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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 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 has been on a drive to build capacity for our suppliers to capitalize on these earnings.
tourism sector include strawberries, onions, tomatoes, pineapples, sweet peppers and Irish potatoes.
In 2015, we completed the first Tourism Demand Study, which revealed that there was a high percentage of leakages, in products that we are either able to produce or are already producing. Buyers stated that the high imports of particular produce, that are grown locally, are because of the poor frequency of supply and the quality were deemed inconsistent.
I must commend the entire team who worked tirelessly to make these crop profiles a reality. I would like to specially praise the Linkages Network’s Technical Working Group on Agriculture, which commissioned this initiative. I additionally want to thank our partnering Ministries and key stakeholders who will be helping us to facilitate the build-out of this currently scarce commodity.
Hon Edmund Bartlett, Minister of Tourism
We have been working very closely with the Ministry of Industry, Commerce, Agriculture and Fisheries to 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. I am very proud of this new initiative, which highlights findings of six key crops in high demand within the
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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 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 along with it. When the Tourism Demand Study in 2015 highlighted the loss of revenue due to an import bill which could be offset by local production, the Tourism Linkages Council accelerated its efforts to foster new strategies for agricultural expansion to plug this gap. Compared to many other countries in the region, Jamaica’s climate and soil is rich for multi-crop cultivation and with the right support, cohesive relations and alignment, we now find ourselves at a crucial juncture with the impetus to charge full-speed ahead. The six investment crop profiles being presented – onions, strawberries, irish potatoes, tomatoes, pineapples and sweet peppers - are essential to the growth of agriculture
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Adam Stewart, Chairman, Tourism Linkages Network
in our country as it will open doors to increasing opportunities for these crops. We therefore encourage our stakeholders to embrace these opportunities as there are huge potential for all parties. This is an awesome initiative for Jamaica! Our Island never ceases to amaze me; we are truly the land of opportunities. Let us re-commit, keep the focus and 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 agriculture tourism supply chain. This is the first in a series of publications aimed at products of economic importance to the tourism industry. 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.
Dr Derrick Deslandes, Chairman, Agriculture Technical Working Group
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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 of Pineapple in Jamaica..................................................................................................................... 8 WHY INVEST IN PINEAPPLES................................................................................................................. 9 Local Investment Opportunity........................................................................................................................ 9 Cost Of Production....................................................................................................................................... 10 INVESTMENT ANALYSIS......................................................................................................................... 14 Climate........................................................................................................................................................ 14 Pest And Disease Management..................................................................................................................... 15 FINANCIAL VIABILITY AND BANKABILITY............................................................................................. 16 Project Cost................................................................................................................................................. 16 ANNEXES................................................................................................................................................ 17
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AN INVESTMENT PROFILE OF THE PINEAPPLE INDUSTRY IN JAMAICA
A Tourism Linkages Project
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BACKGROUND Pineapple (Ananas comosus. L Merrill) is cultivated in all the tropical and subtropical countries. The qualities of pineapple in the diet, its exquisite flavor, high digestibility and incomparable beauty has given it a premier place among the world’s fruits. It is one of the best known of all tropical fruits. Pineapple is cultivated in commercial quantities in a great number of countries including Thailand, The Philippines, Brazil, China, and India. In recent years Costa Rica, Ecuador and Colombia have been highlighted. HISTORY OF PINEAPPLE IN JAMAICA The pineapple plant is native to South America and was likely imported to the Caribbean by native tribes. The first ever record of pineapple in the Caribbean was by the Spanish explorers (Christopher Columbus) who found the fruit in the Caribbean in 1493. It was so treasured that at one time, only royalty in Spain was allowed to eat the fruit. Different historical accounts reveal that planters at great risk and danger stole pineapples from Jamaica and took them to the Hawaiian Islands from which point pineapple production mushroomed. The appearance of the pineapple as part of the Court of Arms, a Jamaican national symbol, speaks volumes to the importance of this fruit nationally.
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introduction
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LOCAL INVESTMENT OPPORTUNITY The Jamaican pineapple industry is still relatively small. According to Ministry of Agriculture & Lands’ Data Bank information, production totalled only 25,296 tonnes in 2016. The industry presents viable investment opportunities for both farmers and agro-processors. According to information on external trade from the Uncomtrade database, Jamaica imported over J$357.7 million (CIF value) (table 2) of processed pineapple and pineapple-based products in 2016. While local production of fresh fruits was valued at J$3.58 billion as prices sky rocketed between 2014 and 2016. The amount of pineapple required to replace imports is estimated at approximately four million kilograms. Currently, most pineapples produced locally are sold as fresh with just a small quantity sold to agro-processors producing tit bits for the local pizza restaurants. Increased demand in the fresh market is expected from the tourism industry as that industry expands, given projections for an increase in room count of approximately 25%, and tourist arrivals by more than 30%.
TABLE 1 Annual Pineapple Production and Value (J$) 2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Crop prod (tonnes)
18,102
20,351
21,368
19,749
17,607
19757
19185
18374
18819
25296
Harvested (ha)
807
910
1,029
1,061
979
1075
1035
1035
1043
1391
Avg. Farmgate Prices
52.16
61.99
76.73
99.74
101.98
99.59
104.8
102.44
121.82
141.36
Crop Value (J$'000)
944,200
1,261,558
1,639,567
1,969,765
1,795,562
1,967,600
2,010,588
1,882,233
2,292,531
3,575,843
TABLE 2 Estimate of Pineapple Production per Quarter QUARTER
2012
2013
2014
2015
2016
Jan – Mar
1,785
1,946
2,424
4,026
4,078
Apr – Jun
8,700
7,121
8,169
6,032
9,648
Jul – Sept
6,764
7,078
5,178
6,293
7,884
Oct – Dec
2,507
3,041
2,603
2,068
3,687
Total Production
19,756
19,186
18,374
18,419
25,297
WHY INVEST IN PINEAPPLEs
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Production trends in Jamaica have begun to show significant changes especially over the past year or so, with demand increasing steadily for processed pineapples although there was a dip in 2013 to 2015 moving from J$300m in 2012 to J$357m in 2016, an increase of 19% over the 5-year period. A significant portion of these imports are bulk concentrate and juice utilized by the agro-processing industry. Some of the major players in this industry have indicated their interest in utilizing local products as long as supplies are constant and of good quality and prices are reasonable. Thus, there is the opportunity for local farmers to produce for the local agro-processing industry; however, the varieties must be ideal for processing - e.g. MD2. In table 2 production trend as estimates are highest for each second quarter and lowest for the fourth quarters over the 2012-2016 period. Table 3 highlights the movements in farmgate prices over the same five-year period. The maximum price change occurred in 2016 where a 38% upward movement was recorded. The fourth quarter recorded the highest movement in farmgate prices registering a 47% increase. COST OF PRODUCTION The cost of production to produce one acre of pineapples is a function of the price of the planting material and the variety of pineapples to be grown. The recommended variety and one that is considered quite suitable for both the local and overseas market is the MD2. Typically, farmers secure planting material from imports out of Costa Rica, either through local entrepreneurs, Govt imports or self-importation. EXPORT INVESTMENT OPPORTUNITY There is a very high demand in the local and export markets of the United Kingdom, the United States and Canada (see tables 6-8). Jamaica can and have export to all three countries in the past as part of various free trade agreements to which we are signatories. The export of fresh pineapple by value increased from US$1.754 billion dollars in 2013 to US$2.091 billion dollars in 2017, an increase of 20% over 5 years. In terms of quantity exports moved from 3,373,792 tons in 2013 to 3,787,865 tons in 2017 which was an increase of approximately 12% over the period. The fresh pineapple export market is dominated by Costa Rica, the Netherlands, Philippines and Belgium. Costa Rica dominates the export market by
TABLE 3 Estimate of Pineapple Farmgate Prices per Quarter QUARTER
2012
2013
2014
2015
2016
INCREASE IN FARMGATE PRICE
Jan – Mar
106.97
109.88
109.98
120.13
151.99
41%
Apr – Jun
85.83
91.91
92.18
108.32
110.58
27%
Jul – Sept
108.87
104.9
100.51
125.98
130.83
21%
Oct – Dec
117.02
131.5
131.46
154.41
178.17
47%
27%
30%
30%
30%
38%
Maximum Price changes during the year* Source: MICAF Annual Crop Estimates
FOOTNOTE Values of local production are calculated using the average annual farm gate prices along with the total annual production
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WHY INVEST IN PINEAPPLEs
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TABLE 4 Imports of Processed Pineapple 2012 to 2016 TRADE FLOW
REPORTER
PARTNER
TOTAL VALUE IN US$
TOTAL VALUE IN J$
TOTAL WEIGHT IN KGS
2012
IMPORT
JAMAICA
WORLD
2,403,687
300,460,875
1,029,471
2,292,632
2013
IMPORT
JAMAICA
WORLD
1,890,985
236,373,125
909,198
2,024,784
2014
IMPORT
JAMAICA
WORLD
2,116,390
264,548,750
952,632
2,121,511
2015
IMPORT
JAMAICA
WORLD
2,369,441
296,180,125
906,638
2,019,083
2016
IMPORT
JAMAICA
WORLD
2,862,291
357,786,375
1,168,798
2,602,913
PERIOD
TOTAL WEIGHT IN LBS
Source: UNComtrade 2018
volume with approximately 57% market share. In 2017, Costa Rica exported 2,160,320 tonnes valued at US$981m, the Philippines exported 495,440 tonnes valued at US$172.4 million while the Netherlands exported 249,150 tonnes valued at US$230.9 million and Belgium exported 121,891 tonnes valued at US$110.4 million. Belgium is the only major exporting country that has seen significant decline in both quantity exported and earning from export of the fruit (Table 6). The major importing countries by value are the USA, Spain, Netherlands, the United Kingdom, Italy, Japan, China, Germany, Belgium and Canada. The quantity of imports by the top ten countries in 2017 was approximately 2.6 billion tonnes or 77% of world imports. The United States accounts for 33% of the import market (table 7). In terms of Jamaica’s export performance, the figures are at best minimal as table 9 demonstrates. At the very least there has been a very small but growing export trade. Critical to exporting to the UK however, is the need for the farms to be global gap certified.
TABLE 5 COP and Profit Margin Calculation based on local market SOURCE OF MATERIAL
COST OF MATERIAL PER UNIT
Local Importer
80
2,584,575
71.79
20,000
36,000
141.36
97%
Govt. Agency
50
1,774,575
49.29
20,000
36,000
141.36
187%
Self Import
35
1,369,575
38.04
20,000
36,000
141.36
272%
COP PER ACRE
COP PER KG
PLANTING DENSITY PER ACRE
ESTIMATED YIELD KGS/ ACRE
FARM GATE PRICE 2016 - KG
COP/FARMGATE MARGIN
WHY INVEST IN PINEAPPLEs
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TABLE 6 Top 10 Fresh Pineapple Exporters RANKING
EXPORTERS
2013
2014
2015
2016
2017
MARKET SHARE
WORLD
3,373,792
3,533,793
3,151,647
3,664,036
3,787,865
1
COSTA RICA
1,961,491
2,126,929
1,902,031
2,019,401
2,160,320
57.03%
2
PHILIPPINES
489,955
461,856
267,789
566,928
495,440
13.08%
3
NETHERLANDS
203,729
255,610
246,611
306,769
249,150
6.58%
4
BELGIUM
152,871
124,781
122,083
119,066
121,891
3.22%
5
UNITED STATES OF AMERICA
113,708
121,928
113,920
120,342
121,635
3.21%
6
MEXICO
56,997
41,271
76,987
86,267
87,476
2.31%
7
ECUADOR
51,789
55,545
66,076
73,990
84,691
2.24%
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HONDURAS
79,086
51,258
60,031
58,817
59,013
1.56%
9
GUATEMALA
21,752
25,091
27,506
35,734
40,347
1.07%
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CÔTE D'IVOIRE
26,323
39,489
34,844
25,429
38,100
1.01% 91.29%
Source: UNComtrade 2018
TABLE 7
Top 10 Fresh Pineapple Exporters 2013
2014
2015
2016
2017
MARKET SHARE
RANKING
WORLD
3,035,845
3,233,609
3,032,535
NO QUANTITY
3,430,320
1
UNITED STATES OF AMERICA
975,590
1,046,527
1,028,693
1,036,970
1,153,024
33.61%
2
NETHERLANDS
295,184
339,670
266,971
281,585
284,454
8.29%
3
SPAIN
114,842
153,249
143,535
151,793
168,738
4.92%
4
UNITED KINGDOM
139,609
145,571
144,205
147,796
168,426
4.91%
5
ITALY
142,020
159,246
139,475
141,971
163,547
4.77%
6
JAPAN
181,197
166,320
150,621
143,173
156,992
4.58%
7
CHINA
39,458
70,216
84,401
101,932
146,003
4.26%
8
GERMANY
156,829
168,223
143,965
168,317
144,946
4.23%
9
BELGIUM
172,900
154,347
136,178
139,001
141,995
4.14%
10
CANADA
122,630
126,289
109,504
118,543
127,584
3.72%
2,655,709
77.42%
Source: UNComtrade 2018
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WHY INVEST IN PINEAPPLEs
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TABLE 8
Fresh Pineapple Exports to the United Kingdom
PERIOD
TRADE FLOW
REPORTER
PARTNER
TRADE VALUE (US$)
NET WEIGHT (KG)
2013
IMPORT
UNITED KINGDOM
WORLD
$137,862,938
139,609,220
2014
IMPORT
UNITED KINGDOM
WORLD
$140,906,296
145,570,979
2015
IMPORT
UNITED KINGDOM
WORLD
$138,064,061
144,205,433
2016
IMPORT
UNITED KINGDOM
WORLD
$131,863,723
147,795,671
2017
IMPORT
UNITED KINGDOM
WORLD
$148,035,911
168,425,851
Source: UNComtrade 2018
TABLE 9
Fresh Pineapple Exports to Canada
PERIOD
TRADE FLOW
REPORTER
PARTNER
TRADE VALUE (US$)
NETWEIGHT (KG)
2013
IMPORT
CANADA
WORLD
$107,970,597
122,629,942
2014
IMPORT
CANADA
WORLD
$110,921,074
126,288,908
2015
IMPORT
CANADA
WORLD
$99,052,175
109,504,212
2016
IMPORT
CANADA
WORLD
$99,180,284
118,542,667
2017
IMPORT
CANADA
WORLD
$100,091,074
127,583,645
Source: UNComtrade 2018
TABLE 10
Fresh Pineapple Exports to the United States
PERIOD
TRADE FLOW
REPORTER
PARTNER
TRADE VALUE (US$)
NETWEIGHT (KG)
2013
IMPORT
USA
WORLD
$631,077,829
975,590,464
2014
IMPORT
USA
WORLD
$700,714,005
1,046,527,054
2015
IMPORT
USA
WORLD
$674,587,716
1,028,693,074
2016
IMPORT
USA
WORLD
$721,567,932
742,936,295
2017
IMPORT
USA
WORLD
$749,682,524
803,185,857
Source: UNComtrade 2018
TABLE 11 Fresh Pineapple Exports by Jamaica EXPORTED VALUE IN 2013
EXPORTED VALUE IN 2014
EXPORTED VALUE IN 2015
EXPORTED VALUE IN 2016
EXPORTED VALUE IN 2017
World
0
1
2
1
6
United States of America
0
0
0
0
4
Canada
0
0
2
1
2
United Kingdom
0
1
0
1
0
IMPORTERS
Unit : US Dollar thousand WHY INVEST IN PINEAPPLEs
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CLIMATE The pineapple is a tropical or near tropical plant limited to low elevations between 30°N and 25°S. A temperature range of 18.33-45°C is most favourable, though the plant can tolerate relatively cold nights for short periods. This allows the plant to be grown almost anywhere in Jamaica. SOIL Though the pineapple can be grown on a wide range of soil types, it does best on well-drained, sandy loams which are acidic (pH 4 – 6) and have a high organic matter content. Ideally the soil should be friable to a depth of at least 60 cm (2 ft). The pineapple plant is susceptible to water logging, so steps should be taken to improve drainage on soils that have poor drainage. Pure sand, red loam, clay loam and gravelly soils usually need some amount of organic enrichment in order to create ideal soil conditions. PLANTING MATERIAL There are several types of planting material that can be used for propagating pineapples including, suckers, slips, crowns and stumps. The planting material should be stripped of excess dry, dead leaves and rotting tissue to expose young roots. The cut end of the base should be turned upwards and allowed to harden and dry a few days before planting. The MD2 variety has become the popular variety in Jamaica. Other varieties include Sugar Loaf, Red Spanish, Ripply and smooth Cayenne. LAND PREPARATION Pine apples are cultivated commercially in trenches. The land is ploughed well and made to a fine tilth. Solid clods, rocks, crop debris, and stones must be removed. The land is dug after ploughing and levelled. Trenches are dug subsequently. Each trench may be 15-30cm deep and 90cm wide. PLANTING DENSITY Planting density will vary according to variety, soil type, fruit size and farmers preference. Pineapples are usually planted in rows using a triangular formation at a spacing of 45-60cm within and along rows. Double row planting will give 11,000 to 28,000 plants/acre. PLANTING At planting the cut end of the base should be dipped in a fungicide (bravo/mancozeb) and a preferred insecticide to reduce infection. Plants should be allowed to drain before planting. If planted when 5-6 months old, the suckers and slips produce flowers after 12 months. Crowns bear flowers after 12-19 months. It is best to plant so that harvesting does not coincide with the rainy season. IRRIGATION MICAF suggests that pineapples 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 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. Compost and or fertilizer can be worked into beds during land preparation. Pineapples require mostly nitrogen and potassium for optimum growth and yield. During land preparation NPK fertilizer can be applied according to soil and crop nutrient requirements. For synchronized flowering, synthetic flowering inducers can be applied.
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Investment Analysis
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PEST AND DISEASE MANAGEMENT The pest and diseases of pineapple includes: rodents, birds, mealy bugs, scale insects, Stem rot, Fruitlet core rot, and Root rot are the most likely threat to the crop. As stated early dipping the end of the planting material in fungicide and/ or insecticide to take care of stem rot and other fungal diseases is very effective in reducing the fungal load. HARVESTING AND YIELD Harvesting of pineapples will depend on the market that is targeted. Harvest only mature fruits tested for acceptable Brix levels and eating quality. Fruits should be harvested in early morning when temperatures are lower. High temperature will reduce the shelf life of fruits. Harvest fruit with a sharp knife leaving more than 2.5cm of stalk to the fruit. (Caribbean Pineapple Production-CARDI) POST HARVEST MANAGEMENT Pineapple fruit should be placed in foam-padded field crates to protect the fruits from bruising. Bruising or puncturing can provide an entrance for pathogens and expose the fruit to infection. The harvested fruit should be stored in a cool place, away from direct sunlight. To avoid chilling injury the green fruit should be stored at 8-10â °C and 85-95% Relative Humidity. (Caribbean Pineapple Production-CARDI) MARKETING There is a growing domestic market for fresh pineapples. The common marketing channels for locally grown pineapples are roadside higglers, municipal markets, supermarkets, the hospitality industry, and pizza shops. As stated in previous sections of the document, there is also a huge export market to target. There is also sale for the suckers, heads and stumps.
Investment Analysis
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PROJECT COST In the financial model, the unit cost of development of 5 acres of Pineapple has been prepared. This can be modified to fit other scales of operation 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 expenditure. 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 invest 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 the financial stipulations laid out by Development Bank of Jamaica 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 pineapple cultivation. For financial analysis, the income was assessed on a conservative basis. The detailed calculation of project’s income and expenditure and other financial details hve been indicated in Annexes attached. IRR and NPW for the enterprise model work out to be 61 %, J$6.1million 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 Cost of Production UNIT
NO OF UNITS
COST PER UNIT
TOTAL ACREAGE
Land Cleaning
MD
10
1500
Ploughing
MD
18
1500
27,000
Furrowing
MD
20
1500
30,000
Maintain Trench
MD
6
1500
9,000
Planting
MD
14
1500
21,000
Pest Management
MD
18
1500
27,000
Weeding
MD
20
1500
30,000
Fertilising
MD
8
1500
12,000
Harvesting
MD
50
1500
75,000
164
300
49,200
COST
TOTAL COSTS
Labour Operations
Lunch
15,000
295,200
Material Inputs Planting Material
1,600,000
Fertiliser
14,500
Fungicide
15,000
Herbicide
5,000
1,634,500
Other Costs Transportation (10% of Material)
10,000
Contingencies (10% of labour and material)
80,000
** Tools discounted for 5 years
7,000
Land Charges per Crop Cycle
10,000
Supervision
50,000
157,000
Total Operating Expenditure per Copr Cycle
2,086,700
Cost of Production per Acre
2,086,700
** Projected Marketable Yield (kg per acre)
27,272.73
Total Yield Cost of Production $/kg
76.51
Revenue
2,400,000
Gross Profit
313,300
Gross Profit Margin
15%
Interest Charges per Crop Cycle Net Revenue Net Margin SOURCE: MOAF (MODIFIED) * PLANTING MATERIAL COSTS $80 PER SUCKER WITH 20,000 NEEDED PER ACRE ** IT IS ASSUMED THAT THE PLANTS WILL FRUIT WITH AN AVERAGE WEIGHT OF 1.36KG
18
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TABLE 2 Cost of Production UNIT
NO OF UNITS
COST PER UNIT
Labour Operations
MD
10
1500
15,000
Land Cleaning
MD
18
1500
17,000
Ploughing
MD
20
1500
30,000
Maintain Trench
MD
6
1500
9,000
Planting
MD
14
1500
21,000
Pest Management
MD
18
1500
27,000
Weeding
MD
20
1500
30,000
Fertilising
MD
8
1500
12,000
Harvesting
MD
50
1500
75,000
164
300
49,200
Lunch
TOTAL ACREAGE
COST
TOTAL COSTS
295,200
Material Inputs Planting Material
1,600,000
Fertiliser
14,500
Fungicide
15,000
Herbicide
5,000
1,634,500
Other Costs Transportation of Material
30,000
Contingencies (5 percent of labour and material)
96,485
Land Charges per Crop Cycle
10,000
Equipment Maintenance Cost
18,000
Supervision (15 man days per acre)
60,000
214,485
Total Operating Expenditure per Copr Cycle
2,144,185
Cost of Production per Acre
2,144,185
** Projected Marketable Yield (kg per acre)
27,272.73
Total Yield Cost of Production $/kg
78.62
Revenue
2,400,000
Gross Profit
255,815
Gross Profit Margin
11.9%
Interest Charges per Crop Cycle Net Revenue Net Margin SOURCE: MOAF (MODIFIED) * PLANTING MATERIAL COSTS $80 PER SUCKER WITH 20,000 NEEDED PER ACRE ** IT IS ASSUMED THAT THE PLANTS WILL FRUIT WITH AN AVERAGE WEIGHT OF 1.36KG
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TABLE 3 Basic Assumptions PARAMETERS
VALUE
Exchange rate USD:JMD
132
Area Planted (acres)
5
Area Planted (hectares)
2
Time to maturity (9-23 months)
3-4 MONTHS
Marketable yields per acre (kg)
27273
Marketable yields per Hectare (kg)
67364.31
Number of crops per year - Crop cycle is indefinite
2
Number of plants per acre
19801
Sales distribution Local to processors via middlemen
60%
Local to higgglers for municipal markets
40%
Prices USD/kg: Local to exporters via middlemen
0.7
Local to higgglers for municipal markets
0.7
TABLE 4 Capital Costs UNITS
NUMBER OF UNITS
FT2
100
Fencing (barb wire)
ACRE
Pickup truck Knapsack sprayer
CAPITAL COSTS Shed/storeroom
RATE/UNIT
TOTAL
2,000
200,000
5
209,000
1,045,000
EACH
1
3,000,000
3,000,000
EACH
2
10,000
20,000
Mist-blower
SET
1
40,000
40,000
Irrigation Equipment
ACRE
5
100,000
500,000
Drip pipe fittings
SET
1
52,272
52,272
Venturi pump
EACH
1
2,000.00
2,000
Water storage Tank (1000gal)
EACH
2
90,000.00
180,000
Water pump
EACH
1
45,000.00
45,000
SET
0
60,000.00
-
Nutrient storage tank
EACH
0
14,000.00
-
Miscellaneous equipment and tools
EACH
1
200,000
Instruments (pH,EC&TDC Metres)
Total
20
200,000 5,284,272
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TABLE 5 Operating Costs UNIT
QTY
UNIT PRICE (J$)
YR1
Direct Expense Crop establishment ACRES
5
200,000.00
1,000,000
Marketing expenses
Pineapple
YR
1
40,000.00
40,000
Contingency
5%
52,000.00
Subtotal
1,092,000
Indirect expenses Land lease
ACRES/YR
10
5,000.00
50,000
Owner/manager
MTH
12
100,000.00
1,200,000
Security
MTH
12
60,000.00
720,000
Fuel
MTH
12
50,000.00
600,000
Salaries and wages:
Accounting and audit fees
MTH
12
20,000.00
240,000
Equipment Maintenance
MTH
12
10,000.00
120,000
Motor vehicle expense/ servicing
MTH
12
20,000.00
240,000
Motor vehicle insurance
YR
1
120,000.00
120,000
Water
MTH
12
20,000.00
240,000
Telephone internet
MTH
12
10,000.00
120,000
Utilities:
-
Electricity
MTH
12
10,001.00
120,012
Stationary &office supplies/printing
MTH
12
10,000.00
120,000
Bank charges
MTH
12
20,000.00
Contingencies
5%
240,000 315,700.60
Sub-Total
4,445,713
Total Operating Costs
5,537,713
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TABLE 6 Annual Operating Costs YR1
YR2
YR3
YR4
YR5
Direct Expense Crop establishment Pineapple
1,000,000
1,100,000
1,210,000
1,331,000
1,464,100
Marketing expenses
40,000
44,000
48,400
53,240
58,564
Contingency
52,000
57,200
62,920
69,212
76,133
1,092,000
1,201,200
1,321,320
1,453,452
1,598,797
-
-
55,000
60,500
-
-
-
-
1,200,000
1,320,000
1,452,000
1,597,200
1,756,920
Security
720,000
792,000
871,200
958,320
1,054,152
Fuel
600,000
660,000
726,000
798,600
878,460
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
Motor 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
-
-
-
-
Subtotal Indirect expenses Land lease Salaries and wages: Owner/manager
Utilities
50,000 -
-
66,550
73,205
Water
240,000
264,000
290,400
319,440
351,384
Telephone internet
120,000
132,000
145,200
159,720
175,692
Electricity
120,012
132,013
145,215
159,736
175,710
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
315,701
347,271
381,998
420,197
462,217
Sub-Total
4,445,713
4,890,284
5,379,312
5,917,243
6,508,968
Total Operating Costs
5,537,713
6,091,484
6,700,632
7,370,695
8,107,765
22
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TABLE 7 Annual Marketing Yield YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Pineapple (kgs)
88,637
97,501
107,251
117,976
129,774
Total
88,637
97,501
107,251
117,976
129,774
TABLE 8 Selling Price (/kg) YR1 Pineapple
YR2 70
YR3 78
YR4 86
YR5 96
106
TABLE 9 Gross Revenue Schedule (J$) YR1
YR2
YR3
YR4
YR5
Pineapple sales
6,204,608
7,575,826
9,250,083
11,294,352
13,790,403
Total
6,204,608
7,575,826
9,250,083
11,294,352
13,790,403
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TABLE 10 Financing Plan TOTAL FINANCING REQUIRED
EQUITY
LOAN
GRANT
TOTAL
Capital Costs 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
500,000
500,000
500,000
52,272
52,272
52,272
2,000
2,000
2,000
180,000
180,000
180,000
45,000
Irrigation Equipment Drip pipe fittings Venturi pump Water storage Tank (1000gal) Water pump
45,000
45,000
Instruments (Ph/EC&TDC Metres)
-
-
-
Nutrient storage tank
-
-
-
200,000
200,000
Miscellaneous equipment and tools
200,000
Physical contingencies (10%) Sub-Total
5,284,272
1,239,272
4,045,000
-
5,284,272
Operating Costs Crop establishment Pineapple
1,000,000
1,000,000
1,000,000
40,000
40,000
40,000
Marketing expenses Contingency Subtotal
52,000
52,000
52,000
1,092,000
1,092,000
1,092,000
-
-
50,000
50,000
Indirect Expenses
-
Land lease
50,000
Salaries and wages:
-
-
1,200,000
1,200,000
1,200,000
Fuel
600,000
600,000
600,000
Accounting and audit fees
240,000
240,000
240,000
Equipment Maintenance
120,000
120,000
120,000
Motor vehicle expense/servicing
240,000
240,000
240,000
Motor vehicle insurance
120,000
120,000
120,000
-
-
Owner/manager
-
Utilities
-
Water
240,000
240,000
240,000
Telephone internet
120,000
120,000
120,000
Electricity
120,012
120,012
120,012
Stationary &office supplies/printing
120,000
120,000
120,000
Bank charges
240,000
240,000
240,000
Contingencies
315,701
315,701
315,701
Sub-Total Total
4,445,713
4,445,713
-
-
4,445,713
10,821,985
6,776,985
4,045,000
-
10,821,985
Equity
63%
Leverage
37%
24
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TABLE 11 Loan Repayment Schedule MONTHS MONTHS 1-3 = YR0 1
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
4,045,000
4,045,000
809,000
323,600
-
1,132,600
3,236,000
3,236,000
809,000
258,880
-
1,067,880
2,427,000
2,427,000
809,000
194,160
-
1,003,160
1,618,000
1,618,000
809,000
129,440
-
938,440
809,000
809,000
809,000
64,720
-
873,720
-
4,045,000
970,800
2 3 4 5 Total
5,015,800
Moratorium - 6 mths Loan period - 5 Yrs (including moratorium) Interest rate:
= 10% per Annum
TABLE 12 Depreciation Schedule ASSET Shed/storeroom Fencing (barb wire) Pickup truck Knapsack sprayer Mist-blower Irrigation Equipment Drip pipe fittings Venturi pump Water storage tank (1000gal) Water pump
ORIGINAL COST
RESIDUAL VALUE
200,000 1,045,000
10
18,000
30000
1,015,000
10
101,500
2,700,000
10
270,000
18,000
10
1,800
5
7,000
5
90,000
50,272
5
10,054
1,500
3
500
170,000
10
17,000
10
4,000
(5,000)
10
(500)
(3,000)
10
(300)
180,000
5
36,000
20,000
2,000
40,000
5,000
35,000
500,000
50,000
450,000
52,272
2,000
2,000
500
180,000
10,000
45,000
5,000
Nutrient storage tank
200,000
DEPRECIATION PER YEAR
180,000
300,000
-
ESTIMATED LIFE (YRS)
20000
3,000,000
Instruments (pH/EC&TDC Metres)
Miscellaneous equipment and tools
DEPRECIABLE COST
5,000 3,000 20,000
40,000
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TABLE 13 Projected Net Income YEAR 1
YEAR 2
YEAR 3
YEAR 4
YEAR 5
Gross Revenue
6,204,608
7,575,826
9,250,083
11,294,352
13,790,403
Operating Cost
5,537,713
6,091,484
6,700,632
7,370,695
8,107,765
Operating Profit
666,895
1,484,342
2,549,451
3,923,656
5,682,638
Depreciation
537,054
537,054
537,054
537,054
537,054
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
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
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)
(500)
(500)
(500)
(500)
(500)
Nutrient storage tank
(300)
(300)
(300)
(300)
(300)
36,000
36,000
36,000
36,000
36,000
452,500.00
452,500.00
452,500.00
452,500.00
452,500.00
Interest Payment
323,600
258,880
194,160
129,440
64,720
Profit before Tax
(646,260)
235,907
1,365,737
2,804,662
4,628,364
Taxable Profit
(646,260)
235,907
1,365,737
2,804,662
4,628,364
Tax (33.3%)
(215,204)
78,557
454,790
933,952
1,541,245
Net Profit after Tax
(431,055)
157,350
910,946
1,870,709
3,087,119
(431,055)
(273,705)
637,242
2,507,951
5,595,070
Shed/storeroom
Venturi pump Water storage tank (1000gal)
Miscellaneous equipment and tools Residual value
(Profit before tax less tax) Cumulative Net Profit
26
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TABLE 14 Summary of Project Costs & Benefits
WORKING
OPER.
TOTAL
SALES
SALVAGE &
WORKING CAPITAL TOTAL
NET
INFLOW
LOAN
OUTFLOW
EQUITY
(1,252,477)
BENEFIT
1,132,600
848,962
BENEFIT
(4,164,877)
1,067,880
1,948,791
CAPITAL
8,318,421
1,916,842
1,003,160
3,087,716
YEAR RESIDUAL VALUE 1,661,314
9,835,771
2,951,951
938,440
(REC)
452,500
1,827,445
11,662,773
4,026,156
4,909,418
REVENUE
6,204,608
2,010,190
13,608,060
873,720
COST
12,483,298
7,575,826
402,500
2,211,209
5,783,138
COST
5,537,713
7,918,929
9,250,083
102,500
16,323,233
CAPITAL
1,661,314
6,091,484
8,710,822
11,294,352
2,432,330
4,045,000
1,827,445
6,700,632
9,581,904
100,500
5,284,272
2
2,010,190
7,370,695
13,790,403
1
3
2,211,209
10,540,095
432,500
4
8,107,765
$6,184,476
2,432,330
61%
$6,356,552
5
NPV = Assuming a real discount rate of 10% Conclusion: Project is viable if NPV positive IRR =
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TABLE 15 Annual Cash Flow Projection ($) YR 1
YR 2
YR 3
YR 4
YR 5
INFLOWS Loan
4,045,000
Equity
6,776,985
Grant
-
Sales
6,204,608
7,575,826
9,250,083
11,294,352
13,790,403
Total Inflows
17,026,592
7,575,826
9,250,083
11,294,352
13,790,403
OUTFLOWS Capital Cost
5,284,272
Operating Cost
5,537,713
6,091,484
6,700,632
7,370,695
8,107,765
-
-
-
-
-
1,661,314
1,827,445
2,010,190
2,211,209
2,432,330
Outflows before Debt & Tax
12,483,298
7,918,929
8,710,822
9,581,904
10,540,095
Cash Flow before Debt & Tax
4,543,294
(343,103)
539,261
1,712,448
3,250,309
Debt service
1,132,600
1,067,880
1,003,160
938,440
873,720
Tax
1,512,917
(114,253)
179,574
570,245
1,082,353
Net Cash Flow
1,897,777
(1,296,730)
(643,473)
203,763
1,294,236
Cumulative Net Cash Flow
1,897,777
601,047
(42,426)
161,337
1,455,573
Capital Replacement Working Capital
Net Present Value
28
J$1,112,914.86
annex
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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. Gregory Robin, Ronald Pilgrim, Sharon Jones and Dorian Etienne (2011), Caribbean Pineapple Production and Post Harvest Manual : FAO/CARDI 5. https://www.agrifarming.in/pineapple-farming/
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