Gibe Dhidhessa Farmers’

cooperative union Output

Marketing Business plan for
2015/16

Negash Deti

General Manager

Submitted to Banks

Nekemte District

December 2015
OUT PUT MARKETING Bankable bueiness Plan
Prepared by Olika Urgessa Business and investment consultancy service
Output Marketing Marketing Bankable Business Plan

Prepared On October 2013

BUSINESS CONTACT:

BUSINESS NAME GIBE DHIDHESSA FARMERS COOPERATIVE UNION

EAST WOLLEGA ZONE

BUSINESS ADDRESS NEKEMTE 03

NEKEMTE TOWN

TELLEPHONE OFFICE 0578619112

FAX 0576617841

EMAIL Geme.Boka@yahoo.com

WEBSITE

LOAN REQUESTED TO CBE 31,000,000 ETB

PRESENTER CONTACT:
 NAME NEGASH DETI

EAST WOLLEGA ZONE

NEKEMTE )2
ADDRESS NEKEMTETOWN

328 KM FROM A.A

POSITION GENERAL MANAGER

TELLEPHONE OFFICE 0578619112

CELL PHONE 0911340056/0917370810

EMAIL

WEBSITE

Prepared by Olika Urgessa Business and Investment consultancy service/0911002870

Table of Contents
I. EXECUTIVE SUMMARY......................................................................................................................................................... 4
1. BACKGROUND AND BUSINESS DESCRIPTION................................................................................................................... 7

2. POTENTIAL ADVANTAGES OF THE FCU........................................................................................................................... 10

3. ECONOMIES OF SCALE...................................................................................................................................................... 10

4. COOPERATIVE PRINCIPLES FOLLOWED:........................................................................................................................... 10

5. STRATEGIC PARTNERSHIP.................................................................................................................................................. 11

6. OPERATIONAL PERFORMANCE......................................................................................................................................... 12

7. COOPERATIVE UNION PERFORMANCE............................................................................................................... 13

8. FINANCIAL DETAILS OF THE ORGANIZATION.................................................................................................. 13

9. PROFIT AND LOSS STATEMENT OF THE UNION IN THE PAST THREE YEARS.................................................................13

10. BALANCE SHEET OF THE UNION.................................................................................................................................. 14

11. LAST YEAR GRAIN MARKETING PERFORMANCE....................................................................................................... 14

12. MARKETING ENVIRONMENT ANALYSIS...................................................................................................................... 15

12.1. Political and legal environment................................................................................................................ 15

12.2. Economic environment................................................................................................................................ 15

12.3. Social environment....................................................................................................................................... 16

 12.4. Infrastructure and technological environment...................................................................................17

13. SWOT ANALYSIS......................................................................................................................................................... 17

14. ORGANIZATION AND MANAGEMENT STRUCTURE.................................................................................................... 20

Chart: Organizational structure of the GDFCU....................................................................................................... 21

15. MANAGEMENT AND MANPOWER................................................................................................................... 22

16. FINANCIAL ANALYSIS................................................................................................................................................... 22

17. GRAIN MARKETING PLAN OF THE UNION IN 2014..................................................................................................23

17.1. Variable Costs in Grain marketing activities........................................................................................24

17.2. Fixed Costs in grain marketing activities............................................................................................... 25

17.3. Other Costs directly related to grain marketing business..............................................................26

18. DEPRECIATION COSTS.................................................................................................................................................. 27

19. SUMMARY OF COSTS.................................................................................................................................................... 28

20. GRAIN MARKETING PLAN IN 2014 AND ITS BREAK EVEN ANALYSIS....................................................................29

21. INCOME STATEMENT AT BREAKEVEN OPERATION.................................................................................................... 30

22. PROJECTED INCOME STATEMENT AT FULL CAPACITY................................................................................................ 31

23. PURPOSE OF LOAN....................................................................................................................................................... 32

24. FINANCIAL DEMAND OF THE UNION BY MONTHS.................................................................................................... 32

25. SALES PLAN OF THE GDFCU..................................................................................................................................... 33

26. CASH FLOW FORECAST.................................................................................................................................................. 1

27. ACTION PLAN OF GRAIN MARKETING........................................................................................................................... 3

Executive Summary

Gibe Dhidhessa Farmers’ Cooperative Union is established in 1996 E. c under the cooperative union’s establishment proclamation No
147/91 in Oromia region state East wollega Zone Naqamte town. The Union established with group of 15 primary cooperatives from six
districts came together to create and synergize their individual operation in terms of market, bargaining power and resource sharing. The
founding primary cooperatives have total membership of 26,810 of which 2,244 of them were female. The union has started its business by
collecting money in form of share 185,000 birr and 7,500 Birr in for of registration fee.
Currently the members of the cooperative has grown to 148 primary cooperatives with total membership of 92,997 and the capital of the

union has reached 18,776,681.81 Birr according to 2005 E.C audit report. The total number of shares sold to the members has

increased from 37 to 934.35 having total value of 4,701,750.00.

Starting from its establishment, Gibe Dhidhessa Farmers’ Cooperative Union is running a profitable business venture. The Profit & Loss
statement indicated that the union had a net profit of Birr 2,182,140.68 for the years 2003 E.C, Birr 3,597,949.15 in the year 2004.E.C and has
increased to 6,699,671.75 on 2005 E. c audit report of the union as we have seen on the profit and loss statement of the union on average,
the net profit of the union is increasing since its date of Establishment.

The rationale of behind this Bankable business plan development is that to access output financing loan for grain marketing business
planed by the union in year 2015/16. Based on strong relationship developed between the union and banks Gibe Dhidhessa Farmers’
cooperative union prepared this business plan to access a loan of 20,000,000.00 to purchase a total of 49,000 quintals of four different
types of crops namely maize, sesame, soya bean and Niger seed from small holder farmers through primary cooperatives . In 2015/ 2016
harvesting season, Gibe Dhidhessa FCU has signed contractual agreement with WFP to supply 37,000 Quintal of white maize in
coordination with its primary cooperatives, Lending institutions voluntary to finance the output marketing business and Cooperative
promotion agency at different levels and other government offices will technically assisting our organization to be successful in maximizing
the income of rural small holder farmers.

According to the plan of the union 37, 000 quintal of white maize will be purchased and supplied to potential customers like WFP, Oromia
cooperative federation and flour mill factory. For the purpose of grain marketing the union request Commercial bank of Ethiopia Naqamte
branch and Cooperative bank of Oromia to finance a total of twenty million Birr.
The union will apply for ten million Birr to commercial bank of Ethiopia to finance for the purchase of maize supplied to WFP where the
mode of payment will be as per tri-party agreement the union and the bank has been practicing for similar activity in the past years.

Similarly, our union also request cooperative Bank of Oromia to Finance for the purchase of sesame, Niger seed and soya bean which need
a total working capital of ten million Birr. Different from last year output marketing, the big challenge to the union in getting the
appropriate warehouse to maintain the quality of the product as per the preference of potential buyers was totally solved by the
construction of standardized warehouse with total capacity of-------------------quintal in 2007 E.C. In addition to the newly constructed
ware house the union has two ware houses that have storage capacity of 30,000 Quintal. The grain marketing business will create job
employment opportunity to the local community in addition to its role of market stabilization and creation of market linkage to farmers
produce to improve the standard of living of their members.

By undertaking this output marketing business the union will expected to generate a profit of --------------------------- ETB that can be
distributed to member primary cooperatives based up on their participation and the number of share they have purchased from the union.
The involvement of the union in grain marketing business has many advantages to individual house hold farmers. The individual farmers will
get better market price for their product because of the positive competition made among buyers to collect more commodities and the
union also facilitate better price for better quality crops demanded by organization like WFP. Thirdly, the individual farmers supplying their
product to their cooperative will get second payment from the profit obtained after the primary cooperative Audited. Gibe Dhidhessa
farmers’ cooperative union has provided training to the Board of directors ,cooperative leaders and staff to make the grain marketing
business more successful in which both the producers, the potential buyers and Banks will happy in the process of grain marketing.

Gibe Dhidhessa Farmers’ cooperative union has good loan repayment history from and of the banks it received loan and no Default has
been recorded by the union in the process of output marketing. In 2014 our union received a loan 5,134,850.00 ETB form commercial bank
of Ethiopia and timely repaid both principal &interest. In year 2015 commercial bank of Ethiopia has provided immediate positive response
for the loan application of the union but the union has not received the loan because of the reason acceptable to the union. Because of its
successful operation the union has distributed dividends to the primary cooperatives instead of distributing the dividends to individual
members the primary cooperatives used the money to purchase output without requesting additional working capital from the union. Gibe
Dhidhessa Farmers’ cooperative union has collected financial demand of primary cooperatives and realized that there should be loan from
commercial bank of Ethiopia to address financial needs of the output suppliers. We kindly request Commercial Bank of Ethiopia to Finance
our union a loan of 10,000,000.00 Birr used for output purchase plan Explained in the business plan in detail. The grain marketing business
is feasible and the union will generate gross profit of 1,750,972.67 by purchasing ---------------- quintal of different types of crops in 2016.

The role of cooperatives in empowering the members.

Cooperatives unions have been established in Ethiopia with the objective of achieving greater economies of scale through the increasing
the bargaining power of primary cooperatives. Gibe Dhidhessa farmers’ cooperative union of the successful cooperatives established with
the interest of members and performing its activities as per cooperative principles and values. The union has been purchasing agricultural
produce from members at competitive price and offer dividend based up on their participation and shareholdings in the organization. The
primary cooperatives were provided output finance loan to purchase Agricultural commodity on yearly bases and the primary cooperatives
collect the products as per the market price and supply to the union. The union also provides various services to like transportation of
produce, storage produce, and supply of consumable goods and facilitation of trainings.
In past years the union has better experience of making surplus and distribute dividends to the cooperative members. As per the data
collected from the union in the auditing periods the union has been paying the dividends to the union. With the current audit report the
union has allocated a total Birr of 4,689,770.22 to dividend.

Historical back ground of GDFCU

Gibe Didesa Farmers’ Cooperative Union (GDFCU) is located at Nekemte city administration, is one of the numerous unions created
following the conducive policy environment and has been enjoying the favorable economic environment. GDFCU was established in
Dec.2003 with subscribed share of 148, and paid up shares of 37 thereby making initial capital of ETB 185,000.00 by 15 cooperatives.
Currently, the union has a subsicribed share of 2,300 among which 940.35 shares have been paid thereby increasing its capital to
18,776,681.81 ETB owned by members of 148 primary cooperatives.

GDFCU operates with vision statement of ‘wishes to see improved livelihood of members through promoting modern technologies and
offering diversified services’. Its mission statement is also clear and congruent with its vision: ‘aims to contribute to the improvement of
members by working on providing improved agricultural inputs in a sustainable manner, increase the income of members by increasing
their bargaining power on their products and promote in value adding activities, be strong and viable Organization that guarantee for
farmers through providing different services that helps for production and livelihoods of members’.
In accordance with its vission and mission statements, GDFCU works on the basis of well tought on, specific, measurable, acheivable, and
realistic objectives among which the following are the main ones:

 Improve member’s income through transforming agricultural products to industry,

 Strengthen the capacity of members by offering education and training,
 Provide improved agricultural inputs for members on time and at right place,
 Facilitate market for members produce,
 Promote saving culture,
 Promote social services of members,
 Participate on protection and Conservation of natural resources,

As per its objectives to improve the living standards of its members through capacity building and provision of diversified services, the
GDFCU has embarked on diversifying its economic activities on such areas as: productions and distributions of improved seeds; grain
trading; construction of multipurpose modern commercial building; and has a plan to be engaged in agro processing industry. However, the
long term objectives of the union is plugged by such problems as shortage of adequate working capital, lack of standard warehouse,
inadequate farm machineries and equipment’s as well as lack of need-based capacity building training for its employees and primary
cooperatives.

It is against this background that this project feasibility study is being undertaken to assess the profitability and sustainability of the projects
so as to provide invaluable information to those agencies willing to finance and work with the union with common purposes and values.

Beneficiaries of the Project

The direct beneficiaries of the project are members of the multipurpose primary cooperatives and the potential members that engaged in
production activities in the operational areas of the union. The members have the right to get dividends from the net profit of the project’s
income and the potential members will also get the same privilege as soon as they become members of the affiliated cooperatives. The
member families are assumed as indirect beneficiaries of the output marketing activity that the union and primary cooperatives are running
and working with better coordination.

The vision of the union

Gibe Dhidhessa Farmers’ cooperative union wishes to see improved livelihood of members through promoting modern technologies and
offering diversified services. Aspire economically well- developed Cooperative Union that can provide satisfactory service to its members
and the community by supporting the output marketing business of the primary cooperatives through which individual farmers will
benefited from the market price and linkage created. With coordinated performance the production and productivity can be enhanced and
achieving good performance in service provision that boost the income of the cooperatives union and hence improve the livelihood of their
members.

General objectives of the union

o To solve problems collectively which primary coops can’t individually achieve.

o To procure inputs and services at lower cost.

o Enable members produce get better market access.

o To promote modern agricultural technologies.

o To involve in natural resource management.

o To promote education and training.

o To improve the bargaining power of members.

Having those objectives the union will contribute much in increasing the countries wheat production, increasing environmental
sustainability and raising farmers benefit.
OPERATIONAL PERFORMANCE OF GDFCU

Output marketing trend of the union

Sales Plan Sales Actual

Year(E.C) Commodity
(Quintal) (Quintal)
Maize 40,000 0
Sesame 5000 0
Plan 2008/2009
Soya bean 2000 0
Niger seed 2000 0
49,000
Maize 400,000 21,933.36
Sesame 5000 1,420.70
2007/2008
Soya bean 2000 0
Niger seed 1500 0
sub total 23,354.06
Maize 30,000 15,102.66
sesame 2000 681.93
Actual performance 2006/2007
soya bean 1000 0
Niger seed 1000 0
sub total 15,784.59
Maize 20,000 11,592.93
sesame
Actual performance 2005/2006 soya bean 126.96
Niger seed
11,719.89
Actual performance 2004/2005 Maize 2542.45
 sesame 2540.17
Soya bean 100.6
Niger seed
sub total 5183.22
Grand total 56,041.76

As we have seen from the table above the output marketing trend of the union has been increasing with actual output marketing of

5183.22 in 2005 E.C. harvesting season and currently reached at 23,354.06 quintals of different types of crops in 2007 E.C. harvesting
season. Furthermore, the union has been making bulk purchase of grains from the smallholder farmers to prevent them from
depressed selling of their outputs to the unscrupulous middlemen. To this end, the union has been purchasing cereals, legumes
and an oilseed from the farmers through its PMCs. In addition GDFU is one of the selected Unions by alliance institutions WFP/P4P
maize marketing forward contract, starting 2010 and has been able to supply to WFP/P4P program successfully as per the agreement and
requirement.

For 2008 harvesting season the union is on process to disburse output marketing loans to primary cooperatives to purchase total of 49,000
quintal of four types of commodities where the maize accounts 40,000 quintal of 37,000 quintal of maize will be supplied to World food
program where the union has acquired reach experience in successfully supplying as per the contractual agreement signed. To make the
grain marketing business successful the union has conducted to the members of the cooperatives will actively participate with better
understanding and well informed.

Output marketing loan Repayment status of the union to Banks

Gibe Dhidhessa Farmers’ cooperative union has been closely working with Banks in facilitating output marketing loans to its members
where on time delivery of loans have an important advantage to the rural farmers who have less access to finance at time of harvesting
except the sale of its produces to address its financial needs. In the past years our union has created good work relationships with both
commercial bank of Ethiopia accessing loans to output purchase of maize for which the union has entered contractual agreement to supply
37,000 quintal of white maize as per the requirement set on the agreement. The union has fully repaid loans received for output marketing
in the past years with and there is no outstanding loan in the name of our union received for the specified purpose.

Loan Repayment
Interest
Year Loan received Bank Repayment status Purpose of loan
rate
2007
10,000,000.00 Oromia cooperative Bank Fully repaid 12.5% Output Marketing
E.C

2006 3,099,600.00 Commercial Bank of Ethiopia Fully repaid 7.5% Output Marketing
E.C 8,000,000.00 cooperative Bank of Oromia Fully repaid 12.5% Output Marketing
2005
Fully repaid Output Marketing
E.C 5,134,850 Commercial Bank of Ethiopia 7.5%

On the other hand cooperative bank of Oromia is very well known for its immediate response to our union loan application and for this year
our union will submit application letter with this detailed business plan for output marketing loan. Our union recognize the bank for last
year loan facilitation and will repay the loans and interests on time as usual. There is no outstanding loan recorded by the name of the
union received for output marketing.

Output marketing Loan Disbursement and collection status of the union

Loan Distribution Status of the union to Primary cooperatives

Description Year # of cooperatives Loan to be disbursed Loan disbursed Loan repaid Balance due

Plan 2008 45 18,000,000.00

Actual performance 2007 44 11,105,000.00 10,603,282 501,718.00

Actual performance 2006 59 12,850,000.00 11,373,230.85 1,476,769.15

Actual performance 2005 41 8,080,000.00 7,981,246.55 98,753.45

 Actual performance 2004 54 9,444,050.00 7,233,264.26 2,210,785.74

Actual performance 2003 23 3,330,000.00 3,166,915.05 163,084.95

Total 44,809,050.00 40,357,938.71 4,451,111.29

With the objective of facilitating loans to primary cooperatives the union has been provided a total loan of 44,809,050 Birr in the past five
years and collected 40,357,938.78 Birr from primary cooperative. Because of output market fluctuation at an expected rate the primary
cooperatives face challenges in repaying their loans on time. Understanding the real situation behind the default the union has been
working with cooperatives to repay their loans as much as possible with in this harvesting season. Additionally the union is closely working
with cooperative promotion agency staff and management committee of the cooperatives to repay the outstanding loans and receive
output marketing loan of this year. The union is planning to provide a loan of 18,000,000.00 Birr for primary cooperatives which can be
undertaken step by step with in output purchasing schedule of the union and the capacity and last years’ delivery experience of the primary
cooperatives are the determining factor for amount of loan disbursed and the frequency of disbursement.

Input distribution

INPUT DISTRIBUTION STATUS OF THE UNION

Description Years

2002 E .c 2003 E.C 2004 E.C 2005 E.C 2006 E.C 2007 E.C

Fertilizer in Birr 75,090,103.88 114,296,128.63 149,089,392.01 246,236,649.30 127,227,319.58 276,187,296.20

 Chemicals In Birr 1,943,850.80

Improved seeds in
18,153,107.00
Birr 32,877,577.00

Herbicides in Birr 30,611,434.00

Total 75,090,103.88 114,296,128.63 149,089,392.01 281,058,077.10 145,380,426.58 306,798,730.20

To increase production and productivity of the smallholder farmers, GDFCU has been supporting members by facilitating the availability of
inputs used by the farmers at production time. As shown on the table above in 2002 E.C. the union has total input supply transaction of
75,090,103.88 and in year 2007.2008 cropping season the input distribution status of the union reached 306,798,730.20 increasing year after
year.

Financial statements of the union

During the past years of its operation, Gibe Dhidhessa farmers’ Cooperative Union has been growing its production and sales. The union is
benefiting its shareholders through dividends payable annually. Since its establishment, the Union has paid a total dividend of Birr
752557.58 in2002, 1176173.83 in 2003 E.C, 2518564.40 Birr in 2004 E.C and 4,689,770.22 Birr in 2005 E.C audit report. The dividend
payments are growing from year to year as presented on the summary of income statements of the union.

Profit and loss statement of the union

INCOME STATEMENT OF THE UNION

 Year
Description
2002 E.C 2003 E.C 2004 E. C 2005 E. C

Total Income 9,803,351.34 15,750,937.98 39,446,371.73 67,210,458.24

Total expense 8,407,140.63 13,568,797.30 35,848,422.58 60,510,786.49

Net profit 1,396,210.71 2,182,140.68 3,597,949.15 6,699,671.75

Dividend 752,557.58 1,176,173.83 2,518,564.40 4,689,770.22

Balance sheet of the union

BALANCE SHEET OF THE UNION

Year
Description
2002 E.C 2003 E.C 2004 E.C 2005 E.C

Fixed Asset 106,335,162.18 2,720,438.02 3,232,463.32 3,312,198.50

Current Asset 103,665,817.94 88,602,050.13 636,710,774.91 440,938,537.55

Liability 94,167,269.90 77,820,230.69 628,923,174.47 431,439,055.24

Capital 12,167,892.28 13,502,257.46 15,985,064.76 18,776,681.81

The capital of the union has been increasing as we see from four year data of the union. Even though there is delay for the audit report of
the union for 2006 the performance of the union is encouraging and attract financial institution to access loans to output marketing and
other business sector the union wishes to undertake investment on the feasible projects based on the approval of general assembly. To
create better relationship with financial institutions the health of financial statements and operational system of the union is crucial.
Potential advantages of the FCU

Gibe Dhidhessa Farmers’ cooperative union has advantages over their competitors as long as its members are committed enough in
strengthening their cooperative union. The union benefits its members by providing the same services/ac tivities at lower costs through its
primary cooperatives who finance, own and the users of the business offered by the union.

Economies of scale

 Reducing transaction costs e.g. for information, implementation, control and exchange of services and goods,
 Reducing uncertainty concerning e.g. prices and availability of inputs,
 Facilitating market linkage, i.e. where for example the purchasing of inputs or the marketing of produce are linked to the provision
of loan facilities.
 They can offer new services / access to external resources / services not otherwise available.

Cooperative principles Followed:

 Co-operatives are voluntary organizations open to all persons able to use their services and willing to accept the responsibilities
of membership without gender, social, racial, political or religious discrimination.
 Co-operatives are democratic organizations controlled by their members who actively participate in setting their policies and
making decisions. Every member has equal voting rights and accordingly one member shall have one vote.
 Cooperatives members shall receive dividends from profit according to their shares and contribution after deducting and setting
aside an amount necessary for reserve and social services.
  Co-operatives are autonomous self-help organizations controlled by their members. If they enter into agreement with other
organizations, including governments or raise capital from external sources, they shall do so on terms that ensure democratic
control by their members and maintain their autonomy.
 Co-operatives provide education and training for their members, elected representatives, managers and employees so as to
enable them to contribute effectively to the development of their societies. They inform the general public, particularly the
youth about the nature and benefit of societies.
 Co-operatives serve their members most effectively and strengthen cooperative movement by working together through local,
national, regional and international structures.
 Co-operatives work for the sustainable development of their communities through policies approved by their members

Strategic partnership

The union believes that achieving its objectives require creation of close relationship with stakeholders that are engaged in rural
development endeavors. Accordingly it has developed strong partnership with government offices, research centers and different NGOS
working on promotion and development of cooperatives and works towards achieving Agricultural development goals of the country.
Regarding government the union has both vertical and horizontal work relationships with offices. The cooperative has been highly
benefited from trainings coordinated through cooperative promotion offices and district level livestock development offices. In addition the
cooperative union works closely with all government sectors in order to meet development goals planned to be achie ved through
cooperative effort. The union has good relationship with financial institutions, Government offices, NGOS working with the union and
cooperative unions working in the country.

Marketing Environment Analysis

Political and legal environment

The Government of Ethiopia has identified the cooperative form of business organization as instrumental to socio-economic development
and has paved the way for better cooperative development in the country by creating the legal basis and further expansion of human
resource development at higher institution levels. In this regard, the country’s different economic reforms and policies including the five
years’ Growth and Transformation Plan (GTP) and the advocated policy of Agricultural Development Lead Industrialization (ADLI) encourage
farmers’ cooperatives and unions by considering them as important instrument in up keeping the rural community among others. The
relevant cooperatives’ proclamation also bestows cooperatives a number of privileges including tax and duty exemptions including on
import of capital goods and business profit.

Economic environment

In recent years, Ethiopia has been one of the fastest growing economies in Africa. The Ethiopian economy has shifted to a higher growth
trajectory since 2003/2004 and continued to grow rapidly for the eight consecutive years, registering in 2010/11 a real GDP growth rate of
11.4%. Industrial wise, during the period 2003/04-2010/11, the average growth rates in the value added agricultural, industrial and service
sectors were 10.2%, 10.8% and 12.8%, respectively.

Ethiopia has the vision of becoming a middle income country in the coming one and half decades after implementing three successive five-
year development plans. The main development objective is to enhance growth. The current five-year plan (2010/11-2014/15), the Growth
and Transformation Plan (GTP), is geared towards fostering broad-based development in a sustainable manner to achieve the Millennium
Development Goals (MDGs). Over the five years period already underway, the current GTP envisions a major leap, not only in terms of
economic structure and income levels, but also in the level of social indicators.

In Ethiopia, Agriculture, mainly smallholdings, employs 80% of the labor force and accounts for 47% of the GDP and 80% of exports. The
Ethiopian Government agricultural strategy, as part of the GTP, directs intensification of marketable farm products by small and large
farmers. And the government focuses on better-functioning agricultural markets for both inputs and outputs, and institutions, including
improved value chains, information flows, quality and standards support; and it is committed to cooperative-led agricultural
commercialization to strengthen the position of farmers in the market. In this respect, wheat is one of the priority strategic crops identified
by the Government of Ethiopia (GOE) for solving the food security challenges in the country and it is also among the target crops in many
donor development plans. In addition, the government supports and gives priority to value adding agro-processing activities at farm or in
the production catchment, both as traditional small industry and modern large scale levels. Thus, Raya is one beneficiary of the strategy and
such investment promotion.

Infrastructure and technological environment

The project zone has many asphalt and dry weather roads linking districts and woredas’ within and outside the zone. With regards to
communication services, the zone has telephone (including mobile), Internet, digital and agent postal services that helps for provision of
communication service for a number of people in the zone. But, safe and reliable water supply and electricity are most often restricted to
urban centers. With regards to technology, there is rising deployment of agricultural mechanization services including usage of modern
agricultural equipment and tools by farmers in the zone. In addition, the project will be benefited from latest flourmill technology to ensure
quality flour production.

SWOT Analysis

Strength
 Dedicated and interested members want
to sale heir product through their
primary cooperative
 The union is running its staff with
professionals
Weakness
 Lack of skilled man power at primary
cooperative level
 All grain marketing activities will be run
through committee system which delay
in decision making
  Education of members on cooperative  Lack of coordination
management  Lack of controlling the quality of grain at
 Strong relationship with Financial primary cooperative level
institution  Lack of using professional advisors
 Better recording system  Lack discussing with lenders on the
 Experienced staff on grain marketing status of grain marketing business
 Delivered cascading trainings to  Lack of systematically set delivery
minimize postharvest loss and improve schedule from PC to union then to
quality. potential buyers
 Good reputation of the union  Lack of identifying the potential buyers
except for maize

Opportunity Threats
 Availability of required resource such as  Lack of standardized ware house
land, machinery and equipment  Lack of output financing loan from Banks
 Government focus to improve the  Increased costs the costs of grain
income of rural small holder farmers  High turnover of staff
through AGP-Program  Increase in price of commodities which
 Growing population and demand for affect the urban consumers
food is increasing  Increase in operation costs
 Contractual based grain marketing  Poor infrastructure while transporting the
system like with WFP grain from pc to the union warehouse
 Support of strategic partners in making  Pest
the business successful  High labor costs
 Better understanding of primary  Lack of on time response from Banks
cooperative leaders in collecting of grain
 Better understanding of lending
institutions about the grain marketing
program-through agricultural lending
risk mitigation workshops
 Grant obtained to train more farmers on
quality of grain from USAID/AMD e
project
 Sell More For more training program to
cooperative leaders through ACDI/VOCA
Ethiopia which focus on improving the
management of cooperative business
Organization and Management Structure

The General Assembly is the supreme body of the union to pass decisions, Approve annual work plan and budget. GDFCU has recruited a
staff for the organizational management system, which has responsibility to monitor the different aspects of the project. The Project
Manager will have the overall responsibility of the project planning and coordination and implementation and the technical staffs are
responsible for implementing their respective planned project components and activities. But decisions are made jointly by the
management body. The support staff is providing an overall assistance to ensure the smooth functioning of the project.
Chart: Organizational structure of the GDFCU

General Assembly

Control
committee

Board of Directors

General Manager

Deputy Manager

Input supply
Department
 Market & Administration Planning,
Information & Finance Monitoring &
Department Evaluation

Accountants, Support
cashier staffs/Drivers,
Recorder, Guards,
Cleaners

Management and manpower

The General Assembly is the highest body of the union that came from primary cooperatives which appoints the Board of Directors and
passes decisions on major issues. The board members take active part in providing guidance and shaping the strategic direction of Gibe
Dhidhessa Farmers’ Cooperative Union while the controlling committee underneath controls the union to be performance-oriented, market-
driven, and customer-oriented. The manager directs overall activities of the union towards achieving the stated objectives. Other staff
members perform activities like marketing of agricultural products, delivery of inputs, quality control and data base management.

Currently the management team of Gibe Dhidhessa Farmers’ Cooperative Union is competent and qualified for the business. Moreover,
since the competition in the industry tends to get tougher with time, this calls for having a management team which is composed of well
qualified and experienced individuals in the field.

Financial Analysis
The Bankable business plan prepared provides a basis for a decision as to whether to proceed or not with the grain marketing business
planned for 2015/16. The basic assumption for financial analysis of the operation is presented in key assumption part of this study. The
financial study of the project is conducted by taking into account the current production potential of the area, the participation of members
to supply their produce to primary cooperatives and the interest of members to use the union’s services
.

Detail presentation of output marketing plan for 2015/16

VARIABLE COSTS

Output marketing costs

Variable costs
Types of commodity
Uni
No Description of Expected costs t Sesame Maize Soya bean Niger seed
Purchase cost at FCU warehouse Birr 1354.35 406.00 714.50 1120.00
Sorting & cleaning Birr 6 8 0 6
PP bag with logo Birr 0 24 0 0
Weighing Birr 2 2 2 2
Re-bagging & string cost Birr 0.5 1 0 0
Leveling
Birr 3 3 3 3
Treatment tablet & fumigation cost
Birr 1 1 1 1
Handling cost Birr 0.5 0.5 0.5 0.5
Loading cost Birr 4 4 4 4
Wastage cost Birr 6 2 3.6 5.6
Total Average Variable cost per unit Birr 1377.35 451.50 728.60 1142.10
Fixed costs I- Operations

Fixed operational costs for output marketing

No List of costs in detail October November December January February March April May Total cost/year
Perdiem, fuel &
transportation cost for 4,571. 4,571.4
1 staff 43 4,571.43 4,571.43 4,571.43 4,571.43 3 4,571.43 4,571.43 32,000.00
571 571.4
2 Telephone (Mobile card) .43 571.43 571.43 571.43 571.43 3 571.43 571.43 4,000.00
114 114.2
3 Electric Cost .29 114.29 114.29 114.29 114.29 9 114.29 114.29 800.00
142 142.8
4 Water Cost .86 142.86 142.86 142.86 142.86 6 142.86 142.86 1,000.00
357 357.1
5 Stationary .14 357.14 357.14 357.14 357.14 4 357.14 357.14 2,500.00
Printing of Source 428 428.5 3,000.
6 documents .57 428.57 428.57 428.57 428.57 7 428.57 428.57 00
11,714. 11,714.2
7 Training of Members 29 11,714.29 11,714.29 11,714.29 11,714.29 9 11,714.29 11,714.29 82,000.00
Plastic sheet 10 meter
for each primary 3,171. 3,171.4
8 cooperative 43 3,171.43 3,171.43 3,171.43 3,171.43 3 3,171.43 3,171.43 22,200.00
Total cost 21,071.43 21,071.43 21,071.43 21,071.43 21,071.43 21,071.43 21,071.43 21,071.43 147,500.00
Human Resource required for output marketing

Gibe Dhidhessa Farmers’ cooperative union

Human resource output marketing operation
Grain Marketing project
# of allocated days
# of working for this Total cost covered
Employee # Monthly months annual days in a specific allocated by output
# positions employees salary for activity salary year activity days in % marketing activity
49,00
1 Manager 1 7000 7 0.00 144 48 33% 16,333.33
42,00
2 Vice Manager 1 6000 7 0.00 144 48 33% 13,860.00
21,00
3 Accountant 1 3000 7 0.00 144 96 50% 10,500.00
Marketing 24,50
4 expert 1 3500 7 0.00 144 144 50% 12,250.00
18,20
5 Purchaser 1 2600 7 0.00 144 48 33% 6,006.00
10,88
8 Store Man 1 1555 7 5.00 144 144 50% 5,442.50
5,60
9 Cleaner 2 800 7 0.00 144 144 50% 2,800.00
1 77,98
0 Security guard 3 11140 7 0.00 144 144 50% 38,990.00
Total 106,181.83
Fixed Depreciation cost

Depreciation cost covered by this activity

Annual
Depreciation cost
From audit Covered by grain
Fixed asset of the organization Quantity report marketing project
Office equipment’s 24,939.35 5,194.59
Electronic Equipment’s 35,305.68 7,353.78
Warehouse 11,183.38 2,329.37
Vehicles 696,265.00 145,024.27
Buildings 109,021.42 22,707.95
Total depreciation received from audit report 876,714.83 182,609.97
Projects of the union Expected profit profit in %
output marketing 750,000.00 21%
Uke project 1,200,000.00 33%
Input distribution (excluding improved seeds) 1,526,000.00 42%
Distribution of consumable goods 100,000.00 3%
Improved seed 24,768.00 1%
Total 3,600,768.00 100%
Summary of Costs

Summary of costs Total costs

No Description sesame maize Soya Bean Niger seed

Total quintal to be purchased 5,000.00 40,000.00 2,000.00 2,000.00 49,000.00

1 Variable cost per commodity 1,377.35 451.50 728.60 1,142.10
2 Fixed costs of output marketing
Salary covered by out- put marketing
2.1 project 106,181.83
Depreciation costs to be covered by output
5 marketing project 182,609.97
Interest for loan 500,000.00
6 Operational costs of the output marketing 147,500.00
Total Fixed cost for the operation 936,291.80
Fixed cost per total commodity ratio 19.11
Fixed Cost per commodity 19.11 19.11 19.11 19.11
Total Fixed & variable cost per quintal 1,396.46 470.61 747.71 1,161.21
Margin in % 0.05 0.05 0.05 0.05
Margin in Birr 69.82 23.53 37.39 58.06
Estimated sales price 1,466.28 494.14 785.10 1,219.27

Fixed cost per commodity 95,550.00 764,400.00 38,220.00 38,220.00 936,390.00

Breakeven quantity calculation

BREAK EVEN ANALYSIS

Commodity
Description sesame maize Soya bean Niger seed
Selling price per unit (A) 1,466.28 494.14 785.10 1,219.27
Variable cost per unit(B) 1,377.35 451.50 728.60 1,142.10
Contribution Margin per unit C= (A-
B) 88.93 42.64 56.50 77.17
Budgeted sales in unit/commodity (D) 39,800.00 4,975.00 1,990.00 1,990.00
Total sales 58,357,864.03 2,458,348.99 1,562,340.05 2,426,348.30
Total variable cost 54,818,340.13 2,246,212.50 1,449,914.00 2,272,779.00
Total contribution margin 3,539,523.91 212,136.49 112,426.05 153,569.30
Total fixed cost per commodity 95,550.00 764,400.00 38,220.00 38,220.00
Break even quantity 1,074.41 17,926.62 676.51 495.27
Income at Breakeven point

Income at Break Even Point

sesame maize Soya Bean Niger seed

Break even Quantity 1,074.41 17,926.62 676.51 495.27
sales price pe unit 1,466.28 494.14 785.10 1,219.27
1,575,379.6 8,858,268.5
Total sales 4 1 531,128.14 603,864.41
Less variable cost
Variable cost per unit 1,377.35 451.50 728.60 1,142.10
1,479,829.6 8,093,868.5
total variable cost 4 1 492,908.14 565,644.41
Contribution margin per unit 88.93 42.64 56.50 77.17
Total contribution margin 95,550.00 764,400.00 38,220.00 38,220.00
Less Fixed cost
Fixed cost per commodity 95,550.00 764,400.00 38,220.00 38,220.00
Income 0.00 0.00 0.00 0.00

Income generated from output marketing activity at planned capacity

 Income at planned capacity
sesame maize Soya Bean Niger seed Total
At full capacity 4,975 39,800 1990 1990
1,466.2 494.1 785.1 1,219.2
sales price per unit 8 4 0 7
1,562,349.1
Total sales 7,294,743.00 19,666,772.00 0 2,426,347.30 30,950,211.40
Less variable cost
Variable cost per unit 1377.35 451.5 728.6 1142.1
1,449,914.0
total variable cost 6,852,292.52 17,969,700.00 0 2,272,779.00
Contribution margin 88.9 42.6 56.5 77.1
per unit 3 4 0 7
Total contribution 442,450.4 112,435.0 153,568.3
margin 8 1,697,072.00 0 0
Less Fixed cost
Fixed cost per unit 19.11 19.11 19.11 19.11
1,396.4 470.6 747.7 1,161.2
F+V per unit 6 1 1 1
Fixed cost per
commodity 95,072 760,578 38,029 38,029
1,487,942.9
Total F+V 6,947,388.50 18,730,278.00 0 2,310,807.90 29,476,417.30
Profit 347,354.50 936,494.00 74,406.20 115,539.40 1,473,794.10

Working capital required for output marketing

 Gibe Dhidhessa Farmers’ cooperative Union
Working capital demand for output marketing
December January February March April May Total amount
Working capital
Purchase of Sesame 677,172.61 3,385,863.07 2,670,938.68 6,733,974.36

Purchase of Maize 1,625,363.37 4,876,090.10 6,501,453.46 3,250,726.73 16,253,633.66

Purchase of Soya bean 714,500.00 714,500.00 1,429,000.00

Purchase of Niger seed 1,120,000.00 1,120,000.00 2,240,000.00
Total 677,172.61 3,385,863.07 4,296,302.05 6,710,590.10 8,335,953.46 3,250,726.73
The Cost of total commodity to reach at FCU ware house
26,656,608.02
Total processing cost to deliver to the potential buyer include processing cost per unit after the commodity
reached union ware house, different types of fixed costs listed including interest rate 2,819,809.28
Total Working capital required by the union 29,476,417.30

Output sales schedule of the union

Gibe Dhidhessa Farmers’ cooperative Union

Output sales plan of the union
 February March April May June Total amount
Commodity Sales in Birr
2,932,560.0
Purchase of Sesame 4362183.00 7,294,743.00
0
Purchase of Maize 4,402,787.40 9,344,187.40 5,919,797.20 19,666,772.00
Purchase of Soya bean 781,174.50 781,174.50 1,562,349.00
Purchase of Niger seed 1,213,173.65 1,213,173.65 2,426,347.30
Total 4362183.00 2932560.00 6,397,135.55 11,338,535.55 5,919,797.20 30,950,211.30
30,950,211.30
Output sales schedule of the union for 2016

Output marketing Loan repayment schedule of the union

Cooperative Bank of Oromia

 Loan Repayment schedule of Union to Cooperative Bank of Oromia
Interest
Payment Beginning Monthly payment on Amount to
S.N period Balance payment loan principal Principal remaining
(1,623,788.59
1 February 10,000,000.00 (1,727,955.26) 104,166.67 ) 8,376,211.41
2 March 8,376,211.41 (1,727,955.26) 87,252.20 (1,640,703.05) 6,735,508.36
(1,657,793.71
3 April 6,735,508.36 (1,727,955.26) 70,161.55 ) 5,077,714.64
(1,675,062.40
4 May 5,077,714.64 (1,727,955.26) 52,892.86 ) 3,402,652.25
(1,692,510.96
5 June 3,402,652.25 (1,727,955.26) 35,444.29 ) 1,710,141.29
(1,710,141.29
6 July 1,710,141.29 (1,727,955.26) 17,813.97 ) 0.00
367,731.54 (10,000,000.00)

Commercial Bank of Ethiopia

Loan Repayment schedule of the union to Commercial bank of Ethiopia

 Interest
S. Payment Beginning Monthly payment on Amount to Principal
N period Balance payment loan principal remaining

1 February 10,000,000.00 (1,703,314.29) 62,500.00 (1,640,814.29) 8,359,185.71

2 March 8,359,185.71 (1,703,314.29) 52,244.91 (1,651,069.38) 6,708,116.33

3 April 6,708,116.33 (1,703,314.29) 41,925.73 (1,661,388.56) 5,046,727.76

4 May 5,046,727.76 (1,703,314.29) 31,542.05 (1,671,772.24) 3,374,955.52

5 June 3,374,955.52 (1,703,314.29) 21,093.47 (1,682,220.82) 1,692,734.70

6 July 1,692,734.70 (1,703,314.29) 10,579.59 (1,692,734.70) 0.00

219,885.75 (10,000,000.00)

Cash flow for Output marketing

 CASH INFLOWS December January February March April May June JULY Periods

Equity 9,476,417.30 0.00 0.00 0.00 0.00 0.00 9,476,417.30

loan 20,000,000.00 20,000,000.00

Sesame sales 4,362,183.00 2,932,560.00 7,294,743.00

Maize sales 4,402,782.40 9,344,187.40 5,919,797.20 19,666,767.00

Soya Bean sales 781,174.50 781,174.50 1,562,349.00

Niger seed sales 1,213,173.65 1,213,173.65 2,426,347.30

Total Cash Inflows 9,476,417.30 $20,000,000.00 4,362,183.00 2,932,560.00 6,397,130.55 11,338,535.55 5,919,797.20 60,426,623.60

CASH OUTFLOWS December January February March April May June July Total for All Periods

Sesame 677,172.61 3,385,863.07 2,670,938.68 6,733,974.36

Maize 1,625,363.37 4,876,090.10 6,501,453.46 3,250,726.73 16,253,633.66

Soya bean 714,500.00 714,500.00 1,429,000.00

Niger seed 1,120,000.00 1,120,000.00 2,240,000.00

Variable costs to process the output 314,683.54 314,683.54 314,683.54 314,683.54 314,683.54 314,683.54 314,683.54 2,202,784.78

Salary 15,168.83 15,168.83 15,168.83 15,168.83 15,168.83 15,168.83 15,168.83 106,181.81

Operational costs 21,071.43 21,071.43 21,071.43 21,071.43 21,071.43 21,071.43 21,071.43 147,500.01

Union equity 9,252,137.30 9,252,137.30

Loan repayment 3,431,269.55 3,431,269.55 3,431,269.55 3,431,269.55 3,431,269.55 3,431,269.55 20,587,617.30

Total Cash Outflows 1,028,096.41 3,736,786.87 8,078,495.40 10,492,783.45 12,118,146.81 7,032,920.08 3,782,193.35 12,683,406.85 58,952,829.22

Net Cash Flow 8,448,320.89 16,263,213.13 (3,716,312.40) (7,560,223.45) (5,721,016.26) 4,305,615.47 2,137,603.85 (12,683,406.85) 1,473,794.38

Cumulative Net Cash Flow 8,448,320.89 24,711,534.02 20,995,221.62 13,434,998.17 7,713,981.91 12,019,597.38 14,157,201.23 1,473,794.38 Equall

Action plan of grain marketing

N Activities Months
o
,

Description December 2015 January February March Apri March

l.

Preparation of Business Plan

Final Submission of necessary

documents to Bank

1 Approval of Business plan

Agreement with Banks

2 Contractual agreement with Buyers

3 Rent warehouses

4 Contact Banks

5 Hiring staff

6 Fulfilling all equipment’s

7 Training to FCU leaders , staff and

members
Communicate with Buyers

Purchase of grain

Delivery schedule to Buyers