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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 Hon Edmund Bartlett, Minister of Tourism and creating opportunities for our local suppliers to 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
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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 The six investment crop profiles being presented – set for even greater explosion, taking other sectors 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 This is an awesome initiative for Jamaica! Our Island climate and soil is rich for multi-crop cultivation and never ceases to amaze me; we are truly the land of with the right support, cohesive relations and opportunities. Let us re-commit, keep the focus and alignment, we now find ourselves at a crucial juncture get it done! with the impetus to charge full-speed ahead.
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Messages
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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 agriculture tourism supply chain. This is the first in a series of publications aimed at products of economic importance to the tourism industry.
Dr Derrick Deslandes, Chairman, Agriculture Technical Working Group
The products selected are guided by the research findings from our tourism demand studies. These investment guides will also be updated from time to time as we strive to improve our service and the quality of the information provided to you our valuable stakeholders.
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CONTENTS MESSAGES............................................................................................................................................. 4 Minister Of Tourism...................................................................................................................................... 4 Tourism Linkages Network Chairman............................................................................................................. 5 Agriculture Technical Working Group Chairman............................................................................................... 6 INTRODUCTION....................................................................................................................................... 8 Background................................................................................................................................................. 8 History of Onions in Jamaica......................................................................................................................... 8 WHY INVEST IN ONIONS......................................................................................................................... 9 Local Investment Opportunity........................................................................................................................ 9 Export Investment Opportunity...................................................................................................................... 12 INVESTMENT ANALYSIS......................................................................................................................... 13 Climate........................................................................................................................................................ 13 Pest and Disease Management..................................................................................................................... 14 FINANCIAL VIABILITY AND BANKABILITY............................................................................................. 15 Marketing.................................................................................................................................................... 15 ANNEXES................................................................................................................................................ 16
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AN INVESTMENT PROFILE OF THE ONION INDUSTRY IN JAMAICA
A Tourism Linkages Project
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BACKGROUND Onions (Allium cepa L.) are the most widely cultivated species of the genus Allium. In most cases, the onion is a biennial or a perennial plant but is usually treated as an annual and harvested in the first growing season. Onions are cultivated across the world. As a food item, they are usually served cooked, as a vegetable or part of a prepared savoury dish but can also be eaten raw or used to make pickles or chutneys. They are pungent when chopped and contain certain chemicals substances which irritate the eyes. Common onions are normally yellow or brown (sometimes called red onions) are full-flavoured and are the onion of choice for everyday use. Many cultivars are bred specifically to demonstrate this sweetness. Yellow onions turn a rich dark brown colour when caramelized and give French onion soup its sweet flavour. The red onion is a good choice for fresh use when its colour adds to the aesthetics of a dish. It is also good for grilling. Onions are available in fresh, frozen, canned, caramelised, pickled, and chopped forms. The dehydrated product is also available as sliced, ring, minced, chopped, granulated and powdered forms. Onion powder is a seasoning widely used when the fresh ingredients are not available. It is made from finely ground, dehydrated onions, mainly the pungent varieties of bulb onions, and has a strong odour. Most varieties of onions are 89% water, 9% carbohydrates (including 4% sugar and 2% dietary fibre) Onions contain low amounts of essential nutrients and have an energy of 166KJ. Onions have been as food for thousands of years; in ancient Egypt, they were worshipped and used in burials. Onions have many possible health benefits including reducing the risk of obesity, heart disease and cancer. They are high in vitamins, minerals, and antioxidants. Varieties of onions grown locally include Mercedez, Arad, Superex and the Grano type. According to RADA these short-day varieties and are ideal for planting in October to December. Long-day varieties such as the Orlando, Caballero, Yellow Granex hybrid are planted in April/March. HISTORY OF ONIONS IN JAMAICA The cultivation of onions in Jamaica goes as far back as the 1960s (RADA). Over the past two decades there has been significant reduction in the production of onions partially due to the liberalization of the Jamaican economy in the early nineties. This period was then characterized by the influx of imported commodities including fresh produce. Policies shifted in early 2000s with a focus on import substitution to prevent outflows of much needed foreign exchange whilst growing domestic production. This shift in policy direction has resulted in the country almost realizing selfsufficiency in onion production. With the successes also comes challenges as the industry grapples with how to manage the negative impact of pest and diseases, postharvest practices and marketing arrangements. One pest of significant importance is the army worm which creates havoc on onions and there are many sad stories of onion farms being totally wiped out by this pest. RADA has developed early warning systems and protocols that will help with monitoring and overall management of the pest. Every growing industry requires adequate infrastructure for present and future development. It is therefore critical that in addition to improvement in agronomic practices that there is also gradual improvement in the local infrastructure to include drying/curing facilities that will increase the shelf life of the harvested crop.
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Introduction
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LOCAL INVESTMENT OPPORTUNITY The production of onions presents a viable investment opportunity as local consumers continue to demand locally produced fresh produce. Local consumers are also becoming more environmentally conscious and are concerned about the processes used to lengthen the shelf life of imported produce. Data in Table 1 from the Ministry of Industry Commerce Agriculture and Fisheries (MICAF) Data Bank Division shows that there was a 79.9% increase in the production of onions over the ten-year period 2008-2017. The average annual production for the period was approximately 818 (818,000kgs) tonnes. The highest production for the period was in 2015 when production levels rose by 68% from 691 tonnes (691,000) to 1,162 tonnes (1.162 million kgs). An annual average of 74 acres was reaped over the period with 2012 recording the highest acreages (102 acres) reaped. Although producers have developed basic postharvest systems, the industry continues to suffer from postharvest losses both at the primary and secondary levels. Postharvest losses were averaging between 15-20% and this had impacted negatively on marketable yields and ultimately revenue. Farmgate prices averaged J$133/kg for the period under review. 2017 recorded the highest market price of J$181.67. There have been moderate price fluctuations year-on-year for most of the period except for 2012-2013 when there was significant upward price movements in the magnitude of 43.7%. The total annual value of onion production has grown over period by 164% from J$47,315 million in 2008 to $J124,933 million in 2017.
TABLE 1 Annual Onion Production and Value Items
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Production (Tonnes)
455
720.9
555
1015
1088
680
691
1162
1092
818
Marketable Yield
341
541
416
761
816
510
518
872
819
614
Harvested (Ha)
50
59
59
95
104
59
69
96
78
69
Farmgate Prices
103.99
89.41
113.67
139.38
102.04
146.67
148.38
149.04
181.67
152.73
64,456
63,087
141,471
111,020
102,531
173,184
198,384
124,933
Crop value
47,315
99,736
Source: MICAF Crop Estimates 2008-2017
In table 2 below quarterly onion production levels over five years (2013-2017) are illustrated. Production levels were highest in the third quarter for most years and lowest the in the last quarter. This trend follows the production cycle since there is a proportion of farmers who rely primarily directly on rainfall for irrigation. Table 3. Shows the changes in farmgate prices for each quarter over a five-year period 2013-2017. The most significant price changes, 118% and 99% were recorded in third quarters of 2014 and 2015 respectively. The Netherlands is the major exporter of fresh or chilled Onions to Jamaica. Over the five-year period, 2013-2017, year 2013 recorded the highest import level of 8.6 million kgs of fresh onions. Average imports for the period was 7.8 million kgs and the average value was estimated at US$5.1 million. There has been an 11% decline in the importation of onions over the period owing to the import substitution policy which has resulted in increased local production. The relative high volume of fresh onion import presents a huge market opportunity for “ramping� up local production. Local consumption of fresh onions is approximately 900 tonnes of which an estimated 10% is provided from domestic production. The remaining 90% is supplied through exports. The data in Chart 1 from the Statistical Institute of Jamaica shows that there has been year-on-year growth of 2% in domestic supplies except for the decline in 2016. When the yield per acre is estimated at 10,000 kilograms, there is a production gap of approximately 800 acres.
Why Invest in Onions
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TABLE 2
Estimate of Onion Production per Quarter
Quarter
2013
2014
2015
2016
2017
Jan – Mar
84.1
182.4
241.4
217
272
Apr – Jun
312.7
399.8
658.9
737
335
Jul – Sept
225.3
70.3
220.8
114
163
Oct – Dec
57.6
38.8
40.8
24
28
Total Production
679.7
691.3
1161.9
1092
798
Source: MICAF Annual Crop Estimates 2008-2017
TABLE 3 Estimate of Onion Farmgate Prices per Quarter
2013
2014
2015
2016
2017
Increase in Farmgate Price 2013-2017
Jan – Mar
141.63
129.69
150.85
143.88
160.17
41%
Apr – Jun
149.64
149.44
150.64
198.73
142.03
27%
Jul – Sept
145.69
192.54
140.72
126
163.35
21%
Oct – Dec
141.69
145.43
157.53
264.55
155.51
47%
-3%
-24%
7%
110%
15%
Quarter
Maximum Price changes during the year
Source: MICAF Annual Crop Estimates 2008-2017
10000000 8000000 6000000 4000000 2000000 0 CHART 1 Onion Production Gap (kgs)
10
2013
2014
2015
2016
Source: STATIN/MICAF
Why Invest in Onions
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As illustrated in Chart 2 below there was a 57% decline in the value of imports from US$4.6 million in 2013 to US$ 2 million in 2017. This is in keeping with the local import substitution policy. A summary of the cost of production for establishing one acre of Irish potato is provided in Table 4 above. A detailed cost of production is attached in the Appendix. In the summary, labour cost was estimated at J$174,500 representing 27% of the total cost. The cost for procuring materials was J$389,812 (60%) while other costs inclusive of transportation and supervision were estimated to be $145, 700 (13%). The overall cost for establishing one acre has been estimated at J$649,118. The cost of production per kilogram was estimated at J$60/kg. The estimates assumed 10892 plants per acre, an estimated marketable yield of 21.784kg and average farmgate price of J$132/kg thus deriving a profit margin of 63%.
500000000 400000000 300000000 200000000 100000000 0
CHART 2 Value of Jamaica's Import of Fresh Onions (J$) 2013-2017
TABLE 4
2013
2014
%
2015
2016
2017
Source: STATIN
COP and Profit Margin Calculation based on Local Market
Labour Cost
Material
Other Costs
COP per Acre
COP per kg
174,500 (27%)
389,812 (60%)
145,700
649,118
60
Planting Density per Acre
Estimated Yield (kgs/acre)
Farm Gate Price 2017 (per kg)
COP/Farmgate Margin
10,000
132
63%
20cm X 6cm Approximately 27,000 plants/3-5kgs of seed/acre
Why Invest in Onions
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EXPORT INVESTMENT OPPORTUNITY Global trade of fresh onions over the five-year period 2013-2017 averages 7.5million tonnes. International Trade Centre (ITC) Database. In 2017, 7.5 million tonnes of fresh onions were traded globally. According to ITC’s database, average global trade over the period in question was valued at US$3.2 billion dollars. The market share for the top 5 exporting countries is as follows; Netherlands (17.5%), China -16.3%, Mexico -12.4 %, India -11.5% and the United States of America -7%. China and the Netherlands showed growth rates among the top five onion exporting countries in 2017. The other top three countries have shown negative growth rates, the United States of America (-7%), India (- 6%) and Mexico (-5%).
USA India %
Mexico China Netherlands CHART 3 Market Share of Top 5 Exporters of Onions (2017)
0
5
10
15
20
Source: ITC Trade Map
USA
Netherlands
Mexico
India
China CHART 4 Exported Growth in Value(%) for 2016/2017
12
-8
-6
-4
-2
0
2
4
6
8
10
12
Source: ITC Trade Map
Why Invest in Onions
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CLIMATE Onions grow best below 1,900 metres altitude; 500-700mmrainfall; 15 -30˚ C temperature range. Leaf, root, and bulb development occurs in cool temperatures between 20 ˚ and 25 ˚ C. High temperature can prevent flowering. After bulbs develop, cool weather with adequate moisture supply is required flower stalk initiation. High temperatures during flowering will result in abortion and consequently lower seed yield. (FAO 2010) SOIL Onions will perform well in most soils that are well drained and have sufficient depth for the bulbs to develop and expand. It is best to avoid heavy soils since they may present a scenario where problems such as poor aeration, crusting and blemishing may arise. For commercial enterprises RADA recommends that the crop is grown in full sunlight in medium texture loams. Soil pH of 6.0-8.0 is preferred for onion production. (FAO 2010) PLANTING MATERIAL The enterprise can either purchase seeds and establish a nursery for growing seedlings or purchase seedlings from local suppliers. Onions can be cultivated either by direct seeded at a rate of 3-5 kilograms per acre. (MICAF) Seedlings grown in the nursery should be sown in polyethylene trays and transplanted when plants are at the two-leaf stage (six to eight weeks). Onions can be classified as short, intermediate or long day types, associated with the hours of sunlight which will trigger bulb formation. Varieties of onions growing locally includes: Mercedes, Arad, Superex and Grano type. These are recommended for cultivating between mid-October to December. For March to April, varieties such as Orlndo, Caballero, Yellow Granex hybrid and Noam can be planted. (MICAF) LAND PREPARATION The selected area should be properly tilled by ploughing, harrowing rotovating and bed-shaping. Drains should be constructed to prevent waterlogging of fields. If the direct seeding method is to be used for bringing the soil to a very fine tilth, it will be critical for the seed to make contact with soil particles. Pre-emergent weedicide should be applied prior to planting so as to avoid competition between the onion plantlets and weeds. PLANTING DENSITY Seeds can be planted in rows 20-30cm (8-12inches) apart, and along rows at 2.5-10ocm(1-4inches) at a depth of 1.25cm (0.5 inches) for direct seeding. Similar spacing and plant population can be adopted for transplanting seedlings. PLANTING For direct seedling to be successful the soil must be prepared to a condition that will facilitate mechanical planters. Planters must be calibrated for the correct depth of sowing, spacing, and discharge of seeds. In the case of transplanting seedlings, 1-2lbs of seeds are needed. Transplanted seeds should be planted the depth similar to what obtained in the trays. IRRIGATION MICAF suggests that onions require approximately 4,600m3/ha (500,000 gallons/acre) of water for growth and development per crop cycle (110 days). Irrigation systems include sprinkler, drip and furrow and the salinity of water should be less than 0.75mmho/cm. 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. The important nutrients for onion production are nitrogen, phosphorus, potassium, Sulphur, manganese, copper and molybdenum. For primary nutrients, onions absorb 165kgs (145 lb/acre), 28kg/acre (25lb/acre) and 177kg (155lb/acre) of NPK respectively. Investment Analysis
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PEST AND DISEASE MANAGEMENT The most common diseases of tomatoes are Purple Blotch, Bacterial soft Rot, Botrytis Leaf Stake and Downy Mildew. The insect pests of importance are Beet Army worm, Thrips and Leaf Miner. These can be controlled by using the wide spectrum of control chemicals 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 The approximate time from planting to harvest, ranges from 110-160 days, depending on the variety and time of planting. The harvesting process begins when 50% of the onions are down (necks broken). Onions may be lifted or toppled over and laid to one side in the field. To allow for optimum drying, onions should be left in the field for 10-14 days. POST HARVEST MANAGEMENT Onions should be removed from the field for curing to retain outer scale leaves and for protection against decay and early sprouting. The temperature conditions for curing are 35â °C, and Relative Humidity 60-70%.
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Investment Analysis
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MARKETING Proper curing and storage will allow the farmer to hold the onions until he is able to get a good price. Onion farmer susually secure contracts before planting so that after reaping the buyer collects the produce from the farm. Some farmers also participate in direct marketing as they believe they can obtain more competitive prices. PROJECT COST In the financial model, the unit cost of development of 5 acres of onions 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 model, 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%. 85% of the development cost of the investment will be funded from equity. The remaining 15% 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 by 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 Annexes. IRR and NPW for the model work out to be 65 %, J$5.8 million respectively and the details are given in Annex X. 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.
Financial Viability and Bankability
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ANNEXES
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TABLE 1
Cost of Production Estimates: One Acre of Onions UNIT
QUANTITY
RATE/UNIT
ACREAGE
COST
Land Preparation Clearing
Man/day
6.4
2,500.00
1
16,000.00
Plowing
Ha.
0.4
10,500.00
1
10,500.00
Harrowing
Ha.
0.4
10,500.00
1
10,500.00
Furrowing/Refining
Ha.
0.4
9,500.00
1
9,500.00
Sowing
Man/day
6
2,500.00
1
15,000.00
Trimming/Supplying
Man/day
3.2
2,500.00
1
8,000.00
Equipment Drip Irrigation system
1
-
acre
1
300,000.00
1
300,000.00
Kg
2
12,276.00
1
24,552.00
Materials Onion Seeds (Texas Early Grano) Fertilizer
1
Urea
Bags
4
3,060.00
1
12,240.00
MPK 14128
Bags
6
3,650.00
1
21,900.00
Selicron
L
2
3,550.00
1
7,100.00
Decis
L
2
2,845.00
1
5,690.00
Insecticides
1
Fungicide
1
Champion
Kg
2
990.00
1
1,980.00
Topsin
Kg
2
3,795.00
1
7,590.00
Dual Gold
L
2
3,460.00
1
6,920.00
Gramoxone
L
2
920.00
1
1,840.00
Herbicide Application
Cycle
3
2,500.00
1
7,500.00
Insecticide Application
Cycle
5
2,500.00
1
12,500.00
Weeding
Man/day
10
2,500.00
Fertilizing
Man/day
6
2,500.00
1
15,000.00
Harvesting
Man/day
6
2,500.00
1
15,000.00
Trimming
Man/day
6
2,500.00
1
15,000.00
Bagging
Man/day
6
2,500.00
1
15,000.00
Weedicide
Crop Care
1
25,000.00
Other costs Contingencies (10%)
56,431.20
Land lease
2,200.00
Supervision
26,175.00
Total
649,118
Production Cost per acre
649,118
Total Yield (kg)
10,000
Projected Marketable Yield (Kg per acre)
8,000
Cost of Production $/Kg Revenue kg/acre Gross Profit Gross profit Margin
65 1,056,000 406,882 63%
Source: RADA
Annex
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TABLE 2
Basic Assumptions
PARAMETERS
VALUE
Exchange rate USD:JMD
132
Area Planted (acres)
5
Area Planted (hectares)
2
Time to maturity (110-160days)
4-5 months
Marketable yields per acre (kg)
10000
Marketable yields per Hectare (kg)
24700
Number of crops per year - Crop cyle is indefinite
2
Number of plants per acre (Direct seeding 7-10kg/hectare
7-10kg
Sales distribution Local via middlemen
70%
Local to higgglers for municipal markets
30%
Prices USD/kg: Local to via middlemen
0.9
Local to higgglers for municipal markets
0.9
TABLE 3
Capital Costs
CAPITAL COSTS
UNITS
NUMBER OF UNITS
RATE/UNIT
TOTAL
Shed/storeroom
ft2
100
2,000
200,000
Fencing (barb wire)
acre
5
209,000
1,045,000
Curing rack
set
1
200,000
200,000
Pickup truck
each
1
3,000,000
3,000,000
Knapsack sprayer
each
2
10,000
20,000
Mistblower
set
1
40,000
40,000
Irrigation Equipment
acre
5
100,000
500,000
Drip pipe fittings
Set
1
52,272
52,272
Venturi pump
Each
1
2,000.00
2,000
Water storage Tank (1000gal)
Each
2
90,000.00
180,000
Water pump
Each
1
45,000.00
45,000
Instruments (pH/EC&TDC Metres)
Set
1
60,000.00
60,000
Nutrient storage tank
Each
1
14,000.00
14,000
Miscellaneous equipment and tools
each
1
200,000
200,000
Total
II
5,558,272
Annex
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TABLE 4
Operating Costs
ITEMS
UNIT
QTY
UNIT PRICE (J$)
YR1
acres
5
334,689.00
1,673,445
Marketing expenses
yr
1
66,937.80
66,938
Contingency
5%
Direct Expense Crop establishment Onion
87,019.14
Subtotal
1,827,402
Indirect expenses Land lease
acres/yr
10
7,500.00
75,000
Owner/manager
mth
12
50,000.00
600,000
Security
mth
12
30,000.00
360,000
Fuel
mth
12
25,000.00
300,000
Accounting and audit fees
mth
12
10,000.00
120,000
Equipment Maintenance
mth
12
5,000.00
60,000
Motor vehicle expense/servicing
mth
12
10,000.00
120,000
yr
1
60,000.00
60,000
Salaries and wages:
Motor vehicle insurance Utilities:
-
Water
mth
12
10,000.00
120,000
Telephone internet
mth
12
5,000.00
60,000
Electricity
mth
12
5,000.50
60,006
Stationary &office supplies/printing
mth
12
5,000.00
60,000
Bank charges
mth
12
10,000.00
120,000
Contingencies
5%
288,490.49
Sub-Total
2,403,496
Total Operating Costs
4,230,898
Annex
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TABLE 5
Annual Operating Costs
ITEMS
YR1
YR2
YR3
YR4
YR5
1,673,445
1,840,790
2,024,868
2,227,355
2,450,091
66,938
73,632
80,995
89,094
98,004
Direct Expense Crop establishment Onion Marketing expenses Contingency Subtotal
87,019
95,721
105,293
115,822
127,405
1,827,402
2,010,142
2,211,156
2,432,272
2,675,499
Indirect expenses Land lease Salaries and wages:
-
-
-
-
-
75,000
82,500
90,750
99,825
109,808
-
-
-
-
-
Owner/manager
600,000
660,000
726,000
798,600
878,460
Security
360,000
396,000
435,600
479,160
527,076
Fuel
300,000
330,000
363,000
399,300
439,230
Accounting and audit fees
120,000
132,000
145,200
159,720
175,692
60,000
66,000
72,600
79,860
87,846
120,000
132,000
145,200
159,720
175,692
60,000
66,000
72,600
79,860
87,846
Equipment Maintenance Motor vehicle expense/servicing Motor vehicle insurance Utilities:
-
-
-
-
-
120,000
132,000
145,200
159,720
175,692
Telephone internet
60,000
66,000
72,600
79,860
87,846
Electricity
60,006
66,007
72,607
79,868
87,855
Stationary &office supplies/printing
60,000
66,000
72,600
79,860
87,846
Bank charges
120,000
132,000
145,200
159,720
175,692
Contingencies
288,490
317,340
349,073
383,981
422,379
Sub-Total
2,403,496
2,643,846
2,908,231
3,199,054
3,518,959
Total Operating Costs
4,230,898
4,653,988
5,119,387
5,631,326
6,194,458
Water
TABLE 6
Annual Marketing Yield YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Onion (kgs)
43,600
47,088
49,442
51,915
54,510
Total
43,600
47,088
49,442
51,915
54,510
TABLE 7 Selling Price (/kg) YR1
YR2
YR3
YR4
YR5
Onion
120
133
148
164
182
Inflation factor
1.11
TABLE 8 Gross Revenue Schedule (J$) YR1
YR2
YR3
YR4
YR5
Onion
5,232,000
6,272,122
7,310,158
8,519,989
9,930,047
Total
5,232,000
6,272,122
7,310,158
8,519,989
9,930,047
IV
Annex
TEF Crop Profile - Onion.indd 4
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TABLE 9
Financing Plan
TOTAL FINANCING
EQUITY
LOAN
GRANT
TOTAL
200,000
200,000
200,000
Capital Costs Shed/storeroom
1,045,000
1,045,000
1,045,000
Curing rack
Fencing (barb wire)
200,000
200,000
200,000
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
Irrigation Equipment
500,000
500,000
500,000
Drip pipe fittings
52,272
52,272
52,272
Venturi pump
2,000
2,000
2,000
Water storage Tank (1000gal)
180,000
180,000
180,000
Water pump
45,000
45,000
45,000
Instruments (pH/EC&TDC Metres)
60,000
60,000
60,000
Nutrient storage tank
14,000
14,000
14,000
Miscellaneous equipment and tools
200,000
200,000
200,000
5,558,272
2,558,272
1,673,445
1,673,445
1,673,445
Marketing expenses
66,938
66,938
66,938
Contingency
87,019
87,019
87,019
Subtotal
1,827,402
1,827,402
1,827,402
Land lease
75,000
75,000
75,000
600,000
600,000
600,000
Sub-Total
3,000,000
5,558,272
Operating Costs Crop establishment Onions
Salaries and wages Owner/manager Security
360,000
360,000
360,000
Fuel
300,000
300,000
300,000
Accounting and audit fees
120,000
120,000
120,000
Equipment Maintenance
60,000
60,000
60,000
Motor vehicle expense/servicing
120,000
120,000
120,000
Motor vehicle insurance
60,000
60,000
60,000
Water
120,000
120,000
120,000
Telephone internet
60,000
60,000
60,000
Electricity
60,006
60,006
60,006
Stationary &office supplies/printing
60,000
60,000
60,000
Bank charges
120,000
120,000
120,000
Utilities
Contingencies
288,490
288,490
288,490
Sub-Total
2,403,496
2,403,496
2,403,496
6,789,170
Total
9,789,170
Equity
69%
Leverage
31%
3,000,000
9,789,170
Annex
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V
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TABLE 10
Loan Repayment Schedule
MONTHS
LOAN
LOAN
PRINCIPAL
INTEREST
INTEREST
TOTAL DEBT
LOAN
Disbursement
Balance at SOY
Payment at EOY
Payment at EOY (8%)
Accrued but not paid (8%)
Serviceable Debt at EOY
Balance at EOY
3,000,000
3,000,000
600,000
240,000
-
840,000
2,400,000
2
2,400,000
600,000
192,000
-
792,000
1,800,000
3
1,800,000
600,000
144,000
-
744,000
1,200,000
4
1,200,000
600,000
96,000
-
696,000
600,000
5
600,000
600,000
48,000
-
648,000
-
3,000,000
720,000
Months 1-3 = YR0 1
TOTAL
3,720,000
Notes Moratorium - 6 mths Loan period - 5 Yrs (including moratorium) Interest rate:
TABLE 11
= 10% per Annum
Depreciation Schedule
ASSET Shed/storeroom Fencing (barb wire)
ORIGINAL COST
RESIDUAL VALUE
DEPRECIABLE COST
ESTIMATED LIFE (YRS)
DEPRECIATION PER YEAR
200,000
20,000
180,000
10
18,000
1,045,000
30,000
1,015,000
10
101,500
Curing rack
200,000
50,000
150,000
5
30,000
Pickup truck
3,000,000
300,000
2,700,000
10
270,000
20,000
2,000
18,000
10
1,800
Knapsack sprayer Mist-blower
40,000
5,000
35,000
5
7,000
Irrigation Equipment
500,000
50,000
450,000
5
90,000
Drip pipe fittings
52,272
2,000
50,272
5
10,054
Venturi pump
2,000
500
1,500
3
500
Water storage Tank (1000gal)
180,000
10,000
170,000
10
17,000
Water pump
45,000
5,000
40,000
10
4,000
Instruments (pH/EC&TDC Metres)
60,000
5,000
55,000
10
5,500
Nutrient storage tank
14,000
3,000
11,000
10
1,100
5
Miscellaneous equipment and tools Total
VI
200,000
20,000
180,000
5,558,272
502,500
5,055,772
36,000 592,454
Annex
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TABLE 12
Summary of Project Costs & Benefits
YR 1
YR 2
YR 3
YR 4
YR 5
Gross Revenue
5,232,000
6,272,122
7,310,158
8,519,989
9,930,047
Operating Cost
4,230,898
4,653,988
5,119,387
5,631,326
6,194,458
Operating Profit
1,001,102
1,618,133
2,190,771
2,888,663
3,735,589
Depreciation
574,454
574,454
574,454
574,454
574,454
Shed/storeroom
18,000
18,000
18,000
18,000
18,000
Fencing (barb wire)
101,500
101,500
101,500
101,500
101,500
Curing rack
30,000
30,000
30,000
30,000
30,000
Pickup truck
270,000
270,000
270,000
270,000
270,000
Knapsack sprayer
1,800
1,800
1,800
1,800
1,800
Mist-blower
7,000
7,000
7,000
7,000
7,000
Irrigation Equipment
90,000
90,000
90,000
90,000
90,000
Drip pipe fittings
10,054
10,054
10,054
10,054
10,054
500
500
500
500
500
Water storage Tank (1000gal)
17,000
17,000
17,000
17,000
17,000
Water pump
4,000
4,000
4,000
4,000
4,000
Instruments (pH/EC&TDC Metres)
5,500
5,500
5,500
5,500
5,500
Nutrient storage tank
1,100
1,100
1,100
1,100
1,100
36,000
36,000
36,000
36,000
36,000
502,500.00
502,500.00
502,500.00
502,500.00
502,500.00
Interest Payment
240,000
192,000
144,000
96,000
48,000
Profit before Tax
(315,853)
349,179
969,816
1,715,709
2,610,634
Taxable Profit
(315,853)
349,179
969,816
1,715,709
2,610,634
Tax (33.3%)
(105,179)
116,277
322,949
571,331
869,341
Net Profit after Tax
(210,674)
232,902
646,867
1,144,378
1,741,293
(210,674)
22,229
669,096
1,813,474
3,554,767
Venturi pump
Miscellaneous equipment and tools Residual value
(Profit before tax less tax) Cumulative Net Profit
Annex
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4,230,898
OPER. COST
6,050,185
11,058,440
TOTAL COST
7,310,158
6,272,122
5,232,000
SALES REVENUE
605,000.00
905,000.00
985,000.00
502,500.00
SALVAGE & RESIDUAL VALUE
1,689,398
1,535,816
1,396,196
1,269,270
WORKING CAPITAL (REC)
12,391,384
10,814,387
9,750,974
8,653,318
7,003,770
TOTAL BENEFIT
4,338,589
3,493,663
3,095,771
2,603,133
(4,054,670)
NET BENEFIT
3,000,000
LOAN INFLOW
648,000
696,000
744,000
792,000
840,000
OUTFLOW
3,690,589
2,797,663
2,351,771
1,811,133
(1,894,670)
EQUITY
WORKING CAPITAL
4,653,988
6,655,203
8,519,989
1,858,338
YEAR CAPITAL
1,396,196
5,119,387
7,320,724
603,000.00
1,269,270
10% of Op. Costs
2
1,535,816
5,631,326
9,930,047
5,558,272
3
1,689,398
8,052,796
1
4
6,194,458
$5,743,703
1,858,338
$5,871,325
5
NPV =
Assuming a real discount rate of 10%
65%
7/23/2019 9:02:02 PM
TEF Crop Profile - Onion.indd 8
Conclusion: Project is viable if NPV positive
IRR =
Annex
VIII
Summary of Project Costs & Benefits
TABLE 13
TABLE 14
Annual Cash Flow Projection ($)
YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
INFLOWS Loan
3,000,000
Equity
6,789,170
Grant
-
Sales
5,232,000
6,272,122
7,310,158
8,519,989
9,930,047
Total Inflows
15,021,170
6,272,122
7,310,158
8,519,989
9,930,047
OUTFLOWS Capital Cost
5,558,272
Operating Cost
4,230,898
4,653,988
5,119,387
5,631,326
6,194,458
-
-
-
-
-
Working Capital
1,269,270
1,396,196
1,535,816
1,689,398
1,858,338
Outflows before Debt & Tax
11,058,440
6,050,185
6,655,203
7,320,724
8,052,796
Cash Flow before Debt & Tax
3,962,730
221,937
654,954
1,199,265
1,877,251
Debt service
840,000
792,000
744,000
696,000
648,000
Tax
1,319,589
73,905
218,100
399,355
625,125
Net Cash Flow
1,803,141
(643,968)
(307,145)
103,910
604,126
Cumulative Net Cash Flow
1,803,141
1,159,173
852,028
955,938
1,560,064
Capital Replacement
Net Present Value
J$1,322,338
Annex
TEF Crop Profile - Onion.indd 9
IX
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REFERENCES
1. Tourism Linkages Hub (2015), Tourism Demand Study, A product of the Ministry of Tourism 2. Ministry of Tourism (2017), Development of the Berry Industry, Derron Grant (Consultant) 3. IOWA Commercial Fruit Production (2008), Production Guide for Commercial Straberries, IOWA State University 4. Cost of Production Estimates (2017), Ministry of Industry Commerce Agriculture and Fisheries, Databank Division 5. Crop Production Estimates (2016), Ministry of Industry Commerce Agriculture and Fisheries, Databank Division 6. International Trade Centre (ITC), https://www.trademap.org/Index.aspx
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