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2. PROFILE ON SESAME FARM
2 - 2
TABLE OF CONTENTS
PAGE
I. SUMMARY 2 - 3
II. PRODUCT DESCRIPTION AND APPLICATION 2 - 3
III. MARKET STUDY AND FARM CAPACITY 2 - 4
A. MARKET STUDY 2 - 4
B. FARM CAPACITY AND FARMING PROGRAMME 2 - 6
IV. FARM MATERIALS AND AGRICULTURAL INPUTS 2 - 7
A. FARM MATERIALS 2 - 7
B. UTILITIES 2 - 8
V. FARM OPERATION TECHNOLOGY AND ENGINEERING 2 - 9
A. FARM OPERATION TECHNOLOGY 2 - 9
B. ENGINEERING 2 - 10
VI. MANPOWER AND TRAINING REQUIREMENT 2 - 11
A. MANPOWER REQUIREMENT 2 - 11
B. TRAINING REQUIREMENT 2 - 11
VII. FINANCIAL ANALYSIS 2 - 13
A. TOTAL INITITAL INVESTMENT COST 2 - 13
B. FARMING COST 2 - 14
C. FINANCIAL EVALUATION 2 - 15
D. ECONOMIC BENEITS 2 - 16
2 - 3
I. SUMMARY
This profile envisages the establishment of a farm for the production of 22,000 quintals of
sesame per annum.
The present demand for proposed product is estimated at 578,243 quintals and it is projected to
reach at 1.36 million quintals by the year 2013.
The farm will create employment opportunities for 55 persons.
The total investment requirement is estimated at Birr 28.88 million, out of which Birr 9.1
million is required for machinery and equipment.
The project is financially viable with an internal rate of return (IRR) of 25% and a net present
value (NPV) of Birr 32.03 million, discounted at 10.5%.
II. PRODUCT DESCRIPTION AND APPLICATION
Sesame is an important oil-seed crop. It is grown in Africa, Asia and parts of Latin America for
its edible seeds which are source of sesame oil. The semi-drying oil is of high quality and is
used as a substitute for olive oil as a salad and cooking oil. The oil is used in the manufacture of
margarine and compound cooking fats and poorer grades in soap and paints, and as a lubricant
and illuminant. It is used as a vehicle for medicinal drugs and perfumes.
2 - 4
III. MARKET STUDY AND FARM CAPACITY
A. MARKET STUDY
1. Post Supply and Present Demand
Sesame is highly demanded crop in the international market and is consumed by existing
domestic large and small-scale oil mills. Table 3.1 shows the country's total production of oil
seeds and sesame as well as the total export of oil seeds.
Table 3.1
PRODUCTION OF OIL SEEDS, SESAME AND
EXPORT OF OIL SEEDS (QUINTAL)
Year Total
Production
of Oil seed
Sesame
Production
Share of
Sesame
(%)
Total
Export of
oil seeds
% of Export
from Production
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
1,674,770
1,567,400
1,794,910
2,383,300
2,081,357
1,965,470
98,250
176,770
166,340
188,780
388,995
362,720
5.9
11.3
9.3
7.9
18.7
18.5
665,540
513,650
431310
550,510
766,040
828,010
39.7
32.8
24.0
23.1
36.8
42.1
Total 11,467,207 1,318,855 3,755,060
Average 1,911,201 230,309 12.1 625,843 32.8
Source:- CSA, Statistical Abstracts for Domestic Production
National Bank, Annual Reports, for Export.
Table 3.1 reveals that during the past six years, i.e, from 1997/98 upto 2002/03, the annual
average production of all types of oil seeds in the country was 1,911,200 quintals. Of the total
annual production of oil seeds, the share of sesame is about 12%. Although total production of
oil seeds fluctuates from year to year, it has generally grown by about 4% in the past six years.
2 - 5
The production of sesame in the past six years has shown a tremendous increase. The production,
which was 98,250 quintals in the year 1997/98 has reached to 388,995 quintals and 362,720
quintals in the year 2001/02 and 2002/03, respectively. This means that domestic production of
sesame in the past six years has almost quadrubled.
On the other hand, export of oil seeds in the past four years, i.e, from 1999/00 to 2002/03 has
almost doubled. Export of oil seeds which was 431,310 quintals in 1999/00 has grown to
822,010 quintals in the year 2002/03. In general, of the total production of oil seeds about 33%
has been exported in the past six years.
The BGRS has a good potential for the production of oil seeds. According to CSA Agricultural
Sample Survey, the level of production of oil seeds in the region in the year 2001/02 was about
120,392 quintals, out of which 55,551 quintals or 46% is the share of sesame.
To determine the present effective demand for sesame, the average production level of years
2001/02 and 2002/03 which was 375,858 quintals has been taken as a base. Since the major users
of sesame, i.e., existing oil mills are working much below their capacity and there are a number
of projects under implementation, the existing production is assumed to cover only 65% of the
demand (domestic and export). Hence, the present demand is estimated at 578,243 quintals.
2. Projected Demand
The demand for sesame is believed to increase with improved capacity utilization of existing
mills, new projects that demand the crop as well as wide export market in Europe and Middle
East countries. Hence, taking the current effective demand as a base and assuming an annual
average growth rate of 10% the project demand is presented in Table 3.2. Moreover, of the total
projected demand 65% is assumed for local consumption and 35% for export market.
2 - 6
Table 3.2
PROJECTED DEMAND FOR SESAME (QUINTAL)
Year Total
Projected Demand
Existing Production
Capacity
Unsatisfied
Demand
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
578,243
636.063
699,674
769,641
846,606
931,266
1,024,392
1,126,832
1,239,515
1,363,466
375,858
375,858
375,858
375,858
375,858
375,858
375,858
375,858
375,858
375,858
202,385
260,205
323,816
393,783
470,748
555,408
648,534
750,974
863,657
987,608
3. Pricing and Distribution
Price of sesame is mainly influenced by the export market and domestic supply of the crop.
Current market price of sesame in Addis Ababa is Birr 750/ quintal. Assuming transportation and
other marketing costs, farm-gate price of Birr 700/quintal is assumed for the project. The product
can be directly exported to the world market or can be sold directly to bulk consumers in the
country.
B. FARM CAPACITY AND FARMING PROGRAMME
1. Farm Capacity
The capacity of the envisaged farm at its full production capacity is estimated to be 22,000 qts
per annum. The above volume of sesame produce is expected to be generated from 2,200
hectares of net irrigable land.
2 - 7
2. Farming Programme
The farm will start with 50 per cent capacity in the first production season, then will reach full
capacity in the fifth year of operation. The production programme of the farm is shown in Table
3.3.
Table 3.3
FARMING PROGRAMME OF SESAME FARM
Year Total Area Yield/ha (Qt) Total Production (Qt)
1. 1100 10 11000
2. 1300 10 13000
3. 1600 10 16000
4. 1900 10 19000
5. 2200 10 22000
IV. FARM MATERIALS, AGRICULTURAL INPUTS AND UTILITIES
A. FARM MATERIALS AND AGRICULTURAL INPUTS
Commercial fertilizers, seeds, chemicals and sacks are among the most important materials
required for sesame farm.
The materials and inputs required along with their corresponding costs at full capacity operation
of the farm are described in Table 4.1
2 - 8
Table 4.1
LIST OF FARM RAW MATERIALS REQUIREMENT AND COSTS
Coast (000 Birr)Sr.
No
Description Unit of
Measure
Qty
FC LC Total
1 Seeds Qt 180 - 90 90
2 Fertilizer Qt 2200 660 220 880
3 Chemicals Qt 22 165 55.0 220
4 Sacks Pcs 22,000 - 66.00 66.00
Grand Total - - 825 431 1,256
B. UTILITIES
In general terms, the utilities required by the farm include electricity, water, fuel, grease and
lubricant. The costs of utilities at full production capacity of the farm are shown in Table 4.2.
Table 4.2
UTILITIES REQUIREMENT AND COST
Sr.
No.
Description Qty
(000)
Cost ('000 Birr)
1. Electricity (kWh) 206 97.65
2. Water (m3
) 208.7 352.35
3. Fuel (lt) 337 843.5
4. Lubricant, grease and oil (lt/kg) 33.7 84.4
Total 1,377.9
2 - 9
V. FARM OPERATION TECHNOLOGY AND ENGINEERING
A. FARMING TECHNOLOGY
1. Farming Process
a) Land Development
The main production process of sesame farm will be started with land development activities,
such as surveying, land clearing, leveling and irrigation system, and access and farm road
construction. The land development activities are expected to be undertaken by machinery and
equipment such as Bulldozers, leveling and surveying instruments. These machinery and
equipment are expected to be rented from other enterprises.
b) Land Preparation, Sowing and Fertilization
Generally, land development for sesame production is followed by land preparation. It
comprises ploughing, disking and harrowing. Sowing follows harrowing with fertilizer
application. For this purpose, tractors with various bottoms like disc plough, disc harrows and
seed and fertilizers drillers are employed in general.
c) Pre-harvest Management
The pre-harvest management in sesame production usually involves irrigation application,
weeding and cultivation, insect pest and disease control. Irrigation water application using
different canals by gravity and weed control will be performed by casual labour. Moreover,
insect pest control is carried out by chemicals and motorized sprayer.
d) Post-Harvest Management
Post harvest in sesame growing include harvesting, threshing, packing, storing and marketing.
Harvesting & threshing are expected to be carried out mechanically/manually by casual labour.
While transporting will be done by tractor driven trailers and trucks, from the farm and stores,
respectively.
2 - 10
2. Sources of Technology
The machinery and equipment required by the envisaged farm could be supplied by Ries
Engineering, Nazareth Tractor Assembly Plant, TETRACO. PLC etc.. Whereas seeds, fertilizers
and chemicals could be supplied by a number of organizations like Agricultural Input Supply
Enterprise, Ambassel, Dinsho, Wondo, etc.
B. ENGINEERING
1. Farm Machinery and Equipment
The machinery and equipment required by the farm and the corresponding costs are given in
Table 5.1. The net cultivable area and the efficiency of the machinery were the basis for
calculating the total required machinery and equipment.
Table 5.1
FARM MACHINERY AND EQUIPMENT REQUIREMENT AND ESTIMATED COST
Coast (000 Birr)Sr.
No.
Description Qty.
No. FC LC Total
1 Tractor 110 HP-125 HP 5 1350 - 1350
2 Disc Plough 5-6 furrow 5 300 - 300
3 Disc Plough of set type 5 450 - 450
4 Planter 6 rows 5 1000 - 1000
5 Cultivator 1 25 - 25
6 Sprayers (manual) 50 50 - 50
7 Ringer 5 200 - 200
8 Trailers 4 360 - 360
9 Workshop (set) 1 50 - 50
10 Tools (set) 1 12.50 - 12.50
11 Generator 1 155 - 155
12 Sickles 83 - 2.2 2.2
Total FOB - 3952.5 2.2 3954.7
13 Inland Cost (20% of FOB) - - 790.94 790.94
Grand Total - 3952.5 793.14 4745.64
2 - 11
2. Land, Building and Civil Works
The total land required for the envisaged project is estimated to be about 3,200 hectares. The
land will be allocated for sesame production, residential houses, offices, stores, launge,
workshop, access and farm road constructions. Rural land lease rate in BGRS ranges from Birr
15 to Birr 30 per hectare, taking the maximum lease rate, and for 70 years of land holding, the
total land lease cost is estimated at Birr 6.72 million. Even though the actual practice is to pay a
certain portion in advance and the balance within a defined period, in this profile it is assumed
that the total land lease cost is paid in advance.
Building area of the farm which includes stores, residential houses, offices, launge and workshop
is estimated to be 7,000 m2
and its total construction costs will be about Birr 4.900 million, at
unit cost of Birr 700 per meter square.
Surveying, clearing and leveling of farm land and main canal, drainage, access and farm road
and hydraulic structures constructions will be among the civil work activities to be carried out
for sesame production. The total costs are estimated at Birr 4.2 million.
3. Proposed Location
The location of the proposed sesame farm is expected to be in Kamashi zone which has big
potential for the production of oil seeds.
VI. MANPOWER AND TRAINING REQUIREMENT
A. MANPOWER REQUIREMENT
The envisaged sesame farm requires 55 permanent work force. The corresponding costs for both
permanent and casual labour for each production season are shown in Table 6.1.
B. TRAINING REQUIREMENT
No special training is required.
2 - 12
Table 6.1
MANPOWER REQUIEREMENT AND ANNUAL LABOUR COST
2009
Sr.
No.
Description Req.
No.
Monthly Salary
Birr '000
Total Annual Salary
Birr '000
1 Farm Manager 1 2250 27.00
2 Secretary 1 700 8.40
3 Agronomist 1 2000 24.00
4 Plant Protection Inspector 1 1500 18.00
5 Irrigation Agronomist 1 2000 24.00
6 Production Supervisor 4 500 12.0
7 Accountant 1 800 9.6
8 Cashier 1 600 7.2
9 Purchaser 1 700 8.4
10 Salesperson 1 700 8.4
11 Tractor Operator 10 500 60.0
12 Assistant Tractor Operator 10 300 36.0
13 Chief Mechanic 1 700 8.4
14 Assistant Mechanic 2 500 6.0
15 Generator Operator 1 300 3.6
16 Driver 3 500 18.0
17 Assistant Driver 2 300 7.2
18 Storekeeper 1 300 3.6
19 Office Boy 1 200 2.4
20 Guard 10 200 24.00
21 Janitor 1 200 2.4
Sub-Total 318.6
Employee Benefit 25% 79.65
Sub-Total 55 - 398.25
Casual labour 1,042.0
Grand Total 55 1,440.25
2 - 13
VII. FINANCIAL ANALYSIS
The financial analysis of seasam farm project is based on the data presented in the previous
chapters and the following assumptions:-
Construction period 2 years
Source of finance 30 % equity
70 % loan
Tax holidays 6 years
Bank interest 10.5%
Discounted cashflow 10.5%
Repair and maintenance 5 % of the total farm machinery & equipment
Accounts receivable 30 days
Raw material, local 30 days
Raw materials, import 90 days
Work in progress 270 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days
A. TOTAL INITIAL INVESTMENT COST
The total initial investment cost of the project including working capital is estimated at Birr
28.88 million, out of which about 14% will be required in foreign currency. Details are indicated
in Table 7.1.
2 - 14
Table 7.1
INITIAL INVESTMENT COST ('000 BIRR)
Sr.
No.
Cost Items Foreign
Currency
Local
Currency
Total
1. Land - 6,720.00 6,720.00
2. Building and Civil Work - 9,100.00 9,100.00
3. Farm Machinery and Equipment 3952.5 793.14 4745.64
4. Office Furniture and Equipment 50.00 50.00
5. Vehicle - 2000.00 2000.00
6. Pre-Farming Expenditure* - 4,808.86 4,808.86
Total Investment cost 3952.5 23,472.00 27,424.50
7 Working Capital 219.68 1,244.88 1,464.56
Total 4,172.18 24,716.88 28,889.06
B. FARMING COST
The annual production cost at full operation capacity of the farm is estimated at Birr 7.82 million
(see Table 7.2). The farming material and utility cost accounts for 32 per cent while repair and
maintenance take 5.34 per cent of the production cost.
------------
* Pre-farming expenditure include interest during construction (Birr 4.2 million), training,
and costs of registration, licensing and formation of the company including legal fees,
commissioning expenses, etc.
2 - 15
Table 7.2
ANNUAL PRODUCTION COST ('000 BIRR)
Year
Items 3 4 7 10
Farming Material and Inputs 628.00 742.16 1,256.00 1,256.00
Labour direct 100.98 119.34 201.96 201.96
Utilities 688.70 813.89 1,377.40 1.377.40
Casual labour 521.00 615.71 1042.00 1042.00
Maintenance and repair 212.13 250.69 424.25 424.25
Labour overheads 42.08 49.72 84.15 84.15
Administration Overheads 67.32 79.56 134.64 134.64
Total Operating Costs 2,268.20 2,671.06 4,520.4 4,520.4
Depreciation 1,537.38 1,537.38 1,537.38 1,030.56
Cost of Finance 2,479.64 2,327.74 1,769.48 1,016.27
Total Production Cost 6,277.21 6,577.36 7,827.26 1,016.27
C. FINANCIAL EVALUATION
1. Profitability
According to the projected income statement, the project will start generating profit in the first
year of operation. Important ratios such as the percentage of net profit to total sales, net profit to
equity (return on equity) and net profit plus interest to total investment (return on total
investment) will show an increasing trend throughout the production life of the project. The
income statement and other profitability indicators show that the project is viable.
2 - 16
2. Break-even Analysis
The break-even point of the project is estimated by using income statement projection.
BE = Fixed Cost = 20 %
Sales – Variable cost
3. Pay-Back Period
The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered within 5 years.
4. Internal Rate of Return and Net Present Value
Based on the cashflow statement, the calculated IRR of the project is 25 % and the net present
value at 10.5% discount rate is Birr 32.03 million.
D. ECONOMIC BENEFITS
The project can create employment for 55 persons. In addition to supply of the domestic needs,
the project will generate Birr 30.83 million in terms of tax revenue. Moreover, the Regional
Government can collect employment, income tax and sales tax revenue. The establishment of
such farm will have a foreign exchange earning effect to the country by exporting its produce.

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Sesame farm bussiness plan

  • 1. 2. PROFILE ON SESAME FARM
  • 2. 2 - 2 TABLE OF CONTENTS PAGE I. SUMMARY 2 - 3 II. PRODUCT DESCRIPTION AND APPLICATION 2 - 3 III. MARKET STUDY AND FARM CAPACITY 2 - 4 A. MARKET STUDY 2 - 4 B. FARM CAPACITY AND FARMING PROGRAMME 2 - 6 IV. FARM MATERIALS AND AGRICULTURAL INPUTS 2 - 7 A. FARM MATERIALS 2 - 7 B. UTILITIES 2 - 8 V. FARM OPERATION TECHNOLOGY AND ENGINEERING 2 - 9 A. FARM OPERATION TECHNOLOGY 2 - 9 B. ENGINEERING 2 - 10 VI. MANPOWER AND TRAINING REQUIREMENT 2 - 11 A. MANPOWER REQUIREMENT 2 - 11 B. TRAINING REQUIREMENT 2 - 11 VII. FINANCIAL ANALYSIS 2 - 13 A. TOTAL INITITAL INVESTMENT COST 2 - 13 B. FARMING COST 2 - 14 C. FINANCIAL EVALUATION 2 - 15 D. ECONOMIC BENEITS 2 - 16
  • 3. 2 - 3 I. SUMMARY This profile envisages the establishment of a farm for the production of 22,000 quintals of sesame per annum. The present demand for proposed product is estimated at 578,243 quintals and it is projected to reach at 1.36 million quintals by the year 2013. The farm will create employment opportunities for 55 persons. The total investment requirement is estimated at Birr 28.88 million, out of which Birr 9.1 million is required for machinery and equipment. The project is financially viable with an internal rate of return (IRR) of 25% and a net present value (NPV) of Birr 32.03 million, discounted at 10.5%. II. PRODUCT DESCRIPTION AND APPLICATION Sesame is an important oil-seed crop. It is grown in Africa, Asia and parts of Latin America for its edible seeds which are source of sesame oil. The semi-drying oil is of high quality and is used as a substitute for olive oil as a salad and cooking oil. The oil is used in the manufacture of margarine and compound cooking fats and poorer grades in soap and paints, and as a lubricant and illuminant. It is used as a vehicle for medicinal drugs and perfumes.
  • 4. 2 - 4 III. MARKET STUDY AND FARM CAPACITY A. MARKET STUDY 1. Post Supply and Present Demand Sesame is highly demanded crop in the international market and is consumed by existing domestic large and small-scale oil mills. Table 3.1 shows the country's total production of oil seeds and sesame as well as the total export of oil seeds. Table 3.1 PRODUCTION OF OIL SEEDS, SESAME AND EXPORT OF OIL SEEDS (QUINTAL) Year Total Production of Oil seed Sesame Production Share of Sesame (%) Total Export of oil seeds % of Export from Production 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 1,674,770 1,567,400 1,794,910 2,383,300 2,081,357 1,965,470 98,250 176,770 166,340 188,780 388,995 362,720 5.9 11.3 9.3 7.9 18.7 18.5 665,540 513,650 431310 550,510 766,040 828,010 39.7 32.8 24.0 23.1 36.8 42.1 Total 11,467,207 1,318,855 3,755,060 Average 1,911,201 230,309 12.1 625,843 32.8 Source:- CSA, Statistical Abstracts for Domestic Production National Bank, Annual Reports, for Export. Table 3.1 reveals that during the past six years, i.e, from 1997/98 upto 2002/03, the annual average production of all types of oil seeds in the country was 1,911,200 quintals. Of the total annual production of oil seeds, the share of sesame is about 12%. Although total production of oil seeds fluctuates from year to year, it has generally grown by about 4% in the past six years.
  • 5. 2 - 5 The production of sesame in the past six years has shown a tremendous increase. The production, which was 98,250 quintals in the year 1997/98 has reached to 388,995 quintals and 362,720 quintals in the year 2001/02 and 2002/03, respectively. This means that domestic production of sesame in the past six years has almost quadrubled. On the other hand, export of oil seeds in the past four years, i.e, from 1999/00 to 2002/03 has almost doubled. Export of oil seeds which was 431,310 quintals in 1999/00 has grown to 822,010 quintals in the year 2002/03. In general, of the total production of oil seeds about 33% has been exported in the past six years. The BGRS has a good potential for the production of oil seeds. According to CSA Agricultural Sample Survey, the level of production of oil seeds in the region in the year 2001/02 was about 120,392 quintals, out of which 55,551 quintals or 46% is the share of sesame. To determine the present effective demand for sesame, the average production level of years 2001/02 and 2002/03 which was 375,858 quintals has been taken as a base. Since the major users of sesame, i.e., existing oil mills are working much below their capacity and there are a number of projects under implementation, the existing production is assumed to cover only 65% of the demand (domestic and export). Hence, the present demand is estimated at 578,243 quintals. 2. Projected Demand The demand for sesame is believed to increase with improved capacity utilization of existing mills, new projects that demand the crop as well as wide export market in Europe and Middle East countries. Hence, taking the current effective demand as a base and assuming an annual average growth rate of 10% the project demand is presented in Table 3.2. Moreover, of the total projected demand 65% is assumed for local consumption and 35% for export market.
  • 6. 2 - 6 Table 3.2 PROJECTED DEMAND FOR SESAME (QUINTAL) Year Total Projected Demand Existing Production Capacity Unsatisfied Demand 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 578,243 636.063 699,674 769,641 846,606 931,266 1,024,392 1,126,832 1,239,515 1,363,466 375,858 375,858 375,858 375,858 375,858 375,858 375,858 375,858 375,858 375,858 202,385 260,205 323,816 393,783 470,748 555,408 648,534 750,974 863,657 987,608 3. Pricing and Distribution Price of sesame is mainly influenced by the export market and domestic supply of the crop. Current market price of sesame in Addis Ababa is Birr 750/ quintal. Assuming transportation and other marketing costs, farm-gate price of Birr 700/quintal is assumed for the project. The product can be directly exported to the world market or can be sold directly to bulk consumers in the country. B. FARM CAPACITY AND FARMING PROGRAMME 1. Farm Capacity The capacity of the envisaged farm at its full production capacity is estimated to be 22,000 qts per annum. The above volume of sesame produce is expected to be generated from 2,200 hectares of net irrigable land.
  • 7. 2 - 7 2. Farming Programme The farm will start with 50 per cent capacity in the first production season, then will reach full capacity in the fifth year of operation. The production programme of the farm is shown in Table 3.3. Table 3.3 FARMING PROGRAMME OF SESAME FARM Year Total Area Yield/ha (Qt) Total Production (Qt) 1. 1100 10 11000 2. 1300 10 13000 3. 1600 10 16000 4. 1900 10 19000 5. 2200 10 22000 IV. FARM MATERIALS, AGRICULTURAL INPUTS AND UTILITIES A. FARM MATERIALS AND AGRICULTURAL INPUTS Commercial fertilizers, seeds, chemicals and sacks are among the most important materials required for sesame farm. The materials and inputs required along with their corresponding costs at full capacity operation of the farm are described in Table 4.1
  • 8. 2 - 8 Table 4.1 LIST OF FARM RAW MATERIALS REQUIREMENT AND COSTS Coast (000 Birr)Sr. No Description Unit of Measure Qty FC LC Total 1 Seeds Qt 180 - 90 90 2 Fertilizer Qt 2200 660 220 880 3 Chemicals Qt 22 165 55.0 220 4 Sacks Pcs 22,000 - 66.00 66.00 Grand Total - - 825 431 1,256 B. UTILITIES In general terms, the utilities required by the farm include electricity, water, fuel, grease and lubricant. The costs of utilities at full production capacity of the farm are shown in Table 4.2. Table 4.2 UTILITIES REQUIREMENT AND COST Sr. No. Description Qty (000) Cost ('000 Birr) 1. Electricity (kWh) 206 97.65 2. Water (m3 ) 208.7 352.35 3. Fuel (lt) 337 843.5 4. Lubricant, grease and oil (lt/kg) 33.7 84.4 Total 1,377.9
  • 9. 2 - 9 V. FARM OPERATION TECHNOLOGY AND ENGINEERING A. FARMING TECHNOLOGY 1. Farming Process a) Land Development The main production process of sesame farm will be started with land development activities, such as surveying, land clearing, leveling and irrigation system, and access and farm road construction. The land development activities are expected to be undertaken by machinery and equipment such as Bulldozers, leveling and surveying instruments. These machinery and equipment are expected to be rented from other enterprises. b) Land Preparation, Sowing and Fertilization Generally, land development for sesame production is followed by land preparation. It comprises ploughing, disking and harrowing. Sowing follows harrowing with fertilizer application. For this purpose, tractors with various bottoms like disc plough, disc harrows and seed and fertilizers drillers are employed in general. c) Pre-harvest Management The pre-harvest management in sesame production usually involves irrigation application, weeding and cultivation, insect pest and disease control. Irrigation water application using different canals by gravity and weed control will be performed by casual labour. Moreover, insect pest control is carried out by chemicals and motorized sprayer. d) Post-Harvest Management Post harvest in sesame growing include harvesting, threshing, packing, storing and marketing. Harvesting & threshing are expected to be carried out mechanically/manually by casual labour. While transporting will be done by tractor driven trailers and trucks, from the farm and stores, respectively.
  • 10. 2 - 10 2. Sources of Technology The machinery and equipment required by the envisaged farm could be supplied by Ries Engineering, Nazareth Tractor Assembly Plant, TETRACO. PLC etc.. Whereas seeds, fertilizers and chemicals could be supplied by a number of organizations like Agricultural Input Supply Enterprise, Ambassel, Dinsho, Wondo, etc. B. ENGINEERING 1. Farm Machinery and Equipment The machinery and equipment required by the farm and the corresponding costs are given in Table 5.1. The net cultivable area and the efficiency of the machinery were the basis for calculating the total required machinery and equipment. Table 5.1 FARM MACHINERY AND EQUIPMENT REQUIREMENT AND ESTIMATED COST Coast (000 Birr)Sr. No. Description Qty. No. FC LC Total 1 Tractor 110 HP-125 HP 5 1350 - 1350 2 Disc Plough 5-6 furrow 5 300 - 300 3 Disc Plough of set type 5 450 - 450 4 Planter 6 rows 5 1000 - 1000 5 Cultivator 1 25 - 25 6 Sprayers (manual) 50 50 - 50 7 Ringer 5 200 - 200 8 Trailers 4 360 - 360 9 Workshop (set) 1 50 - 50 10 Tools (set) 1 12.50 - 12.50 11 Generator 1 155 - 155 12 Sickles 83 - 2.2 2.2 Total FOB - 3952.5 2.2 3954.7 13 Inland Cost (20% of FOB) - - 790.94 790.94 Grand Total - 3952.5 793.14 4745.64
  • 11. 2 - 11 2. Land, Building and Civil Works The total land required for the envisaged project is estimated to be about 3,200 hectares. The land will be allocated for sesame production, residential houses, offices, stores, launge, workshop, access and farm road constructions. Rural land lease rate in BGRS ranges from Birr 15 to Birr 30 per hectare, taking the maximum lease rate, and for 70 years of land holding, the total land lease cost is estimated at Birr 6.72 million. Even though the actual practice is to pay a certain portion in advance and the balance within a defined period, in this profile it is assumed that the total land lease cost is paid in advance. Building area of the farm which includes stores, residential houses, offices, launge and workshop is estimated to be 7,000 m2 and its total construction costs will be about Birr 4.900 million, at unit cost of Birr 700 per meter square. Surveying, clearing and leveling of farm land and main canal, drainage, access and farm road and hydraulic structures constructions will be among the civil work activities to be carried out for sesame production. The total costs are estimated at Birr 4.2 million. 3. Proposed Location The location of the proposed sesame farm is expected to be in Kamashi zone which has big potential for the production of oil seeds. VI. MANPOWER AND TRAINING REQUIREMENT A. MANPOWER REQUIREMENT The envisaged sesame farm requires 55 permanent work force. The corresponding costs for both permanent and casual labour for each production season are shown in Table 6.1. B. TRAINING REQUIREMENT No special training is required.
  • 12. 2 - 12 Table 6.1 MANPOWER REQUIEREMENT AND ANNUAL LABOUR COST 2009 Sr. No. Description Req. No. Monthly Salary Birr '000 Total Annual Salary Birr '000 1 Farm Manager 1 2250 27.00 2 Secretary 1 700 8.40 3 Agronomist 1 2000 24.00 4 Plant Protection Inspector 1 1500 18.00 5 Irrigation Agronomist 1 2000 24.00 6 Production Supervisor 4 500 12.0 7 Accountant 1 800 9.6 8 Cashier 1 600 7.2 9 Purchaser 1 700 8.4 10 Salesperson 1 700 8.4 11 Tractor Operator 10 500 60.0 12 Assistant Tractor Operator 10 300 36.0 13 Chief Mechanic 1 700 8.4 14 Assistant Mechanic 2 500 6.0 15 Generator Operator 1 300 3.6 16 Driver 3 500 18.0 17 Assistant Driver 2 300 7.2 18 Storekeeper 1 300 3.6 19 Office Boy 1 200 2.4 20 Guard 10 200 24.00 21 Janitor 1 200 2.4 Sub-Total 318.6 Employee Benefit 25% 79.65 Sub-Total 55 - 398.25 Casual labour 1,042.0 Grand Total 55 1,440.25
  • 13. 2 - 13 VII. FINANCIAL ANALYSIS The financial analysis of seasam farm project is based on the data presented in the previous chapters and the following assumptions:- Construction period 2 years Source of finance 30 % equity 70 % loan Tax holidays 6 years Bank interest 10.5% Discounted cashflow 10.5% Repair and maintenance 5 % of the total farm machinery & equipment Accounts receivable 30 days Raw material, local 30 days Raw materials, import 90 days Work in progress 270 days Finished products 30 days Cash in hand 5 days Accounts payable 30 days A. TOTAL INITIAL INVESTMENT COST The total initial investment cost of the project including working capital is estimated at Birr 28.88 million, out of which about 14% will be required in foreign currency. Details are indicated in Table 7.1.
  • 14. 2 - 14 Table 7.1 INITIAL INVESTMENT COST ('000 BIRR) Sr. No. Cost Items Foreign Currency Local Currency Total 1. Land - 6,720.00 6,720.00 2. Building and Civil Work - 9,100.00 9,100.00 3. Farm Machinery and Equipment 3952.5 793.14 4745.64 4. Office Furniture and Equipment 50.00 50.00 5. Vehicle - 2000.00 2000.00 6. Pre-Farming Expenditure* - 4,808.86 4,808.86 Total Investment cost 3952.5 23,472.00 27,424.50 7 Working Capital 219.68 1,244.88 1,464.56 Total 4,172.18 24,716.88 28,889.06 B. FARMING COST The annual production cost at full operation capacity of the farm is estimated at Birr 7.82 million (see Table 7.2). The farming material and utility cost accounts for 32 per cent while repair and maintenance take 5.34 per cent of the production cost. ------------ * Pre-farming expenditure include interest during construction (Birr 4.2 million), training, and costs of registration, licensing and formation of the company including legal fees, commissioning expenses, etc.
  • 15. 2 - 15 Table 7.2 ANNUAL PRODUCTION COST ('000 BIRR) Year Items 3 4 7 10 Farming Material and Inputs 628.00 742.16 1,256.00 1,256.00 Labour direct 100.98 119.34 201.96 201.96 Utilities 688.70 813.89 1,377.40 1.377.40 Casual labour 521.00 615.71 1042.00 1042.00 Maintenance and repair 212.13 250.69 424.25 424.25 Labour overheads 42.08 49.72 84.15 84.15 Administration Overheads 67.32 79.56 134.64 134.64 Total Operating Costs 2,268.20 2,671.06 4,520.4 4,520.4 Depreciation 1,537.38 1,537.38 1,537.38 1,030.56 Cost of Finance 2,479.64 2,327.74 1,769.48 1,016.27 Total Production Cost 6,277.21 6,577.36 7,827.26 1,016.27 C. FINANCIAL EVALUATION 1. Profitability According to the projected income statement, the project will start generating profit in the first year of operation. Important ratios such as the percentage of net profit to total sales, net profit to equity (return on equity) and net profit plus interest to total investment (return on total investment) will show an increasing trend throughout the production life of the project. The income statement and other profitability indicators show that the project is viable.
  • 16. 2 - 16 2. Break-even Analysis The break-even point of the project is estimated by using income statement projection. BE = Fixed Cost = 20 % Sales – Variable cost 3. Pay-Back Period The investment cost and income statement projection are used to project the pay-back period. The project's initial investment will be fully recovered within 5 years. 4. Internal Rate of Return and Net Present Value Based on the cashflow statement, the calculated IRR of the project is 25 % and the net present value at 10.5% discount rate is Birr 32.03 million. D. ECONOMIC BENEFITS The project can create employment for 55 persons. In addition to supply of the domestic needs, the project will generate Birr 30.83 million in terms of tax revenue. Moreover, the Regional Government can collect employment, income tax and sales tax revenue. The establishment of such farm will have a foreign exchange earning effect to the country by exporting its produce.