TEF Crop Profile - Irish Potato by TourismLinkagesNetwork

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Minister of Tourism Hon. Edmund Bartlett It is an honour for the Ministry of Tourism, through our dynamic Tourism Linkages Network, to share viable investment opportunities in locally produced fresh produce, which are in high demand. Like many other initiatives of the Network, the findings in these crop profiles, create a unique opportunity to bring us another step closer to bridging the gap between our hospitality and agriculture sectors. We have long since recognized that tourism and agriculture are intimately linked and are of the firm belief that our farmers have the ability and the potential to supply our tourism sector. If a linkages approach is not explicitly encouraged, it is too easy for our hotels, restaurants and attractions to purchase only the basics locally while continuing to source goods and services from already-familiar overseas suppliers. Therefore, as part of our ongoing efforts to bridge this gap, the Network has been actively researching and creating opportunities for our local suppliers to Hon Edmund Bartlett, Minister of Tourism better meet the increased demands of our sector. It is this belief, coupled with the knowledge of potential earnings from supplying the sector that my Ministry I am very proud of this new initiative, which highlights has been on a drive to build capacity for our suppliers findings of six key crops in high demand within the tourism sector. Some of these produce include to capitalize on these earnings. strawberries, onions, tomatoes, pineapples, sweet In 2015, we completed the first Tourism Demand peppers and Irish potatoes. Study, which revealed that there was a high percentage of leakages, in products that we are either able to I must commend the entire team who worked tirelessly produce or are already producing. Buyers stated that to make these crop profiles a reality. I would like to the high imports of particular produce, that are specially praise the Linkages Network’s Technical grown locally, are because of the poor frequency of Working Group on Agriculture, which commissioned this initiative. I additionally want to thank our supply and the quality were deemed inconsistent. partnering Ministries and key stakeholders who will We have been working very closely with the Ministry be helping us to facilitate the build-out of this currently of Industry, Commerce, Agriculture and Fisheries to scarce commodity. combat this issue by providing renewed support to our farmers and by sharing the findings of our studies to guide the crop selection for the sector.

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Adam Stewart Chairman, Tourism Linkages Network

With arrivals to Jamaica at an all-time high, the tourism industry’s ability to continue being the pipeline for the growth and advancement of other sectors is tremendous. One such mutually beneficial and exemplary relationship exists with the agricultural sector; even more so as we continue to work assiduously to further reduce the country’s import gap by contracting the marketing space between local demand and supply. Over the years, the Tourism Linkages Council has developed strategies and implemented tactical reform aimed at contracting said marketing space, bringing together tourism stakeholders and local farmers. This interconnectivity is critical to the long-term viability and sustainability of not just Jamaica’s tourism industry but the country’s economic Adam Stewart, Chairman, Tourism Linkages Network development as a whole. Today’s opportunities were unheard of yesterday and the tourism platform is The six investment crop profiles being presented – now set for even greater explosion, taking other onions, strawberries, irish potatoes, tomatoes, sectors along with it. pineapples and sweet peppers - are essential to the When the Tourism Demand Study in 2015 highlighted growth of agriculture in our country as it will open the loss of revenue due to an import bill which could doors to increasing opportunities for these crops. We be offset by local production, the Tourism Linkages therefore encourage our stakeholders to embrace Council accelerated its efforts to foster new strategies these opportunities as there are huge potential for all for agricultural expansion to plug this gap. Compared parties. to many other countries in the region, Jamaica’s climate and soil is rich for multi-crop cultivation and with the right support, cohesive relations and alignment, we now find ourselves at a crucial juncture with the impetus to charge full-speed ahead.

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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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CONTENTS MESSAGES............................................................................................................................................3 INTRODUCTION......................................................................................................................................8 WHY INVEST IN IRISH POTATOES......................................................................................................... 10 INVESTMENT ANALYSIS....................................................................................................................... 16 FINANCIAL VIABILITY AND BANKABILITY...........................................................................................20 ANNEXES..............................................................................................................................................22

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introduction

Background

Image of irish potatoes

Irish Potato (Solanum tuberosum) was first domesticated in the southern parts of Peru and extreme northwestern Bolivia. Since then it has been dispersed around the world and has become a staple crop. There are thousands of different potato varieties, including those grown commercially and in backyard gardens. They are usually characterized by the colour of the tuber and starch content. Irish potatoes are typically in the ‘white potato’ group and are described by light tan to cream colored skin, and a white flesh that has a waxy texture due to the levels of starch it contains. They are called Irish potatoes because they were the main type cultivated in Ireland in the early 1800s and are associated with The Great Irish Famine, one of the worst agricultural, social, and cultural disasters of that time. White Irish potatoes are said to be the most widely-grown worldwide. They very versatile as they will hold their shape when boiled, they can be turned into potato salad, roasted broiled or fried. Some varieties of Irish potato include: Kennebec, Superior, Atlantic, Cascade, Snowden, White Elephant, White Rose, Cal White. In the United States, potatoes are regarded as the number one crop and the fourth most consumed crop in the world, behind rice, wheat, and corn. (U.S. Department of Agriculture) Potatoes are low in calories, a medium-sized potato contains only about 110 calories. They are a good source of vitamins C and B6, manganese, phosphorous, niacin and pantothenic acid. (Livescience) The USDA has suggested that potatoes are rich with poly-nutrients, which are organic components of plants that are considered to promote health. Vitamin C in potatoes acts as antioxidant. Purple coloured potatoes are rich with antioxidants with delay cell damage and help with digestion and controlling blood pressure.

History of Irish Potato in Jamaica

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introduction

I.E. Johnson in his paper, “The Development of the Irish Potato Industry in Jamaica”, reported that the production of Irish potato in Jamaica dates back to 1897. Evaluations were conducted on two varieties of ‘seeds’ imported from the United Kingdom at elevations of approximately 300ft. The positive results motivated the Jamaica Agricultural Society (JAS) to import other varieties in the 1900. While the trials were conducted, the Society also promoted the consumption of the tuber and over time the response favorable and this was the signal to extend production in other areas. Johnson further explained that the expansion momentum waned due to overreliance on imported seeds and this became apparent when there was no space on the ships during World War I. The survival of the industry was threatened by the high prices for seeds and farmers responded by asking the Government of the day to provide credit assistance for production o continue. The farmers also discussed the possibility of regulating the market for Irish potatoes while the Department of Agriculture conducted feasibility studies to determine viability scenarios. A subsidy scheme was developed by the Government in 1942. During that year the price of seeds was subsidized to growers. Control depots were established at strategic locations in the potato growing areas to facilitate the growers. To prevent the resale of seeds, each farmer had to receive a delivery of seeds from the nearest depot when a certificate of recommendation signed by the Agricultural Extension Officer in that area. To further bolster local production there was indirect government assistance by exempting seed potatoes from import duty. Farmers also had the option of selling locally harvested potato to the Agricultural Marketing Department (AMD). Since the prices offered by the AMD were lower than other buyers, farmers opted for the higher prices. These subsidies continued until 1961/1962. The increase in potato production also realized increases in the levels of pest and diseases. The main areas for growing Irish potatoes remains more or less the same; Devon, Chudleigh, Christiana, Darliston, Guys Hill, Lucky Hill, South Manchester, North Eastern St. Andrew. These are high altitude areas and provide the ideal geo-climatic conditions for the potato to thrive. In March 1959 the Christiana Potato Growers’ Association was registered as a Co-operative Society. The Cooperative was established to address

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Why Invest in Irish Potatoes issues such as: production, marketing, distributor of seeds and to raise funds to provide credit to farmers.

Local Investment Opportunity The production of Irish potato presents a viable investment opportunity since this potato has become a staple in the local diet plus there is high demand for the commodity in the tourist sector. The Ministry of Tourism Demand Study (2015) estimated that the annual national demand for Irish potato was 791,219 kilograms. The Study also highlighted that there was an estimated leakage of US$572,423 due to imports. The average production of Irish potato over the period 2008-2017 (Table 1) recorded by MICAF Data Bank Division was 19,765 kilograms. Over the ten-year period the industry fluctuated from a high 25,296 kgs in 2016 to a low of 17, 148 kgs in 2017 representing a 15.7% decline in production. As with all fresh produce, postharvest losses continue to impact negatively on marketable yields. Postharvest losses were estimated at 20-25% which increases when there are high levels of supply and farmers do not want to sell at the prevailing prices. Farmgate prices have increased by more than 100% over the period with the highest price of 141.36/kg recorded in 2016. Over the period farmgate prices have averaged J$104 per kilogram. As at 2017, production was valued at approximately J$1.7 billion or US$12 million.

TABLE 1 Annual Irish Potato Production and Value 2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

20,351

21,368

19,749

17,607

19,757

19,185

18,374

18,819

25,296

17,148

Area reaped (Acre)

1,568

1,978

2,045

2,381

2,781

3,068

2,821

2,715

3,120

1,039

Marketable Yield

15,263

16,026

14,812

13,205

14,818

14,389

13,781

14,114

18,972

12,861

Farmgate Prices (J$)

61.986

76.73

99.74

101.98

99.59

104.8

102.44

121.82

141.361

130.22

Value of Production ('000'J$)

946,108

1,229,652

1,477,324

1,346,671

1,475,700

1,507,941

1,411,674

1,719,398

2,681,901

1,674,759

Production (Tonne)

Source: MICAF 10-year Crop Estimates 2008-2017

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Why Invest in Irish Potatoes

TABLE 2 Estimate of Irish Potato Production by Quarter (2013-2017) Quarter

2013

2014

2015

2016

2017

Jan-Mar

3,946

6,173

8,264

8,597

5,596

Apr- Jun

8,347

10,131

7,380

6,306

9,288

Jul - Sept

3,851

1,325

1,263

1,036

1,330

Oct - Dec

1,276

1,949

1,308

1,068

934

Total Production

17,421

19,577

18,215

17,007

17,148

Source: MICAF Annual Crop Estimates

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 followed the production cycle that was mentioned earlier. The most significant price change (91%) occurred between the third and fourth quarter in 2014 (table 3) while prices slumped in second and fourth quarters over the 2013-2017 period. TABLE 3 Estimate of Irish Potato Farmgate Prices by Quarter 2013

2014

2015

2016

2017

Change in Farmgate Price 2013-2017

Jan-Mar

137.64

113.08

143.04

111

151.24

10%

Apr- Jun

128.06

90.31

138.03

119.57

104.11

-19%

Jul - Sept

141.28

172.24

177.44

157.84

212.84

51%

Oct - Dec

166.38

138.49

149.08

160.32

146.22

-12%

Maximum Price change during the year

18%

91%

29%

32%

31%

Quarter

Source: MICAF Annual Crop Estimates

The average value of Jamaica’s imports of fresh and frozen Irish potato for the 2013-2017 period was US$1 million (Chart 1) with an average volume of 2.4 million kilograms (Chart 2). Although the importation of potato continues to gradually decline (68% for the period), the Netherland continues to be the largest supplier of this type of potato to Jamaica followed by Canada and the United States.

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Why Invest in Irish Potatoes 1500

Curacao USA

1200

Canada

900

Netherlands 600

World

300

CHART 1 Import Value ($US ‘000”) of Fresh and Frozen Irish Potato to Jamaica (2013-2017)

2013

2014

2015

2016

2017

Source: ITC Trade MAP

10000

Curacao USA

8000

Canada

6000

Netherlands 4000

World

2000

CHART 2 Import quantity (tonnes) of fresh and frozen irish potato to Jamaica (2013-2017)

2013

2014

2015

2016

2017

Source: ITC Trade MAP

Cost of Production A summary of the cost of production for establishing one acre of Irish potato is provided in Table 5 below. A detailed cost of production is attached in the Appendix. In the summary, labour cost was estimated at J$317,500 representing 46%% of the total cost. The cost for procuring materials was J$215, 500 (31%) while other costs inclusive of transportation and supervision were estimated to be $163, 800 (24%). The overall cost for establishing one acre has been estimated at J$$696,800. The cost of production per kilogram was estimated at J$$76.65/kg. The estimates assumed 1,000 pounds of seeds per acre, an estimated marketable yield of 9,091kg and average farmgate price of 110/kg thus deriving a profit margin of 43.5 %.

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Why Invest in Irish Potatoes TABLE 4 COP and Profit Margin Calculation based on Local Market Labour Cost (J$)

Material Costs

317,500 (35%)

215,500

(31%)

163,800 (24%)

Other Costs (J$)

Cop Per Acre (J$)

Cop Per Kg (J$)

Planting Density Per Acre

696,800

76.65

1,000lb/ acre

9091

Estimated Farm Gate Price Yield Kgs/ 2017 - Kg Acre

110

Cop/ Farmgate Margin

43.5%

Source: MICAF Annual Crop Estimates 2008 - 2017

Export Investment Opportunity According to data from the International Trade Centre (ITC) in 2017 the market for fresh and frozen Irish potato was valued at US$3.8 billion. The market suffered an 11% decline over the period 2013-2017 however between 2016 and 2017 there was a 7.6% growth. The top five importing countries of frozen fresh Irish potato are Belgium (10%), Netherlands (8%), Spain and Russia (6%) and the United States of America (5%). Of the top countries (Chart 2) the Russian Federation shows the highest import growth potential (110%) followed by the Netherlands (28%) and thirdly the United States (18%).

Other USA Russia Spain Netherlands Belgium

CHART 3 Import Market Share(%) for Irish Potato per Top 5 Countries (2017)

Source: ITC Trade MAP

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Why Invest in Irish Potatoes

USA

Russia

Spain

Netherlands

Belgium

CHART 4 Growth (Imports) in Irish Potato Market Share per Top 5 Contries

-20

100

120

Source: ITC Trade MAP

The top five exporting countries of the commodity are France (15%), Germany (10%), China (9%), Netherlands and Egypt both having 8% each. The aggregated market share of the top five countries accounts for 51% of the market. Of the top five exporting countries Egypt at 65% showed the greatest export growth potential followed by China (24%) and the Netherlands (11%).

Egypt

Netherlands

China

Germany

France

CHART 5 Growth(%) in Export Market Share Per Top 5 Countries

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Source: ITC Trade MAP

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Why Invest in Irish Potatoes

Other Egypt Netherlands China Germany France

Source: ITC Trade MAP

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CHART 6 Export Market Share(%) per Top 5 Countries (2017)

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Investment Analysis

Technical Requirements Climate

Image of assorted produce

Potato is a cool weather crop with temperatures being the main limiting factor for production. Tuber growth is greatly inhibited in temperatures below 10⁰C and above 30⁰C while optimum yields are obtained where daily temperatures are in the 18 to 20⁰C range. There are two well defined growing seasons in Jamaica: the main crop is planted during February to April and is reaped during the period June to August. The other crop is planted during the period November-January and is reaped during the period February to April. (FAO) This has helped with streamlining production across the potato growing parishes.

Soil Irish potatoes perform best on deep well drained soils. But in Jamaica they are also grown on heavy soils. The predominant soils in the potato growing areas are the free draining terra rosa soils, clay loams, and in some cases clay loam. Sandy loams that are rich in organic matter with good drainage and aeration are most preferred. Soils with pH range of 5.2 to 6.4 are most ideal. (FAO)

Planting Material Irish potatoes are produce from smaller potatoes referred to as seeds. Most of these seeds/planting material are imported from the Netherlands (3,269 tons in 2017) and to a lesser extent from Canada (332 tons in 2017) totally 3,601 tons. (ITC) The most important varieties grown commercially are Arran, Sebago, Kennebec and Red Pontiac, Spunta, Challenger, Ajiba and Sylvana. Currently the price for a 50lb bag of potato seeds is $6500. An estimated twenty 50lb bags are used per acre. This enterprise will be planting at a rate 1,000lbs (20 bags) per acre.

Land Preparation For optimum production, potatoes need full sunlight. They perform

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Investment Analysis

best in a loose, well drained, slightly acid soil. The land selected for planting potatoes should be properly tilled to prevent weed growth, conserve moisture, aerate the soil, increase the available supply of plant food, and stimulate root action/penetration. According to the Small Farmers Journal, the aim of the grower should be to keep the surface soil loose and open from the time of planting the crop until the damage from root injury is greater than the benefit derived by the plant from the loosening of the surface soil. Cultivation may be continued with the harrow until after the plants are well above ground, provided it is so constructed that the teeth can be slanted backward. As soon as the plants are up they should receive as deep a cultivation as it is possible to give. At this stage of development the cultivator can be run quite close to the plants without injury to them. (IBID)

Planting Density It is estimate that 1,000 pounds of seeds are required to plant an acre of potato. Potato pieces/seeds should be planted at a depth of about 4 inches. The seeds should be planted 10-12 inches apart and the farmers should ensure that there is good contact with the soil. The seed/piece should then be covered with about 3 inches of soil.

Planting Seed potatoes should be cut into pieces weighing about 1.5 to 2 ounces, each piece must have at least one good eye. Cut the seeds 5 to 6 days before planting. Fungicide should be applied to the cut seed and it should be subsequently held in well ventilated spot so that it can heal to prevent rotting. There are two standard planting cycles locally which are usually associated with the cultivation area. The main crop is planted during February- April and is reaped during the period June-August. The other crop is planted during the period November-January and Image of farmer holding irish potatoes

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Investment Analysis is reaped during the period February to April.

Irrigation Soil should be kept moist during growth. Too much water enlarges the pores on the tubers and makes them rot easily. The amount of water required depends to a great extent on the type of soil and levels of temperature. Irrigation can be rain-fed, manual watering or by a dedicated drip lines.

Fertilizers Potatoes need adequate fertilizer early in the season hence most of the fertilizers should be applied just before planting. One method is to place two-three pounds of complete fertilizer (11-22-22 etc.) each 30ft of row in bands 2 inches to each side and 1 inch below the seed. Fertilizer should not touch seed/seed piece. To apply fertilizer, flatten the beds and use the corner of a hoe or stick to open trench about 4 inches on each side of the bed. Apply half of the fertilizer in each row. When the plants are 4 inches tall another application of fertilizer can added.

Pest and Disease management Insect pests that affect potato include, the Flea beetle, Colorado potato beetle, Aphid, and Leafhopper. These can be controlled by using the wide spectrum of insecticides available locally. Potatoes are impacted by several diseases including Verticillium Wilt, Fusarium Wilt, Charcoal Rot, Root Knot, Nematodes, Early Blight and Late Blight. The farmer should conduct regular scouting of fields to identify the presence of insects or diseases and thereafter take the necessary precautionary measures. MICAF-Diseases of Irish Potato in Jamaica

Harvesting and Yield

Image of irish potato in soil

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Potatoes are ready to harvest when the tops begin to die and the potato skin becomes firm. The skin is set when it does not scrape easily

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Investment Analysis

when rubbed with the thumb. Cutting off the tops can help with this process. To harvest dig under the plants with a shovel or garden fork, Keep the instrument of choice 8-10 inches away from the plant avoid cutting the potatoes. This should be done preferably when the soil is moist to avoid bruising.

Post Harvest Management Image of assorted produce

Potatoes should be allowed to dry and stored after in a cool location with plenty of air movement. Potatoes can be laid out on newspaper at temperatures approximately 10-15˚ C for about two weeks. This will allow the potato skin to further thicken and dry.

Marketing With proper storage Irish potatoes can be kept for long periods of time. Good storage will allow the farmer to hold the potato until he is able to get a good price. Potatoes are either sold to purveyors/middle men through informal contracts, to 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. There some farmers who develop arrangements with purveyors whereby the purveyor provides the inputs and the farmer establish and care for the crop. At the end of the crop cycle the purveyor pay the farmer an agreed percentage of the total sales.

Project Cost In the financial model, the unit cost of development of 5 acres of Irish potato has been prepared. This can be modified to fit other scale of

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Financial Viability and Bankability operations taking into consideration the attendant changes to the variables used.

Working Capital Working capital represents the operational liquidity that is available to the business enterprise. For this 5-acre the working capital was calculated as 30% of the total operational cost. This is the minimum amount of cash that the business should have at hand to cover at least 30% of the operational cost.

Bank Loan For this venture the cost of capital was estimated at 8%. Interest rates are retailed between 8-11%. 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 by 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 Irish potato cultivation. For financial analysis, the income was assessed on a conservative basis. The detailed calculation of project’s income and expenditure has been indicated in Annexure II. IRR and NPW for the model work out to be 39 %, J$3.2million respectively and the details are given in Annexure IIV.

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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annex TABLE 1 Cost Of Production Irish Potato UNIT

NO. OF UNITS

Land Cleaning

2,000

36,000.00

Ploughing

2,000

60,000.00

Furrowing

2,000

40,000.00

Maintain Trench

2,000

10,000.00

Planting

2,000

20,000.00

Pest Management

2,000

18,000.00

Weeding

2,000

20,000.00

Fertilising

2,000

2,000.00

Harvesting

2,000

48,000.00

127

500

63,500.00

COST/UNIT

TOTAL ACREAGE

COST

Labour Operations

Lunch Material Inputs Planting Material (20 50lb bags/acre) Fertiliser (8 bags)

130,000.00 bags

7,000

56,000.00

Insecticide

20,000.00

Fungicide

6,000.00

Herbicide

3,500.00

Other Costs Irrigation Equipment $100/sqft)

set

300,000

300,000.00

Transportation (10 percent of material)

21,550.00

Marketing(10 percent of labour and material)

53,300.00

Contingencies (10 percent of labour and material)

53,300.00

**Tools discounted for 5 years

7,000.00

Land Charges per crop cycle

2,000.00

Supervision

79,950.00

TOTAL OPERATING EXPENDITURE PER CROP CYCLE Cost of Production per acre

1,050,100.00 1

1,050,100.00

Projected Marketable Yield (Kg per acre)

15,000.00

Total yield

18,750.00

Cost of Production $/Kg

70.01

Revenue

1,650,000.00

Gross Profit

599,900.00

Gross profit Margin

57.1%

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annex

TABLE 2 Basic Assumptions PARAMETERS

VALUE

Exchange rate USD:JMD

132

Area Planted (acres)

Area Planted (hectares)

Time to maturity (110-160days)

3 months

Marketable yields per acre (kg)

10000

Marketable yields per Hectare (kg)

24700

Number of crops per year - Crop cyle is indefinite

Number of plants per acre (Direct seeding 1000lbs/Acre

1000lb

Sales distribution Local via middlemen

70%

Local to higgglers for municipal markets

30%

Prices USD/kg: Local to via middlemen

0.9

Local to higgglers for municipal markets

0.9

TABLE 3 Capital Costs CAPITAL COSTS

UNITS

NUMBER OF UNITS

Shed/storeroom

ft2

100

500

50,000

Fencing (barb wire)

acre

209,000

418,000

Pickup truck

each

2,000,000

Knapsack sprayer

each

10,000

20,000

Mist-blower

set

40,000

Irrigation Equipment

acre

300,000

1,500,000

Drip pipe fittings

Set

52,272

Venturi pump

Each

6,000.00

6,000

Water storage Tank (1000gal)

Each

90,000.00

180,000

Water pump

Each

45,000.00

45,000

Instruments (pH/EC&TDC Metres)

Set

60,000.00

60,000

Nutrient storage tank

Each

14,000.00

14,000

Miscellaneous equipment and tools

each

200,000

Total

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RATE/UNIT

TOTAL

4,585,272

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III

annex TABLE 4 Operating Costs UNIT

QTY

UNIT PRICE (J$)

YR1

Irish Potato

acres

600,000.00

3,000,000

Marketing expenses

120,000.00

120,000

Contingency

Direct Expense Crop establishment

156,000.00

Subtotal

3,276,000

Indirect expenses Land lease

acres/yr

5,000.00

25,000

Owner/manager

mth

60,000.00

720,000

Security

mth

15,000.00

180,000

Fuel

mth

Accounting and audit fees

mth

5,000.00

60,000

Equipment Maintenance

mth

5,000.00

60,000

Motor vehicle expense/servicing

mth

Motor vehicle insurance

Salaries and wages:

Utilities:

Water

mth

20,000.00

240,000

Telephone internet

mth

10,000.00

120,000

Electricity

mth

Stationary &office supplies/printing

mth

2,000.00

24,000

Bank charges

mth

3,000.00

36,000

Contingencies

400,850.00

Sub-Total

1,865,850

Total Operating Costs

5,141,850

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annex

TABLE 5 Annual Operating Costs

YR1

YR2

YR3

YR4

YR5

3,000,000

3,150,000

3,307,500

3,472,875

3,646,519

Marketing expenses

120,000

126,000

132,300

138,915

145,861

Contingency

156,000

163,800

171,990

180,590

189,619

3,276,000

3,439,800

3,611,790

3,792,380

3,981,998

25,000

26,250

27,563

28,941

30,388

Owner/manager

720,000

756,000

793,800

833,490

875,165

Security

180,000

189,000

198,450

208,373

218,791

Accounting and audit fees

60,000

63,000

66,150

69,458

72,930

Equipment Maintenance

60,000

63,000

66,150

69,458

72,930

Motor vehicle expense/servicing

Motor vehicle insurance

Utilities:

Water

240,000

252,000

264,600

277,830

291,722

Telephone internet

120,000

126,000

132,300

138,915

145,861

Stationary &office supplies/printing

24,000

25,200

26,460

27,783

29,172

Bank charges

36,000

37,800

39,690

41,675

43,758

Contingencies

400,850

420,893

441,937

464,034

487,236

Sub-Total

1,865,850

1,959,143

2,057,100

2,159,955

2,267,952

Total Operating Costs

5,141,850

5,398,943

5,668,890

5,952,334

6,249,951

Direct Expense Crop establishment Irish Potato

Subtotal Indirect expenses Land lease Salaries and wages:

Fuel

Electricity

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annex TABLE 6 Annual Marketing Yield YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Fresh Irish Potato (kgs)

48,750

82,500

84,750

82,500

86,250

Total

48,750

82,500

84,750

82,500

86,250

YR1

YR2

YR3

TABLE 7 Selling Price (/kg) Irish Potato

YR4 96

YR5 101

106

TABLE 8 Gross Revenue Schedule (J$) YR1

YR2

YR3

YR4

YR5

Fresh Irish Potato sales

4,241,250

7,536,375

8,129,008

8,308,853

9,120,855

Total

4,241,250

7,536,375

8,129,008

8,308,853

9,120,855

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annex

TABLE 9 Financing Plan FINANCING REQUIRED

EQUITY

LOAN

GRANT

TOTAL

Capital Cost: Shed/storeroom

50,000

Fencing (barb wire)

418,000

Pickup truck

2,000,000

500000

1,500,000

Knapsack sprayer

20,000

Mist-blower

40,000

Irrigation Equipment

1,500,000

Drip pipe fittings

52,272

Venturi pump

6,000

Water storage Tank (1000gal)

180,000

Water pump

45,000

Instruments (pH/EC&TDC Metres)

60,000

Nutrient storage tank

14,000

Miscellaneous equipment and tools

200,000

Physical contingencies (10%) Sub-Total

4,585,272

200,000 -

3,085,272

1,500,000

4,085,272

Operating Costs Crop establishment Irish Potato

3,000,000

Marketing expenses

120,000

Contingency

156,000

3,276,000

25,000

Owner/manager

720,000

Security

180,000

Subtotal Indirect expenses Land lease Salaries and wages:

Accounting and audit fees

Fuel

60,000

Equipment Maintenance

60,000

Motor vehicle expense/servicing

Motor vehicle insurance

Water

Utilities:

240,000

Telephone internet

120,000

Electricity Stationary &office supplies/printing

24,000

Bank charges

36,000

Contingencies

400,850

Sub-Total

1,865,850

Total

9,727,122

8,227,122

1,500,000

9,227,122

Equity

85%

Leverage

15%

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VII

annex TABLE 10 Loan Repayment Schedule MONTHS

LOAN

1,500,000

300,000

120,000

420,000

1,200,000

300,000

96,000

396,000

900,000

300,000

72,000

372,000

600,000

300,000

48,000

348,000

300,000

24,000

324,000

1,500,000

360,000

TOTAL

PRINCIPAL

INTEREST

TOTAL DEBT

LOAN

1,860,000

Moratorium - 6 mths Loan period - 5 Yrs (including moratorium) Interest rate:

TEF Crop Profile - Irish Potato.indd 7

= 10% per Annum

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VIII

annex

TABLE 11 Projected Net Income YR1

YR2

YR3

YR4

YR5

Gross Revenue

4,241,250

7,536,375

8,129,008

8,308,853

9,120,855

Operating Cost

5,141,850

5,398,943

5,668,890

5,952,334

6,249,951

Operating Profit

(900,600)

2,137,433

2,460,119

2,356,519

2,870,904

Depreciation:

586,088

Shed/storeroom

3,000

Fencing (barb wire)

38,800

Pickup truck

170,000

Knapsack sprayer

1,800

Mis-tblower

7,000

Irrigation Equipment

290,000

Drip pipe fittings

10,054

Venturi pump

1,833

Water storage Tank (1000gal)

17,000

Water pump

4,000

Instruments (pH/EC&TDC Metres)

5,500

Nutrient storage tank

1,100

Miscellaneous equipment and tools

36,000

Residual value

452,500.00

Interest Payment

120,000

96,000

72,000

48,000

24,000

Profit before Tax

(2,059,188)

1,002,845

1,349,531

1,269,932

1,808,316

Taxable Profit

(2,059,188)

1,002,845

1,349,531

1,269,932

1,808,316

Tax (33.3%)

(685,710)

333,947

449,394

422,887

602,169

Net Profit after Tax

(1,373,478)

668,897

900,137

847,044

1,206,147

(1,373,478)

(704,581)

195,556

1,042,601

2,248,748

(Profit before tax less tax) Cumulative Net Profit

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1,542,555

5,398,943

5,141,850

OPER. COST

7,369,557

7,018,625

11,269,677

TOTAL COST

8,308,853

8,129,008

7,536,375

4,241,250

SALES REVENUE

102,500.00

402,500.00

432,500.00

452,500.00

SALVAGE & RESIDENTIAL VALUE

1,874,985

1,785,700

1,700,667

1,619,683

1,542,555

WORKING CAPITAL (REC)

11,096,340

10,197,054

10,232,175

9,588,558

6,236,305

TOTAL BENEFIT

2,971,404

2,459,019

2,862,619

2,569,933

(5,033,372)

NET BENEFIT

1,500,000

LOAN

324,000

348,000

372,000

396,000

420,000

OUTFLOW

2,647,404

2,111,019

2,490,619

2,173,933

(3,953,372)

EQUITY

CAPITAL WORKING REPL. CAPITAL

1,619,683

5,668,890

7,738,034

100,500.00

CAPITAL

1,700,667

5,952,334

9,120,855

YEAR

1,785,700

8,124,936

4,585,272

6,249,951

1,874,985

$3,159,587

39%

$3,223,398

NPV = Assuming a real discount rate of 10% Conclusion: Project is viable if NPV positive IRR =

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TEF Crop Profile - Irish Potato.indd 9

IX annex TABLE 12 Summary of Project Costs & Benefits

annex

TABLE 13 Annual Cash Flow Projection ($) YR1

YR2

YR3

YR4

YR5

INFLOWS Loan

1,500,000

Equity

8,227,122

Grant

Sales

4,241,250

7,536,375

8,129,008

8,308,853

9,120,855

Total Inflows

13,968,372

7,536,375

8,129,008

8,308,853

9,120,855

OUTFLOWS Capital Cost

4,585,272

Operating Cost

5,141,850

5,398,943

5,668,890

5,952,334

6,249,951

Working Capital

1,542,555

1,619,683

1,700,667

1,785,700

1,874,985

Outflows before Debt & Tax

11,269,677

7,018,625

7,369,557

7,738,034

8,124,936

Cash Flow before Debt & Tax

2,698,695

517,750

759,452

570,819

995,919

Debt service

420,000

396,000

372,000

348,000

324,000

Tax

898,665

172,411

252,897

190,083

331,641

Net Cash Flow

1,380,030

(50,661)

134,554

32,736

340,278

Cumulative Net Cash Flow

1,380,030

1,329,369

1,463,923

1,496,659

1,836,937

Capital Replacement

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REFERENCES 1. https://www.livescience.com/45838-potato-nutrition.html 2. https://smallfarmersjournal.com/how-to-grow-an-acre-ofpotatoes/ 3. I.E. Wilson (1966) “The Development of the Irish Potato Industry in Jamaica” Root Crops Symposium 4. Jeanette Williams (2003), “Diseases of Irish Potato in Jamaica”, MICAF Technical Bulletin 5.

William Stewart, Small Farmers Journal “How to grow an Acre Potato”, https://smallfarmersjournal.com/how-to-grow-an-acre-ofpotatoes/

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XII

annex

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