Report No. 544b-SP FILE COPY Appraisal of Second Livestock Development Project Spain February 28, 1975 Regional Projects Department Europe, Middle East and North Africa Regional Office Not for Public Use Document of the International Bank for Reconstruction and Development This report waS prepared tor official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. CURRENCY EQUIVALENTS US $1 - Pesetas 58 Pesetas 1 = US $ 0.017 Pesetas 1,000,000 = US $17,241 WEIGHTS AND MEASURES Metric System 1 kilogram (kg) = 2.20 pounds 1,000 kg = 1 metric ton = 0.98 long ton 1 meter (i) = 1.09 yards 1 kilometer (km) 2 - 0.62 mile 1 hectare (ha) = 10,000 m' = 2.47 acres 1 square kilometer = 100 ha = 0.39 square mile = 247.1 acres 1 liter = 0.26 gallon GLOSSARY OF ABBREVIATIONS AC = Concerted Action ASICA = Syndical Caution Association for Farming Activities BCA = Agricultural Credit Bank BE = Bank of Spain CAT = Procurement and Transportation Commissariat DGPA = Directorate General of Agricultural Production FORPPA = Fund for the Regulation and Management of Agricultural Prices and Production ICO = Official Credit Institute INIA = National Institute for Agricultural Research IRYDA = Agricultural Reform and Development Institute LDA = Livestock Development Agency LPS = Livestock Procurement Service SENPA = National Agricultural Products Service GOVERNMENT OF SPAIN FISCAL YEAR January 1 - December 31 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ............. ................ i-ii I. INTRODUCTION ....... ........................... .... 1 II. COUNTRY BACKGROUND AND THE AGRICULTURAL SECTOR ...... 2 A. Country Background ..... .................... 2 B. The Livestock Sub-Sector ....................... 3 C. Agricultural Policies ..... .................... 4 D. Agricultural and Livestock Services ............ 6 E. Agricultural Credit Services ................... 6 F. Government Livestock Program ................. .. 7 G. Land Tenure and Farm Structure ................. 9 III. THE PROJECT ......................................... 11 A. General Features and Objectives ...... # ......... 11 B. Detailed Features .............................. 12 C. Cost Estimates ................................. 15 D. Financing and Lending .......................... 16 E. Procurement .................................... 19 F. Disbursement ................................... 19 G. Accounts and Auditing .......................... 20 H. Organization and Management .................... 20 IV. PRODUCTION, MARKETS AND MARKETING, PRICES AND PRODUCER BENEFITS .............................. 21 A. Production ..................................... 21 B. Markets and Marketing .......................... 22 C. Prices .................... ..................... 22 V. ECONOMIC BENEFITS AND JUSTIFICATION . . 24 A. Economic Benefits and Rates of Return .......... 24 B. Social Benefits ................................ 25 VI. AGREEMENTS REACHED AND RECOMMENDATION ....... ........ 25 ANNEXES 1. The Agricultural Economy 2. Government Livestock Production, Pricing and Marketing Policies 3. Agricultural Credit Institutions and Policies 4. Development Projections 500 - ha Dryland Cattle Ranch, Southwest Table 1 - On-Ranch Investment Projections Table 2 - Cattle Herd Development Projections Table 3 - Sales Projections Table 4 - Projected Operating Expenses Table 5 - Financial Projections 500 - ha Dryland Sheep Ranch, Southwest Table 6 - On-Ranch Investment Projections Table 7 - Sheep Flock Development Projections Table 8 - Sales Projections Table 9 - Projected Operating Expenses Table 10 - Financial Projections 500 - ha Dryland Cattle Ranch With 20 ha Irrigated Pasture, Southwest Table 11 - On-Ranch Investment Projections Table 12 - Cattle Herd Development Projections Table 13 - Sales Projections Table 14 - Projected Operating Expenses Table 15 - Financial Projections 20 - ha Irrigated Farm for Cattle Fattening, Southwest Table 16 - On-Farm Investment Projections Table 17 - Sales Projections Table 18 - Projected Operating Expenses Table 19 - Financial Projections 6 - ha Dairy Farm, North Table 20 - On-Farm Investment Projections Table 21 - Cattle Herd Development Projections Table 22 - Sales Projections Table 23 - Projected Operating Expenses Table 24 - Financial Projections 50 - ha Cattle Farm, North Table 25 - On-Farm Investment Projections Table 26 - Cattle Herd Development Projections Table 27 - Sales Projections Table 28 - Projected Operating Expenses Table 29 - Financial Projections 50 - ha Farm for Cattle Fattening, North Table 30 - On-Farm Investment Projections Table 31 - Sales Projections Table 32 - Projected Operating Expenses Table 33 - Financial Projections 100 - ha Dryland Milk Sheep Farm, Marginal Cereal Zones Table 34 - On-Farm Investment Projections Table 35 - Sheep Flock Development Projections Table 36 - Sales Projections Table 37 - Projected Operating Expenses Table 38 - Financial Projections 5. Cost Estimates Table 1 - Project Cost Estimates Table 2 - On-Farm Development Estimates 6. Livestock Development Agency Table 1 - Staff Projections Table 2 - Cost Projections Chart - Organization Chart Appendix 1 - Consultants - Draft Terms of Reference 7. Number and Phasing of Loan Commitments 8. Project Cash Flow 9. Estimated Schedule of Quarterly Disbursements 10. Financial Rates of Return 11. Economic Rate of Return MAP IBRD 11129R - Project Areas i SUMMARY AND CONCLUSIONS i. The Government of Spain has requested a Bank loan to help finaroce a Second Livestock Development Project. The First Bank-assisted Project financed under Loan 633-SP introduced major changes in livestock productio. techniques aimed at increasing the carrying capacity of the land, expanditng beef production on the basis of pasture rather than feed grains and increfai ing the productivity of the breeding herds to help meet Spain's increasing demand for meat. The Second Project would continue with these objectfvr. and would aim also at resolving problems of farm structure and land tenure presently limiting farm modernization and production in the north of Spain. ii. The proposed loan of US$33 million, equivalent to the total foreign exchange requirements of 22%, would serve to mobilize an additional US$116 million within the country to meet the total cost of the Project approx- imating US$149 million. The contribution of producers, credit agencies. Government and the Bank would be 19%, 16%, 43% and 22% respectively. The Project would finance the development of about: (a) 400 cattle production farms in the Southwest; (b) 200 cattle fattening farms in the Southwest; (c) 150 sheep production farms in the Southwest; (d) 450 dairy farms in the North; (e) 350 cattle production farms in the North; (f) 50 cattle fattening farms in the North; (g) 100 milk sheep farms in marginal cereal zones (Southwest and/or Central). iii. Project funds would be channeled to farmers by Treasury using the Official Credit Institute (ICO) through the Agricultural Credit Bank (BCA) and private lending institutions, utilizing a rediscount operation. On-farm investment loans would be extended to farmers for a term of up to 12 years including a 3-year grace period at a total per annum charge of 7% for lomns up to Ptas 5 million and 7.5% for loans exceeding Ptas 5 million. Communal organizations farming other than communal land pay 0.5% less, and communal organizations farming communal land pay 6.5%. All of these charges inclulde a 0.5% technical assistance fee. The goods and services required for farm development, both locally manufactured and imported, would be procured through existing commercial channels which would also provide the service facilities. The Project would be administered by the Livestock Development Agency which was established to implement the First Livestock Project. - fi - iv. A larger proportion of the Bank's loan (60%) would be disbursed on sub-projects in the North to lend special emphasis to the rural development, small-farmer component of the Project. The smaller farms in the North would also benefit from newly established variable interest rates based on loan size. The larger loans in the Southwest would have interest rates 0.5% higher than the smaller loans in the North. v. It is estimated that at full development in year 13 (repayment of all loans is to be completed in year 12) participating farmers' net cash balances before income taxes, would increase in the dry Southwest from 2- to 14-fold and, in the wetter Norti, from 9-to 85-fold compared with before Project development. Estimateel fi;ancial rates of return on new investments range from 12-13% on the dryla..d beef producing farms and 24-27% on sheep producing farms of the Southwest, to 39% and above for the smaller dairy and beef cattle farms in the climaticaily more favorable region in the North. The overall rate of return to the economy is estimated at about 16%. The Prcject would give rise to an annual iThcrease in output of 35,000 tons of beef, !0,000 tons of sheep meat, 800 tons of wool and 20,000 tons of milk. In addition, it would directly benefit about 5.VJO1 _ farm famijlies including some of the poorest in Spain and would provide the basis for bringing the large tracts of unused and underutilized land in the NVirth into production. Indirectly, the ?roject would exert a major impact on a significant proportion of the 375,000 farmers and their families in the norrhern region of Galicia. vi. The Project is i for a Bank- loan of US$33 million for a term of 15 years including a 5'-year Arace period. The bcrrower would be the Government of Spain. SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT I. INTRODUCTION 1.01 The Government of Spain has applied for a Bank loan to assist in financing a Second Livestock Development Project. The First Project 1/ fi- nanced under Loan 633-SP (US$25 million) became effective on January 31, 1970. It introduced major changes in livestock production techniques aimed at in- creasing the carrying capacity of the land and the productivity of the breeding herds to help meet Spain's increasing demand for meat. An important feature of the Project is the development of subterranean clover in dry regions and improved pastures in other regions which will permit expanded livestock produc- tion based on forages rather than grains. The Second Project would cont:Lnue with these objectives, and in addition would aim to resolve problems of farm structure and land tenure in the north of Spain presently liraiting farm productivity. The proposal was prepared by the Livestock Development Agency (LDA) of the Ministry of Agriculture, the entity established to implement the First Project. The Borrower would be the Government of Spain. The total Project cost is estimated to be US$149.3 million equivalent. 1.02 The Bank has made two loans in the agricultural sector: Loan 633-SP, the first loan for livestock development, and Loan 768-SP, for promotion of agricultural research. The First Livestock Project is progressing well and funds will be completely committed by December 1974. Preliminary results on participating farms indicate that meat production will be substantially in- creased. The Bank's other loan in the agricultural sector amounted to US$12.7 million and was made in FY 1971 to raise the standards of agricultural research through the restructuring of the key official research organization, the National Institute for Agricultural Research (INIA), and reorienting its research activ- ity on a commodity-oriented basis. Progress on this project had been slow be- cause of organizational, administrative and financial (local currency) problems but these difficulties have been resolved and it is expected that progress will become satisfactory. 1.03 This appraisal report is based on the proposal prepared by the LDA and the findings of a Bank mission that visited Spain during February and March 1974, composed of Messrs. J.C. Gerring, H. Walters, W.A. Hardison (Bank) and L. de Telkes (Consultant). The mission discussed with the Spanish authori- ties the key land tenure, farm structure, credit and institutional issues that had arisen during appraisal. After further discussions in the Bank, these issues were discussed with the Government by a mission which visited Spain from May 27 to June 4, and by a subsequent mission which visited Spain from November 10 to December 6, 1974. 1/ See Appraisal Report No. PA-13a of July 1, 1969. -2- II. COUNTRY BACKGROUND AND rHE AGRICULTURAL SECTOR A. Country Background 2.01 Spain covers an area of 504,700 km2 and has a populat-on of around 35 million increasing at an arnnual rate of '.1%. Between 1962 and 1974, total GNP grew at a rate of 7*3% per annum, and per capita GNP reached US$1,350 equivalent in 1973. Cost oL living index rose from 8.2% in 1971 and 1972 to 11.5% in 1973. Under the impetus of price rises in oil and other raw mater- ials, the increase in this index was further accelerated in 1974. Industrial production increased at 8.6% per year compared with 2.3% for agriculturte. Foreign exchange reserves amounted to about US$6.8 billion equivalent at the end of 1973, equal to almost 9 i:onths imports. Tne energy crisis at the end of 1973 drantatically altered the foreign exchange position. The current account deficit in 1974 is expected to reach US$3.3 billion. Furthermore, Government's efforts to absorb a considerable part of the increase in petrol- 1eum prices has resulted in a buadgetary deficit, reducing Spain's capacity for internal financing. 2.02 Spain's chief agricultural products are cereals, meat, fruits, vegetables and beans, dairy products, wines, olives and olive oil. In 1961, agriculture contributed 24% of GWPi but zhis dropped to 13% in 1973. Over this same period, the active p'siation engaged in agriculture fell from 37% to 28%. In the early 1960's, i5O of the covimodities exported originated in agriculture, but this had fallea to 30% in 1973. Agricultural imports, in- creasing at an annua'l rate of 14.4% per annum, have accounted for a fairly constant 20-22% of total ifpor_. Some 30% to 50% of these are made up of meats and products largely destIned for livestock use. Net agricultural production has increased at a sut.stantial 6.7Z annually in the last 5 years, with net output per active persen et.mployed in agriculture rising even faster (Annex 1). 2.03 Despite this substant:..al progress in increasing productivity, diffi- cult institutional and structural problems still beset Spanish agriculture. In the Northwest, farms are szaaall and fragmented, yet extensive areas of com- munal lands exist which, w3.th a i,r-gressive land reform program, could help to provide a sounder farm struet'lr. in contrast, in the drier, less produc- tive South, farms are large and are often operated extensively. Despite a reduction of 13% in the numbei o-; farms during the past 10 years, the overall size distribution has not changed. In the past decade over a million people liave left agriculture as a result of better employment opportunities outslde of the sector, reducing the agricultura'l abor force from 4.5 to 3.5 million. This movement has set the stage for restructuring and modernizing the fanaing industry, making use of farms abandoned and land held and used on a communaL basis. -3- B. The Livestock Sub-sector 2.04 In 1973, livestock accounted for about 38% of agricultural outpult, the principal components being meat 1.49 million tons, and milk 5.29 millioon liters. Pork provided the largest volume of meat (587,000 tons), followed by beef and veal (373,000 tons), poultry (344,000 tons), and sheep (130,000 tons) (Annex 1, Table 7). 2.05 Since 1960, output from the livestock sector has increased at almost three times the rate of crop production. Beef and veal production has been increasing at just over 7% per annum. Since 1960, pork output has risen about 6.5% per annum, poultry production after increasing rapidly from 1960-67, has risen more slowly in recent years. Sheep production has grown less than 1% per year. 2.06 A characteristic feature of the Spanish cattle industry has been the high proportion of cattle slaughtered as calves. This reached 59% in 1967, compared with 36% in the European Economic Community and less than 10% in the UK and USA. This emphasis on veal production relative to beef serious- ly curtailed beef production as well as herd expansion until the late 1960's. Government policies and programs, of which the First Livestock Development Project was a major component, encouraged the production of older and heavier cattle after 1967. In consequence, the percentage of cattle slaughtered as calves declined to 39% in 1970, and to 31% in 1972. At the same time, average carcass dressed weight (cdw) increased from 167 kg in 1968 to 210 kg in 1972. Despite a weaning rate of around 60-70%, the offtake of about 37% is relatively high, reflecting the still relatively low age at slaughter. Average milk pro- duction per lactation is about 2,300 liters per cow (Annex 1, Table 5). 2.07 Cattle population has increased from 3.72 million in 1965 to 4.25 million in 1972. Pig numbers have gone up from 5.7 million to 7.2 million in the same period, while the population of sheep has declined from 20.8 to 17.8 million. Rising incomes in Spain, 5.8% per capita annually, coupled with an increase in the tourist industry, increased the demand for meat, particularly beef and veal, during the early 1960's. A large portion of these increases was met by imports, but since 1967 these stabilized in vol- utme at around 120,000 tons, most of which was beef (Annex 1, Table 12). From 1967 on, further increases in demand have been met by rising levels of domestic production. However, higher international prices for both meat and feed grains have sharply lifted the value of imports and this coupled with increased living costs have somewhat dampened the increasing demand for live- stock products. Despite this situation, total meat consumption is expected to increase from 1.6 million in 1973 to 1.8 million tons in 1975, and to more than 2 million tons by 1980 (Annex 1, Table 11). Thus the gap between demand and the 1974 production level of 1.5 million tons is expected to widen. 2.08 The direction of the projected changes in consumption indicates that the strongest demand increase will be for beef (Annex 1, Table 11). High world prices for meat and feed grains will militate against filling the -4- gap from increased imports, which exceeded Ptas 98 billion (US$1.6 billion equivalent) in 1973 for agricultural products alone. The high cost of imports both of beef and feed grains, limitations on expanding the area under cereals, and the very sharp rise in fertilizer prices, all place particular emphasis on the need to increase meat production domestically. C. Agricultural Policies 2.09 Agricultural growth and development has lagged behind that of other sectors of the economy. Government, therefore, has instituted a number of in- centives to farmers, including incentive prices for cattle slaughtered at heav- ier weiglhts, price supports and various programs designed to increase produc- tion through the provision of low-cost institutional credit. Prohibitions have also been placed on slaughtering calves below minimum weights. These measures have encouraged farmers to invest in improving their operations. Price policies have constituted one of the chief means of bringing farmers' incomes more nearly into line with those of the labor force in other sectors. Increases of 6% per annum in the per capita income of agricultural workers have been achieved, compared with 7% for industrial workers, after discounting for inflation. However, the absolute income per person employed in agriculture is still less than 40% of the average income in other sectors. 2.10 Spain's price policy uses a system of guaranteed and intervention prices. In the case of meat, the Procurement and Transportation Board (CAT) is required to buy carcasses domestically, using monies provided by the Fund for the Regulation and Management of Agricultural Prices and Production (FORPPA), when prices fall below a minimum level. Similarly, should prices rise to a maximum intervention level CAT is required to sell frozen meat in the market. Annex 2, Table 7 gives the guarantee, minimum and maximum intervention prices for beef, pork and sheep meats from 1970/71 through 1974/75. Domestic pur- chases by CAT have been small because prices have usually been above support levels (Annex 2, Table 8). In addition to these price supports, a policy of incentive payments has been instituted to increase the weight of slaughter animals. Government has prohibited the slaughter of young light-weight animals. Tie minimum slaughter weight has been progressively raised reaching 125 kg cdw in 1973/74. From 1968-1972, average carcass weight of all cattle slaughtered increased from 167 kg to 210 kg cdw representing an increased annual output approximating 70,000 tons of beef worth around US$100 million equivalent. 2.11 Government has used low-cost credit, and to a lesser extent direct subsidies, to adjust the pattern of production to conform more closely to na- tional requirements. Loans to farmers reached a level of Ptas 184 billion in 1971 (US$3.2 billion) and are still increasing. In 1971, 62% of the loans were financed from government funds and the remainder from private sources. Credit is available through a wide variety of programs and agencies: those particularly applicable to livestock producers are shown in Annex 3, Table 18. Direct grants are available for certain components of farm investment programs (e.g. up to 20% of the cost of seed and fertilizer for pasture improvement). - 5 - However, the most important element in government's approach to agricultural development is low-cost institutional credit. Over the sector as a whole, interest rates traditionally have ranged from 2.75% to 6%. Rates for medium- and long-term livestock production investments are in the higher part of this range and were raised to 6.5% (plus a 0.5% technical assistance fee) under the First Livestock Development Project. 1/ These rates, other than those for the First Livestock Project loans, were raised in June-July 1974 to var- iable levels depending on the size of loans: 6.5% for loans up to Ptas 2.5 million; 7.0% for loans from Ptas 2.5 to 5.0 million; and 7.5% for loans above Ptas 5 million. Communal organizations receive a discount of 0.5%. Even this level represents a heavy subsidy at current inflation rates (8.2% in 1971 and in 1972 and 14% in 1973) although it is higher than the interest rate obtainable on term deposits, typically 2.5-5% (Annex 3, Table 24). How- ever, the agricultural development policy has major social objectives--such as the correction of regional imbalances--as well as production targets. 2.12 Spain's development policies have led to a continued expansion in annual investment in agriculture. Still greater inflows will be required to sustain and improve rates of growth in farm production to encourage younger members of the farming community to stay on the land, and to restructure agri- culture to bring back into production land which is now unworked or abandoned. In the livestock sub-sector, development policy aims at sustaining and improv- ing the growth of the national herd and lifting its level of output. Increas- ing demand in the face of rising costs of imported meat, feed grains and fertilizer gives urgency to the need to boost meat production from improved pastures and to encourage the trend towards the slaughter of more mature animals. These new technologies, introduced by the First Livestock Project, are not yet widely recognized by livestock producers. Government believes that a further increase in interest rates for livestock development would be a serious disincentive, especially to small farmers who are accustomed to the traditional low-cost credit, and might threaten an important segment of agri- cultural production, as well as the social objectives of the agricultural development policy. 2.13 The Bank is encouraged by the recent increase in interest rates and accepts that the time is not opportune for further increasing interest rates in the agricultural sector as a whole. However, returns to livestock produc- tion are attractive and Government has taken steps to assure that the interest rates charged under all livestock programs are comparable to those under the Project. 1/ The effective cost to many farmers is a little higher since the Agricul- tural Credit Bank prefers bank guarantees, costing 1-2%, to real estate mortgages as collateral. - 6 - D. Agricultural and Livestock Services 2.14 Agricultural research is being assisted by the Bank through Loan 768-SP under which two of the six national centers established within the National Institute for Agricultural Research (INIA) of the Ministry of Agri-- culture are concerned with livestock production. One of these is located at La Coruna in the region of Galicia where studies are underway on the develop- ment of scrub-land into improved pastures for beef and milk producticn. At the other center, located at Badajoz, research studies are being carried out in close association with UNDP on the development of improved dryland pastures as well as forages grown under irrigation for livestock production. The work of both centers is providing and will continue to provide technical support for the First and proposed Second Livestock Development Projects. 2.15 The Agricultural Extension Service is an autonomous organization within the Ministry of Agriculture. It operates 755 district extension agencies located in all parts of the country. The activities which cover a wide variety of subjects are coordinated by a central organization in Madrid. In those areas covered by the First Project technical personnel of the Exten- sion Service have maintained close collaboration with their colleagues in, the LDA. 2.16 Animal health services are satisfactory and medicaments are readily available. The Director General of Agricultural Production in the Ministry of Agriculture is responsible for both the Veterinary Inspection Service and the overall control of animal diseases, Some 14 Regional Animal Health Labo- ratories have recently been constructed or modernized. These are used as diagnostic units as well as in official campaigns against infectious diseases. Foot-and-mouth disease vaccinations are compulsory throughout the country and tuberculin testing for the control and eradication of tuberculosis is required in some regions. 2.17 Graduate and post-graduate agricultural education are provided in the 3 superior technical schools of Madrid, Valencia and Cordoba, and there are 13 agricultural schools of intermediate level. There are four veterinary schools in Madrid, Leon, Zaragoza and Cordoba. Experience gained in recruit- ing staff for the First Livestock Development Project has indicated that ade- quate numbers with professional skills in animal husbandry and farm manage- ment are available. E. Agricultural Credit Services 2.18 Government funds raised locally or through external borrowing are channelled through the Official Credit Institute (ICO), a statutory board responsible to the Ministry of Finance. ICO also grants special investment credits in accordance with economic development plans formulated by Govern- ment (Annex 3). - 7 - 2.19 The Agricultural Credit Bank (BCA) is the agricultural lending arm of ICO and the principal source of public credit to agriculture. BCA is located in Madrid. It has no rural branches save for the one established in Sevilla under the First Livestock Project. However, it maintains more than 100 correspondents in the provincial capitals to appraise loan applications and to make recommendations to the head office concerning the granting of credit. 2.20 BCA extends medium- and long-term credit to farmers both directly and indirectly through institutions acting as credit agencies. Most loans of less than Ptas 1 million ((US$17,000 equivalent) are made indirectly through provincial Savings Banks (Cajas de Ahorro) and Rural Savings Banks (Cajas Rurales). BCA also makes credit available for special agricultural programs, channelling funds allocated by Government, to, for example, the Agricultural Reform and Development Institute (IRYDA), and to Accion Concertada (AC), special credit programs set up within the Ministry of Agri- culture. Most of the short-term financing to commercial agriculture origin- ates from the Commercial Banks. 2.21 Savings Banks and Rural Banks had portfolios of agricultural loans approximating Ptas 59 billion and Ptas 34 billion respectively in 1973. Or- ganized into national federations they have considerable financial resources and, together with cooperatives, they have over 6,000 financing outlets. In addition to lending their own funds, they also operate as agents for BCA for which they carry the full credit risk. F. Government Livestock Programs 2.22 A number of special programs have been created to implement live- stock development and marketing policies. IRYDA was created in 1971 to grant loans up to Ptas 2.5 million to individual sub-borrowers and up to Ptas 15 million for agricultural associations. It also provides subsidies to live- stock and agricultural producing enterprises whose gross marketed output ex- ceeds Ptas 400,000 per annum, and whose improvement programs are in accord with the general policy and directives of the Ministry of Agriculture. Simi- larly, AC, another program of the Ministry of Agriculture, was set up in 1964 to promote beef production. More recently, December 1972, its activities were extended to embrace most types of cattle production systems. In prac- tice, it has concentrated particularly on feed-lot type operations, under which cattle must reach a minimum liveweight of 350 kg before 20 months of age. The LDA, established to implement the First Livestock Development Proj- ect, is also an agency of the Ministry of Agriculture. It is the only prog- ram making sub-loans to farmers on the basis of technically feasible and financially viable farm development plans, the execution of which are super- vised. LDA has had to compete with the other programs (IRYDA and AC) at somewhat less attractive terms to farmers, but as indicated (para 2.13) Government has raised the interest rates charged in other programs to the same level as LDA's. - 8 2.23 The First Livestock Development Project under Loan 633-SP was de- signed to initiate major changes in livestock production techniques to help meet a rapidly increasing demand for meat, particularly beef, and to set the stage for the further expansion of Spain's livestock sub-sector. For these purposes improved technology was introduced to increase the carrying capacity of the farms and the productivity of the herds, the main feature of which was the establishment of legume-based pastures through the introduction of sub- terranean clover in the dryland zone of the Southwest, centered on Sevilla. 2.24 Part of the northern more humid region was also included, but on a pilot basis, to point the way to further large-scale development. Here che Project concentrated on the smaller livestock farms, producing both milk and weaner calves in Santander and adjoining provinces, where the mild climate and well-distributed rainfall are admirably suited to modern high production grass- land farming. 2.25 Livestock producers borrow on the basis of farm plans approved by LDA, which was established to appraise and supervise sub-loans and to provide technical services to the more than 1,000 farmers expected to participate in the Project. The interest rate for sub-loans was 6.5% plus 0.5% technical assistance fee. This will remain the case for Project loans up to Ptas 5.0 million (the majority of loans in the Northwest), but will be raised 0.5% for those above this amotnt (the majority of loans in the Southwest). Sub- loans made under the Project by BCA and participating private credit institu-- tions to livestock producers are reimbursable, up to 100%, from the Fund located in ICO. ICC in turn can withdraw 56% of such expenditures from the Bank loan. These participating agencies pay 5.75%, the low rate being possi- ble because Government's contribution to the Project Fund is made at 4.5% which, with Bank funds under Loan 633-SP at 6.5%, gives a blended rate of 5.75%. The participating agencies thus receive an interest rate spread of 0.75% to cover administrative costs and the risk of delinquent repayments. 2.26 The first year of the Project coincided with a prolonged drought described as the most severe of t.he century. This led to a temporary decline in the number of loan applications received from farmers, but during subse- quent years farmers' interest have continued to increase. Loan processing through BCA has been slow, taking an average of five months. This is because all loans have to be approved by the Board of Directors in Madrid. However, private credit agencies have beeo participating to an increasing extent due to a growing confidence in the LDA's loan appraisal and supervision procedures. To-date 25 private banks have financed 44% of the farm plans and 48% of the sub-loans. Loan processing by private banks averages approximately two months (Annex 3, Appendix 1). Five private banks have so far financed 37 sub-loans totalling Ptas 103.5 million (US$1.8 million equivalent) from their own re- sources. 2.27 By July 1974, 703 farm plans had beer prepared by LDA and presented to the participating banks, for a total otn-farm investment of US$40 million equivalent, averaging US$57,000 per farm to which the farmers have contributed on average 15%. 577 of these farms are located in the Southwest where the in- vestment per farm has averaged US$67,000 equivalent. 126 farms are located in -9- the North where investment per farm has averaged US$16,000. At appraisal, provision was made for financing 780 dryland farms in the Southwest, averaging an on-farm investment of US$50,000, plus 160 dairy farms in the North averaging US$6,700 per farm. US$15 million have been withdrawn from the Bank loan, and a further US$8.6 million of reimbursable funds have been committed, or a total of US$23.6 million of the US$25 million loan. The funds allocated for the Project are expected to be fully committed in calendar year 1974. However, owing to the slow start, the time taken to establish the LDA and the pro- tracted loan processing of the BCA, coupled with the fact that on-farm invest- ments are phased over a period of two to three years, disbursements frorn the Bank loan will not be completed by the Closing Date of December 1, 1974, but should be completed by the end of 1975, one year behind schedule. 2.28 In the majority of cases the investments made on participating farms extends over a period of three years. Even so, herd build-up continues after this and does not normally reach equilibrium at the improved level of produc- tion until the fifth or sixth year from the start of the farm program. As yet, no farm has been in the Project for a full four years, consequently, it is not yet possible to measure the impact of the First Livestock Project on a large number of farms. However, production data from a sample of 54 farms representing different types of operations which have completed their invest- ment programs, show that the output of saleable livestock has increased 320% from cattle breeding farms, 350% from sheep farms, and 550% from mixed cattle/ sheep operations over and above their levels of production before development. 2.29 Under the outstanding leadership of the late Spanish Director, Dr. Manuel del Pozo, and the late expatriate Technical Director, Dr. Bryan Short, the LDA has built up a staff of 24 fully qualified agronomists and veterinar- ians, plus supporting technical and administrative staff totalling in all around 100. Special attention has been given to personnel training by the Agency, through both on-the-job training, including short courses and seminars, and through the granting of overseas fellowships. To-date 12 of the more senior staff have been granted fellowships for more advanced studies to such countries as Australia, New Zealand, United Kingdom, France, Ireland and Uruguay. G. Land Tenure and Farm Structure 2.30 In the northern zones of Cantabrica and Galicia, farms are small and fragmented. 90% of farms in Galicia are 10 ha or less. An individuial farm of 5 ha may consist of 14 or more separate plots of land. A significant exodus, amounting to 2.6% annual reduction of the labor force engaged in agri- culture (averaged over 1962-1972), is taking place leading to a progressive increase in the average age of those remaining (paras 2.03 and 3.03). iAs a result of this exodus, a great number of farms has been abandoned and these have suffered an invasion of underbrush, mostly gorse (Ulex europaeus), called "Tojo" in the region, so that they are producing either nothing or much less than their potential. The problem is accentuated by the appreciation taking - 10 - place in land values in the North reaching up to Ptas 300,000 (US$5,000 equiv- alent) per ha. Land owners migrating from their farms prefer to retain owner- ship hoping thereby to benefit from capital appreciation. 2.31 Of special significance to the Spanish economy is the existence within the northern region of some 2 to 2.5 million ha of common grazing lands, currently very ineffectively used, but capable of intensive develop- ment. About half of the area of these lands is in the four provinces of Galicia. Tney are of two types: (1) Bienes Proprios - in which the owners are local municipal governments, and (2) Bienes Communales - in which the owners are individual mem- bers of the community who have lived in the locality for three or more years. The Government has issued a series of decrees regulating the use of these lands, culminating in a new Land Reform Law which came into effect in 1973. As a result of these decrees, the land cannot be sold nor can it be mortgaged, but with the consent of a majority of the users it can be leased. The Minister of Agriculture can require land to be leased to be submitted to public auction or he can establish an entity to take it over. However, these powers have not yet been fully implemented primarily because of the following constraints: (a) no mechanism has so far been established to obtain the consent of the present users to the leasing of part of their lands; (b) no clear guidelines exist as to the type or types of entities to which communal lands could be leased; and (c) so far leasehold titles have not been used as collateral for credit. 2.32 Committees (Jurados) were established about four years ago for the purpose of determining the legal status of communal and unused land. The decision of the Jurado is final. Consulting firms have carried out the actual land surveys and title searches. 2,369 blocks of land covering 575,000 ha, about half the area to be surveyed in Galicia, is presently being surveyed. In 2 provinces of Galicia, Orense and Lugo, 46 blocks of communally-owned land have been defined and titled, totalling about 10,000 ha and another 30,000 ha are expected to be defined and titled within the coming year. Legal- ly these could be leased to individuals, but in practice such lands will be operated by communal organizations of the owners such as Grupos Sindicales de Colonization or other types of livestock producer organizations. The Director of LDA has agreed to provide the Bank a written statement of how these lands would be used by these organizations under the Project and how LDA would work with them. Receipt of this statement is a condition of Board Presentation. A condition of effectiveness is that five blocks of communal land in at least one of these provinces would be selected for development - 11 - under the Project. Discussions are presently underway with the communal owners of 1 block of land containing 600 ha suitable for pasture development. These five blocks of land would be developed as demonstration units and would be financed in the first year under the Project. Provision has been made, under the proposed Project, for financing the development of some 400 farms, with an average size of 50 ha, in this region from communal lands. III. THE PROJECT A. General Features and Objectives 3.01 The Second Livestock Development Project has three major objectives: (a) to increase meat and milk production in the face of increasing domestic demand and external price levels; (b) to introduce institutional changes in land tenure arrangements and thus assist in the exploitation of the agricultural resources of the underdeveloped Galicia region; and (c) to reinforce technological innovations begun under the First Project and thereby to consolidate the position of LDA as a technical development agency. Increasing meat and milk production through pasture improvement in Spain needs to be viewed both in the short and long term. The First Livestock Project was designed to help Spain meet its increasing meat deficit through demonstra- tion of improved technology and the setting up of a specific organization to carry out the Project. Because of the long-term nature of this type of proj- ect, the Bank's continued participation in the work of LDA is essential. Moreover, the need to reduce the meat deficit is even more urgent now due to increasing demand and the world shortages of feed grains. Consequently, a Second Project to build on the foundations of the First Project is a logical follow-up involving the development of further areas in the Southwest of the country where extra meat can be produced quickly from pastures. 3.02 In the North, the focus of the Project is quite different. While the area to be developed by the Project would be relatively small compared with the Southwest (22,700 ha to 289,000 ha), the Project would aim to solve im- portant land tenure and farm structural problems which are presently holding up the development of the potentially most productive region in Spain for livestock (paras 2.30-2.31). Once these problems are resolved and the farming community is able to observe the results of improved technology based omL es- tablished pastures in a high rainfall area, it is expected that a signif'icant proportion of the 1.2 million ha of presently unused or underutilized land in Galicia would be developed for meat and milk production and the Second Project should act as the catalyst for their development. Such a project in the - 12 - higher rainfall area of the North would go a long way to meet Spain's deficits in meat and milk as well as improving farm incomes in one of the poorest re- gions of the country. Finally, the Second Project is an essential and logi- cal follow-up necessary to consolidate gains already made and to further build up Spanish livestock institutions. B. Detailed Features 3.03 The Project Area in the Southwest has been described in the First Livestock Development Project appraisal report. The Project Area in the Southwest has the hottest summer climate in Spain, winters are mild, and the rainfall is markedly seasonal being virtually confined to September-March. Contour ranges from flat agricultural and irrigated valley land to rolling dryland hills. Soils are generally very poor or only of medium fertility. Most of the grazing land is held in relatively large units of 200 ha and upwards. The region of Galicia in the North, which consists of the provinces of La Coruna, Lugo, Orense and Pontevedra, is characterized by small farm holdings (90% 10 ha or less in area), excessive land fragmentation, and per capita farm incomes the lowest of any region in Spain. Over 50% of the total labor force in the region is engaged in farming, compared with 28% for the country as a whole, and since the younger segment of the population is moving out of agriculture, more than 60% of the farmers are 55 years old or older. Few areas in the temperate world have such a favorable climate for the produc- tion of livestock from pasture. Yet, over one million ha of potentially pro- ductive land is unused or grossly underused, either abandoned or communally- held land covered with scrub and trees (Annex 1 and paras 2.30-2.31). Further- more about one-half of Spain's total cattle inventory is located in the north- ern regions (Annex 2, Fig. 1). 3.04 About 550 dryland farms averaging about 500 ha, each with a minimum of 100 animal units, and 200 irrigated farms averaging about 20 ha, each with a minimum of 120 animal units, would be financed in the Southwest (Annex 4). While cattle breeding with the sale of weaners for fattening would be carried out on most of the dryland farms, 150 dryland farms would be developed as extensive sheep production units, as sheep provide a major alternative to beef cattle in the drier pasture regions of the Southwest. Their shorter period of gestation and more rapid rate of maturity from birth to slaughter confer distinct advantages in adaptability to more restricted seasons of pasture growth. Specialized beef fattening would be undertaken on the irrigated farms. 3.05 As in the First Project, the key element to increased productivity on the dryland farms would be the establisnment of pastures based on free- seeding, self-regenerating annual legumes (principally subterranean clover), adequately supplemented with hay, silage and feed grains. Cattle fattening on irrigated farms would be based on high quality temporary and permanent pastures plus conserved forage crops and concentrates. One of the major sources of animals for fattening would be the weaners from the dryland farms financed under the Project. - 13 - 3.06 In the North, the Project would concentrate on the development of beef and dairy operations from both existing farms and from land which is presently covered with scrub and trees. About 400 farms, averaging about 50 ha, each with a minimum of 50 animal units, would be developed from communal scrub-lands for beef cattle and operated by communal organizations of the owners (para 2.32 and Annex 4). Breeding herds for the production of weaners would be maintained on the majority of these units while only a limited number would be devoted to cattle fattening. About 450 dairy farms, averaging 6 ha in area, each with a minimum of 12 animal units, which could be turned into viable production units would be financed (Annex 4). A significant by-product of the dairy units would be male calves for fattening on the beef farms to be developed. 3.07 In addition to the 1,600 farms mentioned above, about 100 milk sheep farms, averaging 100 ha in size, each with a minimum of 45 animal units, would be financed in the marginal cereal zones in the central provinces of Toledo and Ciudad Real (Annex 4). About 40% of the sheep in these provinces are of the Manchega breed, the major milk producing breed of sheep in the country. Almost 5% (200 million liters) of milk produced in Spain comes from sheep and is used mainly for the manufacture of cheese for which there is a lucrative market. 3.08 Under the Project, credit would be provided for the establishment of improved pastures, fencing, farm buildings, farm machinery, watering fa- cilities, on-farm roads, and the purchase of livestock. On-farm development would generally be spread over a three-year period. The LDA would continue to provide the technical services essential for farmers to successfully plan and implement the desired forage and livestock production and management practices (paras 3.27 and 3.28). Since the proposed operations involve the introduction of new systems of farming, emphasis would be given to the provi- sion of overseas fellowships for training technical personnel in modern methods of production. Pasture Improvement 3.09 During the First Project, valuable experience related to the estab- lishment, maintenance and utilization of sub-clover pastures has been gained. The Second Project would build on this experience and at the same time explore the feasibility of more efficient techniques of pasture improvement. On both the irrigated farms in the Southwest and the farms of the North, pasture im- provement would be brought about primarily through the introduction of improv- ed varieties of perennial ryegrass, white and red clover, cocksfoot and fescue. To take advantage of the latest research findings in the field of pasture im- provement the Project would maintain close liaison with the Center for Pas- tures, Forages and Animal Production in the Semi-Arid Regions located at Badajoz and the Regional Research Center at La Coruna in Galicia (para 2.14). 3.10 Spain produices sufficient alfalfa and vetch seeds to meet domestic requirements. Practically all other pasture seeds are imported, though most, if not all, of Spain's requirements could be produced within the country. Production and marketing of seed in Spain is controlled by the National Seed Selection Institute, an autonomous organization within the Directorate of - 14 - Agricultural Production. Any legal entity approved by the Institute can im- port seed provided an importation license is granted by the Minister of Com- merce and there is no restriction on imports. Under the First Project, the Bank urged Government to organize and develop the local production of seed, and this has become increasingly important with rising costs and reduced availability. As a result of these representations, the Director General of Agricultural Production has recently submitted to the Bank an outline of the Government's program for the production and marketing of forage and pas- ture seeds during the next five years. In the program, the objective is to increase the local production of subterranean clover seed from 50 to 250 tons by 1978. Allowing for a doubling in the area sown, 50% of Spain's require- ments for this variety of seed would be met from domestic production by 1978. The Bank has also provided for a seed production expert on a short-term con- sultancy to assist the Ministry of Agriculture in implementing the above men- tioned seed production program. Staff of the LDA could also be used to select farmers who would multiply seed stocks under supervision. During negotiations, assurances were obtained that within one year of the date of effectiveness, the Ministry of Agriculture would employ a seed production specialist with qualifications and experience and under terms and conditions including terms of reference acceptable to the Bank to assist in developing a seed production program. Farm Construction and Machinery 3.11 Boundary fencing and some internal fencing would be of 5 strand 12-gauge galvanized steel wire with steel or wood posts, depending on avail- ability and relative costs. On some farms internal fencing consisting of two or three strands of wire would be used while others would utilize electric fences with only a single strand of wire. Water for livestock would be pro- vided from natural springs, wells or surface ponds. The farm machinery to be financed would comprise mainly fertilizer spreaders, mowers, forage har- vesters, trailers or forage wagons, hay balers, and tractors. In addition, some irrigation equipment and some milking equipment would be financed. Silos, manure pits, hay sheds, feed bunks, feed-lots, working corrals, milking parlors, and low cost livestock housing would also be financed under the Project. Cattle Procurement 3.12 Under the First Livestock Project, the Ministry of Agriculture was required to organize and operate the Livestock Procurement Service (LPS) to help supply breeding cattle to the Project. Subsequently the LDA assumed responsibility for operation of the LPS with assistance from veterinarians of the Ministry. Using the funds allocated by Government, LDA purchased surplus female calves which passed veterinary inspection from selected cattle breeders at the on-going beef price. The heifers were reared under contract, mated to selected bulls and sold to participating farmers as in-calf heifers at Ptas 65 per kg liveweight. In addition, within 3 years of purchase each farmer was required to return to the scheme free 1 female weaner weighing about 180 kg for each heifer purchased. Since difficulty was experienced in getting - 15 - farmers to return the free calf, the system was modified (by Order of the Ministry of Agriculture, October 20, 1974) as follows: The LPS is operated by the Ministry of Agriculture with the assistance of the LDA. Participating farmers are provided a choice of (a) in-calf heifers which have been mated to selected bulls or (b) female weaners less than one year of age which the farmer mates to bulls of his own choosing. The former animals are obtained from breeding farms established by agreement with provincial non-profit or- ganizations or agencies. One-half of the total cost of the animal is payable upon delivery and the balance in two equal installments paid at the end of the first and second year after purchase respectively. The weaners are pur- chased from groupings (concentraciones de compra) established under the supervision of the Ministry. Total payment is due upon delivery and each farmer is given a free heifer for every three that he purchases. It is ex- pected that option (a) will be used more widely by participating farmers in the North while (b) will be more popular with farmers in the Southwest. 3.13 While most of the livestock required by the Project would be of national origin, some stock would be imported from time to time to upgrade the indigenous animals for which provision has been made in the cost esti- mates. C. Cost Estimates 3.14 Total Project cost is estimated at US$149.3 million equivalent, a breakdown of which, based on March 1974 prices, is shown in the following table: PROJECT COST Ptas Million US$ Million Foreign Local Foreign Total Local Foreign Total Exchange On-Farm Development Pasture Improvement 1,218 786 2,004 21.0 13.6 34.6 Farm Buildings & Facilities 705 74 779 12.1 1.3 13.4 Machinery & Equipment 619 319 938 10.7 5.5 16.2 Livestock 2,324 258 2,582 40.1 4.4 44.5 Working Capital 1,020 364 1,384 17.6 6.3 23.9 Sub-total 5,886 1,801 7,687 101.5 31.1 132.6 23 Livestock Development Agency 543 101 644 9.4 1.8 11.2 16 Livestock Procurement Service 320 - 320 5.5 - 5.5 - Total 6,749 1,902 8,651 116.4 32.9 149.3 22 - 16 - 3.15 On-farm development costs, totalling US$108.7 million, were derived from an aggregation of the investments projected for each type of farming op- eration (Annex 5, Tables 1 and 2), and the numbers of each type expected to participate in the Project (Annex 7). No provision has been made for on-farm development contingencies since in a credit type project such as this, any increase in these costs would reduce the number of farms developed under the Project. However, in view of the emphasis on development in the North, an unallocated amount of US$2.7 million in the Bank loan will be utilized to meet uncertainties in investment costs in the development of communal land in that area. Based on March 1974 prices, 1,700 farms involving a total area of 311,000 ha, averaging 183 ha per farm, are expected to be financed; this number of farms would decrease if estimated costs of development should rise. The capital investments per farm and per ha average US$64,000 and US$350 respectively. These compare favorably with those for the First Project after allowing for inflation over the past four years, and for the higher costs involved in bringing into production the scrub-lands of the North. Invest- ment costs per ha vary considerably with the type of farm, costs for the smaller farms in the poorer areas of the North being generally several times greater than those in the Southwest as illustrated hereunder: Investment Cost/ha Total Farm Type US$ US$ million Southwest 500 ha dryland cattle 187 18.7 500 ha dryland sheep 235 17.6 500 ha dryland cattle including 20 ha irrigated 248 24.8 20 ha irrigated cattle 1,780 7.1 100 ha milk sheep including 5 ha irrigated 540 5.4 73.6 North 6 ha dairy farm 1,900 5.2 50 ha rainfed cattle breeding 1,550 27.1 50 ha rainfed cattle fattening 1,102 2.8 35.1 108.7 3.16 Working capital, amounting to US$23.9 million, has been provided to meet part of the incremental operating costs, including contingencies, as shown in the financial projections (Annex 4). The cost of operating LDA to provide the technical services for the Project is estimated at about US$11.2 million, including price contingencies, and that of running the LPS (para 3.12) US$5.5 million. D. Financing and Lending 3.17 The total cost of about US$149 million would be financed as follows: - 17 - Livestock Livestock On-Farm Development Procurement Development Agency Service Total Amount % Amount % Amount % Amount % --------------------US$ million----------------------- Producers 26.5 20 1.7 15 - - 28.2 19 Credit Agencies/1 23.9 18 - - - - 23.9/1 16 Government 51.1 39 7.7 69 5.5 100 64.3 43 IBRD 31.1 23 1.8 16 - - 32.9 22 Total 132.6 100 11.2 100 5.5 100 149.3 100 /1 Short-term working capital (para 3.22). 3.18 Farmers would contribute, on average, about 20% of the investments required for farm development. Where applicable they would also finance part of the incremental working capital as well as retaining breeding stock needed for herd and flock build-up, that in the absence of the Project would have been sold. Fifteen percent of the cost of LDA would be financed by farmers through the 0.5% charge on their sub-loans earmarked for technical services. The Bank loan of US$33 million would be equivalent to the foreign exchange component (22%). The balance of the investment financing, US$64.3 million equivalent, would be provided by Government (43%). Participating credit agencies would finance the incremental working capital where required (16%). 3.19 The Government would be the borrower and bear the foreign exchange risk. The term would be 15 years with a grace period of 5 years, equal to the disbursement period of the loan. This would allow the recovery of all sub-loans which in turn would be phased over 3 years with terms of 12 years (para 3.22), plus a 2-year allowance for possible slippage. The number and phasing of loan commitments is in Annex 7. 3.20 Project funds for relending and for the LDA would be placed in a separate Special Project Fund (the Fund) in ICO. Upon the effective date of the Loan, Government would credit the Fund with sufficient resources to enable it to initiate operations. The Fund would refinance at a rate of 5.75% per annum, an agreed proportion up to 100% of eligible medium-term sub-loans made by participating lending institutions. 1/ The Fund would replenish its re- sources from the proposed Bank Loan, Government contributions and repayments of sub-loans. Capital repayments received by the Fund, but not needed for Bank debt servicing, would be used for additional relending for farm develop- ment under the Project. Advances for the LDA would be disbursed by the Fund 1/ A rate of 5.75% is approximately the blend rate between the Government's contribution of US$51.1 million equivalent to on-farm development at 4.08%, and the assumed Bank rate of 8.5%. - 18 - through a separate account. The Project cash flow is in Annex 8. The Ministry of Finance would take the necessary steps to ensure that funds are available to LPS promptly as required. During loan negotiations assurances were obtained that: (i) Government would credit the Fund in ICO with sufficient resources to enable the Project to begin operations; (ii) ICO would reimburse up to 100% of eligible medium-term sub- loans made under the Project to participating lending institu- tions at 5.75%, plus 0.5% for technical services. Advances for LDA would be disbursed by the Fund through a separate account; (iii) Resources of the Fund would be replenished as required from Gov- ernment contributions, the proposed Bank loan, and repayment of sub-loans' interest and principal, not needed for servicing the Bank loan; and (iv) Ministry of Finance would provide promptly as needed the funds required by the LPS. 3.21 ICO would extend refinancing privileges under the Project to any eligible bank; assurances to this effect were obtained during negotiations. Eligibility would be the responsibility of ICO and would be based on (a) past experience and performance in agricultural lending, (b) financial conditions, (c) managerial capacity and capability, (d) location of branches in the Proj- ect areas, and (e) an undertaking to extend short-term loans to sub-borrowers. 3.22 Credit to farmers under the scheme would only be extended on the basis of farm investment plans approved by the LDA; an assurance to this effect was obtained during negotiations. Sub-loans would be made to farmers amounting to an average 80% of the farm investment plans for up to 12 years, including a grace period of up to 3 years. Cost projections for each farm development plan would include estimates of working capital requirements. The participating banks would undertake to extend short-term loans in accord- ance with these estimates from their own resources. Assurances were obtained during negotiations that ICO would ensure that agreements made between it and the participating banks would include a commitment to provide this working capital. In the event that participating banks fall short in their contribu- tion to Project financing, an assurance was obtained during negotiations that Government would provide any such shortfall. The inspection of collateral would be the responsibility of the lending institutions which could accept or reject the sub-borrower on the ground of creditworthiness, but which could not modify the investment plan. 3.23 The interest rate on medium-term loans to participating farmers would be 6.5% plus a technical service fee of 0.5% for loans up to Ptas 5.0 million and 7.0% plus a technical service fee of 0.5% for loans above Ptas 5.0 million on outstanding principal. Communal organizations farming other - 19 - than communal land pay 0.5% less and communal organizations farming communal land pay 6.5%. The 0.5% technical assistance fee would help defray part of the costs of the LDA. E. Procurement 3.24 International competitive bidding is not appropriate for this Proj- ect because the individual contracts are small and numerous; purchases would be made over a five-year period, and could not be bulked. The size and mix of farm investments vary substantially between sub-projects and cannot be predetermined. The goods and services required for farm development, both locally manufactured and imported, would be procured through existing commer- cial channels which would also provide the service facilities. Most machinery, wire for fencing, and building materials are manufactured locally and are com- petitive with international prices. An adequate number of international firms is represented to ensure effective competition in the procurement of the re- quired imported goods such as seeds and selected types of machinery and equip- ment. Applicable import duties on farm machinery are generally 25% or less while the import duties on most pasture seeds are below 10%. Under Spain's trade agreement of 1970 with the European Economic Community, certain items to be procured under the Project (agricultural machinery, fertilizers, etc.) would benefit from a reduction in import duty of 5% beginning in 1970 and progressively increasing to 25% by 1977 if procured from EEC countries. F. Disbursement 3.25 The Bank would reimburse 38% of the expenditures incurred by the Fund (US$51.1 million from Government and US$31.1 million from the Bank loan, para 3.17) in refinancing sub-loans and 16% of the costs of the LDA, against certified statements of disbursements. To ensure that Bank funds are chan- neled primarily into the rural development component of the Project in the North, agreement has been reached with the Government that 60% of disburse- ments (excluding working capital which would be provided by participating banks, para 3.22) on individual farm loana in the North and 20% in the South- west will be Bank funds. Total disbursements in the North would be US$35.1 million which would absorb 60% of the Bank loan of US$33 million, or US$16.8 million together with US$2.7 million, the latter being the unallocated portion of the Bank loan which is reserved for the North because of investment cost uncertainties in the development of communal land. In the Southwest, total disbursements would be US$73.6 million and the proportion of Bank funds would be US$11.7 million, 35% of the Bank loan. The estimated schedule of disburse- ments on a quarterly basis is in Annex 9. Full disbursement would be achieved over five years as summarized in the following schedule: - 20 - Year Total 1 2 3 4 5 ------US$ Million------------------- On-Farm Development 6.8 13.3 8.8 2.0 0.3 31.2 Livestock Development Agency 0.3 0.3 0.4 0.4 0.4 1.8 Total 7.1 13.6 9.2 2.4 0.7 33.0 G. Accounts and Auditing 3.26 ICO would continue to maintain the following separate project ac- counts: (a) On-Farm Investment; and (b) Livestock Development Agency, credit- ing the technical service fees to the latter account. These accounts would be audited annually by the Government Auditor and submitted within five months of the close of the financial year to the Bank. Assurances to this effect were obtained during negotiations. H. Organization and Management 3.27 The LDA, established specifically for implementing the First Live- stock Project, is the only institution in Spain which provides a sound tech- nical and financial approach to livestock production and the only one present- ly providing producers with the means for profitable meat and milk production from pasture, including technical assistance in the preparation of farm plans for loan applications. It also provides technical assistance to the farmer once the loan has been made. This integrated livestock extension assistance from a single agency did not exist in Spain prior to the advent of the First Livestock Project. LDA was established in 1970. In four years, it has built up a skilled extension staff assisted by training fellowships and has obtained the confidence of the livestock community in which it operates. The majority of the staff of LDA (save for the Director and one or two senior staff), are presently employed under an annual contract basis which is not conducive to retaining experienced personnel and prevents LDA offering permanent career prospects to its staff. A Second Livestock Project would therefore ensure consolidation of the position of LDA as a development agency, the integrated extension approach to livestock development utilizing pastures, and the reten- tion of trained and experienced livestock specialists by increasing the number of staff with permanent civil service status to about two-thirds. The Minis- ter of Agriculture has accepted the Bank's recommendations that the LDA be given a more permanent status and that at least two-thirds of the personnel be employed as members of the Civil Service (functionarios del Instituto). Appropriate representations to the Ministry of Finance have been made and these changes in employee status are being put into effect. - 21 - 3.28 If the LDA is to provide the technical services envisaged under the Second Proje;L, as well as Lontiuui,ig iLs prese-ait funcxion, its staff must be considerably enlarged. The proposed staffing over the next five years is shown in Annex 6, Table 1. In order to provide for adequate technical assis- tance, the LDA would obtain the services of a full-time consultant, whose qualifications and experience and terms of employment would be satisfactory to the Bank. Such a consultant would need to be experienced in land develop- ment as well as in modern techniques of dairy and beef production from pasture. Short-term consultants would also be employed for specific assignments, e.g. organizing the local production of pasture seed (Annex 6 contains draft Terms of Reference for consultants). Overseas training fellowships would be provid- ed under the Project for Spanish technicians. Anticipated costs of operating the expanded LDA are shown in Annex 6, Table 2. During negotiations assurances were obtained that (i) the LDA would be adequately staffed with competent technical personnel, including a consultant whose qualifications, experience and terms of employment would be satisfactory to the Bank, (2) farm records adequate to evaluate and monitor the Project would be established and main- tained by LDA, (3) short-term consultants, as required, would be employed in consultation with the Bank, and (4) arrangements would be made for the provi- sion of overseas training fellowships for LDA's technical staff. IV. PRODUCTION, MARKETS AND MARKETING, PRICES AND PRODUCER BENEFITS A. Production 4.01 Growth in per capita income, rapid urbanization and continued ex- pansion of tourism exert a continuing pressure on the demand for meat and livestock products in Spain. Rapid production growth in the livestock sec- tor since 1967 due to enhanced government programs, of wlhich a major element was the Bank's First Livestock Development Project, helped to ameliorate these pressures. Meat and livestock feed imports, which had risen sharply during the first half of the decade, were reduced somewhat in terms of quan- tity, and domestic meat production was able to provide for increases in per capita consumption. But rapid growth in the past two years and steep in- creases in meat and grain prices brought about sizeable increases in the value of imports of meat and cereals and some increases in the volume of im- ports as well (Annex 1, Table 12). The additional output resulting from this Second Project amounting to some 45,000 tons of meat, 800 tons of wool and 20,000 tons of milk annually is expected to reduce the pressure on imports of meat and feed grains. Market infrastructure is adequate. Sufficient slaughter- houses, storage and other marketing facilities and services exist on a competi- tive basis. The factors which previously served to discourage expansion of beef production have been significantly reduced by government policies to foster production, rising prices for beef and a gradual decline in the ab- solute level of beef imports. - 22 - 4.02 A significant feature of the Project is that it encourages the shift to livestock fattening on improved pasture (initiated by the First Bank Project), thereby reducing the demand for imported cereals for livestock feed- ing. Furthermore pasture improvement would be based on the use of legumes, plants which fix in the soil significant quantities of nitrogen from the at- mosphere, rather than on the application of nitrogenous fertilizers. Given the rising cost of fertilizers and the world-wide concern for finding methods of reducing grain consumption by livestock and thereby releasing cereals for direct human consumption, the Project has special significance at this time. Spain has the potential for significant further developments in exploiting pasture-fed livestock and the Project provides the necessary leadership. B. Markets and Marketing 4.03 Many of the concerns expressed in the First Livestock Project with respect to veal imports and to the market operations of CAT are no longer a major factor regarding beef production. The slaughter of calves is prohibited, the weight of slaughtered cattle has risen sharply through incentive price policies, and the significance of CAT's market activities in beef have been greatly reduced. Beef imports have declined while domestic beef production has risen sharply and should continue to rise. Beef prices have increased as well. C. Prices 4.04 Although the continued absence of veal imports has helped maintain the absolute ratio between veal and beef prices, the relative gap has been narrowed as beef production has increased. In 1967 beef prices were 81.5% of veal prices and in 1972 they had increased to 87%. Beef cattle prices have risen 59% since 1967 while veal prices rose only 48% (Annex 2). 4.05 Although CAT is empowered to support beef and other meat prices by domestic purchases and storage, as well as to limit price increases by importing meat, beef prices have customarily been well above support levels. Government intends continuing this relationship, which is resulting in a gradual improvement of beef prices relative to veal. With the exception of lamb prices, beef prices have risen more rapidly than those of other meats (Annex 2) indicating a gradually increasing incentive to beef producers. Since the mid-sixties, lamb prices have risen more sharply than cattle prices and, at the present time, exceed Ptas 100 rer kg liveweight for one month old and Ptas 60 per kg for three to eight month old lambs. Current mutton prices are just under Ptas 30 per kg liveweight. There is an unsatisfied demand for sheep meat in Spain. Local meat prices are in line with projected world prices (para 5.03 and Annex 11). - 23 - 4.06 Borrowing farmers, particularly the poorer farmers in the North, are expected to achieve substantial increments in income as a result of their par- ticipation in the Project. At full development in year 13, (repayment of all loans is to be completed in year 12) before and after development income, before income taxes, for the 8 types of farms is as follows (Annex 4): Annual Farm Income /1 Before Dev- After Dev- Number Farm Type Total Area elopment elopment /2 Increase ----ha---- ----------US$OOO…-------- Southwest 200 500 ha dryland cattle 100,000 5.4 22.2 4-fold 150 500 ha dryland sheep 75,000 4.8 43.3 10-fold 200 500 ha dryland cattle includ- ing 20 ha irri- gated 100,000 7.1 33.3 5-fold 200 20 ha irrigated cattle 4,000 8.9 16.9 2-fold 100 100 ha milk sheep includ- ing 5 ha irri- gated 10,000 1.2 16.4 14-fold 289,000 North 450 6 ha dairy farm 2,700 0.6 5.6 9-fold 350 50 ha rainfed cattle breeding 17,500 0.3 21.4 71-fold 50 50 ha rainfed cattle fattening 2,500 0.3 25.5 85-fold 22,700 /1 After debt services etc. /2 At full development in year 13. Estimated financial rates of return on new investments range from 12-13% on the dryland beef producing farms and 24-27% on sheep producing farms of the Southwest, to 39% and above for the smaller dairy and beef cattle farms in the more climatically favorable region in the North (Annex 10). - 24 - V. ECONOMIC BENEFITS AND JUSTIFICATION A. Economic Benefits and Rate of Return 5.01 In its future agricultural development Spain faces a totally differ- ent set of problems than those normally encountered in LDCs. The agricultural labor force is declining, certain areas have become depopulated and, in the process, natural resources are withdrawn from the production process. These developments call for an agricultural development strategy which helps to re- tain an active and entrepreneurial labor force on the land through enlarge- ment of operational holdings, land consolidation and significant improvements in farm income levels. By such means Spanish agriculture can expect to achieve sustained increases both in production and productivity. The proposed Project will help to bring about such structural changes. 5.02 The following table summarizes the estimates of important direct production benefits attributable to the Project: Annual Output Before Full Increase Unit Unit Development Development % Beef Production Metric tons 1,992 36,986 1,857 Muitton and Lamb Production Metric tons 1,600 11,478 717 Wool Production Metric tons 225 995 442 Milk Production Metric tons 8,550 28,900 338 Gross Sales US$ million 13.4 74.4 556 Realization of these production levels of meat and milk would mean a foreign exchange saving of some US$60.0 million annually at full development. 5.03 The economic rate of return to the overall Project has been esti- mated at 16% (Annex 11). The prices used for the major products to be pro- duced were those prevailing in Spain at the time of appraisal (March 1974). Since these are in line with projected world prices, no changes were made for the purpose of estimating the economic rate of return. If capital costs increased by 20%, the economic rate of return would fall to 13%. Should benefits decrease by 25%, the economic rate of return would fall to 12%. 5.04 The economic rate of return does not take account of non-quantifiable benefits. The Project would further the spread of advanced livestock produc- tion technology based on improved pastures thus exploiting a presently neg- lected resource and saving future expenditures on nitrogenous fertilizers and feed grain imports. The demonstrated profitability of these techniques is already having an effect on farmers who are seeking to adopt the same practices. - 25 - The in-service training of local technicians is building up Spanish capability in these techniques. An important new thrust of the Project is to implement existing Land Reform legislation in the North vith the objectives of bringing unused land into production and initiating measures essential for improving farm structure. Both these objectives would represent a significant step forward in the modernization of the agricultural sector and would result in raising the income earning possibilities of Spain's poorest farmers in the provinces of Galicia where farms are small and fragmented, incomes low and dependency on agriculture high (Annex 1). B. Social Benefits 5.05 The introduction of improved pasture and cattle production techni- ques in the Galicia region is a major social benefit of the Project. The re- gion presently has large tracts of unused and underutilized land. Local farm- ers are unaware of the potential usefulness of these lands and communal and absentee ownership presently limit the growth possibilities for these poorest of Spanish farmers. A major thrust in this region should assist in bringing about a better balance in income distribution among Spanish farmers and farm regions and lead to improved labor utilization on Project farms. The Project, as a whole, would directly benefit 5,100 farm families (conservatively based on an average of 3 families per farm), or approximately 25,000 persons through more than a 6-fold increase in the average farm family income and a 50% in- crease in the numbers employed. In addition increased employment opportunities would be created in the processing and marketing of the output from the Proj- ect. Indirectly, the Project would exert a major impact on a significant proportion of the 375,000 farmers and their families (about 2 million persons) in Galicia. VI. AGREEMENTS REACHED AND RECOMMENDATION 6.01 The Project is technically feasible, economically sound and finan- cially viable. It follows logically on the groundwork laid down in the First Livestock Project, and would receive additional technical support from the Bank-financed Agricultural Research Project. Agreement having been reached on the principal issues referred to in Chapter 3, and subject to the condi- tions of Board Presentation and effectiveness described in para 2.32, the Project constitutes a suitable basis for a Bank loan of US$33 million for a 15-year term with 5 years grace. The borrower would be the Government of Spain. ANNEX 1 Page 1 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT The Agricultural Economy 1. Agricultural production in Spain increased in real terms 1/ at an annual rate of 2.3% between 1962 and 1974, twice the rate of population growth. Total GNP increased at 7.3% and industrial production at 8.6%. The relative position of agriculture in the economy is therefore declining and can be ex- pected to continue to do so in the future. In 1961, agricultural production accounted for 24% of GDP while in 1973 it had dropped to 13%. The active population engaged in agriculture has fallen even faster, from 39.2% in 1962 to 27% in 1972. 2/ Over 1.1 million people left agriculture in the past decade - their numbers falling from 4.5 million in 1962 to 3.5 million in 1972. Al- though agricultural exports have increased at an annual (current prices) rate of 12.5% in the past 5 years, agricultural exports as a percent of total exports have fallen from 50% in the early 1960's to 39.7% in 1968 and to 30% in 1973. Agricultural imports, increasing at an annual rate of 14.4% from 1968 through 1972 in current prices, have accounted for a fairly constant 20- 22% of total imports. The gradually increasing gap between imports and exports has contributed to a fluctuating but gradually growing agricultural export deficit, ranging from 4 to 13% of the total trade deficit (Table 1). A large proportion of these imports (ranging from 30 to 50%) is made up of meats and products largely destined for animal feeds - cereals, other feeds and oilseeds (Table 2). 2. Partly because of the rapid movement of labor out of agriculture, net agricultural production has increased at a substantial 6.7% annually in the last five years, with net output per active person employed in agriculture rising even faster (Table 3). 3. The sectoral composition of production has been slow to adjust to shifting demands brought about by the rapid growth of incomes in Spain over the past decade, 5.6% per capita annually during 1960-71. In 1962-63, crops accounted for 58% of agricultural output (which included forestry 4.4% and fisheries 3%) and livestock production 34%; by 1972-73, crops had declined to 53% and livestock had risen to 38%. This slow adjustment has resulted from 1/ At factor cost in 1964 prices. Banco de Espana, Informe Annual 1972, Madrid, p. 237. 2/ The northern provinces of Galicia where this Project is being extended have not shared in this development however and remain heavily dependent on agriculture (see para 17). ANNEX 1 Page 2 difficult land tenure relationships, policies designed to ease the adjustment for farmers out of traditional crops, especially wheat, the high costs of pro- ducing livestock products based on imported feeds, and the slowness to adopt livestock production techniques based on pasture development technology suit- able for Spain. The First and Second Livestock Development Projects are de- signed to speed up this adjustment. 4. Agricultural policies to achieve a more rapid shift in production in the direction of the changing demand pattern gained momentum in the mid- sixties and results have begun to emerge. The area sown to wheat, which was in substantial surplus in the past, has been reduced from 4.3 million ha in 1967 to 3.1 million ha in 1973 (Table 4). Even with greater use of fertilizer and other yield increasing technology, production dropped 1 to 1.5 million tons in 1972 and 1973 compared with the 1967-71 level. This development co- incided with a decline in wheat prices from US$0.11/kg in 1967 to US$0.095 in subsequent years. The area released from wheat has gone primarily to barley, a feed grain, the area of which rose from 1.4 to 2.8 ha, while production grew from 2.5 to 4.4 million tons (Table 4). 5. The increase in grain yields evident in Tables 4 and 5 reflects in- creases in fertilizer use and mechanization. Fertilizer use in 1972 was double the 1961-65 average (Table 6). Tractors and harvester-threshing machines tri- pled during the same period. Nevertheless, Spanish yields are low compared with many European countries, partly because of a less favorable climate and partly due to less use of fertilizer and other yield improving inputs. Spanish wheat yields are only 65% of those in Greece, half those in Italy and 28% of those in France. Although Spanish barley and maize yields are closer to those of Greece and Italy, barley yields are less than half those of France and maize yields one to two tons/ha below France and Italy respectively. 6. Production in the livestock sector increased at close to three times the rate of crop production from 1960 through 1973. Based on 3-year averages (1960-62 and 1971-73 to reduce the impact of annual fluctuations in production) meat production has increased over 7% annually (Table 7). Sheep meat production has grown very slowly, less than 1% per year. Poultry production, after in- creasing very rapidly from 1960 to 1967, has increased at a slower rate in recent years. For the whole period pork output increased at about 6.5% an- nually but grew slowly during 1967-72. Beef output has increased at just over 7% per year. Livestock numbers changed as follows during this period: 1961-65 1970 1971 1972 -----------------thousand head------------------- Cows 3,670 4,238 4,235 4,249 iiorses 434 285 270 250 Hules 1,054 566 550 530 Asses 678 386 360 330 Pigs 5,659 6,915 6,917 7,178 Sheep 20,855 18,729 18,443 17,863 Goats 2,714 2,570 2,636 2,514 Source: FAO Production Yearbook, 1972. ANNEX 1 Page 3 7. Spanish agriculture enjoyed a relatively favorable position with respect to prices between 1964 and 1972. The index of prices received and prices paid favored agriculture throughout the period and in 1972 agricultural prices received were 38% above the 1964 level while prices paid were only 11% above that level, a 24% improvement. Index of Prices Received and Paid by Farmers, 1964-1972 (midyear) 1964 1965 1966 1967 1968 1969 1970 1971 1972 Prices received 100 117.1 191.4 118.5 195.8 131.6 129.1 135.8 138.2 Prices paid 100 103.3 106.2 108.9 110.0 111.8 114.0 119.7 111.1 Parity index 100 113.4 114.3 108.8 114.4 117.7 113.2 113.5 124.4 8. Rapid price increases and inflation have produced dramatic changes in prices in the past three years: Index of Prices Received and Paid by Farmers, 1971-73 (1964=100) Prices Received Prices Paid 1971 1972 1973 1971 1972 1973 -- June -- June Nov. -- June --- June Nov. Agriculture 145 161 183 168 General 120 121 133 145 Livestock products 134 151 151 170 Fertilizer 113 115 124 130 Crops 154 168 204 168 Cereals 108 109 124 115 Seeds 137 141 149 150 Legumes 140 192 180 181 Potatoes 121 137 214 157 Feeds 124 124 139 169 Vegetables 195 199 235 202 Fruits 166 152 204 166 Fuels 111 111 111 117 Wine 147 242 339 282 Olives 140 165 178 192 Although the index of prices paid remained below that of prices received thirough November 1973, the increase in prices paid since June 1971 was more rapid (20%) than that of prices received, and most of this increase was concentrated in 1973. Prices paid rose substantiaily in the last month of 1973 and the first months of 1974. The increases in livestock feed costs are especially signi- ficant. Between 1964 and 1972 feed costs increased only 24% but from mid- 1972 to November 1973 they were 60% above the 1964 level. The very slow re- lative increase in cereals' prices since 1964 is a major explanation of the declining role of wheat. Surprisingly, however, livestock product prices received by farmers have risen no more rapidly than prices received for crops in general. This suggests a continuing absence of a strong incentive to shift rapidly towards livestock production. ANNEX 1 Page 4 9. Rapidly growing per capita incomes have resulted in major shifts in consumption patterns in Spain (Table 10). The major decline has been in ce- reals consumption, from 92.5 to 75.0 kg/capita between 1964 and 1972. Per capita consumption of potatoes, vegetables, fruits and fish have remained relatively constant. Sugar, meat and milk consumption have all shown sub- stantial increases. During the first half of the sixties a large portion of these rapid increases came about as the result of increased imports, especial- ly of cereals for livestock feed and of meat (Table 12). There has been a clear slowing down of the rate of increase in meat consumption since 1967 (Table 10) and the quantity of both meat and cereal imports generally stabil- ized after 1967 at high levels (Table 12). Beef has been the dominant meat imported but the quantity of beef imported has declined since 1969 (Table 13). 10. Rapid inflation has influenced the consumption and trade pattern in agricultural products. The cost of living index rose 22% between 1962 and 1967 and another 20% by 1972. The index for food, beverages and tobacco rose by 29 and 23% during the same periods. The average annual rise in the cost of living was 3.9% and for food 4.8% from 1962 to 1972. In 1973 the inflation rate was nearly 15%. Rising prices have therefore dampened the demand for more expensive foods, of which livestock products are a major component. Increased livestock production, especially since 1967, has helped forestall further major increases in the quantities of livestock products and cereals imported, but progressively higher international prices for these and oilseeds have driven their import values up sharply, especially in 1973. 11. The level of livestock production, especially meat production, in 1973 was exceptionally high. Droughts in 1972 and 1973 and rapidly rising feed prices in 1973 produced exceptionally heavy slaughter - a 35% increase in the cattle slaughter rate. It is expected that meat production will fall in 1974. 12. Given the high level of fish consumption, Spanish meat consumption levels are not likely to increase as rapidly as would be expected in other countries at the same income level where fish is not as prominent in the diet. As indicated in Tables 10 and 11, however, sizeable increases in the demand for meat are projected by 1975 and 1980. Total meat consumption is expected to increase from 1.6 million tons in 1973 to 1.8 million tons by 1975, and from 1.9 to 2.2 million tons by 1980. There is a substantial gap between these projection levels and the most likely 1974 production level of about 1.4 million tons. high world meat and feed prices militate against filling this gap from large increases in imports, which exceeded US$1.6 billion in 1973 for agriculture products alone. 13. The high cost of imports, limitations on expanding the area under cereals, the slow rise in Spanish cereal yields and the very sharp rise in fertilizer prices indicate a need to increase meat production from domestic non-grain sources. The direction of projected changes in consumption indi- cates that the strongest demand increases will be for beef. ANNEX 1 Page 5 Special Characteristics of Galicia 14. The region of Galicia, where it is proposed that the Second Livestock Development Project be focussed, consists of the provinces of La Coruna, Lugo, Orense and Pontevedra. Table 14 shows these to be the four poorest agricul- tural provinces in Spain, based on production per person occupied in agricul- ture. Of the 50 provinces, these 4 ranked among the poorest 13 in 1967 and were the poorest of all regions in 1971. Whereas more advanced provinces had average agricultural production per person in 1971 of from Ptas 120,000 to 165,000, these provinces averaged between Ptas 30,000 and 39,000 per person. 15. Table 15 suggests part of the reason - small farm size. In Galicia as a whole, 47.6% of the farms are less than 2 ha. An additional 27.2% are 2 to 5 ha and 15% 5 to 10 ha. In La Coruna 71% of farms are less than 5 ha, in Orense 80% and in Pontevedra 90%. 16. A second major factor is the age of farmers. Table 16 indicates that in these 4 provinces less than 3% of the farmers are 34 years of age or younger. Farmers between 35 and 54 years old account for 34%, those 55 to 64 account for 29% and 33.6% of the farmers in Galicia are 65 years old or older. 17. In Table 17 the proportion of active population occupied in agricul- ture in Galicia is compared with the proportion in other provinces (compare Tables 14 and 17). In Galicia as a whole, 52.4% of the active population is occupied in agriculture while in Viscaya, the 9th province in terms of agri- cultural production per person employed in agriculture, only 8.1% is thus occupied. In Lugo and Orense provinces the population occupied in agriculture reaches 64 to 67%. 18. Galicia is a depressed rural area where the conditions of small farm size, low farm income and aging farm population are compounded by heavy depend- ence of the population on agriculture as a source of income and way of life. 19. However, the region possesses a major undeveloped potential for livestock production with much unused and underutilized land. The problems of small farm size, communal ownership and lack of knowledge of the technology for developing the region present major challenges which this Project is de- signed to attack by introducing pilot projects designed to offer observable alternatives to the local population backed up with proper technical assist- ance and capital. ANNEX 1 Table 1 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Total and Agricultural Trade, 1968-1972 Annual Imoorts 1968 1969 1970 1971 1972 Increase Total imports (Ptas iiLl) 246.5 296.3 332.3 347.4 437.6 15.7 Agricultural imports (Ptas 55.7 67.3 66.6 77.1 94.4 14.4 Agricultural of total, % 22.6 22.7 20.1 22.2 21.6 Exoorts Total eDoorts (Ptas mil) 111.2 133.0 167.1 205.6 245.2 21.9 Agricultural exports (Ptas 44.2 h7.2 60.2 6h.8 69.9 12.5 mi1) Agricultural of total, % 39.7 35.5 36.5 31.5 28.5 3alance of agricultural trade, (Ptas mil) -11.5 -20.1 -6.4 -12.3 -24.5 Balance of total trade, (Ptas mil) -135.3 -163.3 -165.2 -141.8 -192.4 Agricultural of total, % 8.5 12.3 3.9 8.7 12.7 Source: "La Agricultura Espanola en 1972tt, Ministerio de Agricultura. July 23, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT .Ma,jor Agricultural Imoorts and Exports, 1969-73 1969 1970 1971 1972 1973 % of % of % of % of % of % increase Value total Value total Value total Value total Value total during 1969-72 IMports Oil seeds 7.1 10.5 11.6 17.4 13.3 17.3 14.8 15.7 20.8 11.1 29.7 Cereals 10.0 14.8 9.9 14.9 15.0 19.5 10.3 10.9 17.4 17.6 1.6 Meat 4.2 6.2 4.7 7.1 2.6 3.4 9.8 10.4 8.8 8.9 69.4 Wood 6.6 9.8 6.9 10.4 7.4 9.6 9.0 9.5 11.1 Hides & skins 3.5 5.2 2.6 3.9 3.9 5.1 8.1 8.6 41.0 Animal feeds 2.6 2.8 18.0 18.3 - Exports Fruit 13.2 28.0 18.0 29.9 16.9 26.1 20.9 28.0 17.8 Vegetables & 7.1 15.o 8.3 13.8 9.7 15.0 11.0 14.7 15.7 products Beverages 4.4 9.3 5.4 9.0 6.3 9.7 8.7 11.7 25.8 Legumes & tubers2.2 4.7 5.1 8.5 5.5 8.5 6.3 8.4 51.4 Olives & oils 4.9 10.4 10.0 16.6 12.6 19.5 5.5 8.4 0.3 Source! "la Agricola Esparola" Mj.ni't4ro.`o cie A,rimlt. t, July 23, 1974 ANNEX I Table 3 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT /1 Agriculture in the Spanish Economy. AverLge Average 1_900-61 _1965-66 1968 1973 Agriculture GDP as % of total GDP 23.4 17.8 16.2 1h.5 Active population in agriculture as 41.4 32.7 31.4 27.0 % of total labor force Agricultural exports as % of total exports 54.5 49.0 40.o 28.5 Balance of agricultural trade (in US$ mil) +210 -267 -164 -138 Fixed capital formation in agriculture as 10.3 9.8 n.a. n.a. % of total capital formation Incremental capital/output ratio (average 1963-68) - agricultural 1.7 - total economy 2.3 Annual growth of GDP per active person in agriculture (1960-68), in constant prices 6.6% Annual growth of GDP per active person, total economy (1960-68), in constant prices 5.8% 1 Includes forestry and fisheries. /2 Corrected for changes in the labor force. Source: Derived from OECD and Spanish statistics. July 23, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Area, Yield and Production of Major Cereals, 1961-1973 Total Wheat Barley Maize Area Yield Production Area Yield Production Area Yield Production Area Yield Production Mil ha Tons Mil tons Mil ha Tons/ Mil tons Mil ha Tons Mil tons Mil ha Tons/ Mil tons -a ha ha ha 1961 6.9 1.1 7.5 3.9 0.9 3.4 1.4 1.2 1.7 .447 2.4 1.1 1962 7.3 1.3 9.3 4.3 1.1 4.8 1.5 1.5 2.2 .430 2.1 0.9 1963 9.2 1.3 9.4 4.2 1.1 4.9 1.5 1.4 2.1 .487 2.4 1.2 1964 7.0 1.2 8.3 4.1 0.9 4.0 1.4 1.4 1.9 .514 2.4 1.2 1965 7.1 1.3 8.9 4.3 1.1 4.7 1.4 1.4 1.9 .478 2.h 1.1 1966 7.0 1.3 9.3 4.2 1.2 4.9 1.3 1.5 2.0 .482 2.4 1.2 1967 7.2 1.5 10.7 4.3 1.3 5.6 1.5 1.7 2.6 .478 2.5 1.2 1968 7.4 1.6 11.6 3.9 1.3 5.3 1.9 1.8 3.4 .523 2.8 1.5 1969 7.3 1.6 11.5 3.8 1.3 4.6 2.1 1.9 4.0 .494 3.1 1.5 1970 7.4 1.4 10.2 3.7 1.1 4.1 2.2 1.4 3.1 .530 3.4 1.8 1971 7.5 1.8 13.7 3.7 1.5 5.5 2.4 2.0 4.8 .557 3.7 2.1 1972 7.5 1.6 12.1 3.6 1.3 4.6 2.5 1.7 4.4 .534 3.6 1.9 1973 7.3 1.6 11.6 3.1 1.3 3.9 2.8 1.6 4.4 .531 3.9 2.1 Sources: FAO Production Yearbook, 1972, Vol. 26 Buletin Mensual de Estadistica Agraria, 1 January, 1974, Ministerio de Agricultura. July 23, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROGRAM Yields in Selected Countries - ------------Quintals per ha ------------------------------ --Iiters per lactation-- Wheat average Barley average Maize average Milk average 1952-56 1964-66 1970-72 1952-56 1964-66 1970-72 1952-56 1964-66 1970-72 1952-56 1964-66 1970-72 Spain 9.5 10.8 12.7 11.5 14.3 17.3 19.0 23.7 35.9 1,710 2,100 2,380 Portugal 8.1 7.6 9.2 5.9 4.7 4.6 9.3 11.2 12.6 1,876/2 -- 2,400 Greece 12.1 17.9 19.6 11.0 17.1 18.6 10.7 19.5 35.5 784 1,032 1,200 Italy 17.7 21.4 24.7 11.6 14.1 20.7 24.1 34.9 53.8 2,594 2,530 2,800 France 21.7 30.8 45.8 21.9 29.1 39.0 22.4 36.1 45.8 2,027 2,763 3,300 USA 12.5 17.6 21.9 15.2 21.3 23.5 26.5 43.7 60.8 2,587 3,767 4,500 Source: FAO Production Yearbooks / 1 Quintal = 100 kg 72 1961-65 July 23, 19741 ANNEX 1. Table 6 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Fertilizer Use and Mechanization, 1961-65, 1968 to 1972 1961-65 1968 1969 1970 1971 1972 Fertilizer Average Conumtiize --------------- Thousand tons ------- ---------------- Consumption-Tosn os of plant nutrients Nitrogenous 351 520 589 615 621 683 Phosphates 310 369 369 399 h54 1497 Potash 95 173 206 211 236 281 Tractors in use (Thousands) 111 - 239 260 282 306 Harvesters -threshers (Thousands) 10 - 30 32 34 36 Sources: FAO Production Yearbook, 1972 La Agricultura Espanjola en 1972 July 23, 1974 ANNEX 1 Table 7 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Meat, Milk and Egg Production, 1960-1973 Year Beef & Pork Poultry Lamb & Total Milk Eggs Vel Mutton rooo t ooo --------------- ----t000 tons ------------------ liters dozen 1960 160 258 13 110 572 _ _ 1961 177 239 82 104 651 - - 1962 163 245 110 103 671 2,546 429 1963 172 311 128 104 762 1,672 579 1964 225 317 141 117 850 2,690 531 1965 177 266 147 122 764 2,712 535 1966 198 367 213 121 944 3,071 555 1967 215 419 257 122 1,058 3,356 546 1968 241 419 257 118 1,084 3,679 546 1969 256 437 297 116 1,155 3,968 610 1970 308 492 316 127 1,295 4,895 612 1971 324 475 318 124 1,295 4,800 616 1972 303 461 329 126 1,275 5,o42 621 1973 373 587 344 130 1,490 5,294 627 Source: FAO Production Yearbook La Agricultura Espanola en 1972 Buletin Mensual de Estadistica Agraria Jily 23, 1974 ANNEX 1 Table 8- SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Value of Agricultural Production by Subsector 1968/69 - 1972/73 Subsector 1968/69 1969/70 1970/71 1971/72 1972/73 Annual I.ncrease --------------------------- Ptas mil- ---------------------------- Crops 192.0 188.1 191.3 221.5 237.8 5.7 Livestock 120.4 131.4 138.6 147.7 164.0 8.0 Forestry 8.9 10.2 11.5 12.9 14.4 11.5 TOTAL 321.3 329.7 341.4 382.1 416.2 6.7 Percentage Distribution by Subsector Crops 59.7 57.1 56.o 58.0 57.1 Livestock 34.5 39.8 40.6 38.6 39.4 Forestry 2.8 3.1 3.4 3.4 3.5 Source Anuarios del Ministerio de Agricultura. July 23, 1974 ANNEX 1 Table 9 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Gross Value of Production and Foreign Trade (Crop year 1972/73) Gross Value /1 of Production - Imports Exports Net Trade - - ----- _ _----US$ mil-----_____ ______ _ Livestock products 2,828 249 27 -222 Pasture and forages 356 - - - Cereals 722 180 13 -167 Oil seeds 379 257 95 -162 Vegetables and fruits 1,705 57 470 +413 Total above 6,988 743 605 -138 Total sector /2 7,239 1,643 1,215 -428 /1 Includes intermediate products such as feed grains, and other livestock feed, animal labor, etc. /2 Including forestry, excluding fisheries. Source: La Agricultura Espanola en 1969 Note: US$ 1 = Ptas 50.50 July 23, 1974 SPAINI SECOND LIVESTOCK DEVELOPIElNT PROJECT Per Capita Consumption of Major Foods, 1964-72 and Projections to 1975 and 1980 Year Cereals Potatoes Sugar Vegetables Fruits Meat Leza Fish Milk ---------------------------------------------- Kg per capita ---------------------------------------------- 1964t 92.5 105.0 21.3 132.2 93.0 25.5 10.5 29.5 63.5 1965 92.4 104.8 21.5 130.9 88.6 28.1 10.2 30.6 59.4 1966 92.5 109.5 22.9 134.7 97.9 31.4 10.5 29.7 67.0 1967 88.1 104.5 26.8 130.4 83.1 41.2 10.3 27.6 75.0 1968 88.9 107.2 25.0 131.1 87.5 41.3 10.2 30.1 78.8 1969 77.0 110.4 25.7 126.1 101.7 43.0 10.9 26.6 84.1 1970 76.2 110.0 26.6 125.8 79.0 45.0 11.6 25.1 80.9 1971 75.0 106.7 27.0 132.5 97.3 45.5 11.9 28.6 84.2 1972 75.0 108.0 27.4 132.0 98.0 46.o 12.0 28.5 85.0 Projections 1975 70.8 104.3 30.0 140.0 109.0 51.9 13.1 32.9 93.2 1980 65.5 98.6 33.5 146.4 122.9 60.2 14.6 37.2 102.4 Sources: 1964-1972: La Agricultura expanola en 1972, Ministry of Agriculture Projections, Agricultural Commodity Projections, 1970-1980, FAO, 1971 Vol. II (modified - demand functions and major demand parameters retained but applied to actual Sr.anish per capita consumption figures). July 23, 1974 SPATN SECOND LIVESTOCK DEVELOPlIENT PROJECT Meat Production and Consumption, Total and by Types 1965-1973 and Projections to 1975 and 1980 Year Beef & Veal Pork Poultry Lamb & Mutton Total Meat Produc- Con- Produc- Con- Produc- Con- Produc- Con- Produc- Con- tion sumption tion sumption tion sumption tion sumption tion sumption --------- ~~~t000 tonas - -- ---- ---- ------ -…--- 1965 177 239 266 247 147 170 122 122 764 888 1966 198 278 367 384 213 - 121 121 944 1,001 1967 215 307 417 415 257 - 122 122 1,058 1,324 1968 241 345 419 451 257 - 118 118 1,084 1,347 1969 256 354 437 459 297 - 116 117 1,155 1,417 1970 308 369 492 444 316 286 127 126 1,295 1,498 1971 324 362 475 507 318 - 124 123 1,295 1,530 1972 303 377 461 550 329 _ 126 128 1,275 1,562 1973 373 389 587 344 130 - 1,490 1,612 /\ ~ ~ ~ ~ ~~I l l I Projections Spain FAO FAO Q FAO FAO FA 1975 434 546 571 373 160 1,808 1980 525 695 662 466 178 2,190 ° July 23, 1974 ANIVEX 1 Table 12 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT tleat Imnorts, Fresh, Chilled and Frozen 1961-1973 Total Meat Beef Tons US$ t000 Tons US$ '000 1961 9,780 4,480 3,871 1,834 1962 56,990 28,820 42,554 21,643 1963 96,290 46,820 83,232 40,297 1964 21,950 12,690 19,330 11,343 1965 99,020 70,170 68,580 52,804 1966 120,580 83,3h0 87,786 61,934 1967 113,292 71,237 106,660 67,431 1968 117,874 74,157 109,000 69,162 1969 119,148 73,331 112,095 69,270 1970 102,503 66,043 98,848 63,385 1971 43,375 36,998 34,192 30,565 1972 166,305 171,601 78,383 82,532 1973 122,600 160,000 76,000 _ Cereal Imports 1961-1973 Thtal Cereals Corn Barley Others '000 Value ________ ------ '000 tons _______. tons US$ '000 1961 1,577 106,430 251 361 - 1962 1,351 92,021 306 101 - 1963 1,526 98,418 961 362 - 1964 2,034 129,380 1,149 774 - 1965 2,339 154,930 1,560 539 - 1966 3,432 227,145 2,428 560 361 1967 3,280 212,319 2,575 465 230 1968 2,463 143,859 2,315 10 127 1696 2,401 142,879 2,343 10 46 1970 2,175 141,067 1,972 6 195 1971 3,146 214,230 2,057 220 677 1972 2,566 160,207 2,383 7 174 1973 2,947 300,000 /1 Excludes wheat, flour and rice July 23, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Meat Import by Type, Quantity and Value 1967-73. Li Year Total Meat Beef Pork Poultry Sheen Metric Metric Metric Metric Metric tons US$000 tons US$'000 tons US$O000 tons US$O000 tons US$ o000 1967 113,2 71,237 106,660 |67,231 1,16)4 872 3,471 1,872 16 9 1968 ! 117,874 74,157 109,000 1 69,162 1,74o 1,337 5,427 9 2,857 10 5 1969 1 119,148 73,331 112,095 69,270 1,228 1,066 3,220 1,726 386 226 1970 102,503 66,0243 98,848 63,385 1,103 1,187 3,305 202 447 285 1971 243,375 36,998 324,192 30,565 3,075 2~,603 4,764 2,713 473 365 1972 166,305 171,601 78,383 32,532 76,151 |81, 16 5 9,241 5,688 806 683 1973 122,600 160,000 76,000 - 39,000 X - 7,000 - _ _ _ _ _ ____x 4 __ /1 Fresh, chilled and frozen only. Excludes live animals, processed meats and meat products and other meats. Source: FAO Trade Yearbook Ministry of Commerce, Madrid July 23, 1974 SPAIN Tablei SECOND LIVESTOCK DEVELOPMFNT PROJECT Production Per Person Occupied in Ag'riculture 1967 Ptas 1969 Ptas 1971 Ptas 1 Barcelona 92.7 Lerida T 7. 4 Lerida 1'I.7 2 Valladolid 90.7 Valladolid 123.1 Valladolid 12.0 3 Logrono 88.7 Navarra 122.6 Huesca 141.20 4 Navarra 86.3 Gerona 122.4 Gerona 127.2 5 Huesca 78.1 Alava 114.1 Madrid 123.8 6 Alava 77.3 Huesca 107.3 Barcelona 122.0 7 Gerona 77.3 Barcelona 106.3 Alava 120.2 8 Soria 74.9 Logrono 103.6 Navarra 113).1 9 Cuenca 74.1 Soria 100.1 Vizcaya 11',.4 10 Lerida 73.6 Guipuzcoa, 96.1 Sevilla 112.0 11 Guipuzcoa 72.0 Castellon 94.8 Logrono 11l 6 12 Tarragona 70.3 Segovia 91.7 Cadiz 135 13 Burgos 68.9 Teruel 90.5 Cordoba 1. 16 Vizcaya 67.9 Madrid 89.6 Soria 10 15 Segovia 67.8 Zaragoza 87.9 Segovia 10).7 16 Baleares 67.2 Palencia 87.8 Alicante ID). 17 Sevilla 67.2 Baleares 87.7 Albacete i 18 Zamora 67.1 Toledo 86:4 Toledo 98.7 19 Valencia 66.2 Vizcaya 86.o Baleares 96.' 20 Zaragoza 65.7 Tarragona 80.9 Guip6zcoa 93.8 21 Palencia 64.7 Burgos 80.5 Palencia 92.o 22 Albacete 63.4 Guadalajara 80.3 Burgos 91.6 23 Castello'n 63.3 Cadiz 79.0 - Tarragona 89.6 24 Badajoz 62.7 Cuidad Real 77.7 Valencia 88.6 25 Santander 61.0 Cuenca 76.9 Guadalajara 85.6 26 Madrid 59.9 Valencia 75.2 Badajoz 85.6 27 C6rdoba 58.2 Albacete 74.4 Teruel 85.0 28 Alicante 57.5 Santander 72.4 Cuenca , 81.6 29 Toledo 56.1 Sevilla 69.6 Castollon 84.l 30 Salamanca 55.7 Badajoz 66.0 Zaragoza 8L.2 31 Cadiz 55.4 Murcia 65.4 A1neria 84.0 32 Guadalajara 55.3 Alicante 65.0 Cuidad Real 82.7 33 Las Palnas 54.4 Salamnanca 64.o Murcia 81.1 34 Murcia 54.2 Avila 62.8 Santander 77.1 35 Leon 52.0 Zamora 62.6 Las Palmas 77.4 36 Cuidad Real 51.5 Leon 61.2 Leon 75.l 37 ˇlZu 51.1 Jaen 61.2 Jaen 75.3 38 Sta C. Tener 50.2 Cordoba 59.2 Salamanca 68.! 39 Teruel 49.4 Logo 56.3- Sta C. Tener. 66.3 l6o Huelva 48.8 Caceres 55.0 Avila 63.1 61 Malaga 46.1 Oviedo 54.6 Malaga 62.7 42 Granada 45.6 Las Palmas 51.7 Caceres 59.3 43 Avila 4h.6 Granada 51.0 Zamora 57.0 lilt Oviedo 414.4 Huelva 51.0 Granada 56.3 1J5 Caceres 43.7 Sta C. Tener 50.6 Oviedo 53.1 14 Pontevedra 43.3 Malag3 49.1 Huelva 66.o 47 Alneria 39.4 Almeria 47.2 Pontevedra 3Y.0 48 Jae'n 37.7 Pontevedra 43.5 Lugo 37.8 49 La Coruna 33.8 La Coruna 39.6 Il. Coruna 35.8 50 Orense 28.9 Orense 32.7 Orense 30.2 Source: Banco de Bilbao July 23, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Average Farm Size by Province in Galicia Region Total 0-2 ha 2-5 ha 5-10 ha 10-20 ha 20-50 ha 50-100 ha 100 ha # 114,514 51,633 29,663 19,832 10,513 2,388 209 276 La Coruna % 100 45.1 25.9 17.3 9.2 2.9 0.2 0.2 81,866 19,250 24,023 21,110 13,369 3,727 197 190 Lugo 100 23.5 29.3 25.8 16.3 4.6 0.2 0.2 83.255 37,125 30,280 10,921 3,702 928 72 227 Orense % 100 44.6 36.4 13.1 4.4 1.1 0.1 0.3 # 105,556 75,307 20,951 6,301 2,395 406 36 160 Pontevedra % 100 71.3 19.9 6.0 2.3 0.4 0.03 0.2 # 385,191 183,315 104,917 58,164 29,979 7,449 514 853 Galicia % 100 47.6 27.2 15.1 7.8 2.0 0.1 0.2 Source: 1972 Census July 23, 1974 ANNEX 1 Table 16 SPAIN SECOND LIVESTOCK EEVEWLPMENT PROJECT Age of Farm Owners in Galicia Region Iess than Region 34 35-54 55-64 65 & over TOTAL Non-farming Total 4,034 41,531 31,378 36,088 113,031 33,117 La Coruna T - 3.6 36.7 27.8 31.9 29.3 Total 1,855 25,493 22,136 28,314 77,798 14,378 2.4 32.8 28.4 36.4 18.5 Total 2,153 28,767 24,659 25,784 81,363 16,905 Orense % 2.6 35.3 30.3 31.7 20.7 Total 2,822 32,072 32,170 35,746 102.810 36,807 Pontevedra - 2.7 31.2 31.3 34.8 35.8 Total 10,864 127,863 110,343 125,932 375,002 101,207 GALIC IA i 2.9 34.1 29.4 33.6 27.0 July 23, 1974 ANN 1 Table 17 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Active Population Occupied in Agriculture La CorIna 48.0 Lugo 64.0 Orense 66.7 Pontevedra 42.6 GALICIA 52.4 Oviedo 29.4 Santander 31.4 OVIENDO-SANTANDER 30.0 Guipuzcoa 7.2 Vizcaya 8.1 Alava 16.8 VASCONGADAS 8.85 R E G I O N 33.33 Source: "Renta nacional de Espana y su distribution provincial". Banco de Bilbao 1969 July 23, 1974 AiNNEX 2 Page 1 SPAIN SECOND LIVESTOCK DEVELOPMIENT PROJECT Government Livestock Production, Pricing and Marketing Policies Cattle Inventory and Slaughter in Spain 1. Between 1961-65 and 1970-72, cattle numbers slaughtered increased 31% and beef and veal production increased 70% (Table 1). Until 1969 over half the total animals marketed were calves weighing less than 125 kg. This propor- tion had increased from 50% in 1961 to 59% in 1967 (Table 1) and was causing major concern. Government policies and programs (including the Bank's First Livestock Development Project) designed to correct this adverse development have shown dramatic results since 1967. Calves slaughtered as a percent of total cattle slaughtered dropped from 59% in 1967 to 54% in 1969 and to 31% in 1972. Yearlings and young cattle, only 22% of the total slaughtered in 1967, jumped to 54% in 1972. Older animals slaughtered declined to 15% in 1972. 2. About one-half of Spain's total cattle inventory is located in the northern tier of provinces, comprised of Galicia, Vascongadas, and Asturias- Santander (Figure 1). Relative Prices of Beef and Veal 3. Despite the very sharp change in the proportion of calves slaughtered to total cattle slaughtered, there has been surprising stability in the rela- tionship of calf (veal) prices to other cattle prices. Average liveweight prices for calves up to five months rose from Ptas 50.3/kg in 1967 to Ptas 74.5/kg in 1973. During the same period beef prices rose from Ptas 41.0 to 65.0/kg (Table 2). In absolute terms the margin between beef and veal prices has remained practically identical, Ptas 9.3 to 9.5/kg, but beef prices have risen from 81.5% of veal prices in 1967 to 87.1% in 1972. Although there is some seasonal fluctuation in cattle prices there is no clear pattern (Table 3). Lamb and Mutton Production and Pricing 4. The major alternative to beef cattle in the pasture regions of Spain is sheep. Sheep numbers have fallen from 21 million head in 1961-65 to 17.9 million in 1972 (Annex 1, para 6). Sheep meat production has increased less than 1% annually, from 103,810 tons in 1961 to 129,600 tons in 1973. Wool production has declined from 29,000 tons in 1961 to 25,000 tons in 1973. ANNEX 2 Page 2 5. Prices of lamb (lechal, one month and pascual, three to eight months) show greater seasonal variation than do cattle prices (Table 4), due to sea- sonal pasture conditions in Spain which force lamb sales during the dry season in late spring, summer and early fall. Lamb prices have risen more sharply than cattle prices since the mid-sixties: Changes in Livestock Prices in Spain, 1965-1973 1965 1966 1967 1971 1972 1973 1973/1965 index --------- Ptas/kg liveweight --------- 1965=100 Veal 47.4 48.5 50.3 56.6 70.6 74.5 157 Beef (one to two years) 40.4 41.1 41.0 48.5 57.2 65.0 161 Cull Cows 32.6 31.6 30.4 34.4 40.1 40.7 125 Lambs (one month) 48.3 51.5 54.1 67.8 83.3 97.5 202 Lambs (three to eight months) 36.1 38.2 40.1 51.1 61.3 68.0 188 Mutton 23.9 25.5 24.1 24.2 32.0 35.2 147 The strong upward movement of lamb prices reflects rising incomes of consumers, declining sheep numbers, slowly growing lamb production and the Government's monopoly of imports of meat. Lamb imports were 10 tons in 1968 (Annex 1, Table 13). They rose sharply to 7,000 tons in 1973, induced undoubtedly by the high prices prevailing in that year, Ptas 103/kg in October-November, almost double the 1966 price (Annex 2, Table 4). Both lamb meat and live lambs were imported in 1973 (Annex 1). 6. Support prices for lamb have been raised from Ptas 60 to 65/kg (carcass weight) for lambs under 19 kg in the late sixties to Ptas 90 to 120 in 1972/73. 2Ieat Marketing Channels and Facilities 7. Cattle and other livestock are purchased from producers as follows: (a) in some cities, by meat wholesalers who slaughter and process livestock at municipal abattoirs; (b) for other cities such as Madrid, by tratantes (dealers), who consign the livestock to entradores who on behalf of the tratantes slaughter and process livestock at municipal abattoirs; and (c) by freezing companies which slaughter and process livestock through their own plants. ANNE X 2 Page 3 All of these -- the entradores, the meat wholesalers, and the freezing com- panies -- sell and distribute processed meat to meat retailers, and each is required to obtain from their local municipal authorities licenses to operate. Most meat retailers are not licensed to sell frozen meat which is sold by retailers who have obtained special licenses from local municipalities. 8. The establishment of a municipal abattoir requires a license from the Ministry of the Interior; and the establishment of a freezing company requires a license from the Ministry of Agriculture and the Ministry of the Interior. Municipal abattoirs do not generally have freezing and cold stor- age facilities, although these are available at the Madrid Abattoir. Coopera- tives, on behalf of their farmer members, also process livestock and sell meat to retailers. These cooperatives have freezing and cold storage facilities. The marketing cycle is in some cases fairly complex, but charges at the various stages are not out of line and costs of marketing are reasonable. The Govern- ment collects a turnover tax of 2.7% on every occasion that meat carcasses or cuts are sold. 9. Meat importing is done solely by the CAT under reciprocal trade agreements with Governments of meat exporting countries. Bilateral trade agreements are used which provide for either money payments or exchange of goods. Imported frozen beef is purchased directly from CAT by selected meat retailers who have special licenses to buy and sell frozen meat. CAT sells imported ciiilled beef to the Retail Butchers Association which then distributes the meat to selected retailers (Figure 2). Table 5 shows imports of meat by CAT from 1971 to 1973. Frozen beef has been the principal import since 1964, but has gradually declined as more pork and lamb have been imported (Annex 1, Table 13). Veal is not imported. Beef Price Policies 10. In an effort to reduce the slaughtering of young calves, the Gov- ernment has prohibited the slaughtering of all calves weighing less than 125 kg (cleaned carcass weight) and granted premiums as follows: 1969/70 1970/71 1971/72 1972/73 …------- Ptas/kg carcass weight ----- Weight of Carcass 180-210 kg /a 3 3 3 Over 210 kg/a 6 6 6 190-220 kg - - - 3 220-270 kg - - - 6 Over 270 kg _ _ _ 9 /a Male animals only. AlNEX 2 Page 4 These premiums and the prohibition of calf slaughtering have been effective in shifting the structure of beef slaughter (Table 1). Animals weighing from 180 to 210 kg carcass weight were 35.6% of the total slaughtered in the last half of 1968 and those weighing 210 kg or more were 64.9%. By the last half of 1972 the numbers and proportions were as follows: Carcass Weight of Slaughtered Cattle % of Total 180 to 210 kg 15.2 220 to 270 kg 44.5 More than 270 kg 40.3 11. Independent of the production premium system, CAT regulates prices with minimum and maximum intervention prices. The minimum price is a guar- antee price at which CAT, acting under the general supervision of FORPPA, is required to buy carcasses. An indicative price is established which is an average wholesale price paid by a group of sample slaughterhouses for a yearling carcass weighing more than 220 kg. When the beef price reaches the maximum intervention price, CAT is required to sell frozen beef in the market. These prices for beef from 1969/70 through 1973/74 are given in Table 6. Table 7 gives the guarantee, minimum and maximum intervention prices for beef, pork and sheep from 1970/71 through 1974/75. 12. Support payments are not made to producers but to the owner of the animals at the time of delivery to the abattoir. Whether producers actually benefit fully from price support operations is therefore uncertain. In addition, price supports are not uniformly applicable throughout the country. There is no automatic provision for purchasing meat in individual cases. Only when an entire area or region is declared to be one in which cattle prices are below support levels does CAT stand ready to buy at support prices. Furthermore it only buys at selected abattoirs, with which CAT has contracts, after a rather cumbersome and time-consuming administrative pro- cess. The seller may wait for as long as several months to receive payment from CAT. There could be numerous sales which are not subject to price supports in areas which have not been designated as requiring assistance. 13. CAT's domestic purchases of carcasses to support prices have been small because domestic prices have usually been above support levels (Table 8). In 1970/71, 16,500 tons of beef were purchased domestically and in 1973/74, 12,500 tons. In 1970/71, 58,000 tons of pork were purchased. 14. Import unit values for selected meats are given in Table 9. Aver- age wholesale prices in Madrid in Februarv 1973 and 1974 given below can be compared with wholesale and retail prices in selected cities in 1971, 1972 and 1973 given in Table 10. ANNEX 2 Page 5 Average Wholesale Prices at Type of Carcass Madrid Municipal Slaughterhouse 2-20-74 2-21-73 (Ptas/kg carcass weight) Calf 182.50 185.00 Yearling, grass-fed 132.50 117.00 Bull, grain-fed 107.50 99.00 Baby lamb, nursing 184.00 165.50 Older lamb 137.00 134.00 Special pork 76.50 77.00 Kid goat, nursing 180.00 144.00 15. The margin between average c.i.f. unit values and the wholesale or retail price of all meats is substantial. Whereas in the late 1960's CAT's sales to wholesalers were clearly carried out at a loss (First Livestock Appraisal Report, July 1, 1969, Annex 2), this does not appear to be the case presently. The rapid upward movement of all meat prices in 1971-73 (Table 10) suggests that meat imports have not had a significant dampening effect on meat prices recently. 16. The system of marketing meat products in Spain, coupled with live- stock development projects, has brought about a gradual change in the environ- ment for beef production since the Bank's First Livestock Development Project. Production has been stimulated and has responded with rapid growth. Imports have diminished gradually and producer and consumer prices have risen. As a consequence the price dampening effect of imports has been reduced and the rate of increase of meat consumption per capita has slowed down with higher retail prices. Thus, Spain has lived within its own production capabilities -- maintaining a fairly constant level of imports -- and has managed to in- crease beef production significantly and consumption moderately since 1967. SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Cattle Slaughter by Type 1961-1972 ('000 head) Type 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 Calves 616 574 615 765 605 720 798 802 797 648 655 467 % of total 50 51 52 50 53 58 59 56 54 39 38 31 Yearlings - - - - - - - - - 485 574 668 % of total - - - - - - - - - 29 33 45 Young animals 341 306 326 407 284 294 291 343 397 224 197 133 % of total 28 27 28 27 25 24 22 24 27 13 11 9 Old animals 274 241 240 346 253 228 259 300 288 310 306 221 % of total 22 22 20 23 22 18 19 21 19 19 18 15 Total head 1,231 1,121 1,181 1,518 1,142 1,243 1,348 1,445 1,482 1,666 1,733 1,489 Total tonnage 178 163 172 225 177 198 215 241 256 308 324 302 /1 Carcass weight Source: Ministerio de Agricultura July 1974 & - M ANNEX 2 Table 2 SPAIN SECOND LIVESTOCK DEVEIOPMENT PROJECT Average Annual Prices of Beef and Veal 1965 1966 1967 1968 1971 1972 1973 - --------Pas/kg liveweight- Veal 4 h7.4 48.5 5023 51.3 56.6 70.6 74.5. Beef 40.4 4 l.I 4l.0 41.6 4805 57.2 65.0 Oller cattle /3 - - - - 34.4 40.1 40.3 Price differentials Veal to beef (Ptas/kg) 7.0 7.4 9.3 9.7 8.1 13.4 9.5 Beef to older cattle (Ptas/kg) 14.1 17.1 25.0 Beef price as % of veal price 85.2 84.7 81.5 81.1 85.6 81.0 87.1 /1 Calves up to five months 2 Beef under two years 3 More than two years Source: Ministerio de Agricultura, Secretaria General Tecnica, La Agricultura Espanola en 1966 and 1972 (Madrid, 1967 and 1973) July 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECr Monthly Cattle Liveweight Price, 1965-67 and 1971-73 -___________________- Veal I ------------------ --------------------- Steers L------------Cu-- -------------------- Cull Cows ------------------ 1965 1966 1967 1971 1972 197? 1965 1966 1967 1971 1972 1973 1965 1966 1967 1971 1972 1973 ------------------------------------------------------------------- (Ptas/kg liveweight) ---------------------_--___--______________________________________________ January 41.16 47.92 48.52 52.67 62.28 70.31 34.99 43.36 38.44 47.82 51.78 55.45 29.31 34.20 29.99 32.27 37.42 39.75 February 43.94 48.87 49.28 52.64 63.26 70.51 37.40 42.77 39.87 46.41 52.27 57.06 29.74 33.57 29.36 32.42 37.90 39.68 March 45.74 47.31 50.11 53.39 65.02 69.87 39.13 41.54 40.54 47.41 54.66 58.91 32.86 32.45 30.99 32.93 38.97 40.25 April 48.40 47.73 50.83 54.06 65.66 71.96 40.53 41.40 W0.52 46.92 54.96 57.46 33.91 31.90 30.87 33.32 40.06 40.34 May 49.85 47.80 50.78 56.11 69.04 70.60 41.16 40.97 42.16 47.59 56.84 59.88 33.73 31.83 30,34 33.54 41.12 41.56 June 48.74 45.25 51.01 56.97 69.88 72.95 40.44 40.96 41.74 47.49 58.02 60.35 33.29 31.40 30.49 33.12 42.24 40.93 July 48.51 48.16 49.87 57.42 70.35 72.56 41.28 41.01 40.74 47.52 59.52 62.73 32.44 32.16 29.38 33.39 42.24 40.07 August 48.05 49.63 49.00 56.73 70.12 74.37 41.37 41.31 41.08 46.69 58.14 64.27 32.09 31.87 29.87 33.80 40.26 40.27 September 48.82 49.86 50.51 58.66 70.88 74.57 41.00 40.44 41.34 48.78 58.87 64.66 32.95 30.54 30.25 35.34 70.66 41.13 October 49.16 48.09 51.28 59.85 70.01 74.40 41.49 39.16 41.44 49.26 57.85 65.97 33.37 29.93 30.56 36.93 40.67 41.33 November 48.45 51.37 51,15 60.49 68.82 75.28 42.48 41.53 41.33 50.25 54.50 67.14 34.29 30.95 30.52 37.18 39.91 41.64 December 47.37 49.41 51.52 62.28 69.77 76.50/3 42.74 38.39 42.35 51.64 54.00 68.00/3 33.59 28.51 31.86 37.48 38.12 42.00/3 Average 47.41 48.47 50.34 56.61 70.64 74.50/3 40.37 41.10 41.00 48.50 57.18 65.00 32.65 31.64 30.40 34.38 40.13 40.25/3 /1 Five months old 2 Two years old 3 Estimated Source: Ministerio de Agricultura, Secretaria General Tecnica, La Agricultura Espaflola 1966, 1967 and Beletin Mensual de Estadistica Agraria, I enero 1974. July 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Monthly Lamb and Mutton Liveweight Prices, 1965-67 and 1971-73 ------------- Lamb (Lechul) /I ---------__---- ------------- Lamb (Pascual)/2 ------------- ---------------- Mutton ---------------- 1965 1966 1967 1971 1972 1973 1965 1966 1967 1971 1972 1973 1965 1966 1967 1971 1972 1973 ------------------------------------------------------- (Ptas/kg liveweight) --------------------___________________________________________ January 46.48 55.07 53.06 64.51 81.75 95.62 34.52 41.83 39.48 47.87 63.10 71.40 22.40 28.75 25.48 22.14 29.09 35.93 February 47.68 50.74 49.92 62.51 77.40 89.39 36.64 38.89 38.37 47.82 59.42 66.71 23.98 27.11 24.68 22.06 32.60 34.55 March 46.72 49.09 51.60 62.65 72.27 86.89 36.37 37.08 39.51 48.78 54.07 63.85 23.96 25.47 25.08 22.03 27.92 32.73 April 45.73 47.01 53.57 64.29 84.94 85.39 34.53 34.80 40.63 49.08 54.83 58.81 23.64 25.29 24.33 23.18 28.77 32.61 May 45.34 48.13 54.21 64.82 74.82 88.09 33.57 35.10 40.47 47.61 57.54 55.57 23.34 24.60 24.53 22.80 30.43 33.03 June 44.63 47.88 51.21 65.22 77.25 90.33 33.76 36.03 39.47 48.62 59.90 56.20 23.17 24.44 24.18 22.51 31.47 33.20 July 45.49 50.10 50.53 65.72 77.28 91.23 34.14 36.58 38.63 48.32 60.67 57.92 23.12 24.65 22.65 23.63 33.54 31.74 August 46.55 51.40 52.74 65.69 81.40 94.48 34.81 37.50 38.36 49.66 60.67 65.56 22.67 24.33 23.89 23.78 31.81 33.93 September 49.81 53.20 54.54 68.78 89.29 100.11 35.75 37.82 39.39 52.85 63.83 72.60 23.53 25.05 24.27 24.08 32.94 35.68 October 50.31 55.38 57.43 72.54 90.54 102.81 37.37 40.67 41.34 54.49 66.85 75.51 24.06 25.15 23.07 24.17 32.75 34.74 November 54.10 56.63 60.32 75.05 91.10 102.57 40.07 41.10 43.14 57.13 66.79 76.04 26.39 25.41 23.51 25.40 33.24 34.42 December 56.75 54.83 60.46 81.41 95.10 105.00/3 41.92 40.65 42.86 61.92 67.91 78.00/3 26.84 25.09 23.35 28.63 35.35 36.00/3 Average 48.32 51.50 54.15 67.85 83.30 97.50/3 36.12 38.16 40.14 51.05 61.31 68.00/3 23.93 25.52 24.10 24.16 32.04 35.203 LI One month 2 Three to eight months /3 Estimated zi mx Sources: La Agricultura Espaflola 1966 and 1967 and Boletin Mensual de Estadistica Agraria 1 enero 1974. v July 1974 ANNEX 2 Table 5 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Imports of Meat by CAT Metric Tons 1971 Young cattle, frozen hindquarter meat 2,458 Young cattle, frozen adjusted price 21,658 Pork, frozen - carcass 3,752 Lamb, frozen - carcass 144 1972 Young cattle, frozen hindquarter meat 7,335 Young cattle, frozen adjusted price 65,286 Young cattle, frozen boneless 6,513 Pork, frozen - carcass 74.471 Pork, frozen - breeding sows 4,174 Pork., frozen - cut up 14,650 Lamb, frozen 1,540 Young cattle, refrigerated hindquarter meat 3,490 1973 (through 31-7-73) Young cattle, frozen hindquarter meat 16,708 Young cattle, frozen adjusted price 40,261 Young cattle, frozen boneless 1 ,200 Pork, frozen - carcass 9,200 Lamb, frozen 500 Source: CAT July 1974 ANNEX 2 Table 6 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Guarantee, Intervention and Indicative Beef Prices 1969/70 1970/71 1971/72 1972/73 1973/74 197475 Guarantee Prices --------------- Ptas/kg carcass weight- Carcass weight, kg 175-180 67 - - _ _ 180-210 73 76 80-82 - _ More than 210 73 79 83-85 - - - More than 220 - - - 85 95 118 Cows more than 175 50 50 55-56 - - Intervention Prices (Animals 220 kgs or over) Maximum - 97-102 105 120 132 Minimum - 91-93 95 105 122 Indicative Prices 125-180 77.05 - 180-210 83.95 87.ho - More than 210 83.95 90.85 - Cows more than 175 57.50 55.50 July 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Guarantee, Maximum and Minimum Intervention Prices, 1970/7.1 - 1974/75 Year Guarantee minimum Maximum price intervention intervention price price Beef --------------- Ptas/kg ------------------ 1970/71 76 to 79 - 1971/72 85 93 102 1972/73 85 95 105 1973/74 95 105 120 1974/75 /1 118 122 132 Pork 1970/71 46 to 48 1971/72 47 52 55 1972/73 50 56 62 1973/74 52 58 65 1974/75 /1 64.5O 68 77 Sheep 1970/71 68 1971/72 71 78 96 1972/73 - 90 120 1973/74 100 130 1974/75 120 145 & 3 WrW Li Not yet published Source: CAT July 1974 ANNEX 2 Table f, SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Domestic Meat Purchased by CAT, 1970/71 - 1973/74 Year Metric Tons xPrices Beef' 1970/71 16,500 77.50 Ptas/kg 1971/72 1 972/73 1973/74 12,500 110.00 Pork 1970/71 58,000. 47.00 1971 /72 1972/73 1973/74 Sheep 1970/71 68.00 o 1971 /72 1972/73 1973/74 Source: CAT. July 1974 I CD ANNEX 2 Table 9 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Import unit values of meat, 1967-72 Code number and Unit 1967 1968 1969 1970 1971 1972 Kind of meat 011.1 Beef & veal : Value-uS$'000: 67,431 69,162 69,270 63,385 30,565 82,532 : Quan.-tons 106,660 109,000 112,095 98,848 34,192 78,383 : US$/ton 632.2 634.5 617.96 641.2 893.9 1,052.9 : US$/ kg 0.63 0.63 0.62 0.64 0.89 1.05 : PtasAg: 36.23 36.23 35.65 36.80 51.17 60.37 011.2 Mutton & lamb Value-US$'000: 9 5 226 285 365 683 : Quan.-tons 16 10 386 447 473 806 US$/ton 562.5 500.0 585.5 637.6 771.7 847.4 US$/ kg 0.56 0.50 0.59 0.64 0.77 0.85 Ptas/kg 32.20 28.75 33.93 36.80 44.27 48.87 011.3 Pork Value-US$'000: 874 1,337 1,066 1,187 2,603 81,165 : Quan.-tons 1,164 1,740 1,228 1,103 3,075 76,151 US$/ton 750.9 768.4 868.1 1,076.2 846.5 1,065.8 US$ag 0.75 0.77 0.87 1.08 0.85 1.06 Ptas/kg 43.13 44.27 50.03 62.10 48.87 60.95 011.4 Poultry meat : Value-US$'000: 1,872 2,857 1,726 202 2,713 5,688 : Quan.-tons 3,471 5,427 3,220 305 4,764 9,241 : US$/ton 539.3 526.4 536.0 662.3 569.5 615.5 : us$kg 0.54 0.53 0.54 0.66 0.57 0.61 : Ptas/kg 31.05 30.47 31.05 37.95 32.77 35.07 011.6 Edible offals Value-US$'000: 754 561 807 734 282 815 Quan.-tons 1,605 1,322 1,955 1,541 461 1,296 US$/ton 469.8 424.4 412.8 476.3 611.7 628.9 US$/kg 0.47 0.42 0.41 0.48 0.61 0.63 Ptas/kg 27.03 24.15 23.57 27.60 35.07 36.23 Source: FAO Trade Yearbook. July 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Wholesale and Retail Prices for Various Types of Meat (First Quality), Ptas/kg, 1971-73 In Selected Cities City Year Veal Yearlings Young Cattle nl H0r ratt.e Sheep Carcass PVP Carcass PVP Carcass PVP Carcass PVP Carcass PVP MADRID /1 /2 Li /2 Li 2i L /2 L L2 1971 134 235 104 185 85 156 73 148 115 173 1972 170 319 123 229 105 192 84 161 145 223 1973 187 344 127 243 112 217 93 184 161 245 BARCELONA 1971 114 212 97 196 78 155 64 L 138 208 1972 130 264 114 231 88 189 70 158 220 1973 139 278 124 233 90 193 78 Q 168 241 VAIENCIA 1971 102 185 100 183 85 167 71 . 1o6 158 1972 116 221 116 222 /3 /3 86 /3 130 198 1973 126 240 121 240 3 1 90 1 141 234 BILBAO 1971 112 191 103 174 92 160 75 128 112 178 1972 129 141 120 215 109 185 96 168 142 220 1973 133 263 123 243 116 195 92 167 170 251 L wholesale 2Retail Calves shown for Valencia in 1972 and 1973 were not slaughtered, and those shown under Young Cattle in Barcelona and Valencia at the sales price to the public were destined for processing. SOURCE: CAT (- July 1974 j, <:doo iNoW:-sCooX-lo 4D CD ~ ~ ~ ~ ~ ~ ~ ~ ~ TOSNDHA IHI 2 m , < / ~~~~~~~~~~ISOCllRVES - ANNEX 2 F'igure 2 SPAIN: LIVESTOCK DEVELOPMENT PROJECT OUTLINE OF PRINCIPAL BEEF MARKETING CHANNELS Percntoage A. RURAL LIVE CATTLE MARKET 20 Municipal Abottoir 21 PRODUCER n I TRATANTE " > > CONSUMER 10 BUTCHER RETAILER B. URBAN LIVE CATTLE MARKET 18 Municipal and Municipl Beef 1. PROD"CER TRATANTE" Abattoir Wholesale Morket BUTCHER RETAILER CONSUAIR 12 Municipal ad Municiool Beef rX r 2. PRODUPCER TrovYIIIg m sson | Abottoir Wholesale Mork t COSUE 6H C. URBAN BEEF MARKET 14 I l l l , ff | n~~~~~~~~~~~~~Municipa8 n |ll Be I. PRODUCER Comrnission Mon ftcking Wholesale Market BUTCHER CNUE I I , n rn , , rm ~~~~~~~~~~~Municipal B ee'1 1 2 | PRODUCER Whlsi Marke LocolBM | Packing > | BUTCHER CONSUMER 9 | |C°rnmssion Mon | J | Deoler RETAILER D. MARKET FOR PROCESSED BEEF 5 1. PRODUCER Commission Mon PROCESSOR Solesman RETAILER CONSUMER 2 2. PRODUCER PROCESSOR Solemon RETAILER CONSUMER 3 E. MARKET FOR IMPORTED BEEF 30 I n ~~Licensed Cold Storen Liese.ol toe Retail Butchers Association BUTCHER RETAILER CONSUMER 21 CAT H 2. Licensed Cold Store] 2. ~ ~ ~ATH Meat Processors Association PROCESSOR --IBUTCERTALR ONUR 9 F. OTHER MARKETS 13 ALL MARKETS 1-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~F- | i Copital letters indicote owner of the goods. 21 Agent who, on beholf of the Deoler, slaughters ond processes livestock ot the obattois. | Small letters outside a square indicate an institution. | / Small letters within a squore indicate the agent thot provides the service. IBRO- 4277 ANNEX 3 Page 1 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT I. Agricultural Credit Institutions in Spain 1. Agricultural credit in Spain is extended through various government- al agencies, certain special credit programs, and the private banking system. Instituto de Credito Oficial (ICO) 2. ICO functions as a statutory board responsible to the Ministry of Finance, through which Treasury channels Government funds, raised domestically or through external borrowing, to official credit institutions. The staff of ICO is small. It is engaged in establishing appropriations and budgets and in controlling disbursement of funds. The actual lending operations are conducted by five government owned credit banks and one additional credit institution, all supervised by ICO, with agricultural credit extended mainly by the Banco de Credito Agricola SA. Banco de Credito Agricola SA (BCA) 3. The BCA is the principal lending source of governmental credit to agriculture, and as such the channel for ICO's agricultural financing. BCA was established by Law 2/1962 (reforming the banking system) as a successor agency to the National Service of Agricultural Credit. Law 13/1971 on the reorganization of the governmental banks and banking system established BCA as a Sociedad Anonima, a corporation with share capital fully owned by Govern- ment. 4. BCA derives its resources from its capital stock of Ptas 227 mil- lion, appropriations from ICO totalling about Ptas 50 billion at the end of 1973 and compulsory deposit investment certificates of Ptas 4 billion bearing 2% interest, acquired by private and savings banks. Annual appropriations from ICO increase BCA's lending resources. BCA's balance sheet is shown in Table 1. 5. Although BCA was intended to be an autonomous organization, since 1971 the Government's influence is paramount, as it owns BCA's entire share capital, appoints its president and all members of the board of directors (Consejo de Administration) except two, the latter being appointed by the labor organization (Organizacion Sindical). The Consejo de Administration decides on lending operations, although decisions on individual loans are delegated to an Executive Committee. Whereas prior to 1971 BCA had been properly regarded as an agency of the Treasury, since its incorporation, BCA claims to have become more independent in its actions without political con- siderations in its lending policies. ANNEX 3 Page 2 6. Organization and Staffing. BCA's main office is located in Madrid and it maintains one branch office in Sevilla. 1/ It has a staff of about 150 employees, about 25 of these are senior officers involved in its lending operations. In addition, BCA has over 100 correspondents located in the pro- vincial capitals. They are mostly recruited from among the personnel of the Government's agricultural services and the Treasury, and work part-time for BCA under contract. Their principal task is to appraise direct loan applica- tions and to make recommendations to the head office concerning the granting of credit. In principle, all aspects of a comprehensive loan appraisal are covered, including the farmer's investment plan and budget. Emphasis is placed on the creditworthiness of the applicant and the evaluation of the collateral. The loan cannot be more than 60% of the collateral's value. However, often more stringent security requirements are demanded. The corres- pondent's standard of operations include two farm visits during the execution of the investments, but no supervisory visits during the rest of the lifetime of the loan. 7. The shareholder's general assembly each year nominates two independ- ent outside auditors (Censores de Cuentas) who annually audit BCA's financial statements and books of accounts. The auditor's certificate of examination is regularly published as part of BCA's annual report. In addition to this, ICO has the legal authority and obligation to control and supervise BCA's activities. 8. Lending Policies and Procedures. BCA primarily extends medium- and long-term credit in accordance with a detailed set of governmental directives. Few direct loans are granted below the amount of Ptas 1 million. For the smaller loans, Savings Banks (Cajas de Ahorros) and Rural Savings Banks (Cajas Rurales) act as credit agencies channelling BCA funds to farmers. BCA also extends credit for special agricultural programs, channelling credit allocated by Government to AC for livestock development; to IRYDA for land settlement, farm improvement and agroindustries; to the Servicio Nacional de Productos Agrarios (SENPA) for grain storage and other projects and to the LDA. In addition, BCA extends various types of soft, socio-economic credit, including emergency loans for relief in cases of natural calamities, as well as loans without specific purposes to prevent usurious interest rates, but the latter lending has been of little significance in recent years. 9. BCA extends limited short-term credit directly to farmers. In addition, it makes medium-term advances to collaborating credit institutions for working capital financing. 10. The time required to evaluate and approve a farm plan and obtain a loan directly from BCA, including the processing and recording of a mortgage may take up to nine months (see Appendix 1 for the required procedural steps). Less time is required when the collateral is other than mortgage. Usually 1/ This was established to comply with Section 5.03 (b) of the Loan Agree- ment under IBRD Loan 633-SP. ANNEX 3 Page 3 the local savings banks who are nearer to the applicant's farm area and often know the farmer as a client, process the loan applications somewhat faster and are willing to make advance payments to the borrower. 11. BCA's direct lending procedures at headquarters include a preliminary review of the application in MIadrid. The application is then forwarded to the field correspondents who review the purpose of the loan, appraise the value of the collateral, and assess the character and creditworthiness of the appli- cant. The correspondent's report is then forwarded to Madrid where it is reviewed by BCA's own technicians and lawyers, who make recommendations to the Executive Committee. This Committee meets weekly to make credit decisions and to fix loan terms and conditions. In the case of direct loans, disbursements are made directly to farmers by BCA, usually in installments, according to the correspondent's evaluation of the investment plan's progress. Advances to other credit institutions are made from Madrid and, in general, BCA does not exercise supervision over the use of the funds. Terms and conditions of loans are usually as follows (see Table 2 for details): General Purpose A. Direct Loans: 1. Modernization of farm production; 2. Investment in agriculture, livestock and forestry, First Livestock Development Project; 3. Investment in agroindustries and wholesalers of agricultural products; 4. Machinery purchase loans; and 5. Working capital loans. B. Loans through collaborating institutions: 1. Livestock breeding and fattening; 2. Improvement of production on viable farms; 3. Permanent farm improvements; 4. First Livestock Development Project; 5. Working capital; and 6. Small farmers credit. ANN4EX 3 Page 4 Amounts Usually from 70% to 80% of the project cost, although in the case of the First Livestock Project this may reach 85%. The amounts vary greatly as shown in Table 2. On direct loans it may be as high as Ptas 40 million to a farmer and even higher to an agroindustry. Rural Banks may lend up to Ptas 750,000 and Savings Banks up to Ptas 1.5 million. Terms Maximum 14 years, although, exceptionally, IRYDA may lend up to 20 years for land purchases. In practice, the terms usually are not over eight to ten years. The Savings and Rural Banks may lend up to six years. Interest Rates As Table 3 shows, the interest rates charged have been between 2.25 to 7.5% during the past years. Presently (1974) the interest rates are usually at 6% per annum on loans up to Ptas 2.5 million, and 6.5% above that limit (Table 2), although agroindustries may be charged 7.5%. The First Livestock Development Project borrowers pay 6.5% plus 0.5% per annum for technical assistance. (The interest rate structure in Spain is shown in Table 24). Considering that inflation in Spain was 8% in 1972 and 14% in 1973, most of the interest rates, and specially those paid by agriculture, are negative interest rates. Collateral Collateral is mortgage, bank guarantee, Agrupacion Sindical de Caucion para las Actividades Agrarias (ASICA) guarantee (since 1968), third party guarantee or a combination of all these. In some cases satis- factory personal guarantee is accepted, or the joint guarantee of farmers' associations or cooperatives (for details see Tables 2, 4 and 5). Fifty percent of the amount of direct loans was secured by bank guarantee in 1972, and about 25% by mortgage or mortgage in combination with other types of guarantees. In order to accelerate the processing of a loan, the farmer often will provide a bank guarantee which may cost him up to 2% per annum, and will later substitute a mortgage as collateral. Lending Operations BCA's lending operations have developed significantly since it succeeded the National Service of Agricultural Credit in 1962. Changes in the loan portfolio and new loans granted by sectors are given in Tables 6 and 7 respectively. The direct loan applica- tions received annually varied between 1,364 applications for Ptas 5,830 million (1971) and 1,833 applications for Ptas 7,221 million (1970). About 1,000 new direct loans were granted annually during the past 5 years. However, several of these loans were granted ANNEX 3 Page 5 to groups of farmers, thus less than 1,000 farmers benefitted from these direct loans. The year end portfolio of BCA's direct loans included about 7,000 loans during the last few years. During 1972 the average size BCA direct loan was Ptas 2.3 million. Direct loans were about 32% of the 1972 lending. As almost all small loans and many of the larger loans are extended through collaborating institutions, and as the direct loans are not supervised after the execution of the investment, BCA is able to operate with a relatively small staff. 12. Repayment Records. BCA records show that overdue amortization and interest payments have increased from a 1968 low of 0.7% on all outstanding loans, to 2.5% in 1972 (Table 8). Judicial sales of mortgage collaterals have raised about Ptas 5 million in 1968 and Ptas 6 million in 1971. BCA's conservative policy, requiring a substantial collateral (as a maximum the direct loan cannot be more than 60% of the collateral's value) assures that there are only insignificant losses on bad debts. 1/ In addition, BCA being a second degree lender on about 70% of all loans and on most of the numerous small loans, much of the credit risk is carried by the collaborating institu- tions, like the Savings Banks and Rural Banks. 13. Operating Results. Table 11 which summarizes the operating results for the 1968 to 1972 period, shows that BCA suffered losses during each of these years, ranging from Ptas 210 to 448 million annually. These losses were absorbed by ICO. As ICO charges 4.9% interest on all credits extended to BCA, and BCA's average rate of return on loans is only about 4%, the result is a loss each year of about US$5 million equivalent. Prior to 1967, the method of computing returns was to allow a return to BCA of 12% of interest collections, part of which was used to pay interest due to the private sector, amiounting to 2% per annum on Ptas 4 billion. This method resulted in lower operating losses for BCA since it obviously did not consider the cost of credit to the Spanish Government. Ilowever, since BCA has only very limited funds of its own represented by its share capital, for all practical purposes it extends credit to the limit of its appropriations from ICO. Its annual losses are actually absorbed by the Treasury of Spain, via the ICO, so that these losses do not impair BCA's resources. Government Agencies Extending Agricultural Credit 14. Agricultural credit is also extended by governmental agencies, in- cluding IRYDA and AC, using BCA funds. 15. IRYDA. IRYDA is an autonomous agency, functioning within the Ministry of Agriculture, created in 1971, as the successor of two other agencies which since 1941 had been in charge of land reform and related activities. IRYDA is basically a large financing organization for agriculture and live- stock production, through loans and subsidies (Table 12, 13 and 14). IRYDA's 1/ The size of loans are shown in Table 9; the disbursements, repayments and net increases of the loan portfolio in Table 10. ANNEX 3 Page 6 activities in land reform in the classical sense have been minimal, since during the 43 years of its existence (including its predecessors') only 1.05% of its financing has been used for land distribution. In 1973, 2.3% of its loans and subsidies went for this purpose for an area of 3,167 ha. IRYDA's 1973 annual report characterizes as unsatisfactory this performance, blaming the high land transfer taxes that prevent agricultural land distribution at acceptable prices. 16. IRYDA grants two types of loans (Table 2): (a) to individual farmers for improving production of viable farms in amounts up to Ptas 2.5 million at 6% annual interest for 5 years. New irrigation projects may receive loans for up to Ptas 5 million, but the interest rate above Ptas 2.5 million is 6.5%. These rates applied up to mid-1974 when they were raised to variable levels depending on the size of the loans: 6.5% for loans up to Ptas 2.5 million; 7.0% for loans from Ptas 2.5 to 5.0 million; and 7.5% for loans above Ptas 5 million. (b) loans for permanent improvements, which may be made even to non-viable farms. The amount of the loan may be up to Ptas 15 million to groups of farmers. Interest rates are 5.5% per annum for land purchases, otherwise the same as in (a) above. 17. In 1973, IRYDA made 15,805 loans for Ptas 5,395 million, including subsidies that usually are granted together with the loans. About 83% of the recipients were individual farmers, who received an average of Ptas 297,800 (Table 12). 18. Since its inception in 1941 to 1973, IRYDA has disbursed Ptas 29,432 million in assistance, of which Ptas 1,125 million (3.8%) were granted for livestock purchases, Ptas 5,734 million (19.5%) were used for rural con- struction, an unspecified part of which went for the construction of stables, fences and other installations on livestock farms (Table 13). 19. Table 14 gives details of livestock project costs, amount of IRYDA loans and that of subsidies, and the farmers' own investment in 1973. The projects included about 140,000 animals with about 26,000 head of cattle. Also shown are about 600 m2 of stable and 2,200 m2 wintering shelter construc- tion for cattle and sheep, and the building of about 4,000 km of pasture fences. 20. None of the IRYDA assisted projects can receive more than 80% of the project costs in the form of loans and subsidies. 21. AC. The AC program for beef production was introduced in 1964. Accomplishments of the program during the past 8 years, including 1973, are shown in Tables 15 and 16. Basically the program is concerned with the ANNEX 3 Page 7 provision of credit for beef production under approved conditions. Partici- pants may be individual farmers, syndical groups, associations, corporations or cooperatives operating either production units or general slaughterhouses with refrigerated facilities. 22. Agreements are entered into between the Government and the producer for a minimum period of five years and credit maay be extended for all aspects of the enterprise having a direct bearing on beef production, including build- ings and facilities, machinery and the purchase of calves. Credit is made available for a period of 8 to 10 years for financing up to 80% of the invest- ment in buildings, permanent improvements, equipment and animals; 55% of the investment in breeding and fattening cattle for 1 year; and 30% of the amount budgeted in the project for working capital for 18 months. At the time of appraisal interest rates were 6% per annum for loans up to Ptas 2.5 million and 6.5% for loans above this amount. In mid-1974, the rates were raised to variable levels depending on the size of the loan (para 16a). Mortgages, bank guarantee, ASICA guarantee or acceptable third party personal guarantee are required as collaterals. 23. In order to participate in the program each producer is supposed to follow a predetermined system of husbandry, and in principle the enter- prise is subject to periodical inspection during the term of the loan. No technical assistance or guidance on production techniques are provided to the producers, who are required to fatten the animals up to a liveweight of 350 kg, or to sell the animal to another fattening enterprise which operates under a similar minimum liveweight - fattening contract. 24. The farm plans are drawn up by the producers in cooperation with the representatives of the Ministry of Agriculture. The creditworthiness of the prospective borrowers are evaluated by BCA. During the period 1966 to 1973, AC provided loans and subsidies totalling about Ptas 6,000 million, with individual producers contributing about Ptas 4,800 million, or 44.3% of the total project costs. During these years about 300,000 animals were fattened with AC assistance, and about 80,000 milk and beef cattle under breeding operations were involved. As shown in Table 16, the fattening operations during the past few years have included about 40 - 60,000 animals annually and the yearly breeding operations have varied from about 11 - 19,000 head of cattle. Although during the early years the program's future may have been doubtful, it has now developed into a substantial livestock fattening endeavour. Banco de Espana (BE) 26. BE is the State Bank and handles its Treasury. In addition it is the Central Bank and as such controls liquidity. It finances the marketing of agricultural products and related activities through five governmental agencies, as shown in Table 17. The year end balances of outstanding credits to those agencies increased from Ptas 46 billion in 1968 to Ptas 63 billion in 1973. As shown in Table 18 one of these agencies (SENPA) is giving subsi- dies to growers of maize, sorghum and alfalfa for forage and loans for the ANNEX 3 Page 8 purchase of seeds and fertilizers. BE financing facilitates the price regula- tory and price support activities of the five agencies, with resulting bene- fits to the agricultural and livestock sectors. Saving Banks and Rural Banks 27. Savings Banks and Rural Banks, all private enterprises, provide substantial credit for agriculture throughout Spain where together with credit cooperatives they have over 6,000 financing outlets. 28. The network of these Spanish banks is unusually strong, with con- siderable financial resources. Organized into a national federation (Con- federacion de Cajas de Ahorro) the 87 regional Savings Banks cover almost every province of Spain. Their financial strength is typified by the Cajas de Ahorros de San Fernando with 129 branches in Sevilla and Huelva, with 240,000 accounts and deposits in excess of US$43 million equivalent. The Cajas de Ahorras de Sevilla have resources of Ptas 5 billion. Special law provides that each Savings Bank has to invest at least 13% of its resources in agricultural loans. The most important agricultural credit is medium-term, up to six years. Portfolios of agricultural loans extended by Savings Banks at the end of 1972 was about Ptas 53 billion which increased to Ptas 59 billion by the end of 1973 (Table 20). 29. Although the Rural Banks are small credit cooperative type banks, their considerable financial strength is indicated by their agricultural loan portfolio which as of August 31, 1973 totalled over Ptas 34 billion. They are organized into 46 regional and 1 national federation. 30. Agricultural credits by the Savings Banks are usually up to 6 years, at 7.25 to 7.5% interest. Industry and housing borrowers are charged 7.5 to 7.75%, commercial borrowers and artisans at 8.0 to 8.5%, while financing of investments in the stock market are at 6.75 to 7.75%. Loans are granted only up to 70% of project costs. The average loan per borrower has been around Ptas 130,000 during the past years. In 1972, in addition to lending their own funds, 72 Savings and 30 Rural Banks operated as agents for BCA, for loans up to Ptas 750,000. Normally the banks administer such loans and carry the full credit risk for a loan fee of 1% per annum. The banks also actively participate, with BCA funds, in the financing of the First Livestock Devel- opment Project at a 0.75% per annum lending fee from BCA. 31. Those banks which operate mostly in the rural areas, with few commercial and industrial borrowers, are inclined to lend to farmers at in- terest rates of about 7.25 to 7.5% interest as this is practically their only outlet for lending. These banks would be among the logical private financial institutions that could absorb a portion of the Second Livestock Development Project financing. ANNEX 3 Page 9 Commercial and Industrial Banks 32. Up to 1962 the Commercial Banks were the only private financial institutions of Spain, outside of the Savings and Rural Banks mentioned above. The operations of these banks were greatly restricted as to the loan interest rates, the types and terms of loans they could grant, and the kind of colla- teral that could be accepted. In order to foster industrial development through medium- and long-term industrial and agricultural lending, at higher interest rates, the so called Industrial Banks were established in 1962 under the bank reform and related laws. Many of these new banks were created and controlled by the existing Commercial Banks. The Industrial Banks' resources were created through the issuance of industrial bonds. Although the Indus- trial Banks have developed rapidly, their share in private institutional fi- nancing is still small. At the end of 1972 the outstanding loan portfolio of the Industrial Banks was Ptas 192 billion as contrasted with the Commercial Banks' portfolio of Ptas 1,412 billion. 33. Commercial Banks extend credit to commercial farmers who operate on a large enough scale to be financially viable but almost exclusively on a short-term basis. Up to 1968 Commercial Banks were only authorized to grant credit up to 18 months. Since then this limit has been extended to three years, and on livestock loans up to five years. On the other hand, Industrial Banks are authorized to extend medium- and long-term credit to agriculture and industry without such time limits. 34. The private banking structure has a dense network of national, regional and local banks throughout Spain with the necessary facilities to extend lending services to livestock farmers. With the existing interest rate structure the private banks can collect on industrial and commercial credits up to 11% per annum for interest, commissions and other charges, and the maximum 6.5 to 7.5% interest that farmers are currently paying on loans is not attractive to private banks. In addition private banks are seldom willing to lend for more than 3 years, and therefore agriculture, requir- ing loans often up to 12 years, is not the domain of private lending. The grace period of up to three years required by most agricultural projects is a further obstacle to private institutional credit. 35. Private commercial banks in Spain are required to invest 22% of their deposit resources in government securities (15%) and in industrial, com- mercial and agricultural lending (7%). Years ago, a special portion of the latter was segregated as compulsory lending to agriculture, and revival of such a legal requirement might increase the flow of credit to agriculture and livestock enterprises. 36. Private banks, specially those with headquarters in the northern agricultural areas of Spain, might be willing to absorb the early maturing agricultural loans (up to three years) if no grace period is involved, and the official credit institutions would continue to finance the portion of the loans which mature after three years. However, even so, the low agricul- tural interest rates appear to present an obstacle. ANNEX 3 Page 10 37. Fifteen private banks mostly with headquarters in the interior of Spain have participated in AC and the First Livestock Development Project using BCA funds. They receive from BCA an interest margin of 0.75% per year for servicing the loan and carrying the credit risk. Two of these collaborat- ing banks and 3 Rural Banks have used their own funds to finance 37 of the Project sub-loans totalling about Ptas 104 million, at 6.5% annual interest rate. This should be considered as a favorable sign. Credit Guarantees for Small Loans Without Collateral 38. ASICA was founded in 1967 as an independent legal entity by the Spanish Organization Sindical (a semi-official labor organization) to provide credit guarantees for agricultural loans up to Ptas 2.5 million for indi- viduals, and even larger amounts in the case of cooperatives. Its purpose is to facilitate the granting of agricultural loans to those who otherwise would have difficulties in providing satisfactory collateral. ASICA charges 1% annual guarantee fee and requires that the borrower deposit 6% of the amount of the loan guaranteed into a fund out of which all guarantee losses cf ASICA are paid. If, during the lifetime of a guarantee, no such losses occur, the borrower's 6% deposit is returned to him intact when his loan has been completely repaid. AC, IRYDA and the LDA are willing to accept ASICA credit guarantees. Private financial institutions usually require other types of collateral. 39. Since 1968, ASICA has received applications for guarantees rising from 394 to 1,006 annually and amounting to 3,194 in 5 years for a total of Ptas 3,220 million. Only 877 applications were actually honored for a total of Ptas 519 million. At the end of 1973 the outstanding guarantees totalled Ptas 486 million (about US$8 million equivalent) for about 1,000 borrowers. ASICA's resources, paid in by the Sindicates, and accummulated profits total only about Ptas 60 million (US$1 million equivalent), which limits the num- ber of guarantees it can issue. Although ASICA represents a start in the right direction, its impact on agricultural lending is small. It would be highly desirable to increase ASICA's capitalization through governmental con- tributions, which would enable it to extend guarantees to a larger nunber of small farmers, who are unable to offer acceptable collateral for loans. If ASICA could issue about 10,000 guarantees instead of the 1,000 outstanding at the end of 1973, the small farmers, specially in the Galicia area of Northern Spain, would be substantially benefited. Governmental Subsidies to Farmer 40. Table 18 shows the important governmental agencies that give sub- sidies to farmers and livestock enterprises, and the terms on which subsidies may be obtained. Table 19 gives the details of the Ptas 6,145 million sub- sidies that were paid to agriculture in 1972. As noted, Ptas 1,820 million of the total were granted to livestock farmers, who could also have obtained subsidies for machinery purchases, pesticides, marketing assistance, etc. ANNEX 3 Page 11 41. Practically any farmer, including those borrowing under the IBRD- financed First Livestock Development Project, are eligible for subsidies. Publicly financed agricultural loans, including subsidies, cannot be more than 80% of the borrower's project cost. Some of IRYDA's subsidies have a Ptas 500,000 upper limit per farmer, but other subsidies are a fixed percentage of project cost, or a fixed amount per animal, irrespective of the size of the operation (Table 18). The First Livestock Development Project 42. The LDA is administering the First Livestock Development Project in Spain. From 1970, when the Project was initiated, until the end of 1973, about 600 livestock development sub-projects totalling Ptas 1,921 million have been approved and Ptas 1,268 have been actually disbursed (Table 21). The Project funds consisting of IBRD's loan of US$25 million and the matching contribution of the Spanish Government of Ptas 1,120 million, total about Ptas 2.5 billion. Considering the speed with which the Project has progressed in 1973, it is reasonable to expect that the Project funds will be completely allocated in 1974 to approved sub-projects. 43. LDA's performance in livestock development compares favorably with the record of the two other governmental agencies that grant loans in the same field, namely IRYDA and AC. The total loan amount granted by these 3 organizations in 1973 follows: Ptas million IRYDA 901 AC 941 LDA 1,010 While IRYDA has been operating since 1941 and AC since 1964, the LDA is only about four years old. 44. Up to June/July 1974, AC and IRYDA granted livestock development loans on softer terms than LDA, namely at 6% per annum up to Ptas 2.5 million and at 6.5% for higher amounts. The LDA's interest charges are uniformly 7% per annum, including a 0.5% fee for technical assistance. Since June/July 1974, AC and IRYDA interest rates have been raised to a level approximately equivalent to LDA rates. Technical assistance is not provided by either AC or IRYDA; neither is assistance provided for the careful preparation of farm plans. Their loans are based more on safe collateral than on the viability of the borrower's farm plan. uNNEX 3 Page 12 II. The Volume of Agricultural Lending 45. BCA, Savings Banks and Rural Banks are the principal sources of intermediate and long-term lending while the commercial banking sector is the principal source of short-term financing. During recent years there has been a rapid expansion of all types of agricultural credit in Spain, reflect- ing the sector's need for capital inflow both to bring about much needed modernization, and reduce the large imports of food and feed. Annual agricul- tural investment from 1960 to 1972 is shown in Table 22, while annual private investment from 1966 to 1972 is shown, according to sector details, in Table 23. Both show a steady rise of investment in agriculture from Ptas 10.4 bil- lion in 1960 to Ptas 43.4 billion in 1972. ANNEX 3 Appendix 1 Page 1 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Time required for the processing of a loan application to participate in the First Livestock Project through the LDA 1. Loan application (Solicitud de estudio tecnico de la explotacion) and specification of the collateral (Plan de Garantias) offered are prepared by the applicant with general guidance from the LDA. 2. A desk study is undertaken by LDA's technical group during which the obviously unacceptable applications are rejected. The successful appli- cants are visited by the LDA technicians who prepare a Preliminary Project (Anti-projecto) setting forth the amount of the project cost. 3. The Preliminary Project is sent to the collaborating credit insti- tution, suggested by the applicant, for a desk study mainly to evaluate the applicant's offer of collateral. 4. If the credit institution finds the collateral acceptable, the LDA prepares the Final Project (Projecto Definitivo), the loan application, and, if real estate has been offered as collateral, the certificate of registra- tion in the name of the applicant. Note: The time required for accomplishing the above four steps may be from one to three months, occasionally longer when the collateral title is not clear. 5. The application and the Final Project with any supporting documenta- tion is examined by the Loan Committee (Consejo de Prestamos) of the credit institution. If the application is for a BCA direct loan and the applicant is in the Sevilla region, the BCA Sevilla branch does a routine examination and forwards the papers with recommendations to BCA in Madrid. 6. After the Loan Committee has reached a favorable decision, the papers are returned to the LDA with the decision. (In case of an unfavorable decision, the case is either discontinued or an effort is made to amend the Final Report.) 7. The credit institution asks the official "Officer of Deeds" (Notario) to prepare the mortgage document (Escritura de la Hipoteca) to be signed by the loan applicant. After signature, the document is sent by the credit ins- titution to the Registry of Landed Property (Registro de la Propriedad Immo- biliaria) for entering in the Land Register. With the statement of registra- tion, the document is sent by the Registry to the Notario who forwards it to the credit institution. ANNEX 3 Appendix 1 Page 2 8, The credit institutic2 obtains the taxK essipticn certificate from the Provincial Delegate of the Ministry of the Trea-ury. 9. After receiving the tax exemption certificate, the credit institute issues the loan contract l(Formalizacion del Prestamo) to the LDA. 10. The LDA issues its "Authorization of Loan Disbursement" (Libramento de los Fondos) to the credit institution, authorizing it to pay the first installment of the loan in accordance with the progress of the sub-project. 11. The credit institution pSvS the aut:orLized amount directly to the borrower. In the case of a BCA direct loan, ZCA requests the BE to pay out of BCA's account the authorized amount directly to the borrower, (this needs from 20 to 25 days). Note: The above steps No. 5 to 11 require 5 months for a direct BCA loan from Madrid, and 2 months with a collaborating credit institution located near the applicant's home base, where procedural shortcuts can be taken. If bank guarantee or third party guarantee is offered, instead of a mortgage, the time required is shorter. The LDA's records show that the preparation of sub- projects and the processing of the loan application through a credit institu- tion require an average of 197 days, the maximum being 388 days. Out of this time, BCA takes up as much as 15Q days, other credit institutions about 70 days. SPADI SECOND LIVESTOCK DEVELOPKDET PROJECT EANCO DE CREDITO AGRICOLA Consolidated Balance Sheet froc December 31. 1968 to 1973 (Ptas nil) ASSETS Preliinsiry 1968 1969 1970 1971 1972 1973 Cash on Hand 4 (1) 1 1 1 1 Deposit in the 72 167 385 402 150 207 Banco de Espaefa Government Bonds 5 5 5 4 4 4 Deposits in Savings Banks - - - - - 260 Loans Outstanding 32,116 38,143 42,663 47,760 48,907 52,403 Amortization and Interest 221 710 1,098 1,123 1,242 1,289 Payments Overdue Lans in Default 56 - - - - - Loans under Judicial 21 7 6 a 3 2 Proceedings Furniture, Fixtures and 39 38 37 89 86 84 Materials Miscellaneous 24 38 44 43 92 92 Operating Losses of the Year 301 210 448 386 271 175 Tr al 32,859 39,318 44,687 49,808 50,756 54,517 July 23, 1974 -a Preliminary LIABILITIES 1968 1969 1970 1971 1972 1973 Credits from the Instituto de Credito Oficial: 2 Regular Agric. Credits 27,411 35,009 40,253 43,872 45,562 48,544 Disaster Credits - - - 66 123 925 For the Agencia de - - 85 300 621 Desorollo Ganadero Special Credit Fund - - - 9 Credits from Private Banks and Savings Banks 4,000 4,000 4,000 4,000 4,000 4,000 Government Deposit on - - 888 384 - Current Account Deposits on Current Accounts 6 4 7 9 91 Miscellaneous Liabilities 31 43 170 232 106 55 Interest Payable on the Ptas 4,000 million loan from 40 40 40 - _ the Private and Savings B1anks Capitalization by the Gov't 220 220 220 272 272 272 1971 Gov't Contribution to Absorb Operating Isses - - - 386 - Interest Payable to the Institute de Credito Oficial 2 1,157 _ - - _ Total 32,859 39,318 44,687 49,808 50,756 54,517 1 Less than Ptas 500,000 Up to 1971: Instituto de Credito a Medio y Iargo Plazo June 28, 1974 H 0 H' 0 '-0 H' 00 loHol 10 o 0 0 0 H 0 0 00000 HEHO" I'" 10000 I' - 0 0 00 HO H 'H  Hoooo 0 00 H HO Oo,'oO gi  000 0 OH "HO HOO 0 0 0 OH' '0 OH 00"HH '00,', I I iA I H 00 H' HO H H' H HOH' HOOHo o. 0 00 00000 00 l  H 0 H "'H H OOO'HH HH'HO 000 HHH'HOOoH H' 0 00 0 H HO 0H 0 000 00 H H 'O00H H OH OH H 0'H',oO - 000 0 0 - oH'0000 0, * 0 H 0'00 H 000000 0H0"O'0 - 0'' 0 HO O H H OH H' HO OOHOO,HHO 0 H' 0 '0 H0 H'O HO 'H   000 HOOHO 00. oH " 0000000 00 -0 H " 00 0 ' '00000 0 H H HO -' 0 o-O HH'HOO o 0 H H0'0HH -4 H - "H' H H H' 00 H'HO 0 00 HO OH H 00, 0 000 H H 000 H"HHH0 - 00HOH01 0 -' 0 0'O0 Ho - 0 H 0 0 OH 0000H HH' H' 00 - '0 o "00 2 ts'r OH HO * 00'H 00 - - - 00 OH H'H OH 0 0 00 0 H HO OH 000 H H H' oOH.0 HO HO ,, HO 0 HO 0050 H HO H - 0 H HO OH HO 00 HO H H H '0 0 H H HO HO OH H HO "0 0000 H 0 0 0' HH 0OH 0 00 H" OHO 0 H 0 0 00 HH' HH OH 0 H H 0 0 HO 00 H H HA"o o H' H' H' 00 H H' HO H' 0 H"  gc.a' 'H co 0 0ˇ oo 00 00' HO HH 0' o 00 00 o00'" 000 HO HOHO 0HZ 00 HH'HH O0HO0OH000H' >0 0 H' '0ooo 0 0 OH 0 0 H 0 0000000 00 OH 0 oooooob oo O 0H'o00 0 HO H 0 '00000 H0000HOHOO H' H 0000000001 0"' V ' 00 00 0 H H 00 H H' 0 H OH 0 0000 H- o 00 0000 0 000, "' H H H HHH' _ - 00 0 H' 0 0 HOO'o 00H H OH H '000 000 0'o 0 000 o o 000 H' 0 00 0 0 0 00 00 0 0 HO 000 OH H' HO 000 00"' 00 OHH 00 "" 00 000 0 00 H O 'go 000 VOOH't 0 0"H o 0 OHH'OH' 0 0 0 H H' 00 H "0 0 H"00H 000 H 000 H oooo oo"0 H H H' 00000 0 0 0 00 0 0 H H HHO 000 HO 00 oOj '0 0100 00 H'o '000 0 000' H 0 H 0 0>0 H 'ooo HO OH 000 H 0 H'H' HO" 000 0000 OHo, 0 "00" Ho H OH 0 0 000 HO OH OH 000 HO HO OHO 000' H' HOH 000 ' H H 0 00 H' 00000 H 00 HO H H OH 000, HOHI 000H' 0 0 00 -o " 0 OHH 00 H' 00 00 000 "H 00H' 00 o* 0000 000 0 -00 HH'0 HO 00 0 H 00 H 0 00000 0000 OHH 00 OH 0 0H 0000 H 000 H' OH OH 000'HO 0 01 00 0 '0 0 00 o 'H HO 0 0 HO Oo 00 OH 00000 0 0 0 00 H H 00 00 o 0 000 H' oooo O H ooo' HH 00 0 O 00000 HO 0080 0 0 0 0 000 0000' HOHOHOOO'O00000H'0H' 00 OOHOHHOO 0 0 to oo I 0 00 0 000 OO,OHOoOOH0OH0H 0" 0000 00 0000 oolo" oo HO 0 0000 ooo0%0OOOo 00 f 0000 Io H HOHHOoH000 0000 000 0' 00 0000 000 00000000000 HO 0 ' HO' 00 H H 0 0 00 000 0' 000000 "0 '0 000 o 010 [ H 00000,00 00 010 000 8 0001 000 00 00' - 0' OH H oO*HHOH 00 H000 00", 0 000 F 0 00 00 00 0 "' HO H'0 0 OHO O o '000 0 'i HH0000 0 00H0 H OH' H 000 Ho 000000 0 0"oH' OHOHO 0 0 OH H'0 H 00000 F 0180002 '4 0 H'0OH' HOOO ,800O H' '0 200 0 0000> 08 0 I 0>0 " 0 08 S S 000 8 1! ANNE 3 Table 3 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT BANCO DE CREDITO AGRICOLA Portfolio of Outstanding Loans According To The Rate of Interest From December 31, 1968 to 1972 (Ptas mil) Rate of Annual Interest 1968 1969 1970 1971 1972 2.25% 12 9 - - - 2.50 933 717 516 385 138 2.75 6,852 5,200 4,632 3,420 2,466 3.00 7,034 10,220 9,326 6,976 4,565 3.25 744 1,037 1,211 1,061 816 3.50 1,098 1,900 1,727 1,797 1,236 3.75 5,207 6,462 5,342 4,653 4,145 4.00 4,655 5,141 6,950 8,866 7,999 4.25 288 633 972 1,119 1,059 4.50 1,029 1,468 2,239 3,082 5,904 4.75 - - 1,078 2,640 2,063 5.00 1,579 1,975 2,703 5,052 6,468 5.25 - - 139 596 3,398 5.50 - 32 1,986 2,861 2,342 5.625 244 198 142 90 54 5.875 1,998 2,033 1,827 1,501 1,159 6.00 2 28 183 544 1,212 6.25 - - - 102 118 6.50 74 781 1,486 1,952 2,509 6.75 125 - - 178 189 7.00 - - 339 414 959 7.25 99 123 143 165 143 7.50 - - 10 20 20 /1 Advances to the 306 575 403 894 658 Rural Banks Interest A"t 58 321 408 509 529 Total 32,337 38,853 43,762 48,884 50,149 /1 The interest rates on these advances were as follows: 1968 4/, 5%, 6% 1969 4.5%, 5.5%, 6.5% 1970-72 5.5%, 6.5%, 7.5% July 23, 1974 AX=z 3 SPAIN Table SECOND LIVESTOCK DEVELOPMENT PROJECT BANCO DE CREDITO AGRICOLA Portfolio of Outstanding Direct Loans by BCA, From December 31, 1969 To 1972. According to the C.llat.ra3j of the Loan (Ptas mil) Types of Collaterals On Direct Loans by BCA (Short & Medium Term) 1969 1970 1971 1972 Personal Guarantee 3,093 3,177 3,228 2,771 Mortgage 3,300 3,772 3,907 4,320 Bank Guarantee 5,740, 6,486 6,971 7,387 Warrant 39 195 41 11 Deposit of Valuables 4 8 20 24 Special Agreement with Collaborating Credit Institutions 85 85 75 - Mixed Collaterals: Personal and Bank Guarantee 294 280 258 272 Mortgage and Bank Guarantee 687 675 653 755 Mortgage and Personal Guarantee 974 875 761 604 Unclassified 52 70 74 85 Total 14,268 15,623 15,988 16,229 Loans Granted Through Collaborating Credit Institutions 24,585 28,139 32,896 33,920 Total Loan Portfolio 38,853 43,762 48,884 50,149 Note: 1968 figures were not available July 23, 1974 AM 3 SPAIN Table 5 SECOND LIVESTOCK DEVELOPMENT PROJECT BANCO DE CREDITO AGRICOLA New Direct Loans by BCA From December 31, 1969 to 1972 According to the -Collaterals. of the Ikmna -_- (Ptas mil) Types of Collateral On Direct Loans by BCA 1969 1970 1971 1972 (Short & Medium Terms) Personal Guarantee 1,616 1,156 905 784 Mortgage 690 771 965 828 Bank Guarantee 2,103 1,515 1,706 1,830 Warrant - 220 Deposit of Valuables 7 4 13 7 Mixed Collaterals: Deposit of Valuables 21 - - 9 and Bank Guarantee Personal and Bank 86 9 30 37 Guarantee Mortgage and Bank 179 73 332 86 Guarantee Mortgage and Personal 28 48 30 115 Guarantee Special Agreement with - - 75 Collaborating Credit Institutions Subtotal 4,730 3,796 4,065 3,696 Loans Granted Through 8,744 10,838 9,816 9,676 Collaborating Credit Institutions Total Loans Granted 13,474 14,634 13,881 13,372 Note: The 1968 figures were not available. July 2, 1974 AN=S 3 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT BANCO DE CREDITO AGRICOLA Portfolio of Loans Outstanding From December 31. 1968 to 1972 - (Ptas mil) Disbursed Directly and Through Collaborating Credit Institutions 1968 1969 1970 1971 1972 Direct Loans by BCA h1 14,268 15)623 15,988 16,229 Savings Banks l,517l 12,353 14, 543 16,776 16,660 Rural Banks 14,083 )4,940 5,012 5,835 5,661 Commercial Private Banks 82 367 643 842 865 IRYDA 5,o47 6,627 7,745 9,039 10,372 Other Public Organizations 1,373 298 196 404 362 Total 32,337 38,853 43,762 48,884 50,149 July 2, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT BANCO DE CREDITO AGRICOLA New Ians Granted by Sector !LwI:L the 1968 to 1 72 Years (Ptas mil) Livestock Loans 1968 1969 1970 1971 1972 Livestock Purchases 1,233 1,125 2,134 1,003 1,313 Others 330 Total 1,563 1,125 2,134 1,003 1,313 Agric. and Agroindustry Loans Dryland Improvements - 122 243 282 62 Irrigation 1,099 352 367 341 388 Constructions - 755 740 394 606 Machinery Purchases 2,758 3,116 3,451. 3,010 3,773 IRYDA 2,200 2,208 2,130 2,909 2,850 Miscellaneous 1,152 9 459 106 237 Agroindustries 1,578 1,926 880 1,565 1,060 Distribution (Storing 970 3,641 3,130 3,158 2,788 and Marketing) Total Investment Loans 11,320 13,254 13,504 12,759 13,077 Short Term Working 141 220 98 118 102 Capital Loans Emergency Loans to 909 - 1,032 1,004 193 Stricken Agric. Areas Total 12,370 13,474 14,634 13,881 13,372 July 23, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT BANCO DE CREDITO AGRICOLA Amortization Installments and Interest Payments Overdue on Loans From 1968 To 1972 (Ptas mil) 1968 1969 1970 1971 1972 DirecL Loans Amt. Int. Amt. Int. Amt. Int. Amt. Int. Amt. nt. Less than six months 172 26 299 42 609 54 519 61 572 60 Six months to one year 11 1 33 5 17 4 22 7 32 9 One to two years 8 1 34 3 27 4 36 5 56 11 Over two years 2 0 24 2 34 3 31 2 48 5 Total 193 28 390 52 687 65 608 75 708 85 Loans through collaborating - - - 268 4 342 6 434 5 444 credit institutions 193 28 390 320 691 407 614 509 713 529 Total 221 710 1,098 1,123 1,242 Overdues as percentage of all loans outstanding (rounded) 0.7% 1.8% 2.5% 2.37. 2.5% July 23, 1974 AINNE 3 Table9 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT BANCO DE CREDITO AGRICOLA Portfolio of Outstanding Loans According to the Size of the Loans, From December 31, 1968 to 1972 (Ptas mil) Size of Loans 1968 1969 1970 1971 1972 to Ptas 750,000 14,402 16,825 19,255 22,081 21,774 750,001 - 1 million 402 415 434 437 400 1 to 1½ million 587 621 630 634 607 1½ to 5 million 3,345 3,653 3,998 4,136 4,031 5 to 10 million 2,212 2,735 3,048 3,207 3,284 10 to 25 million 2,704 3,180 3,551 3,575 3,694 25 to 50 million 1,926 2,197 2,424 2,517 2,418 50 to 100 million 652 805 838 897 1,072 Over 100 million 119 133 243 211 398 Atcion Concertada Loans - to Ptas 24 million 736 1,038 1,286 1,467 1,486 2½ to 5 million 227 304 423 533 585 over 5 million 379 689 843 990 848 Miscellaneous Loans Advances to Rural Banks 306 575 403 894 658 Advances to IRYDA 4,282 5,362 5,978 6,796 8,365 Interest Accumnulated 58 321 408 509 529 Total 32,337 38,853 43,762 48,884 50,149 Jul7 1, 1974 ANX3 Table 1 0 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT BANCO DE CREDITO AGRICOLA Operations From 1967 to 1972 (Ptas mil) Loans and Interest Year Disbursements Repayments Net Increase In Outstanding On Loans Outstanding Loans At End of Year 1967 9,502 6,151 3,391 27,098 1968 11,454 6,214 5,295 32,393 1969 13,584 7,652 6,460 38,853 1970 13,341 8,347 4,994 43,762 1971 15,384 10,853 4,530 48,884 1972 13,719 12,474 1,245 50,149 1973 n.a. n.a. n.a. 53,692 Surcess Banco de Espaft; Bletin Estadistico July 2, 1974 ANN 3 SPAIN Table 11 SECOND LIVESTOCK DEVELOPNENT PROJECT BANCO DE CREDITO AGRICOLA Profit and Loss Statement For the Years Ending December 31, 1968 to 1972 (Ptas mil) INCOME 1968 1969 1970 1971 1972 Interest Income 999 1,441 1,521 1,872 2,095 Other Income _ _ 1 - 2 Total 999 1,442 1,522 1,872 2,097 EXPENSES Interest on Gov't Loans 1,157 1,483 1,813 2,070 2,172 Interest on - - - - 4 LDA Funds Personnel 45 62 68 98 100 Materials 16 27 8 8 11 Interest Charges on Ptas 80 80 80 80 80 4,000 Million Loan From Private & Saving Banks Other Financial and a a / 1 / Miscellaneous Expenses Losses on Bad Debts 2 L 8 / / Total 1,300 1,652 1,970 2,258 2,368 Losses absorbed by the ICO -301 210 448 386 271 /1 Negligible. July 2, 1974 ANNEX 3 Table 12 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT IRYDr Assistance in 1973, According to Groups of Applicants Pt as mili No. of applications Total IRYDA Percentage of total assistance IRYDA assistance Individual farmers 15,144 4,467 82. 80 Colonization groups .287 363 6.72 Cooperatives 70 169 3.13 Rural 101 76 1.41 Farmers' and farm workers associations 63 167 3.08 Others l1O 154 2.86 Total 5n,805 5,395 100.00 Note: Average IRYDA assistance to individual famners was Ptas 297,800 in 1973. July 2, 1974 ANNEX 3 Table 13 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT IRYDA Assistance to Agricultural, Livestock and Agroindustrial Enterprises by IRYDA since its Inception in 1941 to December 31, 1973 1941 - 1973 Ptas % of mil Total Irrigation 10,634 36.13 Rural Construction 5,734 19.48 Machinery Purchases 3,910 13.29 Electrification & 3,249 11.04 Agroindustries Soil Improvements 2,128 7.23 Purchase of Livestock 1,125 3.82 Crops 1,040 3.53 Purchase of Land 307 1.05 Miscellaneous 1,305 4.43 Total 29,432 100.00 July 2, 1974 ANNE 3 Table 1 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT IRYDA Assistance to Livestock Farmers and to Other Agricultural and Agroindustrial Enterprises by IRYDA in 1973 Total Project Sub- Sub- Private Units Units Cost Loans sidies total Investment Livestock Purchase - - ______________________ _ -_ - -_--- - (Pta s mil 1) - - - Milk Cattle head 6,678 205 107 35 142 63 Beef Cattle head 19,864 242 101 38 139 103 Sheep & Goats head 108,727 202 1Q6 35 141 61 Pigs head 758 3 2 /1 2 1 Poultry n.a. n.a. n.a, n.a. n.a. n.a. n.a. Miscellaneous head 3,693 2 18 8 26 -24 Subtotal 139,720 654 334 116 450 2o4 Construction for Livestock Projects Stables for Milk Cattle t000 3 232 327 178 59 237 90 Stables for Beef Cattle '000 Ai 165 226 121 39 160 66 Stables for Sheep & Goats '000 3 204 225 122 39 161 64 Stables for Pigs too( i /L ai /L LD La /1 Stables for Poultry '000 2 4 13 7 2 9 4 Miscellaneous '00 31 44 24 8 32 12 Wintering Shelters '000 S 2,227 363 211 63 274 89 Fences km 3,963 220 102 40 142 78 Subtotal _ - 1,418 765 250 1,015 403 Permanent Pasture Developlment - 8,971 44 11 4 15 29 Livestock Projects _ - 2,116 1,110 370 1,480 636 Other Agricultural & 6352_97 938 3,9151,720 Agroindustrial Purposes GRAND TOTAL - 7,751 4,087 1,308 5,395 2,356 /1 - Less than one unit of this schedule. July 2, 1974 SPAIN SECOND ISVESTOCK DVEIOPMANT PROJECT ACCION CONCERTADA Investments in Livestock Operations With Accion Concertada Assistance during the Eight Iwar Period. 1966 - 1273 Total of Accion Livestock Farmers' No. of Total Permanent Working Livestock Totel Concertada Own Investments Years Enterprises Project Cost Subsidies Improvements Capital Purchase Loans Assistance Amount % (Ptas mil) --- 1966 34 61 2 17 4 8 IJ 32 29 47.5 1967 389 758 30 211 51 113 375 405 353 46.6 1968 575 1,274 54 378 81 196 655 708 566 44.4 1969 507 1,465 61 454 82 253 79G) 851 614 41.9 1970 568 2,130 84 613 123 390 1, 1',6 1,210 921 43.2 1971 367 1,335 51 416 75 218 708 759 576 43.1 1972 373 2,067 78 584 122 349 1,056 1,134 933 45.1 1973 382 1,844 81 439 134 368 941 1,022 822 44.6 Total 3,195 10,934 441 3,112 672 1,895 5,681 6,121 4,814 Ju3,y 2, 19741 SPAIN SECCI)D LTVSTOCD PROJECT 1CCT CeONRTADA - Fattening and Breeding Operations Developed With Accion Concertada Assistance During 1966-1973 Beef Fattening Breeding Operations for Breeding Operations for Years Milk Cattle Beef Cattle No. of No. of No. of No. of No. of No. of Enterprises Animals Enterprises Aa3J Eniterprises Ania 1966 24 2,483 4 318 6 422 1967 315 31,297 33 1,476 41 2,754 1968 449 39,419 59 3,404 67 4,764 1969 322 40,601 87 4,460 98 6,458 1970 355 59,862 118 5,771 9j 12,100 1971 160 33,338 109 4,301 98 4,863 1972 183 54,526 103 7,858 87 11,609 1973 159 39,972 97 3,116 12A 8,350 Total 1,967 301,498 610 30,704 618 51,320 July 2, 1974 I AN=E 3 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Banico do Esaa's Portfolio of Outstanding Agricultural Type Credits from 1 9&tp 17to Five Government A encies Financing the Mar-keting of Agricultural Producto and Related Activities,' (Ptas bil) Agencies 1968 1969 1970 1971 1972 1973 SENPA 20 16 4 - - - CAT 16 13 12 9 9 13 CCE Vino 9 8 7 8 8 8 Cotton Premiums 1 1 1 1 1 1 FORPPA - 20 36 37 36 41 TOTAL 46 58 6o 55 54 63 Sources Banco de Espana. Boletin Estadistico. January 1974. Explanation of the Above Abbreviations: SENPA Servicio Nacional de Productos Agrarias CAT Comisaria de Abastecimientos y Transportes CCE Vino Comision de Compras de Excedentes de Vino FORPPA Fondo de Ordenacion y Regulacion de Precios y Producciones Agrarias July 2, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Governmental Subsidies Available to Farmers as of January 1974 MINISTRY OF AGRICULTURE MINISTRY OF AGRICULTURE MINISTRY OF AGRICULTURE ACCION CONCERTADA (Direccion General de Is Produccion (Direccion General de la Produccion (Direccion General de la Production Agaria) Agraria) Agraria) Subsidy for the production of Subsidy for the production of sheep Subsidy for the purchase of Subsidy for pasture improvements and meat cattle, up to 107% of for meat in cooperative enterprises machinery: Price production of forage up to 250 ha per investments in buildings where the owners of the animals for soil preparation 207% individual farmer, or without limit installations, equipment and establish joint sheep farms. The for fertilizing 30th for joint efforts of groups of farmers. breeding cattle. subsidy is Ptas. 200 for pregnant for collection of forage 35% female animals of over 6 months of The subsidy may reach 60% of the cost The livestock enterprise also age. Additional Ptas. 200 subsidy Whenever the machinery is of seeds, 40% of the cost of fertilizer receives 95% reduction on five is paid for any of these animals which I purchased by farmers' groups 50% of the cost of cleaning of difficult different types of taxes, and have to be replaced during the first or cooperatives an additional 10% terrains of stones, bushes and other the free technical assistance 6 months of the enterprise up to a of subsidy is paid, growth; 20% of the cost of fences on of various agencies of the maximum of 207 of the herd. Additional pastures. Ministry of Agriculture. Ptas. 50 annual subsidy is paid for each animal whenever the cooperative The cattle can not be sold employs a technical expert for the until they reach 350 kg live better development of the enterprise. weight prior to 20 months or have to be sold to other The enterprise is obligated to fattening enterprises to transfer all increases of the herd reach the same weight. to fattening establishments, with the exception of breeding animals. The enterprise has to have at least 30 animals for fattening or 40 breeding cows. SENPA IRYDA ICONA 1. Subsidy for the cultivation 1. Subsidy for the joint exploitation of agricultural areas for livestock, Subsidy for soil conservation and control of of maize and sorghum for forage whenever it covers 80% of the area of municipality, and no farmer owns errosion, covering works of general interest in zones of Spain suitable for more than 50% of the jointly exploited land. The subsidy may cover up up to 100% of their cost; works of community their production. Subsidy covers to 207% of the cost of seeds, fertilizers and pesticides. interests up to 807. of their cost; and of the price of the: private interest up to 15% of the cost. seeds 50% 2. Subsidy to small and medium size farmers to purchase agricultural Additional subsidies are available for specific fertilizer 20% land to increase their holdings to a viable farm. The subsidy covers river, road, harbor, drainage, etc. works and pesticides various 10%7 of the purchase price of the additional land. earth movement. Note: in the humid North of Spain, higher subsidies are paid. 3. Subsidy only to viable farms, up to a maximum of Ptas. 500,000 for the purcba of equipment, machinery and animalstneeded for programs of 2. Subsidy for the cultivation of improvements and conservation, up to 207 of the project cost. for forage and leguminous concentrates, covering 40I of the cost of seeds. 4. Subsidy for permanent improvements and installations, including 3. Subsidy for the cultivation of irrigation, rural housing, rural industries, rural electrification, alfalfa: 50% of the cost of the water works, usually up to 30% of the project costs. The upper limit seeds. of the subsidy varies greatly; it may reach 1½ million Ptas. for municipal governments and Ptas. 500,000 for individual farmers. No upper limit is set for the construction of certain irrigation works for livestonk d6iflopment, where the subsidy may reach 307 of the project w costs. I Note: IRYDA loans and subsidiesnimay not exceed 80' of the cost of mny project. July 2, 1974 ANNEX 3 Table 19 SPAIN SECCND LIVESTOCK DEVEIDPNENT PROJECT Governmental Subsidies Paid to Aariculture in 1972 Type of SubsidY Pta. ail Livestock: Construction on Livestock Farms 61 Censtruction of Livestock Markets 54 Pasture Improvement 180 Livestock Improvement 1,015 Livestock Purchases 59 Compensation for the Slaughter of Sick Animals 351 Seeds and Fertilizer for Forage Production and Pastures 100 Subtotal 1,80 Agriculture: Seeds and Fertilizer 1,060 Machinery Purchases 217 Rural Construction 217 Corn and Sorghum Driers and Silos 102 Plantations 12 Improvement of Low Yielding Cereal Growing 521 Improvement of Agricultural Production 162 Pesticides 717 Marketing Assistance 785 Soil Conservation 97 Improvement of Forests 131 Agroindustries and Electrification 32 Subtotal 4,053 Social Improvements in the Rural Areas: Electrification, Waterworks, Education, Infrastructure 272 GRAND TOTAL 6,145 July 23, 1974 spAI SECOND LIVESTOCK DEVELOPMENT PROJECT Portfolio of Agricultural Loans of the Saving Banks (Cajas de Ahorro) December 31, 1971 to November 30, 1973 (Rtas mi1) Ty;S& of L4a&= w M* Bonds of the BCA 0.880 1.8 o.881 1.7 o.881 1.5 Working capital 3.994 8.1 4.326 8.2 3.889 6.6 Special loans without new 12.005 24.1 13.315 25.2 14.478 24.6 investments Machinery purchases 4.135 8.4 3.8224 7-3 3.724 6.3 Investment in farms and 20.863 42.1 22.533 42.7 23.759 40.3 agroindustries Purchase of additional farm land 2.177 4.4 2.458 4.6 2.877 4.7 Subtotal 44°054 88.9 47.337 89.7 49.608 84.0 Mortgages of a general nature 2.538 5.1 1.742 3.3 2.071 3.6 General loans with personal 2.962 6.0 3.672 7.0 .318 12.4 guarantee -- Total 49.554 . . . 10v °2.751 100 58.997 100 Fuente: Confederacitn Lspatola de Gajas de Ahorros Ber>fL z . Ju2l 23, 19t74 O SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Sub-loans Processed Under IBRD Loan 633-SP, during 1970-1973 (Ptas mil) Preliminary Agencia Approvals Farm Plans of Farm Plans Bank A ls Disburseent Number of Subproject Subproject Amount of %T F of Applications No. Costs No. Costs No. Loans Availability AJA.nt AvailabWUi 1970 452 131 416 70 197 39 118 4.7 40 1.6 1971 469 334 765 212 534 119 293 11.6 122 4.8 1972 685 397 1.145 259 763 181 500 19.8 348 13.8 1973 652 443 1,726 342 1,435 259 1,010 40.1 758 30.1 -726 - - _ Total 2,258 1,305 4,052 883 2,929 598 1,921 76.2 1,268 50.3 Notet Total Fund Availability: IBRD's $25 million equals about Ptas 1,400 million Matching Gov't Funds Ptas 1,120 million Total Ptas 2,520 million July 23, 1974 -hU SPAIN SBCE D LIVESTOCK DVEWOPDT PROECT ANNUAL A0IICURAL INISN FM Iffe9 TO 1972 (Ptas bil) _ea~ Nb.Pbc private Total 1960 5.4 5.0 10.4 1961 6.6 6.6 13.2 1962 7.9 9.1 17.0 1963 10.6 9.6 20.2 1 964 11.9 8.1 20,1 1965 12.7 114.6 L3 27.3 1966 13.2 17.3 30.5 1967 12.2 20.5 32.7 1968 11.9 21 *7 33.6 1969 13.1 23.6 36.7 1970 13.0 23.6 36.6 1971 21.4 24.3 45.7 1972 18.2 251.2 4 Total 158.1 209.2 367.3 /1 Sines 1965, a wider definition has bee used. Somrce: Ministry of Agricultur. July 1, 1974 SPAIN SECU D LIV2E3'7>CY l)V'LL'. - JE, AlJrlAL PRIVATE ITVESTM2IT ILl AO82ICUL"TUR Fli 196f, 1 972 (Ptas mil) 1966 1967 1968 1969 1970 1971 1972 Tractors 14765 4860 4,754 5,288 4,967 5;866 51,469 Other machinery and equipment /1 3L5 3,060 3,720 14,49 2,615 2,361 2,495 Action Concertada, Cattle, 6,0(l 776 1,3-8 1,663 2,54 1,345 2,05& Agro-'lndustries /i n.a. 2,090 1.12 )990 2,729 2000 12814 Farm buildings /1 n.a. 420 481 54,3 435 1,463 3,022 Irrigation works /I n.a. 1,220 2,253 1,421 2,083 2,808 2,04 Other investinents /1 On.a. 1,730 1i242 14389 1416 1,261 1,026 Investments through industrial banks - - - - 1]388 691 702 Other state aided investments n.a. 1030 2622 2,666 1,388 2,560 2,179 Plantations 3,660 3)880 3)715 -3:25 3,463 3038 2,941 Other unaided investments n.a. _ 1,250 L ,723 1152 942 1P78 1179 Tetal 17)275 2U,16 Zy140 a3611 23,580 2471 2i159 Ll Financed through the Agricultuaral Credit Dank Source: Ministry of Agriculture, La Agricultura Espaiola, various years. Ju2y 1, 1974 Table 24 Page 1 SEOD TIvESTOC K DEVEIflMITJMQaM~ TUhter_est Bate Stnruture in Soain Per Annum Rate (, Interest Rates Paid to epositors by Private Banks Interest as of July 21, 1969 Current sight accounts 0.50 Savings account sight deposits 2.50 3-month deposits 3000 6-month deposits 4°° 1-year deposits 4.50 Over 2 years (industrial banks) no set limit Interest since July 26, 1973 Current sight accounts 0.75 Savings account sight deposits 2.50 Savings account, 2-year deposits ) Private banks, 2-year deposits ) 6100 Credit coops, 2-year deposits ) Interest Rates on Goverrment Obligations Amount of Obligation (Ptas mil) Term 20,000 1 month J. C' 2 months 11' 6,000 3 months 5 .0 10,000 10 years 5.0 8,000 6 months 4.0 1 year 4.5 Discount Rates of the Banco de Espafla (1969-1973) Date July 1969 5.50 March 1970 6.50 January 1971 6.25 April 1971 6.00 October 1971 5.00 July 1973 6.00 ANNEX 3 Table 24 Page 2 Selected Interest Rate on Loans Charged by Saying Banks as of February 197 Type of Loan Maximum Amount Term ltate (.t) Working capital Ptas mil 2 3-11 months 7.25 Machinery purchases Ptas mil 2 5 years 7.50 Investment in farms ) 70% of project cost; - 7.50 and atro-industries ) up to Ptas mil 12 Subsidized construction) Ptas 2,000 per m ; 5-16 years 7.50 of living quarters ) 70% of project cost Purchase of ) 70% of project cost; 12 years 7.50 agricultural land ) up to Ptas 800 Other medium-term 1-1/2 - 3 years 8.00 loans > 3 years not regulated Selected Interest Rates on Loans Charged by the BCA Type of Loan Maximum Amount (Ptas mil) Machinery purchases - 5.50 To small farmers 1-5 6.00 To commercial farmers > 2-1/2 6.50 Agro-industries 7.50 Older special loans 2.50 - 4.75 Maximum rate on loans 7.50 Selected Interest Rates on Loans Charged by Private Banks Short-term loans 7.5 + 1.0 commission Maximum rate including commission and ether charges 11.0 June 27, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND CATTLE FARM - SOUTHWEST On-Far-m Investment Projections Development Phasing Cost - 200 Farms Average Average Cost Per Farm ------------------Year ---------------- Investment Item Unit Units Per Unit Coat (US$ '000 1 2 3 4 (US$ mil. Farm (Ptas) (Ptas '000) equiv.) (----------------Ptas '000-------------- Ptas mil.) equiv.) Pasture establishment Land clearing ha 50 5,000 250 4.3 150 100 - - 50.0 0.86 Primary land preparation ha 50 3,000 150 2.6 90 60 - - 30.0 0.52 Seeding L1 ha 150 6,500 975 16.8 390 390 195 - 195.0 3.36 Pasture consolidation ha 150 1,200 180 3.1 - 72 72 36 36.0 0.62 Fencing km 7 55,000 385 6.6 128 128 129 - 77.0 1.28 Watering Points No. 4 20,000 80 1.4 40 40 - - 16.0 0.28 Hay Shed m2 600 250 150 2.6 75 75 - - 30.0 0.52 Feeding bunks l.m. 150 350 52 0.9 26 26 - - 10.4 0.18 Cattle working facilities No. 1 150,000 150 2.6 75 75 - - 30.0 0.52 Machinery Fertilizer spreader No. 1 24,000 24 0.4 24 - - - 4.8 0.08 Forage wagon No. 2 120,000 40 0.7 40 - - - 8.0 0.14 Hay baler No. 252,000 80 1.4 80 - - - 16.0 0.28 Hay rake No. 1 30,000 30 0.5 30 - - - 6.0 0.10 Mower No. 1 72,000 72 1.2 72 - - - 14.4 0.24 Cultipacker No. 1 62,000 62 1.1 62 - - - 12.4 0.22 Housing for labor No. 1 100,000 100 1.7 100 - - - 20.0 0.34 Cattle 2-yr old heifers No. 40 25,000 1,000 17.2 1,000 - - - 200.0 3.44 Yearling heifers No. 100 15,000 1,500 25.9 750 750 - - 300.0 5.18 Yearling bulls No. 2 40,000 80 1.4 40 40 - - 16.0 0.28 Mature bulls No. 1 60.000 60 1.0 60 - - - 12.0 0.20 0 Total - - - 5,420 93.4 3,232 1,756 396 36 1084.0 18.7 Li Including seed, fertilizer and tillage. /2 Only 30% of the farms own forage wagons and balers. May 22, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELiPMENT OF 500-HA DPYLAND CATTLE FARM - SOUTHWEST Cattle Herd Development Projections Before ---------------------------------------------- Years ---------------------------------------------- Category Unit Development 1 2 3 4 5 6 7 8-12 Herd Composition Breeding cows No. 70 69 108 151 203 206 220 220 200 Bulls No. 2 4 5 5 7 7 8 8 8 2-yr old heifers No. 7 48 57 71 37 49 38 38 38 Yearling heifers No. 8 58 72 38 50 39 39 39 39 Weaned calves No. 48 48 86 121 162 165 176 176 176 Total incl. calves No. 135 227 328 386 459 466 481 481 481 Total AU 87 178 242 265 297 301 305 305 305 Mortality Cows No. 1 1 2 3 4 4 4 4 4 2-yr old heifers No. - I I I - I 1 1 I Yearling heifers No. - I I I I I 1 1 1 Total No. 1 3 4 5 5 6 6 6 6 Sales Weaners, females No. 16 2 5 10 42 43 49 49 49 Weaners, sales No. 24 23 42 58 79 80 86 86 86 Cull cows No. 7 7 11 15 30 30 33 33 33 Cull bulls No. - 1 1 1 2 2 2 2 2 Total No. 47 33 59 84 153 155 170 170 170 Purchases Yearling heifers No. - 50 50 - - - - - 2 yr old heifers No. - 40 - Yearling bulls No. - I I - - - - - - Mature bulls No. - I - - - - - - Total No. - 92 51 - - - - - Technical Coefficients Calves weaned % 70 70 80 80 80 80 80 80 80 Cows culled , 10 10 10 10 15 15 15 15 is Bulls culled 25 25 25 25 25 25 25 Mortality 2 2 2 2 2 2 2 2 2 /1 Animal -nits. All animals 1 year of age or older. poes not include calves. May 21, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND CATTLE FARM - SOUTHWEST Sales Projections Before ---------------------------Years------------------------------- Category Unit Development 1 2 3 4 5 6-12 CATTLE Number of Head Sold Weaners males No. 24 23 42 58 79 80 86 females No. 16 2 5 10 42 43 49 Cull cows No. 7 7 11 15 30 30 33 Cull bulls No. - 1 1 1 2 2 2 Average Liveweight Weaners males kg 190 190 200 200 210 210 210 females kg 170 170 180 180 190 190 190 Cull cows kg 500 500 500 500 500 500 500 Cull bulls kg 750 750 750 750 750 750 750 Price Liveweight Weaners Ptas/kg 68 68 68 68 68 68 68 Cull cows Ptas/kg 45 45 45 45 45 45 45 Cull bulls Ptas/kg 50 50 50 50 50 50 50 Cattle Sales Weaners Ptas '000 495 320 632 911 1,671 1,698 1,861 Cull cows Ptas '000 158 158 248 338 675 675 742 Cull bulls Ptas '000 - 38 38 38 75 75 75 -w Total Ptas '000 653 516 918 1,287 2,421 2,448 2,678 May 21, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVEL0PMENT OF 500-HA DRYLAND CATT1E FARM - SOUTHWEST Projected Operating Expenses Before ---------------------------Years------------------------------------------- Unit Unit Cost Development 1 2 3 4 5 6 7 8-12 (Ptas) (-------------------------------------------Ptas '000------------------------------------------ Pasture maintenance Fertilizer - natural pasture ha 1,000 _ 200 200 200 200 200 200 200 200 Fertilizer - improved pasture ha 1,200 - - - 72 144 180 180 180 180 Annual forage ha 7,500 80 213 299 348 425 425 425 425 425 Animal health Before development AU 150 13 - - - - - - - - Year 1-12 AU 300 - 53 73 80 89 90 92 92 92 Labor Before development man equiv. 100,000 200 - - - - - - - - Year 1-12 man equiv. 120,000 - 240 240 240 240 240 240 240 240 Repair and maintenance - /- - 3 5 8 8 8 8 8 of fence Building repair and - /- - 6 11 11 II 1I 11 11 maintenance Machinery repair and - /2 - 20 31 31 31 31 31 31 31 maintenance Taxes - /3 47 66 68 72 75 76 76 76 76 Subtotal - - 340 792 920 1,059 1,223 1,261 1,263 1,263 1,263 Total /4 - 340 871 1,012 1,165 1,345 1,387 1,389 1,389 1,389 /1 2% on cost of construction. 12 10% on cost of machinery. 1 > 3 70 Ptas per ha real estate tax plus 135 Ptas per AU. /4 Including 10% allowance for contingency, except in situation "Before Development." ( May 22, 1974 SPAIN SECOND LIVESTOCIK DEVELROPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND CATTLE RANCH--SOUTHWEST Finan-ial ProjectIons ------------ ----------- -------- --- ----------- ----------- ----- ------ ------- ---- ---- - Y -a -s - ----------- ----------- ----------- ----------- ----------- --------- -- ----------- De-vloptt 1 2 3 5 6 7 8 9 10 11 12 13 CASH EN7L0w 1. Annual eales 653 516 918 1,287 2,421 2,448 2,678 2,678 2,678 2,678 2,678 2,678 2,678 2,678 2. Investment capital I a. Farner's c-ntributicn / - 646 351 79 7 - - - - - - - - - b. Lang-tern Noan - 2,586 1,405 317 29 - - - - - - - - 3. Working capital a. FPrmer' -coetribktion - 313 313 203 88 209 228 300 300 300 300 300 300 b. Short-tern lone - 479 745 859 740 485 - - - - - - - Total enpeetod caskh iflow 653 4,540 3,732 2,745 3,2895 3,142 2,906 2,978 2,978 2,978 2,972 2,978 2,978 2,678 CASH OUTFLOW 1. lnveetment - 3,232 1,756 396 36 - - - - - - - - 2. Operating enpe-ses 340 871 1,012 1,165 1,345 1,387 1,389 1,389 1,380 1,389 1,389 1,389 1,389 1,389 3. Debt -eevice a. Long-tern loan12 (i) Intereet - - 64 214 270 282 251 219 188 157 125 94 63 31 (ii) Principal - - - - - 481 482 482 482 482 487 482 482 482 b. Short-tern on-2 (i) Interest- - 31 48 56 48 32 - - - - - - - (ii) Principal /4 _ _ 479 745 859 740 485 - - - - - c E. ) Prihnicip src- - 9 20 25 25 22 17 14 12 lo 7 5 2 Total expeeted -ash outflow 340 4,227 3,529 2,657 3,076 2,914 2,592 2,073 2,040 2,006 1,972 1,939 1,904 1,389 Total enpreted eash balane- at -ear's end 313 313 203 88 209 228 314 905 938 972 1,006 1,039 1,074 1-289 1 A-oonts far 202. of the total on-fern enveerneet cost. /2 6.57' on the ontetanding loan. /3 12 yearc repa-ent wiEk 3 yearn of groer. /4 0.55 on the -otstanding debt. D-ernbec 19, 1074 ar SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND SHEEP FARM - SOUTHWEST On-Ranch Investment Projections Development Phasing Average Average Cost Per Farm ------------Years-__________ Cost - ISOFarms Investment Item Unit Units Per Unit Cost (US$ '000 1 2 3 4 (US$ mil Farm (Ptas) (Ptas '000) equiv.) (------------Ptas '000-------------)(Ptas mil) equiv.) Pasture establishment Land clearing ha 50 5,000 250 4.3 150 100 - 3 37.5 0.64 Primary land preparation ha 50 3,000 150 2.6 90 60 - _ 22.5 0.39 Seeding /1 ha 150 6,500 975 16.8 390 390 195 - 146.2 2.52 Pasture consolidation ha 150 1,200 180 3.1 - 72 72 36 27.0 0.46 Fencing km 7 55,000 385 6.6 128 128 129 - 57.7 0.99 Watering points No. 8 18,000 144 2.5 72 72 - - 21.6 0.37 2 Hay shed m 1,000 250 250 4.3 150 100 - - 37.5 0.64 Feeding bunks l.m. 270 350 94 1.6 47 47 - - 14.2 0.24 Sheep working facilities No. 1 25,000 25 0.4 25 - - - 3.7 0.06 Sheep shed m 500 1,000 500 8.6 250 250 - - 75.0 1.29 Machinery: Fertilizer spreader No. 1 24,000 24 0.4 24 - - 3.6 0.06 Forage wagon No. 1 120,000 120 2.1 120 - - - 18.0 0.31 Hay baler No. 1 252,000 252 4.3 252 - - - 37.8 0.64 Hay rake No. 1 30,000 30 0.5 30 - - - 4.5 0.07 Mower No. 1 72,000 72 1.2 72 - - - 10.8 0.18 Tractor No. 1 360,000 360 6.2 360 - - - 54.0 0.93 Sheep: Ewes No. 1,000 3,000 3,000 51.7 1,200 1,200 600 - 450.0 7.75 Total - - - 6,811 117.4 3,360 2,419 996 36 1,021.7 17.6 v /I Including seed, fertilizer and tillage. May 7, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-NA DRYLAND SHEEP FARM - SOUTHWEST Sheep Flock Development Projections Before - -----------------------Year - ------------------------- Category Vnit Development 1 2 3 4 5 6-12 Flock Composition Breeding ewes No. 500 500 900 1.340 1,660 1,800 1,800 Breeding rams No. 22 22 36 54 66 72 72 Lambs we-ned No. 400 635 1,215 1,916 2,374 2,574 2,574 Replacement ewes No. 125 i11 255 465 567 454 454 Replacement rams No. 5 19 25 24 20 15 15 Total No.,1 1,052 1,287 2,431 3,799 4,687 4,915 4,915 Total /2 AU 109 109 203 314 386 390 390 Ewe equivalents No. 652 652 1,216 1,883 2,313 2,341 2,341 Mortalitv Ewes No. 25 25 36 54 66 72 72 RaEs No. 1 1 1 1 1 1 1 Replacement ewes No. 10 9 17 23 28 22 22 Total Mo. 36 35 54 78 95 95 95 Sales Lambs No. 270 355 726 1,329 1,905 2,105 2,105 Ctll ewes No. 90 77 162 268 332 360 360 Cull rsm No. 4 4 6 11 13 14 14 Total No. 364 436 894 1,608 2,250 2,479 2,479 Porchases Yearling ewes No. - 400 400 200 - - - Technical Coefficients Mortality: (a)Ewes 5 5 5 4 4 4 4 4 (b)ems 4 4 4 3 2 2 2 (c) Replacement ewes 8 8 7 5 S 5 5 Culling: (a) Ewes 18 15 18 20 20 20 20 (b)Rams R- 18 18 18 20 20 20 20 Ewes lanbing 7) 80 85 85 85 85 85 85 Lambs per ewe lambing No. 1.25 1.25 1.25 1.20 1.25 1.0?5 1.25 Lambs per ewe per year No. 1.00 1.50 1.50 1.00 1.50 1.50 1.50 Lambs weaned 7) 80 80 85 90 90 90 90 Yield of wool kg/ewe equiv. 2.3 2.4 2.5 2.S 2.5 2.5 2.5 /1 6 sheep are eqoivaleot to 1 animal nit (AU). /2 Total of all sheep except weaned lambs. May 7, 1974 P ATN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND SHEEP FARM - SOUTHWEST Sales Projections Before ----------------------Years------------- Category Unit Development 1 2 3 4 5 6-12 SHEEP Number of Head Sold Lambs No. 270 355 726 1,329 1,905 2,105 2,105 Cull ewes No. 90 77 162 268 332 360 360 Cull rams No. 4 4 6 11 13 14 14 Average Liveweight Lambs kg 27 27 27 27 27 27 27 Cull ewes kg 35 35 35 35 35 35 35 Cull rams kg 57 57 57 57 57 57 57 Price Liveweight Lambs Ptas/kg 60 60 60 60 60 60 60 Cull ewes Ptas/kg 26 26 26 26 26 26 26 Cull rams Ptas/kg 26 26 26 26 26 26 26 Sheep Sales Lambs Ptas '000 437 575 1,176 2,153 3,086 3,410 3,410 Cull ewes Ptas '000 82 70 147 244 302 328 328 Cull rams Ptas '000 6 6 9 16 19 21 21 Subtotal Ptas '000 525 651 1,332 2,413 3,407 3,759 3,759 WOOL Number shorn ewe equiv. 652 652 1,216 1,883 2,313 2,341 2,341 Yield kg/ewe equiv. 2.3 2.4 2.5 2.5 2.5 2.5 2.5 Production kg 1,500 1,565 3,040 4,708 5,782 5,852 5,852 Price Ptas/kg 70 70 70 70 70 70 70 Sales Ptas '000 105 110 213 330 405 410 410 TOTAL SALES Sheep Ptas '000 525 651 1,332 2,413 3,407 3,759 3,759 Wool Ptas 000 105 110 213 330 405 410 410 Total Ptas '000 630 761 1,545 2,743 3,812 4,169 4,169 May 1, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND SHEEP FARM - SOUTHWEST Projected Operating Expenses Before --………-…---------------------Years.------------------------------.---______ Unit Unit Cost Development 1 2 3 4 5 6 7 8-12 (Ptas) (_--------------------------------------------------Ptas '000------------------------------------- Pasture maintenance: Fertilizer - natural pasture ha 1,000 _ 200 200 200 200 200 200 200 200 Fertilizer - improved pasture ha 1,200 - - - 72 144 180 180 180 180 Annual forage: Fertilizer ha 3,000 30 120 150 150 150 150 150 150 150 Seed and tillage ha 3,000 30 120 150 150 150 150 150 150 150 Hay making tons 500 15 100 100 100 100 100 100 100 100 Concentrates: Lambs head 50 20 32 61 96 119 129 129 129 129 Animal health ewe equiv. 20 13 13 24 38 46 47 47 47 47 Labor man equiv. 120,000 180 240 240 300 300 300 300 300 300 Shearing ewe equiv. 20 13 13 24 38 46 47 47 47 47 Repair and maintenance of fence A 3 8 8 8 o 8 Building repair and maintenance - - 11 20 20 20 20 20 20 Machinery repair and maintenance - -2 43 86 86 86 86 86 86 86 Taxes - a 50 50 62 77 87 88 88 88 88 -~~~~~~~~~~~~~~~~~~~~~-3 Subtotal _ - 351 931 1,111 1,332 1,366 1,505 1,505 1,505 1,505 Total - 4 351 1,024 1,222 1,465 1,503 1,655 1,655 1,655 1,655 a \o -r7- /1 2% on cost of construction. 2 10% on cost of machinery. /3 70 Ptas per ha real estate tax plus 135 Ptas per AU. Including 10% contingency allowance, except in situation, "Before development." April 30, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOP1MENT OF 500-hA DRYLAND ShEEP RANCH--SOUTHWEST Financial Projactions B.f. . -- ---- --- ---- ---- ---- --- ---- ---- --- ---- ---- ---- --- ---- ---- --- ---- ---- Yea-- ---- ---- --- ---- ---- ---- --- ---- ---- --- ---- ---- ---- --- ---- ---- --- Bef ore Development 1 2 3 4 5 6 7 8 9 10 11 12 13 ---------------------------------------------------------------------------------------------------- Pt..s '000 -------------------------------------------------------------F----s---'000-- CASN INFLOW 1. Annual sales 630 761 1,545 2,743 3,813 4,169 4,169 4,169 4,169 4,169 4,169 4,169 4,169 4,169 2. Investment capital a. Farer's contributiou - - 672 484 199 7 - - - - - - - - - b. Long-term loan - 2,688 1,935 797 29 3. Working capital a. Famer's cotribution - 279 11 - b. Short-tem loan - 102 122 - - - - - - - - - - - Total empected cash inflow 630 4,502 4,096 3,739 3,849 4,169 4,169 4,169 4,169 4,169 4,169 4,169 4,169 4,169 CASN OUTFLOW 1. Investment - 3,360 2,419 996 36 - - - - - - - - - 2. Operating expenses 351 1,024 1,222 1,465 1,503 1,655 1,655 1,655 1,655 1,655 1,655 1,655 1,655 1,655 3. Debt service a. Long-tem loan, (i) Interest 2 - 94 256 351 380 339 297 255 212 170 127 85 42 - (ii) Principal a _ - - - 601 606 606 606 606 606 606 606 606 b. Short-term lo?4 (i) Interest - 7 8 - - - - - - - - - - (ii) Principel . - - 102 122 - - - - - - - - - c. Technical service - 7 19 25 27 24 21 18 15 12 9 6 3 - Total empected cosh outflow 351 4,492 4,026 2,959 2,547 2,624 2,579 2,534 2,488 2,443 2,397 2,352 2,306 1,655 Total espected cash balance at year's end 279 10 70 780 1,302 1,545 1,590 1,635 1,681 1,726 1,772 1,917 1,863 2,514 /1 Accounts for 20% of the total on-fam investnent cost. /2 7.0% on the outstanding losn. al 12 years repayment with 3 years of grace. /4 6.5% on the outstanding loan. /5 0.5% on the outstanding debt. December 19, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPNENT OF 500-HA DRYLAND FARM WITH 20-HA IRRIGATED ALFALFA - SOUTHWEST On-Ranch Investment Projections Development Phasing Average Average Cost Per Farm ---------------Years--------------- Cost - 200 Farm3 Investment Item Unit Units Per Unit Cost (US$ '000 1 2 3 4 (Us$ mil Farm (Ptas) (Ptas '000) equiv.) (--------------Ptas '000-------------) (Ptas mil) equiv.) Pasture establishment: Land clearing ha 50 5,000 250 4.3 150 100 - - 59.0 0.86 Primary land preparation ha 50 3,000 150 2.6 90 60 - - 30.0 0.52 seeding L ha 150 6,500 975 16.8 390 390 195 - 195.0 3.36 Pasture consolidation ha 150 1,200 180 3.1 - 72 72 36 36.0 0.62 Alfalfa establishment /I ha 20 9,000 180 3.1 90 90 - - 36.0 e.6? Fencing km 7 55,000 385 6.6 128 128 129 - 77.0 t.3P Watering points No. 4 20,000 80 1.4 40 40 - - 16.0 0.28 Hay shed m 850 250 212 3.7 106 106 - - 42.4 0.74 Feeding bunks l.m. 250 350 87 1.5 44 43 - - 17.8 0.30 Cattle working facilities No. 1 150,000 150 2.6 75 75 - - 30.0 0.52 Machinery:16002 Hay baler No. /2 252,000 80 1.4 80 - - - 16.0 0.28 Fertilizer spreader No. 1 24,000 24 0.4 24 - - - 4.8 0.08 Forage wagon No. L2 120,000 40 0.7 40 - - - 8.0 0.14 Mower No. 1 72,000 72 1.2 72 - - - 14.4 0.24 Hay rake No. 1 30,000 30 0.5 30 - - - 6.0 0.10 Electrical installations a No. 1 300,000 300 5.2 150 150 - - 60.0 1.04 Irrigation equipment and ha. 20 30,000 600 10.3 300 300 - - 120.0 2.06 installation Cattle: 2-yr old heifers No. 80 25,000 2,000 34.5 1,000 1,000 - - 400.0 6.90 Yearling heifers No. 70 15,000 1,050 18.1 525 525 - 210.0 3.60 Yearling bulls No. 6 60.000 360 6.2 180 - 180 - 72.0 1.24 Total - - - 7,205 124.2 3,514 3,079 57c 36 1,441.0 24.8 (3 g Including seed, fertilizer and tillage. Only 30%S of farms own balers and forage wagons. A For irrigation. May 16, 1974 ATrOEX 4 Table 12 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND FARM WITH 20-HA IRRIGATED ALFALFA - 301THWEST Cattle Herd Development Projections Before - -------- ---Years --------- Category Unit Development 1 2 3 4 5 6 7 8-12 Herd Composition Breeding cows No. 90 88 127 188 220 235 255 255 255 Bulls No. 3 6 5 8 9 9 9 9 9 2-yr old heifers No. 10 50 84 65 53 73 57 57 57 Yearling heifers No. 10 45 66 54 74 58 58 58 58 Weaned calves No. 63 62 108 160 187 200 217 217 217 Total incl. calves No. 176 251 390 475 543 575 596 596 596 Total AU 113 189 282 315 356 375 379 379 379 Mortality Cows No. 2 2 2 4 4 5 5 5 5 2-yr old heifers No. - 1 2 1 1 1 1 1 1 Yearling heifers No. - 1 1 1 1 1 1 1 1 Total No. 2 4 5 6 6 7 7 7 7 Sales Weaners, males No. 31 30 53 77 92 98 107 106 107 Weaners, females No. 22 - - 6 35 42 50 51 50 Cull cows No. 10 9 19 28 33 47 51 51 51 Cull bulls No. - 1 1 2 2 2 2 2 2 Total No. 63 40 73 113 162 189 210 210 210 Purchases Yearling heifers No. - 35 35 - - - - - - 2-yr old heifers No. - 40 40 - Yearling bulls No. - 3 - 3 Total No. - 78 75 3 - - - - - Technical Coefficients Calves weaned 70 70 85 85 85 85 85 85 85 Cows culled 7 10 10 15 15 15 20 20 20 20 Buils culled 25 25 25 25 25 25 25 25 25 Mortality: (a) Yearlings % 2 2 2 2 2 2 2 2 2 (b) 2-yr old heifers % 2 2 2 2 2 2 2 2 2 (c) Cows % 2 2 2 2 2 2 2 2 2 11ay 16, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND FARM WITH 20-HA IRRIGATED ALFALFA - SOUTHWEST Sales Projections Before - ---------------------------Years---------------------- Category Unit Development 1 2 3 4 5 6 7 8-12 CATTLE Number of Head Sold Weaners males No. 31 30 53 77 92 98 107 107 107 females No. 22 - - 6 35 42 50 51 50 Cull cows No. 10 9 19 28 33 47 51 51 51 Cull bulls No. - 1 1 2 2 2 2 2 2 Average Liveweight Weaners males kg 190 190 220 220 220 220 220 220 220 females kg 170 170 200 200 200 200 200 200 200 Cull cows kg 500 500 500 500 500 500 500 500 500 Cull bulls kg 750 750 750 750 750 750 750 750 750 Price Liveweight Weaners males Ptas/kg 68 68 70 70 70 70 70 70 70 females Ptas/kg 68 68 70 70 70 70 70 70 70 Cull cows Ptas/kg 45 45 45 45 45 45 45 45 45 Cull bulls Ptas/kg 50 50 50 50 50 50 50 50 50 Cattle Sales Weaners Ptas '000 655 388 816 1,270 1,907 2,017 2,348 2,346 2,348 Cull cows Ptas '000 225 202 428 630 742 1,058 1,148 1,148 1,148 Cull bulls Ptas '000 - 38 38 75 75 75 75 75 75 Total Ptas '000 880 628 1,282 1,975 2,724 3,150 3,571 3,571 3,571 (D May 16, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 500-HA DRYLAND FARM WITH 20-HA IRRIGATED ALFALFA - SOUTHWEST Projected Operating Expenses Before --------------------------------------------- Years ---------------------------------------------------- Unit Unit Cost Development 1 2 3 4 5 6 7 8 9 10 11 12 (Ptas) (-------------------------------------------------------Ptas '000----------------------------------------------------- Pasture maintenance Fertilizer - natural pasture ha 1,000 - 230 230 230 230 230 230 230 230 230 230 230 230 Fertilizer - established pasture ha 1,200 - - - 72 144 180 180 180 180 180 180 180 180 Alfalfa maintenance Fertilizer ha 3,000 - - 30 60 60 60 60 60 60 60 60 60 60 Reseeding ha 9,000 - - - - - - 90 90 - - - 90 90 Annual forage ha 7,500 160 345 - - - - - - - - Nay making tons 500 - - 75 150 150 150 75 75 150 150 150 75 75 Animal health Before development AU 150 17 - - - - - - - - - - - - Years I - 12 AU 300 - 57 85 94 107 112 114 114 114 114 114 114 114 Irrigation ha 2,000 - 20 40 40 40 40 40 40 40 40 40 40 40 Labor man equiv. 120,000 240 360 480 480 480 480 480 480 480 480 480 480 480 Repair and maintenance - a - - 3 5 8 8 8 8 8 8 8 8 of fence Building repair and - / - 5 11 11 11 11 11 11 11 11 11 11 maintenance Machinery repair and - L2 - 35 92 115 115 115 115 115 115 115 11S 115 115 maintenance Taxes - A 50 60 73 78 83 85 86 86 86 86 86 86 86 Subtotal - - 467 1,107 1,113 1,335 1,428 1,471 1,489 1,489 1,474 1,474 1,474 1,489 1,489 Total /4 - - 467 1,218 1,224 1,468 1,571 1,618 1,638 1,638 1,621 1,621 1ft2i 1,638 1,638 L 2o on cost of construction. 2 10% on machinery cost. 70 Ptas per ha real estate tax plus 135 Ptas per AU. i Including 10% allowance for contingency, except in situation "Before Development." May 31, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVEIOP¶EIFr OF 500-HA DRYLAND RANCH WITH 20-HA IRRIGATED ALPALFA--SOUTHWEST Financial Frojactions Before --Year - Development 1 2 3 4 5 6 7 8 9 10 11 12 13 -o ts 0 '000. -.--------.-.---------------------------------------- CASH INFLOW 1. Annual sales 8S0 628 1,282 1,975 2,724 3,150 3,571 3,571 3,571 3,571 3,571 3,571 3.571 3,571 2. Investment capital a. Parmer's costribotin / - 703 616 115 7 - - - - - - - - - b. Long-tern loan - 2,811 2,463 461 29 - - 3. Working capital a. Former's contribution - 413 284 22 187 114 145 b. Short-tem Soan - 609 612 734 628 162 - - - - - - - Total expected cash inflow 880 5,164 5,257 3,307 3,575 3,426 3,716 3,571 3,57i 3,571 3,571 3,571 3,571 3,571 CASH OUTFLOW 1. Investment - 3,514 3,079 576 36 - - - - - - - - - 2. Operating expenses 467 1,218 1,224 1,468 1,571 1,618 1,638 1,638 1,638 1,638 1,638 1,638 1,638 1,638 3. Debt service a. Long-term loann (i) Interest /- _ 98 283 385 403 358 314 269 224 179 134 90 45 - (ii) Principal - - - - 644 640 640 640 640 640 640 640 640 b. Short-torn loa74 (i) Interest- - 40 40 48 41 11 - - - - - - - (ii) Principal - - 609 612 734 628 162 - - - - - - c. Technical service - - 10 23 31 32 26 22 19 16 13 10 6 3 Total sopected cash inflow 467 4,880 5,235 3,120 3,461 3,281 2,776 2,566 2,518 2,470 2,422 2,374 2,326 1,638 Total erpected cash balance at year's end 413 284 22 187 114 145 940 1,005 1,053 1,101 1,149 1,197 1,245 1,933 /1 Accoouts for 207. of total on-farme investment cost. /2 7.07, on the outstanding lonn. /3 12 years repayment with 3 years of grace. /4 6.5% on the outstanding lonn. /5 0.5% on the outstanding debt. December 19, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 20-HA IRRIGATED FARM FOR CATTLE FATTENING - SOUTHWEST On-Farm Investment Projections Development Phasing Average Average Cost Per Farm --------Years------ Investment Item Units Per Unit Cost (US$ '000 Cost - 200 Farms Unit Farm (Ptas) (Ptas '000) equiv.) 1 2 3 (Ptas mil.) (US$ mil. equiv.) ----- Ptas '000 ---- Pasture establishment ha 11 9,000 99 1.7 64 35 - 19,8 0,34 Alfalfa establishment ha 3 8,500 26 0.4 17 9 - 5.0 0.08 Fencing (stationary) km 2 55,000 110 1.8 72 38 - R220 0.36 Fencing (movable, electric) No. 1 15,000 15 0.3 15 - - 3.0 0.06 Pit silo m 500 400 200 3.4 130 70 - 40.0 0,68 Hay shed m 120 900 108 1.9 71 37 - 21.6 0.38 Watering points No. 3 5,000 15 0.3 15 - - 3.0 0.06 Feeding bunks lm 50 500 25 0.4 17 8 - 5,0 0.08 Cattle shed m2 150 1,000 150 2.6 98 52 - 30.0 0.52 Sprinkler irrigation ha 20 35,000 700 12.1 455 245 - 140.0 2.42 Machinery: Forage harvester No. 1 144,000 144 2.5 144 - - 28.8 0.50 Forage wagon No. 1 120,000 120 2.1 120 - - 24.0 0.42 Mower No. 1 72,000 72 1.2 72 - - 14.4 0.24 Hay rake No. 1 30,000 30 0.5 30 - - 6.0 0.10 Hay baler No. 1 252,000 252 4.3 252 - - 50.4 0.86 Total - - - 2,066 35.6 1,572 494 - 413.2 7,1 May 15, 1974 AmuEX 4 Table 17 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 20-HA IRRIGAFED FARM FOR CATTLE FATTENING - SOUTHWEST Sales Projections Before -----Years------ Category Unit Development 1 2-12 CATTLE Number of head sold No. - 104 157 Average liveweight kg - 425 425 Price liveweight Ptas/kg - 68 68 Cattle Sales Ptas '000 - 3,006 4,537 CASH CROPS Area Wheat ha 4 - - Maize ha 5 - - Potatoes ha 2 - - Cotton ha 7 - - Tomatoes ha 2 - - Alfalfa ha 2 - - Yield Wheat kg/ha 3,000 - - Maize kg/ha 6,000 - - Potatoes kg/ha 15,000 - - Cotton kgiha 2,000 - - Tomatoes kg/ha 30,000 - - Alfalfa kg/ha 50,000 - - Production Wheat 12,000 - - Maize kg 30,000 - - Potatoes kg 30,000 - - Cotton kg 14,000 - - Tomatoes kg 60,000 - - Alfalfa kg 100,000 - - Prices Wheat Ptas/kg 7 - - Maize Ptas/kg 7 - - Potatoes Ptas/kg 3 - - Cotton Ptas/kg 38 - - Tomatoes Ptas/kg 2.5 - - Alfalfa Ptas/kg 0.5 - - Sales Wheat Ptas '000 84 - - Maize Ptas '000 210 - - Potatoes Ptas '000 90 - - Cotton Ptas '000 532 - - Tomatoes Ptas '000 150 - - Alfalfa Ptas '000 50 - - Subtotal Ptas '000 1,116 - - TOTAL SALES Cattle Ptas '000 - 3,006 4,537 Cash crops Ptas '000 1,116 - - Total Ptas '000 1,116 3,006 4,537 May 15, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 20-hA IRRIGATED FARM FOR CATTLE FATTENING - SOUTHWEST Projected Operating Expenses Before - - - - - Years----------------------------------------------------- Unit Unit Cost Development 1 2 3 4 5 6 7 8 9 10 11 12 (Ptas) ------------------------------------------------------------Ptas '000-------------------------------------------------- Pasture maintenance Fertilizer ha 3,500 - - 24 38 38 38 38 38 38 38 38 38 38 Reseeding ha 4,500 _ - - - 16 16 16 16 16 16 16 16 16 Alfalfa maintenance Fertilizer ha 3,500 - - 7 to 10 10 10 10 10 10 10 10 10 Reseeding ha 8,500 - - - - - - 17 9 - - - 17 9 Annual forage Maize silage ha 17,000 - 100 100 100 100 100 100 100 100 100 100 100 100 Vetch and oats ha 7 ,500 - 45 45 45 45 45 45 45 45 45 45 45 45 Cash crop ha 9,000 198 - - - - - - - - - - - - Labor man equiv. 120,000 360 240 240 24C 240 240 240 240 240 240 240 240 240 Purchase of weaners head 15,000 - 1,590 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 Concentrates head 2,000 - 208 314 314 314 314 314 314 314 314 314 314 314 Animal health head 250 - 26 40 40 40 40 40 40 40 40 40 40 40 Purchase of irrigation water ha 2,000 40 40 40 40 40 40 40 40 40 40 40 40 40 Repair and maintenance - - - 2 3 3 3 3 3 3 3 3 3 3 of fences Building repair and - L - 16 20 20 20 20 20 20 20 20 20 20 maintenance Machinery repair and - /2 - 46 62 62 62 62 62 62 62 62 62 62 62 maintenance Taxes - /3 1 9 13 13 13 13 13 13 13 13 13 13 13 Subtotal - - 599 2,304 3,303 3,325 3,341 3,341 3,358 3,350 3,341 3,341 3,341 3,358 3,350 Total /4 - 599 2,455 3,513 3,538 3,555 3,555 3,574 3,565 3,555 3,555 3,555 3,574 3,565 (D /I 2% on cost of construction. /2 10% on cost of machinery. /3 70 Ptas per ha real estate tax plus 70 Ptas per calf. 4 Including a contingency allowance of 10% on operating expenses, except purchase of weaners, plus 54 on purchase of weaners, except in situation "Before Development." May 31, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 20-HA FARMS FOR CATTLE FATTENING--SOUTHWEST Financial Projections Before Development 1 2 3 L 5 6 7 8 9 10 11 12 13 ---------------------------------------~------------~--------------------------------------------- ---- Ptas ' 000 - --- ----- ---------------- --------------_---_---_________--_______--------------- CASH INFLOW 1. Annual sales 1,116 3,006 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 2. Inve ntmeot capital /3 a. Farmer's contribution -314 99m b. Long-term loan - 1,258 395 3. Working capital a. Farmer's contribution - - b. Short-tem loan - - - - - - - - - - Total empected cash inflow 1,116 4,578 5,031 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 CASH OUTFLOW 1. Invesment - 1,572 494 - - - - - - - - - - - 2. Operating eapenses 599 2,455 3,513 3,538 3,555 3,555 3,574 3,565 3,555 3,555 3,555 3,574 3,565 3,555 3. Debt service a. Long-term Ioan/2 (i) Interest 7s - 41 94 107 107 95 83 71 59 48 36 24 12 - (ii) Principal -3 - - - 189 183 183 183 183 183 183 183 183 b. Short-term loan (i) Interest (ii) Principal -- c.Technical service- - 3 7 8 8 7 6 5 4 3 2 1 1 - Total expected cash outflow 599 4,071 4,108 3,653 3,859 3 840 3,846 3,824 3,801 3,799 3,776 3 792 3,761 3,555 Total expected cash balance at year's end 517 507 923 884 678 697 691 713 736 748 761 755 776 992 /L Accounts for 20% of the total on-for investment coat. /2 6.5% on the outstanding loan. /3 12 years repayment with 3 years of grace. /4 0.57. on the outstanding debt. December 19, 1974 e SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 6-HA DAIRY FARM - NORTH On-Farm Investment Projections Development Phasing Average Average ---_ Cost per Farm Years------ Cost - 450 Farms Units Per Unit Cost (US$ '000 1 2 (US$ mil. Investment Item Unit Farm (Ptas) (Ptas '000) equiv.) (---Ptas '000---) (Ftas mil.) equiv.) Pasture establishment ha 3 12,000 36 0.6 36 - 16.2 0.27 Pasture consolidation ha 3 4,000 12 0.2 - 12 5.4 0.09 Fencing km 1.5 30,000 45 0.8 27 18 20.2 0.36 Watering points No. 8 5,000 40 0.7 24 16 18.0 0.31 Cattle housing (cubicles) No. 20 8,000 160 2.8 96 64 72.0 1.26 Young stock housing m2 25 1,700 42 0.7 25 17 18.9 0.31 Milking parlor /1 No. 1 50,000 50 0.9 50 - 22.5 0.40 Pit silo m3 80 500 40 0.7 40 - 18.0 0.31 Manure pit m 70 500 35 0.6 35 - 15.7 0.27 Milking equipment No. 1 50,000 50 0.9 50 - 22.5 0.40 Cattle Cows No. 2 50,000 100 1.7 100 - 45.0 0.76 Heifers No. 2 25.000 50 0.9 50 - 22.5 0.40 Total - - - 660 11.4 533 127 297.0 5.1 /I 4-stall parlor May 24, 1974 X >m ax4. Co ANNEX 4 Table 21 SPAIN SECOND LIVESTOCK DEVELOPNENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 6-HA DAIRY FARM - NORTH Cattle Herd Development Projections Before ----------------------Years--------------------- Category Unit Development 1 2 3 4-12 Herd Composition Mature cows No. 6 9 11 13 15 Replacement heifers 1-2 yrs No. 2 4 4 4 4 Calves born No. 5 7 9 11 12 Total incl. calves No. 13 20 24 28 31 Total AU 8 13 15 17 19 Sales Male calves No. 3 3 5 5 6 Female calves No. - - - 2 2 Heifers No. - - - - 1 Cull cows No. 1 2 2 2 3 Total No. 4 5 7 9 12 Purchases Cows No. - 2 - - - Heifers No. - 2 - - - Total No. - 4 - - - Technical Coefficients Calving rate % 80 80 82 82 82 Mortality /1 Cows culled % 20 20 20 20 20 Milk production kg/cow 3.800 4,000 4,200 4,400 4,500 /I No allowance made for mortalities. May 23, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 6-HA DAIRY FARM - NLRTH Sales Projections Before ----------------------------------Years--------------------------------- Category Unit Development 1 2 3 4 5 6 7 8 9 10 11 12 CATTLE Number of Head Sold Cows No. 1 2 2 2 3 3 3 3 3 3 3 3 3 Heifers No. - - - - 1 1 1 1 1 1 1 1 1 Male calves No. 3 3 5 5 6 6 6 6 6 6 6 6 6 Female calves No. - - - 2 2 2 2 2 2 2 2 2 2 Price Cows Ptas/head 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Heifers Ptas/head 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Male calves Ptas/head 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 Female calves Ptas/head 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 Cattle Sales Cows Ptas '000 20 40 40 40 60 60 60 60 60 60 60 60 60 Heifers Ptas '000 - - - - 20 20 20 20 20 20 20 20 20 Male calves Ptas '000 24 24 40 40 48 48 48 48 48 48 48 48 48 Female calves Ptas '000 - - - 14 14 14 14 14 14 14 14 14 14 MILK Cows No. 6 9 11 13 15 15 15 15 15 15 15 15 15 Calving rate % 80 80 82 82 82 82 82 82 82 82 82 82 82 Cows in milk No. 5 7 9 11 12 12 12 12 12 12 12 12 12 Milk yield 1/cow 3,800 4,000 4,200 4,400 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 Milk production '000 1 19 28 38 48 54 54 54 54 54 54 54 54 54 Milk price Ptas/l 10 10 10 10 10 10 10 10 10 10 10 10 10 Milk sales Ptas '000 190 280 380 480 540 540 540 540 540 540 540 540 540 TOTAL SALES Cattle Ptas '000 44 64 80 94 142 142 142 142 142 142 142 142 142 Milk Ptas '000 190 280 380 480 540 540 540 540 540 540 540 540 540 Total Ptas '000 234 344 460 574 682 682 682 682 682 682 682 682 682 May 24, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 6-HA DAIRY FARM - NORTH Projected Operating Expenses Before ------------------------------------Years----------------------------------------- Unit Cost Development 1 2 3 4 5 6 7 8-12 (Ptas) ---------------------------------------------Ptas '000------------------------------------------------- Pasture maintenance Fertilizer Before development ha 2,000 10 - - - - - - Years 1-12 ha 4,000 - 16 16 16 16 16 16 Reseeding ha 7,500 - - - 15 15 15 15 15 Annual forage ha 7,500 8 15 15 15 15 15 15 15 15 Animal health Before development AU 400 3 - - - - - - - - Years 1-12 AU 550 - 7 8 9 10 10 10 10 10 Concentrates Cows head 8,000 48 72 88 104 120 120 120 120 120 Heifers head 3,000 6 12 12 12 12 12 12 12 12 Labor man equiv. 120,000 120 120 120 120 120 120 120 120 120 Repair and maintenance - - 6 8 8 8 8 8 8 8 of fence and buildings Machinery repair and - - 5 5 5 5 5 5 5 5 maintenance Taxes - 2 3 4 4 5 5 5 5 5 Subtotal / - - 197 240 260 293 326 326 326 326 326 ' Total - - 197 264 286 322 359 359 359 359 359 a S Ili. 4~ /1 2% on cost of construction. /2 10% on cost of equipment. / 135 Ptas per ha real estate tax plus 200 Ptas per AU. / Including 10% allowance for contingency, except in situation "Before Development." May 23, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 6-hA DAIRY FARM--NORTH Financial Projections -Year- ------- ------------------------------------------------ ----------------------- Ye- --------------- Before Development 1 2 3 4 5 6 7 8 9 10 11 12 13 ------------------ta------------------------- __________________________________-- -- Ptas 000 --------- - - ----------- -------------------------------------------------- CASH INFLOW 1. Annual sales 234 344 460 574 682 682 682 682 682 682 682 682 682 682 2. Investment capital /1 a. Farmer's contribution- - 107 25 b. Long-term loan - 426 102 3. Working capital a. Farmeras contribution - - b. Short-tern lon - - - - - - - - - - - - - - Total expected cash inflow 234 877 587 574 682 682 682 682 682 682 682 682 682 682 CASH OUTFLOW 1. Investment - 533 127 - - - - - - - - - - - 2. Operating ..penses 197 264 286 322 359 359 359 359 359 359 359 359 359 359 3. Debt service a. Long-term an /2- 14 31 34 34 31 27 23 19 15 11 7 4- ()Itrs /3 (ii) Principal/ - - - - 56 59 59 59 59 59 59 59 59 b. Short-term loan (i) Interest - - (ii) Principal 4 - c. Technical srvice- - 2 3 3 2 2 2 1 1 1 1- - Total axpected cash outflow 197 812 446 359 452 451 447 443 438 434 430 426 422 359 Total expected cash balance at year's end 37 65 141 215 230 231 235 239 244 248 252 256 260 323 /1 Accounts for 207. of the total on-farn investment cost. /2 6.5% on the outstanding loan. /3 12 years repayment with 3 ye.ar of grace. /4 0.5% on the outstanding debt. December 19, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-HA MOUNTAIN FARM FOR BEEF PRODUCTION - NORTH On-Farm Investment Projections Development Phasing Average Average Cost Per Farm ---------Years--------- Units Per Unit Cost (US$ '000 1 2 3 Cost - 350 Farms Investment Item Unit Farm (Ptas) (Ptas '000) equiv.) (-------Ptas '000 ------) (Ptas mil.) (US$ mil. equiv.) Pasture establishment Land clearing ha 50 15,000 750 12.9 375 375 - 262.5 4.51 Seeding ha 50 10,000 500 8.6 250 250 - 175.0 3.01 Pasture consolidation ha 50 4,000 200 3.4 - - 200 70.0 1.19 Fencing km 5 36,000 180 3.1 90 90 - 63.0 1.08 Watering points No. 7 5,000 35 0.6 35 - - 12.2 0.21 Silo (clamp) m3 650 200 130 2.2 130 - - 45.5 0.77 Storage building /I n.a. n.a. 50,000 50 0.9 50 - - 17.5 0.31 Cattle working facilities No. 1 80,000 80 1.4 40 40 - 28.0 0.49 Machinery Tractor No. 1 200,000 200 3.4 200 - - 70.0 1.19 Trailor No. 1 72,000 72 1.2 72 - - 25.2 0.42 Fertilizer spreader No. 1 24,000 24 0.4 24 - - 8.4 0.14 Front-end loader No. 1 72,000 72 1.2 72 - - 25.2 0.42 Road improvement 100,000 100 1.7 50 50 - 35.0 0.59 Cattle Cows No. 50 30,000 1,500 25.9 1,500 - - 525.0 9.06 Heifers No. 20 25,000 500 8.6 500 - - 175.0 3.01 Bulls No. 2 50.000 100 1.7 100 - - 35.0 0.59 Total - - - 4,493 77.5 3,488 805 200 1,572.5 27.1 /I Remodeling of existing structure. May 21, 1974 ANNEX Table 2d SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-HA MOUNTAIN FARM FOR BEEF PRODUCTION - NORTH Cattle Herd Development Projections Before --- -----------Years --------------------- Category Unit Development 1 2 3 4 5 6 7 8-12 Herd Composition Breeding cows No. - 50 64 77 85 92 100 100 100 Bualls No. - 2 3 3 4 4 4 4 4 Neifers 8-20 months No. - 20 20 20 22 24 18 18 18 BuLlls 8-20 months No. - - 20 27 31 35 38 42 42 Weaned calves No. - 40 54 65 72 78 85 85 85 Total incl. calves No. - 112 161 192 214 233 245 249 249 Total AU - 72 107 127 143 156 160 164 164 Mortality Cows No. - 1 1 1 2 2 2 2 2 Bulls No. - - - - - - - - - Neifers 8-20 months No. - - - 1 1 1 1 1 1 Bulls 8-20 months No. - - 1 1 1 1 1 1 Total No. - 1 1 3 4 4 4 4 4 Sales Weaners (females) No. - - 7 10 12 21 24 24 24 Bulls (fattened) No. - - 20 25 30 34 37 41 41 Cull cows No. - 5 6 11 13 14 15 15 15 Culi bulls No. - - - 1 1 1 1 1 1 Total No. - 5 33 47 56 70 77 81 81 Purchases Heifers 8-20 months No. - 20 - - - - - Cows No. -5 - - - - - Bulls No. - 2 - - Total No. - 72 - - Technical Coefficients Calves weaned %- 80 85 85 85 85 85 85 85 Cows culled - 10 10 15 15 15 15 15 15 Bulls culled 7 - - 25 25 25 25 25 25 Mortality %- 2 2 2 2 2 2 2 2 May 17, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-HA MOUNTAIN FARM FOR BEEF PRODUCTION - NCRTH Sales Projections Before ------------------------------------- Years -------------------------------- Category Unit Development 1 2 3 4 5 6 7-12 CATTLE Number of Head Sold Weaners No. - - 7 6 10 11 21 24 Bulls (fat) No. - - 20 25 30 34 37 41 Cull cows No. - 5 6 11 13 14 15 15 Cull bulls No. - - - I I I I I Average Liveweight Weaners kg - 220 220 220 220 220 220 220 Bulls (fat) kg - 425 425 425 425 425 425 425 Cull cows kg - 500 500 500 500 500 500 500 Cull bulls kg - 750 750 750 750 750 750 750 Price Liveweight Weaners Ptas/kg - 80 80 80 80 80 80 80 Bulls (fat) Ptas/kg - 70 70 70 70 70 70 70 Cull cows Ptas/kg - 45 45 45 45 45 45 45 Cull bulls Ptas/kg - 50 50 50 50 50 50 50 Cattle Sales Weaners Ptas '000 - - 123 106 176 194 370 422 Bulls (fat) Ptas '000 - - 595 743 893 1,012 1,101 1,220 Cull cows Ptas '000 - 112 135 248 292 315 338 338 Cull bulls Ptas '000 - - - 38 38 38 38 38 Subtotal Ptas '000 - 112 853 1,135 1,399 1,559 1,847 2,018 CASH CROP (Rye) Area ha 5 - - - - - - - Yield kg/ha 1,000 - - - - - - - Production kg 5,000 - - - - - - - Price Ptas/kg 6 - - - - - - - Sales Ptas '000 30 - - - - - - GRAZING FEE Area ha 45 - - - - - - - Price Ptas/ha 200 - - - - - - - Rent Ptas '000 9 - - - - - - - TOTAL SALES (D x Cattle Ptas '000 - 112 853 1,135 1,399 1,559 1,847 2,018 _ Cash crop Ptas '000 30 - - - - - - - GrazinR fee Ptas '000 9 - - - - - - - Total Ptas '000 39 112 853 1,135 1,399 1,559 1,847 2,018 M.y 20, 19/4 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-HA MOUNTAIN FARM FOR BEEF PRODUCTION - NORTH Projected Operating Expenses Before ---------------------------------Years----------------------------------- Unit Unit Cost Development 1 2 3 4 5 6 7 8-12 (Ptas) (------------------------------------------------Ptas '000--------------------------------- Pasture maintenance Fertilizer ha 4,000 - - - - 200 200 200 200 200 Reseeding ha 4,200 - - - - 20 20 20 20 20 Cash crop (rye) ha 2,950 /I 15 - - - - - - - Hay tons 500 - - 10 12 15 15 15 20 20 Silage tons 175 - 25 50 50 50 50 50 50 50 Concentrates Cows head 600 - 30 38 46 51 55 60 60 60 Yearlings head 2,000 - - 40 50 60 70 75 80 80 Animal health 250 - 18 27 32 36 39 40 41 41 Labor man equiv. 150,000 - 150 150 150 150 150 150 150 150 Road maintenance - /2 - 1 2 2 2 2 2 2 2 Repair and maintenance - /2 - - 2 4 4 4 4 4 4 of fence Building repair and - 2 - - 5 6 6 6 6 6 6 maintenance Machinery repair, maintenance - /3 - 28 37 37 37 37 37 37 37 and operation Taxes /4 5 18 25 29 32 35 35 36 36 Sub-total - 20 270 386 418 663 683 694 706 706 a x Total X 20 297 425 460 729 751 763 776 776 0 v co /1 Including tillage, seed, fertilizer and harvesting. 2 21% on cost of construction. 7l10o on cost of machinerv Plus 300 Ptas per ha for fuel and lubricants. T 70 Ptas per ha real estate tax plus 200 Ptas per AU. - 7 Includes 10M allowance for contingency, except in situation "Before Development". May 20, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-PA MOUNTAIN FARM FOR BEEF PRODUCTION--NORTH Financial Projections -~~~~~~~~~~~~~~_________-___--Years----~~~~~~~~~~~~~~~ Before Development 1 2 3 4 5 6 7 8 9 10 11 12 13 ------------------------------------------------------------------------------------------------------ Ptas '000 -------------------------------------------------------------------------_---_ CASH INFLOW 1. Annual sales 39 112 853 1,135 1,399 1,559 1,847 2,018 2,018 2,018 2,018 2,018 2,018 2,018 2. Investment capital Li a. Farmer's contribution - 698 161 40 - - - - - - - - - b. Long-term loan - 2,790 644 160 - 3. Working capital a. Farmer's contribution - 19 13 22 175 b. Short-term loan - 297 103 - - - - - - - - - - Total expected cash inflow 39 3,916 1,774 1,357 1,574 1,559 1,847 2,018 2,018 2,018 2,018 2,018 2,018 2,018 CASH OUTFLOW 1. Investment - 3,488 805 200 - - - - - - - - - 2. Operating expenses 20 297 425 460 729 751 763 776 776 776 776 776 776 776 3. Debt service a. Long-term 10577 a. ) Interest lo? _ 91 202 228 234 208 182 156 130 104 78 52 26 (ii) Principal - - _ - - 394 400 400 400 400 400 400 400 400 b. Short-term 1057 (i) Interest 19 7 - - - - - - - - - - (ii) Principal /4 - - 297 103 - - - - - - - - - c. Technical service - - 8 16 18 18 16 14 12 10 8 6 4 2 Total expected cash outflow 20 3,903 1,752 1,009 1,375 1,375 1,359 1,344 1,316 1,288 1,260 1,232 1,204 776 Total expected cash balance at year's end 19 13 22 348 199 184 488 674 702 730 758 786 814 1,242 /I Accounts for 207, of the total on-farm investment cost. /2 6.57, on the outstanding loan. /3 12 years repayment with 3 years of grace. /4 0.5% on the outstanding debt December 19, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-EA MOUNTAIN FARM FOR BEEF FATTENING - NORTH On-Farm Iavestment Projections Development Phasing Average Average Cost Per Farm --------Years-------- Units Per Unit Cost (Us$ '000 1 2 3 Cost -50 Farms Investment Items Unit Farm (Ptas) (Ptas 000) equiv.) (-------Ptas '000-------) (Ptas mil.) (US$ mil. equiv.) Pasture establishment Land clearing ha 50 15,000 750 12.9 375 375 - 37.5 0.64 Seeding ha 50 10,000 500 8.6 250 250 - 25.0 0.43 Pasture consolidation ha 50 4,000 200 3.4 - - 200 10.0 0.17 Fencing km 10 36,000 360 6.2 180 180 - 18.0 0.31 Watering points No. 7 5,000 35 0.6 35 - - 1.7 0.03 Feed lot m2 1,500 250 375 6.5 225 150 - 18.7 0.32 Silo (clamp) m3 750 200 I50 2.6 150 - - 7.5 0.13 Storage building /1 n.a. n.a. 50,000 50 0.9 50 - - 2.5 0.04 Cattle working facilities No. 1 150,000 150 2.6 90 60 - 7.5 0.13 Road improvement n.a. n.a. 100,000 100 1.7 50 50 - 5.0 0.08 Maohinery Tractor No. 1 288,000 ,88 5.0 288 - - 14.4 0.25 -Mower No. 1 72,000 72 1.2 72 - - 3,6 0.o6 Trailer No. 1 72,000 72 1.2 72 - - 3.6 o.o6 Fertilizer spreader No. 1 24,000 24 0.4 24 - - 1.2 0.02 Front-end loader No. 1 72,000 72 1.2 72 o - 3.6 _._6 Total - - 3,198 55.1 1,933 1,Q65 200 159.9 2,8 L Remodeling of existing structure. May 14, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-HA MOUNTAIN FARM FOR BEEF FATTENING - NORTH Sales Projections Before ------ Years- Category Unit Development 1 2-12 CATTTF Number of head sold No. - 144 240 Average Liveweight kg - 400 400 Price liveweight Ptas/kg - 70 70 Cattle sales Ptas '000 - 4,032 6,720 CASH CROP (Rye) Area ha 5 - - Yield kg/ha 1,000 - - Production kg 5,000 - - Price Ptas/kg 6 - - Sales Ptas '000 30 - GRAZING FEE Area ha 45 - Price Ptas/ha 200 - Rent Ptas '000 9 - - TOTAL SALES Cattle Ptas '000 - 4,032 6,720 Cash crop Ptas '000 30 - - Grazing fee Ptas '000 9 - - w Total Ptas '000 39 4,032 6,720 May 15, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-HA MOUNTAIN FARM FOR BEEF FATTENING - NORTH Projected Operating Expenses Unit Unit Cost Before ------------------------------------Years----------------------------------------- (Ptas) Development 1 2 3 4 5 6 7 8-12 (--------------------------------------------------Pts - -------------------------------) Pasture maintenance Fertilizer ha 4,000 - - - - 200 200 200 200 200 Reseeding ha 4,200 - - - - 20 20 20 20 20 Cash crop (rye) ha 2,950 /1 15 - - - - - - - - Silage ton 175 - 65 105 105 105 105 105 105 105 Hay ton 500 - 38 63 63 63 63 63 63 63 Concentrates head 2,000 - 288 480 480 480 480 480 480 480 Animal health head 250 - 38 63 63 63 63 63 63 63 Labor man equiv. 150,000 - 150 150 150 150 150 150 150 150 Road maintenance - 2 - 1 2 2 2 2 2 2 2 Repair & maintenance - 2 - - 4 7 7 7 7 7 7 of fence Building repair & - 2 - - 11 15 15 15 15 15 15 maintenance Machinery repair, maintenance & operation - - 40 53 53 53 53 53 53 53 Purchase of weaners head 15,000 - 2,250 3,750 3,750 3,750 3,750 3,750 3,750 3,750 Taxes - /4 4 14 21 21 21 21 21 21 21 Suihtotal - - 19 2,884 4,702 4,709 4,929 4,929 4,929 4,929 4,929 Total / - - 19 3,060 4,985 4,993 5,234 5,234 5,234 5,234 5,234 /I Including tillage, seed, fertilizer and harvesting. /2 2% on cost of construction. Ai 10% on cost of machinery, plus 300 Ptas per ha for fuel and lubrication. /4 70 Ptas per ha real estate tax, plus 70 Ptas per calf. A5 Including a contingency allowance of 10% on operating expenses, except purchase of weaners, plus 5% on purchase of weaners, except in situation "Before Development." May 15, 1974 SPAIN SECOND LIVESTOCK DEVEWPFENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 50-lA MOUNTAIN FARM FOR BEEF FATTENING--NORTH Financial Projection. BeforeYer Development 1 2 3 4 5 6 7 8 9 i0 it 12 13 CASH INFLOW 1. Annual sales 39 4,032 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 2. Iveat.cent capital a. Farmer'a contribution - 387 213 40 - - - - - - - - - - b. Long-term loan - 1,546 852 160 3, Working capital a. Farmer's contribution - - b. Short-term loan - - - Total expected cash inflow 39 5,965 7,785 6,920 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 CASH OUTFLOW 1. Investment - 1,933 1,065 200 - - - - - - - - - - 2. Operating eapenaes 19 3,060 4,985 4,993 5,243 5,243 5,243 5,243 5,243 5,243 5,243 5,243 5,243 5,243 3. Debt service a. Long-term loan/2 (i) Intereat - _ 50 128 161 166 148 129 111 92 74 55 37 18 - (ii) Principal /3 - - - 286 284 284 284 284 284 284 284 284 b. Short-term loan (i) Interest - - - - - - - - - (ii) Principal /4 4 1 1 1 1 1 9 7 6 - c. Technical service - - 4 10 12 13 11 10 9 7 6 4 3 1 Total expected caah outflow 19 5,047 6,188 5,366 5,708 5,686 5,666 5,647 5,626 5,607 5,5e6 5,567 5,546 5,243 Total expected cash balance at year's end 20 918 1,597 1,554 1,012 1,034 1,054 1,073 1,094 1,113 1,134 1,153 1,174 1,477 /1 Accounts for 207. of the total on-fern investment coat. 7i 6.5% on the outstanding loan. /3 12 years -epeyment with 3 yc-a grtce. T4 0.5% on the outatanding debt. December 19, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 100-HA DRYLAND MILK SHEEP FAR- 'WITH 5-PA IRRIGATED PASTURE - MARGINAL CEREAL ZONES On-Farm Investment Projections Development Phasing Average Average Cost Per Farm -- Years--------- Units Per Unit Cost (US$ '000 1 2 3 Cost - 100 Farms Investment Item Unit Farm (Ptas) (Ptas '000) equiv.) (--------Ptas '000-------) (Ptas mil.) - (US$ mil. equiv.) Pasture establishment ha 5 10,000 50 0.9 25 25 - 5.0 0.09 Alfalfa establishment ha 20 8,000 160 2.8 80 80 - 16.0 0.27 Fencing km 6 55,000 330 5.7 110 110 110 33.0 0.57 Watering points No. 2 25,000 50 0.9 25 25 - 5.0 0.09 Sheep shed 2 400 1,000 400 6.9 200 200 - 40.0 0.69 Milking parlor m 70 2,500 175 3.0 175 - - 17.5 0.30 Milking equipment,/A incl. No. 1 430,000 430 7.4 430 - - 43.0 0.74 refrigerated milk storage tank 2 Mechanical feeding units No. 24 11,000 264 4.6 264 - - 26.4 0.46 in milking parlor Mower No. 1 50,000 50 0.9 50 - - 5.0 0.09 Hay rake No. 1 30,000 30 0.5 30 - - 3.0 0.05 Sheep: Ewes No. 300 3,500 1,050 18.1 1,050 - - 105.0 1.81 Rams No. 12 12,000 144 2.5 144 - - 14.4 0.25 Total - - - 3,133 54.0 2,583 440 110 313.3 5.4 ' > /I Two rows of twelve sheep each, /2 1,200 1. capacity. - May 13, 1974 Table 35 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 100-HA DRYLAND MILK SHEEP FARM WITH 5-NA IRRIGATED PASTURE - MARGINAL CEREAL ZONES Sheep Flock Development Projections Before- -------------------- -Years ------------------------------------------- Category Unit Development 1 2 3 4 5 6-12 Flock Composition Breeding ewes No. - 300 374 400 400 400 400 Breeding rams No. - 12 15 16 16 16 16 Lambs born No. - 318 595 636 636 636 636 Replacement ewes No. - - 143 111 111 111 ill Replacement rams No. - - 5 3 3 3 3 Total No. - 630 1,132 1,166 1,166 1,166 1,166 Total AU - 52 90 88 88 88 88 Ewe equivalents No. - 312 537 530 530 530 530 Mortality Ewes No. - 6 7 8 8 8 8 Rams No. - - - - - - Lambs No. - 32 59 51 51 51 51 Replacement ewes No. _ - 3 2 2 2 2 Total No. - 38 69 61 61 61 61 Sales Lambs No. - 138 422 471 471 471 471 Cull ewes No. - 60 75 80 80 80 80 Cull rams No. - 2 3 3 3 3 3 Yearling ewes No. - - 32 21 21 21 21 Total No. - 200 532 575 575 575 575 Purchases Ewes No. - 300 - - - - Rams No. - 12 Total No. - 312 - - - - Technical Coefficients Ewes lambing - 85 85 85 85 85 85 Lambs per ewe lambing No. - 1.25 1.25 1.25 1.25 1.25 1. 25 Lambs per ewe per year No. - 1.50 1.50 1.50 1.50 1.50 1.50 Culling: (a) Ewes - _ 20 20 20 20 20 20 (b) Rams - 20 20 20 20 20 20 Mortality: (a) Breeding ewes -% 2 2 2 2 2 2 (b) Replacement ewes - 2 2 2 2 2 2 (c) Lambs - 10 10 8 8 8 8 Milk production 1/ewe/yr. - 90 135 135 135 135 135 Yield of wool kg/ewe equiv. - 2.2 2.2 2.2 2.2 2.2 2.2 May 8, 1974 ANSNFX 4 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 100-RA DRYLAND MILK SHEEP FARM WITH S-NA IRRIGATED PASTURE - MARGINAL CEREAL ZONES Sales Projections Before- ------------------------Year- Category Unit Develop-ent 1 2 3 4 5 6-12 SHEEP Nuaber of Read Sold La-b. No. - 138 422 471 471 471 471 Coil ewes No. . 60 75 80 80 80 80 Call rRos No. . 2 3 3 3 3 3 Breeding aninals No. - - 32 21 21 21 21 A-erage Live-eight Lanks kg - 12 12 12 12 12 12 Culle1wes kg - 45 45 41 45 45 45 Cull ra-s kg _ 60 60 60 60 60 60 Price Liveweight Laebs Ptes/kg - 105 105 105 105 105 105 Cull e-es Ptas/kg - 32 32 32 32 32 32 Coil ra-s Pt.s/kg - 32 32 32 32 32 32 Breeding aninals Ptas/head - 2,700 2,700 2,700 2,700 2,700 2,700 Sheep Sales Laa,bs Ptas '000 - 174 532 593 593 593 593 Cull e.es Ptas '000 - 86 108 115 115 115 115 Cull reose Ptis '000 - 4 6 6 6 6 6 BreedinC . ninals Ptas '000 - - 86 57 57 57 57 Subtotal Ptas '000 - 264 732 771 771 771 771 WOOL NBaber shorn ewe equiv. _ 312 537 530 530 530 530 Yield kg/ewe equiv. - 2.2 2.2 2.2 2.2 2.2 2.2 Production kg - 686 1,181 1,166 1,166 1,166 1,166 Price Ptis/kg - 70 70 70 70 70 70 Sales Ptes '000 - 48 83 82 82 82 82 Ewes No. - 300 374 400 400 400 400 Lasbing rate % - 85 127 127 127 127 12'7 Ewes in oilk No. . 255 475 508 508 908 50B Milk yield 1/-ue/yr. - 90 90 90 9O 90 9O Milk prodoction '000 1 - 23 43 46 46 46 46 Milk prior Ptis/I - 22 22 22 22 22 22 Milk sales Ptas'000 - 506 946 1,012 1,012 1,012 1,012 CASN CROPS Area Wheat he SO 20 20 20 20 20 20 Grain legues ha 25 - - - - - Sugarbeets he 5 - - - - - - Yield Wheat kg/ha 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Grain legune kg/he 700 - - - - - - Sugarbeets kg/he 30,000 - - - - - - Production Wheat tons 50 20 20 20 20 20 20 Grain legune tons 17 - - - - - - Sugarbeets tons 150 Prices Wheat Pt.s,/kg 7 7 7 7 7 7 7 Grain leg-e. Ptes/kg 10 sogarbeets Ptis/kg 2 - - - - - - Sales Wheat Ptie '000 350 140 140 140 140 140 140 Grain leguee Pt.s '000 170 - - - - - - S.g.rb..ts Ptas 000 300 - - Subthtal Ptis '000 820 140 140 140 140 140 140 TOTAL SALES Sheep Ptis '000 - 264 732 771 771 771 771 Wool Ptis '000 - 48 83 82 82 82 82 Milk Ptas '000 - 506 946 1,012 1,012 1,012 1,012 Cash crops Pts '000 820 140 140 140 140 140 140 TotaS Ptis '000 820 958 1,901 2,005 2,005 2,005 2,005 May 10, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT DEVELOPMENT PROJECTIONS DEVELOPMENT OF 100-HA DRYLAND MILK SHEEP FARM WITH 5-hA IRRIGATED PASTURE - MARGINAL CEREAL ZONES Projected Operating Expenses Before ----------------------------------------------------Years----------- Unit Unit Cost Development 1 2 3 4 5 6 7 8 9 10 11 12 (Ptas) (--------------------------------------------------------Ptas '000-------------------------------------------------------------- Pasture maintenance Fertilizer ha 3,200 - _ 8 16 16 16 16 16 16 16 U. 16 16 Alfalfa maintenance LI Fertilizer ha 1,800 - - 18 36 36 36 36 36 36 3e 36 Reseeding ha 8,000 - - - - - - 80 80 - - _: Annual forage ha 7,500 - 150 150 150 150 150 150 150 150 150 150 15r) 150 Cash crops Wheat ha 7,000 350 140 140 140 140 140 140 140 140 140 140 14() 140 Oats ha 6,000 - 120 120 120 120 120 120 120 120 120 120 120 120 Grain legume ha 4,000 100 80 80 80 80 80 80 80 80 80 80 80 80 Sugar beets ha 25,000 125 - - - - - - - - - _- - Concentrates head 180 - 54 67 72 72 72 72 72 72 72 72 72 72 Animal health ewe equiv. 120 - 37 64 64 64 64 64 64 64 64 64 64 64 Labor man equiv. 150,000 150 150 150 150 150 150 150 150 150 150 150 150 150 Repair and maintenance of fence - L2 - - 2 4 7 7 7 7 7 7 7 7 7 Building repair and maintenance - 2 - 8 12 12 12 12 12 12 12 12 12 12 Machinery repair and maintenance - /3 - 38 76 76 76 76 76 76 76 76 76 76 76 Taxes - /4 22 29 34 34 34 34 34 34 34 34 34 34 34 Subtotal - - 747 798 917 954 957 957 1.037 1,037 957 957 957 1,037 1 037 Total A -- 747 878 1,009 1,049 1,053 1,053 1,141 1,141 1,053 1,053 1,053 1,141 1,141 /I Dryland alfalfa. /2 2% on cost of construction. 3 10% on cost of machinery. g - /4 70 Ptas per ha real estate tax plus 135 Ptas per AU plus 15,000 Ptas annually for Social Security. a Ai Including 10% contingency allowance, except in situation "Before Development."' u t- May 31, 1974 SPAIN SECOND LIVESTOCK DEVEWLPMENT PROJECT DEVELOPHENT PROJECTIONS DEVELOPMENT OF 100-HA DRYLAND MILK SHEEP FARM WITH 5-HA IRRIGATED PASTURE--MARGINAL CEREAL ZONES Financial Projections Before ---------------------------------------------------------------------------------------- Years ----------__________-___________________________________________________________-_ Development 1 2 3 4 5 6 7 8 9 10 11 12 13 -------------------------------------------------------------------------------------------P---------- Pt..s '000 -------------------------------------------------------------------------------- CASH INFLOW 1. Annu.al salee 820 958 1,901 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2. Invesement capitol 517 88 22 - - - - - - - - - - a. Fars,er'a contribstion b. Long-ten Sees - 2,066 352 SS 3. Working cepital a. Farmer's contribution - 73 - b. Short-term lo.- Total expected cash inflow 820 3,614 2,341 2,115 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 CASH OUTFLOW 1. Investment - 2,583 440 110 - - - - - - - - - - 2. Operating expenses 747 878 1,009 1,049 1,053 1,053 1,141 1,141 1,053 1,053 1,053 1,141 1,141 1,053 3. Debt service a. Long-tern loan,2 (i) Interest 7I - 67 146 160 163 145 127 109 91 73 54 36 18 - (ii) Principal 3 - - - - 274 279 279 279 279 279 279 279 279 b. Short-term loan (i) Interest - - - - - - - - - (ii) Principal A - - - - c. Technical service - - 5 1l 12 13 11 10 8 7 6 4 3 1 - Total expected cash outflow 747 3,533 1,606 1,331 1,503 1,488 1,557 1,537 1,430 1,411 1,390 1,459 1,439 1,053 Total expected eash balance at year's end 73 01 735 784 502 517 448 468 575 594 615 546 566 952 /1 Accounts for 20% of the total on-farm investment cost. /2 6.5% on the outstanding loss. /3 12 years repayment with 3 years of grace, /4 0.5% on the outstanding debt. December 19, 1974 ANNEX 5 Table 1 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Project Cost Estimates L/ Ptas million US$ million X For_i.n Local Foreign Total Local Foreign Total tghan5 I. On-Farm Development Pasture establishment 718 637 1,355 12.4 11.0 23.4 Pasture consolidation 92 92 184 1.6 1.6 3.2 Fencing 330 41 371 5.7 0.7 6.4 Watering facilities 78 16 94 1.3 0.3 1.6 Farm buildings 665 74 739 11.4 1.3 12.7 Machinery and 619 319 938 10.7 5.5 16.2 equipment Road improvement 40 - 40 0.7 - 0.7 Livestock 2,324 258 2,582 40.1 4.4 44.5 Working capital 1,020 364 1,384 17.6 6.3 23.9 Subtotal 5,886 1,801 7,687 101.5 31.1 132.6 23.0 II. .Livestock Development Agency Expatriate experts - 22 22 - o.4 0.4 Local staff 433 - 433 7.5 - 7.5 Vehicles and expenses 110 73 183 1.9 1.3 3.2 Training grants - 6 6 - 0.1 0.1 Subtotal 543 101 644 9.4 1.8 11.2 16.0 rI1, Livestock Procurement Service Subtotal 320 - 320 5.5 - 5.5 !V. Total Project Cost 6,749 1,902 8,561 116.4 32.9 149.3 22.0 /1 Costs are based on prices obtained at time of appraisal, February/March 1974. September 6, 1974 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT On-Farm Development Cost by Region and by Farm Type Southwest North Dryland Dryland Dryland Irrigated Dairy Cattle Sheep Plus Cattle Sheep Dairy Cattle Cattle Production Production Irrigated Fattening Production Subtotal Production Production Fattening Subtotal Total Cattle Production --------------------------n--------------------------------------------US$ million---------------------------------------------------------Cn------…) Pasture establishment 4.7 3.6 5.4 0.4 0.4 14.5 0.3 7.5 1.1 8.9 23.4 Pasture consolidation 0.6 0.5 0.6 - - 1.7 0.1 1.2 0.2 1.5 3.2 Fencing 1.3 1.0 1.3 0.4 0.6 4.6 0.4 1.1 0.3 1.8 6.4 Watering facilities 0.3 0.4 0.3 - 0.1 1.1 0.3 0.2 - 0.5 1.6 Farm construction 1.6 2.2 1.5 1.7 1.0 8.0 2.5 1.6 0.6 4.7 12.7 Machinery and equipment 1.1 2.2 3.9 4.6 1.3 13.1 0.4 2.2 0.5 3.1 16.2 On-farm roads - - - - - - - 0.6 0.1 0.7 0.7 Livestock 9.1 7.7 11.8 - 2.1 30.6 1.2 12.7 - 13.9 44.5 Incremental working capital 12.9 0.6 8.0 - - 21.5 - 2.4 - 2.4 23.9 Total 31.6 18.3 32.8 7.1 5.4 95.2 5.1 29.5 2.8 37.4 132.6 September 9, 1974 Table 1 SPAIN S3CCIID LI;ESs'OCK D3VELOPMENT PROJECT LIV};STOCK DEVELOPHENT AGENCY Staffing Pattern m- AWdlnistrative Staff Senior L; 44 Tuni.or L4 16 18 18 l 8 Supporting 33 37 2 2 k2 T'echnical Staff Senior /1 35 38 4 Peritos 48 55 60 60 60 Yo~~~~ £34~~ 250165 16- 16 Co+t.- __13' 3150 1e7_ /1 Includes Technical Consultant. July 23, 19714 ANNEX 6 Table 2 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT LIVESTOCK DEVELOPMENT AGENCY Administrative Costs 1 ~ ~~2 3 45 Technical Consultant 3.0 3.0 3.0 3.0 3.0 Salaries 53.0 62.5 71.9 75,5 79.3 Social Security 8.0 9.4 10.8 11.3 11.9 Office Operating Expenses 26.0 30.0 33.0 35.0 38.0 Purchase of Vehicles and Equipment 1.0 1.0 1.2 1.2 1.5 Overseas Training 1.0 1.0 1.0 1.0 1.0 Part-Time Consultants 0.9 0.9 0.9 0.9 0.9 Sub-Tot l 92.9 107.8 121.8 127.9 137.6 Total Li. 102.2 118.6 134.0 140.7 149.2 /1 All staff benefits and travel costs are included. /2 Includingl0% allowrance for contingency. July 23, 1974 kX,+iN EX U APPepcix 1 Page 1 SPAIN SECOND LIVES TOCK DEVELOPMIENT PROJECT Consultants - Di:aft Terms of Reference Technical Consultant 1. Qualifications: A university degree in Agricultural Science, preferably with an animal husbandry and/or farm management bias, or the equivalent. Candidates must have broad professional experience of at least 10 years in land development as welL as in riodern teclniques of dairy and beef production from pasture. They should have the ability and experience to undertake technical and financial evaluation of investment plans for farm development. They should also have the ability to prepare and carry out training programs for livestock technicians and have wide experience in on- farm extension. 2. Duties: The Techrnical C2onsultant would be responsible for the technical aspects of the Project, particularly in respect of the Northern Project Area, and would be direcLly responsible to the Director of the LDA. His specific duties would include but would not be limited to the following: (a) Advise tJe o,irct o the LDA on major policy matters in respect ol thce Irofi:.p iArticularly iri the Northern Project Area; (b) Advise and assist the Director of the LDA in recruiting, training and managing the technical staff, particularly for the Northern Project Area; (c) With the assistance of the 'ocal staff, help participating farmers to prepare on- farm developm4ent programs, as well as review and approve farm investment plans; (d) On the auithority -f t.i- rec&r of the LDA, recomTmend loans under the P.roject to warticipatimg lending institutions; (e) Supervise the execution of approved farm development plans, particularly in the Northern Project Area, and recommend remedial actiorn when eded; ANNEX 6 Appendix 1 Page 2 (f) Maintain records of investment plans and loan supervision, particularly in respect of the Northern Project Area, in order to provide an adequate basis for measurement of Proj- ect impact; (g) Prepare Quarterly and Annual Progress Reports as required by the Director of the LDA; and (h) Assist the Director of the LDA in the selection of recipients of training fellowships provided for under the Project. Seed Production Specialist 3. Qualifications: A university degree in Agricultural Science, preferably with a major in pasture agronomy, or the equivalent. Candidates must have broad professional experience in pasture and forage seed production, including at least 5 years in the production and harvesting of annual forage legume seeds, especially subterranean clover. In addition, they should be able to design and carry out research and demonstration trials and to organize training programs in seed production. 4. Duties: The Seed Production Specialist would be responsible for advising the Director, National Institute for Seeds and Nursery Plants, and assisting the Ministry of Agriculture in planning and implementing a pasture and forage seed production program. his specific duties would include but would not be limited to the following: (a) Advise as to what pasture and forage seeds are the most suitable for production in Spain, including the feasibility of increasing the production of those grasses and legumes indigenous to the country; (b) Demonstrate modern and efficient techniques of pasture and forage seed production, including harvesting; (c) Assist in setting up the most feasible system of producing high quality seed, i.e., on Government farms or by farmers under license; (d) Advise and assist in recruiting and training the technical personnel needed for the seed production program; (e) Advise and assist in the importation of any special machinery, equipment or seed stock; and (f) Advise and assist in seed quality control and seed certification. SPAIN SECOND LiVESTOCK DEVELOPMENT PROJECT Livestock Development Agency Proposed Organizational Chart fl Coordinating Commission MINISTRY OF AGRICULTURE lUnder-Secretary of Agriculture (President) Directorate General of Agricultural Production Director General of Agricultural Production (Vice-president) _ _ Representative of FORPPA Representative of the Directorate General of the Treasury and Budgets (Representative of IRYDA Representative of ICONA |Representative of the Office of the Deputy Director General of Foreign Financing DIRECTOR Representative of ICO - L Representative of the National Livestock Raising - Organization I IRepresentative of the National Farmers' and Ranchers' Society AUDITOR LEGAL Representative of the Ministry of Development Planning ADVISOR (Representative of DGCEA The Deputy Director General for Animal Production DEPUTY DIRECTOR |The Director of the Livestock Development Agency PROJECTS TECRNICAL LIASON AND RESEARCH AND CHI F OF SECRETARY ASSISTANCE PROGRAM SERVICES EXPERIMENTATION OFFICE GENERAL CARTOGRAPHY LIRRARy AND DOCUMENTATION TEAMS GENERAL ACCOUNTING REGISTRY DRAFTING | LPUBLICATIONS AFFAIRS i AND FILES | AFFfIRSS DIRECT RELATIONS - - - - - - - - - - CO-ORDINATION July 23, 1974 ANNEX 7 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Number and Phasing of Loan Commitments -------Years------- 1 2 3 Total - - - - - Farms - Dryland cattle production 100 100 - 200 Dryland sheep production 75 75 - 150 Dryland (plus irrigated 100 100 _ 200 pasture) cattle production Irrigated cattle fattening 60 60 80 200 Dairy cattle production 150 150 150 450 Mountain cattle production 50 20 100 350 Mountain cattle fattening 16 17 17 50 Dairy sheep_production 30 30 140 100 Total 581 732 387 1,700 August 29, 1974 SECOND LIVESTOCK DEVELOPMENT PROJECT Project Cash Flow L ----------------------------------------------------------------- Years ---------------------- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total …Pr-------------------------------------s--------------------- Ft.s Millio ----------------_______________________________________________ INFLOW 1. Government contributian 850.0 1,500.0 1,000.0 250.0 130.0 - - - - - - - - - - 3,730.0 2. IBRD loan 411.8 788.8 533.6 139.2 40.6 - _ _ _ - _ - - _ _ 1.914.0 Subtotal 1,261,8 2,288.8 1,533.6 389.2 170.6 - - - - - - - - - - 5,644.0 3. Loan repayments (a) Dryland cattle farms - - - 48.1 96.3 96.4 96.4 96.4 96.4 96.4 96.4 96.4 48.2 - - 867.4 (b) Dryland sheep farms - - - 45.1 90.5 90.9 90.9 90.9 90.9 90.9 90.9 90.9 45.5 - - 817.4 (c) Dryland cattle farms - - - 64.4 128.4 128.0 128.0 128.0 128.0 128.0 128.0 128.0 64.0 - - 1,152.8 with irrigated pasture (d) Irrigated cattle - - - 11.4 22.3 37.2 36.6 36.6 36.6 36.6 36.6 36.6 25.6 14.6 - 330.7 fattening farm (a) Dairy farm - _ _ 8.4 17.2 26.2 26.6 26.5 26.6 26.5 26.6 26.5 17.7 8.8 - 237.6 (f) Mountain cattle - - - 19.7 98.8 139.4 140.0 140.0 140.0 140.0 140.0 140.0 120.0 40.0 - 1,257.9 production fanm (g) Mountain cattle - - - 4.6 9.4 14.3 14.2 14.2 14.2 14.2 14.2 14.2 9.6 4,8 _ 127.9 fattening farm (h) Milk sheep farm - - - 8.2 16.o 27.7 27.9 27.9 27.9 27.9 27.9 27.9 19.5 11.2 _ 250.6 Subtotal - - - 209.9 479.5 560.1 560.6 560.5 560.6 560.5 560.6 560.5 350.1 79.4 - 5,042.3 4. Interest income 36.7 145.4 264.3 322.2 304.6 288.2 248.8 213.2 175.9 138.5 101.3 64.6 27.5 5.1 _ 2,336.3 5. Teehnical service6 3.4 12.3 21.5 25.8 25.0 22.0 18.8 14.9 13.2 10.4 7.8 4.7 2.0 0.3 - 182.1 Total cash inflow 1,301.9 2,446.5 1,819.4 947.1 979.7 870.3 828.2 788.6 749.7 709.4 669.7 629.8 379.6 84.8 _ 13,204.7 OUTFLOW 1. Loans to (a) Dryland cattle farms 258.6 399.1 172.2 34.6 2.9 - - - - - - - - 867.4 (b) Dryland sheep farms 201.6 346.7 204.9 62.0 2.2 _ _ _ _ _ - _ _ - 817.4 (c) Dryland cattle farms 281.1 527.4 292.4 49.0 2.9 - - - - - - - - - - 1,152.8 with irrigated pasture (d) Irrigated cattle 75.5 99.3 124.3 31.6 - - - - - - - - - - - 330.7 fattening farm (e) Dairy farm 63.9 79.2 79.2 15.3 - - - 2 - _ - - _ _ _ 737.6 (f) Mountain cattle production farm 139.5 590.2 415.8 96.4 16.0 - - - - - - - - - - 1,257.9 (g) Mountain cattle 24.7 39.9 43.3 17.2 2.8 - - - - - - - - - - 127.9 fatteniag farm (h) Milk sheep farm 62.0 72.5 95.8 16.7 3.6 - - - - - - _ _ _ - 250.6 Subtotal 1,106.9 2,154.3 1,427.9 322.8 30.4 - - - - - - - - - - 5,042.3 2. Operation LDA 102.0 118.0 134.0 141.0 149.0 - - - - - - - - - - 644.0 3. IBRD loan serice Interest & commitment fee 30.3 76.8 128.1 154.1 161.1 162.4 151.7 139.8 126.9 112.9 97.7 81.2 63.3 43.9 23.2 1,553.4 Principal - - - - - 129.3 140.0 151.9 164.8 178.8 194.0 210.5 228.4 247.8 268.5 1,914.0 Subtotal 30.3 76.8 128.1 154.1 161.1 291.7 291.7 291.7 291.7 291.7 291.7 291.7 291.7 291.7 291.7 3,467.4 4. Government loan aervice Interest 17.3 65.3 116.3 141.8 149.5 152.2 139.5 126.3 112.6 98.3 83.4 67.8 51.9 35.1 29.9 1,387.2 Principal - - - - - 310.5 323.2 336.4 350.1 364.4 379.3 394.9 410.8 427.6 432.8 3,730.0 Subtotal 17.3 65.3 116.3 141.8 149.5 462.7 462.7 462.7 462.7 462.7 462.7 462.7 462.7 462.7 462.7 5,117.2 Total cash outflow 1,256.5 2,414.4 1,806.3 759.7 490.0 754.4 754.4 754.4 754.4 754.4 754.4 754.4 754.4 754.4 754.4 14,270.9 CASH SALANCE- Yearly 45.4 32.1 13.1 187.4 489.7 115.9 73.8 34.2 (4.7) (45.0) (84.7) (124.6) (374.8) (669.61 (754.4)(1,066,2) Cumulative 45.4 77.5 90.6 278.0 767.7 883.6 957.4 991.6 986.9 941.9 857.2 732.6 357.8 (311.8) (1,066.2) /1 If cash aurploses are reinve.ted at ac intret rat. of 5,757O per annum, the final cash deficit i year 15 would be reduced to aboot Ptas 680 million. Decenber 20, 1974 ANNEX 9 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Estimated Schedule of Quarterly Disbursements IBED Fiscal Year Cumulative Disbursements and Quarter at end of Quarter -US$ '000) 1975/76 June 30 355 September 30 1,420 December 31 3,550 March 31 7,100 1976/77 June 30 9,140 September 30 11,860 December 31 15,940 March 31 20,700 1977/78 June 30 22,080 September 30 23,920 December 31 26,680 March 31 29,900 1978/79 June 30 30,260 September 30 30,740 December 31 31,1460 Marct; 31 32,300 1979/80 June 30 32,1405 September 30 32,545 December 31 32,755 March 31 33,°000 August 29, 1974 SLAIN SECOND LIVESTOCK DEVELOPIENT PHOJECT FINANCIAL RATES oF RETURN Before Years lO 1 2 Financial ODvelopnen.t 1 2 3 4 5 6 7 B 9 15 15 12 Rate of Retur ------------------------------------------------------------------- Ptas…… 0 r------------------------------------------------------ - 12 Yearn One 500 h. Drylnd Form - Cattle Produ-tion (per camtl Bales 653 516 918 1,287 2,421 2,448 2,678 2,678 2,678 2,678 2,678 2,678 2,678 operoting Expe-oee 340 871 1,012 1,165 1,345 1,387 1,389 1,389 1,389 1,389 1,389 1,389 1,389 On Ra-cS Invest-ent - 3,232 1,756 396 36 - - - - - - lncremental Voce liHed 7,906 Balance 313 (3,587) (1,850) (274) 1,040 1,061 1,289 1,289 1,289 1,289 1,289 1,289 98195 Incremenetl ooBance - (3,900) (2,163) (587) 727 748 976 976 976 976 976 976 8,882 12 One 500 ho DryJand Farn - Sheep Prod,StEon1 soles 630 761 1,545 2,743 3,012 4,169 4,169 4,169 4,169 4,169 4,169 4,169 4,169 Operating Expemnes 351 1,024 1,222 1,465 1,503 1,655 1,655 1,655 1,655 1,655 1,655 1,655 1,655 on Ree11 Investnent - 3,360 2,419 996 36 - - - - - - Increnectal Val-e Fleck 9,587 Balance 279 (3,623) (2,096) 282 2,273 2,514 2,514 2,514 2,514 2,514 2,514 2,514 12,101 Increnentai Balance - (3,902) (2,375) 3 1,993 2,235 2,235 2,235 2,235 2,235 2,235 2,235 11,822 24 one 500 ha Dryland Faon with 20 ha Irrigated Pastare - Cettle Production Boles 880 628 1,282 1,975 2,724 3,150 3,571 3,571 3,571 3,571 3,571 3,571 3,571 Operating Expenscs 467 1,218 1,221 1,468 1,571 1,618 1,638 1,638 1,621 1,621 1,621 1,638 1,638 On Ranch Inve-tment - 3,514 3,079 576 36 - - - - - - Incremental Value Heed 9,385 Balance 413 (4,5n4) (3,021) (69) 1,117 1,532 1,933 1,933 1,950 1,95C 1,950 1,933 11,318 Increnental Belence - (4,517) (3,434) (482) 704 1,119 1,520 1,520 1,537 1,537 1,537 1,520 10,905 13 One 20 ha Irrigated Fore - Cattle Fattening Boles 1,116 3,006 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 4,537 Operating Enpen-es 599 2,455 3,513 3,538 3,555 3,555 3,533 3,565 3,555 3,555 3,555 3,5/4 3,565 On FaPn Invest-ent - 1,572 494 - - - - - - - - - - Balance 517 (1,021) 530 999 982 982 963 972 982 982 982 963 972 Increnm-al BSalane - (1,538) 13 482 465 465 446 455 465 465 465 446 455 21 One 6 ha Dairy FaPr Sales 234 344 460 574 682 682 682 682 682 682 682 682 682 Operating Enpe.ses 197 264 286 322 359 359 359 359 359 359 359 359 359 on Farm Investment - 533 127 - - - - - - - - - - Incremental Val-e lard 272 Balance 37 (453) 47 252 323 323 323 323 323 323 323 323 595 Incremental Balance - (490) 10 215 286 286 286 286 286 286 286 286 558 39 One 50 ha Fare - Cattle Peoductiom Soles 39 112 853 1,135 1,399 1,559 1,847 2,018 2,018 2,018 2,018 2,018 2,018 Operoatig E.penmce 20 297 425 060 729 751 763 776 776 776 776 776 776 on Flon 1n-e-t,noct - 3,488 805 200 - - - - - - - - - Incre1n- tal Val-e iled 5,550 Balance 19 (3,673) (377) 475 670 808 1,084 1,242 1,242 1,242 1,242 1,242 6,792 Incremntanl Balance - (3,692) (396, 456 651 789 1,065 1,223 1,223 1,223 1,223 1,223 6 773 19 one 100 ha Deyland Milk sheepPoem With 5 ho Irrigated Pasture Sal.e 820 958 1,901 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 2,005 Operating Expenses 747 878 1,009 1,049 1,053 1,053 1,141 1,141 1,053 1,053 1,053 1,141 1,141 On Fane Investmert - 2,583 440 110 - - Sncomnmti bEeValn Fleck 1,574 Balanct 73 (2,503) 452 846 952 952 864 864 952 952 952 864 2,438 Incremental Balance - (2,576) 379 773 879 879 791 791 879 879 879 791 2,365 27 One 50 ho Fore - CoLtlc Fatteng27 Sales 39 4,032 5,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 6,720 op-eating Expee-ne 19 3,060 4,985 4,993 5,243 5,243 5,243 5,243 5,243 5,243 5,243 5,243 5,243 On Pane leveetment - 1,933 1,064 200 - - - - - - - - - Balance 20 (961) 670 1,527 1,477 1,477 1,477 1,477 1,477 1,477 1,477 1,477 1,477 T -cremenL0l Ralaone - (981) 650 1,50,' 1,457 1,457 1,457 1,457 1,457 1,457 1,457 1,457 1,457 Sons-itivity Analysen: 1. Operating enpens.en increoed 10% and 1 on-facm i-vestment ionceased 207 3S t 2. op-r-tlmgnnpenten in-p-- e 10%l -,do _____________________________________________ _ __ salts dcnreased 57 _2* 97 July 29, 1974 ANNEX 11 Page 1 SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Economic Analysis and Rate of Return 1. The prices used for valuing sales in the financial analysis of all farm plans were those prevailing in Spain at the time of appraisal (March 1974). In comparing the quality of Spanish livestock products with imported commodi- ties to determine whether a set of comparable shadow prices is needed, the following considerations are appropriate. 2. Beef: The imported product used for purposes of comparison was chilled Argentine hindquarters (boneless) c.i.f. Smithfield. The IBRD Com- modities Section projected 1980 price, in constant 1974 prices, is US$377.00/100 kg or US$3.77/kg. At a conversion factor of 50% this converts to US$1.88/kg (bone-in carcass weight basis). At the 1974 exchange rate of US$1.00 = Ptas 58, this converts to a Spanish price of Ptas 109.04/kg carcass weight; and at a constant 1972 exchange rate for British L, US$ and Spanish Ptas, it would con- vert to Ptas 117.00/kg carcass weight. Since Spanish carcasses would be pre- dominantly fresh home-killed yearlings compared with Argentine three to four years old animals (chilled), a 7% premium should be allowed for the Spanish carcasses. This would raise the shadow price between Ptas 116.63/kg and 125.19/kg, depending upon exchange rate used. Approximately 30% of the beef produced under the Project would be cull cows and bulls and i0% yearlings. The March 1974 carcass weight price for yearlings (Madrid market) was Ptas 132.50/kg and for cull cows and bulls Ptas 107.50/kg. This results in an average carcass weight beef price for the Project (March 1974) of Ptas 125.00/kg which is identical to the upper range of the shadow price calculated above. 3. Given the variability of the exchange rates involved and the margin of error involved in the various conversion factors used, the price of beef production resulting from the Project is in line with the projected world price. Consequently no deduction is made in the value of beef sales for this Project compared with a 20% deduction made in the First Project because Spanish beef prices at that time were considered to be above world prices. 4. Lamb: The projected 1980 IBRD lamb price is between US$1.30 and US$1.50/kg c.i.f. UK markets, which converts to a Spanish price of Ptas 75.40 to 87.00/kg carcass weight. These would be frozen New Zealand carcasses. The Spanish product being freshly slaughtered requires a 20% premium over frozen imported lamb. About 78% of the mutton and lamb production from the Project would be lamb, of which 71% would be from lambs three to eight months. The price used in the financial analysis of farm plans for lambs up to three months was Ptas 105/kg liveweight (22% of total mutton and lamb production), for lambs three to eight months, Ptas 60/kg (56% of mutton and lamb production), and for mutton, Ptas 26/kg (22% of mutton and lamb production). The average ANNEX 11 Page 2 liveweight price for all mutton and lamb produced in the Project is about Ptas 60/kg. This is the average of prices received by farmers in the Project areas where mutton and lamb is produced and differs from the average liveweight prices reported for the country as a whole (Annex 2, Table 4). 5. At a dressing percentage of 50%, the projected world lamb price in 1980, at 1974 constant prices, would be between Ptas 37 and 43/kg. Since fresh lamb deserves a premium of 20% this would raise the average world shadow price to about Ptas 50/kg. 6. As in the case of beef -- and again in contrast to the situation prevailing at the time of the First Project when it was considered that Spanish mutton and lamb prices were appreciably above world market prices -- the prevailing Spanish prices used in the financial analysis of farm plans are only slightly higher than present projected world prices. 7. Milk and Wool: The amount of wool produced under the Project is relatively small and differences in Spanish and world market wool prices do not have a significant effect on the economic analysis. Since alternative milk supplies come from nearby European countries, the imported price of whole milk (Ptas 9.50/liter) are not substantially different from the pre- vailing Spanish price (Ptas 10/liter) and no adjustment is warranted. 8. Based on the above, the prices prevailing in Spain for the major products to be produced under the Project do not appear to differ greatly from projected 1980 world prices. Therefore, by contrast with the First Livestock Project, no adjustment is made in the value of output between the financial and the economic analysis. SPAIN SECOND LIVESTOCK DEVELOPMENT PROJECT Economic Rate of Return L Y e a r s 2 3 4 5 6 7 8 9 10 11 12 13 14 -_____________________________________________________ __________-_ s m--L ------------------------------------------------------------------- Aggregate of Farms Incremental Cash Balances E (1,578) (2,864) (1,475) 530 1,231 1,425 1,563 1,523 1,641 1,648 1,643 1,643 1,643 10,882 Net Transfer Payments 1a (142) (258) (¸77) (207) (65) (45) (23) (23) (23) (23) (23) (23) (23) (23) Operation of the LDA 102 119 1314 'i. 14S 144i 145 144 144 la 144 1141, 4 Net Cash Balance i,322) (3,241) (1 ,7-36) 182 1,017 1,236 1,396 1,356 2,b174 1,481 1,476 1,476 1,476 10,715 Bate of Return: 16% /1 Negative figures appear between parentheses. /2 Cash balances have been aggregated on the basis of the investment phasing. /3 Taxes minus subsidies. July 23, 1974 j 7 l.XXHoay o........af 815sc ay,' I ( r X Satatrnder y , . g;. L U 6 ' .-4~~~~~~~~~~~~~~~~~ A N C E -- ~~~~~~~AS j- U RI AD- 0 y -41'~~. Santiago/A L1 UJ G 43 - . . - \ C A ; L E S N G+ e/erna ,/. r--,E Nt wS -1 Se A~ ~ ~ tlo Bl AZ D m, 41'~~~~~a GOVI ,< ) | l / S E V I L L ~~~A Ver IA L> A -(MADRIDi Bunare O 50 100 700 @ C\,_ SPAIN~~~J 5e I ' I KILOIsA}ETERS I . SECOND LiVESTOCK DEVELOPMENT PSECOND ROJECT s mr2!~~~~~~~D A J. E NFIRST PROJE.CpT,l. > b N~9 ;,lr AIiverc.s.. L_1'. .~~~~~~~~~~~~\HEV Prvni._ondre