Gibe Diary Farm Final Final11

Project Feasibility Study
I. EXECUTIVE SUMMARY
This is a feasibility study for Gibe Diary farm project which is planned to be established at Jimma
town. The main activity of the project is to establish a commercial scale dairy farm project at the
town and supplying different dairy products for the potential customers residing in the town.
The dairy farm project is planned to be established by PLC named Gibe Dairy farm private
limited company comprising of three shareholders. Ethiopia is believed to have the largest
livestock population in Africa and diverse agro-ecological zones suitable for livestock production
and for growing Varity of feed and fodder crops. As the population of the town is drastically
increasing due to high fertility, huge immigration to the town from different area, availability of
different academic institution and being the center for the western of the country’s trade Centre
the demand for diary product is far above the supply of the products. Hence driven by the
availability of this high demand supply gap in the dairy product Gibe Diary farm project is
planned to be established with motives of generating high income to the owners of the project
meanwhile though the supply of quality dairy products to the population of the town, creating
job opportunity, generating income in the form of tax for the government.
The other rationality to invest in this project is its ideal geographical area of the project; Man
power requirement is abundantly available in the area, the climate is very suitable to dairy
production, accessibility of utilities like telephone and water, proximity to the market. It is
planned to be established over five hector land to be acquired on the lease base from Jimma town
Municipality.
The total investment cost of the project is estimated to be Birr 7,512,741.24. The source of fund
is bank loan Birr 5,292,741.24 (70%) and equity Birr 2,220,000.00 (30%). The total project
investment cost includes all the fixed investment and the working capital cost of the project. The
project fixed asset is estimated to be birr 5,120,000.00 and the working and overhead cost is
birr 2,318,330.00 working capital includes production costs such as costs for purchase of cows,
medication, marketing costs, salary, wages, fuel and lubricant, maintenance, insurance, utilities
and travel and per diem.
GIBE DIARY FARM PLC. Page 1

The project expected to generate revenue amounting Birr 8,235,000.00 in the first year of
operation and annual revenue of Birr 21,809,089.17 at the end of the 10th year from the sale of
milk, Bulls and cows.
The projected cash flow indicates the liquidity position of the project over its estimated life span.
Hence, the project under caption expected to generate net cash flow Birr 2,250,729.01 at the first
year of project operation. It is also expected to generate a cumulative cash inflow of birr
2,250,729.01 and birr 79,100,267.13
The projected Balance Sheet indicates the growth or movement of the project's asset at a point in
time. The project’s worth stands at Birr 7,512,741.24 at first year and Birr 81,784,591.60 at the
end of the projected life. The FIRR is one of the viability indicators used in investment decisions.
It represents the return (in percentage terms) earned on an investment over its economic life.
FIRR is 133% before tax and 84% after tax, showing that the project is viable. The project’s
sensitivity to adverse circumstances is viewed from three different scenarios― by increasing its
investment and operating costs and by decreasing its sales revenue all by 10%. Sensitivity
analysis shows that if revenue drops by 10% FIRR before and after tax is 102% and 71%
respectively. If investment costs increases by 10%, FIRR before and after tax is 106% and 77%,
and in case operating costs raises by 10%, the FIRR stands at 86 % and 63% respectively. This
altogether confirms the profitability, liquidity, and viability of the project.
The project has also many benefits for the development of the country by creating employment
opportunity, generating tax for government, transfer advanced knowledge to the local people and
contribution in food security. The project is found to be viable with all aspects of viability
indicators. It is financially profitable, economically and socially desirable therefore, it is wise
decision for financial institution to finance its cost partially.

II. PROJECT BACKGROUND
2.1. Dairy Back ground
This livestock sector has been contributing considerable portion to the economy of the
country, and still promising to economic development of the country. It is eminent that
livestock products and by-products in the form of meat, milk, honey, eggs, cheese, and
butter supply the needed animal protein that contribute to the improvement of the
nutritional status of the people. Livestock also plays an important role in providing
export commodities, such as live animals, hides, and skins to earn foreign exchanges to
the country. On the other hand, draught animals provide power for the cultivation of
the smallholdings and for crop threshing virtually all over the country and are also
essential modes of transport to take holders and their families long-distances, to convey
their agricultural products to the market places and bring back their domestic
necessities. Livestock as well confer a certain degree of security in times of crop failure,
as they are a “near-cash” capital stock. Furthermore, livestock provides farmyard
manure that is commonly applied to improve soil fertility and also used as a source of
energy.
As per the Information of CSA in 2007/08, the Domestic livestock herds are 47.5 million
cattle, 26 million sheep, 21.7 million and goats distributed throughout the country. The
greatest concentration occurs in the highland where 70% of the human populations live.
However, livestock production has mostly been subsistence oriented and characterized
by very low reproductive and production performance.
Dairy Production is an important part of the livestock production systems in Ethiopia.

Cattle, Camel and goats are the main livestock species that supply milk, the cow
contributing 83% of the total milk output. Ethiopia has a total of 6.5 million dairy cows
on average between the year 2004/05to 2008/09. However, the current per capita
consumption of 19 liters is the lower as compared to 27 liters for African countries and
100 liters for world.

Due to huge number of populations and limited disposable income in Ethiopia, average
per capita income is very low that creates lack of effective demand and market outlets
of dairy product. Traditionally, the primary actors are small-scale producers who
supply products to small traders, wholesalers, retailers and consumers. In addition,
farmers’ cooperatives and unions are prime drivers of the rural economy through the
provision of credit, inputs, market outlets and information on markets and technology.
However, this structure is changing due to the emergence of commercial farms and the
introduction of new technologies as well as the growth of supermarkets. This
commodity study therefore tries to focus on the modern commercial farming units with
medium and large scale in the country.
2.2. Brief History Of The Promoters And The Project
Gibe Dairy farm project will establish with the objective of establishing modern
commercial scale dairy farm in the short run with the objective of supplying dairy
products to the peoples residing in Jimma town and surrounding areas. The land used
to establish the farm will be acquired from Jimma town municipality on the lease basis
for 50 years. The required land size is 5 hector and hopefully Jimma town municipality
will grant the land to promote the sector. The farm will be established and registered
according to the civil code of the country. Since the shareholders has enough expertise
in running the business one of the will the General Manager of the project and under
take over all activities of the project.
The shareholders of the project as both business and theoretical skill to run the project
management and believes in hiring necessary manpower for posts needed to be fulfilled
by other qualified professionals. Other supportive staffs in diverse areas will be
recruited from the market since they are available in large number.
2.3. Mission and Objectives of the Project
Mission

Gibe Diary farm Project is established to pursue on creative and innovative approach in
all its endeavors of creating better and stronger links between and among a range of
major actors to supply quality Diary products while maximize the returns for the
shareholders through optimizing its production and give due concern for its employees
and customers.
THE PROMOTER is strongly determined to add value considerably on how best

existing or new business can maintain profitability, sustainability, growth and
expansion in their respective areas of engagement erected on the arduous road leading
to realization of the business.
Objective
Gibe Dairy farm project PLC is established to be engaged in the commercial scale dairy
farm so that it can contribute its part in supplying dairy products in order to fulfill an
increased market demand for this favorite dairy and its product both in domestic and
foreign market.
Specific Objectives of the project
 To generate income for the owner of the project by supplying dairy products so
that it bridge gap between the demand supply gaps existing in the market.
 Contributing in the development of the country by creating employment

opportunity both skilled and unskilled labors on casual and permanent basis.
 Contributing to minimize the country’s dependence on food aid and imports,
and thereby, helping spare the nation sizable foreign currency outflows.
 Upholding the utmost sense of Corporate Social Responsibility so as to help
foster socio-economic harmony, wealth creation and environmental friendly.
 Generating government revenue in form of income tax.
III. MARKET ANALYSIS
3.1. Overview of Market Situation

There are around 250 million cows producing milk across the world. The European
Union is the largest milk producer and has about 23 million dairy cows. This compares
with 10 million in North America and over 6 million in Australia and New Zealand.
Milk production is also on the increase in South-East Asia, including countries not
traditionally noted for their milk consumption, such as China, which now has over 12
million cows producing milk.
In many, and predominantly in developed countries, the dairy market is one of the
most heavily regulated agricultural markets. Government interventions in the domestic
dairy market are most commonly aimed at controlling quantities of production,
establishing minimum prices and guaranteeing farmers’ incomes. Frequently,
governments also intervene through public purchases and storage of oversupply or
apply policies to foster dairy consumption.
Demand for milk and dairy products are influenced by (1) population (2)
unemployment rate and (3) personal disposable income. Generally as population
increases, so does consumption of dairy products. Unemployment rate is also a key
factor affecting the demand for milk and dairy products. As the unemployment rate
declines, consumption of dairy products is expected to increase. When people are
employed, they have the buying power to purchase dairy products for consumption.
The same is true with an increase in personal disposable income.
Socioeconomic and demographic factors like age, family size and composition and
education also affect consumption. But it is often difficult to measure.
A study by the Ministry of Agriculture and Rural Development in March 2011 indicated
that the current per capita cow milk consumption in Ethiopia is 19 liters per annum
which includes consumption in both pasteurized and whole milk form. The per capita
consumption is lower as compared to 27 liters for African countries and 100 liters to
world per capita consumption. This per capita milk consumption is utilized together

with population statistics obtained from CSA to obtain total cow milk consumption in
the country. Total cow milk consumption has been growing steadily over the past five
years at an average growth rate of 2.63% per annum which is mainly due to the rate of
increase of population.
3.2. Past Supply and Present Demand
Ethiopia's Livestock population is among the largest in Africa. However, despite large
cattle population, the diary industry in Ethiopia is not yet developed. According to
International Livestock Research Institute’s “Dairy Development In Ethiopia” 2003,
milk production system in Ethiopia can be broadly categorized into urban, peri-urban
and rural milk production systems, based on location. Both the urban and peri-urban
systems are located near or in proximity of Addis Ababa and regional towns and take
the advantage of the urban markets.
The urban milk system consists of 5,167 small, medium and large dairy farms
producing about 35 million liters of milk annually. Of the total urban milk production,
73 % is sold, 10% is left for household consumption, 9.4 % goes to calves and 7.6 % is
processed into butter and ayib (cheese). In terms of marketing, 71% of the producers sell
milk directly to consumers. The peri-urban milk system includes smallholder and
commercial dairy farmers in the proximity of Addis Ababa and other regional towns.
This sector controls most of the country’s improved dairy stock. The rural dairy system
is part of the subsistence farming system and includes pastoralists, agro pastoralist, and
mixed crop-livestock producers mainly in the highland areas. The system is non-market
oriented and most of the milk produced in this system is retained for home
consumption.
As of 2012, the population of Jimma is estimated at about 207,573 this shows that per
capita consumption of milk is about 7.6 Kg/ year which is much less than the world per
capita average of about 100 Kg/ annum.

Considering the city’s population size in 2013 which is 216,706 and a per capita
consumption of 20 Kg/ year the demand for milk in 2013 is estimated at 1,647 tones
Therefore, the present supply demand gap is estimated at 3,486 tones.
3.3. Projected Demand
The demand for milk depends on many factors including consumer preference,
consumer’s income, population size, price of the product, price of substitutes and other
factors. In general, increasing population growth and rising real income are expected to
expand the demand for milk and milk products.
Population in Ethiopia is estimated to grow at 2.9% per year while the urban population
increases at a rate of 4.4 %. Therefore, increase in population growth and consumer
income in the future is expected to increase milk consumption. A growth rate of 5% is,
hence, assumed to be reasonable to execute demand projection for milk in Jimma.
A higher demand of milk is exists in Jimma town for industrial and consumer buyers.
And different documents and observations indicate there is higher gap between the
demand and supply of milk in Jimma town. The number of dairy farms in the town are
not serving the existing demand due to the fact that milk is demanded for all types of
customers; industrial-hotels, restaurants, cafeterias and households consumption. The
current total daily milk production is estimated about 3,324 liters from the 53 farms in
the town. The total supply per annum is 1,213 tones.
Demand projection for milk (tones)
Year Projected Demand Existing Supply Demand Supply Gap
2014 1,647 1,213 434
2015 1,729 1,213 516
2016 1,815 1,213 602

2017 1,906 1,213 693
2018 2,001 1,213 788
2019 2,101 1,213 888
2020 2,206 1,213 993
2021 2,316 1,213 1,103
2022 2,432 1,213 1,219
2023 2,554 1,213 1,341
2024 2,682 1,213 1,469
2025 2816 1,213 1,603
3.4. Pricing, promotion and Distribution
The price of raw milk varies between Birr 14 and 15 per liter. For the envisaged dairy
farm a farm-gate price of Birr 14 per liter is recommended. It is to be set based on cost
and consumer base pricing strategies. Intra - urban producers mostly sell liquid milk
directly to consumers, except the small percentage sell to caterers ( hotels, bars, etc).

The distribution strategy of the firm is advertizing (FM radio, billboard, ceremony at
start and personal selling).
The distribution strategy of the firm is direct distribution strategy and sometimes with
branches and shorter outlets in the town.
The project is planned to market its product in the markets availed nearby the project.
Most of the project product will be sold in Jimma town where the company can get
more than enough customer at least for short run production operation.
Initially the output will be sold to different retailers, cafeterias and academic institution
in the town. Besides the milk which is the primary output of the project we also planned
to sell bulls and cows in excess of the projects requirement.
IV. LOCATION, SITE AND ENVIRONMENT ANALYSIS
4.1 Location and Site Analysis
The location of the main office of Gibe dairy farm plc is planned in Oromia region
Jimma zone Jimma town specifically around Agaro ber with a 5 hector area. And the
main sites or branches are planned to distribute in five directions namely kochi, farmid,

merkato and around bus station of the town and there may be future sites in Agaro and
surrounding weredas.
The project will be established at Jimma town which is located 352Km south-west of
Addis Ababa. The town's geographical coordinates are approximately 7°41' N latitude
and 36° 50'E longitude. The town is found in an area of average altitude of about 1780 m
above sea level. It lies in the climatic zone locally known as Woyna Daga which is
considered ideal for agriculture as well as human settlement. The town is generally
characterized by warm climate with a mean annual maximum temperature of 30°C and
a mean annual minimum temperature of 14°C. The annual rainfall ranges from 1138
mm to 1690 mm. Maximum precipitation occurs during the three months period, June
to August, with minimum rainfall in December and January. From a climatic point of
view, abundant rainfall makes this region one of the best watered of Ethiopian highland
areas, conducive for agricultural production.
This location is selected due to
The suitability of climate of the area for cattle reproduction
Easily access for feeds
To get technical support from Jimma university college of agriculture and

veterinary medicine.
To closely access customers in Jimma town
Easily accessible for raw materials
To get the required infrastructures
To use the waste and urea of the chattels for fertilization so as to protect the
environmental wellbeing and collect revenue.
4.2. Environmental Impact Analysis
Despite the project uses some medications to prevent diseases may occur during the
production period, there is no such highly intoxicated medicals used that adversely
affect the environment.

V. PROJECT OPERATION AND ENGINEERING
5.1. Dairy Farm Process

5.1.1. Cattle Breeding and Mating System
A desirable mating system determines which male will be allowed to mate with which
female or group of females among the available breeding stock. The mating systems
which may be used on a dairy farm are:

 Inbreeding
 Out breeding (Cross breeding & Grading)
Inbreeding is the mating of animals that are closely related to each other. This system
can be utilized with some advantages if practiced with heavy culling and selection.
Although inbreeding lowers milk production, but a small amount of inbreeding is
involved in pure breeding for keeping the foundation cattle group uncontaminated
from crossing with ordinary or less useful livestock. When non-relative cattle of the
same breed are mated together, the system is termed out breeding. Out breeding
combined with selection is an important device for improvement in total production of
herd.
This system brings about immediate improvement in milk production in next

generation. The offspring consequently produced will have at least 50% heritage of
male. The females off springs of the cross are again mated with Purebred bull. In the
second-generation females, the inheritance of the male will be 75%.The process is
repeated generation after generation so that the inheritance of the purebred male
reaches approximately 99% by the sixth or seventh generation in the up graded females.
Very encouraging results have been obtained through artificial insemination (AI).
5.1.2. Lactation Period
The lactation period is the period during which the cattle yield milk. As per a specific
study 80% of the total number of cows considered for analysis, gave the following data.
The Calving interval (The interval between two calvings) in a cow has 15-16 months.
Generally the lactation period of cows is 300 days. The calving interval in cow has 13
months. The average milk yield of cow is estimated at 30 x 300 = 9000 liters per
lactation.

A cow will produce large amounts of milk over her lifetime. Certain breeds produce
more milk than others; however, different breeds produce within a range of around
4,000 to over 10,000 kg of milk per annum. Production levels peak at around 40 to 60
days after calving. The cow is then breed. Production declines steadily afterwards, until,
at about 300 days after calving, the cow is 'dried off', and milking ceases. About 360
days later, one year after the birth of her previous calf, a cow will calve again. The
average amount of milk in the Life time of the cow is measured by giving birth. On
average one cow give milk up to the birth of 7or 8 calves. In order to maintain 100 cows
giving milks the project is planned to sale the excess of the cows.
Gibe Diary Farm

Production plan
sr project year
no Description 1 2 3 4 5 6 7 8 9 10
Stock from previous 1 1 1 1 1 1 1 1
1 year - 81 00 00 00 00 00 00 00 00
2 Cows Purchase 60 - - - - - - - - -
3 Death rate 10% 6 11 10 10 10 10 10 10 10 10

4 Remaining Cows 54 70 90 90 90 90 90 90 90 90
5 Number of borne Calf 54 70 90 90 90 90 90 90 90 90

% of calf to be cows
6 50% 27 35 45 45 45 45 45 45 45 45
7 Bulls for sale 27 35 45 45 45 45 45 45 45 45

1 1 1 1 1 1 1 1 1
8 cows before sale 81 05 35 35 35 35 35 35 35 35
9 Cows for sale - 5 35 35 35 35 35 35 35 35

Net remaining cows at 1 1 1 1 1 1 1 1 1
10 end of the year 81 00 00 00 00 00 00 00 00 00
Feed
The ration is allowance of nutritionally balanced feed in 24 hours. It includes dry matter
and concentrate to increase animal productivity. Wheat straw is also used as dry
roughage along with green fodder. About 1 kg of concentrate feed is required for the
production of 2liters of milk. These feed ingredients when mixed according to feed
formula will provide adequate energy according to energy and protein requirements of
animal in production. Mineral mixtures are good source of energy and increase the
animal productivity to give milk. The fodder yield (except multi cut Mott Grass which
yields 247.12-307.66 tones/ hectare in 4 to 6 cuttings per year) varies between 24.7 tons
to 98.84 tons per hectare depending upon the fertility of land, quality of seed and
application of fertilizer. There is no fixed fodder requirement for the animals but a rule
of thumb says that an animal needs daily fodder equal to 9%-10% of its body weight.
Cow consumes about 40-45kg fodder per a day.
5.2. Investment requirements
5.2.1. Building and Civil Works
Constructions that ensure smooth operation of the project are planned. These include
farm store and farm office and are estimated to Birr 3,300,000.00.

Sr. Description Unit Cost Quantity Total Cost

No.
1 Cow Pen 800,000.00 1 800,000.00
2 Heifer pen 750,000.00 1 750,000.00
3 Calves pen 500,000.00 1 500,000.00

4 Toilet 200,000.00 1 200,000.00
5 Office 350,000.00 1 350,000.00
6 Store 400,000.00 1 400,000.00
7 Staff Residence 300,000.00 1 300,000.00
Sub- Total 3,300,000.00 - 3,300,000.00
Milking House
 This building comprises milking area, dressing area and temporary milk
store.
 Its floor must be smooth finished, but non slippery reinforced concrete slab.
The super structural framework should be firm and the wall should be at
least both sides pointed.
 The roof should at least be CIS with eucalyptus truss, but steel truss with
EGA sheet may also be used for large spans.
 It must also have sufficient openings for the penetration of sufficient light and
ventilation.
 The milking platform and the pit need to be carefully designed.
 There should be an inlet ramp at the entry and an outlet ramp at the exit.
 In general the platform height should be between 0.85 – 1.00 m and the width
should also be between 1.60 – 1.80 m.
 The floor of the work areas should slope (2% - 4%) towards the milking
platform and the platform overhang generally between 0.10 – 0.45 m.
Pens / Barns
This includes cow pens, calves pen, heifer’s pen, cattle pen and isolation pen. Minimum
requirements for the under listed buildings: masonry foundation capable to bear the

super-structural load, both sides pointed HCB wall , CIS roofing over eucalyptus truss,
door with metal frame and cement screed flooring. The bedding floor shall be graded
by 2% towards the urine and dung channel. This channel, covered by metal grid is
usually between 50 – 80 cm wide and deep.
Vehicle
The vehicle is needed for transportation of raw materials, workers and farm manager.
The project is planned to acquire one pick up vehicle, Isuzu NPR, and motor cycle to
facilitate the transportation of project produce. The total vehicle cost is estimated to
be 1,520,000.00
1 Isuzu NPR 760,000.00 1 760,000.00
2 Motor Cycle 40,000.00 1 40,000.00

pick up 720,000.00 1 720,000.00
3
Sub- Total 1,520,0 1,520,000.
00.00 00
Generator
In order to mitigate lack of electric power, generator that worth Birr 300,000.00 is
planned to be procured.
1 Generator 300,000.00 1 300,000.00

Sub Total 300,000.00 - 300,000.00
Utility
The establishment of the project is also justified by the readily preparation of

infrastructure facilities, such as electric power, water, and other communication services

which are crucial for the proper function of the project. Electricity, water, road to the
market is the utilities required by the dairy farm. Electric power is an important
infrastructure in terms of running the machineries and for lighting purposes too. The
electric power is supplied by the city Ethiopian electric power authority and in addition
power generator will be purchased for any power interruption. The other utility
required by the project is water for drinking the cows and cleaning and clearing the
ward.
Office Furniture and Equipment
Description Unit cost Quantity Total Cost

Table 2,022.96 9 18,206.64
Managerial chair 1,400.00 5 7,000.00

Swivel Chair 1,435.82 5 7,179.10
Secretary
Guest Chair 681.68 10 6,816.80
Computer 10,000.00 3 30,000.00
Printer 5,208.70 1 5,208.70
Total 74,411.24
5.3. Raw Material Study
5.3.1. Feed Resource
It is one of the major inputs that are necessary for dairy production and feed cost cover
around 50-60% of the total running cost of the dairy business( it does not include
vaccine cost). Feed for dairy animal are classified as green fodder (grazing), crop
residue, improved feed, hay, agricultural and industrial by-products, and other feeds.
Green fodder is simply pasture grasses; Crop residue includes harvested by-products
(straw and chaff of cereals and pulses, etc.); improved feed is like alfalfa; hay includes
any type of grass, clover etc. cut and dried as fodder; and Finally industrial by-products

are like oil cake (rapeseed cake, nueg cake, sunflower cake, etc.), bran, and brewery
residue.
i. Source and Market arrangement for feed resource

Most of feed resource producer factories are found in and around Addis Ababa and on the
Deberazaitet-modjo road. Regarding to the market arrangement ,customers( dairy farmer ),are
buy the feed at the gate of the factories and they cover there transportation cost by
themselves.
ii. Feed requirement for lactating cow (dairy cow)
Different sources indicates that the daily concentrates supplement for

lacting cows is not exceed 6 kg / head / day( for cross bread and exotic)
and the dry feed also ranges from 9-11 kg per day. On the other hand,
 0.5 kg of concentrates required to produce for 1 kg of milk per day
 2 kg of concentrates required for maintenance of the cow per

day/cow
 2 kg of concentrates required for pregnant cow as a challenge

feeding per day
iii. Water
Water is one of the major inputs required in dairy production system. The average daily
water intake for milking cows (exotic and cross bread) is 37-45 liter per day and plus 5
liters per day for maintenance purpose. If a cow is not lactating water requirement per
day is 37-45liters. The calf and heifer require 20 liter / day/head.
iv. Medication
A number of parasitic, bacterial, fungal and viral diseases and nutritional deficiencies
which are prevalent in the country affect the productivity and reproductive efficiency of
dairy cattle and make individuals insecure to be involved in and invest on dairy

production specially using cows with exotic blood. Among these diseases, venereal
diseases have a direct effect while and nutritional deficiencies and other infectious
diseases play an indirect role in hampering the reproductive efficiency of dairy cows.
Moreover, extensive areas in the humid zone are Tse-tse infested and hence are
unfavorable for livestock production.
VI. ORGANIZATION, AND MANPOWER
6.1. Legal Form of the Organization

The dairy farm project is planned to be established by PLC named Gibe Dairy farm
private limited company comprising of three shareholders.
6.2. Organizational structure

6.3 Man Power Requirement

Account
Finance and marketing
Since dairy production is farming, it is labor intensive. Man power is an essential factor in theDep’t Section
successful production of agricultural farming. Especially The establishment of commercial dairyPurchase &
Supply Section
farming project needs the availability of skilled and unskilled labor with its land holding.

Man power requirement for Gibe Dairy Farm Project PLC
Sr.No Position No. Monthly salary Total

required
1 General Manager 1 5,000.00 5,000.00
2 Administration head 1 2,000.00 2,000.00
3 Secretary 1 1,200.00 1,200.00
4 Drivers 2 1,320.00 2,640.00
5 Messenger 1 550.00 550.00
6 Office cleaner 1 500.00 500.00
7 Guards 2 500.00 1,000.00
8 Purchaser 1 1,100.00 1,100.00
9 Accountant 1 1,000.00 1,000.00
10 Cashier 1 1,500.00 1,500.00
11 Dairy farm Forman 1 1,200.00 1,200.00
12 Animal health expert 1 1,500.00 1,500.00
13 Sanitation and safety expert 1 1,200.00 1,200.00
14 Marketing officer 1 1,500.00 1,500.00

15 Cow milking man 2 600.00 1,200.00
16 Feed & water supplier to cow 2 600.00 1,200.00
17 Cow ward cleaner 2 600.00 1,200.00
Monthly Salary 22 21,870.00 25,490.00
Yearly Salary 305,880.00
6.4. Project Implementation Plan
The major activities to be undertaking on this project are building and construction acquisition of
vehicles, purchase of cows, Taking care for cows, marketing and the like.
Activities Sept. Oct. Nov. Dec. Jan. Feb. March April May June July Aug

Land
acquisition,
license
arrangements
and promotion
Bank loan
Arrangement
Building
construction
Acquisition of
equipment,
vehicles
Cows Purchase
Operational Conti.
activities
Marketing Conti.
6.5. Key Success and Risk Factors
i. Key success factors

The key factors for dairy industry or market are:

 Population growth: the high rate of population increase is reckoned to affect

dairy processing industry development. The demand for dairy products directly
related with the annual population growth.
 Continuous innovation by adopting new technology and adapting to changing

consumer demands.
 Consumer base with sufficient disposable income to create and drive the market
for milk and dairy products – or alternatively – accessible export markets.
 The availability of the human, animal, natural and material resources to secure
the production of milk.
 The existence of the requisite infrastructure for an efficiently operating

processing facility.
 Presence of institutional support including research and training institute to be

supplied by up-to-date information, training and technical assistant.
 Efficient and effective Product distribution strategy.
ii. Key Risk Factors

 Sudden climatic changes as cyclical drought that repeats itself every 4 to
5 years which adversely affects livestock - the resource base of the
industry;
 Sudden outbreak of livestock Epidemic diseases,
 Inefficient and ineffective distribution strategy.
 No concern for profession and planning.
iii. Opportunities and Threat
Opportunities
 Increasing population and demand. Growing population and high birth

rates will have a direct and unquestionable impact on demand.

 Strong tradition of dairy product consumption habit.

 Huge cattle population
 The existence of diversified agro-ecological areas for animal production
 Large trainable labor force and relatively low wage than other competing
countries
 Conducive business environment with facilitated institutional support
 Strong government policy that support agro-processing industries.
v. Threats
 Poor quality control.

 Inadequate number of grade (exotic) cattle in the country which could be a
reason for insufficient supply of the raw milk for the industry.
 Poor infrastructure which has been an obstacle to expand network for collection
of milk by the firms operating in the industry.
 The constraints such as unavailability of improved feed in adequate faced by the
dairy cattle farming sector which has a direct link with the dairy processing
industry by serving as a source of raw milk.
 The low productivity of the dairy cattle farming sector.
 Very strong health requirement for food and drinking item in international
market
 Low productivity levels leading to uncompetitive pricing.
 Less quality of veterinary service
VII. FINANCIAL ANALYSIS

7.1 Investment out lay
The investment out lay of the project includes building and construction cost,
acquisition of vehicles and equipment costs and working capital requirement for the
project. Total investment cost of the project will be Birr 7,512,741.24. The source of
finance is bank loan and owns equity contribution.

Gibe Diary Farm
Total Financial Requirement and Source of Fund
Investment costs
Source of Fund
Description
Total Equity Loan
Building &
construction 3,300,000.00 400,000.00 2,900,000.00
Vehicles 1,520,000.00 1,520,000.00
Generator 300,000.00 300,000.00 -
Office fur. & eqp. 74,411.24 74,411.24
Working capital 2,318,330.00 2,318,330.00
Total 7,512,741.24 2,220,000.00 5,292,741.24
Percentage 100% 30% 70%
7.2. Revenue Estimates and Operating Costs

7.2.1. Revenue Estimate
The project expected to generate revenue amounting Birr 8,235,000.00 in the first year of
operation and annual revenue of Birr 21,809,089.17 at the end of the project year from
sale of the production.
7.2.2. Operating Cost
This cost basically includes costs of purchase of cows, medication, animal feed, salary,
wages, fuel and lubricant, maintenance, insurance, utilities and travel and per diem are
operating expense. These costs account a total of Birr 2,318,330.00 in the first year and
Birr 2,854,324.47 at the end of the projected year.

7.3. Projected Financial Statements
There are three financial statements which indicate the profitability, liquidity and net
worth of a given project. These are the income statement, the cash flow projection, and
the balance sheet.
7.3.1. Profit and/or Loss forecast

The projected profit and/or loss statement indicates that the project is going to be a
profitable venture through its life. The project’s net profit at first year and at the end of
the project year is Birr 3,080,929.04 and Birr 11,979,705.32 respectively. This shows that
the business is highly income generating and profitable venture.
7.3.2. Cash Flow Forecast

The projected cash flow indicates the liquidity position of the project over its estimated
life span. Hence, the project under caption expected to generate net cash flow and
cumulative cash flow amounting Birr 2,250,729.01 in the first year and at the end of the
year the project expected to generate Birr 2,250,729.01 & Birr 79,100,267.13 net and
cumulative cash flows respectively. This can be an evidence for the project to meet its
obligations since it has a positive liquidity position throughout the projected year.
7.3.3. Balance Sheet Forecast

The projected Balance Sheet indicates the growth or movement of the project's asset at a
point in time. The project’s worth stands at Birr 9,227,029.13 at first year and Birr
81,784,591.60 the end of the projected life.
7.4. Viability
The FIRR is one of the viability indicators used in investment decisions. It represents the
return (in percentage terms) earned on an investment over its economic life. FIRR is

113% before tax and 84% after tax, showing that the project is viable. The project’s
sensitivity to adverse circumstances is viewed from three different scenarios― by
increasing its investment and operating costs and by decreasing its sales revenue all by
10%. Sensitivity analysis shows that if revenue drops by 10% FIRR before and after tax
is 102 % and 71% respectively. If investment costs increases by 10%, FIRR before and
after tax is 106% and 77%, and in case operating costs raises by 10%, the FIRR stands at
86 % and 63% respectively. This altogether confirms the profitability, liquidity, and
viability of the project.
7.5. Socio Economic Benefits of the Project

The establishment of this Dairy farm would have so many socio-economic benefits. The
benefits of economic development are often more immediate, important, and obvious to
the societies and the project owner. In addition to supply of the domestic needs, the
project can create employment opportunities, generate tax revenues for the government
and also the project has a forward linkage effect with food industries.

Gibe Diary Farm Final Final11

Uploaded by

Copyright:

Available Formats

Gibe Diary Farm Final Final11

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Gibe Diary Farm Final Final11

Uploaded by

Copyright:

Available Formats

Project Feasibility Study

GIBE DIARY FARM PLC. Page 1

GIBE DIARY FARM PLC. Page 2

II. PROJECT BACKGROUND

2.1. Dairy Back ground

Dairy Production is an important part of the livestock production systems in Ethiopia.

GIBE DIARY FARM PLC. Page 3

2.2. Brief History Of The Promoters And The Project

GIBE DIARY FARM PLC. Page 4

THE PROMOTER is strongly determined to add value considerably on how best

Specific Objectives of the project

 Contributing in the development of the country by creating employment

3.1. Overview of Market Situation

GIBE DIARY FARM PLC. Page 6

3.2. Past Supply and Present Demand

GIBE DIARY FARM PLC. Page 7

3.3. Projected Demand

Demand projection for milk (tones)

Year Projected Demand Existing Supply Demand Supply Gap

2014 1,647 1,213 434

2015 1,729 1,213 516

2016 1,815 1,213 602

GIBE DIARY FARM PLC. Page 8

2017 1,906 1,213 693

2018 2,001 1,213 788

2019 2,101 1,213 888

2020 2,206 1,213 993

2021 2,316 1,213 1,103

2022 2,432 1,213 1,219

2023 2,554 1,213 1,341

2024 2,682 1,213 1,469

2025 2816 1,213 1,603

3.4. Pricing, promotion and Distribution

GIBE DIARY FARM PLC. Page 9

IV. LOCATION, SITE AND ENVIRONMENT ANALYSIS

4.1 Location and Site Analysis

GIBE DIARY FARM PLC. Page 10

This location is selected due to

The suitability of climate of the area for cattle reproduction

Easily access for feeds

To get technical support from Jimma university college of agriculture and

To closely access customers in Jimma town

Easily accessible for raw materials

To get the required infrastructures

4.2. Environmental Impact Analysis

GIBE DIARY FARM PLC. Page 11

V. PROJECT OPERATION AND ENGINEERING

5.1. Dairy Farm Process

GIBE DIARY FARM PLC. Page 12

 Out breeding (Cross breeding & Grading)

This system brings about immediate improvement in milk production in next

5.1.2. Lactation Period

GIBE DIARY FARM PLC. Page 13

Gibe Diary Farm

3 Death rate 10% 6 11 10 10 10 10 10 10 10 10

GIBE DIARY FARM PLC. Page 14

5 Number of borne Calf 54 70 90 90 90 90 90 90 90 90

7 Bulls for sale 27 35 45 45 45 45 45 45 45 45