Wheat Production Enterprise

Project proposal for

establishment of wheat farm

PROMOTER:- Ms.Mestawet Gurmu Tuli

LOCATION:- ARSI ZONE ,XIYO
WOREDA,ABOSARA KEBELE DISTRICT

1|Page project proposal developed for desert

wheat
 Wheat Production Enterprise

Table of Contents
CHAPTER ONE................................................................................................................ 7

A. Executive Summary................................................................................................. 7

B. The vision and mission statement of the project.....................................................7

C. Background information of the project....................................................................7

1. Background of the project........................................................................................ 8

1.1. Objectives of the project....................................................................................... 9

1.2. key to success/ opportunities.............................................................................. 10

1.3. Present status of the project............................................................................... 10

1.4. Strategic opportunities........................................................................................ 11

1.5. Business strategies............................................................................................. 11

1.6. Expected Benefits............................................................................................... 11

1.7. Main Component of the Project...........................................................................12

Table 1 main component to be implemented during project operation...........................12

1.8. Management and Organizational Set up.............................................................15

1.9. Study of the Project Area.................................................................................... 15

Chapter two.................................................................................................................. 17

2. Company analysis, legality and physical condition of the farm..............................17

2.1. Legal structure of;............................................................................................... 17

2.2. Business Name and Address............................................................................... 17

2.3. Project site.......................................................................................................... 17

2.4. Land Ownership (lease, rent, etc).......................................................................17

2.5. Physical and Natural Condition of the project Site..............................................18

2.5.1. Climate............................................................................................................. 18

2.5.2. Rainfall............................................................................................................. 18

2|Page project proposal developed for desert

wheat
 Wheat Production Enterprise
2.5.3. Soil................................................................................................................... 18

2.6. Infrastructure condition of the project area........................................................18

2.6.1. Communication:............................................................................................... 18

2.6.2. Road:................................................................................................................ 18

2.6.3. Health centre’s;..........................................................................................................................18

2.6.4. Financial institution;......................................................................................... 19

Chapter three............................................................................................................... 20

3. Marketing Analysis of the project...........................................................................20

3.1. Demand Analysis................................................................................................. 20

3.1.1. Market System Analysis;.................................................................................. 20

3.1.2. Market segmentation....................................................................................... 20

3.1.3. Risk Analysis.................................................................................................... 21

3.1.4. Risk management systems.............................................................................. 21

3.1.5. Distribution channels....................................................................................... 21

3.2. Pricing techniques............................................................................................... 21

3.3. Promotional and advertising............................................................................... 22

CHAPTER 4.................................................................................................................... 23

4. ORGANIZATIONAL PROFILE (MANAGEMENT TEAM).................................................23

4.1. Structure of the project which could show level status.......................................23

4.2. Skilled and unskilled manpower..........................................................................23

Table 2 human resource requirement.............................................................................24

CHAPTER FIVE............................................................................................................... 24

5. Production Process................................................................................................. 24

5.1. Land Clearing;..................................................................................................... 25

5.2. Grubbing;............................................................................................................ 25

5.3. Leveling;.............................................................................................................. 25

5.4. Land Preparation & Sowing................................................................................. 25

3|Page project proposal developed for desert

wheat
 Wheat Production Enterprise
5.5. Fertilization......................................................................................................... 26

5.6. Weeding.............................................................................................................. 26

5.7. Disease & Pest Control........................................................................................ 26

5.8. Harvesting and Threshing................................................................................... 26

5.9. Environmental Impact Mitigation........................................................................27

5.10. Crop Rotation:.................................................................................................. 27

5.11. Soil Fertility:..................................................................................................... 27

5.12. Soil Sanitation:................................................................................................. 27

5.13. Protection of Water Bodies...............................................................................28

5.14. Land Management........................................................................................... 28

5.15. Management of Vulnerable Areas....................................................................28

CHAPTER SIX................................................................................................................ 29

6. Socio-economic Analysis........................................................................................ 29

6.1. Social Analysis..................................................................................................... 29

6.2. Market Analysis................................................................................................... 29

6.3. Profitability.......................................................................................................... 30

CHAPTER SEVEN........................................................................................................... 32

7. Farming Program, plan, and revenue estimation...................................................32

7.1. Farming Program of the project..........................................................................32

Table 3 Farming program................................................................................................ 32

7.2. Production Plan and estimated yield...................................................................32

Table 4 production plan and estimation of revenue for each product.............................33

7.3. Summary of revenue........................................................................................... 34

Table 5 summery Revenue.............................................................................................. 34

CHAPETER EIGHT.......................................................................................................... 35

8. Financial Analysis................................................................................................... 35

8.1. Source of Fund.................................................................................................... 35

4|Page project proposal developed for desert

wheat
 Wheat Production Enterprise
8.2. Total Investment................................................................................................. 35

Table 6: Total investment cost........................................................................................ 35

8.3. Financing structure............................................................................................. 36

Table 7 Financing structure............................................................................................. 36

8.4. Depreciation & amortization............................................................................... 37

Table 8 Depreciation & amortization............................................................................... 37

8.5. Fixed Asset Investment....................................................................................... 38

Table 9 Estimated Fixed Investment cost of the Project..................................................38

8.6. Loan requirement and repayment schedule.......................................................38

Table 10 Repayment schedule......................................................................................... 38

8.7. Project cost estimation........................................................................................ 39

Table 11 project cost estimation..................................................................................... 39

8.8. Project Cash Flow................................................................................................ 42

Table 12 Project Cash Flow.............................................................................................. 42

8.9. Project Income Statement................................................................................... 42

Table 13 Project Income Statement................................................................................. 42

CHAPTER NINE.............................................................................................................. 43

9.1. Challenges & Opportunities................................................................................. 43

9.2. Monitoring & Evaluation (M & E).........................................................................43

9.3. Parameters for M & E.......................................................................................... 44

9.4. Conclusion........................................................................................................... 44

Content of tables

Table 1 main component to be implemented.......................................................12

Table 2 human resource requirement..................................................................24
Table 3 Farming program....................................................................................32

5|Page project proposal developed for desert

wheat
 Wheat Production Enterprise
Table 4 production plan and estimation of revenue for each product.................33
Table 5 summery Revenue..................................................................................34
Table 6: Total investment cost............................................................................35
Table 7 Financing structure.................................................................................36
Table 8 Depreciation & amortization...................................................................37
Table 9 Estimated Fixed Investment cost of the Project......................................38
Table 10 Repayment schedule............................................................................38
Table 11 project cost estimation.........................................................................39
Table 12 Project Cash Flow..................................................................................42
Table 13 Project Income Statement.....................................................................42

6|Page project proposal developed for desert

wheat
 Wheat Production Enterprise
CHAPTER ONE

A. Executive Summary

Ms.Mestawet Gurmu Tuli Wheat Production Enterprise ; formed for lease

of 31 hectares of land for its agricultural project. The project mainly focuses on
the area of producing wheat and cotton. The farm will create job opportunities
for 52 permanent and more than 200 temporary persons. The total capital
requirement for to the farm will be estimated For implementing this project a
total of 34,000,000.00 Eth birr is required. From this 30% or 10,200,000.00
birr will be owner’s contribution while the rest 70% or, 23,800,000.00 Eth birr
will be covered by bank loan

B. The vision and mission statement of the project

Vision:- To be the main and competitive seed producer and supplier as well as
wheat crop producer and supplier company in the region, there by empowering
the local community with modern farm business, agricultural technologies, to
enhance their farm production. Beyond this the enterprises participate in social
infrastructure development of kebele and woreda levels.

Mission: - Produce and supply high quality cash crops to the local markets and
international markets.

C. Background information of the project

 Name Ms.Mestawet Gurmu TuliWheat Production Enterprise

 Project Address
o Region Oromia Regional state
o Zone Arsi zone,
o Woreda Xiyo Woreda
o Kebele will be stated in future
 Type of project integrated farm
 Total area 1,000 hr
 Initial capital 34,000,000Birr

 Project manager Mengistu Yeshitila

o Phone number + - -
7|Page project proposal developed for desert
wheat
 Wheat Production Enterprise
o Address London

8|Page project proposal developed for desert

wheat
 Wheat Production Enterprise

1. Background of the project

This is the business plan for activation and operation of legal project of
Ms.Mestawet Gurmu Tuli Wheat Production farm. It purposes to function
as domestic investor in our country. This document is prepared by the founder of
the enterprise.

The exciting economy strategy and concentration of the governments is to

enhance the food security as well as utilize the resources of the country to
improve the living condition of the citizen, by promoting the investment
opportunity to domestic investor as well as foreign investment by providing
different type of incentives promised overall economic climates.

The founder of the project propose to be beneficiary by current economy police

and to take to project as citizen of the country by rebuilding the country
economy and hope to bring change by utilizing the resource with technology in
establishing modern farm. As modern business, the ultimate purpose is
operating this project at the profit. Management at this project will pursue
sound, will define policies and execute as an effective and efficient marketing
plan that will optimize profitability.

The major economic importance, farming is typically undertaken by subsistence

farmers on small plots of land. The generally luck capital, proper tools, good
economic police, integration with finance organization like banks and have little
or no access to outside market and technology. Thus, large scale farming and
production are still conspicuously elusive to our country agro-industry, and the
advantages they bring are

9|Page project proposal developed for desert

wheat
 Wheat Production Enterprise
not being realized. adequate infusions of capital and injections of vitalizing
technology, this industry that represents the heart of our economic structure will
continuous at it slow rate of development. As the life’s blood of socio economic
development, agriculture must be nurtured on a scale not seen before and
rewards that follow must be dispersed to the benefits of the larger rural
populations.

Hence, there is an evident needed to promote farm development, improve the

condition of rural poor, and the overall economy of this land. There for, it is
necessary to increase the quantity and quality of food in the country, to create
employments, to generate foreign exchange, and to introduce modernizing
technologies. In an effort of fulfill these needs, Ms.Mestawet Gurmu Tuli
Wheat Production is established with clear view of its in place in society within
which it will operate. It embraces its moral responsibility to help this fertile land
nourish to our people.

Ms.Mestawet Gurmu Tuli Wheat Production: formed for leasing 31 hectares

of land for its agricultural project. The company will produce wheat, wheat and
cotton and others in all the request land.

1.1. Objectives of the project

We are by providence placed in a position to provide an oil product specially

wheat to the world market and onion to the local.

In short terms:

safe and clear the designated farm land,

make permanent residence farm house
buildings, acquisitions seeds,
acquire transport and
equipment, target regional
markets,
expands distribution networks to neighboring region

transfer new technology to the local community/ farmers

In long terms:
10 | P a g project proposal developed for desert
wheat
 Wheat Production Enterprise

make the permanent farm residence office

building, purchase additional farm equipment ,
establish infrastructure ,
create crop seed multiplication and plant nursery in the
site expands distribution networks to neighbouring
countries

Generate income for the government in the form of taxation

1.2. key to success/ opportunities

The key to success/opportunities in the projects are:

sub_ tropical climate _ it characteristics adequate annual rain fall,

temperature and fertile soils,
providing environments conductive to produce agricultural
products high level of ground water resources deemed suitable
for irrigation
flat topography of the land which is suitable for mechanized farming
methods the absence of industrial pollutants existing in the soil ,ground
water, and air around the project site
conducive political stability around the site currently

1.3. Present status of the project

Ms.Mestawet Gurmu Tuli Wheat Production Enterprise; starts its

operational activities immediately after the land is given and approved by the
regional government

and has the plan to finish 31 hectares of the land in five production years.

1.4. Strategic opportunities

Resource advantages; - the enterprise will own the sufficient hectares of

land which is virgin, very fertile land and able to produce different crops.
The lease of the time is long and the lease cost is also least.
Marketing strategies:- the enterprise has the following market advantages

11 | P a g project proposal developed for desert

wheat
 Wheat Production Enterprise
The ever increase of demand of oil seed crops to domestic and
international market
The enterprise also rent tractors for farmers by buying additional tractors.

1.5. Business strategies

Market lead production; - which is strongly supported by continuous

market research assessment and analysis demand and supply of the market
based on existing market situation. The project produces and supplies the
oil seeds and cash crops by studying the gap of the markets.
Production based on highest per hectares productivity level; - the
enterprise will select the type of crops which have high market demand for
production and ability to produce highest yield per hectare.
Resources Requirements; - the project required non related and related
resource to operate the day to day operation of its farm business. Some of
this resources are;
 Human power both professional and daily labors
 Financial resource
 Raw material such as; improved seeds, fertilizers, sacks, chemicals and etc.
 Machineries and equipments such as tractors, hand tools, vehicles etc.

1.6. Expected Benefits

Some of the direct financial benefit are;- very progressive, potential

and attractive profit to the owner. For financial institutions give interest
for their

loan, export earnings for the government and increase domestic market
supply, the firm provides competitive selling prices of the produced crops.
Some of the most vital non financial benefits are;- create on farm
and off job opportunities to the local community, adopting and diffusion of
modern farming technologies and inputs, achieve food self sufficient and
so on

1.7. Main Component of the Project

Table 1 main component to be implemented during project operation

No_ Main The activities under the component

12 | P a g project proposal developed for desert
wheat
 Wheat Production Enterprise
component
of the project
1) A. Technology transfer for local societies

 The project will farm by modern technology and

Contribution mechanized way and it will promote for societies.

of the B. Infrastructure development

Project for  The projects will old road maintaining and constructing
societies new road which serve both for the societies and the
project.
 supporting health post in material and financially
 supporting primary school both by material and
financially
2) Environmental protection plan of the project
 Seedling indigenous plants and distributing for societies
 The project plan produce indigenous and economically
important
Environmen
 Develop Environmental Impact Mitigation on the project
tal
 Soil Sanitation
protection
 Protect Water Bodies which is in the project
plan
 Land Management; which is not suitable for mechanized
farm
 forestation ; covering areas in the project by the forest
 Protecting soil erosion by planting trees

13 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
 Using waste material as fertilizer (composting)

3) Out growing plan of the project

 The project plan to develop training center collaborating
with government body like Agricultural and rural
Out growing development bureau, specially establishing Farmer
plan
Training Center (FTC) in the kebele where the project
will established and train the local societies the way they
increase productivities in small land
(out growing).

4) Capacity and commitment

To operate the project success fully, owner has the
following
 Loan from bank ------ 23,800,000Birr
 Owner equity 10,200,000 Birr
 Total capital 34,000,000birr
 will purchase farm machinery in the future like;
 4 tractors with full machinery
 1FSR ISUZU
Capacity
 1Pick up
and
 1Tracker
commitme
nt  1 Dozer
 1 combiner
 1 planter
 1 chemical spry machine
 1 transport vehicle
 2 motor cycle
 2 generator

14 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
5) The overall production plan of the project
The overall  The project will export 70% of the total production
production output

plan /edible oil/ and it distribute 30% for international and

local market respectively.

6) The experience of the investor
The  The owner have experience on producing edible oil and
experience also it will be managed by experts those graduates in
of the Agronomist and
investor other related fields.
7) Value adding of plan of the project
 after the project will be operational and transfer to
production the investor plan in two way
 Short run plan; in short run the production product
value adding will be used as raw material for the factory planted in
plan
Addis Ababa. And producing standardized edible oil.
 Long run plan; in long run the project will establish
Agro

industry and process the product into edible oil which

will be distributed to local and international market.

8) The project plans on working environment

 The project plan to construct shelters for permanent and
Creating
temporary worker
conducive
 The project plan to establish health post, restaurant hall,
working
entrainment area for the employees
environme
 The project plan to pay attractive salary
nts
 Practically advising the worker to deposit the salary they
earn

15 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
1.8. Management and Organizational Set up

The proposed organizational and managerial set up of the project comprises

management and technical divisions. The project comprises of managerial,
production, financial and administrative divisions. The project manager,
Ms.Mestawet Gurmu Tuli will serve both as a manager and contact person.
The duty & responsibility of each division is highlighted below.

General Manager: The general manager manages the entire business.

Moreover, he deals with strategic planning and decision making matters.

Production division:

 is responsible for crop production, supervision and provision of farm

inputs and outputs,
 conducts regular follow up and evaluation with regard to farm operations,
 supervises the overall operations of the enterprise,

Finance and administration division:

 Works directly under the manager and is responsible to him,

 Consists of different sections that handle a variety of responsibilities,
 Keeps different books of records,
 Prepares periodic financial plans and reports for the manager as well as
external users &manages the logistics and human resource aspects of the
project.

1.9. Study of the Project Area

Ms.Mestawet Gurmu Tuli Wheat Production Enterprise will be established

in Oromia Regional State, Arsi Zone, Xiyo Woreda, and kebele's will be stated in
the future. The project area experiences sub-tropical temperature and lies in
low land agro- climate zone. The area is selected for investment as it satisfies
the following criteria employed by Ethiopian investment authority.

 The area is fully investment site specially for agricultural sector,

 The area is not covered by both forest and animal species of ecological
importance,
16 | P a g project proposal developed for desert
wheat
 Mestawet gurmu Wheat Production
 For the sake of conserving, developing and properly utilizing the woreda’s
agriculture, Xiyo woreda were suitable for the envisaged purpose in terms
of environment.
Chapter two

2. Company analysis, legality and physical condition of the farm

2.1. Legal structure of; -

Ms.Mestawet Gurmu TuliWheat Production Enterprise is formed as

private limited company by the Ethiopian citizen. The company will get its legal
registration from B/G/regional state.

2.2. Business Name and Address:

 The Name of the project;MEStawet Gurmu wheatProduction

 The Owner Address; England London
 Project offices;- proposed to open in either Manbuki town
 Project Address;- Xiyo woreda

2.3. Project site

The project site is found in Oromia Regional state ARSI Zone, Xiyo woreda, the
kebele will be stated in the future. The total area of the project is 31 hectares
out of which around 5-7 hectares assumed covered by forest, stone, hill, valley
and which not suitable for crop cultivation.

2.4. Land Ownership (lease, rent, etc)

The land farm obtains from B/G/regional state in either Xiyo woreda. The land
lease from regional government for 25 years for lease rent 154.50 birr per
hectares annually. Once the land is leased, demarcated and handed over by the
concerned authority to the project, it will carry out different activity like land
development, construction and building, inter farm development etc.

2.5. Physical and Natural Condition of the project Site

2.5.1. Climate

The project areas are categorized sub tropical, hot low land to warm sub humid
moist low land which is kola. The Xiyo woreda are district has average minimum

17 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
temperature (25, 27 degree celcues).

2.5.2. Rainfall

The average annual rainfall of the study area ranges from 1000mm to1600mm.

2.5.3. Soil

In Xiyo district, the soil would be sandy clay to loamy clay. The texture is clay
with strong angular blocky structure. These soils have the potential to produce
different oil seeds, cereals crops and vegetable like onion and other.

2.6. Infrastructure condition of the project area

2.6.1. Communication:

In regard to communication, the project area is not connected with telephone

connections, but we hope that, the government will plan to expand the
telecommunication service to all area in Ethiopia in these five years.

2.6.2. Road: -

Xiyo woreda’s were connected roads to region capital city Shasgamanne and
Sidema region.

2.6.3. Health centre’s;

In Xiyo woreda, health post and clinics are constructing and the health service
coverage is increasing gradually. In order to protect the well being/safety of the
worker and the society around the project, an owner of the project is willing to
open his own clinic in the farm site or should ready to afford any medicines
before from nearby government clinic.

2.6.4. Financial institution;-

The enterprise can get financial services from commercial bank Xiyo or Abora
kebele district.

Chapter three

3. Marketing Analysis of the project

3.1. Demand Analysis

Ethiopia demand for grain continued to increase because of the population

18 | P a g project proposal developed for desert
wheat
 Mestawet gurmu Wheat Production
pressures, while supply remain short, and largely for increasing the foreign
currency especially from oilseeds and the domestic demand also increase for
those crops. Oil seeds are the second largest foreign currency earning sector of
the country next to coffee. Ethiopia government has also an ambitious plan to
boast different factories that require agricultural product as input. Ethiopia at the
moment is also importing huge quantity of edible which could have been
substituted if the local factories were developed. Export of wheat has grown
from year to year. Due to the above point there exists enough demand for oil
seeds and cereals crops both in domestic and international market.

3.1.1. Market System Analysis;-

Market situation for oilseeds and cash

crops The indicators of oilseeds market

are;-

 The market for oilseeds and cash crops are expending in international market
 Ethiopia being expand its export market destinations through time to time
 Local production improves and the supply of the crop increase

3.1.2. Market segmentation

The enterprise has the following market segmentation

 To the government and private organization for industry with Ethiopia

commodity exchange. ( ECX)
 To whole seller for exporter or domestic market

 To regional and individual customers

3.1.3. Risk Analysis

The major anticipated risks of the enterprise will face the following factors

Absence of rain fall and erratic

nature Pest and insect migrations
Crops
failure Wild
fire

19 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
Infrastructure problems, especially water, electric power, road and financial
institutions

3.1.4. Risk management systems

Doing experiment and research during cultivation

periods The enterprise get insurance for any risks
Clear the surrounding place to prevent wild
fire Digging ground water hole in the
project site Install generator to the project
site
Use chemical and pest acid inputs for the farm

3.1.5. Distribution channels

The enterprise use different distribution channels to makes its product available
and accessible to every end user and trader or Ethiopian commodity exchange
(ECX) and in the future plan to export the product for international market.

3.2. Pricing techniques

The enterprise has several competitive cost advantage and topographic benefit
for the production of different crops. Due to this, the enterprises use the
following pricing techniques.

 Market penetration price technique i.e. set competitive lower price to the
product to get larger quantities sales volumes
 Quantity discount pricing techniques;- give discount advantages for large
quantity buyers to achieve advantages.

3.3. Promotional and advertising

The enterprise uses the following promotional techniques to penetrate market and
to achieve its forecasted sales targets;

 Personal selling promotions; use sales force to present the crops to target
customer
 Trade fairs and expansions as means of promotions
 Donations and free technological services to the local community.

20 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
CHAPTER 4

4. ORGANIZATIONAL PROFILE (MANAGEMENT TEAM)

4.1. Structure of the project which could show level status

It is structure of the project that shows how day to day operations are organized
in such a way that could enable to run smoothly the project activities effectively
and efficiently.

General Manager

Financial section and admin

manager
Production and technology
section manager

 Accountant  General  Driver

 Cashiers services  Guards Crop protection Technology
 officer 
Purchaser Operator and production
  section
Office cooker
secretary

4.2. Skilled and unskilled manpower

The farm required 52 permanent and more than 200 casual labourers on
average for each production season.

21 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
Table 2 human resource requirement

No- Description Qty Monthly Total Total

Salary/ salary salary per

annual
individ

ual per month

1. General manager 1 4,000 4,000 48,000
2. Financial section manager 1 3,000 3,000 36,000
3. Technology and 1 3,000 3,000 36,000
production
manager
4. Accountant 2 1,500 1,500 18,000
5. Casher 2 1,000 1,000 12,000
6. Office secretary 1 700 700 8,400
7. General service officer 2 1,000 1,000 12,000
8. Driver 4 1,500 3,000 36,000
9. Guard 4 1,000 2,000 24,000
10. Cooker 4 600 1,200 14,400
Total 22 244,800

22 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production

CHAPTER FIVE

5. Production Process

As far as production pattern is concerned, the 31 hectare will be proportionally

allocated for different types of production like wheat and others. However, as
per the prevailing market demand and the dynamics of nature, the planned
production pattern will be readjusted.

5.1. Land Clearing;

Prior to land levelling, removing heavy vegetation growth is advantageous.

Clearing land encompasses removing of some vegetation types such as trees,
bushes, trashes and boulders from the area to be cultivated. This is done either
manually or mechanically. As far as this project is concerned, land clearing shall
be carried out both manually and mechanically.

5.2. Grubbing;

The process of removing stumps, deep-set stones & old roots as per required.
This will be done by using human labour as well machinery.

5.3. Leveling;

As mentioned earlier, the project area will be virgin and covered with a variety of
vegetation types. In order to bring the area under cultivation, in the long run,
land clearing & grubbing activities will be carried out in an environmentally
friendly manner.

5.4. Land Preparation & Sowing

It is advisable that the preparation of crop fields should be carried out several
weeks prior to planting and as such an activity helps the pre-germination of
unwanted or weeds crops. Otherwise, a delay of the last tillage until the
germination of those weeds is desirable. Appropriate planting dates should be
chosen so as to avoid risky environmental conditions such as delay or extension
of rainfall. Planting is recommended after a thorough preparation of field crops

23 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
which, in turn, ensures the rapid germination of seeds as well as crop
development. Crop fields should be well ploughed and prepared so as to ensure
proper harrowing and fine filth production. Planting depth should coincide with
common practices of the area in which the project is situated.

5.5. Fertilization
The application of fertilizers is to achieve maximum production while
considering social, economic and environmental factors. Appropriate fertilization
depends on soil types, environmental conditions and the type of the crop to be
produced. The application of fertilizers should be on the basis of expertise
knowledge and this avoids contamination and environmental pollution.
5.6. Weeding
Proper control of weeds, insect pests and diseases is an integral part of crop
production. Proper weed control is instrumental as it largely facilitates aeration,
proper growth of crops, high yield, and avoids undesirable competition for
sunlight, water & minerals. On the other hand, improper weed control results in
undesirable disease and insects which leads to reduced yield and quality.

5.7. Disease & Pest Control

Controlling of both surface and underground insects is important in crop
production. Most underground pests are controlled either by crop treatment or
granular insecticides application. The application of chemicals is essential for
controlling insects which feed particularly the silks, ears and tassels of crops. An
integrated pest management program (IPM), including proper scouting, is
recommended. In the same manner, proper disease control is vital for both
quantity and quality crop production. In addition, proper disease control
mechanisms avoid the spread of crop borne pathogens. Genetic resistance in
parental lines is preferable but sometimes outstanding lines are susceptible to
particular pathogens present in production fields. In general, the project shares
the responsibility of abandoning the application of the internationally abandoned
chemicals.
5.8. Harvesting and Threshing

24 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
Late harvesting results in dropping of ears, stalk lodging ear rot development,
shelling of ears and other related negative effects. As a result, harvesting should
be done immediately after maturity when crops form brown layer at the point of
attachment with cobs and the content of moisture is reduced to 20-25%.
Harvesting is possible both manually and mechanically. However, in developing
countries like Ethiopia, the former is more suitable as human labour is abundant
and cheap.

5.9. Environmental Impact Mitigation

Experiences have shown that large scale mechanized agriculture has caused
massive environmental degradation such as deforestation, soil erosion and the
like. Environmental degradation is largely caused by unwise use of natural
resources. Vegetative wise, at present, the project area is mainly covered by
savannah vegetation type with flat and gentler topography. In order to minimize
the adverse environmental damages and loss of soil fertility in sustainable
manner, crop rotation and wind break mechanisms will be employed.

5.10. Crop Rotation:

As opposed to the monoculture, crop rotation is a mix of cropping on rotational
basis and has the following merits:
5.11. Soil Fertility:

A rotation of different crops ensures soil fertility for a sustained period of time as
compared to a single crop grown on the same plot year after year. Even though
man made fertilizers like crop residue and compost are believed to be applied
immediately after the commencement of the project, chemical fertilizers such as
urea and dap will be employed as per the demand arises, i.e. when the land
loses its virginity and fertility and after the approval of agricultural research.

5.12. Soil Sanitation:

Growing the same crop on the same plot continuously accelerates infestation
with diseases, insects and weeds resulting reduction in production and higher
cost of cultivation. A diligent follow up will be carried out in this respect so as to
control the possible adverse effects.

5.13. Protection of Water Bodies:

25 | P a g project proposal developed for desert
wheat
 Mestawet gurmu Wheat Production
The project gives due emphasis to the protection of water bodies such as rivers
& streams. In doing so, the project moves in accordance with the regional land
administration & uses legal frameworks.

5.14. Land Management:

In the project area, land management will be ensured by the application of

organic fertilizers and other improved agricultural practices. In addition, when
the need arises, the application of chemical fertilizers will be in effect. Nursery
practices will also be undertaken side by side.

5.15. Management of Vulnerable Areas:

The project gives due emphasis for the protection & conservation of easily
vulnerable areas such as sloppy, swampy and rugged areas. In doing so, such
areas, instead of being cultivated, shall be left out or else managed and
protected through terracing, plantation and other conservation mechanisms.

CHAPTER SIX

6. Socio-economic Analysis

6.1. Social Analysis

The area in which the project is located is slightly poor in terms of infrastructural
provision as well as supply of daily labourers. However, the project tries to
handle such setbacks in a hand-in-hand manner with the regional as well as
federal government development Endeavour’s. As far as daily labourers are
concerned, the project tries to employ daily workers from the indigenous
community and, if not, fetches from nearby localities of other regions. Moreover,
in addition to the various endeavour’s made by both the regional & federal
governments, transportation problems shall be alleviated by the project. The
farming system of indigenous community is by far traditional and hence the
project contributes much to the improvement of such practices.

6.2. Market Analysis

According to Ministry of Finance & Economic Development, MoFED, agriculture is

the most contributors to GDP. For instance, in 2008/09, agriculture accounted
for 42.5% of the GDP per annum and, the contribution of crop production to GDP
26 | P a g project proposal developed for desert
wheat
 Mestawet gurmu Wheat Production
was 2%.

Grain production is the mainstay of the rural population as well as the economy
of the state. Commercial crops especially wheat is the 2nd largest export earner
for the country and a great deal of smallholders are involved in its production.
The project has planned to produce both commercial and consumable crops as
the demand for both is increasing at domestic & international markets.

Despite the difficulty of quantifying and determining the exact demand-supply

gap in the agricultural sector, due to an increase in population size, consumption
pattern, income, import-export transactions and other factors, one can easily
imagine that there is unmet demand-supply gap in the sector.
Consequently, market wise, the
products of the project of the project are demanded both locally as well as
internationally. From the view point of the nation’s import-export trend, in
2007/08, the total export value of Ethiopia, driven by high international prices of
agricultural products, grew by 23.7%. According to annual report of NBE,
2007/08, the value of major agricultural products such as coffee, wheat, flowers,
pulses, live animals and chat has shown an increase of 23.65%, 16.9%, 57.7%,
105.5%, 11.12% and 16.5%, respectively. An increase in the price of
commodities in global markets has resulted in an increase in the value of
exported items. In the same period, the share of major agricultural products,
namely, coffee, wheat, pulses, flowers and chat from the total value of exports
was 35.8%, 14.9%, 7.6% and 7.4%, respectively.

In general, the existing market environment is quite favorable for the sale of
farm produce and purchase of inputs. In both cases the project can have access
to local and national market center of the country. Since the project is located in
food deficit area, it has a vital role in stabilizing the price of food crops in the
region. Therefore, the project can sell its produce to market centers of ARSI,
Chagni, Bahir Dar, and Addis Ababa. Moreover, the sale of the produce at nearby
markets is profitable even immediately after harvesting is completed.

6.3. Profitability

According to the projected income statement, the project will start generating
profit in the first year of operation. Important ratios such as the percentage of

27 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
net profit to total sales, net profit to equity (return on equity) and net profit plus
interest to total investment (return on total investment) will show an increasing
trend throughout the production life of the project. The income statement and
other profitability indicators show that the project is viable. In line with this, the
break-even point of the project is estimated by using income statement
projection as

BE = Fixed Cost = 20
% Sales – VC

The investment cost and income statement projection are used to project the
pay-back period. The project's initial investment will be fully recovered within 5
years. Based on the cash flow statement, the calculated IRR of the project is 18
% and the net present value at 5.4%. As far as the liquidity of the project is
concerned, the project is free from any liquidity problem throughout its life.
Sensitivity analysis is among the crucial elements of project evaluation. In line
with this, the project under consideration has been evaluated from three points
of view: if price/benefit decreases by 10%, its IRR will be 10%. Similarly, if
investment costs are increased by 10%, its IRR will be 13%. Consequently, the
project is feasible even under conditions unfavorable to it.

28 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
CHAPTER SEVEN

7. Farming Program, plan, and revenue estimation

7.1. Farming Program of the project

The project, with full capacity, commenced production in 2024/25 production

season. In doing so, the project tries to fully develop the estimated 31 hectare of
land within 5 years. Land clearing activities will be accomplished accordingly.

Table 3 Farming program

No Type of Unit Yield/ Land development And patricianly production plan

crops ha
2024/25 2025/26 2026/27 2026/27 2027/28

1. Wheat Quintal 6 16 20 26 29 31

7.2. Production Plan and estimated yield

The enterprise has an estimated area of 31 hectare of land and tentatively

planned to produce a mixture of crops such as Wheat, cotton, Maize, haricot
bean, Soya bean, and Sorghum. However, as mentioned above, the planned
production pattern will be readjusted as per the prevailing market demand and
the dynamics of nature.

29 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
Table 4 production plan and estimation of revenue for each product

Crop Yr1 Yr2 Yr3 Yr4 Yr5

1. Wheat

Area in Ha 120 200 300 400 600

Yield/Ha/Qt 6 6 6 7 7

Total production 760 1200 1800 2,800 4,200

in
Quintal
Price per quintal 2,800 2,800 2,800 3,000 3,000
Revenue 2,016,000 3,360,000 5,040,000 8,400,000 12,600,000

2. Wheat

Area in Ha 110 170 225 280 280

Yield/Ha/Qt 40 40 45 45 45

Total production 4,400 6,800 10,125 12,600 12,600

in
Quintal
Price per quintal 4,500 4,500 4,500 4,500 4,500
Revenue 19,800,000 30,600,000 45,562,500 56,700,000 56,700,000

3. Cotton
Area in Ha 30 30 75 120 120

Yield/Ha/Qt 15 15 15 15 15

Total production 450 450 1,125 1800 1800

in
Quintal
Price per quintal 1,500 1,500 1,500 1,500 1,500
Revenue 675,000 675,000 1,687,500 2,700,000 2,700,000

4. Irrigation of
vegetable /
mango,

lemon,

30 | P a g project proposal developed for desert

wheat
 Mestawet gurmu Wheat Production
avocado, orange

31 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
& others

Area in Ha 45 50 60 70 80

Yield/Ha/Qt 120 120 125 125 130

Total production
in 5,400 6,000 7,500 8,750 10,400
Quintal
Price per quintal 1,000 1,000 1,000 1,000 1,000
Revenue 5,400,000 6,000,000 7,500,000 8,750,000 10,400,000

Total
10,216,00 13,260,00 18,697,50 25,205,00 31,055,000
revenue
0 0 0 0
production year
Note: Yield per hectare in quintal estimation is made based on conventional
production practices. As a result, it is understood that yield per hectare in quintal
can either increase or decrease depending on the application of modern farming
inputs and the prevailing rainfall pattern

7.3. Summary of revenue

Table 5 summery Revenue

Revenue type Yr1 Yr2 Yr3 Yr4 Yr5

Revenue from wheat 2,016,000 3,360,000 5,040,000 8,400,000 12,600,000

Revenue from wheat 19,800,000 30,600,000 45,562,500 56,700,000 56,700,000

Revenue from cotton 675,000 675,000 1,687,500 2,700,000 2,700,000

Revenue from 5,400,000 6,000,000 7,500,000 8,750,000 10,400,000

irrigation
Total revenue 27,891,00 40,635,00 59,790,00 76,550,00 82,400,000
0 0 0 0
Note: Revenue from each crop is estimated on the basis of current market
prices. Consequently, such prices are subject to market fluctuations such as
inflation and other related factors.

32 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise

CHAPETER EIGHT

8. Financial Analysis

8.1. Source of Fund

The total investment of the project is estimated to be an Ethiopian Birr

34,000,000birr. Of which 70% (23,800,000) will be financed by the development
Bank of Ethiopia in long term. The remaining 30% (10,500,000) will be covered
by the project owner. Other major assumptions for financial analysis of the
project are summarized hereunder. For the sake of simplicity and financial
analysis purpose, the life time of the project is assumed to be 5 years. The
project bears costs to a number of central facilities to support the
implementation of it. All fixed assets shall be replaced at the end of the
expected economic life based on three respective depreciation rates. A straight
line depreciation method is adopted for cumulative annual depreciation changes.

8.2. Total Investment

The overall investment required by the project includes fixed asset investment,
production cost, administration cost and working capital, and is estimated to be
34,000,000Ethiopian birr.

Table 6: Total investment cost

Description measuremen Quantity Unit price Total

t
Land development Hectare 1,000 5,000 5,000,000

Pick up vehicle No. 1 3,500,000 3,500,000

Motorbike No. 2 35,000 70,000

FSR ISUZU No. 1 1,500,000 1,500,000

33 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
Generator No. 2 45,000 90,000

Tractor with accessories No. 2 1,400,000 2,800,000

Dozer No. 1 2,000,000 2,000,000

Combiner No. 1 1,750,000 1,750,000

Planter No. 1 1,500,000 1,500,000

Building & construction Lump sum - - 300,000

Office equipment Bulk 200,000

Infrastructure cost Bulk 2,000,000 4,000,000

Working Pre-operating Bulk 11,629,930

Expenditure

Total 34,000,00
0
Note: The cost estimations are made based on current market prices. Therefore,
they are not exhaustive and hence they are subject to change due to inflation
and related factors.

8.3. Financing structure

Table 7 Financing structure

Description Equity Bank loan Total

Amount % Amount %

Land development 1,500,000 30 3,500,000 70 5,000,000

Pick up vehicle 1,050,000 30 2,450,000 70 3,500,000

FSR 21,000 30 49,000 70 70,000

Motorbike 450,000 30 1,050,000 70 1,500,000

Generator 27,000 30 63,000 70 90,000

34 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
Tractor with accessories 840,000 30 1,960,000 70 2,800,000

Dozer 600,000 30 1,400,000 70 2,000,000

Combiner 525,000 30 1,225,000 70 1,750,000

Planter 450,000 30 1,050,000 70 1,500,000

Building & construction 90,000 30 210,000 70 300,000

Office equipment 60,000 30 140,000 70 200,000

Infrastructure cost 1,200,000 2,800,000 70 4,000,000

Working Pre-operating 6,188,979 30 14,440,951 70 20,629,930

expenditure

10,500,00 23,800,000 43,339,930

0

8.4. Depreciation & amortization

Table 8 Depreciation & amortization

Description Cost Rate 1-5 yr

Land development 1,000,000 20% 200,000

Pick up vehicle 500,000 20% 100,000

Tractor with accessories 800,000 10% 80,000

FSR 1,000,000 20% 200,000

Generator 90,000 10% 9,000

Building and 300,000 20% 60,000

constructions
Office equipment 200,000 5% 10,000

Working Pre-operating 1,040,000 2% 20,800

expenditure

Total 679,800

35 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
8.5. Fixed Asset Investment

The major investment items of the project include: Purchase of tractor with
accessories, 4wd double pickup, FSR and Purchase of office equipment,
Construction of office and residence.

Table 9 Estimated Fixed Investment cost of the Project

Description Quantity Unit price Total

Building & construction Lump sum 300,000 300,000

Tractor with accessories 2 1,400,000 2,800,000

FSR 1 1,500,000 1,500,000

4wd pickup 1 3,500,000 3,500,000

Generator 2 45,000 90,000

Motorbike 2 35,000 70,000

Office equipment & Lump sum 200,000 200,000

Furniture

Total fixed asset investment 8,460,000

Note: The cost estimations are made based on current market prices. Therefore,
they are not exhaustive and hence they are subject to change due to inflation
and related factors.

8.6. Loan requirement and repayment schedule

Table 10 Repayment schedule

Loan amount Principal Interest Out ball

repayment
23,800,000 23,800,000

23,800,000 3,033,795.1 3,640,554.1 27,304,155.9

27,304,155.9 3,033,795.1 3,276,498.7 24,270,360.8

36 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
24,270,360.8 3,033,795.1 2,912,443.3 21,236,565.7

21,236,565.7 3,033,795.1 2,548,387.9 18,202,770.6

18,202,770.6 3,033,795.1 2,184,332.5 15,168,975.5

15,168,975.5 3,033,795.1 1,820,277.1 12,135,180.4

12,135,180.4 3,033,795.1 1,456,221.6 9,101,385.3

9,101,385.3 3,033,795.1 1,092,166.2 6,067,590.2

6,067,590.2 3,033,795.1 728,110.8 3,033,795.1

3,033,795.1 3,033,795.1 364,055.4

Note: A term of four years loan repayment period and a grace period of nine
months are taken in to account. Plus, a 9.5% lending rate is taken in to account.

8.7. Project cost estimation

The cash flow of the project reveals that the project, including its loan, can easily
settle its financial obligation without difficulties. Even if the project shows short
of cash in the first year of operation due to pre-production expenditures, it turns
in to liquidity after the 1st year of operation. Details are shown below.

Table 11 project cost estimation

37 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
Cost items Year 1 Year 2 Year 3 Year 4 Year 5

Seed 412,400 514,800 618,000 720, 597 823,

597
Chemicals 42,000 52,500 62,800 73,250 83,500

Spare parts 44,420 110,450 116,725 128,061 139,464

Wage 542,000 562,000 572,000 576,000 585,000

Fuel 112,500 117,500 122,500 222,500 322,500

Land rent 154,500 154,500 154,500 154,500 154,500

Packing materials 115,000 117,000 122,000 125,000 130,000

Salary 114,000 246,000 244,800 244,800 244,800

Repair & maintenance 5,000 14,400 26,970 40,970 50,970

Insurance 20,000 20,000 20,000 20,000 20,000

Office supply 15,000 30,000 30,000 35,000 40,000

Oil & lubricant 140,000 180,000 200,000 212,000 221,000

Travel &per diem 10,000 15,000 20,000 20,000 20,000

Depreciation & amortization 43,313 86,626 129,939 259,878 346,504

Tractor 2,400,00 2,400,00 400,000 400,000 -

0 0
4D pick up 2,750,00 - - - -

38 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
0

39 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
Motor bike - 35,000 - 35,000 -

Generator 250,000 45,000 - - 45,000

FSR ISUZU 1,500,000 - 1,500,000 - 1,000,000

Dozer - 2,000,000 - - 1,500,000

Total operational cost 8,670,133 6,700,776 4,340,234 4,046,959 6,226,835

40 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
8.8. Project Cash Flow

Table 12 Project Cash Flow

Description Yr1 Yr2 Yr3 Yr4 Yr5

Total revenue from

Sales 27,891,000 40,635,000 59,790,000 76,550,000 82,400,000

Total cost
8,670,133 6,700,776 4,340,234 4,046,959 6,226,835

Annual loan payment 3,033,795.1 3,033,795.1 3,033,795.1 3,033,795.1 3,033,795.1

Interest payment 4,004,609.5 4,004,609.5 4,004,609.5 4,004,609.5 4,004,609.5

Revenue before tax 12,182,462 26,895,819 48,411,361 65,464,636 69,134,760

Income tax
4,263,861.8 9,413,536.8 16,943,976.5 22,912,622.7 24,197,166.1

8.9. Project Income Statement

Table 13 Project Income Statement

Description Year 1 Year 2 Year 3 Year 4 Year 5

Total revenue 27,891,000 40,635,000 59,790,000 76,550,000 82,400,000

Operating cost 8,670,133 6,700,776 4,340,234 4,046,959 6,226,835

Annual 3,033,795. 3,033,795.1 3,033,795.1 3,033,795.1 3,033,795.1
loan 1
payment
Interest 4,004,609.5 4,004,609.5 4,004,609.5 4,004,609.5 4,004,609.5
payment

revenue before 12,182,462 26,895,819 48,411,361 65,464,636 69,134,760

tax

Income tax 4,263,861. 9,413,536.8 16,943,976. 22,912,622. 24,197,166.

8 5 7 1
Net profit 7,918,601 17,482,28 31,467,385 42,552,014 44,937,59
3 4

41 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
CHAPTER NINE

9.1. Challenges & Opportunities

The project is viable to natural catastrophes such as climate changes like delay
or extension of rainfall. In addition, it is subject to market dynamics such as
inflation which, in turn, affects the import-export Endeavour’s of the project.
Plus, the rise and fall of market prices may also affect the project both
negatively and positively.

At international level, the demand for agricultural products, both commercial &
food crops, is increasing at an alarming rate. This, in turn, leads investors to be
beneficiary & competent in the area. In other words, investors in question will be
encouraged to produce more in terms of both quantity and quality, and hence
benefit from the international arena.

The Ethiopian government has given due attention to the sector and has
developed a conducive investment policy together with a variety of incentives.
In connection to this, as the country is witnessing a double digit growth, different
industries are expanding which, in turn, creates a back-forth linkage between the
sector & industries.

9.2. Monitoring & Evaluation (M & E)

The day-to-day activities of the project will be monitored by the agronomist. The
general manager shall visit the project site when necessary. The physical and
financial plans as well as reports of the project will be prepared and submitted to
the general manager on time. According to the reports submitted, the project
will check and verify through supervision. The financial and physical audits will
be undertaken at the end of each year either by internal or external auditors. In
general, both heads of the management and technical divisions, assisted by
other relevant sectors, are the main responsible bodies for monitoring and
evaluation of the project and a variety of

42 | P a g project proposal developed for desert

wheat
 Mengistu Yeshitila Wheat Production
Enterprise
criteria shall be taken in to account. In other words, the monitoring and
evaluation part will be carried out in an integrated manner.

9.3. Parameters for M & E

As per the stages of the project, the parameters to be monitored and

evaluated include project establishment, project implementation & progress,
post implementation, environmental management, data management, camp set
up, protection of water management, land management, application of modern
agricultural inputs, and composition of machinery and so on.

9.4. Conclusion

According to the study made, the aggregate and planned cost required to
establish the project is estimated to be 34,000,000Ethiopian birr. Out of the
total financial requirement, 30% will be covered by the investor and the
remaining 70% will be covered by loan from banks. In addition, the project is
financially, socially, politically and environmentally viable. In other words, the
establishment of the project has immense importance in this regard.

43 | P a g project proposal developed for desert

wheat