from the Dominican Republic at an average value of US$350. No importation of sweet peppers was recorded for 2017. Average marketable yield was estimated at 10,025 tonnes taking into consideration post-harvest losses of 25-30%. Production from open field operations is usually sold to the municipal markets and supermarkets. The output from green houses are usually coloured peppers which are sold to hotels and high-end supermarkets. When there is a low supply the government usually gives consideration to the importation to meet domestic demand. Investors contemplating the production of the sweet peppers should target the coloured pepper market segment and aim to produce consistently throughout the year. If high volume production is being contemplated, arrangements should made be made to tap into the export market. Terminal market prices for sweet peppers averages approximately US$4.50/kg. Average Sweet pepper production as illustrated by the Table 2 is highest in the first quarter and tapers off in the third quarter but increases again in the October to December quarter. This is instructive as potential investor should be guided by the production cycle to prevent over production and a subsequent slump in prices.
Why Invest in Bell Peppers
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TABLE 1
Annual Sweet Pepper Production and Value 2008
2009
2010
2011
20112
2013
2014
2015
2016
2017
Production (tonnes)
7,869
10,803
10,017
14,998
15,154
17,396
15,445
14,938
18,494
18,282
Area Reaped (Ha)
1,699
1,568
1,978
2,045
2,381
2,781
3,068
2,821
2,715
3,120
Farmgate Prices (J$/kg)
130
142
136
228
159
188
184
155
223
234
Farmgate Prices (US$)
1.98
2.06
1.72
2.62
1.84
2.11
1.83
1.39
1.90
1.87
Crop Value (J$000)
837,354
840,350
1,104,093
1,716,287
1,784,687
2,131,713
2,403,648
1,793,512
2,499,388
3,239,732
Source: MICAF 10-year Crop Estimates 2008-2017
TABLE 2
Estimate of Sweet Pepper Production by Quarter
Quarter
2013
2014
2015
2016
2017
Average
Jan – Mar
3,972
4,266
4,531
5,244
4,974
4,597
Apr – Jun
4,694
4,518
4,019
4,751
4,455
4,487
Jul – Sept
4,340
2,632
2,498
4,205
4,684
3,672
Oct – Dec
4,391
40,295
3,890
4,295
4,169
4,186
Total Production
17,396
11,416
14,938
18,495
18,282
Source: MICAF 10-year Crop Estimates 2008-2017
TABLE 3 Estimate of Sweet pepper Farmgate Prices by Quarter Quarter
2013
2014
2015
2016
2017
Avg. Farmgate Prices/Qtr (2013-2017)
Jan – Mar
242.63
167.88
190.99
195.4
339.93
227.37
Apr – Jun
112.69
129.77
173.86
129.57
186.28
146.43
Jul – Sept
144.02
224.96
299.45
219.06
298.14
237.13
Oct – Dec
247.62
123.27
262.33
394.21
343.87
274.26
Maximum price changes during the year
-54%
-45%
72%
80%
-45%
Source: MICAF 10-year Crop Estimates 2008-2017
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Why Invest in Bell Peppers
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COST OF PRODUCTION Based on cost of production estimates, approximately J$548,263 is required to cultivate one acre of sweet peppers in open field conditions. Labour input accounts for 28% ($255,000) material/equipment input 34% and other costs including but not exclusive to transportation and utilities 47%. Other costs include purchasing, installation and operation of an irrigation system that will supply a water and nutrients (in some cases) to the plants. The cost of production estimates assumes that the planting material is from seeds. The sweet pepper crop can last for 6-9 months of harvesting depending on the level of management that is implemented. The detailed cost of production can be found in the appendix. EXPORT INVESTMENT OPPORTUNITY In 2017 world exports of sweet pepper was valued at US$5.08 billion. Of the top ten countries examined in Table 5, Spain and Netherlands had the highest market share of 22% each. Mexico, Canada and the United States recorded, 19%, 7% and 5% respectively. The Netherlands showed the highest growth potential of 14% followed by Spain 4% and Canada 2%. Both the USA and Mexico had negative growth in 2016/2017. World exports over the five-year period 2013-2017 (Table 5) had moderate growth of 4.5% with 6% decline from 2013 t0 2015 and a gentle increase of 9% in 2016 and this growth trend continued in 2017. According to ITC data in Chart 1, China showed the greatest growth potential (131%) followed by Morocco (110%), Turkey 17% while Spain and Canada had the same rate of 15%. World growth rate was recorded at 5%. The United States in Chart 2 is leader in the importation of sweet pepper recording 5.3 million (27%) tonnes in 2017. They also showed the second highest import value growth rate over the period after France that recorded 21%.
TABLE 4 Estimate of Sweet pepper Farmgate Prices by Quarter Type Of Enterprise
Labour
Material Inputs
Cop Per Acre
Cop Per Kg
Planting Density Per Acre
Estimated Mkt-Yield Kgs/Acre
Farm Gate Price 2016 - Kg
Cop/ Farmgate Margin
Open Field
J$255,000
J$311,863
J$905,863
J$98.6
10,890
11,772
J$178
80.7%
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TABLE 5 Top 10 Fresh Bell Pepper Exporting Countries ($US”000”) Ranking
Exporters
2013
2014
2015
2016
2017
Market Share
World
4,862,364
4,811,160
4,563,625
4,974,904
5,082,302
1
Spain
988,058
1,061,359
969,717
1,096,166
1,138,633
22%
2
Netherlands
1,133,716
999,886
956,556
959,349
1,096,395
22%
3
Mexico
867,642
892,206
927,460
1,106,094
984,698
19%
4
Canada
307,261
317,242
332,804
343,598
353,204
7%
5
USA
220,267
236,787
217,824
252,486
231,747
5%
6
Morocco
73,678
77,603
71,673
81,487
154,661
3%
7
Israel
226,277
187,875
138,672
99,806
105,450
2%
8
Turkey
82,234
79,979
77,863
90,019
96,445
2%
9
Republic of Korea
90,878
84,378
86,650
94,917
91,060
2%
10
China
35,338
47,836
74,791
76,054
81,596
2%
Source: International Trade Centre Trade MAP Database
CHART 1 Growth in Export Market Share Value for Top 10 Exporters of Sweet Peppers
12
China Korea Turkey Israel Morocco USA Canada Mexico Netherlands Spain World -60
-30
0
30
60
90
120
150
Source: International Trade Centre Trade MAP Database
Why Invest in Bell Peppers
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TABLE 6 Top Ten Fresh Sweet Peppers Importers Ranking
Importers
2013
2014
2015
2016
2017
Market Share
World
5,158,850
5,153,317
4,794,403
5,134,879
5,269,637
1
USA
1,294,139
1,373,451
1,325,472
1,440,012
1,430,106
27%
2
Germany
902,116
849,094
799,299
808,792
833,468
16%
3
UK
427,821
447,170
418,618
430,644
441,703
8%
4
France
255,708
257,414
253,973
303,868
308,129
6%
5
Canada
224,914
242,174
235,260
282,659
247,255
5%
6
Netherlands
204,463
184,407
169,245
163,943
214,272
4%
7
Russia
243,828
212,326
126,655
126,937
162,248
3%
8
Japan
152,805
132,149
132,012
144,469
134,766
3%
9
Poland
101,224
105,348
93,797
97,269
112,190
2%
10
Italy
118,230
107,508
107,879
101,262
107,923
2%
Source: International Trade Centre Trade MAP Database
Canada France UK Germany USA CHART 2 Growth in Value of Import Market Share (2016/2017)
0
5
10
15
20
25
30
Source: International Trade Centre Trade MAP Database
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CLIMATE Sweet peppers can be characterized as warm season crop which performs best under frost free conditions. It is vulnerable to frost and doesn’t grow well at temperatures between 5 and 15 degree Celsius. Seedling germination is enhanced between temperatures of 24 to 30 degrees Celsius. The optimum soil temperature for germination is 29 °C. Low temperatures also slow down seedling growth, which leads to prolonged seedling exposure to insects, diseases, salt or soil crusting, any of which can severely damage or kill off the seedlings. Higher yields are obtained when daily air temperature ranges between 18 and 32 °C during fruit set. Persistent high relative humidity and temperatures above 35 °C reduce fruit set. Fruit that is formed during high-temperature conditions is normally deformed. Sweet peppers are also very sensitive to sunscald. Fruit colour development is hastened by temperatures above 21°C. SOIL Sweet peppers grow best in deep, fertile, well drained loamy soils with pH of 6.0 to 7.5 slightly acid to slightly alkaline. Pepper fields should be located as far away from tobacco plantings as possible owing to potential spread of aphidvectored viruses from tobacco to peppers. Growers should conduct soil test(s) to determine fertilizer and liming requirements (if necessary). Adjust the soil pH to near neutral (7,0) for maximum yields. They will grow moderately over a wide range of soil types, provided they are well drained to a depth of 600mm. The importance of organic matter cannot be overemphasized. It increases the capacity of the soil to retain water and nutrients. PLANTING MATERIAL Peppers may be sown directly in the field. But most commercial operations prefer to buy or propagate their own seedlings. The enterprise can either purchase seeds and establish a nursery for growing seedlings or purchase seedlings from local suppliers. Hybrid varieties such as Admiral, Abay and commandant are popular varieties grown locally. LAND PREPARATION The selected area should be properly tilled by ploughing, harrowing and farrowing to ensure that the that roots of seedlings will have direct contact with the soil particles. A properly tilled soiled will allow the roots maneuver freely through the soil and root hairs will be able to absorb water and nutrients. Proper drainage is also critical to ensure that the soil does not become waterlogged. Starter fertilizer and organic manure can be applied days before transplanting the seedlings so that it can be incorporated properly into the soil and does not destroy the delicate roots of the seedlings. PLANTING DENSITY Seedlings can be planted based on the level of production that is envisaged. A 2ft x 2ft configuration (2ft between and within rows) is popular among local farmers. The same configuration can also be used for protected structure operations. Higher planting density will require more intense management. PLANTING Planting/transplanting should be done once the seedlings have been ‘hardened off ’ early in the morning or in the evening when the sun has gone down. Plants should be set into the soil two inches deeper two inches deeper than they were growing in previous containers. Proper drainage is critical during land preparation as the soil should be properly drained especially if the enterprise is located on flat lands and/or if the soil is moderate to heavy. Planting on slopes will require that keen attention is given good land management practices such as reverse slopes, strip cropping, live or dead barriers and dry mulching. IRRIGATION Sweet peppers should have adequate supply of water. The drip system is the most preferred irrigation system for growing tomatoes as water is slow released into soil consistently over time. Storage tanks should also be installed and connected to drip system. The size of the storage tank is dependent on the size of the operation. For a five acre plot a 1,000-gallon capacity storage tank can adequate. There is however no limit on the amount of water that can be stored 14
Investment Analysis
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on the farm to reduce the risks that comes along climate change. 20mm drip lines leading from 40mm lines will be used to convey water to the plants. FERTILIZERS As a rule of thumb soil tests should be conducted to determine the most appropriate fertilizer regime that is most suited for the crop and the existing soil. Sweet peppers are heavy feeders, hence a good nutrient regime is critical to getting good crop yield. Organic compost can be ploughed into the land during land preparation or the placed into induvial holes two weeks prior to transplanting. Nutrients can be supplied in the liquid form by using a venturi pump to introduce nutrients into the irrigation lines. Foliar fertilizers can also be applied. The current common practice is to supply the nutrients to the crop through existing irrigation systems (fertigation). A complete fertilizer is good for starting off the crop. In addition to the macro nutrients (nitrogen, phosphorus and potassium) the nutrient regime must also include the micro nutrients such as calcium, magnesium, boron, Sulphur, iron, manganese, molybdenum chlorine, and zinc. PEST AND DISEASE MANAGEMENT The most common pest of sweet pepper are mites, thrips, aphids, and stink bugs. Sweet peppers are also susceptible to diseases such as Bacterial leaf spot, Powdery mildew, Damping-off, Bacterial wilt, Bacterial soft rot and Tobacco mosaic virus. These can be controlled/managed by using the wide spectrum of insecticides available on the local market. The farmer should develop an integrated pest management programme which will include: conducting regular scouting of fields to identify the presence of insects or diseases and thereafter take the necessary precautionary measures, planting compatible barrier crops and using sticky traps. HARVESTING AND YIELD Marketable yields of sweet peppers ranges between 15-25 tons per acre depending on the crop care regime that is applied. When harvesting a clean cut is required as such cut surfaces heal much faster and reduces the incidence of decay when in storage. Maturity is determined when the fruit is smooth and firm to the touch. Depending on market preference sweet peppers can be harvested green or ripe. Sweet peppers should harvested using crates and not bags to reduce compression and postharvest losses. POST HARVEST MANAGEMENT Mature green peppers are best stored at temperatures 7-12â °C and 95% relative humidity. Peppers should be harvested in the morning or late afternoon to reduce field heat and the onset of condensation when in storage. Rapid precooling of harvested sweet peppers is essential in reducing marketing losses. MARKETING Proper storage will increase the shelf life of sweet peppers. Sweet peppers are either sold to purveyors/middle men through informal contracts, higglers at the farmgate or some farmers will take the produce directly to market. Framers are encouraged to secure contractual arrangements before planting a crop which reduces the risk of losses if proper storage is not available. Sweet pepper production goes through annual boom and bust cycles with increased supply during the first quarter and tapers off during the latter part of the second to third quarter. This follows the local rainfall pattern. To get high prices production should be irrigated so that production can occur in the summer months when rainfed dependent operations stopped producing.
Investment Analysis
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PROJECT COST In the financial model, the unit cost of development of 5 acres of sweet pepper has been prepared. This can be modified to fit other scale of operations taking into consideration the attendant changes to the variables used. WORKING CAPITAL Working capital represents the operational liquidity that is available to the business enterprise. For this 5-acre the working capital was calculated as 30% of the total operational cost. This is the minimum amount of cash that the business should have at hand to cover at least 30% of the operational cost. BANK LOAN For this venture the cost of capital was estimated at 8%. Interest rates are retailed between 8-11%. 68% of the development cost invest will be funded from equity. The remaining 32% will be funded from a bank loan. The loan is required to purchase a 3-4years old pickup truck. RATE OF INTEREST For this venture the cost of capital was estimated at 8%. Interest rates for agricultural loans are retailed between 8-11%. SECURITY The project will be guided the financial stipulations laid out by Agricultural Bank for agricultural loans. The tenets of Good Agricultural practices will be adhered to ensure high productivity and produce that is safe for consumption. Proactive actions such as scouting will be implemented for early detection of pest and diseases. The irrigation system established will ensure that the plants are adequately irrigated to give the maximum yield. FINANCIAL ANALYSIS Financial analysis was carried out for five acres (2.5 hectares) of Irish potato cultivation. For financial analysis, the income was assessed on a conservative basis. The detailed calculation of project’s income and expenditure has been indicated in Annexure II. IRR and NPW for the model work out to be 62 %, J$8.6million respectively and the details are given in Annexure XII. REPAYMENT OF LOAN Based on the cash flow the detailed repayment schedule has been worked out and furnished in the Annexure IV. The repayment period works out to five years including 6 months grace period for repayment of principal.
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Financial Viability and Bankability
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ANNEXES
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TABLE 1
Basic Assumptions
PARAMETERS Exchange rate USD:JMD
VALUE 132
Area Planted (acres)
5
Area Planted (hectares)
2
Time to maturity (months)
3-4 months
Marketable yields per acre (kg)
24545
Marketable yields per Hectare (kg)
60626
Number of crops per year (continuous bearing up to 6 months) Number of plants per acre
1 10890
Sales distribution Local to exporters via middlemen
40%
Local to higgglers for municipal markets
50%
Prices USD/kg: Local to exporters via middlemen
0.4
Local to higgglers for municipal markets
0.4
annex
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TABLE 2
Operating Costs COST/UNIT
TOTAL ACREAGE
UNIT
NO. OF UNITS
COST
MD
3
1,500.00
1
4,500.00
Ploughing
tractor
5
2,500.00
1
12,500.00
Harrowing
tractor
2
2,500.00
1
5,000.00
Furrowing
tractor
2
2,500.00
1
5,000.00
Lining Irrigation Hose
MD
2
1,500.00
1
3,000.00
Nursery Operations
MD
5
1,500.00
1
7,500.00
Transplanting
MD
8
1,500.00
1
12,000.00
Pest Management
MD
12
1,500.00
1
18,000.00
Fertilising
MD
3
1,500.00
1
4,500.00
Weeding
MD
22
1,500.00
1
33,000.00
Harvesting
MD
30
1,500.00
1
45,000.00
Lunch
85
300.00
Labour Operations Land Cleaning
1
25,500.00
Material Inputs Planting Material
acre
23,000.00
1
23,000.00
Fertiliser
acre
55,000.00
1
55,000.00
Insecticide
acre
40,000.00
1
40,000.00
Fungicide
acre
23,000.00
1
23,000.00
Herbicide
acre
2,750.00
1
2,750.00
Water
acre
7,500.00
1
7,500.00
Seed Trays
acre
8,000.00
1
8,000.00
Transportation (10 percent of material)
15,925.00
1
15,925.00
Contingencies (10 percent of labour and material)
33,475.00
1
33,475.00
Other Costs
Capital Equipment (Drip Irrigation system) Land Charges per annum - 2200 per acre per year Supervision
1 acre
1
-
10,000.00
1
10,000.00
50,213.00
1
50,213.00
TOTAL OPERATING EXPENDITURE PER CROP CYCLE Cost of Production per acre Total yield Cost of Production $/Kg
444,363.00 1
7,273.00 61.10
Revenue
800,030.00
Gross Profit
355,667.00
Gross profit Margin
80.0%
II
annex
TEF Crop Profile - Bell Peppers.indd 2
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TABLE 3
Capital Costs
CAPITAL COSTS
UNITS
NUMBER OF UNITS
RATE/UNIT
TOTAL
Shed/storeroom
ft2
100
2,000
200,000
Fencing (barb wire)
acre
5
209,000
1,045,000
Pickup truck
each
1
3,000,000
3,000,000
Knapsack sprayer
each
2
10,000
20,000
Mist-blower
set
1
40,000
40,000
Irrigation Equipment
acre
5
100,000
500,000
Water storage tank (1000gal)
Each
1
90,000.00
90,000
Miscellaneous equipment and tools
each
1
40,000
40,000
Total
TABLE 4
4,935,000
Monthly Operating Costs UNIT
QTY
UNIT PRICE (J$)
YR1
acres
5
700,000.00
3,500,000
Marketing expenses
yr
1
140,000.00
140,000
Contingency
5%
Direct Expense Crop establishment Sweet pepper (estimating 1 crop cycle /year)
182,000.00
Subtotal
3,822,000
Indirect expenses Land lease
acres/yr
10
10,000.00
100,000
Salaries and wages
mth
12
2,000.00
24,000
Owner/manager
mth
12
175,000.00
2,100,000
Security
mth
12
60,000.00
720,000
Fuel
mth
12
40,000.00
480,000
Accounting and audit fees
mth
12
20,000.00
240,000
Equipment Maintenance
mth
12
10,000.00
120,000
Moto vehicle expense/servicing
mth
12
20,000.00
240,000
Motor vehicle insurance
yar
1
120,000.00
120,000
Utilities:
-
Water
mth
12
20,000.00
240,000
Telephone internet
mth
12
10,000.00
120,000
Stationary &office supplies/printing
mth
12
10,000.00
120,000
Bank charges
mth
12
20,000.00
240,000
Contingencies
5%
625,400.00
Sub-Total
5,489,400
Total Operating Costs
9,311,400 annex
TEF Crop Profile - Bell Peppers.indd 3
III
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TABLE 5
Annual Operating Costs YR1
YR2
YR3
YR4
YR5
3,500,000
3,850,000
4,235,000
4,658,500
5,124,350
Marketing expenses
140,000
154,000
169,400
186,340
204,974
Contingency
182,000
200,200
220,220
242,242
266,466
3,822,000
4,204,200
4,624,620
5,087,082
5,595,790
-
-
-
-
-
100,000
110,000
121,000
133,100
146,410
24,000
26,400
29,040
31,944
35,138
2,100,000
2,310,000
2,541,000
2,795,100
3,074,610
Security
720,000
792,000
871,200
958,320
1,054,152
Fuel
480,000
528,000
580,800
638,880
702,768
Accounting and audit fees
240,000
264,000
290,400
319,440
351,384
Equipment Maintenance
120,000
132,000
145,200
159,720
175,692
Moto vehicle expense/servicing
240,000
264,000
290,400
319,440
351,384
Motor vehicle insurance
120,000
132,000
145,200
159,720
175,692
-
-
-
-
-
Water
240,000
264,000
290,400
319,440
351,384
Telephone internet
120,000
132,000
145,200
159,720
175,692
Stationary &office supplies/printing
120,000
132,000
145,200
159,720
175,692
Bank charges
240,000
264,000
290,400
319,440
351,384
Contingencies
625,400
687,940
756,734
832,407
915,648
Sub-Total
5,489,400
6,038,340
6,642,174
7,306,391
8,037,031
Total Operating Costs
5,609,400
6,170,340
6,787,374
7,466,111
8,212,723
Direct Expense Crop establishment Sweet pepper (estimating 1 crop cycle /year)
Subtotal Indirect expenses Land lease Salaries and wages Owner/manager
Utilities
IV
annex
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TABLE 6
Annual Marketing Yield YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Sweet Pepper (Kg)
85,908
94,498
103,948
114,343
125,777
Total
85,908
94,498
103,948
114,343
125,777
TABLE 7
Gross Revenue Schedule (J$) YR1
YR2
YR3
YR4
YR5
Pepper sales
6,013,525
7,342,514
8,965,210
10,946,521
13,365,702
Total
6,013,525
7,342,514
8,965,210
10,946,521
13,365,702
TABLE 8
Selling Price YR1
YR2
YR3
YR4
YR5
Sweet pepper
70.00
77.70
86.25
95.73
106.26
Inflation factor
1.11
TABLE 9
Loan Repayment Schedule
MONTHS
LOAN
LOAN
PRINCIPAL
4,345,000
4,345,000
869,000
3,476,000
869,000
2,607,000
869,000
1,738,000
869,000
869,000
869,000
1 2 3 4 5
TOTAL
4,345,000
INTEREST
INTEREST
TOTAL DEBT
521,400
-
1,390,400
3,476,000
417,120
-
1,286,120
2,607,000
312,840
-
1,181,840
1,738,000
208,560
-
1,077,560
869,000
104,280
-
973,280
-
1,564,200
LOAN
5,909,200
Moratorium - 6 mths Loan period - 5 Yrs (including moratorium) Interest rate:
= 10% per Annum
annex
TEF Crop Profile - Bell Peppers.indd 5
V
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TABLE 10 Financing Plan TOTAL FINANCING REQUIRED
EQUITY
LOAN
GRANT
TOTAL
Capital Cost: Shed/storeroom
200,000
200,000
200,000
Fencing (barb wire)
1,045,000
1,045,000
1,045,000
Pickup truck
3,000,000
3,000,000
3,000,000
Knapsack sprayer
20,000
20,000
20,000
Mist-blower
40,000
40,000
40,000
Miscellaneous equipment and tools
40,000
40,000
40,000
4,345,000
4,345,000
Physical contingencies (10%) Sub-Total
4,345,000
-
Operating Costs Crop establishment Sweet pepper (estimating 1 crop cycle /year)
3,500,000
3,500,000
3,500,000
Marketing expenses
140,000
140,000
140,000
Contingency
182,000
182,000
182,000
3,822,000
3,822,000
Subtotal
3,822,000
Indirect expenses Land lease Salaries and wages Owner/manager
-
-
-
100,000
100,000
100,000
24,000
24,000
24,000
2,100,000
2,100,000
2,100,000
Security
720,000
720,000
720,000
Fuel
480,000
480,000
480,000
Accounting and audit fees
240,000
240,000
240,000
Equipment Maintenance
120,000
120,000
120,000
Moto vehicle expense/servicing
240,000
240,000
240,000
Motor vehicle insurance
120,000
120,000
120,000
Utilities:
-
-
-
Water
240,000
240,000
240,000
Telephone internet
120,000
120,000
120,000
Stationary &office supplies/printing
120,000
120,000
120,000
Bank charges
240,000
240,000
240,000
Contingencies
625,400
625,400
625,400
Sub-Total Total
5,489,400
5,489,400
13,656,400
9,311,400
Equity
68%
Leverage
32%
VI
5,489,400 4,345,000
13,656,400
annex
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TABLE 11 Depreciation Schedule ASSET Shed/storeroom
ORIGINAL COST
RESIDUAL VALUE
DEPRECIABLE COST
ESTIMATED LIFE DEPRECIATION PER (YRS) YEAR
200,000
20000
180,000
10
18,000
Fencing (barb wire)
1,045,000
30000
1,015,000
10
101,500
Pickup truck
3,000,000
300,000
2,700,000
10
270,000
Knapsack sprayer
20,000
2,000
18,000
10
1,800
Mist-blower
40,000
5,000
35,000
5
7,000
Irrigation Equipment
500,000
50,000
450,000
5
90,000
Miscellaneous equipment and tools
40,000
2,000
38,000
5
7,600
TABLE 12 Projected Net Income YR1
YR2
YR4
YR5
Gross Revenue
6,013,525
7,342,514
8,965,210
10,946,521
13,365,702
Operating Cost
5,609,400
6,170,340
6,787,374
7,466,111
8,212,723
Operating Profit
404,125
1,172,174
2,177,836
3,480,410
5,152,980
Depreciation
477,900
477,900
477,900
477,900
477,900
18,000
18,000
18,000
18,000
18,000
Fencing (barb wire)
101,500
101,500
101,500
101,500
101,500
Pickup truck
270,000
270,000
270,000
270,000
270,000
Knapsack sprayer
1,800
1,800
1,800
1,800
1,800
Mistblower
7,000
7,000
7,000
7,000
7,000
90,000
90,000
90,000
90,000
90,000
7,600
7,600
7,600
7,600
7,600
409,000.00
409,000.00
409,000.00
409,000.00
409,000.00
Interest Payment
521,400
417,120
312,840
208,560
104,280
Profit before Tax
(1,004,175)
(131,846)
978,096
2,384,950
4,161,800
Taxable Profit
(1,004,175)
(131,846)
978,096
2,384,950
4,161,800
Tax (33.3%)
(334,390)
(43,905)
325,706
794,188
1,385,879
Net Profit after Tax
(669,785)
(87,941)
652,390
1,590,761
2,775,920
(669,785)
(757,726)
(105,336)
1,485,425
4,261,345
Shed/storeroom
Irrigation Equipment Miscellaneous equipment and tools Residual value
YR3
(Profit before tax less tax)
Cumulative Net Profit
annex
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VII
7/23/2019 8:52:31 PM
TABLE 13 Summary of Project Costs & Benefits
YEAR
1 2 3 4 5
4,935,000
CAPITAL
-
-
-
CAPITAL REPL.
746,611
678,737
617,034
560,940
WORKING CAPITAL
5,152,980
3,480,410
6,787,374
6,170,340
5,609,400
OPER. COST
5,974,252
4,227,021
11,105,340
TOTAL COST
13,365,702
10,946,521
6,013,525
SALES REVENUE
7,466,111
8,965,210
7,342,514
821,272
6,787,374
-
NPV =
WORKING CAPITAL (REC)
TOTAL BENEFIT
(4,530,875)
NET BENEFIT
4,345,000
LOAN
560,940
6,574,465
-
617,034
$8,684,911
8,212,723
7,466,111
1,172,174
-
678,737
11,693,132
7,959,548 -
746,611
14,186,974
2,177,836 -
821,272
9,643,947
-
SALVAGE & RESIDENTIAL VALUE
Assuming a real discount rate of 10%
62%
OUTFLOW
1,390,400
1,286,120
1,181,840
1,077,560
973,280
EQUITY
(1,576,275)
(113,946)
995,996
6,388,551
7,239,443
$8,079,750
7/23/2019 8:52:32 PM
TEF Crop Profile - Bell Peppers.indd 8
Conclusion: Project is viable if NPV positive IRR =
annex
VIII
TABLE 14 Annual Cash Flow Projection ($) YR1
YR2
YR3
YR4
YR5
INFLOWS Loan
8,690,000
Equity
9,311,400
Grant
-
Sales
6,013,525
7,342,514
8,965,210
10,946,521
13,365,702
24,014,925
7,342,514
8,965,210
10,946,521
13,365,702
Total Inflows OUTFLOWS Capital Cost
4,935,000
Operating Cost
5,609,400
6,170,340
6,787,374
7,466,111
8,212,723
-
-
-
-
-
1,682,820
1,851,102
2,036,212
2,239,833
2,463,817
Outflows before Debt & Tax
12,227,220
8,021,442
8,823,586
9,705,945
10,676,539
Cash Flow before Debt & Tax
11,787,705
(678,928)
141,623
1,240,576
2,689,163
Debt service
1,390,400
1,286,120
1,181,840
1,077,560
973,280
Tax
3,925,306
(226,083)
47,161
413,112
895,491
Net Cash Flow
6,471,999
(1,738,965)
(1,087,377)
(250,096)
820,392
Cumulative Net Cash Flow
6,471,999
4,733,034
3,645,657
3,395,561
4,215,953
Capital Replacement Working Capital
Net Present Value
J$3,968,091.86
annex
TEF Crop Profile - Bell Peppers.indd 9
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TABLE 15 Fresh Bell Pepper Exports to the USA PERIOD
TRADE FLOW
REP0RTER
PARTNER
TRADE VALUE ('000'$US)
NET WEIGHT (TON)
2013
Import
USA
World
1,294,139
1,903,085
2014
Import
USA
World
1,373,451
2,041,064
2015
Import
USA
World
1,325,472
2,030,680
2016
Import
USA
World
1,578,892
2,305,243
2017
Import
USA
World
1,429,995
2,370,771
Source: International Trade Centre Trade MAP Database
TABLE 16 Fresh Bell Pepper Exports to the United Kingdom PERIOD
TRADE FLOW
REP0RTER
PARTNER
TRADE VALUE ('000'$US)
NET WEIGHT (TON)
2013
Import
United Kingdom
World
1,263,320
615,587
2014
Import
United Kingdom
World
1,342,420
644,903
2015
Import
United Kingdom
World
1,276,836
668,287
2016
Import
United Kingdom
World
1,228,281
718,630
2017
Import
United Kingdom
World
1,255,670
711,621
Source: International Trade Centre Trade MAP Database
TABLE 17 Fresh Bell Pepper Exports to PERIOD
TRADE FLOW
REPORTER
PARTNER
TRADE VALUE ('000'$US)
NET WEIGHT (TON)
2013
Import
Canada
World
734,209
475,552
2014
Import
Canada
World
746,151
466,565
2015
Import
Canada
World
741,793
458,246
2016
Import
Canada
World
781,178
472,551
2017
Import
Canada
World
788,442
481,368
Source: International Trade Centre Trade MAP Database
X
annex
TEF Crop Profile - Bell Peppers.indd 10
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REFERENCES
1. Cost of Production Estimates (2017), Ministry of Industry Commerce Agriculture and Fisheries, Databank Division 2. Crop Production Estimates (2016), Ministry of Industry Commerce Agriculture and Fisheries, Databank Division 3. International Trade Centre (ITC), https://www.trademap.org/Index.aspx 4. USDA Market News, https://www.marketnews.usda.gov/mnp/hm-home 5. https://www.medicalnewstoday.com/articles/276714.php 6. Tourism Linkages Hub (2015), Tourism Demand Study, A product of the Ministry of Tourism 7. Trade Data, Statistical Institute of Jamaica Library
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12
References
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