Tourism Top Crops- Bell Peppers

1

TEF Crop Profile - Bell Peppers.indd 1

7/23/2019 8:52:24 PM

2

TEF Crop Profile - Bell Peppers.indd 2

7/23/2019 8:52:26 PM

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.

Messages

TEF Crop Profile - Bell Peppers.indd 3

3

7/23/2019 8:52:26 PM

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!

4

Messages

TEF Crop Profile - Bell Peppers.indd 4

7/23/2019 8:52:26 PM

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

Messages

TEF Crop Profile - Bell Peppers.indd 5

5

7/23/2019 8:52:27 PM

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

6

Messages

TEF Crop Profile - Bell Peppers.indd 6

7/23/2019 8:52:27 PM

AN INVESTMENT PROFILE OF THE BELL PEPPER INDUSTRY IN JAMAICA

A Tourism Linkages Project

TEF Crop Profile - Bell Peppers.indd 7

7/23/2019 8:52:29 PM

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.

8

Introduction

TEF Crop Profile - Bell Peppers.indd 8

7/23/2019 8:52:29 PM

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

TEF Crop Profile - Bell Peppers.indd 9

9

7/23/2019 8:52:30 PM

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

10

Why Invest in Bell Peppers

TEF Crop Profile - Bell Peppers.indd 10

7/23/2019 8:52:30 PM

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%

Why Invest in Bell Peppers

TEF Crop Profile - Bell Peppers.indd 11

11

7/23/2019 8:52:30 PM

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

TEF Crop Profile - Bell Peppers.indd 12

7/23/2019 8:52:30 PM

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

Why Invest in Bell Peppers

TEF Crop Profile - Bell Peppers.indd 13

13

7/23/2019 8:52:30 PM

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

TEF Crop Profile - Bell Peppers.indd 14

7/23/2019 8:52:30 PM

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

TEF Crop Profile - Bell Peppers.indd 15

15

7/23/2019 8:52:30 PM

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.

16

Financial Viability and Bankability

TEF Crop Profile - Bell Peppers.indd 16

7/23/2019 8:52:30 PM

ANNEXES

TEF Crop Profile - Bell Peppers.indd 17

7/23/2019 8:52:30 PM

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

TEF Crop Profile - Bell Peppers.indd 1

I

7/23/2019 8:52:30 PM

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

7/23/2019 8:52:30 PM

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

7/23/2019 8:52:31 PM

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

TEF Crop Profile - Bell Peppers.indd 4

7/23/2019 8:52:31 PM

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

7/23/2019 8:52:31 PM

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

TEF Crop Profile - Bell Peppers.indd 6

7/23/2019 8:52:31 PM

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

TEF Crop Profile - Bell Peppers.indd 7

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

IX

7/23/2019 8:52:32 PM

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

7/23/2019 8:52:32 PM

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

TEF Crop Profile - Bell Peppers.indd 11

7/23/2019 8:52:32 PM

12

References

TEF Crop Profile - Bell Peppers.indd 12

7/23/2019 8:52:35 PM