Market Study

Concepts and Definitions

Market: The word “market” has many connotations. Bain and Peter (1988), define “markets” as a
single arrangement in which one thing is exchanged for another. A market is also thought of as a
meeting point of buyers and sellers, a place where sellers and buyers meet and exchange takes
place, an area for which there is a demand for goods an area for which price determining forces
(demand and supply) operates. For McNair and Hansen (1956), “market is another name for
demand”. Others define market as a system or an atmosphere or a mechanism that facilitate price
fixation and thereby exchange of goods and services.

Marketing: In its simplest form is defined as the process of satisfying human needs by bringing
products to people in the proper form, time and place (Branson and Norvel, 1983).

Marketing has an intrinsic productive value, in that it adds time, form, place and possession utilities
to products and commodities. Through the technical functions of storage, processing and
transportation, and through exchange, marketing increases consumer satisfaction from any given
quantity of output Mendoza (1995). Kotler (2003) also stated shortly marketing as the task of
creating, promoting, and delivering goods and services to consumers and businesses.

Agricultural Marketing: It is defined as agriculturally oriented marketing. It embraces all

operations and institutions involved in moving farm products from farm to consumers Pritchard
(1969). It covers all the activities associated with the agricultural production and food, feed, and
fiber assembly, processing, and distribution to final consumers, including analysis of consumers’
needs, motivations, and purchasing and consumption behaviour.

It is both a physical distribution and an economic bridge designed to facilitate the movement and
exchange of commodities from farm to fork. Food marketing (of branded foods) tends to be inter-
disciplinary, combining psychology and sociology with economics, whereas agricultural marketing
(of unbranded products) is more mono disciplinary, using economics almost exhaustively.

Marketable and marketed surplus: Marketable surplus is the quantity of produce left out after
meeting farmers‟ consumption and utilization requirements for kind payments and other
obligations (gifts, donation, charity, etc). Marketed surplus shows quantity actually sold after
accounting for losses and retention by farmers, if any and adding previous stock left out for sales.
Thus, marketed surplus may be equal to marketable surplus, it may be less if the entire marketable
surplus is not sold out and farmers retain some stock and if losses are incurred at the farm or during
transit (Thakur et al., 1997). The importance of marketed and marketable surplus has greatly
increased owing to recent changes in agricultural technology as well as social pattern. In order to
maintain balance between demand for and supply of agricultural commodities with rapid increase
in demand, accurate knowledge on marketed/marketable surplus is essential in the process of
proper planning for procurement, distribution, export and import of agricultural products (Malik et
al., 1993).

2.3. Characteristics of Vegetables and its Marketing

Being produced both by commercial and smallholder farmers’ vegetable production and marketing
is influenced by a number of factors that can be attributed to production, product, and market
characteristics. Kohls and Uhl (1985) identified the major attributes that inhabit marketing.

Perishability: As vegetables are highly perishable, they start to lose their quality right after
harvest and continued throughout the process until it is consumed. For this purpose elaborated and
extensive marketing channels, facilities and equipments are vital.

This behavior of vegetables exposed the commodity not to be held for long periods and fresh
produce from one area is often sent to distant markets without a firm buyer or price. Prices may be
negotiated while the commodities are in route, and they are frequently diverted from their original
destination of a better price can be found. Sellers might have little market power in determining a
price. As a result, a great deal of trust and informal agreements are involved in marketing fresh
vegetables. There could not always be time to write everything down and negotiate the fine details
of a trade. The urgent, informal marketing processes often leads to disputes between buyers and
sellers of fresh fruits and vegetables. Producers are normally price takers and are frequently
exposed for cheating by any intermediary. Hence, these marketing challenges are exactly faced by
the vegetable producers of farmers surrounding Kombolcha Woreda.

Price /Quantity risks: Due to perishable nature and biological nature of production process there
is a difficulty of scheduling the supply of vegetables to market demand. The crops are subjected to
high price and quantity risks with changing consumer demands and production conditions. Unusual
production or harvesting weather or a major crop disease can influence badly the production and
marketing system.
Seasonality: Vegetables have seasonal production directly influencing their marketing. Normally
they have limited period of harvest and more or less a year round demand. In fact, in some cases
the cultural and religious set up of the society also renders demand to be seasonal. This seasonality
also worsened by lack of facilities to store.

Product bulkiness: Since water is the major components of the product, it makes them bulky and
low value per unit that is expensive to transport in fresh form every time. This, therefore, exposed
farmers to lose large amount of product in the farm unsold.

These listed characteristics of the product require a special complex system of supportive inputs. It
demands a regular marketing preparation process like washing, cooling, proper management from
the time of harvest until the produce is put on display. It is frequently believed a vegetable not only
remain attractive to the consumer it must also have a shelf life of few days after having purchased
by the consumer (Nonnecke, 1989).
Global production and consumption of fruit and vegetables

1.2.1. Global production trends of fruit and vegetables

World production growth has largely been driven by area expansion in Asia, especially China,
which has emerged as the world’s largest fruit and vegetable producer, with global output shares
of about 20 percent for fruit, and more than 50 percent for vegetables. However, the familiar
tendency for stagnant production growth in other developed regions also prevails in these
commodities.

Strong growth rates in fruit and vegetable cultivation have also been recorded in food-insecure
and low-income regions such as sub-Saharan Africa and Southern Asia. Horticultural crop
production generates high economic returns per unit of land, offering promising income
prospects, especially for smallholders and in areas where land is scarce. In addition, horticulture
can contribute to poverty reduction by providing paid employment opportunities, because it is
labour intensive.

1
Table 1.1: Global fruit production by variety (in tons) from 2008-2012

Production Year
Fruit variety 2008 2009 2010 2011 2012
Apples 69047694 71000804 70581492 76130690 76378738
Apricots 3730544 3660528 3317702 3675142 3956640
Avocados 3444318 3969478 3897688 4276592 4360018
Bananas 96222991 100223702 105726175 106058471 101992743
Berries nes 999671 975543 916076 990766 1010465
Blueberries 310368 333699 323875 364884 399309
Carobs 174111 164734 170550 179006 162911
Cashewapple 1887560 1831300 1903761 1984613 2001301
Cherries 1847361 2193691 2072455 2158934 2256519
Cherries, sour 1264183 1385078 1163353 1273068 1149531
Cranberries 440960 412859 397456 449245 504030
Currants 671953 689635 654485 664108 662972
Dates 7066767 7224396 7557553 7225246 7548918
Figs 1093391 1175893 1100547 1082413 1093189
Fruit, citrus nes 10537717 11922073 12281985 12611262 12840318
Fruit, fresh nes 28158613 28783095 29414585 30769668 31447977
Fruit, pome nes 75500 81400 91200 100120 105250
Fruit, stone nes 517271 527573 558736 566886 579441
Fruit, tropical fresh nes 18693591 19727107 19448412 20396718 20416074
Gooseberries 168384 168397 142511 161833 161462
Grapefruit (inc. pomelos) 7144796 7126694 7096335 7819819 8040038
Grapes 67461040 68294187 67460130 69992067 67067129
Kiwi fruit 1354895 1427173 1450509 1490000 1412455
Lemons and limes 17152783 17242158 15046384 15173377 15118462
Mangoes, mangosteens, guavas 35620684 34939232 37221109 39095714 42139837
Oranges 69551373 67787981 69045495 69759261 68223759
Papayas 10160446 10927798 11403685 11809121 12411566
Peaches and nectarines 19965800 20484195 20781746 21486834 21083151
Pears 21205238 22428237 22705619 24072248 23580845
Persimmons 3880342 3985010 4058285 4317346 4468955
Pineapples 19488333 19488240 20377660 21934533 23333886
Plantains 35195610 35634816 35586405 36600427 37162205
Plums and sloes 10302912 10896822 10719274 11070472 10702774
Quinces 472861 502706 528988 561297 596532
Raspberries 468336 503122 526768 644273 597917
Strawberries 4130279 4596586 4352869 4328129 4516810
Tangerines, mandarins,
clementines, satsumas 21521445 22497667 23867076 26047845 27060756
2
Asia dominates the world vegetables scene accounting for nearly 60% of global production, with
China and India ranking as 1st and 2nd. European Union and USA follow next. Over the last
quarter of a century, the fruit and vegetable market has been one of the fastest growing of all
agricultural markets.

Table 1.2: Global production of vegetables by variety (in tons) from 2008-2012
Production Year
Vegetable Variety 2008 2009 2010 2011 2012
Artichokes 1483212 1498209 1446879 1541478 1634219
Asparagus 7205469 7359306 7483585 8205831 8301482
Beans, green 18955578 19092152 19772926 20240943 20742857
Cabbages and other brassicas 64865039 65145711 65300717 69513476 70104972
Carrots and turnips 32991424 33397365 33664631 35830269 36917246
Cassava leaves 67501 68850 85007 85007 85007
Cauliflowers and broccoli 18788865 19758400 20127967 20894699 21266789
Chillies and peppers, green 27954512 28720913 29232234 30063389 31171567
Cucumbers and gherkins 58522273 60882411 62571825 64327678 65134078
Eggplants (aubergines) 39808557 43166252 44278381 46837769 48424295
Garlic 22790483 22033859 22541421 23710768 24836877
Leeks, other alliaceous
Vegetables 2095503 2111256 2102823 2116906 2165667
Lettuce and chicory 23738548 23878698 24352168 24969359 24946142
Maize, green 9523587 9519758 9188127 9345387 9764006
Melons, other (inc.cantaloupes) 30281088 26429872 31495365 31464188 31925787
Mushrooms and truffles 6823220 7207163 7152019 7780460 7959979
Okra 6437008 6809175 7066641 8058753 8359944
Onions, dry 74484149 73640837 78865614 85008230 82851732
Onions, shallots, green 4181251 4180948 4170890 4329035 4342135
Peas, green 15024694 16154359 16346356 17361839 18490920
Pumpkins, squash and gourds 21852827 22440270 23059686 24274016 24616115
Spinach 18831100 19698391 20235899 20980905 21662608
String beans 2084226 2113937 1992168 1790438 1883594
Tomatoes 141080419 154332817 152007674 158019581 161793834
Vegetables, fresh nes 248875321 248925361 261185369 265523067 269852343
Vegetables, leguminous nes 1579253 1798751 1645692 1536252 1527329
Watermelons 94656782 98737055 101342555 103310253 105372341

3
Table 1.3: Top 20 producers of selected fresh fruit and vegetables worldwide in
2012/2013
Fresh fruit (in 1,000 metric tons) Fresh vegetables (in million metric tons
India 7650 China 573.94
Vietnam 3010 India 109.14
China 2356 United States 35.95
Iran 1802 Turkey 27.82
Indonesia 1438 Iran 23.49
Myanmar 1425 Egypt 19.83
Nigeria 1300 Russian Federation 16.08
Nepal 1029.7 Mexico 13.6
Papua New Guinea 1000 Spain 12.3
North Korea 535 Italy 12.3
Thailand 505.5 Nigeria 11.94
Bangladesh 500 Japan 11.35
Egypt 490 Brazil 11.05
Mexico 475 Indonesia 10.51
Saudi Arabia 415.5 Ukraine 10.02
Turkey 326.8 South Korea 9.93
Niger 307 Vietnam 9.44
Philippines 247 Uzbekistan 8.58
Cuba 241.8 Philippines 6.32
Costa Rica 240 Algeria 6.04

4
 Table 1.4: Global fruit production by region (in tonness) in 2008-2012

Production Year
Area
2008 2009 2010 2011 2012
World 994981889.9 1019102076 1048714616 1087119977 1106133866
Africa 66203308 68972437.55 70948466.17 70874071 74152507
Northern America 38284791.6 39680701.6 37947307.6 36977235.6 38308173.6
Central America 15981574 14908051 15696366.64 15285536 16781312
Caribbean 3542971.4 3707861.04 3285786.61 3500604.36 3395157.19
South America 22728802 23707621.21 24298606 24765341.21 24326677.96
Asia 750126706.2 765562962.6 799541157.1 832464118.7 850229684
Europe 94649984.7 99039589 93473427.7 99963107.17 95332356.8
Oceania 3463752 3522851 3523498 3289963 3607997

2.4. Vegetable Production and Marketing in Ethiopia

Ethiopia has a variety of vegetable crops grown in different agro ecological zones by small
farmers, mainly as a source of income as well as food. The production of vegetables varies from
cultivating a few plants in the backyards, for home consumption, to large-scale production for the
domestic and home markets.
2.2. Analysis of the performance of the fruit and vegetable sub-sector

2.2.1. Production

The agricultural sector accounts for 55% to the Gross Domestic Product and provides 85% of
employment. Vegetable and fruit production and consumption is relatively limited. Small-scale
farmers, who account for 90% of the agricultural output, cultivate an estimated 96% of total
cropped land. Table 2.1 shows the trend of fruit and vegetable production in quintal by private
peasants during the period 2008-2012. The production of fresh vegetables has shown a
significant increment from 3,451,306 to 8,523,082 quintal within the mentioned years. Root crop
production has also increased significantly from 14,095.463 to 36,298,616.52 quintals. Fruit
production showed a relatively low increment trend from 4,599,851 to 4,793,360.64 quintals
compared to the remarkable increment achieved in vegetable and root crop production during
these years.
 Table 2.1: Fruit and vegetable production trend in quintal (in 2008-2012)

Production Year (quintals)

Items
2008 2009 2010 2011 2012
Vegetables 5988570.5 5,573,568 6,756,055.79 7,557,282.01 8,523,082.90
Head cabbage 241334.6 203,881 194,634.78 434,839.43 232,247.44
Ethiopian Cabbage 2815668.2 2,741,975 3,316,365.11 3,231,804.87 3,709,951.99
Tomatoes 418149.53 404,261 556,351.41 817,380.54 555,142.79
Green peppers 658725.19 614,637 577,726.84 657,668.37 855,477.90
Red Peppers 1834026.5 1,593,275 2,098,721.25 2,394,540.56 3,165,614.50
Swiss Chard 6809.47 6,392 10,227.39 17,008.38 3,290.41
Root crops 12136043 18,063,778 19,155,610.11 16,710,299.57 36,298,616.52
Beetroot 200927.41 100,785 144,293.51 245,430.49 168,485.13
Carrot 134666.07 182,293 123,457.63 135,502.63 51,046.70
Onion 1488548.9 1,693,168 2,369,221.60 3,281,574.18 2,191,886.02
Potatoes 3840456.9 5,723,325 4,473,334.87 4,754,405.46 8,633,477.92
Garlic 1560476.8 1,796,578 1,284,409.36 1,239,614.63 2,225,479.30
Taro/’Godere’ 2282427.8 4,060,001 3,397,399.42 3,152,420.66 11,177,733.55
Sweet Potatoes 2628538.7 4,507,628 7,363,493.72 3,901,351.52 11,850,507.89
Fruit crops 3512593.2 4,089,115 4,862,760.13 5,393,387.63 4,793,360.64
Avocados 324519.07 376,509 572,989.66 730,968.04 256,331.64
Bananas 1943331 2,085,962 2,705,715.16 2,912,576.89 3,025,022.32
Guavas 19473.94 29,285 30,143.07 22,149.99 11,730.03
Lemons 48713.27 62,131 45,929.27 81,602.96 55,167.50
Mangoes 441582.14 656,199 656,516.76 727,528.60 697,507.30
Oranges 293409.71 438,276 439,792.40 487,504.78 357,458.39
Papayas 440034.99 436,576 402,453.64 425,733.33 386,943.15
Source: CSA and FAOSTAT
2.2.3. Export and import trends: By trade value

Export of fruit and vegetables can be categorized into three types. First, export of relatively high
value perishable produce to Europe. Second, the export of low value produce cultivated
predominantly in Eastern Ethiopia around Dire Dawa, to regional markets (mostly Djibouti) and
third, some processed and fresh produce to Middle East countries.
Table 2.2: Imports of processed fruit and vegetable products to Ethiopia during 2009-2013

Processed Products 2009 2010 2011 2012 2013

Imported Quantity
10777966.38 11731151.97 14791595.24 19734308.37 18882624.65
(Kg)
Processed apple 92378 113307.2 300118.29 168479.87 168479.87
Processed apricots 4003.78 15656 7310.6 16748.89 16748.89
Processed beans and 128910.56 120628.04 57374.18 119278.51 119278.51
Peas
Processed grape 7327 110009 172187.33 52021.69 52021.69
Processed mango 6621889.81 6472602.76 7440740.53 13704052.64 13704052.64
Processed mushroom 45148.31 34501.24 35166.72 39943.57 39943.57
Processed orange 281841.5 238154.2 101483.01 74744.89 74744.89
Other Processed fruit 3025828.08 3906771.3 3361434.8 2905869.37 2905869.37
and vegetables
Other processed 138570.34 157312.99 2572443.95 1830609.84 1830609.84
Vegetables
Processed pineapple 233675 496929.2 562539.1 282502.31 282502.31
Processed tomato 198394 65280.04 180796.73 540056.79 540056.79
Value of Imports
101854937.3 132206627.1 360244901.1 368409015.8 380907535
(ETB)
Processed apple 1090477.18 864064.28 3522769.25 3333711.26 864064.28
Processed apricots 77316.1 377740.88 422881.07 578757.14 377740.88
Processed beans and 2606946.73 2053007.61 1430591.02 2684369.51 2053007.61
Peas
Processed grape 217190.6 1096190.41 6767164.7 935552.41 1096190.41
Processed mango 52668247.16 58565090.23 92964257.97 173402466 58565090.23
Processed mushroom 1162519.46 2077879.62 2026419.97 939596.43 2077879.62
Processed orange 3400728.73 3691701.27 1629088.05 1353625.72 3691701.27
Other Processed fruit 30755962.44 51813443.44 58163636.27 55368226.71 51813443.44
and vegetables
Other processed 4614320.94 5460204.16 181682644.4 114302476.1 5460204.16
Vegetables
Processed pineapple 2982239.84 5343752.47 9033444.46 5974015.71 5343752.47
Processed tomato 2278988.09 863552.7 2602003.95 9536218.85 863552.7

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 Table 2.3: Exports of processed fruit and vegetable products from Ethiopia
during 2009-
2013

Processed Products 2009 2010 2011 2012 2013

Exported Quantity (Kg) 50809.89 292511.3 1585064 1139342 409549.1
Processed fruit 16894.89 99796.31 519096.1 744626.4 339031.1
Shelled bean 900 10000 39000 …….. ……..
Other processed vegetables 33015 181731 180398 363586 69818
Processed tomato ……. 984 846570 31130 700
Value of Exports (ETB) 3076278 25822835 53489421 57986735 54196664
Processed fruit 2664180 24271727 44941491 54624755 53666769
Shelled bean 5085.94 100013.4 471749.3 ……… ……….
Other processed vegetables 407011.6 1431941 1557819 3082535 524989.1
Processed tomato ……… 19153.8 6518362 279445.4 4905.6

Source: Ethiopian customs and revenue authority

D. Market Capacity to Absorb Increased Production

The gap of local supply and local demand of vegetables in two municipal markets (Arba Minch and Sodo) is
high. Tables (Table 1, Table 2, Table 3)

According to CSA (2012) the area under these crops (vegetables and root crops) was
estimated to be 359,950.13 hectares with a total production of 24,267,581.58 tons in the year
2011/12. Root and tuber crops are by far the dominant product group. Potatoes (32%) stand
out as the important products, followed by taro/Godere (19%), garlic (12%), and onions
(nearly 12%). Potatoes are mostly found in the Amhara Regional State (51%) and Oromia
(33%). Among small-scale producers of vegetables, Ethiopian cabbage (Kale) takes the
higher almost 50%, followed by red pepper with a share of 31%, and green pepper 10%.

Smallholder vegetable farms are based on low input – low output production systems. The
use of improved seeds and planting material of high yielding varieties and other inputs such
as fertilizer and plant protection materials is not common in the smallholder sector. Technical
training and extension services on improved crop husbandry techniques are not available. As
a result average productivity levels are low in the small scale farming sector (EHDA, 2011).

The Ethiopian Fruit- and Vegetables Marketing Enterprise (ETFRUIT for short) is a state
trading organization established in April, 1980 under the Horticulture Development
Corporation (HDC) of the Ministry of State Farm Development. ETFRUIT is a wholesale
institution dealing with domestic and export trade of fresh fruits, vegetables, flowers,
processed horticultural products and some slice crops. The marketing operation of the
enterprise includes the collection of products from production sites, transportation, storage,
grading and quality control, packing and distribution of these horticultural, floriculture and
spice crops (MSDF, 1984).

Table 2: Area and Production of Major Fruit Crops in Ethiopia

Area ( in '000 Hectares) Production ( in '000 Metric Tons)
Fruit Crops 2013/14 2014/15 2015/16 2016/17 2017/18 2013/14 2014/15 2015/16 2016/17 2017/18
Avocados 11 14 14 18 18 18 54 54 65 81
Bananas 41 54 54 63 59 340 478 440 538 494
Guavas 2 3 2 3 2 1 4 2 4 3
Lemons 1 1 1 1 1 5 8 7 8 8
Mangoes 10 13 15 15 15 72 91 100 105 105
Oranges 3 3 4 3 4 31 31 28 21 31
Papayas 2 2 3 3 3 32 40 48 50 54
Pineapples 0.3 0.2 0.2 1 1 0.5 0.4 0.3 1 1
Total 72 90 92 108 104 499 707 680 792 777
Source: CSA Ag Survey

2.5. Marketing Constraints Facing Smallholder Farmers

The aim of this section is to identify key constraints facing smallholder farmers in the study
area, such as lack of physical infrastructure, lack of market, and high transaction costs.
Smallholder farmers find it difficult to compete in the new market environment. They face
enormous constraints when it comes to physically accessing markets. They also lack market
information, business and negotiating experience, and a collective organization to give them
the power they need to interact on equal terms with other generally larger and stronger
market intermediaries. The result is poor term of exchange and little influence over what they
are offered (Heinemann, 2002). Below follows a discussion of some of the common
marketing constraints facing smallholder farmers, as revealed through international
experience.

2.6.1. Constraints on production

Producing for the market calls for production resources that include land , labour force and
capital. Poor access to these assets affects the way in which smallholder farmers can benefit
for opportunities in agricultural markets, and especially in terms of the volume of products
traded and the quality of those products (Bienabe et al., 2004). Small-scale farmers lack
regularity in terms of producing for the markets due to insufficient access to production
resources.

2.5.2. High transaction costs

High transaction costs are caused, inter alia, by poor infrastructure and communication
services in remote rural areas (Hease and Kirsten, 2003). Transaction costs also result from
information inefficiencies and institutional problems such as the absence of formal markets
(Makhura, 2001). Transaction costs include the costs of information, negotiation, monitoring,
co-ordination, and enforcement of contracts. Smallholder farmers are located in remote areas
and are geographically dispersed and far away from profitable markets. Distance to the
market, together with poor infrastructure and poor access to asset and information results
high transaction costs. Since small holders are poor, they find it difficult to compete in
profitable markets due to the high transaction costs. Traders with higher social capital are
better able to enter more capital- intensive marketing activities such as wholesaling and long-
distance transport, whereas traders with poor social networks face major barriers to entry into
the more lucrative market segments (Kherallah and Kirsten, 2000).

Minimizing transaction costs is the key to improving access to high-value markets in

developing countries, because high transaction costs will make it difficult for poor
smallholder enterprise to market their produce.
Market structure

Market structure includes those characteristics of the organisation of the market that seem to
exercise strategic influence on the nature of competition and pricing within the market (Bain,
1986). The most salient characteristics of market structure according to Scarborough and
Kydd (1992) include:

1. The degree of seller’s and buyer’s concentration which refers to the number and size
distribution of firms in relation to the size of the market;
2. The degree of the product differentiation among outputs of the various sellers in the
market; and
3. Barriers to entry or freedom to entry and exit from the market: this refers to the conditions
for entry of new firms into the market or exit of existing firms.

Entry or the ease, with which an individual can join and leave business, is important to a
competitive market structure. This may refer to the process of setting a license or professional
qualification or skill or to the need of having a minimum amount of capital or other resources
in order to operate successfully. Lack of available capital could effectively restrict entry of
new firms if a large initial outlay is required (Staal, 1995).

Market conduct

Market conduct refers to the behavior that firms pursue in adopting or adjusting the market in
which they sell or buy. The major aspects according to Scarborough and Kydd (2004) include
pricing and selling policies and tactics, overt and tacit inter-firm co-operation, or rivalry, and
research and development activities.

The specified structural features of atomistic numbers, homogeneous product, and free entry
and exit require a form of conduct such that each firm must operate as if in isolation. The
market behavior of firms will determine whether or not they compete and whether they are
acting innovatively to improve market efficiency. Informal association between even a small
numbers of firms (collusion) can cause price distortions and seemingly independent firms can
have joint ownership (subsidiaries) (Staal, 1995).
Market performance

Market performance refers to the composite of end results which firms in the market arrive at
by pursuing whether lines of conduct they espouse-end results in the dimensions of price,
output, production and selling cost, product design, and so forth (Bain and Qualls, 1987). The
principal aspects of the market performance according to the same authors are:

1. The relative technical efficiency of production so far as this is influenced by the scale or
size of plants and firms (relative to the most efficient), and by the extent, if any, of excess
capacity;
2. The selling price relative to the long-term marginal cost of production and to the long run
average cost of production (usually about the same as long-run marginal cost), and the
resultant profit margin;
3. The size of industry output relative to the largest attainable consistent with the equality of
price and long-run marginal cost;
4. The size of sales promotion costs relative to the costs of production;
5. The character of product, or products including design, level of quality, and variety; and
6. The rate of progressiveness of the industry, both products and technologies of production
relative to rate which are attainable and also economic in view of the costs of progress.

The above dimensions of marketing performance such as technological progressiveness

efficiency of resource use and product improvement and maximum market services at the
least possible cost must fit with goals of the agricultural marketing system in developing
countries. Due attention should be given to the interrelatedness between the categories of
structure, conduct, and performance in studying agricultural marketing efficiency.
2.6.1.2. Market integration

Market integration is considered an important determinant of food flow, availability,

accessibility and price stability. As Nyange (1999), puts it, the extent to which markets make
food available and accessible, and keep price stable, depends on the degree of market
integration across a region. Goletti and Christina (2000), define integrated markets as markets
in which price of comparable goods do not move independently. According to the Law of
One Price(LOP), if two markets are integrated, change in price in one market due to excess
demand or supply shocks will have an equal impact in the related market price. If this
equilibrium condition holds, the two spatially separated markets are said to be integrated. In
other words, the Law of One Price prevails between the two markets (Zanias, 1999; Sexton et
al., 1991) or the two markets are spatially price efficient (Tomek and Robinson, 1998).
Otherwise, markets may have some constraints on efficient arbitrage such as barriers to entry
and information asymmetry (Barrett, 2001; Mohr et al., 2008) or imperfection competition in
one or more markets (Faminow and Benson, 1990). Hence, the study of spatial market
relationships provides the extent to which markets are related and effecicent in pricing.

The notion of market integration is often associated with the degree of price transmission,
which measures the speed of traders’ response in moving foods to deficit zones when there is
an emergency, or some catastrophe that leads to hunger in deficit zones (WFP, 2007). A
number of factors that lead to market integration have been identified (Rapsomanikis et al.,
2005; Timmer, 2009).

Among the key factors, weak infrastructure and large market margins that arise due to high
transfer costs have been asserted as the main factors that partly insulate domestic market
integration. Especially in developing countries, poor infrastructure , transport and
communication services gives rise to large marketing margins due to high costs of delivering
locally produced commodities to the reference market for consumption .high transfer coast
and marketing margins hinder the transmission of price signals, as they may prohibit (Sexton,
et al., 1991;Bernstein and Amin, 1995). As a result, change in reference market price is not
fully transmitted to local prices, resulting in economics agents adjusting partially to shift in
supply and demand.
2.6.1.3. Market supply

Agricultural products differ from manufactured goods in terms of supply and demand.
Agricultural products supply is different because of the very seasonal biological nature while
their demand is comparatively constant throughout the year. In economic theory, it is stated
that human being is always under course of action of choice from a number of options. The
basis for the decisions could be issues ranging from household characteristic to the
exogenous unmanageable factors. A case in point here is market supply where researchers put
each owns point of determining variables.

The analysis can identify factors that determine market supply. A clear understanding of the
determinants helps to know where to focus to enhance production and marketable supply. The
study of market supply helps fill the gap for success of commercialization. There are different
factors that can affect market supply.

According to Wolday (1994) market supply refers to the amount actually taken to the markets
irrespective of the need for home consumption and other requirements where as the market
surplus is the residual with the producer after meeting the requirement of seed, payment in
kind and consumption by peasant at source.

Empirical studies of supply relationships for farm products indicate that changes in product
prices typically (but not always) explain a relatively small proportion of the total variation in
output that has occurred over a period of years. The weather and pest influence short run
changes in output, while the long run changes in supply are attributable to factors like
improvement in technology, which results in higher yields. The principal causes of shifts in
the supply are changes in input prices, and changes in returns from commodities that compete
for the same resources. Changes in technology that influence both yields and costs of
production /efficiency/, changes in the prices of joint products, changes in the level of
price/yield risk faced by producer, and institutional constraints such as acreage control
programs also shift supply (Tomek and Robinson, 1990).

A study made by Moraket (2001) indicated households participating in the market for
horticultural commodities are considered to be more commercially inclined due to the nature
of the product. Horticulture crops are generally perishable and require immediate disposal. As
such, farmers producing horticulture crops do so with intent to sell. In his study it was found
that 19% of the sample households are selling all or a proportion of their fruits and vegetable
harvest to a range of market outlets varying from informal markets to the large urban based
fresh produce markets. Typically, many of the households producing fruits and vegetables
also have access to a dry land plot where they commonly produce maize and/or other filed
crops.

Wolday (1994) used about four variables to determine grain market surplus at his study in
Alaba Siraro. The variables included were size of output, access to market center, household
size, and cash income from other crops. In his analysis, factors that were affecting market
supply of food grains (teff, maize and wheat) for that specific location include volume
produced, accessibility (with negative and positive coefficients), were found significant for
the three crops while household size in the case of teff and maize still with negative and
positive coefficients. Cash income from other crops was insignificant.

A Similar study on cotton at Metama by Bossena (2008) also indicates that four variables
affect cotton marketable supply. Owen oxen number, access to credit, land allocated to
cotton, productivity of cotton in 2005/06 were the variables affecting positively cotton
supply. Similar study on sesame at Metema by Kinde (2007) also pointed out six variables
that affect sesame marketable supply. Yield, oxen number, foreign language spoken, modern
input use, area, time of selling were the variables affecting positively sesame supply and unit
cost of production was found to negatively influence the supply. Similarly, Abay (2007) in
his study of vegetable market chain analysis identified variables that affect marketable
supply. According to him, quantity production and total area owned were significant for
onion supply but the sign for the coefficient for total area of land was negative. For tomato
supply, quantity of production, distance from Woreta and labor were significant.

Similarly, Rehima (2007) in her study of pepper marketing chain analysis identified variables
that affect marketable supply. According to her, access to market, production level, extension
contact, and access to market information were among the variables that influence surplus.
Another study by Gizachew (2006) on dairy marketing also captured some variables that
influence dairy supply. The variables were household demographic characteristics like sex
and household size, transaction cost, physical and financial wealth, education level, and
extension visits. Household size, spouse education, extension contact, and transaction cost
affects positively while household education affects negatively.

According to Moti (2007) a farm gate transaction usually happens when crops are scarce in
their supply and highly demanded by merchants or when the harvest is bulk in quantity and
inconvenient for farmers to handle and transport to local markets without losing product
quality. For crops like tomato, farm gate transactions are important as grading and packing
are done on the farm under the supervision of the farmer. Therefore, households are expected
to base their crop choice on their production capacity, their ability to transport the harvest
themselves and their preferred market outlet. From these little reviews, it is possible for
households to decide where to focus to boost production and knowing the determinants for
these decisions will help choose measures that can improve the marketing system in
sustainable way.

Market Strategy
One of the mechanization of market penetration of the project is that the promoter has to plan
to produce even three time year to supply including in the slack period for most of the project
life year. Production of high quality products that meet the standards and that are organic in
nature are one of our objectives. To achieve this project has to use best technology like
packaging area, cool store, and suitable harvesting and transportation system. In addition to
this setting appropriate cost reduction and price setting mechanism are one of the project
goals.
Fruit and Vegetable Demand Forecast
One could easily assume that the demand of fruit and vegetable is to be the minimum
consumption, that is 400gm per day or 146 kg per year per person due to the different
positively influencing the consumption. There for the demand for fruit and vegetable
forecasted based on the population growth rate 2.9%, the minimum per capital consumption
with the annual growth rate 4.5% and the annul export at the rate of 7.4% per year. There for
the total demand for the base year taken as 15.85 tone according the Ethiopian agricultural
research gate.net for horticultural crop production and level of consumption. Thus the
forecasted demand is estimated and indicated in the following table.
 Demand forecasting for the next 10 Years
Consumption per Export at Total
year in million 7% annual Estimated
tons at annual growth rate demand
Population @ growth rate of in million in million
Year 2.9% in million 4.5%. tone tone
2017/18 103.9 15.85 0.069 15.919
2018/19 106.91 16.563 0.0738 16.637
2019/20 110.01 17.309 0.0790 17.388
2020/21 113.20 18.087 0.0845 18.172
2021/22 116.49 18.901 0.0904 18.992
2022/23 119.87 19.752 0.0968 19.849
2023/24 123.34 20.641 0.1036 20.744
2024/25 126.92 21.570 0.1108 21.680
2025/26 130.60 22.540 0.1186 22.659
2026/27 134.39 23.555 0.1269 23.681
2027/28 138.28 24.615 0.1357 24.750
2028/29 142.29 25.722 0.1452 25.867

3.3 Fruit and Vegetable Supply

3.3.1 Domestic Supply
The potential of fruit and vegetable grow in different parts of the country both in commercial
quantities as well as small volume by private farmer and other operator engaged in the
business. In the fruit and vegetable sector export is still dominant by the to state farms (Upper
awash agro industries enterprise UAAIE and Horticulture development enterprise HDE).
Alongside the state companies and a number of private sector companies and cooperatives re
involved in relatively in small scale production, processing and export of vegetable
production. The major producers of horticultural crops are small –scale farmers produce in
fruit and vegetable cultivation estimated at 6.0 million farmer. The production estimate of
fruit and vegetable include root crops are 2.16 million tons (that is 9.2% of the total national
peasant crop production of the season).
The production of fruit and vegetable has been increasing substantially according the CSA
2009/11 the average annual production has been around 3.429 million tons during the year
(2002-2011) with in verge annual growth rate of 4.3% though the growth rate is much higher
for the first three years of the period reaching up to 10%. Within the fruit group banana is the
most common fruit being produced.
The following table shows the average annual production, supply for the year 2017/18-
2027/28 is taken for supply forecasting, the growth rate of 4.3%.

Table; Fruit and Vegetable Supply Forecasting.

Supply in
year million tone
2017/18 5.833
2018/19 6.084
2019/20 6.345
2020/21 6.618
2021/22 6.903
2022/23 7.200
2023/24 7.509
2024/25 7.832
2025/26 8.169
2026/27 8.520
2027/28 8.887
2028/29 9.269

3.3.3 Demand Supply Gap Analysis

The unsatisfied demand supply gap is expected to grow from 10.086 million ton in 2017/18
to 16.599million ton in 2028/29. This is clearly indicated in the following table.

Demand Supply Gap in million tone

Deman
d
Supply
Year Demand Supply Gap
2017/18 15.919 5.833 10.086
2018/19 16.637 6.084 10.553
2019/20 17.388 6.345 11.042
2020/21 18.172 6.618 11.554
2021/22 18.992 6.903 12.089
2022/23 19.849 7.200 12.649
2023/24 20.744 7.509 13.235
2024/25 21.680 7.832 13.848
2025/26 22.659 8.169 14.490
2026/27 23.681 8.520 15.161
2027/28 24.750 8.887 15.864
2028/29 25.867 9.269 16.599
Technical study
Project location and site

Ashenafi Altaye’s Agricultural Development Project Is Found In Snnp Regional State

Wolita Zone Humbo Wereda Ajaje Faricho Kebele to produce fruit and vegetable on 123
hectar of land . The project site is 35Km far from wolita soddo town and 217Km from
regional state. The farm is located between geographical grid between 736730-736934 North
latitude and 346407-346576 to longuted. And also latitude range from 1341 to 1378 a.s.l
elevation.

Land Ownership

The promoter/owner has find 123hectar of land through winning and purchasing by
conducting foreclosure from Development Bank of Ethiopia Wolita District.
Natural and Environmental condition of the project area.

Datas from Wolaita zone humbo wereda Agriculture office data, the annual average
temperature of the project area is fall within a range of 22- 29 ˚C. From the same office
description, it is also reported that the project site is located on an elevation of 1346 m above
sea level. Therefore it is concluded that, both the temperature and altitude in the project site
are suitable for both vegetable and fruit farming.

Project Building and Civil Work

As mentioned earlier the company has to plan to cultivate 123 hectar of land by different
crops. Among those to plan to cultivate crop types are Onion, Tomato, Green paper , Banana
and Papaya. There amount of hectares stated below the table.

Land use plan

Cultivated Area (ha)

Variety of crops Season1 Season2
Onion 25 25
Tomato 10 10
Green paper 10 10
Papaya 40 40
Banana 30 30
farm road &
infrastructure 8 8
Total 123 123

The promoter has to plan to develop the entaier land through irrigation development. The
project has already constructed borrow hole for easily access of water. The promoter has to
plan to build new building and finish and maintain the existed building.

Detail plan of the civil work has to shown bellow the table.

Total existed construction cost

No Description Amount in Birr
1 Office Building 878,993.9
 2 Shade for Grage 454,478.8
3 Cool Store 891,247.0
4 Packing Room 230,148.0
5 Shade for Genrator 109,352.0
6 Guard House 92,534.0
sub-total 2,656,753.7

Project machineries and Equipments’.

Project machineries and equipments consist of Tractor and farm implements.

The planed machineries and equipments, vehile and Others

Summury
Qt Total Price
Iteam Description y Unit Price of Iteams

Agricultural Tractor 1 2,184,184 2,184,184

Disc plough 1 143,499 143,499

Disc harrow 1 337,920 337,920

Sprayer 1 155,862 155,862

Agricultural Trailer 1 237,947 237,947

Disel Generator Set 1 1,150,500 1,150,500

Light Duty Truck 1 1,590,000 1,590,000

Pick Up Truck 1 1,660,000 1,660,000

Pumping
Equipment 1

Total 7,459,912 7,459,912

Farm Tools

The project has pland to procure farm tools necessary to carry out the
production of intended out put at accost of birr 6500.Detail tools of farm are
presented in the annex

Office Furniture and Equipment .

There is also plan for procure office furniture and equipments whose cost is
estimated and the planed office furniture and equipments are presented in the
table below.

List of office furniture and equipments

furniture and equipments Qt. required list price Total Price

dell disktop computer/7010 1 15,852.17 15,852.17

Hp printer/LJ 1 13,869.57 13,869.57

Photocoppy machine 1 30,347.83 30,347.83

L-shape table 1 17,869.57 17,869.57

high back chair " 14,025.00 14,025.00

two door shelf " 8,470.00 8,470.00

l-shape table " 5,689.00 5,689.00

secretary chair " 3,000.00 3,000.00

guest chair fabric " 1,500.00 1,500.00

Total 110,623

Utility

Water Supply
In order to successfully deal with the day to day farm operation system based on irrigation
water is essential. The farm has already constructed borehole water for using drip irrigation
system. The existence of water is confirmed and easy for accuses.

Raw Material and Inputs

The farm requires input like seed, planting materials, packing, pesticide and insect side. Since
the soil is virgin limited amount of fertilizer is required. Crop seed is required for onion,
tomato, pepper and as well as planting materials of papaya, banana is also important to be
considered. Packing materials include sacks and wooden box are very essential especially for
vegetable crops. There for the raw materials and inputs for vegetable and fruit are:-

 Seedling
 Fertilizer and Chemicals
 Packaging Materials

Capacity and Capacity Utilization

The Farm will produce Onion, tomato and green pepper from vegetable and Banana and
Papaya from fruit. And the total planned land is about 123 hectares. Out of this 25 hectares
are planned for Onion 10 hectares planned for Tomato, 10 hectares planned to cultivate
Green pepper hence 45 hectares reserved for vegetable crop. Out of the total cultivable land
of the project 40 hectares allocated for papaya and 30 hectares allocated for banana there for
the total land reserved for fruit cultivation is 70 hectares.

Technology

The project uses the proven and efficient technology of irrigation system known as Drip
Irrigation system. Regarding power supply for the project as long as the main hydro electric
power installation line will establish alternative source of power supply i.e. generator were
planned to purchase.

Productivities Status of Proposed Vegetable and Fruit

At present, many private commercial farms & private farmers are producing fruits and
vegetables both for domestic and export markets in the country.

Processing plays an important role in the conservation and effective utilization of fruits and
vegetables. It converts perishable fresh products to more durable processed products in cases of
sluggish markets or when there are profit- generating demands for processed products. It also
helps in generating rural employment. Besides, processed fruits and vegetables are sources of
foreign exchange earnings.

In Ethiopia, the number of fruits and vegetables processing industries is limited. Currently, there
are only 5 fruits and vegetables processing plants in the country. These plants presently process
limited products: tomato paste, orange marmalade, vegetable soup, frozen vegetables and wine.
Most of the processing plants fall in the small-scale processing units category. In general,
processed products are mainly geared to domestic markets.

Table 2: Productivity Status of Selected Fruits, Vegetables and Root Crops of Ethiopia
as Compared to other Countries

Yield (qt/ha)
S.No Crop Type At peasant Farm At demonstration Other countries
site
1 Tomato 102 288 600-1000
2 Potato 62 294 600-700
3 Sweet potato 86 248 Above 700
4 Asparagus - 400 1000
5 Banana - 250 Up to 1000
 Source: Ministry of Agriculture and Rural Development

Project's Implementation Schedule

Implementation Periods
2013 2014
Ja Ju Sep
Description of activities Dec n Feb Mar Apr May Jun l Aug t Oct Nov
Procurement of machinery & Farm
Equipments
Land Development
Coffee plantation 98ha
Building construction
Procurement of Vehicles
Procuring office equipments
Farming Operation

Organization and Managment

The project plans fully flagged management system will established on the site.the general
manager supposed in the overall planning, while the farm manager will follow day to day
activities of the farm with his team. The organization structure of the farm will not be
complex , the farm manager will have full power to excute day to day activities/operation of
the busness.

Organizational set up of Ashenafi Altaye fruit and Vegetable farm.

The organization structure is designed in such a way that it can enable to fully undertake the
project objectives.

G.Manager

Secretary
 Production &
Adm & Finance Head Farm Manager technical Dept Head

Adm head & Staffs

Supervisor crop
Supervisor Agr.
prod. And
irrigation
Store head &
controller
Staffs

Tractor operator
Finance &
Marketing Head &
Forman crop
Staffs
protection

Description of Key Management Staff

The project is managed by the General Manager who is assisted by the Farm Manager for the
day to day activities. The company has four divisions being production, Technical,
administrative and finance divisions. The production manager will manage production that is
responsible for cultivation, production, and protection. Qualified agronomists will control and
coordinating all the steps from the production to final harvesting. The production manager
will also in charge of protection department where the spraying supervisors are responsible
for correct implementation of the spray program and application of chemical treatments.

The General Manager; will decide on overall and general issues of the farm. Approve
annual budget, receives audit reports, follow general working condition of the farm and
similar issues. The management of the company consists of the general manager farm
manager, administrative and finance head. The following table holds the required personnel’s
in the farm.

Table; Presents the description, required personnel’s in the farm.

No of Monthl Annual
Position staff y Salary Salary
1 Farm Manager Office

Farm manager 1 10,000 120,000

Administration and Fin.
3 Head 1 5,214 62,568

Finance & marketing 1 4191 50,292

Accountant/Cashier 1 4191 50,292

Sales 1 2459 29,508

Store Head 1 3000 36,000

Book keeper 2 2250 27,000

Messenger 1 1500 18,000

Guards 2 1500 36,000

3 Production Head 1 8562 102,744

Farm Mechananization Head 1 6000 72,000

Supervisor 1 4000 48,000

Tractor operators 2 3000 72,000

Irrigation scout 3 3500 126,000

Superviors 1 2159 25,908

Camp head 1 2000 24,000

Guards 4 1000 48,000

Total 25 948,312
Remark:- Wages & salaries will increase by 5 % each year
 2. BACKGROUND

2.1 Introduction

Ethiopia has a comparative advantage in a number of horticultural commodities due to its

favorable climate, proximity to European and Middle Eastern markets and cheap labor.
However, the production of horticultural crops is much less developed than the production of
food grains in the country.
On average more than 2,399,566 tons of vegetables and fruits are produced by public and
private commercial farms, this is estimated to be less than 2 percent of the total crop
production.
According to recent information obtained from the Central Statistics Authority, the total area under
fruits & vegetables is about 12,576 hectares in 2011. Of the total land area under cultivation in the
country during the same year, the area under fruits and vegetables is less than one per cent (i.e.
0.11%), which is insignificant as compared to food crops.
At present both state owned and private farms are operating in fruit and vegetable production,
export and processing sub-sector in Ethiopia. The average yield of fruit and vegetable in the
country is low as compared to other countries. Today many private commercial farms &
private farmers are producing fruits and vegetables both for domestic and export markets in
the country.
The Government emphasized the priority given to agricultural development through its policy
document entitled Agricultural Development Led Industrialization (ADLI). This policy
focuses on the development of agriculture both as a source of production for direct
consumption and of raw materials for industrial processing, on the one hand, and as a major
source of consumer products coming out from the industrial sector, on the other.

Thus production and processing of horticultural crops, vegetables and fruits have been
placed by the Government in the list of high priority areas and various incentives have been
provided for investors investing in this sub-sector.

Ethiopia has diverse climate and altitude conditions which are conducive to various
agricultural activities. There are several lakes and perennial rivers that have great potentials
for irrigated agriculture. The groundwater potential of the country is about 2.6 billion cubic
meters.

Groundwater in the country is generally of good quality and it is frequently used to supply
homes and farmsteads. The potentially irrigable land area of the country is estimated at 10
million hectares, out of which only about 1% is currently under irrigation. Most of the soil
types in fruits and vegetables producing regions of the country range from light clay to loam
and are well suited for horticultural production. Endowed with favorable weather, altitude,
adequate water and availability of suitable soils, the potential to develop horticultural crops,
such as fruits, vegetables, root crops and cut flowers is great in Ethiopia.

Fruit crops of significant importance and with a potential for domestic consumption, export
markets and industrial processing include pineapples, passion fruits, bananas, avocados,
citrus fruits, mangoes, mandarin, papayas, guava, grapes, asparagus and vegetable crops of
economic importance such as tomato, melon, pepper, chilies, onion, carrot, green beans,
green peas, cabbages, okra, cauliflower, cucumbers are produced in the country. The major
vegetables produced for domestic consumption are Onion, tomatoes and garlic, while green
beans and peas have recently emerged for export purposes.
To benefit from this opportunity Ashenafi Altaye integerated agricultural development
project has planned to establish a farm on 123 hectares of land to produce vegetable and fruit,
like onion, tomato, green pepper, Banana and papaya. The feasibility of the farming shows
the management condition and has been studied in the document and presented in the
following chapters.

2.2 General Overview

Ethiopia is a country of great geographic diversity. The topographical differences result in

different climatic zones which make Ethiopia an attractive country for different kinds of
agricultural production systems. About 60% of the surface is suitable for agriculture. Also the
amount of land which can be irrigated is large, but at the moment only a small part is actually
utilized.

The geographical differences result in three climatic zones:

• Cool zone, above 2400 meters, day temperatures ranging from freezing to 16°C
• Temperate zone, 1500 – 2400 meters, day temperatures from 16 – 30°C
• Hot zone, below 1500 meters, day temperatures above 27°C
Diversification into horticultural crops is becoming attractive for many poor farmers around
the world. Worldwide production of fruit and vegetable crops has grown faster than that of
cereal crops, albeit from a much lower base. Between 1960 and 2000, the area under
horticultural crops worldwide has more than doubled. There are several reasons for the global
increase in production and trade of fruit and vegetable crops. Horticultural production is
profitable. Farmers involved in horticultural production usually earn much higher farm
incomes as compared to cereal producers and per capita farm income has been reported up to
five times higher
Ethiopia usually has two different rainy seasons. The long rainy season, Meher, takes place
from mid-June to mid-September. During February to March some regions have a short rainy
season, the Belg. The remaining months are mostly dry.
More than 47 thousand hectares of land is under fruit crops in Ethiopia. Bananas contributed
about 60.56% of the fruit crop area followed by Mangoes that contributed 12.61% of the area.
Nearly 3.5 million quintals of fruits was produced in the country. Bananas, papaya, mangoes
and orange took up 55.32%, 12.53%, 12.78% and 8.35% of the fruit production, respectively
(CSA, 2008).
Ethiopia has a variety of vegetable crops grown in different agro ecological zones produced
through commercial as well as small farmers both as a source of income as well as food.
However, the type is limited to few crops and production is concentrated to some pocket
areas. In spite of this, the production of vegetables varies from cultivating a few plants in the
backyards for home consumption up to a large-scale production for domestic and export

According to the CSA (2008) 501,599.14 ha was under fruit (47,990.34 ha) and vegetable
(453,608.8 ha crops). Papaya, onion and tomato covered 3,254.3 ha, 15,628.44 ha and
5,341.58 ha, respectively. An annual production of 21,637,206.7 quintal was estimated from
fruit (3,512,593.2Qt) and vegetable (18,124,613.5Qt) by the same year. Of which papaya,
onion and tomato constituted 440,034.99Qt , 488,548.9Qt and 418,149.53Qt, respectively.

2.3 The Applicant

 Ashenafi Altaye
 Ntionality Ethiopian

2.4. The Project

 Name: - Ashenafi Altaye Agricultural development.

 Region:- SNNP Regional State
 Zone :-
 Wolita
 Woreda: Humbo
 Kebele: Ajaje Farecho

 Legal Form of the business:- Sole Proprietorship

 Status of the Project :- New
 Regestration agency:-
 Licensing Agency:-
 Registration Number and date :-
 Tax Paying Identification Number;-
 Vat:-
 Types of the project :- agriculture
  Project Objective: - To produce vegetable and fruit for domestic and export
market.

2.5. Breif History of the Enterprise

Ashenafi Altaye Agricultural development has established 2012E.C with registered

capital of Birr _______________ Ato Ashenafi Altaye is the general project manager. He
has 10+2 certificate and ample experience in business sector from his young age start up
till today. The project has to plan to hires appropriate farm manager graduate in
agronomy, horticulture and other agricultural related field of study.

2.6. Swot analysis of the Project

 Strengths

Climate
Ethiopia has a beneficial climate for growing a wide range of fruits and vegetables
throughout the year. The good soil and water conditions are enabling the agricultural
potential further.
Facilitating government policies
Investments are encouraged by the Government of Ethiopia through several incentives for
example through beneficial tax schemes for export investments. Government offices work
according to procedures resulting in a relatively low level of corruption compared to other
African countries.
Costs of production
Land lease costs are low and labour is relatively inexpensive and productive.
Geographical location
Ethiopia has a favourable geographical location as it is in particularly very close to Djibouti
and the Middle Eastern markets.
Security
Compared to other countries in the region Ethiopia security situation is not bad.
Private sector service provision
The rapid growth of the floriculture sector leads to a growing critical mass of service
provision level by private sector parties also relevant for the fruit and vegetable sector.
New initiatives
A broad interest from private sector parties and public organisations and NGO's to enter
into the fruit and vegetable sector as a potential for economic development in Ethiopia.
Potentials for irrigation
Potentials for irrigated production with improved water saving techniques (drip irrigation)
are high.
Transport
Although land locked a good internal major road network exists between major fruit and
vegetable production centres and Addis; airfreight is available and capacity constantly
increasing.
Code of Practice in floriculture sector
Experiences gained in the development of a Code of Practice by the floriculture sector will
benefit the Fruits and Vegetable sector.
 Weaknesses
Constant high quality supply in sufficient quantities
Apart from beans, a fragmented and non constant supply of fruit and vegetable with limited
quantities and high variation in quality, leads to a weak position compared to competitors
as Kenya; Ethiopia yet lacks the critical mass and reputation of a high potential source of
fruit and vegetable.
Varieties
Limited knowledge and availability of the proper varieties with respect to local climatic
conditions and consumer demand.
Packaging
Low quality of locally produced packaging material.
Cold Storage
Limited capacity of appropriate cold storage capacity.
Technical Know How
Limited technical knowhow for production and handling high quality fruit and vegetable for
export markets.
Research and extension
Limited research and extension programs focused on the export oriented fruit and
vegetable sector.
Input supply
Problems in sourcing appropriate types of fertilisers and pesticides.
Land Tenure
Insecurity due to lack of land tenure causes constraints for investments.
Market Information
Information about export markets, especially Middle East, is limited.
Domestic market
Very low consumption rates of fruits and vegetables give little options for selling non
export grades.
Banking
The regulation of the banking system is a major constraint. There is no free exchange for
foreign exchange, which hampers international financial transactions.
Bureaucracy
Government procedures (including customs, repayment of VAT, etc.) are sometimes slow
and unclear and require regular follow up.
Communication
The mobile phone network is over stressed and e mail/internet connections slow.

 Opportunities

Demand in Europe and Middle East

In both Europe as in the Middle East there is a high and growing demand for fruits and
vegetables. The objective of importers to diversify sourcing from main suppliers like
Kenya provides an opportunity for Ethiopia. For European importers Ethiopia is very
interesting in order to have a year round delivery of fruits and vegetables.

A range of vegetable products have a potential in EU markets but need to be timed to fit
specific marketing windows to ensure economic returns. This range includes asparagus,
baby corn, snow peas, sugar snap, okra and other Asian vegetables. In the Middle East
market demand for both fresh and processed fruit and vegetables is increasing. Green
house vegetables receive a lot of interest from current producers and investors and trade
with the Middle East has started which is hopeful.

The low value regional export sector can have potential with efforts to further
professionalise this sector through improved chain integration, logistic arrangements,
packaging, market information, etc. can add substantial value to this export channel.

Demand for processed fruits and vegetables

Processed fruits and vegetables have a high demand in Europe and Middle East markets;
also import substitution in the domestic market provide opportunities. Demand for tomato
concentrate in the Middle East and Sudan is increasing.

Ecological and fair trade production

Demand in the European market for ecological and fair trade products is increasing. Also
major retailers like the UK based TESCO is demanding high social standards of their
imported products. Ethiopia offers good scope for ecological and fair trade production.

 Threats
Increased competition in European and Middle East Market, High competition of countries
with already a strong position (e.g. Kenya in the European market) and countries with a
growing position (Morocco,Egypt in Europe; Turkey, Jordan in Middle East). China may
also become real competitor for processed products.
Regional politics
Political insecurity due to possible escalating conflicts within different area of the country
has put its black shadow on the development of the sector.

Summary of Ashenafi Altaye Fruit and Vegetable Farm

1.1 Descripton of the project

Ashenafi Altaye Fruit and Vegetable Farm located Wolita Zone Humbo Woreda Ajaje
Faricho kebele of SNNP Regional state. Its geographical location is at 12.5830cN
Latitude and 39.7070cS longitude. Its elevation is range about 1,341 to 1378 meters
above sea level around 28 Km stern side of the zonal capital of woilota soddo. The site is
one of the fertile plains which is Known for its productivity in times when it gets
adequate moisture.

As part of the project plan of the farm at present the total project area was 123 hectares
for which this report include detail study of the site including soil and water analysis
and all project cost requirements and benefits. Such establishment of the farm area is
envisage to the benefit of the promoter and to supply of the local market of the country
and international (export market)and it is expected to play significant role in the
development of the country’s economic endeavour.

Based on the envisage project plan out of 123 hectares the majority of the land will be
used for annual crop production but their will be substantial amount of perennial crops
like fruit to maintain ecology of the area apart from the economic benefit of trees.

1.2 Amount of Finance Required

The total investment cost of the project is estimated at ETB 32,471,740 and out it the
planned investment cost of the project is ETB 24,482,451 and ETB 7,989,289 is expected
from bank loan and holders respectively. Hence the source of finance from the investor
and bank loans proportion of 25% and 75% respectively.

1.3 Profile of the project

Ashenasfi Altaye agricultural development were established 2012EC by taking over the
land from development bank wolyta soddo through winning the foreclosure bids. Hence
the promoter has to plan to produce suitable crop type of both vegetable and fruits like
Onion, Tomato, Green pepper, Banana and papaya. The crop type is very marketable
and has to convey good return for the promoter and let the promoter easy to repay his
loan timely.

Financial study

Investment out lay (cost of investment).

The total investment cost of the project is Birr 32,471,740 should be covered by promoter
contribution and from bank loan.

Summary of investment cost of the project

Description DBE Equity Total

2,452,54
Land development & Farm road 2,452,546 6
Drip irrigation 5,838,10
 4,138,102 1,700,000.00 2
2,656,75
Buildings 2,656,754 4
2,771,18 3,490,54
Machinery and Equipment 0 719,366 6
3,250,00 3,250,00
Vehicles 0 0
110,62
Office Equipment and furniture 110,623 3
350,00
Pre-investment Cost 350,000 0
14,323,16
Operating/working cost 14,323,169 9
24,482,45 32,471,74
Total 1 7,989,289 0
Total Investment 32,471,740
Bank loan 75%
Owner Investment 25%

Financial scheme and source of fund

Total cost of the project is estimated at ETB 32,471,740 out of this 25 % is owners
contribution and 75% is from bank loan estimated at ETB 7,989,289 and ETB 24,482,451
respectively.

Production Revenue and Operating cost