Proposal on Dairy Farming

operational management (Arba Minch University)

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 ARBA MINCH UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

Individual Assignment for the course: Project Management

Title: Family Dairy Farm and Milk Processing Project

BY: Behailu Tesfaye ID NO PEWBE/062/14

Submitted to: Awel Beker (Ass.Professor)

Submission Date: November, 2022

Arba Minch,

Ethiopia

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 TABLE OF CONTENT
1. EXECUTIVE SUMMARY.......................................................................................................1
1.1. Project Title.......................................................................................................................1
1.2. Promoter’s Profile.............................................................................................................1
1.3. Location of the Project......................................................................................................1
1.4. Project Goal and Purpose..................................................................................................1
1.5. Estimated Cost of the Project............................................................................................2
2. INTRODUCTION.....................................................................................................................2
2.1. BACKGROUND OF THE PROJECT..............................................................................3
2.2. Support for the Project......................................................................................................4
3. THE SOLUTION OF THE PROJEC........................................................................................5
4. OBJECTIVE OF THE PROJECT.............................................................................................5
4.1. THE OVERALL OBJECTIVE.........................................................................................5
4.2. THE MAIN AND SPECIFIC OBJECTIVES...................................................................6
4.3. The Specific Objectives....................................................................................................6
5. PROJECT WORK PLAN.........................................................................................................6
5.1. Project Description............................................................................................................6
5.2. Products of the project......................................................................................................6
5.3. Production Process............................................................................................................7
5.4. Production Capacity..........................................................................................................7
5.5. Plant Capacity...................................................................................................................7
5.6. Milk Processing Equipment..............................................................................................8
5.7. Vehicles.............................................................................................................................8
5.8. Office Furniture and Equipment.......................................................................................8
5.9. Milking Cows....................................................................................................................8
5.10. Raw Milk.......................................................................................................................8
5.11. Land /site development.................................................................................................8
5.12. Building.........................................................................................................................9
5.13. Feed resources for dairy animals..................................................................................9
5.14. Availability of utilities, Infrastructures and Other service............................................9
5.15. Credit Facilitation........................................................................................................10

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 5.16. Milk Market Linkage..................................................................................................10
5.17. Technology Transition................................................................................................10
5.18. Implementation Plan...................................................................................................11
6. PRODUCTION AND SALES PLAN.....................................................................................11
7. Human Resources....................................................................................................................12
8. PROJECT SITE/ GEOGRAPHICAL LOCATION................................................................13
9. PROPOSED BUDGET AND TIME FRAME OF THE PROJECT PROPOSAL..................13
9.1. INVESTMENT COST....................................................................................................13
9.2. Source of Finance............................................................................................................14
9.3. Project Duration..............................................................................................................14
9.4. Financial Analysis...........................................................................................................14
9.5. Key assumptions.............................................................................................................15
9.5.1. Production Related Assumptions.........................................................................15
9.5.2. Cost Related Assumption.....................................................................................15
9.5.3. Revenue estimates.................................................................................................15
9.6. Proposed Sales Budget....................................................................................................16
9.7. Proposed Cost and Expense............................................................................................16
10. PROJECT MONITORING AND EVALUATION............................................................16

II

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 1. EXECUTIVE SUMMARY
1.1. Project Title: Family Dairy farm and Milk Processing Project
1.2. Promoter’s Profile: The anticipated Dairy Farming and Milk Processing
Project” is initiated and owned by Family Dairy Farming Partnership plc.
Family Dairy Farming Partnership (plc) was formed in accordance with
the commercial code of Ethiopia. The members of the organization were
from One Family and all of them are well educated. The composition of
sex is four members were male and one is female. Though the partnership
is newly formed, the experience of members is outstanding one of them is
PHD candidate, one other have MA in Business Administration the other
two of them are graduated from University with associate degree in
Agribusiness and value chain management, the experience they have
given a position that significantly increases the chance of success.
1.3. Location of the Project The proposed project can be setup in Southern
Nation, Nationalities and people Regional State (SNNPRS) Gofa Zone in
Bulki Town Administration.
1.4. 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
and etc.

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 1.5. Estimated Cost of the Project: At the beginning of the production year
the project will have the following costs
 Capital 2,587,500
 Working Capital 1,471,128.88
 Total cost : 4,058,624.88
1.6. Project Component
 Total production area: 20,000 Square meters
 Types of investment: Diary Farming and milk processing
1.7. Expected Beneficiaries:
 Permanent employee: 15
 Temporary employee: 20
1.8. Socio-Economic benefit
 The project will create additional means of employment for skilled, semi-
skilled and casual laborers in the area.
 Aside from the increase in income of the partners, 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.

2. INTRODUCTION
Animal husbandry and agriculture are synergistically involved and are the important
source of income and employment in rural areas. Among them, dairying provides security
to farmers, especially when agriculture fails. Dairy farming is essential to millions of
poor households across the country not only as a source of income but also as a major
source of protein, supplementary nutrition, fertilizer, fuel and a store of wealth.

Enhancement in milk processing has necessitated the increased demand for milk and
this triggered the setting up of many commercial dairy units in medium and small scale in

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different parts of the country. Introduction of improved technologies, availability of
compounded feed are the other factors responsible for this shift from traditional mixed
farming production to specialized dairy production system. Dairying with high yielding
breeds has generated ample scope for developing the dairy farming on commercial lines
as a business enterprise.

2.1. BACKGROUND OF THE PROJECT

In Ethiopia, per capita annual consumption of dairy is just 11% of World Health
Organization recommended levels (gain briefing paper dairy in Ethiopia 2021). Meeting
the increasing demand for milk and dairy products cannot be realized without rapidly
increasing the number of high producing tropically adapted cows, the number of
commercial dairy herds, and the number of cows per herd and productivity per cow.

In Gofa Zone genetic improvement of indigenous breeds through crossbreeding and

upgrading, and the accelerated production of crossbred cows from farmers’ indigenous
breeds through artificial insemination (AI) started more than 8 years ago. However, the
number of improved breeds in the Zonal administration is still too small to transform the
current subsistence-based smallholder dairy system to market oriented commercial dairy
production and boost milk production to meet current and predicted future domestic
demands.

Despite its potential for dairy development, productivity of indigenous livestock genetic
resources in general is low. The annual rate of increase in milk yield (estimated to be
1.2%) lags behind the increment in human population (estimated to be about 4.8% per
annum) (Gofa zone plan and development department annual statistic data 2020) and this
resulted in large supply–demand variance for fresh milk. The FAO recommends the
consumption of 200 liters of milk per person per year. The annual socio-economic
statistical abstract of Gofa zone Plan and Development department report shows that the
average consumption of Bulki Town was only 16 liters per year. Demand for milk and
milk product is already higher than supply across Gofa Zone Bulki Town and there is
only Two Milk processing cooperative association and it is not producing at full capacity.

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 On the other hand, the potential of dairy development in Bulki Town is very huge. The
existence of suitable agro-ecologies for dairy production, increasing domestic demand for
milk and milk products, and better market opportunity indicate the potential and
opportunities for dairy development in the Town.

The Project proposal of Family Dairy Farming Considering the important of dairy
farming to sustainable food value chain, and employment opportunities to the society, can
contribute immensely to poverty alleviation and improved nutrition in the Gofa Zone
Bulki town.

2.2. 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.

a) Gofa Zona and Bulki Town agriculture department/offices: organizations like

Zonal agricultural department, Bulki Town Administration agriculture sector provide
veterinary and other extension services. The service includes,
(i) treatment, vaccination and laboratory services;
(ii) AI services;
(iii) facilitate forage seed and feed market linkage, equipment supply for
producers;
(iv) provide training services 8 for producers;
(v) Provide advice and support for producers in their dealing with other sector
office like environmental protection Office, Health Office, trade and industry
Office.
b) 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.
c) 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

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 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, Zonal Agriculture and Wereda office
will give technical advice on dairy and milk processing technologies and control the
quality of milk processed.

3. THE SOLUTION OF THE PROJEC

 At present the low level of raw milk supply is critical at Gofa zone. Family
Dairy farming will supply raw milk and milk products to the society.
 There are different private small scale farm and household farm competitor in bulki
town. At city level one small scales dairy farm and 2 cooperatives that collects raw
milk from member. But this farm unit not actively produced milk at sufficient
quantity and quality. Due to this reason there no strong completion between them. We
distinguish ourselves from them by providing better quality milk at reasonable prices,
and delivering both fresh and special package refrigerated milk to the customer door.
 Possible interventions on the supply side could be strengthening of raw milk
supply, improving milk collection centers, provision of feed, logistics and breed
improvement. In the processing chain quality improvement, business linkages,
training, and technology transfer are important activities to be considered

4. OBJECTIVE OF THE PROJECT

4.1. THE OVERALL OBJECTIVE

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.

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 4.2. THE MAIN AND SPECIFIC OBJECTIVES
The main objectives of the Organization is to provide various types of product that dairy
farming can produce for the local society of Bulki Town in short run and in the long run
for the people of Gofa zone overall and to maximize profit so as to sustain the project .

4.3. The Specific Objectives

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;

5. PROJECT WORK PLAN

5.1. 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 15 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.

5.2. 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

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course of activity is focuses on milk production and processing involving a range of
value addition on the main product.

5.3. 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 200 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 75 and 200 gram paper packages. After
separation, cream is held in stainless steel tanks and refrigerated at (4oC).

5.4. Production Capacity

The dairy farm will have 15 milking cows, which are exotic breeds, with better milk
production capacity. The farm size will increase to approximately 80 animals within 5
years. Average yield per cow is estimated to be 25 liters per day and the cows will give
milk for at least ten months. Overall daily total production is about 375 liters per day. In
addition, so as to supply more milk for processing, daily 70 liters of milk will also be
collected from surrounding farmer. Overall annual raw milk production is about 135,500
liters in the first year of production. The farm milk production will increase with the
growth in herd size in subsequent years.

5.5. 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 400 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.

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 5.6. Milk Processing Equipment
According to the Performa invoices submitted from local suppliers, the aggregate cost of
the machinery and equipment is summed up to Birr 400,000 and other milk equipment is
estimated to be Br. 220,000.

5.7. Vehicles
The farm would utilize an Isuzu (milk tankers installed) as a farm vehicle. According to
the Performa invoices submitted from local suppliers, the aggregate cost of the vehicles is
summed up to Birr 800,000.

5.8. Office Furniture and Equipment

According to the Performa invoices submitted from local suppliers, the aggregate cost of
the office furniture & equipment is summed up to Birr 25,000.

5.9. Milking Cows

Initial herd sizes of 15 cows, which are cross breeds, with better milk production are
considered. A total cost of the cows is Birr 900,000. The farm will not need to purchase
any cows. The flock would be “bred up” by increasing the percentage of dairy blood in
the cow flock over time.

5.10. Raw Milk

The dairy farm will purchase 75 liters of raw milk per day from surrounding farmers at a
price of 30 per litter to supply the plant. A total of birr 810,000 will required for the year
of production. The cost of purchasing milk from surrounding farmers is taken for initial
investment and it will revolve.

5.11. Land /site development

Land is one of the important resources for dairy farming. 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. The partnership
holds 20,000 square meters land at bulki town mindire site; which is suitable for dairy

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 farming with moderate climate. Since the land is owned by the partners, we have zero
cost of land acquisition.

5.12. Building

Dairy animals are often housed at night and the type of housing provided varied
depending upon the classes of dairy animals, agro-ecology, production system,
physiological stage of dairy animals. The types of houses provided, in general, varied
from roofed to simple corral with no roof. Since the site of the farm is located at
highland, the housing should be well constructed for adult cows, adult calves, milk house
and water tanker.

5.13. Feed resources for dairy animals

We have a number of improved forage species planted on agriculture site. Included
Napier grass, Elephant grass, Desho grass (Pennisetum spp. Pedicellatum), oats and
locally farmers supply us Rhodes grass, which were introduced as pure stands or
intercropped with cereal crops such as maize and sorghum. It is not enough for
improvement of milk volume and quality, so it’s better to purchase concentrated feed
such as molasses, furushica and other recommended concentrated supplementary feed.

5.14. Availability of utilities, Infrastructures and Other service

i. Road; The project area can be accessed by all-weather roads up to Bulki Town
Administration The area is connected all sides with all-weather roads, so the project
can transport inputs and output easily.
ii. Electric Power; Bulki Town Administration of the project area has access to
hydroelectric power. Currently, the government has setup additional power station at
Bulki Town Administration. This power station will help us to reduce the cost of
operation with better efficiencies and will ensure uninterrupted availability of power.
iii. Water Resources; by now, access to safe drinking water is not a problem in the
project area. A recent major success of the Bulki Town Administration is the
inauguration of new water project which supply water for the next 50 year.
iv. Telecommunication ; According to the data collected from the gofa zone plan and
development department, the town administration and all PAs in the project area have

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 access to different telephone services, such as, mobile telephone service, and
wireless.
v. Educational Services; Bulki Town Administration has good access to educational
services especially from kinder Garden to high school and TVT College.
vi. Financial Institutions; There are government and private banks in the project area
and surrounding. Hence, the project can get bank services nearby.
vii. Health Services; the project area can access health service nearby Hospitals and
Health center which is 14 k. meter and 1 k. meter far from project area.

5.15. Credit Facilitation

The total investment cost of the project Birr 4,058,624.88 will be financed from two
sources: equity of the owner and a loan from Development Bank of Ethiopia. By this,
about 80% of the project cost (3,246,900 Birr) will be financed from the Bank.

5.16. Milk Market Linkage

In Gofa zone, milk and milk products are marketed through both informal marketing
systems. In this marketing system, producers sell to consumers directly or to unlicensed
traders or retailers. Price is usually set through negotiation between the producer (seller)
and the buyer; this system is predominant in the rural dairy production system. Our
organization will use the formal marketing system, which there are cooperatives and
private milk collecting and processing plants that receive milk from us and channel to
consumers, and the informal marketing system.

5.17. Technology Transition

The population growing at 4.8% per annum necessitates unprecedented growth in
agricultural production particularly in the foods of animal origin to satisfy the food
(nutrient) requirement of the growing population. To satisfy the increasing requirement of
milk and milk product, with existing productivity being low, production has to come
from increased number of animals. Use of improved and pure (exotic) dairy cattle for
high production and as a farm business is well recognized in urban, pre-urban and mixed
highland areas where market favors sale of milk. As a result the need for the supply of
these improved dairy breeds is increasing. The introduction of crossbred cows and

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 complementary feeding as well as management technology adopted by family dairy
farming, we can share the experience and provide adult calves for reasonable price to the
local farmers. By doing this practice we can accelerate the adaptation of effective
breeding alternative technologies of artificial insemination and management technology.

5.18. Implementation Plan

The Project required 20,000 m2 of land in Bulki town Administration, which is an ideal
place for serving the purpose. The required amount of loan is expected to be obtained in
short period of time; the implementation of the project would not take more than Seven
months. The enterprise will start commercial production As of July, 2023 Action plane of
the activities of the project is presented below.

Table 1: Implementation Plan

No Activity Time Table

1 Finalized Design Jan 2023
2 Bank loan Requisition Jan 2023
3 Contractual agreement with local contractor for construction of Buildings Feb- April 2023
and Shed, Arrangements of supply of water pipelines, telephone and electric
power line installation
4 Recruitment of personnel and Training employees March 2023
5 Purchase of animal feed and dairy supplies April 2023
6 Purchase of dairy cows and vehicles May 2023
Purchase of office equipment
7 Purchase of milk processing plant from local dealer and plantation of the May- June 2023
machine
8 Trail Production June 2023
9 Promotion From June 2023
on ward
10 Obtaining Trade Record and Licensing July 2023
11 Start up to selling the product to the customers From July 2023
on ward

6. PRODUCTION AND SALES 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.

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The actual raw milk production will therefore begin at 133,500 litters in the first year of
production and the milk production will increase with the growth in herd size in
subsequent years.

7. Human Resources

Our management is expected to use resource wisely, operate profitably and abide by
law and regulations. We will have manager of farm whom graduated from University
with associate degree in Agribusiness and value chain management. The manager
oversees the total dairy farming operation, with daily responsibilities for managing
milking, milk house work, and fieldwork. Other assists with all farm responsibilities, with
daily responsibilities for maintaining herd health records, heifer raising, and fieldwork.
To manage the finance we appointed one partner from the family who has graduated from
university with Accounting and finance BA Degree controls the overall financial
activities of the organization. There will be contract/temporary employee’s work on the
farm on daily work for hygiene of the cows, harvest feed and manage available feeds,
transport milk to formal linked market and process milk further accordingly. The
personal plan reflect the need to booster our capability to match our position project farm,
will have the following staff
I. Dairy farm manager → BSc
II. Barn worker skilled - Contract
III. Veterinarian → diploma
IV. Pasture and worker→ skilled - Contract
The ultimate goal of all our employees is to meet or exceed our customers' expectations.
They are all empowered to take any reasonable action to avoid a customer leaving our
premises dissatisfied. Our continuous improvement policy encourages all employees to
continually look for ways to keep updated with the latest technology, to improve
processes, reduce costs and save time. This approach serves the goal of reducing costs
and delivery times, and increasing the service quality and customer satisfaction.

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Table 2 Manpower Requirement and Labor Costs
No Job Description Vacant position Monthly salary Annually salary
required
1 General Manager 1 8,017 96,204
2 Farm Manager 1 6,000 72,000
3 Finance and Administrative 1 6,000 72,000
manager
4 Veterinarian 1 5,200 62,400
5 Accountant 1 5,200 62,400
6 Milk processing plant worker 1 4,667 56,004
7 Barn Worker 5 3,882 46,596
8 Marketing and sales man 1 4,667 56,004
9 Store keeper 1 3,000 36,000
10 Guard 2 3,000 36,000
Sub – total 15 49,633 595,608
11 Pension contribution (11%) 65,516.88
12 Grand total 661,124.88

8. PROJECT SITE/ GEOGRAPHICAL LOCATION

The geographical location of the project is SNNPR, GOFA ZONE, BULKI Town
administration, which is located west of Sawla town and 16 kilo meter distance far ways.
The project site is at “Mindre” site and we selected it because of the criteria its altitude
from see level is recommendable for the dairy farming – which is highland, the land of 2
hectare are owned by the partner (by the family) and there are Kalehiwot church dairy
farming near to our site by which we can share the experience of their farm work.

9. PROPOSED BUDGET AND TIME FRAME OF THE PROJECT

PROPOSAL

9.1. INVESTMENT COST

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 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 4,058,624.88 for details see below.

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Table 3 Initial Investment Cost

No Description Grand Total

1 Land
2 Building and civil works 210,000
3 Milk Processing plant 400,000
4 Refrigerated Vehicle 800,000
5 Milking Equipment 220,000
6 Office Furniture and Equipment 25,000
7 Dairy Heifers 900,000
8 Pre-Production Expense 32,500
Total 2,587,500
9 Working Capital 1,471,128.88
10 Total Investment Cost 4,058,624.88

9.2. Source of Finance

The total investment cost of the project Birr 4,058,624.88 will be financed from two
sources: equity of the owner and a loan from Development Bank of Ethiopia. By this,
about 80% of the project cost (3,246,900 Birr) will be financed from the Bank, while the
remaining balance (811,724.88 Birr) will be from owner’s equity.

9.3. Project Duration

The life time of the project will be 5 years. The project might be extended above the
given period depending on the profitability of the first 5 year by following the investment
rule of the region.

9.4. 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 1,395,962.59 which is projected to increase to about Birr
10,946,202.10 at the end of the five 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

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show an increasing trend during the life time of the project. The projected financial
statement shows that the project will remain profitable throughout its life.

9.5. Key assumptions

The financial analysis of the project where based on the data presented in the previous
chapters and the following assumptions:-

9.5.1. Production Related Assumptions

Two alternative production systems of milk processing and dairy are considered in the
project. Under operating costs, the primary component is working capital cost which has
been estimated separately for the milk processing and dairy units. There are no feed mills
that produce concentrate dairy and so the project has to source all ingredients/ crop by-
products/ to supplement production unit.

The project will initiate with 15 pregnant cows in single production year. Over the years
the size of the project will increase gradually reaching the limit of 80 cows in production
year. Dairy animals will be fed 3 kilogram of concentrate along with 7 kilogram of
roughage per head per day. The cost of concentrate and roughage feed per kilogram is
estimated to be 5 and 3 birr respectively.

9.5.2. Cost Related Assumption

Cost Assumptions Price ETB

Purchase price of pregnant heifers 60,000 Birr per Head

Purchase price of milk from local farmers 30 Birr per Liter

9.5.3. Revenue estimates

Revenue estimates are derived mainly from sales of Pasteurized milk
Expected sales Price ETB

Production of milk/ days/head 25 liters/day

Total Number of cows 15
Number of considered Days in a year 300 Days

Milk selling price per liter amt 40.00 Birr

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 9.6. Proposed Sales Budget
Item Year 1 Year 2 Year 3 Year4 Year 5
Sales of milk 5,340,000 9,600,000 14,400,000 19,200,000 24,000,000
Sales of Cheese 1,250,000 2,300,000 3,000,000 4,200,000 5,000,000
Sales of Better 250,000 650,000 850,000 960,000 1,050,000
Sales of Adult Calves - 600,000 600,000 600,000 600,000
Total 6,840,000 13,150,000 18,850,000 24,960,000 30,650,000

9.7. Proposed Cost and Expense

No Type of Year One Year Two Year Three Year Four Year Five
Cost
1 Feed 213,525 455,520 683,280 911,040 1,138,800
2 Raw milk 756,000 756,000 756,000 756,000 756,000
3 Medicine 10,000 15,000 20,000 25,000 30,000
& Veter.
4 AI 2,000 2,750 3,500 4,250 5,000
5 Water 25,000 40,000 55,000 70,000 85,000
6 Labor 661,124.88 661,124.88 661,124.88 661,124.88 661,124.88
7 Training 60,000 60,000 60,000 60,000 60,000
8 Operating 2,587,500 2,707,500 5,355,000 8,062,500 10,770,000
Expense
9 Insurance 15,000 32,000 48,000 64,000 80,000
10 Cleaning 15,000 24,000 30,000 38,000 46,000
Supplies
11 Promotion 29,000 29,000 29,000 29,000 29,000
12 Fuel &Oil 20,000 25,000 30,000 35,000 40,000
13 Interest 325,907.53 325,907.53 325,907.53 325,907.53 325,907.53
Expense
Total 4,720,057.41 5,133,802.41 8,056,812.41 11,041,822.41 14,026,832.41

10. PROJECT MONITORING AND EVALUATION

Monitoring of the project will be carried out as a continuous process to provide
qualitative and quantitative information & data on the management and technical aspects.
The monitoring system will not only focus on providing data on inputs, outputs and
effects but also considers the processes involved in project implementation. The
information so generated in the process will be used to improve management through
guiding management decisions to ensure effective implementation of the project. The
monitoring tool will be monthly report; business report will be done a regular manner. As
a result monthly reports on the progress business implementation will be prepared from
bottom to top level of management, and a follow up activities according to the schedule.

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