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RUAF “From Seed to Table” Programme, 2009- 2010

BUSSINESS PLAN FOR PRODUCTION AND MARKETING OF GREEN AMARANTHUS, 2009-2010

Odogbo Barracks Women Vegetable

Producers Group, Ibadan

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Acknowledgement

In preparing this Business Plan, several people provided diverse inputs and we wish to acknowledge their contributions. The first of mention is the DGIS (Netherlands) for providing funds through RUAF Foundation for the implementation of the project in Ibadan. Second of mention is the RUAF Regional Coordination Office in Ghana, headed by Dr Mrs Olufunke Cofie for training the Local FStT team and providing the technical guidance for the preparation of the Business Plan. Mention is also being made of Mr. Theophilus Otchere Larbi, the Regional Coach for Ibadan, who spent precious time with the Local Team in Ibadan, providing technical guidance, insightful inputs and detailing the content and finalization of the Business Plan into its present state. Lastly, the Local FStT Team members, comprising Illori Oluwabusayomi, Dr Stephen Babajide, Dr Lawrence Olajide Taiwo, Prince Ogundipe and Emmanuel Akhimeini, need commendation for their time and dedication in preparing this Business Plan.

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EXECUTIVE SUMMARY

The Odogbo Vegetable Growers Business is aimed at introducing and producing a new large leafy amaranthus variety, NHAc3(locally called “Efo green”) that is safe and of high quality (with limited use of pesticides), graded and well packaged for local markets in the Ibadan metropolis. The business will supply green leafy amaranthus throughout the year except between April and July during the rainy season when most farmers hardly produce the crop. They rather shift to the production of perennial crops such as maize and cassava. The initial investment by the farmers for this business is estimated to be N 354,500. The total variable costs in terms of consumables and hired labour is N 1,735, 000, and fixed (working) capital is N2 ,953, 500. The variable cost is projected to be N142.99/ per 6.7 kg amaranthus. Amaranthus is sold in bundles at local markets. Bundles weigh averagely 6.7 kg. The profitability assumption is based on the total annual production of 8358 bundles (55,998.6Kg) of green leafy amaranth. This is the volume of the product that will be supplied to the market after deducting 20% for wastes and losses. The break even quantity is 3313 bundles [22197.1Kg]. The business is expected to provide an annual profit of N 3,479,088.50 in the first year.. Prices of amaranthus vary between N100-N400/bundle, depending on the season. An average and stable price of N250/bundle of green leafy amaranth is the price at which the 100 farmers will supply to the market/clientele. A worst case scenario is when farmers produce less than the break-even point (i.e. 3313 bundles [22197.1Kg] per annum) which will yield a loss of 8,6975.00. A best case scenario is when the target production level of 8358 bundles (55998.6Kg) is produced. The worst and best case scenarios are developed taking into account loans/credit, a sales price of 250 per 6.7kg and other personal costs for the farmer over a period of a year. The business is expected to have 100 households engaged in the production cycle. Odogbo Vegetable Growers will achieve good results once farmers produce 8358 bundles (55,998.6 kg) over a period of a year and the green leafy vegetables are sold at a basic minimum of N250 per bundle of 6.7kg. Secondly, sustainable production of good quality leafy that are supplied timely to clients will ensure that the farmers have a group of clients for its products and farmers retain a profit over their investment. BUSINESS IDEA The business idea for the Odogbo Vegetable Growers is the ‘Production and marketing of leafy amaranth vegetable (green) for local market consumption’. Most of the current supply is done by the Odogbo farmers and other farmers outside Ibadan city popularly called “Oloko”. Although some production of the vegetable is been done at Odogbo Barracks in Ibadan, the variety been grown popularly called “Efo Barracks” is widely accepted. Farmers grow the green amaranth vegetable, harvest and take to the market for prospective buyers without sorting and grading. The business is set out to produce safe green amaranth (Efo green) of improved variety called „large green‟ by the Odogbo barracks vegetable producers that is acceptable by the

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consumers. The underlying strategy is to reduce cost of production and increase production through the innovations. The Odogbo barracks vegetable producers have the cosmopolitan advantage as they are close to the market especially the Bodija and Ojoo market where various individual buyers come to buy vegetables for their needs. Being close to the city, they also have the opportunity of taking the current market advantage The closeness of the producers to the city will reduce the cost of transportation and also increase the preservation period of the product. It also predisposes the producers to access to supply of inputs and tools and technical backstopping from relevant agencies within the Ibadan metropolis.

The innovation is therefore outlined as;

1. Introduction of an improved amaranthus variety, NHAc3

2. Production of a safer product with little or no pesticide use, produced with organic manure

3. Improved post-production handling through washing, grading and packaging, and

4. Marketing at specific and strategic market locations to reach out to more consumers

1. Improved variety: An improved amaranthus variety NHAc3, with large leaves, preferred by consumers will be introduced to the farmers. The certified seed will be produced and supplied to the farmers by National Horticultural Research Institute (NIHORT). The production system of this variety is not significantly different from what farmers are producing and no major challenges are expected.

2. Production methods: Farmers currently used fertilizer and in rare cases poultry

manure, which are not fully matured. Farmers will be trained on composting and curing of poultry manure and its application to shift from total dependence on fertilizer. This is to improve the soil fertility status of the farm which have been degraded over time due to leaching and continuous cropping. It is also expected to ensure more sustainable production of amaranthus.

3. Packaging: currently the producers harvest their products and tied them in bundles and transport them in sacks or wrap then in a wrapper to the market. Nets and plastic baskets will be used to transport products from the farm gate to the market to preserve the quality of the vegetables, and packaged into plastic bags for sale to consumers.

4. Marketing: The farmers will be involved in direct marketing and collect market information in order to produce products that conform to market requirements as opposed to the current scenario where one grows a crop without actually knowing who will require the product. Two market sheds will be constructed at Ojoo and Bodija markets to ensure impeded access to consumers. These sheds will be inscripted as way of advertising the farmer‟s produce.

BUSINESS DESCRIPTION The Business will produce leafy green amaranth (popularly called Efo green) that is of high quality with limited use of agro-chemical, graded and well packaged for local markets in Ibadan

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metropolis. The vegetable will be supplied in bulk tied in dozens of an average weight of 6.7kg. Local restaurants, markets and homesteads can easily buy in these units. The Business will be based at Odogbo Barracks, and will be owned jointly by 5 farmer groups,. The land area required (acquired) for the business is 2.4 hectares. Each producer will have access to an average of 20 beds measuring 3m x 4m per bed. An average of (0.024ha) will be available to each producer. It is expected that an estimated 270 tonnes of green leafy amaranth will be produced in the seven productive cycles of the year. This represents 80 percent of total production while the rest 20 percent is assumed to be consumed by the producers or given out as gifts. All production and pre-processing functions will be carried out by the farmers. Each farmer will harvest quality green leafy amaranth which will be delivered to a central point for sorting, weighing, grading and packaging by the production and post harvest committee. The product is then sent to the market accompanied by the farmer or the groups‟ designate. The Odogbo Vegetable producers will contribute fund to procure inputs in bulk and allocated to farmers according to their requirements and contributions. Additionally, the cost of centralized grading, packing, transport and sale will also be passed onto the farmer. The money collected from the farmers will be ploughed back into the input supply chain as well as the marketing of vegetable (green amaranth). OPERATIONAL PLAN The seasonal calendar for the production and market of Green Leafy Amaranth for the Odogbo Vegetable Growers appears in Table 1.

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SEASONAL CALENDER FOR SELECTED OPTION

MONTH 1 2 3 4 5 6 7 8 9 10 11 12

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Activities

seed acquisition + + + + + + + + + + + + + + + +

land clearing + + + + + +

tilling & making of beds

+ + + + + +

Turning of soil + + + + + + + + + + + +

soil testing

Sand mixture + + + + + + + + + + + + + +

planting + + + + + + + + + + + + +

watering + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +

weeding + + + + + + + + + + + + + + + + + + + + + + +

application of manure + + + + + + + + + + + + + +

pest control (application of agrochemical)

+ + + + + + + + +

harvesting + + + + + + + + + + + + + + + + + + + + +

sorting & grading & weighing

tying into bundles + + + + + + + + + + + + + + + + + + + + +

selling + + + + + + + + + + + + + + + + + + + + +

heavy loss + + + + + +

special problems encountered

problem 1; diseases (nematodes,rooten plant,enzema(multi-colour),leaf blight,burnt leaf etc)

+ + + + + + + + + + + + + + + + + + + + +

problems 2; pests (grasshoppers,locust)

+ + + + + + + + + +

periods of low & high market prices

- - - + + + - - - + + + - - - + + + + + +

periods with labour shortage

fund

+ + + +

N.B. Planting of seeds are synchronized in such a way that it is sequential and not at once. However, each production cycle is scattered in a way that there is always product to harvest every week.

Production

1. Seed Variety

The chosen variety green leafy amaranth that will be grown is the large leaf variety, NHAc3. Its unique advantage is that it has broader leaf and the leaf does not collapse easily like other varieties. This makes it more attractive to buyers. Farmers do not grow this yet, so it will be introduced through UPFS…

2. Source of seed, chemical and fertilizers Seeds The seeds for the new variety will be obtained from NIHORT, Ibadan. The institute is one of the partnering institutions with the RUAF – FStT project. NIHORT is giving a subsidy of N150 on every kilogram of seed purchased by participating farmers. The expected seed to be produced is 250kg. The market price for a kilogramme of seed is N750 /kg. The cost for seed production per season amounted to N187, 500. The RUAF programme will make available the sum of N150, 000 as revolving fund set purposely for that. .The sum of N37, 500 will be a subsidy from NIHORT. The subsidy will amount

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to N262, 500 per annum. This will be managed by the farmer group and NIHORT contracted to produce for subsequent seasons. .

3. Soil fertility and crop pests’ management Integrated pest management practices would be adopted through the UPFS. This is to limit the use of pesticides and to make the produce safer. In critical cases of pesticide use, recommended pesticides will be applied. Composted poultry manure would be procured from poultry farms in and around Akinyele to improve soil fertility. However, urea fertilizer will be used to supplement the manure.

4. Equipment requirement The following tools (Table 2) will be required by each of the 100 urban producers to successfully grow green leafy amaranthus. These tools are owned by farmers already.

Table 2. Amaranth production equipment for individual producers will include:

Item Quantity

Watering can 2

Garden folk 1

Rake 1

Hoe 2

cutlass 1

Shovel 1

Sprayer 1

Rain boots 1 pair

Nose & mouth mask 1

Gloves 1

5. Irrigation Four wells will be sunk at strategic locations on the farmers‟ field to provide all year round water supply. These will be fitted with water pumps and water storage tanks. Generators (petrol) will be fixed to provide power for the pumps. The crops can then be irrigated by gravity from the storage tanks. The wells will be managed by each group through a task force purposely established. The task force will be responsible for the running and maintenance of the water pumps and wells. Special levies will be collected from beneficiaries for such purpose. 6. Production cycle

The field activities are planned over two main production cycles spanning November 2009 to March 2010 with all the 100 farmers. Although farmers continue to produce amaranthus over the year, very few farmers go into production after March (the rainy season). A third production cycle will be undertaken between October – December 2010 to consolidate the learning/innovations and to assess impacts of the product.

Each farmer will have access to an average plot size of 0.024ha, comprising 20 beds measuring 3m x 4m. These are plots allocated to amaranthus production only. Farmers have other plots for the production of other crops.

The short cultivation period of 42 days also makes continuous production possible and it is estimated that 8 months of 7 cycles continuous production will make the enterprise

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viable. Planting of seeds will be synchronized in such a way that it is sequential and not at once. However, each production cycle is scattered in a way that there is always product to harvest every week.

First harvesting is done 21 days after sowing, second harvesting follows a week later while the last harvesting for the first cycle follows 2 weeks after the second harvest. The land is then prepared for the second cycle.

After harvest, the amaranthus will be washed, sorted, tied, graded and packaged before sale to consumers.. A centralized grading and packaging system will be in place in each of the production sites and the leaders of each group will ensure quality control of standards within the production and marketing process.

Equipments that will be required to this purpose are listed below:

Table 3: Processing equipment for individual producers and grading committee

Item Quantity

Baskets 2

Buckets 1

Net 2

Weighing Scales 10 (for grading committee)

7. Coordination

In order to have consistence in the quality and quantity of amaranthus produced, a participatory team comprising representative of the farmers and the local team will be established to monitor the field activities throughout the production cycle. Similarly, another team will be formed to coordinate the exchange of information, learning and experiences among the farmers.

The leaders of the sub-groups will form the coordinating link among themselves and also between the groups and the other external supporting institutions. However, the overall coordination of the business will be facilitated by the NGO facilitator, in collaboration with the farmer representatives on the local team.

8. Processing

Vegetables will not be processed into another product. But it will be well graded and packaged to attract consumers.

9. Marketing

The marketing will be organized along the existing strategies adopted by the farmers, where leaders of the various sub-groups coordinate the harvesting and transportation of the produce to the market on specific days (on rotational basis). However, to facilitate marketing the product, the business will explore avenues of promoting the product through:

Building a good customer relationship with potential buyers and enticing them to advertise the product.

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Printing and mounting a promotional banner at the farmers shed at the Ojoo and Bodija markets.

Production and distribution of hand bills on the product.

Participation in agricultural shows, exhibitions and expos.

i. Branding of the product

Ribbon or nylon for tying with inscription stating the producers contact address, where the produce can be assessed in the open market will be used to package the produce for customers. This will promote and advertise the product to other customers. The FStT project will finance the production while the producers will buy and use the money realized for subsequent production.

Acquire stands at agric show and other agricultural festivals (World Food Day, Oyo State Farmers Day) This will also bring into limelight the activities of the Odogbo barracks vegetable producers.

Promotion of the product on Premier FM Ibadan on a programme called “Ise-buse” anchored by the National Horticultural Research Institute (NIHORT), Ibadan.

Market stalls with inscription on banner will be made available where produce can be assessed in the open market.

Product will be offered for sale in a bundle of 1 dozen with an average weight of 6.7kg/ bundle and in uniform weight. The bundle will be tied with customized tape/ ribbon. Product can be supplied to the buyers on order or can be accessed at the market stall that will be provided in two leading markets- Bodija and Ojoo, which are located within Ibadan metropolis.

ii. Transport

The transportation of produce to the markets will be by public transport. However, special arrangements will be made by the framer leaders with the local Transport Union for regular, timely and reliable transport services to the markets. The cost of transport will be borne by the groups through their group savings or special levies that may be imposed for such purposes.

STAFFING STRUCTURE 1. Staff Structure

There will be limited labour required for the business for now but there will be need for hired labour for land preparation especially during the peak season. Self and family labour will be used for most of the labour requirements and this will be costed as appropriate. The total labour requirement is put at 100 man days. The total salary of labour is put at N80, 000 (Eighty Thousand Naira only).

2. Committees

The following committees will be put in place for the smooth running of the business enterprise. The committee members will not be paid but will be on voluntary basis.

Loan Committee to be formed in each group to monitor the disbursement of loans and to monitor the repayment of such loans. This committee will also have oversight responsibility for the Group savings and running of the Revolving fund. Each cluster will select three members preferably the financial secretary, the

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treasurer and the leader of the group. These three will select a leader for the committee

Production, Quality Control and Marketing Committee: will be responsible for ensuring production, quality and regular supply of produce, sorting, weighing, grading and packaging of vegetable. This committee will coordinate the arrangement of transport services from the farm gate to the marketing centers. Five members will be selected across the participating clusters and will have a leader for the committee.

Maintenance Committee: will be responsible for the running and use of all equipments and structures and see to their repair and servicing for better performance and longer life span. Five members will be selected across the participating clusters and these five will select a leader for the committee.

Inputs/Purchasing Committee: they will coordinate and source for input and purchase and distribute such inputs for to the participating farmers, as well the purchase of all equipments and logistics of the group. Five members will be selected across the participating clusters and these five will select a leader for the committee.

3. Record Keeping: Each of the committees will keep separate records of their functions and activities. Relevant data will be taken and recorded for the purpose of tracking the performance of the business enterprise. Records from pre- production, production and post-production will be the responsibility of these committees.

PRODUCT STRATEGY

The Odogbo Vegetable producers will offer high quality vegetables devoid of pest infestation with minimum usage of agrochemicals and well packaged green leafy amaranth required for consumption in Ibadan metropolis. People in Ibadan city consume green leafy amaranth in bulk or small quantities for their household and business needs when supplied on schedule which the Odogbo vegetable producers will be able to supply throughout the year.

Clients for the product

Potential clients identified are wholesalers in local markets, the local restaurants, institutional canteens and individuals who patronize the local markets. However, the business is targeting the local markets where demand is assured and is regular.

Competition

The main competitors for the Business are the rural farm producers popularly called “Oloko” (farmers from villages). The main competitors could cut down prices or increase their unit/price in order to increase their sales and this could result in “price wars” and destabilize market prices. This is particularly so during the rainy season. However their products are known to be characterized by high usage of chemical fertilizers and pesticides.

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The uniqueness and competitiveness of the business product lies in the preference for the variety (large, broad and leafy), grown with little or no pesticide, and devoid of pest infestation, well sorted and graded product devoid of impurities, with specialized branding and packaging for its clientele. Promoting a good relationship with clientele will also serve as a good strategy to win the heart of consumers. Other advantages over competitors include, improved quality supply, certified product packaging (use of inscribed ribbon or nylon) & standardized weights, regulated market supply, competitors (mostly villagers) are only in the market in the raining season while the urban producers are well organized also for dry season production. SWOT of the Business

Strength The chosen vegetable is a high demand

variety, used as ingredient in most diets. Production is planned during the high priced

period. Available research and extension information

for the production of the crop. The close proximity to market, limiting transport

time to markets (cosmopolitan advantage) Availability & security of land for practicing

farmers.

Weaknesses The groups are not yet formally

registered and so cannot access some services (e.g. credit).

Weak linkages with other farmers groups and organizations like All Farmers Association of Nigeria (AFAN).

Inadequate water supply during dry season

Opportunities Availability of advisory & support services from

development organizations & government agencies

Demand for other products other than amaranthus

Availability of land for business expansion The social mobilization capacities of the

farmers (support one another in time of problem)

Transfer of innovations for production of other crops

Threats Price competition-cheaper products

from other farmers, especially during raining season

Economic recession in the country that might results in high prices of inputs.

Erratic rainfall and effect of climate change on production conditions

Incidence of pests. & diseases. Strict military regulations at the

barracks

Competition from other farmers

Demand and Production capacity of the Farmers

Each producer will have access to an average of 20 beds measuring 3m x 4m per bed. An average of (0.024ha) will be available to each producer. It is expected that an estimated 270 tonnes of green leafy amaranthus will be produced during the business period. Market demand far exceeds the 270 tonnes and no marketing challenges (demand-wise) are expected. The 270 tonnes will supply the project clients.

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Price

There are three price regimes for green amaranthus vegetable. This depends on the prevailing season i.e. dry or wet season. Better price regime of N400 is experienced during the dry season (October –March, each year) while the lowest price of N100 is experienced at the peak of the rainy season (April-July, each year). However a stable price regime of N250 is obtained during August –September, each year.

Pricing Price of produce will be according to the prevailing market price while discount can be given on bulk purchases. The price of the produce will go along with the price of other vegetable sellers without special reference to price increase as a result of the innovation committed during the production periods. However, the underlying strategy is to increase farmers‟ production levels to compensate for the “constant” price. But since buyers are readily available during the cycle of scarcity which is the dry season, producers will take better advantage of price increase of vegetables during this period. PARTNER STRATEGY The following table shows individuals and agencies we will partner with in the business enterprise for it to be successful: Table 5: Partnering Organizations

Preferred partner Area of partnership Conditions and terms

Remark

NIHORT Production of certified seeds and training

Member of Local team, provision of expertise. General institutional collaboration arrangement

Seeds from NIHORT is subsidized for

participating farmers, member of Local Team

Private Local Transport Union

Transportation of farm produce, inputs and other logistics

cash and carry arrangement (Full payment for services rendered)

Akinyele LGA Provision of funds, Access to land and space for farmers shed at Ojoo, Provision of technical expertise.

Grant / Funds for well construction, security of space at market,

On request

Member of Local Team

Garrison Command A Allocation of land for production

Free-lease of land

Ministry of Commerce & Cooperative

Registration and Training of producers‟ group

Payment of registration fees and contract for training

Issue certificate of registration

JDPC Technical & Administrative support, training and capacity building,

MoU and ToR with RUAF

Coordinating Institution, member of Local Team

NAPEP Possible credit facility for producers‟ group,

Policy influencing

Conditions as set under programme

National Poverty reduction programme

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Ibadan North Local Government

Allocation of land for market stalls at Bodija

Free-lease of space for shed

To develop and secure a good relationship with the partners and get their commitment, the following strategies will be employed: Personal contact, office visits, development and circulation of project briefs Awareness creation and capacity building, through workshops and seminars Advocacy and lobbying visits to the Executive Chairmen of the Local Councils

(Akinyele & Ibadan North) and other partner institutions. Participation of partners in the MSF.

FINANCIAL PLAN The model of the financial plan is based on the core activities being carried out by members at their respective farms. A larger portion of variable costs will be handled by the members while the fixed cost will be handled by the members and some of the participating organizations such as the Local Government Councils and the RUAF Foundation. The Business is targeting 100 farmers. It is estimated that each farmer currently invests N5,000 for their production activities. By mere extrapolation, the Business will have a total of N500,000 as startup capital, which will be used to purchase the individual production inputs (e.g. seeds, tools and equipments, pesticides, etc)

Table 6: Income statement:

Income statement Assumption

Total revenue from produce sold 80% of produce sold

Annual Increase in Expenses 5%

Maintenance expenses 2% of sales

Increase in rentals 10% every 3 years

Market tolls, levies, fees, etc 10% Table 7: Balance sheet

Balance sheet Assumption

Accounts receivable (credit sales not yet collected)

3 months

Inventories of seed, raw material 10% of the total cost of goods sold

Account payable 1 month of cost of sales

Expenses payable 20% of general expenses

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Investment in Capital Items

Table 8: Fixed Costs

Description Quantity Unit Rate (N) Amount (N) Land 2.4ha 800/0.024ha 80, 000

Rent on land for market stall 2 10, 000 20, 000

Market stall 2 175, 000 350, 000

Digging of wells+ Rings+ installation of rings 4 150, 000 600, 000

Construction of Scaffolds 5 146, 000 730, 000

Laying of pipes & faucets + workmanship 5 50, 000 250, 000

water pumps (1hp) 5 12, 000 60, 000

Generator + cable connections 5 55, 000 275, 000

Storage tanks (3500ltr capacity) 5 40, 000 200, 000

Watering can 100 800 80, 000

hoe 100 350 35, 000

cutlass 100 600 60, 000

Banners/ signpost 2 8, 000 16, 000

Plastic baskets (big size) 100 700 70, 000

shovel 50 1, 200 60, 000

Knapsack sprayer 5 6, 500 32, 500

Nose & mouth mask 100 350 35, 000

Total fixed cost 2,953,500

Table 9: Variable costs

Description Quantity Unit Rate (N) Amount (N)

Seeds 250kg*7 = 1750kg

600 1,050, 000

Manure (Poultry) 10 truck loads*2=

20 trucks loads

3,000 60, 000

Urea Fertilizer 5bags*3=15 bags

3,700 55,500

Labour (mandays) 100 800 .00 80, 000

Pesticides 15ltrs*7= 105 ltrs 2,000 .00 210, 000

Fuelling of generators 1000 ltrs 65 65, 000

Transportation 20,000*7.00 140, 000

Maintenance & repairs (generator + taps)

15,000 75, 000

Total Variable Cost 1,735, 000

Total working Capital

Total cost = total variable cost + total fixed cost

= N 2,953,500 + N1, 735, 000 =N 4, 688,500

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Table 10: Variable costs per annum

Description Quantity Unit Rate (N) Amount (N)

Seeds 250kg*7 = 1750kg

600 1,050, 000

Manure (Poultry) 10 truck loads*2=

20 trucks loads

3,000 60, 000

Urea Fertilizer 5bags*3=15 bags

3,700 55,500

Labour (mandays) 100 800 .00 80, 000

Pesticides 15ltrs*7= 105 ltrs 2,000 .00 210, 000

Fuelling of generators 1000 ltrs 65 65, 000

Transportation 20,000*7.00 140, 000

Maintenance & repairs (generator + taps)

15,000 75, 000

Total Variable Cost 1,735, 000

Table 11: Total Fixed cost per annum

Description Total cost

(N)

Lifespan Annual

Depreciation

value (N)

Rent on land 80,000 - 80,000

Rent on land for market 20,000 - 20,000

Depreciation on:

Generator

275,000 5 55,000

Market buildings 350,000 10 35,000

Garden tools 340,000 4 85,000

Well and rings 600,000 10 60,000

Storage tanks 200,000 10 20,000

Knapsack sprayer 32, 500 5 6,500

Banner/ signpost 16,000 2 8,000

Scaffolds 730,000 15 49,000

Water pump 60,000 3 20,000

Pipes and faucets 250,000 4 62,500

Total 501,000

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Total cost of production per annum = Annual variable cost + Annual fixed cost = N 1735000 + N 501,000 = N 2,236,000 A working capital of N 22,360 (Twenty-two thousand, three hundred and sixty Naira) is estimated for each farmer per annum. EXPECTED INCOME

Three price regimes exists depending on the season, these regimes are used in the table below to estimate the expected income. The three price regimes are: Lowest: N100, Stable: N250, Highest: N400. A bundle of green leafy amaranth weighs averagely 6.7 kg A best situation of N400/ bundle and a worst situation of N100/ bundle will also be used to estimate the break-even point Table 12: Expected production per Year Season Duration Unit Price /

Bundle % sold (80%) Qunatity

sold Qty in Kg (6.7kg/Bundle)

Revenue (N)

1 Feb-March 400 40 bundles*100 4000 26800 kg N1,600,000

2 Oct-Nov 300 40 bundles*100 4000 26800kg N1,200,000

3 Aug-Sept 250 35 bundles*100 3500 23450 kg N875,000

4 May-June 250 35 bundles*100 3500 23450 kg N875,000

5 April-May 250 30 bundles*100 3000 20100 kg N750,000

6 Dec-Jan 350 25 bundles*100 2500 16750 kg N 875,000

7 June-July 100 20 bundles*100 2000 13400 kg N 200,000

Total 150, 750 kg N6, 375,000.

20% of produce is assumed to be consumed by the producers or given out as gifts. From the table above, the average production per participating farmer is estimated to be 1,507.50kg per annum (i.e.1.5075 tonnes) of leafy green amaranth.

At the best price regime of N400/ bundle, the total estimated income will be:

N 400* (150750kg ÷ 6.7) =N 9,000,000

At the worst price scenario of N 100/bundle, the total estimated income will be N 100*100* (2713.5 ÷ 6.7) = N 2, 250,000

The Gross profit will then be; Expected Income – Cost of Goods Sold

= N 6,375,000 – N 2, 236,000 = N 4,139,000

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It is estimated that a gross profit of N 41,390 would be realized by each producer every year and at a factor of 100 members for the producer group, the gross revenue stands N 4,139,000 Sales growth rate expected is as follows: 5% in the 2nd year 3% in the 3rd year 2% in the 4th year 2% in the 5th year

Business Income Statement

It is assumed that each farmer will produce and sell a minimum of 2713.5kgs of green leafy amaranth per annum and all of it will be sold at a price not less than N100 per kg. It preferred that green leafy amaranth be sold at N100 – N400 per kg. Straight line depreciation has been used to calculate the depreciation captured in financial statements. The following financial statements (income statement, balance sheet, cash flow and evaluation tables) explain how the Groups‟ finances will be handled and the design for farmers to adopt.

Table 13: Profit and Loss Projections

Year by year Profit and Loss assumptions

Year 1 Year 2 Year 3 Year 4 Year 5

Annual cumulative

price (income)

increase

- 3% 3% 4% 5%

Annual cumulative

inflation (expense)

increase

- 5% 5% 5% 5%

Interest rate on

ending cash

balance

10% 10% 10% 10% 10%

Revenues Year 1 Year 2 Year 3 Year 4 Year 5

Total Revenue 6, 375,

000

6,566,250 6,763,237.50 7,033,766.80 7,385,455.14

Total cost of

goods sold

2,236, 000 2,247,180 2,359,539.00 2,477,515.95 2,601,391.75

Gross margin 4,139,000 4,319,070 4,403,698.50 4,556,250.85 4,784,063.39

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Other Source of

Revenue

- - - - -

Interest Income - - - - -

Total Revenue 4,139,000 4,319,070 4,403,698.50 4,556,250.85 4,784,063.39

Operating Expenses

Land rent 80,000 80,000 88,000 88,000 88,000

Rent on market

stall

20,000 20,000 22,000 22,000 22,000

Maintenance of

equipment

- 86,381.40 88,073.97 911,25.02 95,681.27

Depreciation

Expenses

- 254,500 254,500 254,500 254,500

Utilities 124,170 129,572.10 132,110.96 136,887.53 143,521.90

Total operating

Expenses

224,170 570,453.50 584,684.93 592,512.55 603703.17

Operating Income 3914830.00 3,748,616.50 3,819,013.57 3,963,738.30 4,180,360.22

Earnings Before Tax

Operating margin 10% 5% 5% 8% 12%

Taxes on income

5%

195,741.50 187,430.83 190,950.68 198,186.92 209,018.01

Net Income (Loss) 3479088.50 3561185.67 3628062.89 3765551.38 3971342.21

Net Profit Margin 10% 5% 5% 8% 12%

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BREAK-EVEN ANALYSIS Fixed Costs Unit Variable costs

Description Amount (N)

Seeds 125. 62

Manure (Poultry) 7.18

Urea Fertilizer 6.64

Labour (mandays) 9.57

Pesticides 25.12

Fuelling of generators 7.78

Transportation 16.75

Maintenance & repairs (generator + taps)

8.97

Total Variable Cost 142.99

Description Annual

Depreciation value

(N)

Rent on land 80,000

Rent on land for

market

20,000

Depreciation on:

Generator

44,000

Market buildings 35,000

Garden tools 85,000

Well and rings 60,000

Storage tanks 16,000

Knapsack sprayer 6,500

Banner/ signpost 8,000

Total 354,500

20

BREAK-EVEN ANALYSIS Total Fixed Cost: N 354, 500 Total variable Unit Cost: N 142.99 Expected Unit Sale: 8358 bundles (55,998kg) Price Per Bundle: N 250/6.7kg Break Even Units: 3313 bundles (22,197kg)

Units

(Bundles)

Fixed cost Variable cost Total cost Revenue Gross margin

2500 354, 500 357,475 711,975.00 625000 -86,975.00

3000 354, 500 428,970 783,470.00 750000 -33,470.00

3200 354, 500 457,568 812,068.00 800000 -12,068.00

3300 354, 500 471,867 825,367.00 825000 -367.00

3310 354, 500 4732,96.9 827,796.90 827500 -296.90

3312 354, 500 473,582.88 828,082.88 828000 -82.88

3313 354, 500 473,725.87 828,225.00 828250 25.00

3315 354, 500 474,011.85 828,511.85 828750 238.15

3340 354, 500 477,586 832,086.60 835000 2,913.40

3350 354, 500 479,016.5 833,516.50 837500 3,983.50

3500 354, 500 500,465 854,965.00 875000 20,035.00

4000 354, 500 571,960 926,460.00 1000000 73,540.00

5000 354, 500 714,950 1,069,450.00 1250000 180,550.00

6000 354, 500 857,940 1,212,440.00 1500000 287,560.00

7000 354, 500 1,000,930 1,355,430.00 1750000 394,570.00

8000 354, 500 1,143,920 1,498,420.00 2000000 501,580.00

8358 354, 500 1,195,110.42 1,549,610.42 2089500 539,889.58

The average fixed costs amount to N 354,500 while the variable cost is estimated at N142.99 per bundle of green leafy amaranth produced. The break-even quantity will be expected at a sales volume 3313 bundles kgs of leafy green amaranth produced. The gross margin at the maximum level of sales stands at 8358 bundles of green amaranth. The average gross margin is about N 539,899.58).

21

RECOMMENDATIONS AND KEY SUCCESS FACTORS In order to achieve the results of the Business plan, there are some key success factors that are crucial for the performance of the Business.

1. The Business need to ensure regular production and supply of amaranthus, maintaining good standards of the produce to sustain demand. There is the need to obtain regular supply of the improved seed variety from reliable source in order to produce good quality produce. There is the need to have an efficient production chain developed to ensure uninterrupted production cycle.

2. It will be necessary to guarantee the quality of the produce in order to gain the trust of consumers. Building trust is an effective way of gaining and maintaining a market share and building reputation for the business. The production standards of using near-organic production innovations will have to be maintained to guarantee the sustainability of the Business.

3. A regular market data and information gathering on price trends and consumer preferences will be required to make the produce competitive on the local market. Providing discounts on quantity sales, providing personalized services and supplying the needs of consumers will tend to ensure maximum satisfaction of consumers and to sustain demand.

4. The management and organizational abilities of the farmer groups need to be constantly built to ensure effective and efficient group planning, production and marketing of their produce. Good control systems within the group will ensure that all farmers conform to internal decision making procedures and processes. This will facilitate the farmers access to goods and services required for their production activities.

IMPACTS OF THE BUSINESS The Business is expected to impact on the economic situation of the farmers. It is expected that The Business will create full time employment opportunities for the farmers and others within and around the Barracks. The Business is also expected to improve food security among the farm households by providing fresh and safe vegetables for home consumption improved household incomes and improved livelihood opportunities.