CHAPTER X: ESTABLISHMENT OF A MODERN DATE PLANTATION

by A. Zaid and A. Botes Date Production Support Programme

1. Introduction
During the last ten years, reports have indicated the potential and viability for a date production industry. Most of these reports focused on economics and marketing of the date palm at national or regional level. This chapter will concentrate on useful information in both technical and fi nancial aspects for individual farmers. Technical establishment of a date plantation will cover the following components: f easibility study, suitability of the site, selection of varieties to be planted, site preparation, irrigation system and technical practices, while fi nancial establishment will highlight the establishment and operational costs and the cash fl ow statement.

2. Technical establishment of a date plantation

2.1 Feasibility study After being convinced about the marketing potential of dates, and before purchasing land or developing his/her own farm, a potential date grower must seriously look at several factors and consequently conduct a feasibility study before any physical date establishment. The feasibility study should focus on the following: - Survey of the area: with maximum information on its location (latitude, longitude and altitude), vegetation, communications and infrastructure; - Meteorological data: The date grower must contact the nearest weather station to his plantation (within a circle of 30 to 50 km if possible) and request the following data for at least 10 - 15 years: * Daily values of maximum temperatures (C); * Daily values of average temperature (C); * Daily values of minimum temperatures (C); * Daily values of rain (mm); * Daily values of evapotranspiration (mm); * Daily values of sunshine (Hr.);

* Daily values of wind (km); * Daily values of maximum humidity (%); and * Daily values of minimum humidity (%). - Soil analysis: This is a primary factor since it will indicate the success potential of the culture, and will also be used as a guideline for future fertilisation programmes, and irrigation requirements. - Water analysis: The most important factor to look at is the salinity level along with the depth of the underground water table, if any. - Mode of irrigation: Depending on water availability, its quality and also taking into consideration all the above factors, a mode of irrigation system will be selected. Flood irrigation is discouraged for a commercial plantation. In order to ensure high water use-effi ciency the date grower should select either drip or microsprayer systems. - Economical analysis: A local and national market survey is to be implemented to see how promising the market is. - Climatic requirements: The two main climatic requirements for successful cultivation of dates is a long, hot growing season and an absence of heavy rain or high humidity during the ripening period. Frost incidence, is another environmental factor to take into consideration. Details on climatic requirements can be found in Chapter IV. - Water availability: To maximise the probability of a successful date plantation, long term water availability must be ensured. Salinity level must not be too high (5 - 6 % at most) even though adult date palms can survive higher levels (9 - 10 %). - Soil type: Date palms are grown in a wide variety of soils. The optimum soil should have a maximum water-holding capacity and good drainage. Sandy soils require excessive fertilisation and irrigation and permit rapid leaching of mineral nutrients. However, sandy soil that is underlined by more retentive soil of fi ner texture in the first two metres is appreciated. Growth development and fruit quality of dates are reduced under very saline soil conditions. - Labour requirements: Date palm culture is labour intensive during pollination and harvesting/packing periods. Labour requirements for other operations during the year (bunch thinning, pulling down and tying, covering bunches, irrigation, pruning, fertilisa-tion, etc.) are lower. 2.2 Selection of varieties to plant Local clones, which are exclusively of seed-origin, must be assessed for their suitability for commercial production. Even though some of these seedlings show signs of measuring up to the best internationally renown varieties, such as Medjool, Bou Fegouss, Barhee, etc, these seedlings must be thoroughly evaluated before large scale multiplication and planting can be initiated. The

large scale multiplication and plantation of international renown varieties is essential for reaching the international market and getting high value from the plantation. 2.3 Site preparation Once all the above factors and conditions have been assembled, the date grower must concentrate on the preparation of his/her site for the initiation and establishment of the date plantation. To avoid repetition, the reader is invited to refer to Chapter VI.

3. Financial establishment of a date palm plantation

3.1 Establishment cost The introduction of a new enterprise to the farm business can be expensive. However, diversifi cation into date production is seen as part of the bigger existing farming business which will make use of existing infrastructure and mechanisation. Careful planning is thus needed to allocate scarce resources amongst the different farming activities, in a way that the best alternative satisfi es the respective requirements. Detailed calculations are necessary for the farmer to determine the capital needed to implement his/her plan and to forecast its fi nancial result. It should be kept in mind that costs will vary from one farm to another, depending on the current setup in terms of existing infrastructure and machinery, source of water supply, irrigation system to be used, etc. Costs given are based on a Namibian Date Palm Project (80 ha at Naute/Keetmanshoop), quotations and some estimates of the authors. In light of possible existing scenarios, the following costs are not included: acquisition of land; source of water supply; mechanisation; and marketing cost. Additional costs needed for date production will be highlighted. The breakdown of cost items in this paper should be used as a guideline and need to be adapted for each specifi c situation. Table 61 gives an outline of the establishment costs involved per hectare, for a modern plantation of at least 20 ha. The spacing is 10 8 m and 125 palms are planted per hectare, of which 5 are males. TABLE 61 Establishment costs per ha for a modern date plantation (US$) COST ITEM Land Preparation: 1. cleaning and levelling 2. ripping Water Supply Line On-land Irrigation System 20 60 1,600 1,200 COST IN US$

Establishment of Plantation: 3. plant material 4. fertilisers 5. labour 6. hardening of plants TOTAL COST (4 US$ 2 5 days) (US$ 22 120) 2,640 24 40 16 5,600

The irrigation system to be installed in a modern plantation should be such that effi ciency is at maximum (at least 85 %) and that volume of water per palm can be controlled. A well planned and effective irrigation system, based on the use of microsprayers or drippers, together with proper management and production practises will result in optimum yields. The smaller producer establishing only 1 to 5 ha will not install such an expensive irrigation system and it is estimated that the establishment cost might be in the order of US$ 3,200 per ha. This amount includes US$ 2,640 for plant material, US$ 80 for labour, fertiliser and pesticides, and US$ 520 for water supply. Table 62 gives an outline of additional capital expenses needed to build and equip a modern packing house, for a larger commercial plantation of at least 40 ha. The international food market is very competitive and quality control and hygiene criteria are strict. Thus, to enter the export market successfully and to sustain the supply of quality fruit, the facilities mentioned are essential. Realising the magnitude of the total costs involved, the immediate question is whether the project will survive. This question will be answered in the sections to follow. It should be kept in mind that date production is a long term project and generates only income from year four or fi ve from establishment. Measures should thus be taken to maintain a cashfl ow during that period. Various options exist, and the farmer, as a manager, should decide what option best fi ts his skills and business. The following can be successfully implemented as an intercrop: vegetable production; lucerne and citrus. An intercrop will however increase capital investment. TABLE 62 Additional capital expenses (US$): buildings and equipment of a packing house COST ITEM INFRASTRUCTURE Packing House/Shed structure (office, ablution, packing room, cold rooms, etc.) Labour Houses IMPLEMENTS Tractor and trailer 24,000 140,000 300,000 COST IN US$

Pick-up Equipment tools plastic crates for harvesting grading/sorting line/Table washing Table packing line/Table electronic scale press for pitted dates vacuum packer TOTAL

16,000 200 3,400 3,000 1,000 2,000 1,000 1,000 5,000 496,200

One of the advantages of a date plantation is that it creates a special micro climate favourable for other crops. Some plantations in the northern hemisphere, for instance, successfully produce citrus as an intercrop. Because of the high costs of needed facilities, i.e. packing house, cold rooms, labour houses, etc., it seems almost essential to have other crops also utilising these facilities. Other crops sharing these capital expenses have not been considered in the sections to follow. 3.2 Operational cost Operational expenses represent those expenditures that occur only if production is undertaken. Capitalisation of the investment cost is dependent upon the production process. Each activity to improve yield and quality costs money and the manager should decide how much, of which activity and at what cost to apply. A carefully worked out balance of inputs in relation to outputs is needed since maximum production does not necessarily result in maximum profi t. Tables 63 and 64 represent the activities involved in date production, packaging and marketing with their respective costs over a 10- year period, for large and small commercial date plantations, respectively. Cost indications in Table 63 is per hectare and refl ects the Naute Date project (Namibia), while Table 64 represents activities and respective cost estimates to be encountered by the small date producer (5 ha plantation). Analysing Table 63, it is clear that the expensive activities are packaging and export marketing. In year 10, full production, pre-harvest costs are about 6 cent (US) per kg and harvest costs are US$ 0.524 of which packaging material is US$ 0.496. At this point of the production cycle, one should decide whether to export in bulk, thus achieving lower prices, or whether to target the retail stores and pre-pack the date fruit in attractive "glove boxes", achieving higher prices. TABLE 63 Operational cost per ha for a large commercial date plantation (US$)

YEAR ACTIVITY Pre-harvest Cost: water fertilisers labour (*) mechanisation protection: bags: plastic shade net pesticides SUB-TOTAL (1) Harvest Costs: labour mechanisation Packing Costs packaging material: packages cartons labour (**) SUB-TOTAL (2) Marketing Costs: cold Storage/electricity Local marketing: transport agency fees Export marketing: transport: road air/sea agency fees SUB-TOTAL (3) TOTAL(1 + 2 + 3) 84 840 277.2 168 1680 554.4 294 420 420 420 0 1,386 588 1,76 4 1940.4 882 1,260 1,260 1,26 970.2 1,386 1,386 36 97.2 72 194.4 126 340.2 180 486 180 486 180 486 252 486 1,000 1,000 1,400 1,400 1,600 1,600 2,000 480 62 4 556 960 124 5 1,109 960 2,400 2,400 2,40 217 20 310 40 310 55 0 310 70 7,967 2,840 2,885 2,920 3,36 0 800 80 4,400 5 5 10 10 30 20 60 30 80 40 100 40 120 40 10 10 15 78 84 89 15 89 100 400 20 596 400 20 499 100 400 20 602 400 30 516 100 400 30 621 400 30 524 28 28 28 24 24 24 6 12 12 10 10 10 28 24 12 10 28 24 14 10 28 24 17 10 28 24 20 10 28 24 24 10 28 24 29 10 28 24 32 10 1 2 3 4 5 6 7 8 9 10

2,334.4 3,708.8 4,012.4 5,132 5,332 5,332 7,224.8 78 84 89 2,979.4 5,373.8 6,478.4 8,574 8,733 8,873 12,148.8

(*) Labour includes weeding, pruning, pollination, thinning and orchard maintenance. (**) Labour includes sorting, cleaning, de-stoning, packing and packing house maintenance. The calculations in Table 63 for marketing costs are based on the assumption that 30 % of the harvest will be marketed locally and 70 % will be for the export market. Estimated marketing costs are in the order of US$ 0.86 per kg. In the calculations for transport to Europe, air transport is used only during the first two years of production. Air transport is quite expensive, but since volumes to be exported are low in the initial stages of production, sea transport cannot be considered. Total operational cost as outlined in Table 63 amounts to US$ 1.446 per kg (Naute Project during 1997). TABLE 64 Operational cost for a small date plantation (1 ha); (US$) YEAR ACTIVITY Pre-harvest Cost: water (***) fertilisers labour (*) mechanisation protection: bags: plastic shade net pesticides SUB-TOTAL (1) Harvest Cost: labour mechanisation Packing Costs packaging material: labour (**) SUB-TOTAL (2) Marketing Cost: cold storage transport SUB-TOTAL (3) TOTAL (1+2+3) 40 120 160 40 240 280 60 420 480 60 420 480 80 420 500 80 420 500 100 840 940 35 4 49 70 5 95 130 20 200 180 40 310 180 55 355 180 70 390 250 80 490 5 5 10 10 30 20 60 30 80 40 100 40 120 40 10 10 15 15 170 176 181 181 100 400 20 708 400 20 611 100 400 20 734 400 30 648 100 400 30 753 400 30 696 1 2 3 4 5 140 24 14 10 6 140 24 17 10 7 160 24 20 10 8 160 24 24 10 9 160 24 29 10 10 200 24 32 10

120 120 120 120 24 24 24 24 6 12 12 12 10 10 10 10

170 176 181 390 1,083 1,291 1,524 1,503 1,643 2,126

(*) Labour includes weeding, pruning, pollination, thinning and orchard maintenance. (**) Labour includes sorting, cleaning, de-stoning, packing and packing house maintenance. (***) Higher water cost for small date plantation due to the fact that water is usually supplied from a borehole and pumped with a diesel engine at high cost. In this scenario the small scale producer will sort and grade the fruit, but sell in bulk to a packing house. As a result, the expensive activities, i.e. pre-packing and export, are covered by someone else. This strategy will reduce production cost from US$ 1.446 per kg to US$ 0.236 per kg. Obviously the price to be received will also be much lower, as will be the risks involved in exporting. 3.3 Cash flow statement The function of cash fl ow is to provide information on the timing and magnitude of cash (infl ows and outfl ows). Both cash fl ow statements here below summarise the cash fl ows for large (40 ha) and small scale (5 ha) date plantations, over a period of 10 years. For the calculations in Tables 65 and 66, the following average production potential per palm in kg is considered. YEAR LARGE SCALE YEAR SMALL SCALE 1-3 4 5 6 7-9 10 10* 20 35 50 70 1-4 5 6 7-8 9 10 15 30 35 40 50

* For a well maintained large scale modern date plantation, production could start one year earlier than the small scale one and be over 100 kg/palm/year. An estimated cashfl ow statement for the large scale modern date plantation is given in Table 65. The costs indicated are calculated as follows: * gross income: * development cost: - 30 % of production at US$ 2.4/kg - 70 % of production at US$ 3/kg - plantation: 20 % own capital and rest as loan over 10 years at 18 %. - infrastructure: established only in year 4 with 20 % as own capital and rest as loan over 10 years at 18 %. TABLE 65 Cash flow statement for 40 ha date plantation (US$)

Yea Prod. Gross r Incom e kg 1 2 3 4 48,000 135,36 0 5 96,000 270,72 0 6 168,00 473,76 0 0 7 240,00 676,80 0 0 8 240,00 676,80 0 0 9 240,00 676,80 0 0 10 336,00 947,52 0 0 11 336,00 947,52 0 0 12 336,00 947,52 0 0 13 336,00 947,52 0 0 14 336,00 947,52 0 0 15 336,00 947,52 0 0 US$

Development Cost

Operationa Managemen l t Cost

Net

Balance

Plantatio Infrastructur n e 44,000 40,000 40,000 40,000 96,600

& Incom Overheads e 3,120 40,000 -87,120 3,360 3,560

-87,120

40,000 -83,360 -170,480 40,000 -83,560 -254,040 40,000 - -414,456 160,41 6 - -527,688 113,23 2

119,176

40,000

89,000

214,952

40,000

40,000 40,000 40,000 40,000 40,000 40,000

89,000 89,000 89,000 89,000 89,000 89,000 89,000 89,000 89,000

259,136 342,960 349,320 354,920 485,952 485,952 485,952 485,952 485,952 485,952

40,000 45,624 -482,064 40,000 164,84 -317,224 0 40,000 158,48 -158,744 0 40,000 152,88 0 -5,864

40,000 292,56 286,704 8 40,000 292,56 579,272 8 40,000 332,56 911,840 8 40,000 332,56 1,244,40 8 8 40,000 332,56 1,576,97 8 6 40,000 421,56 1,998,54 8 4

The Table 65 cash fl ow statement suggests that net income is positive only as of year six, while the accumulating balance is negative up to year nine. Total costs in year 10 totals to US$ 1.95 per kg. Although costs can be recovered over the 15- year period with proper production techniques, planning and management, attention should be focused to improve the cashfl ow situation in years 1 to 5.

TABLE 66 Cash fl ow statement for 5 ha date plantation (US$) Year 1 2 3 4 5 6 7 8 9 10 9,000 18,000 21,000 21,000 24,000 30,000 9,000 18,000 21,000 21,000 24,000 30,000 Prod. Kg Gross Income US$ Development Cost 16,000 Operational Cost 850 880 905 905 3,540 3,055 3,677 3,240 3,765 3,480 Net Balance Income -16,850 -16,850 -880 -17,730 -905 -18,635 -905 -19,540 5,460 -14,000 14,945 17,323 17,760 20,235 26,520 945 18,268 36,028 56,263 82,783

Analysing costs at a smaller scale (Table 66), it can be seen that operational costs can already be covered in the first year of production (year 5 after establishment). The accumulated balance, however, is only positive in year 6. In calculating the cashflow, an income of US$ 1 per kg is assumed, considering that financing management and administration costs are taken into account. Investment in a 5 ha date plantation might thus result in a net income of US$ 26,520 in year 10 with a yield of 50 kg per palm at US$ 1 per kg. When comparing the cost of production of 1 kg of dates for a large scale modern plantation and that for a small producer, one would like to suggest that a nucleus-regional packing