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Messages

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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Messages

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 now set for even greater explosion, taking other The six investment crop profiles being presented – sectors along with it. onions, strawberries, irish potatoes, tomatoes, When the Tourism Demand Study in 2015 highlighted pineapples and sweet peppers - are essential to the the loss of revenue due to an import bill which could be offset by local production, the Tourism Linkages Council accelerated its efforts to foster new strategies for agricultural expansion to plug this gap. Compared to many other countries in the region, Jamaica’s climate and soil is rich for multi-crop cultivation and with the right support, cohesive relations and alignment, we now find ourselves at a crucial juncture with the impetus to charge full-speed ahead.

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growth of agriculture in our country as it will open doors to increasing opportunities for these crops. We therefore encourage our stakeholders to embrace these opportunities as there are huge potential for all parties. This is an awesome initiative for Jamaica! Our Island never ceases to amaze me; we are truly the land of opportunities. Let us re-commit, keep the focus and get it done!

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CONTENTS MESSAGES............................................................................................................................................. INTRODUCTION....................................................................................................................................... WHY INVEST IN ONIONS......................................................................................................................... INVESTMENT ANALYSIS......................................................................................................................... FINANCIAL VIABILITY AND BANKABILITY.............................................................................................

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Messages

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Introduction

Background Onions (Allium cepa L.) are the most widely cultivated species of the genus Allium. In most cases, the onion is a biennial or a perennial plant but is usually treated as an annual and harvested in the first growing season. Onions are cultivated across the world. As a food item, they are usually served cooked, as a vegetable or part of a prepared savoury dish but can also be eaten raw or used to make pickles or chutneys. They are pungent when chopped and contain certain chemicals substances which irritate the eyes. Common onions are normally yellow or brown (sometimes called red onions) are full-flavoured and are the onion of choice for everyday use. Many cultivars are bred specifically to demonstrate this sweetness. Yellow onions turn a rich dark brown colour when caramelized and give French onion soup its sweet flavour. The red onion is a good choice for fresh use when its colour adds to the aesthetics of a dish. It is also good for grilling. Onions are available in fresh, frozen, canned, caramelised, pickled, and chopped forms. The dehydrated product is also available as sliced, ring, minced, chopped, granulated and powdered forms. Onion powder is a seasoning widely used when the fresh ingredients are not available. It is made from finely ground, dehydrated onions, mainly the pungent varieties of bulb onions, and has a strong odour. Most varieties of onions are 89% water, 9% carbohydrates (including 4% sugar and 2% dietary fibre) Onions contain low amounts of essential nutrients and have an energy of 166KJ. Onions have been as food for thousands of years; in ancient Egypt, they were worshipped and used in burials. Onions have many possible health benefits including reducing the risk of obesity, heart disease and cancer. They are high in vitamins, minerals, and antioxidants. Image of onions

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Varieties of onions grown locally

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Introduction

include Mercedez, Arad, Superex and the Grano type. According to RADA these short-day varieties and are ideal for planting in October to December. Long-day varieties such as the Orlando, Caballero, Yellow Granex hybrid are planted in April/March.

History of Onions in Jamaica The cultivation of onions in Jamaica goes as far back as the 1960s (RADA). Over the past two decades there has been significant reduction in the production of onions partially due to the liberalization of the Jamaican economy in the early nineties. This period was then characterized by the influx of imported commodities including fresh produce. Policies shifted in early 2000s with a focus on import substitution to prevent outflows of much needed foreign exchange whilst growing domestic production. This shift in policy direction has resulted in the country almost realizing self-sufficiency in onion production. With the successes also comes challenges as the industry grapples with how to manage the negative impact of pest and diseases, postharvest practices and marketing arrangements. One pest of significant importance is the army worm which creates havoc on onions and there are many sad stories of onion farms being totally wiped out by this pest. RADA has developed early warning systems and protocols that will help with monitoring and overall management of the pest. Every growing industry requires adequate infrastructure for present and future development. It is therefore critical that in addition to improvement in agronomic practices that there is also gradual improvement in the local infrastructure to include drying/curing facilities that will increase the shelf life of the harvested crop.

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Why Invest in Onions

Local Investment Opportunity The production of onions presents a viable investment opportunity as local consumers continue to demand locally produced fresh produce. Local consumers are also becoming more environmentally conscious and are concerned about the processes used to lengthen the shelf life of imported produce. Data in Table 1 from the Ministry of Industry Commerce Agriculture and Fisheries (MICAF) Data Bank Division shows that there was a 79.9% increase in the production of onions over the ten-year period 2008-2017. The average annual production for the period was approximately 818 (818,000kgs) tonnes. The highest production for the period was in 2015 when production levels rose by 68% from 691 tonnes (691,000) to 1,162 tonnes (1.162 million kgs). An annual average of 74 acres was reaped over the period with 2012 recording the highest acreages (102 acres) reaped. Although producers have developed basic postharvest systems, the industry continues to suffer from postharvest losses both at the primary and secondary levels. Postharvest losses were averaging between 15-20% and this had impacted negatively on marketable yields and ultimately revenue. Farmgate prices averaged J$133/kg for the period under review. 2017 recorded the highest market price of J$181.67. There have been moderate price fluctuations year-on-year for most of the period except for 2012-2013 when there was significant upward price movements in the magnitude of 43.7%. The total annual value of onion production has grown over period by 164% from J$47,315 million in 2008 to $J124,933 million in 2017. In table 2 below quarterly onion production levels over five years (2013-

TABLE 1 Annual Onion Production and Value Items

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Production (Tonnes)

455

720.9

555

1015

1088

680

691

1162

1092

818

Marketable Yield

341

541

416

761

816

510

518

872

819

614

Harvested (Ha)

104

Farmgate Prices

103.99

89.41

113.67

139.38

102.04

146.67

148.38

149.04

181.67

152.73

Crop value

47,315

64,456

63,087

141,471

111,020

99,736

102,531

173,184

198,384

124,933

Source: MICAF Crop Estimates 2008-2017

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Why Invest in Onions

2017) are illustrated. Production levels were highest in the third quarter for most years and lowest the in the last quarter. This trend follows the production cycle since there is a proportion of farmers who rely primarily directly on rainfall for irrigation. Table 3. Shows the changes in farmgate prices for each quarter over a five-year period 2013-2017. The most significant price changes, 118% and 99% were recorded in third quarters of 2014 and 2015 respectively.

TABLE 2 Estimate of Onion Production per Quarter Quarter

2013

2014

2015

2016

2017

Jan – Mar

84.1

182.4

241.4

217

272

Apr – Jun

312.7

399.8

658.9

737

335

Jul – Sept

225.3

70.3

220.8

114

163

Oct – Dec

57.6

38.8

40.8

Total Production

679.7

691.3

1161.9

1092

798

Source: MICAF Annual Crop Estimates 2008-2017

TABLE 3 Estimate of Onion Farmgate Prices per Quarter Quarter

2013

2014

2015

2016

2017

Increase in Farmgate Price 2013-2017

Jan – Mar

141.63

129.69

150.85

143.88

160.17

41%

Apr – Jun

149.64

149.44

150.64

198.73

142.03

27%

Jul – Sept

145.69

192.54

140.72

126

163.35

21%

Oct – Dec

141.69

145.43

157.53

264.55

155.51

47%

Maximum Price changes during the year

-3%

-24%

110%

15%

Source: MICAF Annual Crop Estimates 2008-2017

The Netherlands is the major exporter of fresh or chilled Onions to Jamaica. Over the five-year period, 2013-2017, year 2013 recorded the highest import level of 8.6 million kgs of fresh onions. Average imports for the period was 7.8 million kgs and the average value was estimated at US$5.1 million. There has been an 11% decline in the importation of onions over the period owing to the import substitution policy which has resulted in increased local production.

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Why Invest in Onions The relative high volume of fresh onion import presents a huge market opportunity for “ramping” up local production. Local consumption of fresh onions is approximately 900 tonnes of which an estimated 10% is provided from domestic production. The remaining 90% is supplied through exports. The data in Chart 1 from the Statistical Institute of Jamaica shows that there has been year-on-year growth of 2% in domestic supplies except for the decline in 2016. When the yield per acre is estimated at 10,000 kilograms, there is a production gap of approximately 800 acres.

10000000 8000000 6000000 4000000 2000000 CHART 1

Onion Production Gap (kgs)

2013

2014

2015

2016

Source: STATIN/MICAF

As illustrated in Chart 2 below there was a 57% decline in the value of imports from US$4.6 million in 2013 to US$ 2 million in 2017. This is in keeping with the local import substitution policy. 500000000 400000000 300000000 200000000 100000000

CHART 2 Value of Jamaica's Import of Fresh Onions(J$) 2013-2017

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2013

Source: STATIN

2014

2015

2016

2017

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Why Invest in Onions TABLE 4 COP and Profit Margin Calculation based on Local Market Labour Cost

Material

174,500 (27%)

389,812 (60%)

Other Costs

145,700

COP per Acre

649,118

COP per kg

Planting Density per Acre

Estimated Yield (kgs/acre)

Farm Gate Price 2017 (per kg)

COP/Farmgate Margin

20cm X 6cm Approximately 27,000 plants/35kgs of seed/acre

10,000

132

63%

A summary of the cost of production for establishing one acre of Irish potato is provided in Table 4 above. A detailed cost of production is attached in the Appendix. In the summary, labour cost was estimated at J$174,500 representing 27% of the total cost. The cost for procuring materials was J$389,812 (60%) while other costs inclusive of transportation and supervision were estimated to be $145, 700 (13%). The overall cost for establishing one acre has been estimated at J$649,118. The cost of production per kilogram was estimated at J$60/kg. The estimates assumed 10892 plants per acre, an estimated marketable yield of 21.784kg and average farmgate price of J$132/kg thus deriving a profit margin of 63%.

Export Investment Opportunity Global and Local Trade Global trade of fresh onions over the five-year period 2013-2017 averages 7.5million tonnes. International Trade Centre (ITC) Database. In 2017, 7.5 million tonnes of fresh onions were traded globally. According to ITC’s database, average global trade over the period in question was valued at US$3.2 billion dollars. The market share for the top 5 exporting countries is as follows; Netherlands (17.5%), China -16.3%, Mexico -12.4 %, India -11.5% and the United States of America -7%. China and the Netherlands showed growth rates among the top five onion exporting countries in 2017. The other top three countries have shown negative growth rates, the United States of America (-7%), India (- 6%) and Mexico (-5%).

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Why Invest in Onions

USA India %

Mexico China CHART 3 Market Share of Top 5 Exporters of Onions (2017)

Netherlands 0

Source: ITC Trade Map

USA

Netherlands

Mexico

India

China

CHART 4 Exported Growth in Value(%) for 2016/2017

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-8

-6

-4

-2

Source: ITC Trade Map

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Investment Analysis

Technical Requirements Climate Onions grow best below 1,900 metres altitude; 500-700mmrainfall; 15 -30˚ C temperature range. Leaf, root, and bulb development occurs in cool temperatures between 20 ˚ and 25 ˚ C. High temperature can prevent flowering. After bulbs develop, cool weather with adequate moisture supply is required flower stalk initiation. High temperatures during flowering will result in abortion and consequently lower seed yield. (FAO 2010)

Soil Onions will perform well in most soils that are well drained and have sufficient depth for the bulbs to develop and expand. It is best to avoid heavy soils since they may present a scenario where problems such as poor aeration, crusting and blemishing may arise. For commercial enterprises RADA recommends that the crop is grown in full sunlight in medium texture loams. Soil pH of 6.0-8.0 is preferred for onion production. (FAO 2010)

Planting Material The enterprise can either purchase seeds and establish a nursery for growing seedlings or purchase seedlings from local suppliers. Onions can be cultivated either by direct seeded at a rate of 3-5 kilograms per acre. (MICAF) Seedlings grown in the nursery should be sown in polyethylene trays and transplanted when plants are at the two-leaf stage (six to eight weeks). Onions can be classified as short, intermediate or long day types, associated with the hours of sunlight which will trigger bulb formation. Varieties of onions growing locally includes: Mercedes, Arad, Superex and Grano type. These are recommended for cultivating between mid-October to December. For March to April, varieties such as Orlndo, Caballero, Image of growing onions

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Investment Analysis Yellow Granex hybrid and Noam can be planted. (MICAF)

Land Preparation The selected area should be properly tilled by ploughing, harrowing rotovating and bed-shaping. Drains should be constructed to prevent waterlogging of fields. If direct seeding method is to be use bringing the soil to a very fine tilth will be critical for the seed make contact with soil particles. Pre-emergent weedicide should be applied prior to planting so as avoid competition between the onion plantlets and weeds.

Planting Density Seeds can be planted in rows 20-30cm (8-12inches) apart, and along rows at 2.5-10ocm(1-4inches) at a depth of 1.25cm (0.5 inches) for direct seeding. Similar spacing and plant population can be adopted for transplanting seedlings.

Planting For direct seedling to be successful the soil must be prepared to a condition that will facilitate mechanical planters. Planters must be calibrated for the correct depth of sowing, spacing, and discharge of seeds. In the case of transplanting seedlings, 1-2lbs of seeds are needed. Transplanted seeds should be planted the depth similar to what obtained in the trays.

Irrigation MICAF suggests that onions require approximately 4,600m3/ha (500,000 gallons/acre) of water for growth and development per crop cycle (110 days). Irrigation systems include, sprinkler, drip and furrow and salinity of water should must be less than 0.75mmho/cm.

Fertilizers As a rule of thumb soil tests should be conducted to determine the most appropriate fertilizer regime that is most suited for the crop and the existing soil. The important nutrients for onion production are nitrogen, phosphorus, potassium, Sulphur, manganese, copper and molybdenum. For primary nutrients, onions absorb 165kgs (145 lb/acre), 28kg/acre (25lb/acre) and 177kg (155lb/acre) of NPK respectively.

Pest and Disease management The most common diseases of tomatoes are Purple Blotch, Bacterial soft Rot, Botrytis Leaf Stake and Downy Mildew. The insect pests of

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Investment Analysis

importance are Beet Army worm, Thrips and Leaf Miner. These can be controlled by using the wide spectrum of control chemicals available on the local market. The farmer should develop an integrated pest management programme which will include: conducting regular scouting of fields to identify the presence of insects or diseases and thereafter take the necessary precautionary measures, planting compatible barrier crops and using sticky traps.

Harvesting and Yield The approximate time from planting to harvest, ranges from 110-160 days, depending on the variety and time of planting. The harvesting process begins when 50% of the onions are down (necks broken). Onions may be lifted or toppled over and laid to one side in the field. To allow for optimum drying, onions should be left in the field for 10-14 days.

Post Harvest Management Onions should be removed from the field for curing to retain outer scale leaves and for protection against decay and early sprouting. The temperature conditions for curing are 35⁰C, and Relative Humidity 6070%.

Marketing Proper curing and storage will allow the farmer to hold the onions until he is able to get a good price. Onion farmer usually secure contracts before planting so that after reaping the buyer usually collects the produce from the farm. Some farmers also participate in direct marketing as they believe they can obtain more competitive prices.

Project Cost In the financial model, the unit cost of development of 5 acres of onions has been prepared. This can be modified to fit other scale of operations taking into consideration the attendant changes to the variables used.

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Financial Viability and Bankability

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 Image of onion farm

For this venture the cost of capital was estimated at 8%. Interest rates are retailed between 8-11%. 85% of the development cost of the investment will be funded from equity. The remaining 15% will be funded from a bank loan. The loan is required to purchase a 3-4years old pickup truck.

Rate of Interest For this venture the cost of capital was estimated at 8%. Interest rates for agricultural loans are retailed between 8-11%.

Security The project will be guided by the financial stipulations laid out by Agricultural Bank for agricultural loans. The tenets of Good Agricultural practices will be adhered to ensure high productivity and produce that is safe for consumption. Proactive actions such as scouting will be implemented for early detection of pest and diseases. The irrigation system established will ensure that the plants are adequately irrigated to give the maximum yield.

Financial Analysis Financial analysis was carried out for five acres (2.5 hectares) of Irish potato cultivation. For financial analysis, the income was assessed on a conservative basis. The detailed calculation of project’s income and expenditure has been indicated in Annexes. IRR and NPW for the model work out to be 65 %, J$5.8 million respectively and the details are given

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Financial Viability and Bankability

in Annex X.

Repayment of loan Based on the cash flow the detailed repayment schedule has been worked out and furnished in the Annexure IV. The repayment period works out to five years including 6 months grace period for repayment of principal.

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ANNEXES

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Annex TABLE 1 Cost of Production Estimates: One Acre of Onions ITEM

UNIT

QUANTITY

RATE/UNIT

ACREAGE

COST

Clearing

Man/day

6.4

2,500.00

16,000.00

Plowing

Ha.

0.4

10,500.00

Harrowing

Ha.

0.4

10,500.00

Furrowing/Refining

Ha.

0.4

9,500.00

Land Preparation

Sowing

Man/day

2,500.00

15,000.00

Trimming/Supplying

Man/day

3.2

2,500.00

8,000.00

Equipment Drip Irrigation system

acre

300,000.00

12,276.00

24,552.00

Materials Onion Seeds (Texas Early Grano) Fertilizer

Urea

Bags

3,060.00

12,240.00

MPK 14128

Bags

3,650.00

21,900.00

Insecticides

Selicron

3,550.00

7,100.00

Decis

2,845.00

5,690.00

Fungicide

Champion

990.00

1,980.00

Topsin

3,795.00

7,590.00

Dual Gold

3,460.00

6,920.00

Gramoxone

920.00

1,840.00

Cycle

2,500.00

1 1

Weedicide

Crop Care Herbicide Application

1 7,500.00

Insecticide Application

Cycle

2,500.00

Weeding

Man/day

2,500.00

12,500.00

Fertilizing

Man/day

2,500.00

15,000.00

Harvesting

Man/day

2,500.00

15,000.00

Trimming

Man/day

2,500.00

15,000.00

Bagging

Man/day

2,500.00

15,000.00

25,000.00

Other costs Contingencies (10%)

56,431.20

Land lease

2,200.00

Supervision

26,175.00

Total

649,118

Production Cost per acre

649,118

Total Yield (kg)

10,000

Projected Marketable Yield (Kg per acre)

8,000

Cost of Production $/Kg

Revenue kg/acre

1,056,000

Gross Profit

406,882

Gross profit Margin

63%

Source: RADA

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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)

4-5 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 7-10kg/hectare

7-10kg

Sales distribution Local via middlemen

70%

Local to higgglers for municipal markets

30%

Prices USD/kg: Local to via middlemen

0.9

Local to higgglers for municipal markets

0.9

TABLE 3 Capital Costs CAPITAL COSTS

UNITS

NUMBER OF UNITS

RATE/UNIT

TOTAL

Shed/storeroom

ft2

100

2,000

200,000

Fencing (barb wire)

acre

209,000

1,045,000

Curing rack

set

200,000

Pickup truck

each

3,000,000

Knapsack sprayer

each

10,000

20,000

Mistblower

set

40,000

Irrigation Equipment

acre

100,000

500,000

Drip pipe fittings

Set

52,272

Venturi pump

Each

2,000.00

2,000

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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5,558,272

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III

Annex TABLE 4 Operating Costs ITEMS

UNIT

QTY

UNIT PRICE (J$)

YR1

Onion

acres

334,689.00

1,673,445

Marketing expenses

66,937.80

66,938

Contingency

Direct Expense Crop establishment

87,019.14

Subtotal

1,827,402

Indirect expenses Land lease

acres/yr

7,500.00

75,000

Owner/manager

mth

50,000.00

600,000

Security

mth

30,000.00

360,000

Fuel

mth

25,000.00

300,000

Accounting and audit fees

mth

10,000.00

120,000

Equipment Maintenance

mth

5,000.00

60,000

Motor vehicle expense/servicing

mth

10,000.00

120,000

Motor vehicle insurance

60,000.00

60,000

Salaries and wages:

Utilities:

Water

mth

10,000.00

120,000

Telephone internet

mth

5,000.00

60,000

Electricity

mth

5,000.50

60,006

Stationary &office supplies/printing

mth

5,000.00

60,000

Bank charges

mth

10,000.00

120,000

Contingencies

288,490.49

Sub-Total

2,403,496

Total Operating Costs

4,230,898

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Annex

TABLE 5 Annual Operating Costs ITEMS

YR1

YR2

YR3

YR4

YR5

1,673,445

1,840,790

2,024,868

2,227,355

2,450,091

Marketing expenses

66,938

73,632

80,995

89,094

98,004

Contingency

87,019

95,721

105,293

115,822

127,405

1,827,402

2,010,142

2,211,156

2,432,272

2,675,499

75,000

82,500

90,750

99,825

109,808

Owner/manager

600,000

660,000

726,000

798,600

878,460

Security

360,000

396,000

435,600

479,160

527,076

Fuel

300,000

330,000

363,000

399,300

439,230

Accounting and audit fees

120,000

132,000

145,200

159,720

175,692

Equipment Maintenance

60,000

66,000

72,600

79,860

87,846

Motor vehicle expense/servicing

120,000

132,000

145,200

159,720

175,692

Motor vehicle insurance

60,000

66,000

72,600

79,860

87,846

Water

120,000

132,000

145,200

159,720

175,692

Telephone internet

60,000

66,000

72,600

79,860

87,846

Electricity

60,006

66,007

72,607

79,868

87,855

Stationary &office supplies/printing

60,000

66,000

72,600

79,860

87,846

Bank charges

120,000

132,000

145,200

159,720

175,692

Contingencies

288,490

317,340

349,073

383,981

422,379

Sub-Total

2,403,496

2,643,846

2,908,231

3,199,054

3,518,959

Total Operating Costs

4,230,898

4,653,988

5,119,387

5,631,326

6,194,458

Direct Expense Crop establishment Onion

Subtotal Indirect expenses Land lease Salaries and wages:

Utilities:

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Annex

TABLE 6 Annual Marketing Yield YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Onion (kgs)

43,600

47,088

49,442

51,915

54,510

Total

43,600

47,088

49,442

51,915

54,510

TABLE 7 Selling Price (/kg) ITEM

YR1

YR2

YR3

YR4

YR5

Onion

120

133

148

164

182

Inflation factor

1.11

YR1

YR2

YR3

YR4

YR5

Onion

5,232,000

6,272,122

7,310,158

8,519,989

9,930,047

Total

5,232,000

6,272,122

7,310,158

8,519,989

9,930,047

TABLE 8 Gross Revenue Schedule (J$)

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Annex

TABLE 9 Financing Plan TOTAL FINANCING

EQUITY

LOAN

GRANT

TOTAL

Capital Costs Shed/storeroom

200,000

Fencing (barb wire)

1,045,000

200,000

Curing rack

200,000

Pickup truck

3,000,000

Knapsack sprayer

20,000

200,000 3,000,000

20,000

3,000,000 20,000

Mist-blower

40,000

Irrigation Equipment

500,000

Drip pipe fittings

52,272

Venturi pump

2,000

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

Sub-Total

5,558,272

2,558,272

Onions

1,673,445

Marketing expenses

66,938

3,000,000

5,558,272

Operating Costs Crop establishment

Contingency

87,019

Subtotal

1,827,402

Land lease

75,000

Owner/manager

600,000

Security

360,000

Salaries and wages

Fuel

300,000

Accounting and audit fees

120,000

Equipment Maintenance

60,000

Motor vehicle expense/servicing

120,000

Motor vehicle insurance

60,000

120,000

Utilities Water Telephone internet

60,000

Electricity

60,006

Stationary &office supplies/printing

60,000

Bank charges

120,000

Contingencies

288,490

Sub-Total

2,403,496

Total

9,789,170

6,789,170

Equity

69%

Leverage

31%

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2,403,496 3,000,000

9,789,170

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VII

Annex TABLE 10 Loan Repayment Schedule MONTHS

LOAN

PRINCIPAL

INTEREST

TOTAL DEBT

LOAN

Months 1-3 = YR0

Disbursement

Balance at SOY

Payment at EOY

Payment at EOY (8%)

Accrued but not paid (8%)

Serviceable Debt at EOY

Balance at EOY

3,000,000

600,000

240,000

840,000

2,400,000

600,000

192,000

792,000

1,800,000

600,000

144,000

744,000

1,200,000

600,000

96,000

696,000

600,000

48,000

648,000

3,000,000

720,000

TOTAL

3,720,000

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

= 10% per Annum

TABLE 11 Depreciation Schedule ASSET

ORIGINAL COST RESIDUAL VALUE

DEPRECIABLE COST

ESTIMATED LIFE (YRS)

DEPRECIATION PER YEAR

Shed/storeroom

200,000

20,000

180,000

18,000

Fencing (barb wire)

1,045,000

30,000

1,015,000

101,500

Curing rack

200,000

50,000

150,000

30,000

Pickup truck

3,000,000

300,000

2,700,000

270,000

Knapsack sprayer

20,000

2,000

18,000

1,800

Mist-blower

40,000

5,000

35,000

7,000

Irrigation Equipment

500,000

50,000

450,000

90,000

Drip pipe fittings

52,272

2,000

50,272

10,054

Venturi pump

2,000

500

1,500

500

Water storage Tank (1000gal)

180,000

10,000

170,000

17,000

Water pump

45,000

5,000

40,000

4,000

Instruments (pH/EC&TDC Metres)

60,000

5,000

55,000

5,500

Nutrient storage tank

14,000

3,000

11,000

1,100

Miscellaneous equipment and tools

200,000

20,000

180,000

36,000

Total

5,558,272

502,500

5,055,772

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VIII

Annex

TABLE 12

Summary of Project Costs & Benefits

ITEM

YR 1

YR 2

YR 3

YR 4

YR 5

Gross Revenue

5,232,000

6,272,122

7,310,158

8,519,989

9,930,047

Operating Cost

4,230,898

4,653,988

5,119,387

5,631,326

6,194,458

Operating Profit

1,001,102

1,618,133

2,190,771

2,888,663

3,735,589

Depreciation

574,454

Shed/storeroom

18,000

Fencing (barb wire)

101,500

Curing rack

30,000

Pickup truck

270,000

Knapsack sprayer

1,800

Mist-blower

7,000

Irrigation Equipment

90,000

Drip pipe fittings

10,054

Venturi pump

500

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

502,500.00

Interest Payment

240,000

192,000

144,000

96,000

48,000

Profit before Tax

(315,853)

349,179

969,816

1,715,709

2,610,634

Taxable Profit

(315,853)

349,179

969,816

1,715,709

2,610,634

Tax (33.3%)

(105,179)

116,277

322,949

571,331

869,341

Net Profit after Tax

(210,674)

232,902

646,867

1,144,378

1,741,293

(210,674)

22,229

669,096

1,813,474

3,554,767

(Profit before tax less tax) Cumulative Net Profit

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OPER. COST

11,058,440

TOTAL COST

6,272,122

5,232,000

SALES REVENUE

905,000.00

985,000.00

502,500.00

SALVAGE & RESIDUAL VALUE

1,689,398

1,535,816

1,396,196

1,269,270

WORKING CAPITAL (REC)

10,814,387

9,750,974

8,653,318

7,003,770

TOTAL BENEFIT

4,338,589

3,493,663

3,095,771

2,603,133

(4,054,670)

NET BENEFIT

3,000,000

LOAN INFLOW

648,000

696,000

744,000

792,000

840,000

OUTFLOW

3,690,589

2,797,663

2,351,771

1,811,133

(1,894,670)

EQUITY

WORKING CAPITAL

4,230,898

6,050,185

7,310,158

605,000.00

12,391,384

CAPITAL

1,269,270

4,653,988

6,655,203

8,519,989

1,858,338

YEAR

1,396,196

5,119,387

7,320,724

603,000.00

10% of Op. Costs

1,535,816

5,631,326

9,930,047

5,558,272

1,689,398

8,052,796

6,194,458

$5,743,703

1,858,338

65%

$5,871,325

NPV =

Assuming a real discount rate of 10%

Conclusion: Project is viable if NPV positive

IRR =

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IX Annex TABLE 13 Summary of Project Costs & Benefits

Annex

TABLE 14 Annual Cash Flow Projection ($) YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

INFLOWS Loan

3,000,000

Equity

6,789,170

Grant

Sales

5,232,000

6,272,122

7,310,158

8,519,989

9,930,047

Total Inflows

15,021,170

6,272,122

7,310,158

8,519,989

9,930,047

OUTFLOWS Capital Cost

5,558,272

Operating Cost

4,230,898

4,653,988

5,119,387

5,631,326

6,194,458

Working Capital

1,269,270

1,396,196

1,535,816

1,689,398

1,858,338

Outflows before Debt & Tax

11,058,440

6,050,185

6,655,203

7,320,724

8,052,796

Cash Flow before Debt & Tax

3,962,730

221,937

654,954

1,199,265

1,877,251

Debt service

840,000

792,000

744,000

696,000

648,000

Tax

1,319,589

73,905

218,100

399,355

625,125

Net Cash Flow

1,803,141

(643,968)

(307,145)

103,910

604,126

Cumulative Net Cash Flow

1,803,141

1,159,173

852,028

955,938

1,560,064

Net Present Value

J$1,322,338

Capital Replacement

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Annex

REFERENCES 1. Linkages Hubb (2015), Tourism Demand Study, A product of the Ministry of Tourism nad Entertainment 2. Ministry of Tourism (2017), Development of the Berry Industry, Derron Grant (Consultant) 3. IOWA Commercial Fruit Production (2008), Production Guide for Commercial Straberries, IOWA State University 4. Cost of Production Estimates (2017), Ministry of Industry Commerce Agriculture and Fisheries, Databank Division 5. Crop Production Estimates (2016), Ministry of Industry Commerce Agriculture and Fisheries, Databank Division 6. International Trade Centre (ITC), https://www.trademap.org/ Index.aspx

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XII

Annex

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