dairy farm project feasibility report
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Transcript of dairy farm project feasibility report
Hamza Irfan Project ManagerAwais Younas CFOUsman Bukhari Marketing ManagerAsim Khalid Operations ManagerMudassar Nawaz Chief Accounts OfficerShazib Qamar Legal Advisor
Group Members
National
Non Industrial
Conventional Technology
Medium in Scope
A Grass Root Project
Normal in nature
Project Type (Turn-key)
Owner
Construction
Project Manageme
nt Company
Supply Technical
Hierarchy
Feasibility Study
2008-0951.8% contribution of total agricultural sector11.3% contribution to national GDPValue of livestock is 6.1% more than combined major and minor cropsFocal point of government policies
Demand Study-Market
Potential
Increasing trend in livestock
Strategic agreements betweenZTBL & M/S Nestle Pakistan limitedZTBL & M/S Pakistan Dairy development
companyIncrease milk supply, Mitigate poverty and Improve the living standard of the rural population.
White Revolution
Wheat straw(from land owners)Green fodder(grow themselves on leased land)Mineral mixture(available from factories or outlets)
Raw material study
Pakistan: 175 million people, high milk consuming tradition
Some facts about agri-sector
• Irrigable land in Pakistan –20 million hectares
• Fodder cultivated in 2.8 million hectares, i.e. only 14%
• Fodder yield very low -24 Tones/hectare (Australia approx 70 Tones/hectare)
• Largest irrigation network in the world
• Cheap farm labor, though unskilled
(Still demand is high and supply is low)
High domestic demand
The feasibility study suggests an initial herd size of 200 Cows, which is economical to justify the overhead cost. The farm size will increase to approximately 1,000 cows within 10 years. Herd mix of 100% cows is recommended to get the maximum milk production round the year.
Proposed supply Capacity
Cost-based strategy In this feasibility study, it is assumed that all the milk will be sold to milk processing companies, dairies & milk shops etc. @ Rs. 40/liter.
pricing
Following are some of the target clients for a dairy farmer. 1. Milk outlets in local markets 2. Dairy Companies 3. Milk collection companies
The cost of production per liter of raw milk should be lower than its sale price so that farmer could feel it economical.
Target Customers
SWOT AnalysisAbout the sector
• Back bone and main stay of economy. Provides raw material for food & Leather industry. • Major source of food, i.e. Milk & Meat • Source of Farmyard Manure (FYM). • Sizeable foreign exchanges earning through exports. • Wide scope of Milk Production, ranking 5th in the world.• Ample human resource employment sector. • Stationed, Permanently located secured loaning sector. • Huge demand and supply gap in dairy sector.
Strengths
Lack of appropriate knowledge, research extension • Lack of commercially viable breeds of animal • Lack of education and initiative in farmer, traditional approach due to lack of skills and management. • Unorganized sector, unaware of basic farm management practices. • Remote area, lack of farm to market approach & transportation. • Non-availability of communication services. • Lack of farm/ market infra structures & marketing information. • Lack of record keeping on farm.
Weaknesses
Govt. of Pakistan & Sate Bank of Pakistan priority sector.
Dairy products needs are 30% higher than supply. Ample opportunities are available in the Banking
Sector. Commercially viable sector with great credit
potential and absorption capacity. Vast range of area of operation, more needs and
scope of development. Value added dairy products are in demand.
Opportunities
Implementation of WTO will result in open & competitive commodity pricing.
Due to fear of default, banker community has reluctance for lending loans.
High risks of diseases in live stock. Defective and unorganized markets. Imbalance between prices of inputs & outputs. Rising trend of cost of production with higher rate
of interest as compared to profit ratio. Lack of media projection, non-recognition of
problems and monopoly of multinationals. Lack of community organizations and out dated
farm practices.
Threats
Facts over the years
Noon Pakistan Nestle Milkpak Prime Dairies Idara-e-Kisan (Halla) Chaudhry Dairy Millack foods Dairy Land Engro foods Limited ShakarGunj Foods Alturhem Milk JK Dairies Doctor Dairies Gourmet Foods
Dairy Market Players
Proposed capacity: for 200 cows with an upper limit of 1000 cows at most.
Herd mix: 100% cows.Business status: Sole
Proprietorship/Partnership/Company Pvt Ltd.Total Project Cost: 84,000,000.
The proposal
Location of our dairy farm is Darajke, Sadhoke 20 km off G.T road Lahore
District.
Location
Availability of land is easy because of the links of the project director over there. We need 3 acres of land for our dairy farm and it cost Rs. 3, 000, 000.
Availability and cost of land
Approach to site
Approach to the dairy farm is convenient. While coming from Ravi bridge G.T road it is 40 km and coming from Thokar Niaz baig it is 56 km approxiamately. The road is also doubled well carpeted from ravi bridge to Sadhoke. From Sadhoke to Darajke is single road but well built. Any vehicle from car to 24 wheeler truck could approach there easily.
As raw material here mostly, consists of feed and feed will be purchased from all over the Pakistan like magnesium, calcium, rice straw, fodder etc. But the most consumable feed is fodder for which the priority will be to purchase it from surrounding villages.
Source of raw material
Transportation and marketing of finished product
Our finished product has to reach to two targets1. Milk outlets in local markets2. Dairy companies3. Collection companies Milk outlets and dairy companies are easily
accessible in the areas of Lahore, Gujranwala, Sheikhupura and Sialkot. Gujranwala is further 60km through G.T road, Sialkot through Pasrur road is further 50km.
Darajke is in the center of city Kamoke and Muridke and these both cities are the hub for rice cultivation, so the availability of water is in too much excess over here. Upper Chenab canal also passes through these areas. So, the water will be attained by the canal and through boring.
Source and Availability of water
Availability of power and source
Electricity and sui gas is needed in terms of power for the
dairy farm. WAPDA is present over here at Darajke but during summer season load shedding leads to 10-12 hours. So, for this reason we have purchased a 25KVA generator to overcome the load shedding.
Sui gas commercial connection is installed in the dairy farm.
Farm has its own well-designed system for drainage of liquid effluents. As far as cow-dung is concerned, it is used as farmyard manure (FYM). Therefore, it would be sold to fertilizer companies as well as the local farmers. It is also used for household fuel requirements by the villagers.
Facilities of drainage and effluent disposal
Description Area (acres)
Shed for cows 1.57
Cage for calves 0.08
Shed for calves 0.51
Stores for fodder 0.01
Utensils and milk storage 0.01
Servant premises 0.01
Bunker silage 0.77
Total 3 (appx)
Land Requirements
Equipment Cost (Rs)
Maize cutter (1) 450,000
Milking machine (1) 4,000,000
Milk chillers (2) 1,400,000
Generator (25 KVA) 500,000
Pump (1) 350,000
Ventilating fans (4) 300,000
Trolley (1) 150,000
Tractor (1) 600,000
Total 9,000,000
Farm machinery
Description No. Annual Salary (Rs)
Farm Manager 1 420,000
Technician 1 180,000
Workers 8 672,000
Tractor driver 1 84,000
Total 11 1,356,000
Personnel Requirements
Minerals (magnesium, calcium, potassium, sodium, iron)
Fodder crop (wheat straw, grasses, cotton seed hull, sugarcane grass, rice straw, oats, oat straw, maize, millets, corn cobs etc).
Daily consumption/animal: Approximately 50kg fodder per day.
Feed
Artificial Insemination charges: Almost 5000 Rs per animal per year.
Medical Charges (vaccination etc): 2000 Rs per animal per year.
Clinical Charges
Holstein Australian Freisian Sahiwal Jersey
Herd Mix
Financial Aspect
Capital Investment Rs. in actual
Animal Cost (200)40,000,000
Building/Infrastructure 20,000,000Land (3 Acre) 3,000,000Machinery & equipment 9,000,000Pre-operating cost 900,000Office Vehicle 1,000,000Office equipment 100,000Total Capital Costs
73,500,000
Project cost
Working Capital Rs. in actualRaw material Inventory 1,000,000Cash in hand 500,000Total Working Capital 1,500,000____________________________________________________
Total Capital Cost 73,500,000Total Working Capital 1,500,000Total Project cost 84,000,000
Project cost
Investment Rs. in actualPersonal Investment (50%) 42,000,000Bank Financing (50%) 42,000,000Total Investment
84,000,000
Project Financing
No. of Cows * Milk per Cow (Liters) * No. of Days = Total Consumption
200 * 20 * 365 = 1,460,000
Total Milk Production (Liters) * Sales Price (per liters) = Total Revenue
1,460,000 * 40 = 58,400,000
Annual Revenue (est.)
Fodder per Cow (Kg) * No. of Cows * Days in Year = Total Annual Consumption
20* 200* 365 = 1,460,000
Price of Fodder (per Kg) * Total Consumption = Total cost of Fodder
12* 1,460,000 = 17,520,000
_______________________________________________________________
Rs. In Actual
Total Revenue 58,400,000
Raw Material Cost 17,520,000
Gross Profit 40,880,000
Operating Cost 10,500,000
Net Profit 30,380,000
Operating Cost (est.)
Pay Back Period (PBP):
Pay Back period (PBP) = Original Investment / Annual Income = No. of Years
84,000,000 / 30,380,000 = 2.75 years
Return on Investment (ROI):
Return on Investment (ROI) = Average Annual Earning / Average book Investment
(30,380,000 * 10) / 10 = 55% 84,000,000 + 26,000,00
Salvage Value Rs. In Actual
Land 25,000,000
Animals (30,000*200) 6,000,000
Plant & Machinery 4,000,000
Project Viability
Net Present Value (NPV):
NPV = Discounted Inflows – Original Investment
NPV = 164,849,271 – 84,000,000 = 80,849,271
Benefit Cost Ratio (BCR):
BCR = Discounted inflows / Original Investment
BCR = 164,849,271 / 84,000,000 = 1.962
Project Viability
Order of Magnitude Estimates
Farm layout
Shed Cross-section
Process Flow Diagram
Purchase of land
Construction
Housing of cattle
Milking process
Sale of dairy products
Electrical and wiring
Water and gas piping
Installment of
equipment
Purchase of cattle
Construction: The construction contract is done with Izhar construction Pvt Ltd.
Electrical works, gas and water piping is to sub-contracted by the construction company itself.
The total contract has been undertaken at an amount of Rs 20 million.
Sub-contracting
Guestimating Approach
te = (to + 4tm + tp) / 6to = 5 monthstm = 7 monthstp = 9 months
te = 7 Months* This method is used on the based on previous industry information
Time Estimte
Time-line
Feb
15 1 15 1 15 1 1 15151 115
Purchase of land
Construction
MarchApril May June July Aug Sept Oct Nov Dec Jan Feb March
1111 11 115 15151515 151515
Electrical
Water & gas
Equipment installation
Purchase of cattle
Housing of cattle
Milking process
Sale
Zero date – 1st Feb 2011
Ending date – 31st august 2011