MATTU UNIVERSITY

COLLEGE OF NATURAL RESOURCES AND AGRICULTURAL ECONOMICS

DEPARTMENT OF NATURAL RESOURCE MANAGEMENT

COURSE TITLE:PROJECT PLANNING,ANALYSIS AND MANAGEMENT

COURSE CODE: NaRM421

PROJECT PLAN ON MILKING DAIRY FARM

Name ID NO
1. Ojulu Kwot... ………………………………………………….....RU/3887/13

2. Bikilla Bayisa………………………………………..............RU/1866/13

3. Aziza Nasir…………………………………………................RU/2777/13

4. Birtukan Tilahun…………………………………...............Ru/0614/13

5. Gebireselassie Birhanu.....................................RU/1303/13

6 Bitewush Amin. .................................................RU/0536/13

SUBMITTED TO: Mr.TEMESEGEN

SUBMISSION DATE: 02/03/2024

ADDRESS: BEDELLE TOWN

TABLE OF CONTENT page

Status of the project………………………………….……………….. 3

Address……………………………………………………….……………… 3

Form of organization…………………………….……….…………… 3

Registration…………………………………………..…………………… 3

Business license………………………………………………………… 3

Investment permit………………………………….………………….. 3

1. Introduction……………..………………………………………..... 4
2. Objective……………………………………………………………… 4
2.1. Objective of the company……………….….…………… 4
2.2. Brief information on the owner……………………….. 5
2.3. Brief on the project……………………………..….………… 5

3. Location of the project……………………………………..…….….. 7

4. Credit relation……………..………………………..………………… 8

5. Technical assessment…………………………………….………….… 9

6. Project layout…………………………………….……..…..….………… 9

7. Equipment furniture………………………………..………..….……… 11

8. Market study…………………………………….…………………….……….. 11

9. Management,Organization and manpower……............………. 13

9.1 Structure of project management……………………………… 13

9.2 Structure of project organization............................... 14

9.3 Manpower requirement and cost……………………………… 15

10. Financial analysis…………………………………………………….…… 18

11. Investment cost and source of finance……………..…………………. 19

12. Investment benefits……………………………………………..…….. 21

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 13. Conclusion…………………….. 22

 MANGER:

 Address: western Ethiopia Oromia region Bedelle zone Bedelle town Administration

 Form of organization:PLC

 Registration:on progress

 Business license: on progress

 Status of the project: New

List of table

Table 1 :Manpower Requirement and Labor Costs

Table 2: Cash inflow statements

Table 3: Cash out flow

Table 4: INITIAL INVESTMENT COST

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 1. INTRODUCTION

Dairy farming is a class of agriculture for the long-term production of milk, which
is processed (either on the farm or at a dairy plant, either of which may be called
a dairy) for the eventual sale of a dairy product. Dairy farming has a history that
goes back to the early Neolithic era, around the seventh millennium BC, in many
regions of Europe and Africa. Before the 20th century, milking was done by hand
on small farms. Beginning in the early 20th century, milking was done in large
scale dairy farms with innovations including rotary parlors, the milking pipeline,
and automatic milking systems that were commercially developed in the early
1990s.

Centralized dairy farming as we understand it primarily developed around villages

and cities, where residents were unable to have cows of their own due to a lack of
grazing land. Near the town, farmers could make some extra money on the side
by having additional animals and selling the milk in town. The dairy farmers would
fill barrels with milk in the morning and bring it to market on a wagon.

Dairy production in the tropics is predominantly subsistence, characterized by low

production and productivity, dependent on local breeds, and managed under
extensive grazing and uncontrolled breeding. Milk produced in these systems is
dominantly from local breeds, and in Ethiopia, about 95% of milk produced is
from local breeds). The demand for milk and milk products is increasing in
developing countries and the drivers of change to the dairy sector are
demography, growing economies, underserved markets, conducive policy and
enabling environment, globalization, and market opportunities .

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 2. OBJECTIVES

2.1 Objective of the company

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

2.2. Brief information on the owner

The ''NaRM '' Dairy farm is going to be built by the members of the group
(Yoakin,Rbka,Temesgen,Belaynew and kochito) with contribution of 30% of the
total share.

2.3. Brief on the project

2.3.1.Project Description

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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.

2.3.2.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.

2.3.3Production 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
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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 (4oC).

2.3.4.Production Capacity

The dairy farm will have 10 milking cows, which are exotic breeds, with better
milk production capacity. The farm size will increase to approximately 100 animals
within 5 years. Average yield per cow is estimated to be 20 liters per day and the
cows will give milk for at least ten months. Overall daily total production is about
100 liters per day. Overall annual raw milk production is about 30,000 liters in the
first year of production. The farm milk production will increase with the growth in
herd size in subsequent years.

2.3.5. 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 5,000 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.

3. LOCATION OF PROJECT

The proposed project can be setup in western Ethiopia oromia region Bedele zone
town Administration on 5 ha of land,the land is given by . Bedelle Zone Bedele
town administrator found at the far of 600 kilometers from Addis Ababa in west
direction from jimma 200 km, Mattu in 150 km, Nikemet in 120 km this give us
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good oportunity to create market chain with d/t firm which run their bussines on
diary product.

4. CREDIT RELATION

The term "credit relation" typically refers to the relationship between a borrower
and a lender regarding financial transactions involving credit. Our company was
borrowed money from commercial bank of Ethiopia.

5. TECHNICAL ASSESSMENT

5.1 Location and Plant layout

The proposed project can be setup in western Ethiopia Oromia region Bedele
Zone Town Administration. The total area required for the project is about 5 ha.
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.

5.2 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;
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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.

5.3 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 feed lot 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.

6. PROJECT LAYOUT

1. Barn: The central structure of the dairy farm project layout will be the barn,
where the cows are housed and milked. The barn should be spacious enough to
accommodate all the cows comfortably, with separate areas for milking, feeding,
and resting.
2. Pasture: Adjacent to the barn, there should be a large pasture where the cows can
graze and exercise. The pasture should be fenced to ensure the safety of the cows
and to prevent them from wandering off.Most of the time the cows may stay at
their barn but sametimes they will released to graze the pasture.
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3. Milking parlor: A dedicated area within the barn for milking the cows. This area
should be equipped with modern milking machines and tools to ensure efficient
and hygienic milk production.
4. Feed storage: A separate building or area for storing feed and hay for the cows.
This should be located close to the barn for easy access during feeding times.
5. Manure management: A designated area for managing and storing cow manure.
This could include a composting area or a system for converting manure into
fertilizer.
6. Office and facilities: A small office building or room for managing
administrative tasks related to the dairy farm, as well as facilities for farm workers
such as restrooms and break areas.
7. Equipment storage: A separate area for storing farm equipment such as tractors,
plows, and other machinery used for maintaining the farm.
8. Water source: Access to a reliable water source is essential for a dairy farm
project layout. This could include a well, pond, or connection to a municipal water
supply.
9. Veterinary care area: A designated area for providing veterinary care to the
cows, including a treatment room and facilities for storing medical supplies.
10. Waste management: A system for managing waste products such as used
bedding, packaging materials, and other non-biodegradable waste generated by the
farm.
Overall, the layout of a dairy farm project should prioritize the health and well-
being of the cows, as well as efficiency in milk production and farm management.
It should also take into consideration environmental sustainability and compliance
with regulations related to dairy farming.
7. EQUIPMENT, FURNITURE

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1. Milking machines

2. Feed troughs

3. Water troughs

4. Hay storage racks

5. Manure spreader

6. Tractors and plows

7. Fencing materials

8. Office furniture (desks, chairs, filing cabinets)

9. Veterinary equipment (medical supplies, treatment tools)

10. Waste management bins and containers

8. MARKET STUDY

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 120 million currently increasing
trends are shown,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
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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.

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.
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  Order buyers: Acts as agents for distribution of dairy products and other
processed milk.

9.ORGANIZATION, MANAGEMENT AND MANPOWER

9.1 Structure of project management

The Owners control 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 owners among themselvs to manage
the overall activities of the farm. He is also one of the project owner and serves
as a cosignatory with the other members of owners 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 man, 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.

9.2 Structure of project organization

The project will have its own organizational set up 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. The proposed organizational structure for startup of the project is
as shown below.

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 9.3 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
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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

Table 1 :Manpower Requirement and Labor Costs

No Description Required Monthly Annual salary

number salary (Birr)

(Birr)

1 General manager 1 5000 60000

2 Farm Manager 1 4500 54000

3 Marketing Manager 1 4500 54000

4 Finance & Administration 1 4500 54000

Manager

5 Laboratory analyst 1 3000 36000

6 Farm supervisor 1 1 3000

7 Vet 1 2500 36000

8 Accountant 2 3500 84000

9 Milk processing plant 2 2400 57600

workers

10 Barn workers 5 1500 90000

11 Marketing and sales man 2 2000 48000

12 Driver 1 2400 28800

12 Guards 2 1200 28800

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 13 Store Keeper 2 1700 40800

SUB- total 22 702,000

PLAN OF OPERATION

The major investment required to establish the project include civil works,
purchase of cows, feeds ,different machinery and equipment ,vehicles and selling
of milk for surrounding consumers and far customers.

1. Construction of barns, milking parlors, and other infrastructure: The cost of

constructing these facilities will be around 1.5 million birr.

2. Purchase of dairy cows and livestock: Initial herd sizes of the projet is 10 cows,
which are cross breeds, with better milk production are considered. The total
purchasing cost of the cows is 600,000.00 birr, it costed 60,000 per cow. The farm
will need to purchase any cows and the flock would be “bred up” by increasing
the percentage of dairy blood in the cow flock

3. Feed and nutrition costs: On average, a dairy cow can consume around 5 kg of
feed per cow, per day ,which means 235 birr per cow per day. This includes a
combination of hay, silage, grains, and other supplements to meet their
nutritional needs. The specific feeding requirements can vary based on the cow's
stage of lactation, size, and breed. The annual cost of feeding 10 milking cows will
be around 857,750 per year.

4. Equipment and machinery for milking, processing, and storage: The cost of
necessary equipment will be 900,000.
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5. Labor and staffing expenses(civil workers): This will depend on the specific
labor market and wage rates, its aggergates would be amount to annually.

6. Veterinary care and animal health management: Vaccination & medicine is

required to prevent any disease outbreak in the animal herd. Each new animal
will be vaccinated before entering the farm and the existed cows vaccinate and
take medicine regularly in the half day of the month.The vaccines and medicine
are obtained from the Government institutes on payment. It will cost birr of 150
per cow for a total cost of birr 36000 for the first production year.

7. Marketing and distribution costs: This will depend on the specific marketing
and distribution strategies,. The farm would utilize small Isuzu (milk tankers
installed) as a farm vehicle to distribute its products to customers,its costs for
driver 2400 per month,28,800 per year and sells man 2000 per month, 24,000
per year.

10. FINANCIAL ANALYSIS

Profit maximization is the overriding factor in most management decisions. Thus,

an economic profitability analysis is necessary to determine whether investing in
a dairy and milk processing plan will result in profit in the long run. Considering
the implementation of the project as planned, the project will remain profitable
right from the beginning., the net profit at initial will be Birr 909,610 which is
projected to increase to about Birr 2,047,104 at the end of the sixth year (with all
loan repayment amounts deducted from the net cash inflows). The cash
generating capacity of the project for each period is found to be significant

Important ratios such as profit to total sales, net profit to equity (Return on
equity) and net profit plus interest on total investment (return on total
investment) will show an increasing trend during the life time of the project. The

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 projected financial statement shows that the project will remain profitable
throughout its life.

Table 2: Cash inflow statements

Year 1

Items Quarter 1 Quarter 2 Quarter 3

Milk 10cow’s*42days*100/ 10 cows*55 10ows*35

L(50) days*100L(50)+ days*100(50)bir
10cows*65days* r+10cows*85da
Birr+10*78days*100/
100L(60)birr= ys*100(60)birr=
L(60)=
275000+390000= 175000+510000
210000+468000=
665000birr =685000birr
678000birr

Manure
10quntals*200birr=200 10quntals*200bir 15quntals*200bi
0birr r=2000birr rr=3000birr
Fasting

cows& 5cows*50,000bi
calves rr=250,000
Culled Non
fasting 5cows*45,000bi
rr=225,000
Total 680000birr 667000birr 546500birr

T of total 1,893,500birr

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Table 3: Cash out flow
Item Cost (per year)
Feed 226,300
Salary 702,000
Total 928,300

11. INVESTMENT COSTS AND SOURCES OF FINANCE

11.1Investment costs

The investment cost for a dairy farm will vary depending on factors such as the
size of the farm, the number of cows, the quality of infrastructure and equipment,
and the level of automation.

The key expenses to consider when estimating the investment cost for a dairy
farm include:

1. Land acquisition or leasing costs

2. Construction of barns, milking parlors, and other infrastructure

3. Purchase of dairy cows and livestock

4. Feed and nutrition costs

5. Equipment and machinery for milking, processing, and storage

6. Labor and staffing expenses

7. Veterinary care and animal health management

8. Marketing and distribution costs

Investment costs of a project are categorized as fixed and working capital. Fixed
investment costs are costs incurred for construction of fixed assets and/or to
acquire asset that are fixed in nature. Working capitals are to supply inputs
19
required to produce the proposed product items in the production year and pre
operational. The overall investment cost includes fixed cost, pre- operating cost &
working capital estimated at Birr 8, 060,817.

Table 4: INITIAL INVESTMENT COST

N Description
Description Grand Total in ETB
o

1 Land

Construction of barns, milking 850,000

2
parlors, and other infrastructure

Purchase of dairy cows and 600,000

3
livestock

4 Feed and nutrition costs 226,300

Equipment and machinery for 300,000

5
milking, processing, and storage

6 Small Izuzu/vehicls 450,000

7 Labor and staffing expenses 471,600

Veterinary care and animal 36,000

8
health management

9 Marketing and distribution costs 52,800

Total Investment cost 2986700

Working capital 513,300

Total Investment cost 3500,000

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 11.2 Source of finance

The total investment cost of the project Birr 3.5 million birr will be financed from
two sources: equity of the owners and a loan from Development Bank of Ethiopia.
By this, about 70% of the project cost (2500,000Birr) will be financed from the
Bank, while the remaining balance (1000,000.00Birr) will be from owner’s equity.

12. INVESTMENT BENEFITS

As generally, Investing in a dairy farm in Gubure town can have several benefits.

1. High demand for dairy products: Ethiopia has a growing population with an
increasing demand for dairy products. Investing in a dairy farm can tap into this
demand and provide a steady market for milk and other dairy products.

2. Diverse income streams: In addition to selling milk, a dairy farm can also
produce and sell other dairy products such as cheese, yogurt, and butter. This
diversification can provide multiple income streams for the business.

3. Job creation: A dairy farm can create employment opportunities for the local
community, contributing to economic development in the area.

4. Sustainable agriculture: Dairy farming can be integrated with sustainable

agricultural practices, such as using organic feed and minimizing waste,
contributing to environmental conservation.

5. Potential for export: With the right infrastructure and quality control measures,
there may be potential to export dairy products to neighboring countries,
expanding the market reach of the business.

6. Government support: The Ethiopian government may offer support and

incentives for agricultural investments, including dairy farming, which can make it
an attractive investment opportunity.

Specifically the projet owners gain its money from selling of milk, culled cows
and male calves and collected manure. By considering the whole products to be
sold in the market, the project will have a cash inflow of 1,893,500 birr in the 1st

21
year of operation and cash out flow of 928,300birr in the same year. Therefore, the
project profit will be 965,200birr; indicating the" NaRM " dairy farm is profitable.
Therfore the project is acceptable.

Overall, investing in a dairy farm in Gubure town can be a profitable venture with
the potential for long-term growth and sustainability.

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