Tourism Top Crops- Tomatoes

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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 supply and the quality were deemed inconsistent. this initiative. I additionally want to thank our 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 Adam Stewart, Chairman, Tourism Linkages Network tourism industry but the country’s economic 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 growth of agriculture in our country as it will open When the Tourism Demand Study in 2015 highlighted doors to increasing opportunities for these crops. We the loss of revenue due to an import bill which could therefore encourage our stakeholders to embrace be offset by local production, the Tourism Linkages these opportunities as there are huge potential for all Council accelerated its efforts to foster new strategies parties. for agricultural expansion to plug this gap. Compared 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, Dr Derrick Deslandes, Chairman, Agriculture Technical Working Group 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 The products selected are guided by the research importance to the tourism industry. 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.

Messages

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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 Tomato in Jamaica........................................................................................................................ 8 WHY INVEST IN TOMATOES................................................................................................................... 9 Local Investment Opportunity ....................................................................................................................... 9 Cost of Production........................................................................................................................................ 10 Export Investment Opportunity...................................................................................................................... 11 INVESTMENT ANALYSIS......................................................................................................................... 13 Climate........................................................................................................................................................ 13 Fertilizers..................................................................................................................................................... 14 FINANCIAL VIABILITY AND BANKABILITY............................................................................................. 15 Project Cost................................................................................................................................................. 15 ANNEXES................................................................................................................................................ 16

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AN INVESTMENT PROFILE OF THE TOMATO INDUSTRY IN JAMAICA

A Tourism Linkages Project

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BACKGROUND Tomato (Solanum lycopersicum) is an edible red fruit. The species originated in Western South Africa. The Spaniards during their visits to the Americas brought it back to Europe and the other colonies. The fruit is consumed in various ways such as an ingredient in many dishes, sauces, salads and drinks. Many varieties of tomato are widely grown in temperate climatic conditions across the world by using greenhouses to facilitate production throughout the year.

Tomato plants usually grow 1-3metres in height and have a week stem hence the need for continuous support throughout the crop cycle. It is a perennial but cultivated as an annual. Information from Medical News Today, explains that a tomato is a nutrient-rich superfood that is beneficial to a range of bodily systems. Its nutritional content supports healthy skin, weight loss and a healthy heart. Tomato is said to be rich in vitamin c and is a powerful antioxidant Tomato varieties include: •

Beefsteak tomatoes are 10 cm (4 in) or more in diameter, often used for sandwiches and similar applications. Their kidney-bean shape, thinner skin, and shorter shelf life make commercial use impractical.

•

Plum tomatoes, or paste tomatoes (including pear tomatoes), are bred with a lower water /higher solids content for use in tomato sauce and paste, for canning and sauces and are usually oblong 7–9 cm (3–4 in) long and 4–5 cm (1.6–2.0 in) diameter; like the Roma-type tomatoes, important cultivars in the Sacramento Valley.

•

Cherry tomatoes are small and round, often sweet tomatoes, about the same 1–2 cm (0.4–0.8 in) size as the wild tomato.

•

Grape tomatoes are smaller and oblong, a variation of plum tomatoes

HISTORY OF TOMATO IN JAMAICA The cultivation of tomato in Jamaica has undergone various changes. In the early years tomatoes were primarily cultivated in the open field. Salad/table and cherry tomatoes were the primary varieties. Over time there was the introduction of medium sized hybrid varieties such as Roma that are well known locally as plummy. The liberalization of the economy provided an opening for the importation of other hyhbrid varieties of tomato. Local input supplies also went into distribution arrangements with seed producing companies in the United States. This allowed farmers to have access to the seeds of the varieties that were imported.

The introduction of growing crops under protected structures added a new dimension to the production of tomatoes.

Farmers growing tomato under protected structures realized improvement in the quality of produce and that it was comparable to the imported fresh tomatoes. Farmers have now adopted technology such as applying nutrients in the liquid form in open field operations. This has resulted in increased yields and provided there is water available, there is an opportunity for better scheduling of production to allow continuous yearly supply.

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Introduction

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LOCAL INVESTMENT OPPORTUNITY The production of tomato 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 a 42% increase in the production of tomato over the ten-year period 2008-2017. The average annual production for the period was approximately 25 thousand tons (25 million kgs). The highest production for the period was in 2016 when production levels rose by 31% from 23, 890 tons (23.89 million kgs) to 31, 427 tons (31.427 million kgs). An annual average of 2,497 acres was reaped over the period with 2016 recording the highest acreages (3,120 acres) reaped. The industry continues to suffer from postharvest losses both at the primary and secondary levels. Postharvest losses have been averaging between 20-30% and this continues to impact negatively on marketable yields and ultimately revenue. Farmgate prices averaged J$126/kg for the period under review with 2017 recording the highest market price of J$164.42. There have been moderate price fluctuations year-on-year for most of the period except for 2014 and 2016 when there were significant upward price movements in the magnitude of 55%. The value of tomato production has grown over period by over 130% from J$1.56 billion in 2008 to $J3.62 billion in 2017.

Table 2 illustrates quarterly production levels over five years (2013-2017). Production levels were highest in the second quarter for most years and lowest the in the last quarter. This trend follows the production cycle since there are some farmers who rely directly on rainfall for irrigation. Table 3. Shows the changes in farmgate prices for each quarter over the five-year period. The most significant price changes, 118% and 99% were recorded in third quarters of 2014 and 2015 respectively. The greatest increase in farmgate prices (64%) occurred in the last quarter.

The United States of America is the major exporter of fresh or chilled tomato to Jamaica. Over the five-year period shown in the Chart 1 below, 2015 recorded the highest quantity of imported (53,550kgs) fresh tomatoes from the USA. Average quantity of imports for the period was 17,737kgs and the average value was US$18, 141. There has been over 200% decline in the importation of tomato from the USA moving from 16,742 in 2013 kilograms to 5,147kgs in 2018.

TABLE 1 Annual Tomato Production and Value Items

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Production (Tonne)

19,387

21,190

19,006

26,950

26,526

29,128

25,238

23,890

31,427

27,545

Area Reaped (Acre)

1,568

1,978

2,045

2,381

2,781

3,068

2,821

2,715

3,120

1,470

Marketable Yield

15,510

16,952

15,205

21,560

21,221

23,302

20,190

19,112

251,42

22,036

Farmgate Prices (J$)

100.3

95

159.42

97.16

97.37

113.57

118.66

184.39

130.56

164.42

1,555,613

1,610,440

2,423,949

2,094,770

2,066,269

2,646,454

2,395,793

3,524,062

3,282,487

3,623,159

Value of Production (J$)

Source: MICAF Annual Crop Estimates 2008-2017

Why Invest in Tomatoes

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COST OF PRODUCTION A summary of the cost of production for establishing one acre of tomato is provided in Table 4 below. A detailed cost of production is attached in the Appendix. In the summary table, labour cost was estimated at J$280,000 representing 35%% of the total cost. The cost for procuring materials was $127,772 (16%) while other costs inclusive of transportation and supervision were estimated to be $389, 070 (49%). The overall cost for establishing one acre has been estimated at $796,842.

The cost of production per kilogram was estimated at $64.96/kg. The estimates assumed 10,892 plants per acre, an estimated marketable yield of 21.784kg and average farmgate price of J$126/kg thus deriving a profit margin of 52 %.

TABLE 2 Estimated Tomato Production: 2013-2017 Quarter

2013

2014

2015

2016

2017

Jan – Mar

7,089

7,613

7,352

8,859

8,324

Apr – Jun

7,224

6,980

6,783

8,281

6,736

Jul – Sept

7,547

4,100

3,960

7,250

6,957

Oct – Dec

7,268

6,544

5,793

7,037

5,527

Total Production

29128

25237

23888

31427

27544

Source: MICAF Annual Crop Estimates 2008-2017

TABLE 3 Estimated Tomato Farmgate Prices: 2013-2017 Quarter

2013

Jan – Mar Apr – Jun

2014

2015

94.84

94.11

86.11

100.85

Jul – Sept

108.92

Oct – Dec

163.96 26%

Maximum price changes during the year

Increase in Farmgate Price 2013 - 2017

2016

2017

172.93

107.77

108.46

14%

114.99

112.68

124.41

44%

220.07

228.47

130.93

186.77

71%

102.68

250.08

172.43

269.3

64%

118%

99%

32%

44%

Source: MICAF Annual Crop Estimates 2008-2017

2013 2014 2015 2016 2017 2018 CHART 1 Fresh and Frozen Tomato Imports (kg): 2013-2017 10

0

10000

20000

30000

40000

50000

60000

Source: Statistical Institute of Jamaica (STATIN)

Why Invest in Tomatoes

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EXPORT INVESTMENT OPPORTUNITY According to information from the International Trade Centre (ITC) trade statistics database, the global trade of fresh tomatoes was valued at approximately US$9 billion in 2017 averaging $8.7 billion annually. The Netherlands had the largest export market share value of 22.3%, followed by Mexico (21.9%), Spain (12.8%), Morocco (6.5%) and Canada (4.5%). The United States of America had the highest (4%) potential for growth (Chart 4) among the top 5 fresh tomato importing countries in 2017. The remaining four countries growth and the world had negative growth for the same period.

TABLE 4

COP and Profit Margin Calculation based on Local Market

Labour Cost

Material Costs

Other Costs

COP (per acre)

COP (per kg)

Planting Density (per acre)

Estimated Yield (kgs/acre)

Farm Gate Price 2017 (kg)

COP/ Farmgate Margin

280,000 (35%)

127,772 (16%)

389,070 (49%)

796,842

64.96

10,892

21,784

126

52%

25 20 15 % 10 5 0

CHART 2 Netherlands Mexico

Spain

Morocco

Canada

10

15

Export market share value (%) of top 5 exporters of fresh tomatoes

Source: ITC Database

Canada Morocco Spain Mexico Netherlands -10

Source: ITC Database

-5

0

%

5

20

CHART 3 Export growth (%) of top 5 countries for 2017 Why Invest in Tomatoes

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Russia 9%

Other 6%

USA 38%

UK 11%

France 12%

Germany 24%

CHART 4 Import market share(%) for tomatoes in the top 5 countries for 2017

Source: ITC Database

Russia United Kingdom France Germany USA World -15

CHART 5 Import growth value (%) for 2017/2018 in the top 5 countries

12

-12

-9

-6

%

-3

0

3

6

Source: ITC Database

Why Invest in Tomatoes

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CLIMATE Tomatoes require daily maximum temperatures between 25 to 35 ⁰C for ideal plant growth. (UCDavis) Providing soil moisture is consistent and at tolerable levels tomato plants are able to grow in relatively high temperatures.

Long exposure to temperatures above a 35⁰C can adversely affect fruit development.

SOIL Tomatoes grow best in loam or sandy loam soils although they can in wide varieties of soil. Sandy soils drain better than denser soils such as clay. If planting on dense soils like loam and clay loam, the fields must be properly drained and carefully irrigated. Generally speaking all soils must be well prepared prior to planting. Tomatoes prefer slightly acidic soils, pH between 6.0 to 6.8.

PLANTING MATERIAL The enterprise can either purchase seeds and establish a nursery for growing seedlings or purchase seedlings from local suppliers. Seedlings for transplanting should be dark green, stocky plants six to 10 inches tall, with stem the thickness of a pencil. Spindly plants with leaves spaced far apart or with leaf spots, yellow or curling leaves. Plants that are already fruiting should also be avoided. Tomato varieties can determinate or indeterminate. Determinate varieties will grow up to a certain size and all the fruit will ripen within several weeks. Indeterminate varieties continue to grow all throughout the year and are usually grown in greenhouses.

LAND PREPARATION The selected area should be properly tilled by ploughing, harrowing and farrowing to get a fine tilth which will allow that the delicate roots of seedlings to have direct contact with the soil particles. A properly tilled soiled will allow the roots to maneuver freely through the soil and root hairs will be able to absorb water and nutrients.

PLANTING DENSITY It is estimated that 45-50 grams of seeds are required to plant an acre of plummy tomato. Seedlings can be planted based on the level of production that is envisaged. A 2ft x 2ft configuration (2ft between and within rows) or 2ft x 1ft can be used. 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 than they were growing in previous containers. In the case where plants are long stemmed a small trench can be created in the soil and the stem is buried horizontally under two to three inches of soil leaving the cluster of top leaves uncovered. Roots will grow from the covered stem in a few days and the plant will assume its vertical position thereafter. Proper drainage is critical during land preparation as the soil should be properly drained to avoid being waterlogged especially if the enterprise is located on flat lands and/or if the soil is moderate to heavy clay. Planting on slopes will require that keen attention is given to good land management practices and include conservation measures such as reverse slopes, strip cropping, live or dead barriers and dry mulching.

IRRIGATION Tomatoes should have adequate supply of water. Blossom end rot can be prevented by keeping the soil evenly moist.

The drip system is the most preferred irrigation system for growing tomatoes as water is slowly released into soil consistently over time. Storage tanks should also be installed and connected to the 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 is adequate.

There is however no limit on the amount of water that can be stored on the farm to reduce the risks that come along with climate change. 20mm drip lines from 40mm bulk lines will be used to convey water to the plants.

Investment Analysis

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FERTILIZERS As a rule of thumb soil tests should be conducted to determine the appropriate fertilizer regime that is most suited for the crop and the existing soil. Tomatoes 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 micro nutrients such as calcium, magnesium, boron, Sulphur, iron, manganese, molybdenum chlorine, and zinc.

PEST AND DISEASE MANAGEMENT The most common pest of tomatoes are leaf minors, whiteflies, caterpillars and stink bugs. Tomatoes are also susceptible to fungal diseases such as Blosson end rot, Mosaic virus, Cracking, Septora leaf spot, Early blight and Late blight. These can be controlled by using the wide spectrum of control chemicals available on the local market. The farmer should develop and implement 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 Tomato will have matured seven weeks after seedling transplant provided that the correct agronomic practices are followed. On commercial enterprises tomatoes are harvested when they are mature but still have its green colour. This is done to increase shelf and reduce postharvest losses. Each tomato plant can produce 12-20lbs and if indeterminate and a good nutrient regime is maintained the yields can be greater. Plastic crates should be used for harvesting to reduce the occurrence of compaction and bruising.

POST HARVEST MANAGEMENT Tomatoes should be harvested in morning or late afternoon to reduce field heat and the onset of condensation. Mature green tomatoes are best stored at temperatures 13-21â °C for 1-3weeks while ripe tomatoes are stored at the same temperature but only for 4-7days.

MARKETING Proper storage will allow the farmer to hold the tomato until it can be sold at the best market pice although tomato has a relatively short shelf life. Tomatoes are either sold to purveyors/middle men through informal contracts, higglers at the farmgate or some farmers will take the produce directly to market. Farmers are encouraged to secure contractual arrangements before planting a crop which reduces the risk of losses if proper storage is not available. Tomato production goes through a cycle each year with plenty supply during the first quarter and tapers off during the later part of the second to third quarter. This follows the local rainfall pattern. To get high prices, the crop should be irrigated so that production can occur in the summer months when rain-fed dependent operations stopped producing.

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Investment Analysis

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PROJECT COST In the financial model, the unit cost of developing of 5 acres of plummy tomato 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%. 60% of the development cost for the investment will be funded from equity. The remaining 40% 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 Banks 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 the Annexes. IRR and NPW for the model work out to be 72 %, J$9.8 million respectively and the details are given in Annexure 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 Basic Assumptions PARAMETERS

VALUE

Exchange rate USD:JMD

132

Area Planted (acres)

5

Area Planted (hectares)

2

Time to maturity (months)

3-4 months

Marketable yields per acre (kg)

10000

Marketable yields per Hectare (kg)

24700

Number of crops per year

2

Number of plants per acre

10890

Sales distribution Local to exporters via middlemen

40%

Local to higgglers for municipal markets

50%

Prices USD/kg: Hotels and supermarket via direct sales

0.6

Local to higgglers for municipal markets

0.4

TABLE 2 Capital costs CAPITAL COSTS

UNITS

NUMBER OF UNITS

Shed/storeroom

ft2

100

2,500

250,000

Fencing (barb wire)

acre

5

20,000

100,000

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

150,000

750,000

Each

1

90,000.00

90,000

each

1

200,000

200,000

Water storage tank (1000gal) Miscellaneous equipment and tools Total

RATE/UNIT

TOTAL

4,450,000 Annex

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TABLE 3 Monthly Operating Costs ITEMS

UNIT

QUANTITY

UNIT PRICE (J$)

YR1

acres

5

500,000

2,500,000

Marketing expenses

yr

1

100,000

100,000

Contingency

5%

Direct Expense Crop establishment Tomato (estimating 2 crop cycles /year)

130,000

Subtotal

2,730,000

Indirect expenses Land lease

acres/yr

5

10,000

50,000

Owner/manager

mth

12

65,000

780,000

Security

mth

12

5,000

60,000

Fuel

mth

12

50,000

600,000

Accounting and audit fees

mth

12

5,000

60,000

Equipment Maintenance

mth

12

10,000

120,000

Motor vehicle expense/servicing

mth

4

30,000

120,000

Motor vehicle insurance

yar

1

120,000

120,000

Salaries and wages

Utilities

-

Water

mth

12

20,000

240,000

Telephone internet

mth

12

10,000

120,000

Stationary &office supplies/printing

mth

12

3

36

Bank charges

mth

12

3,000

36,000

Contingencies

5%

388,302

Sub-Total

2,694,338

Total Operating Costs

5,424,338

II

Annex

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TABLE 4 Annual Operating Costs ITEMS

YR1

YR2

YR3

YR4

YR5

2,500,000

2,600,000

2,700,000

2,750,000

2,800,000

Marketing expenses

100,000

110,000

121,000

133,100

46,410

Contingency

130,000

143,000

157,300

173,030

190,333

2,730,000

2,853,000

2,978,300

3,056,130

3,136,743

-

-

Direct Expense Crop establishment Tomatoes (2 crop cycles/year)

Subtotal Indirect expenses Land lease

50,000

Salaries and wages

-

55,000

-

60,500

-

-

66,550 -

73,205

-

-

Owner/manager

780,000

858,000

943,800

1,038,180

Security

60,000

66,000

72,600

79,860

87,846

Fuel

600,000

660,000

726,000

798,600

878,460

Accounting and audit fees

60,000

66,000

72,600

Equipment Maintenance

120,000

132,000

145,200

159,720

175,692

Motor vehicle expense/servicing

120,000

132,000

145,200

159,720

175,692

Motor vehicle insurance

120,000

132,000

145,200

159,720

175,692

Utilities

-

-

79,860

1,141,998

87,846

-

-

Water

240,000

264,000

290,400

319,440

351,384

Telephone internet

120,000

132,000

145,200

159,720

175,692

36

40

44

48

53

Bank charges

36,000

39,600

43,560

47,916

52,708

Contingencies

388,302

427,132

469,845

516,830

568,513

Sub-Total

2,694,338

2,963,772

3,260,149

3,586,164

3,944,780

Total Operating Costs

5,424,338

5,816,772

6,238,449

6,642,294

7,081,523

Stationary & office supplies

Annex

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TABLE 6 Annual Marketing Yield ITEM

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Tomato (kgs)

88,000

99,000

137,500

132,000

126,500

Total

88,000

99,000

137,500

132,000

126,500

YR1

YR2

YR3

YR4

YR5

55.00

70.00

75.00

85.00

120.00

YR1

YR2

YR3

YR4

YR5

Tomato sales

4,840,000

6,930,000

10,312,500

11,220,000

15,180,000

Total

4,840,000

6,930,000

10,312,500

11,220,000

15,180,000

TABLE 6 Selling Price ITEM

Tomato

TABLE 7 Gross Revenue Schedule ITEM

IV

Annex

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7/23/2019 8:47:04 PM

TABLE 8 Financing Plan TOTAL FINANCING REQUIRED

EQUITY

LOAN

GRANT

TOTAL

CAPITAL COST Shed/storeroom

250,000

250,000

250,000

Fencing (barb wire)

100,000

100,000

100,000

Pickup truck

3,000,000

3,000,000

3,000,000

Knapsack sprayer

20,000

20,000

0,000

Mist-blower

40,000

40,000

40,000

Miscellaneous equipment and tools

200,000

200,000

200,000

3,610,000

3,610,000

3,610,000

Physical contingencies (10%) Sub-Total OPERATING COSTS Crop establishment Tomato (estimating 2 crop cycles /year)

2,500,000

2,500,000

2,500,000

Marketing expenses

100,000

100,000

100,000

Contingency

130,000

130,000

130,000

2,730,000

2,730,000

2,730,000

50,000

50,000

50,000

Owner/manager

780,000

780,000

780,000

Security

60,000

60,000

60,000

Fuel

600,000

600,000

600,000

Accounting and audit fees

60,000

60,000

60,000

Equipment Maintenance

120,000

120,000

120,000

Motor vehicle expense/servicing

120,000

120,000

120,000

Motor vehicle insurance

120,000

120,000

120,000

Water

240,000

240,000

240,000

Telephone internet

120,000

120,000

120,000

36

36

36

Bank charges

36,000

36,000

36,000

Contingencies

388,302

388,302

9388,302

Sub-Total

92,694,338

92,694,338

92,694,338

Total

99,034,338

95,424,338

Equity

60%

Leverage

40%

Subtotal Indirect expenses Land lease Salaries and wages

Utilities

Stationary &office supplies

93,610,000

9,034,338

Annex

TEF Crop Profile - Tomato.indd 5

V

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TABLE 9 Loan Repayment Schedule MONTHS

LOAN

LOAN

PRINCIPAL

INTEREST

INTEREST

TOTAL DEBT

LOAN

Disbursement

Balance at SOY

Payment at EOY

Payment at EOY (12%)

Accrued but not paid (12%)

Serviceable Debt at EOY

Balance at EOY

3,610,000

3,610,000

722,000

433,200

-

1,155,200

2,888,000

2

2,888,000

722,000

346,560

-

1,068,560

2,166,000

3

2,166,000

722,000

259,920

-

981,920

1,444,000

4

1,444,000

722,000

173,280

-

895,280

722,000

5

722,000

722,000

86,640

-

808,640

-

3,610,000

1,299,600

Months 1-3 = YR0 1

TOTAL

4,909,600

Notes Moratorium - 6 mths Loan period - 5 Yrs (including moratorium) Interest rate: = 8% per Annum

TABLE 10 Depreciation Schedule ASSET

ORGINAL COST

RESIDUAL VALUE

DEPRECIABLE COST

ESTIMATED LIFE (YRS)

DEPRECIATION PER YEAR

Shed/storeroom

250,000

20000

230,000

10

23,000

Fencing (barb wire)

100,000

30000

70,000

10

7,000

3,000,000

300,000

2,700,000

10

270,000

Knapsack sprayer

20,000

2,000

18,000

10

1,800

Mistblower

40,000

5,000

35,000

5

7,000

Irrigation Equipment

750,000

50,000

700,000

5

140,000

Miscellaneous equipment and tools

200,000

2,000

198,000

5

39,600

Pickup truck

VI

Annex

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7/23/2019 8:47:04 PM

TABLE 11 Projected Net Income YR1

YR2

YR2

YR4

YR5

Gross Revenue

4,840,000

6,930,000

10,312,500

11,220,000

15,180,000

Operating Cost

5,424,338

5,816,772

6,238,449

6,642,294

7,081,523

Operating Profit

(584,338)

1,113,228

4,074,051

4,577,706

8,098,477

Depreciation

465,400

465,400

465,400

465,400

465,400

Shed/Storeroom

23,000

23,000

23,000

23,000

23,000

Fencing (Barb Wire)

7,000

7,000

7,000

7,000

7,000

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

Irrigation Equipment

140,000

140,000

140,000

140,000

140,000

Miscellaneous Equipment And Tools

39,600

39,600

39,600

39,600

39,600

409,000.00

409,000.00

409,000.00

409,000.00

409,000.00

Interest Payment

433,200

346,560

259,920

173,280

86,640

Profit Before Tax

(1,891,938)

(107,732)

2,939,731

3,530,026

7,137,437

Taxable Profit

(1,891,938)

(107,732)

2,939,731

3,530,026

7,137,437

Tax (33.3%)

(630,015)

(35,875)

978,931

1,175,499

2,376,767

Net Profit After Tax

(1,261,923)

(71,857)

1,960,801

2,354,528

4,760,670

Cumulative Net Profit

(1,261,923)

(1,333,779)

627,021

2,981,549

7,742,219

Pickup Truck

Residual Value

Annex

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VII

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TABLE 12 Summary of Project Costs & Benefits

YEAR

CAPITAL REPL

WORKING CAPITAL

OPER. COST

TOTAL COST

SALES REVENUE

SALVAGE & RESIDUAL VALUE

WORKING CAPITAL (REC)

TOTAL BENEFIT

NET BENEFIT

LOAN INFLOW

OUTFLOW

(2,170,538)

EQUITY

453,668

1,155,200

1,068,560

3,501,131

3,610,000 1,522,228

981,920

6,156,014

(4,625,338) 9,084,031

4,483,051

895,280

6,876,301

1,745,031

12,593,035

7,051,294

6,681,883

1,627,301

409,000.00

1,871,535

13,621,688

808,640

409,000.00

6,930,000

409,000.00

1,992,688

7,490,523

4,840,000

7,561,803 10,312,500

409,000.00

17,713,457

11,50ยน,639

5,816,772 8,109,983 11,220,000

2,124,457

5,424,338

1,745,031 6,238,449 6,570,394

409,000.00

1,627,301

2 1,871,535 4,577,706

15,180,000

4,450,000

3 1,992,688 10,222,934

1

4 8,098,477

$9,385,732

2,124,457

$9,888,524

5

NPV = Assuming a real discount rate of 10%

72%

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TEF Crop Profile - Tomato.indd 8

Conclusion: Project is viable if NPV positive

IRR =

Annex

VIII

TABLE 13 Annual Cash Flow Projection ($) YR1

YR2

YR3

YR4

YR5

6,930,000

10,312,500

11,220,000

15,180,000

5,816,772

6,238,449

6,642,294

7,081,523

INFLOWS

Loan

3,610,000

Equity

5,424,338

Grant Sales

4,840,000

OUTFLOWS

Capital Cost

4,450,000

Operating Cost

5,424,338

Capital Replacement

-

-

-

-

-

Working Capital

1,627,301

1,745,031

1,871,535

1,992,688

2,124,457

Outflows before Debt & Tax

11,501,639

7,561,803

8,109,983

8,634,982

9,205,980

Cash Flow before Debt & Tax

2,372,699

(631,803)

2,202,517

2,585,018

5,974,020

Debt service

1,155,200

1,068,560

981,920

895,280

808,640

Tax

790,109

(210,390)

733,438

860,811

1,989,349

Net Cash Flow

427,390

(1,489,973)

487,159

828,927

3,176,031

Cumulative Net Cash Flow

427,390

(1,062,583)

(575,424)

253,503

3,429,535

Net Present Value

J$2,061,398

Annex

TEF Crop Profile - Tomato.indd 9

IX

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TABLE 14 Profitability Analysis PROFITABILITY ANALYSIS RATIOS

YR 1

YR2

YR3

YR4

YR5

AVERAGE

Profitability (Net profit/gross income)

-39%

-2%

29%

31%

47%

0.1

Operating ratio(total operating expense/gross income)

1.1

0.8

0.6

0.6

0.5

0.7

Fixed ratio (fixed expense/ gross income)

0.6

0.4

0.3

0.3

0.3

0.4

Capital turnover(gross income/ capital investment)

1.1

1.1

1.1

1.1

1.1

1.1

UNIT

YR 1

YR2

YR3

YR4

YR5

Projected sales unit

kg

88,000

99,000

137,500

132,000

126,500

Total fixed costs

J$

388,302

427,132

469,845

516,830

568,513

Fixed cost per unit

J$

4.413

4.314

3.417

3.915

4.494

Total variable cost

J$

2,730,000

2,853,000

2,978,300

3,056,130

3,136,743

Variable cost per unit

J$

31.02

28.82

21.66

23.15

24.80

J$/kg

55.00

70.00

75.00

85.00

120.00

USD/kg

35.44

33.13

25.08

27.07

29.29

USD

890,702

726,030

660,642

710,304

716,585

Kg

113,858

69,278

55,837

49,414

32,948

BREAKEVEN ANALYSIS

Parameters

Selling price

Breakeven price Breakeven revenue Breakeven sales units

X

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. https://www.medicalnewstoday.com/articles/276714.php 4. International Trade Centre (ITC), https://www.trademap.org/Index.aspx 5. Medical News Today, (September 2017) everything you need know about tomatoes. https://www.medicalnewstoday.com/articles/273031.php 6. Production Guide for Commercial Strawberrie(2008), Iowa State University, University Extension 7. Tourism Linkages Network (2015), Tourism Demand Study, A product of the Ministry of Tourism 8. Trade Data, Statistical Institute of Jamaica Library 9. USDA Market News, https://www.marketnews.usda.gov/mnp/hm-home

References

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32

References

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