The livestock plays an indispensable role in the traditional agriculture and largely subsistence economy, the sub-sector contributes about 15.3% of the total agricultural sector. The sector is undergoing a massive transformation fueled by high demand for meat and milk and milk product, which is likely to double in the past years and near future, the major forces behind this, is the combination of population growth, urbanization and income growth. Are you looking for funding for your Dairy farming project or to scale up your existing business? Are you are a non-government organization and want to develop your own sample proposal on Dairy Farming. This project will surely help you. This proposal is designed to produce milk and milk processing products for local markets and to maximize profit. The goal of the project is to contribute towards the economic development through using the existing investment opportunities in the Country and taking advantage of the expressed policy incentives that emphasize on greater commercialization of agriculture and enhancing private sector development with the specific objectives like introducing modern dairying and milk processing technologies, creating job opportunity for skilled, unskilled local citizens and market linkages with small holder farmers.
INTRODUCTION OF THE PROJECT
Economic Background and Potential in Relation to the Proposed Investment
Livestock production is an integral part of Ethiopian’s agriculture sector and plays a vital role in national economy. At present, livestock is contributing about 49.1% to the agricultural sector and 11.4 per cent to the GDP. Role of livestock in rural economy may be assessed by the fact that 30 to 35 million of the total rural population is engaged in livestock farming, having 2 to 3 cattle and 5 to 6 sheep/goats per family deriving 30 to 40 per cent of income from it. Most farmers (about 75%) have small land holdings on which most of the livestock population is concentrated. Dairy farm also creates different opportunity which includes; livestock genetic resources and production system, access services and land inputs, agricultural extension services and technologies, income generation and employment opportunities.
The future prospects of dairying seems to be bright because the challenges so far indicated and the government is attempting them to address through polices and strategies. Thus, dairy farmers are on the way to getting accesses to services and inputs that could help promote dairy production and productivity. This mainly include feed and feeding, breeding services, credit extension, training veterinary services and appropriate marketing system that address costumers demand. Since dairying is labor intensive, it promotes the motto of government policy in creating employment opportunities at house hold level. This improves employment, income and nutrition values of the family of the producers and the other demanders/consumers. The dairy industry would address and serve as one of the major instrument of the governments’ policy in achieving food security. This in turn promotes dairy production due to the attention of given by the government. The development of infrastructure like, transportation would help change the traditional thinking of fresh milk not for sale other than exclusively intended for human consumption among the rural population. On the other side when the rural farmers expose themselves to the market, their income will increase and be in position to buy non-market food types in exchange and there by improve their living standard. Since the country is an agrarian economy, dairying is much expected to be one of the major targets of the prospective agro- processing industries in the country.
The dairy industry is highly significant and it plays a great role in creating rural employment in highlands and pastoral/agro-pastoral areas (livestock Cooperative Agreement, 2010). Livestock provides an enormous service in the Ethiopian household economy by providing food, input for crop production and soil fertility management, cash income as well as in promoting savings, fuel, social functions, and employments. With this wide array of functions, livestock can be considered as a vehicle for improving food security and better livelihood of the rural population.
The huge and diverse cattle population, varied and favorable agro-ecology for dairying, increasing demand for dairy products in urban and peri-urban areas, longstanding culture of dairy products consumption, and favorable policies are indicators of the importance and potential of dairying in the country. The policy and strategies of the federal and regional governments encourage investors to fully participate in owning all large and medium scale business in the agriculture sector. The strategies focus on selected high-potential areas and modern agricultural technologies to be prioritized export livestock products like cattle, sheep and goat fattening and dairy products. The Ministry of Agriculture and Rural Development has also identified agricultural investment areas and prioritized investment areas for the focused interventions.
Ethiopia is ecologically suitable where there is enough manpower, potential of good market, well fertile soil to produce animal feed and suitable climatic condition for the production of good quality and quantity products. Milk production is given priority over other livestock production systems due to ecological conditions (rainfall, temperature, and soil types are conducive to forage production) and the population pressure that favor commercial dairy production and milk processing.
In view of this background, xxxx has been interested to invest on the dairy farming and milk processing in xxxx Town Administration.
Project Goal and Purpose
The overall goal of the project is to contribute towards the economic development of Ethiopia through using the existing investment opportunities in the Country and taking advantage of the expressed policy incentives that emphasize on greater commercialization of agriculture and enhancing private sector development.
The main objective of the said project is to produce milk and milk processing products for local markets and to maximize profit so as to sustain the project.
In line with this the following are specific objects of the project.
To introduce modern dairying and milk processing technologies to the surrounding locality.
To create job opportunity for skilled and unskilled local citizens.
To create market linkages with small holder farmers in the town and its surroundings etc
Estimated Cost of the Project
- At the beginning of the production year the project will have the following costs
- Capital xxxx
- Working Capital xxxx
- Total cost xxxx
- The proposed project can be setup in Southern Nation, Nationalities and people Regional State.
- Project Component
- Total production area: xxxx Square meter
- Types of investment Diary Farming and milk processing
- Estimated production
Project Component
- Total production area: xxxx Square meter
- Types of investment Diary Farming and milk processing
- Estimated production
Expected Beneficiaries:
- Permanent employee: 30
- Temporary employee: 20
Socio-Economic benefit
The project will create additional means of employment for both skilled, semi-skilled and casual laborers in the area.
Aside from the increase in income of the owner, the project would activate the economy especially in the continuous production of milk and milk products. It will also encourage entrepreneurs in the country to engage in milk processing and milk production.
The expected increase income of the permanent and temporary employees’ beneficiaries would eventually contribute to good health and nutrition in the family and allow them to access better education for their children, improve sanitation and provide for the necessities in the household.
Features of the Agriculture Sector
The agricultural sector greatly influences economic performance in Ethiopia. Approximately 95 per cent of agricultural GDP and 85 per cent of employment, and 90 per cent of exports. Cereals dominate Ethiopian agriculture, accounting for about 70 per cent of agricultural GDP. Over the past decade, cereal production has more than doubled to nearly 15 million tones, as a result of horizontal expansion and increased yields.
The agricultural sector has performed strongly over most of the last decade, but there is still substantial potential to improve productivity and production. Since 1996/97 the average growth rate of the agricultural GDP has been about 10 per cent per annum, and since 2004-05 the sector has been reported to have expanded at around 13 per cent per annum. On the other hand, the share of agriculture in GDP declined from 53 per cent to 43 per cent between 1995/96 and 2008/09, reflecting strong growth in other sectors of the economy. The contribution of livestock and livestock products to the agricultural economy is significant, accounting for 40% excluding the value of draft power, fuel, manure and transportation. They are a source of income, which can be used by rural populations to purchase basic needs and agricultural inputs. Livestock comes second to coffee in foreign exchange earnings. Its contribution can equally well be expressed at household level by its role in enhancing income, food security and social status. A country endowed with such enormous livestock resources and climatic situations conducive to livestock production should not be allowed to continue importation of dairy products and other livestock products. Self- sufficiency in cattle, sheep and goat meat and dairy products should be encouraged to optimize the use of available resources to fill the gap between demand and supply. To bridge this gap, it is necessary to design appropriate and sustainable Milk Production [Dairy farming] development strategies based on ‘felt’ needs of the public sectors.
The Government, with strong support from development partners, has made different strategic interventions to enhance the delivery of improved production technologies and support services thereto. Over the past several years, the Ethiopian Government has demonstrated strong commitment to agriculture and rural development through allocations of more than 10 per cent of the total budget. Despite these achievements, however, the Government recognizes much remains to be done in the agriculture sector to realize the vision to become a middle income country by 2020.
Beneficiaries
The project can create permanent employment for 30 persons. The establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports. The project will create forward linkage with the agro industry sub sector and contribute to the mitigation of the adverse environmental impact created by the project. The project will also generate income for the Government in terms of payroll tax.
Past and present intervention
Ethiopia has the largest livestock population in Africa estimated at about 90 million tropical livestock units. The major production systems are: Settled Mixed Crop–Livestock System and Pastoral and agro-pastoral production systems. There are other production systems that are not currently practiced widely but have a future are: Ranching and Urban and peri-urban (landless) Meat and Milk dairy farming system. Ethiopia’s livestock resources consist of 53.9 million cattle, 24 million goats, 25 million sheep, 1 million camels, 1 million horses. Mules and 6 million donkey.
Production is estimated at 97,000 ton of beef, 510,000 ton (510 million liters) of cow milk, 41,000 of sheep meat, 16,000 ton of goat meat, and limited amounts from various other animals. Per capita meat and milk consumption is estimated at just 6 kg per capita and 19.16 k/g per capita respectively, which is below the FAO minimum per capita requirements of 50 kg and 200 litter of meat and milk, respectively. It is expected that rural consumption is lower than urban, reflecting different levels of income. Livestock husbandry is becoming increasingly common and it has been argued that livestock is increasingly replacing other crops production as a major asset and source of income for rural livelihoods.
The livestock plays an indispensable role in the traditional agriculture and largely subsistence economy, the sub-sector contributes about 15.3% of the total agricultural sector (CSA, 2015). The sector is undergoing a massive transformation fuelled by high demand for meat and milk and milk product, which is likely to double in the past years and near future, the major forces behind this, is the combination of population growth, urbanization and income growth.
In the recent past, there is a greater emphasis on sustainable beef production through private sectors cattle, sheep and goats beef fattening and milk production which has its focus on the long-term health of the environment while maintaining the economic viability of the farm and addressing consumers’ concern about beef and milk they eat.
However, milk production is very low and is estimated at about 1.2 million tons per annum, increasing at a rate of 1.2% for milk produced from indigenous stock and 3.5% for milk produced from improved stock Conversely, the human population of Ethiopia is estimated at about more than 90 million, increasing at a rate of 3% per annum; values projected for the year. To this effect caput consumption of milk is 19 kg/year; this value is lower than African and world per capita averages, which are 27 kg/year and 100 kg/year respectively. Accordingly, about 495 thousand tones and 5 million tons of milk are required annually to feed the Ethiopian population as per the African and world averages, respectively. This indicates the probability of a wide gap between the current supply of and the demand for milk in Ethiopia.
Today the government support the private sectors by the continuing the development of agro- industrial estates in urban areas and small towns, and to provide the necessary locations for large and medium-scale livestock industrial development.
JUSTIFICATION OF THE PROJECT
There are a number of reasons that led xxxx to opt for this specific project, Firstly, a country endowed with such enormous livestock resources and climatic situations conducive to livestock production. Secondly, the Country is among the first producers of livestock in the Africa and has a well-established linkage to the major global markets,
Increasing population, urbanization and income and trend towards consuming more animal products
Ethiopia has opted to raise milk production through genetics, feed and health interventions to improve traditional family cow dairy production and expand and improve specialized dairy production units over the GTP II period (2015-2020);
Dairy farmers in urban, per-urban and rural dairy production system demonstrated strong interest to expand dairying as one of the means of income generating activity. This is a great opportunity for the entrants to collect and process raw milk into different milk products, and supply for domestic and export markets.
There is political stability, conducive investment climate, government policy reforms, and market orientation that is favorable for dairy investment.
The future of the dairy sector in Ethiopia is more positive especially taking the domestic market growth, potential and production enhancement initiative in the country is also another important factor to initiate the project. .
This helped XXXXX to choose Dairy Farming and Milk Processing, which have a vast market in the region and the country as whole.
Support for the Project
There are some supportive roles expected from public and non-governmental organizations that are supporting to ensuring smooth and effective implementation as well as long-run sustainability of the anticipated project.
Organizations like XXXXX livestock and fishery offices, XXXX Town Administration agriculture sector provide veterinary and other extension services. The service includes,
- treatment, vaccination and laboratory services;
- AI services;
- facilitate forage seed and feed market linkage,
- equipment supply for producers;
Provide training services for producers;
Provide advice and support for producers in their dealing with other sector office like environmental protection Office, Health Office, trade and industry Office.
National Artificial Insemination Centre: The center established to collect and distribute improved breeds and to provide training for AI service providers. It supply Siemens for AI service providers either private or government.
Non-Governmental Organizations: NGOs are engaged in direct provision and facilitating the service development. Training related to dairy production, marketing and dairy products processing.
Financial Institutes: Financial services for dairy is a critical issue to expand its business and to run day to day operation with enough working capital.
Generally, the above mentioned actors have a great roll towards facilitating effective and smooth implementation of the project. Furthermore, worda’s Agriculture and Animal office will give technical advice on dairy and milk processing technologies and control the quality of milk processed.
GOAL & OBJECTIVES
Overall goal
The overall goal of the project is to contribute towards the economic development of Ethiopia through using the existing investment opportunities in the Country and taking advantage of the expressed policy incentives that emphasize on greater commercialization of agriculture and enhancing private sector development.
Main and Specific Objective Main objective
The main objective of this project is to produce milk and milk processing products for local markets and to maximize profit so as to sustain the project.
In line with this the following are specific objects of the project.
To introduce modern dairying and milk processing technologies to the surrounding locality.
To create job opportunity for skilled and unskilled local citizens.
To create market linkages with small holder farmers in the town and its surroundings
Reduce the environmental impact of our operation by devising methods such as supplying of animals waste for farming and use of Bio-fuel;
Reason for selection of investment
The reasons for selection of the investment include:
Availability of suitable topography for milk production with good combinations of, climate and market that allow optimal production of these farming;
No requirements for infrastructure development because of the topography and visible prospects of on-going development initiatives in the area including power supply, telecommunication and other basic infrastructures available;
Accessibility of the area by all-weather roads and ease of making choices between marketing options;
STUDY OF THE PROJECT SITE
Descriptions of the Area
The area identified for implementing the anticipated project is located in xxx Town Administration of xxxx, State. Part of the xxxx, xxxx Adminstration is bordered on the south north, east and west by the xxxx. The administrative center of xxxx is xxx. The project area is 110 km long and is located north of Addis Ababa, connecting xxxx with very good road connection to Addis Ababa. The area also has high potential for roughage production, access to feed from nearby feed factories and factory by- products are also widely available. Artificial insemination (AI) services are functioning well. Market potential is high because of access to nearby places like Addis Ababa.
According to XXXX Finance and Economy Office, XXXX Town Adminstration has an estimated total population of 25,409, of whom 12,786 are men and 12,623 women.
Land Holding
Urban land permit by lease is on negotiation base. The Recommended size of Dairy farm, approximately XXX m2 of land is required with future expansion and other requirements the total cost of land, at the rate of Birr XX per m2 for 70 years of land holding is estimated at Birr 435,000. The details Land Use Plan is Annexed.
Physical and Natural condition of Project Site
Topographic Features
The topographic features of the proposed project area are characterized by slightly too gently sloping terrain. The topography of the project area generally indicates availability of favorable opportunity for low cost installation of infrastructures and site development requirements.
Climate
The agro- climatic zone of XXXX Town Administration is categorized as weyna dega. The annual rainfall varies from 900-1,200 mm and the annual average minimum and maximum temperature varies from 15 to 26 degree centigrade.
PROJECT DESCRIPTION
Milk is a traditional constituent of the Ethiopian diet, especially areas where the livelihood is based on cattle production. Liquid milk handled traditionally has a very limited shelf-life. In modern dairy production exotic cross breeds or pure breed castles are used and the milk is processed to have longer shelf-life.
The project will start a breeding arrangement with 50 heads of exotic cross breeds pregnant heifers. These heifers would give birth in two to three months’ time and production of milk will be started nearly of the first year. The dairy farm will have milk processing and packing facilities. The project will also collect milk from small holder farmers around the town to supply the processing plant. Finally, the product will be distributed by establishing own distributing stores in major towns or by using commissioned agents.
Products of the Project
Taking the existing opportunity in to account, the project intends to offer major dairy products including: Raw & pasteurized milk, Butter and Cheese (Ayib). Thus, the main course of activity is focuses on milk production and processing involving a range of value addition on the main product.
Production Process
After the fresh milk is received it is filtered and pumped into the dump tank; it is then chilled with help of a chiller so that the growth of bacteria is minimized .One percent of the fat content is separated and chilled in a cold store. Then, the cream in either churned to butter or sold as it is depending on the availability of local market. After the end of cream separation process, the milk will then undergo different value added products like milk, Butter and cheese. Milk products undergo pasteurization process; the pasteurized milk is filled in the cooling tanks for delivery to urban milk distribution centers. Pasteurized milk would be packed into 500 mille liter plastic containers, so two plastic containers would be used to package one liter of pasteurized milk and distributed to the market. Cheese and butter would be packed into 250 and 500gram paper packages. After separation, cream is held in stainless steel tanks and refrigerated at (40C).
Production Capacity
The dairy farm will have 50 milking cows, which are exotic breeds, with better milk production capacity. The farm size will increase to approximately 272 animals within 10 years. Average yield per cow is estimated to be 17 liters per day and the cows will give milk for at least ten months. Overall daily total production is about 850 liters per day. In addition, so as to supply more milk for processing, daily 250 liters of milk will also be collected from surrounding farmer. Overall annual raw milk production is about 346,250 liters in the first year of production. The farm milk production will increase with the growth in herd size in subsequent years.
Plant Capacity
Processing raw milk produces a number of products such as, pasteurized milk, cream, yoghurt, cheese and butter, and investment could be on pasteurizing plants with a capacity of processing 10,000 liters per day. The processing plant will start production at 75% of its installed capacity initial year, thereby increasing the capacity by 5% until it reaches 95% in the fifth year.
TECHNICAL STUDY
Location and Plant layout
The proposed project can be setup in Southern Nation, Nationalities and people Regional State Gurage Zone in XXXX Town Administration. The total area required for the project is about 5,000.00 m2. The landscape of the intended project site is quite ideal for erection of the plant building & construction and for some other activities such as transporting of inputs & outputs. Generally, the project site is suitable for dairy farming due to its perishable nature of the product.
Land Use
Dairy Farm has extensive facility requirements. The basic dairy facility requirements are a milking parlor, open area, feed storage, waste storage, Calves and heifer development facilities.
Cows spend most of their time in the pasture or in free. Feed storage facilities are another requirement for dairy operations because of the large amount of feed fed to each cow. Upright silos and pit silos hold corn silage or haylage. Most dairies also have grain and bulk bins that hold prepared feeds or supplements. Most dairies also require waste storage facilities because of the amount of production that takes place in confinement in barns, which generates a lot of manure finally; dairy farms usually raise their own replacement females. Producers usually raise heifers in hutches where each is kept individually until weaning. After weaning, they are moved to group pens to be raised. Tool/machinery shed on the farm for storage, Office etc. The details Land Use Plan is annexed
Design of the Dairy Farm
The design of most recently established dairy farm and milk processing plant have many similarities in common Development of housing and feedlot facilities requires integration of space, shelter, feed, water, waste management and handling facilities . These requirements will be adapted to natural features of the site and organized for efficient operation. The feedlot design must be simple and pen layout should be rectangular pens should be arranged using double row arrangement. A double row arrangement requires feedlot construction on both sides of the feed alley. The major investment items designed to establish the project are the following;
Building and Constructions
The major civil works to be built as part and parcel of the dairy farm include; Dairy barn or shed, calves room, water and feeding troughs ,Isolation pen , water system and latrine .Other building and construction facilities needed at the site are- fence including gates, Guard room and Office.
Milk Process Plant
The processing plant have receiving facilities, storage for raw milk, pasteurizing, cleaning equipment and coolers for finished products, as well as office space. Many products may also have additional equipment in common. To the extent that common equipment can be shared and not duplicated in separate plants, the overhead cost can be reduced. This efficiency is in addition to the fact that multi-line plants gain efficiencies from more even seasonal use of milk and facilities. Investment could be on pasteurizing plants with a capacity of processing 10,000 liters per day
Sources of Investment Inputs
The construction activity will be carried out by local Contractors. Construction materials such as sand, Gravel, masonry, Cement, and corrugated sheets are easily available in XXXX town. Different machineries required for the milk processing activity are mostly imported items and are to be supplied by local dealers. Milking cows will be purchased from a reliable supplier from XXXX .Wage laborers are abundantly found in the town. Skilled and semi-skilled manpower is not a constraint.
Availability of Raw Materials and Auxiliary materials
The principal raw material required for the production of pasteurized milk, butter, cheese and cream is raw milk. Raw milk is available from the project dairy farm and also acquired from surrounding farmer. The auxiliary materials required for the envisaged plant comprise packing materials like plastic bags, paper and carton box. The plastic bags and carton boxes can be acquired from the local market.
Availability of utilities, Infrastructures and Other service
- Road; The project area can be accessed by all-weather roads up to XXXX Town Administration The area is connected all sides with all-weather roads, so the project can transport inputs and output easily.
- Electric Power; XXXX Town Administration of the project area has access to hydroelectric power. Currently, the government has setup additional power station at XXXX Town Administration. This power station will help us to reduce the cost of operation with better efficiencies and will ensure uninterrupted availability of power.
- Water Resources; by now, access to safe drinking water is not a problem in the project area. A recent major success of the XXXX Town Administration is its agreement with Airsh aid. Under the agreement, Airsh Aid will generating underground water and install water pipe line all over the town to alleviate the future problem.
- Telecommunication ; According to the data collected from the Bureau of Finance and Economy, the town administration and all PAs in the project area have access to different telephone services, such as, mobile telephone service, and wireless.
- Educational Services; XXXX Town Administration has good access to educational services especially from kinder Garden to high school and TVT College.
- Financial Institutions; There are government and private banks in the project area and surrounding. Hence, the project can get bank services nearby.
- Health Services; the project area can access hospital service nearby Hospitals and Health center which is 300 meter far from project area
SOCIO-ECONOMIC STUDY
Socio-Economic Benefit for the Society
The socio-economic impact of the project is expected to be positive, as the operational area is devoid of major any potential displacement/ eviction or conflicts. The positive impacts are more pronounced in view of the development of an abandoned and uninhabited rural area, bringing large employment opportunities to the surrounding peoples.
As the project requires labour for undertaking its operational activities, a number of people will have the opportunity of being employed in the project. In this regard, the project will create new employment post for about 30 individuals on permanent basis and for up to more than 20 casual labourers. Since the project use own dairy production and rely on milk collected from surrounding farmers, the farmers would have a guaranteed buyer from which, they could get consistent and better financial gains as far as they could engage in such business.
Important social aspect of the project is that it would increase supply of milk and related products which consumptions is beneficial in many ways and helps in battling various diseases
The expected increase in income of the permanent & temporary employees would eventually contribute to good health & nutrition in the family and allow them to access better education for their children, improve sanitation and provide for the necessities in the household.
Economic Benefit for the Community
The creation of substantial direct and indirect employment opportunities with potential for out- growers will have impact for increasing incomes and skill of the rural community. There will also be good opportunities for out-growers linkages with the surrounding farmers and the use of the project’s facilities, knowledge and experience, thereby increasing the economic activities of the inhabitants of the area. Promotion and transfer of new agricultural technology that could be adaptable to the surrounding farming community and improve their skills through training and sharing of the project experiences will also be another benefit for the community.
Economic Benefit for the Country
This Proposed project will have significant economic benefits, both to the national economy of the country at large, and the region in particular in which the project is to be established.
The specific direct benefits will include;
Development of uninhabited part of the country and exploitation of hitherto abandoned physical resources of the particular area through the establishment of modern livestock agriculture.
Aside from the increase in income of the owner, the project would activate the economy especially in the continuous production and supply of processed milk & milk products. Being efficient in terms of business returns and thus considered as a role model, we hope, this project will also encourage other entrepreneurs in the country to engage in milk processing industry.
Supply of agricultural commodities to the national and export markets, thereby enlarging the domestic basket of food items and contributing to the foreign exchange balance of the country, both through generation of foreign exchange and import substitution.
Provision of physical and social infrastructure, thereby creating conducive and suitable environment for regional development.
Substantial increase regional government revenue, through direct & indirect taxation.
Livestock Production Profile Related to the Project
This investment project is intending to production of milk and milk products. This farm project will entirely apply a modern farming system. Different species of livestock have been reared in all of the production systems of Ethiopia by pastoralists, agro pastoralists, and crop/livestock farmers. Based on climate, land holdings and integration with crop as criterion, dairy production systems are classified into three main systems:
- rural,
- peri-urban and urban and
- Commercial dairy systems.
Rural milk production: Majority of livestock keepers rely on rural dairy system which is part of the subsistence farming system that contribute up to 98% of the total milk production of in Ethiopia and includes pastoralists, agro-pastoralists, and mixed crop–livestock producers
The system is not commercial based and most of the milk produced in this system is left for home consumption. In the highlands of Ethiopia, small scale farmers keep mostly zebu cattle which have lower milk produce on ranging from 400 to 600 lit for a two hundred day lacta on period (2 – 3 lit/day/head) and well suited to the existing environment. Livestock are subjected to graze on communal pastures although a considerable amount of fodder production for both on-farm use and sale is increasing using bulls as common for breeding purposes except near to national artificial insemination center. In these areas, milk is processed on farm using traditional technologies to produce products like butter, ghee, ayib and sour milk, which can be sold. The bulk of butter and ayib in the highlands is channeled through the informal market. Farmers, mainly women, take the products on a weekly or monthly basis to market places or sell at the farm gate to brokers who take the commodities to local or, more distant markets where there is a demand. In pastoral areas, diet is based on fresh/sour milk and leftover milk is poorly utilized. The herd size per household is large and hence there is a. greater surplus of milk/person than in the highlands. Market access in this production system is a critical factor. Subsequently, due to crossbreeding program has been underway in the country the government is delivering semen for AI services at subsidized cost for milk production increment.
During the past two decades, to offset the shortfall in milk production, the import dependency of Ethiopia for milk and milk products has increased. A country endowed with such enormous livestock resources and climatic situations conducive to livestock production should not be allowed to continue importation of dairy products. Self-sufficiency in dairy products should be encouraged to optimize the use of available resources to minimize between demand and supply. Considering this effect the dairy has intended in production of milk to fill the gap.
Peri-urban milk production: Peri urban milk production has been performed in areas where the population becomes high and the agricultural land is scares due to urbanization around major cities like Addis Ababa and other regional becoming prominent in the highlands among mixed crop- livestock farmers. Dairy farmers and cooperatives involved in milk production in the peri-urban and urban areas are selling milk to consumer in the nearby town and city. Dairy Producers in this production system have a better understanding of dairy management and processing facilities. Urban dairy farming is a highly specialized dairy farming owned by state or businessmen and is mainly concentrated in major cities of the country. Pure exotic and cross bred cows have been used in this produce on system comprising 40,000 pure exotic and crossbred cows in urban and peri urban areas of the country. In Addis Ababa alone, there are about 5200 dairy farms with some 58,500 cattle (almost 50 percent crossbred).
Commercial Milk Production: Dairy Producers would rely almost exclusively on AI for good semen and keep breeding records with paying for the more expensive imported genetics and breeding supplies. In around Addis Ababa there are an estimated 5,000 dairy producers with pure and cross- bred cows producing 34 million lit per year.
There are about 35 active dairy processors in the country. The processors collect raw milk from dairy farms, private milk collectors, cooperatives and unions. As described above, the raw milk is collected at the collection center and transported to the processing plant. It is processed into pasteurized milk, cheese, butter and yogurt. The companies are supplying different combination of dairy products that includes, Pasteurized milk (full cream), Pasteurized milk (skim), Raw milk (full cream), Cream, Table butter, Cooking butter, Ayib (local cheese), and Flavored yoghurt. There is no Ethiopian company processing milk powder, although some processors are planning to invest in such facilities. Recently Anchor, New Zealand’s leading milk brand has begun producing fortified milk drink in Ethiopia with quick gain of market share. Even though few are operating with their full capacity most are functioning under capacity, on average the companies are working 18-43% on average for the different products. The main factors for the under capacity operation are lack of collection facilities (chillier, vehicles, refrigerator), machinery spare part access, capital, power, low demand in fasting months, productivity versus profitability from producers and processors side, lack of experience in the market as new entrants and lack of quality raw milk.
The processed dairy products are distributed to retail shops, supermarkets, schools, hospitals, restaurants, cafes and hotels located in major urban centers. The main market destination is Addis Ababa market for most of their processed products with share of 50-65%. XXX, XXX, and XXX are the other main destinations for processing companies in Addis Ababa and its surrounding. In other big towns like XXX and XXX there are processing companies supplying to their towns.
Pasteurized milk and other milk products pass mainly through supermarkets and retail shops channel. Restaurants and distributors are the next important outlets for the processed products. For Ayib (local Cheese) and butter customers that come to the processing companies, factory gate or others own shops are the important outlets.
Because of this reason her livestock production is not enough to meet the domestic consumption requirement. The total supply of livestock products fall short of the overall demand.
Environmental Consideration
Environmental Impact Assessments
This project is designed to cultivate and promote the production of quality milk by maintaining the existing environmental system. It also intends to protect the environment from the possible risks. The project will have no negative environmental impact in the areas as shown under:
Run-off control:
The feedlot and processing facilities will be constructed so as to meet existing environmental compliance if any. Construction of effluent treatment plant is necessary in case of multiproduct large size plants for treating the effluents before discharging for proper disposal. The milk processing plants has to be hygienically designed and easily cleaned to prevent contamination of products by insects, birds, rodents or microorganisms.
The dairy products plant does not have any pollutant emitted from the production process, except the washing water, which has to be connected to appropriate sewerage line to get rid of. Thus, the envisaged project is environment friendly. A grass/forage filter composed of elephant grass will be planted in area of 1 times the feedlot area to take care of the effluents as such type of grass plants could be used to filter liquid wastes.
Animal waste/Manure management:
During the 2nd half of the first year of the project, biogas digester with a volume of 100 m3 will be constructed so that, all manure wastes from the barns will be used to produce biogas fuel for the project consumption. So as to doso, during construction of the barns, floor slope will be made appropriate for gravity flow of liquid manure to the digester, and in addition, the remaining manure, which could not flow as liquid, will be daily collected and dumped in the digester so as to keep the barns clean as well as to alleviate the environmental problems associated with manure wastes.
Air Pollution dust and odor problems will be minimized by proper site selection. Prevailing winds and habitable structures will be considered to avoid air pollution problems
MARKET STUDY
General Overview
The future of the dairy sector in Ethiopia is more positive with different driving factors, which includes positive economic outlook and life style changes. Ethiopia has an estimated population of approximately 99.4 million in 2016, up from 2015’s estimate of 98.9 million, the second- most populous country of Africa after Nigeria (CSA, 2013). National real GDP growth averaged 10.1% per annum during the period of GTP I and real GDP growth during the last 12 years averaged 10.8 percent per annum. The economy expected to remain robust from 2016 to 2019 at 7.6% as per IMF projection and above 11% as per GTP II. In line with the economic growth, the emerging middle class consumer segments are willing to embrace new products and services that include agricultural products. With the increase in income, it is expected that consumption pattern shifts to high value food items that demands encouraging supply of livestock products.
In addition to the purchasing power increase, urbanization, population growth and consumer awareness will increase the demand for quality, volume, graded and standardized products and traceability of sources. Life style changes call for more of fresh and finished ready to eat products with appropriate packaging and labelling. As per research findings of Land O’ Lakes in 2010 showed that the top 10% earners in Addis Ababa consumed about 38% of milk, while the lowest income group, approximately 61% of the population consumed only 23%. The high milk price for pasteurized milk in supermarkets, considered high to afford for middle and low- income consumers. The growing demand for milk and milk products offers a good opportunity for producers (and other actors in the dairy chain) in high-potential, peri-urban areas to enhance their livelihoods through increased production. Ethiopia exported an amount less than 300,000 USD per annum during the last five years. Majority of the export destined to Somalia and traditional spiced butter export for Ethiopian community and other consumers to USA and other countries. With the expansion of the sector the volume exported to Somalia can be increased and to other destinations like Sudan, South Sudan and Djibouti can be expanded.
Production and Supply
From the 2015/16 CSA survey estimate of 57.83 million total cattle, the female cattle constitute about 55.38 percent (CSA, 2016). When classified with purpose it is estimated that there are 6.74 million dairy cows and 11.34 million milking cows. The total volume of milk produced in Ethiopia increased over the last 15 years from less than 1 billion litres to 3.06 billion litres in 2015/16. The dairy sector contribution to the national Gross Domestic is expected to increase in the years to come too. The overall country milk production expected to surpass existing milk demand as per GTP II period (2015–2020) projection with about 2501 million litres that is 47% above (LMP, 2015). As per the plan the surplus of milk could then be substituted for imported milk products and used domestically for new or additional industrial uses (e.g. in the baking industry), or exported as milk powder to raise foreign exchange earnings.
The milk is produced by 11.34 million milking cows are kept within five different dairy farming systems:
- Urban and peri-urban systems that is the emerging smallholder dairy farming;
- Specialized commercial intensive dairy farming;
- Mixed crop livestock system, the traditional highland mixed farming;
- Pastoral livestock Farming,
- Agro-pastoral system, that is the lowland mixed livestock farming.
The rural dairy system, which includes the last three groups, contributes 98% of total production, while the first two groups contribute only 2% of the total national milk production but main sources for big cities milk consumption.
Demand for and Consumption of Milk
Although, the contribution of cow milk is dominant, milk from camels and goats are also consumed in Ethiopia, especially in pastoral and agro-pastoral systems of production. In Ethiopia there is long standing and strong culture of consumption of dairy products. In addition to row milk, milk products, such as butter, cottage cheese, fermented milk (yogurt) and whey are also commonly consumed
SUPPLY AND DEMAND ASSESSMENT
Present supply and demand
There is inadequate supply of milk and milk products to urban consumers. The bulk of the increased demand for milk is in urban areas, particularly for processed, i.e. pasteurized milk and milk-products. There is also unstable supply of milk and milk products to urban consumers due to inefficient delivery system and inadequate market outlet for milk and milk products from rural areas. The contribution of imports of milk and milk-products to total consumption of milk has been rising over the past several years, due to lack of quality milk production.
Projected Demand
Demand for standard dairy products from the modern sector is met by domestic production and through imports. 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 (as in the following Table) and rising real income are expected to expand the demand for milk and milk products. Therefore, increase in population growth and consumer income in the future is expected to increase the consumption of milk products.
The annual demand in Ethiopia for dairy products is increasing. This is as a result of the current high population and future growth trends, a growing number of urban centers and urbanized lifestyles, and finally steadies economic growth rates registered by the country and visible increased income levels of the general population. In Ethiopia, the demand for milk products is increasing while supply is lagging. As a result, imports have surged in recent years, which consist primarily of processed milk, including cheese and milk powder.
Market Segments
There are a number of marketing methods which are used in the marketing of milk and milk products. The main target customers for our dairy products include but not limited to:
- Small kiosks: – these kiosks are already experienced at selling raw milk and milk projects like yogurt, ice cream, butter, and cheese to the general public. These kiosks do not require sophisticated packaging and have good product handling skills.
- Individual consumers, Hotels, Guest houses, and Restaurants: these are to be used to provide a meaningful linkage.
- Direct General Markets: milk products will be brought to the general markets where to be sold to the general public.
- Dealers: independent operators who buy and sell packed milk and milk products. The dealing is usually done at the shop level.
- Order buyers: Acts as agents for distribution of dairy products and other processed milk.
Moreover, this project aims to sell the products for those main consumers mentioned above, who could be found within the specific project location as well as the surrounding regions, including:
- Main towns within SNNP Regional State: – XXXX (the specific project location),
- Main towns with in Oromiya Regional State:- xxxxx
- Addis Ababa and the surrounding Urban and Peri-Urban areas.
Competitiveness on the Market and Competitors
Since agricultural market is a proxy for competitive market, the expected market for the products of the project will get high competition from local farmers, local private farms, and private farms engaged in similar activities in South and Oromiya regions.
In Ethiopia, Milk and milk products are channeled to consumers through both formal and informal marketing systems. Recently, however, private businesses have begun collecting, processing, packing, and distributing milk and other dairy products. Still, the proportion of total production being marketed through the formal markets remains small. Formal milk markets are particularly limited to peri-urban areas and to Addis Ababa. The informal market involves direct delivery of fresh milk by producers to consumer in the immediate neighborhood and sale to collectors or traders nearby towns. In the informal market, milk may pass from producers to consumers directly or it may pass through two or more market agents. The informal system is characterized by no licensing requirement to operate, low cost of operations, high producer price compared to formal market and no regulation of operations. The informal (traditional) market has remained dominant in Ethiopia.
The traditional processing and trade of dairy products dominate the Ethiopian dairy marketing sector. Since the dairy products from these informal processing and marketing sectors are not pasteurized and appropriately packed, they could not stay fresh for considerable time durations. For this reason, the dairy products from such sectors could not give practical solution for the marketing challenges associated with seasonality in demand for milk and milk products which is identified, as one of the major problems by 10.5% of the rural and 75% of the urban dairy producers, respectively. However, for this marketing challenge created due to seasonality in demand for milk and milk products, modern business projects involved in dairy farming, processing, and marketing, which could use modern processing technologies (like the those technologies to be used in this business project) to extend the shelf-life of dairy products so as to remedy the problem. With this limited number of modern dairy farming projects in Ethiopia, this project intended to fill the huge gap between demand and supply by contributing its share in alleviating the insufficient milk supply to the urban milk demand through producing better quality of milk and milk processing products for the market.
Competitive Strategy
Marketing functions or services include many phases such as collecting higher quality milk from supplier, processing, & managing them to attain the required product types with standard qualities, transporting to potential markets, and distributing them to customers, such as Super markets, hotels, individual consumers, and restaurants. In economic terms, the utility or time, place and form will be added so that acceptable products will be offered to the ultimate consumer at the required time.
Product Pricing and Distribution Strategy
The main objective of the project is producing milk and milk processing products to maximize profit and make the project sustainable. To achieve this objective, consideration of production and other costs that determine profitability is necessary. In addition, the profit from such kind of dairy business is attained by minimizing production costs which account nearly half of the total cost of products. Any attempt to improve production and increase its efficiency, therefore, needs to focus on better utilization of available resources. The planned project will rely on using locally available materials and agro-processing byproducts to feed cows including molasses, concentrate made from maize, bean, wheat, barley. Feedlots will also have to be devised as mechanisms to source feeds by-passing middlemen and other profiteers who charge high prices for these feeds relative to the lower products prices. Through using these resources the cost of production will be lower than other commercial dairy and milk processing farms in the country. In addition, the project will adjust the price of products supplied to the consumers based on market situations.
Distribution of the products could be undertaken through small retail outlets as well as large wholesalers and catering establishments. The product can be distributed by establishing own distributing stores in towns or the products will be delivered directly to the customers to avoid unnecessary price increment which will affect the purchasing power of customers..
Promotion
To promote its products, the project will use different promotion means such as hand bills and posters and radio & TV advert air times. In addition, seasonal promotions will be done especially for religious holidays, on which such promotions will be based on particular types of products prepared for each occasion.
Production and Sales Plan
Production Plan
For processing facility, The financial projection assume the total raw milk available for value addition will be divided into pasteurized milk and cheese production ,Of the total production, 80 percent will be pasteurized milk and 20 percent will be cheese. During milk processing, cream is left over. In order to use the cream, butter will be produced. It is assumed that 75 percent of cream will be processed to butter.
The actual raw milk production will therefore begin at 346,250 litters (320,281.25k/g) in the first year of production and the milk production will increase with the growth in herd size in subsequent years. The production plan of milk, cream, butter and cheese for the project years will be depicted in the following table.
Production Cost
The production cost includes; feeds, veterinary, salary &wage, water electric power, purchase of raw milk, dairy supplies etc. Annual production cost requirement with the corresponding estimated cost is annexed.
Sales Plan
The major source of revenue for the farm would be the sale of milk or products made from milk. As would be expected, processing milk into finished products will add value to each kilo-gram of milk produced. In addition of the sale of milk and milk products, the other source of revenue for the farm would be the sale of culled cows, bull calves and heifers not kept as a milk replacer.
In this study, it assumed that the price of each cull cows, bull calves & heifers is Birr 24,000, 3,000 & 25,000 respectively.
Revenue could be generated by selling 80% of the milk as fluid milk, 20% of the milk processed into cheese and the left over cream is processed into butter. The diversification of products would help buffer the enterprise from volatility in the product markets. Prices can vary depending on the market outlet that a producer is selling through.
When selling through a retail outlet, a producer will receive a wholesale price .When selling directly to consumers; the producer receives a retail price. In this study it assumed a wholesale price, that the price of pasteurized milk, cheese, butter &cream per k/g is Birr 26, 60, 200 & 350 respectively.
The financial projection assumes that total raw milk available for value addition will be divided into milk and cheese production. Therefore, the total raw milk available for value addition, 80 percent will be pasteurized milk and 20 percent will be cheese. During milk processing, cream is left over. In order to use the cream, butter will be produced.
ORGANIZATIONAL AND MANAGEMENT
Structure of Project management and Personnel
The highest executive body of the project management organ is XXXX which is privately owned. The Owner controls and supervises the overall activity of the project at times while the operation and management of the farm will be entrusted to qualified and well experienced manger. All staff members of the project are accountable to the General manger who is assigned by the investor to manage the overall activities of the farm. He also serves as a cosignatory with the owner of the project.
Under the General Manager three section will be organized, Farm manager, Marketing Manager and Finance and Administration Manager. The responsibility bounded to the farm site would be delegated to the farm manager who will direct different animal husbandry practices at the farm e.g. feeding, watering, and milking and care of animals etc. Under the farm manager, farm supervisor, barn workers, milk processor, Laboratory analyst & Barn workers will be organized. Under Finance and Administration manager Accountants, store keepers, drivers and office workers will be organized. Under marketing expert, sales mane, shop keeper will be organized, Marketing Finance and Human resource sections. Each worker is responsible to their respective job descriptions provided by the respective section head. The store keeper will be responsible to systematically record and keep the input and outputs of the project respective working areas.
Organization Structure
The project will have its own organizational set up (structure) to run the production, finance & Administration and Marketing of the farm. The organizational chart, shall serve as a fundamental guide to the reporting responsibilities of the senior officers and the work force.
Manpower Requirement and Cost
The farm will engage a team of professional, highly qualified and experienced management personnel. Initially the farm will employ a total of 30 full time staff including a General Manager with qualifications in Business with experience. Staff employed in the technical team will be responsible for cattle induction, dispatch, storage and handling of feeds, and general maintenance activities within the feedlot, including pen cleaning, feeding and animal health.
The Marketing team will be responsible for coordinating, and recording daily farm transactions, marketing and advertising of the farm products. Other responsibilities will include managing the logistics of the facility to ensure timely delivery to clients as well as maintaining an adequate supply of production on hand. Accounting team Establish an appropriate accounting system and procedures. They will also perform regular internal audits to ensure that the company’s accounting procedures are implemented correctly. As the flock size increases, in the fifth year the organization will hire 6 additional labors for milking, feeding and manure removal. Manpower requirement for the farm & the corresponding labor costs are shown in below
