There is a growing concern that the fast expanding and globalized competitive world market is causing decline in grower returns and expansion of urban development and environmental regulations causing production cost increases and challenging the viability and sustainability of producing these hass avocado. Muranga and Kiambu counties are among the top  hass avocado producing counties in Kenya. These counties make up 49% of the Kenyan hass avocado industry; grossing over Ksh 1 billion in 2017.

Hass avocado farming is a booming venture and the demand is overwhelming. If you are a farmer and a businessman, think hass avocado.

Facts about hass Avocado Market

  • Global avocado consumption has grown strongly over the last decade,
  • While demand in the U.S. market has nearly tripled in this time, demand in the EU market has remained relatively stable
  • The EU’s difficulty in finding sources for increased supply and seasonal price fluctuations offers a high potential export opportunity
  • Kenya has the ideal agro-climatic conditions for hass avocado cultivation
  • Kenya provides a cheaper cost basis for avocado packaging / export than other countries in the EAC
  • Kenya is well positioned to serve as an extension of the existing regional avocado export network
  • The farm gate price at local market in current year for a 4kg carton is Ksh 200 – 500. It has been increasing per year so we predict it will even double in five years’ time as global demand of hass avocado increases.
  • With your farm production it’s easy to export especially when you have grown them organically. At global market last year a 4kg carton was retailing at Ksh 2000-3500.
  • Export-oriented industries enjoy substantial Government support

Read: How to write a business plan for your agribusiness venture/dairy farming/horticultural farming

What is Return on Capital Invested (ROIC)?

Return on Capital Invested Capital (ROIC) is most precisely a profitability ratio. This ratio helps one understand how the business is using its invested capital i.e. equity, raw materials, production cost and debt to generate profit at the end of the day.

The reason this ratio is so very important for investors before investment is because this ratio gives them an idea about which type of farming to venture in. Because the percentage of profits generated from the invested capital is a direct ratio of how good a farm is doing in terms of transmuting its capital into income.

While calculating this ratio, one thing you need to remember is that whether you are taking the core income of the business (i.e. most of the times “net income” of the farm) as a measuring grid. The business can generate incomes from other sources, but if it’s not from their core operations, it shouldn’t be taken into account.

Establishment And Production Practices Of Hass Avocado

Land preparation and Planting

Hass avocado at Mkulima Wa Nyeri Farm

In Muranga and Kiambu counties there have been very little avocado orchard establishment on new open land since 2015. If new orchards are planted, they are commonly planted on previous avocado ground. The typical land preparation for an avocado orchard planting includes the following.

  • Set in a rectangular system that allows for movement of orchard equipment between the trees for spraying and harvesting.
  • Spacing of hass avocado can vary from 5m * 5m to 9m* 5m but the final decision rests with the grower
  • The tree rows should be planted as close as possible in an east-west direction for maximum sunlight on both sides of the trees.
  • The tree drip area should be kept clean of any growing crop but should be mulched.
  • Make sure that at the time of planting the soil is clean of weeds in the planting rows, the irrigation has been installed and is in a working condition and enough stakes are available for supporting the trees directly after planting.
  • Trees should be kept upright and out of direct sunlight until they are physically planted. Planting holes can be dug with a hoe and spade and needs to be 2ft * 2ft *2ft.
  • When ready for planting the bag is carefully cut open along one side without disturbing the root system. Loose soil is piled into the planting hole so that the soil level of the avocado tree will be 1/3 above the ground.
  • The tree is then kept upright and the hole is filled with soil and firmly pressed down. Fill to the soil level of the planting bag.
  • The majority of the land preparation operations including irrigation and drainage system installations are done by contractors.

Read: 8 types of agribusiness ideas to think about in 2018

Pruning

Pruning begins in establishment year 4. Pruning is needed for improving yield for profitability, reducing fertilization needs, and maximizing tree-bearing surfaces. Pruning consists of removing deadwood and overcrowding branches, and creation and maintenance of desirable structure and size. Growers in these regions typically prune once per year in September starting in establishment year 4. Pruning is considered to take 6 minutes per tree in year 4; 7 minutes per tree in year 5; 9 minutes per tree in year 6.

Read: Improving banana farming in Kenya through Value Addition

Hass Avocado Projections After Establishment (5 Acres)

Below is a projection and an estimated income. From this information a farmer is able to calculate return on capital for his project depending on the capital injected. Capital will vary depending on place and whether the farmer owns a land or will have to lease.

 

Year Expected no of (kg) per hass tree/year

(Calculate with average)

Total number of trees (5 Acres) Total average no of Carton. (1 carton = 4kg) Total income

Cost of a 4kg cartoon

(Ksh50-120)

Ave- ksh 75

2nd 10-13 750 2250 0.2 millon
3rd 40-60 750 9375 0.7 million
4th 80-120 750 18750 1.4 million
5th 130-160 750 27187 2.0 million
6th 170-185 750 33187 2.5 million
7th 200-220 750 39375 3.0 million
8th 220-230 750 42187 3.1 million
9th 230-240 750 44062 3.3 million
10th 240-270 750 47812 3.6 million
:

:

:

:

:

17th 650-750 1300 105000 7.8m
:

:

:

:

50th

Note! Oxfarm.co.ke only advises you and is not liable whatsoever. Always follow your instincts, consult your agricultural experts and do your own research.

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2 thoughts on “How Many Years Will It Take To Get Returns On Invested Capital Under Hass Avocado Farming

  1. […] Read: How Many Years Will It Take To Get Returns On Invested Capital Under Hass Avocado Farming […]

  2. I need to be part of this farming

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