Ontario Swine Farms Profitability versus Productivity Presented to: Federal, Provincial, Territorial...
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Transcript of Ontario Swine Farms Profitability versus Productivity Presented to: Federal, Provincial, Territorial...
Ontario Swine Farms
Profitability versus Productivity
Presented to:
Federal, Provincial, Territorial Working Group
AAFC, Ottawa
October 26, 2012
Randy Duffy, Ken McEwan, Ken Poon
University of Guelph
Outline
Industry Background Ontario Farm Income Database - Preliminary Results
Continuous Sample (370 farms) Average vs. Top 20% / Bottom 20%
Ontario Data Analysis Project (ODAP – UGRC) Average vs. Top 50%
Preliminary Key Learning Points (OFID)
Industry Background
Ontario Hog Price vs. Estimated Net Return
Source: OMAFRA Swine Budgets
$190 $188
$126 $125
$165
$178
$141 $140
$168
$150
$132$126 $127
$121
$143
$161$154
$9 $19
($23) ($16)
$20
$32
($10) ($14)
$18 $14
($2)
($26)
($39) ($40)
($4) ($4)($10)
($50)
($25)
$0
$25
$50
$75
$100
$125
$150
$175
$200
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Price ($/ckg, index 100) Net Return ($/head)
Ontario Producers vs. Hogs Marketed
-
5,000
10,000
15,000
20,000
25,000
-
1
2
3
4
5
6
1980198219841986198819901992199419961998200020022004200620082010
# o
f Pro
du
cers
# H
ogs
Mkt
d
Millions
1-50 hogs 51-500 hogs 501-3000 hogs >3000 hogs # of Producers
Source: Ontario Pork
Producers that Market
Since 2005:20-25% reduction in sows / pigs50% reduction in producers
Ontario Farm Income Database
Swine Farms
OFID – Swine - Advantages
All Farms (1,000) Continuous Sample (370) Income Range / Gross Revenue (5 categories) Swine Production Type (5 categories) Link to Production / Inventory (swine, crops) Captures large share of total Ontario industry
OFID – Swine - Limitations
Completeness of production / inventory schedules
Declining swine farm numbers
Estimated Debt proxy
Estimated Share of Ontario Industry
Category All Farms Continuous Sample
Avg0310 2010 Avg0310 2010
Number of Farms 1,059 666 370 370
Sow Inventory 79% 85% 37% 44%
Market Hogs Sold 63% 74% 32% 45%
*Grow Corn for Feed 58% 66% 69% 75%
Source: OFID; University of Guelph, Ridgetown Campus calculations.
Estimated Share of Total Ontario Swine, by Farm Size
Category Number of Farms
Total Operating Revenue
EstimatedTotal Debt
2003 2010 2003 2010 2003 2010
$0-$100,000 13% 6% 1% <1% 2% <1%
$100,000-$300,000 31% 15% 8% 2% 10% 4%
$300,000-$500,000 20% 18% 10% 6% 13% 8%
$500,000-$1,000,000 19% 27% 18% 15% 22% 25%
> $1,000,000 16% 34% 63% 77% 53% 62%
All Farms 1,330 666 $978 m $897 m $938 m $845 m
Source: OFID; University of Guelph, Ridgetown Campus calculations.
Estimated Share of Total Ontario Swine, by Production Type
Category Number of Farms
Total Operating Revenue
EstimatedTotal Debt
2003 2010 2003 2010 2003 2010
Farrow to Finish 44% 49% 37% 49% 40% 53%
Finish 38% 27% 35% 30% 27% 23%
Farrow to Wean 8% 6% 12% 4% 18% 6%
Farrow to Feeder 7% 14% 8% 13% 10% 13%
Mixed 3% 4% 8% 4% 6% 4%
All Farms 1,330 666 $978 m $897 m $938 m $845 m
Source: OFID; University of Guelph, Ridgetown Campus calculations.
OFIDPreliminary Results– All Swine Farms
• 2003-2010• Profitability Quintiles
• Operating Profit Margin = EBIT / TOR
Total Operating RevenueAll Swine Farms
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
2003 2004 2005 2006 2007 2008 2009 2010
Total Operating Revenue - cash Total Operating Revenue - accrual
Avg Diff: $14 millionRange: -$12 to +$44 mill.
Total Operating Revenue – Per Farmby Profitability Quintile
0
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000
1,750,000
2,000,000
2003 2004 2005 2006 2007 2008 2009 2010
Bottom 20% Average Top 20%
Based on:Operating Profit Margin= EBIT / TOR
Total EBITAAll Swine Farms
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
$200,000,000
2003 2004 2005 2006 2007 2008 2009 2010
Total EBITA - cash Total EBITA - accrual
Avg Diff: $9 millionRange: -$24 to +$35 mill.
EBITA – Per Farmby Profitability Quintile
(400,000)
(300,000)
(200,000)
(100,000)
0
100,000
200,000
300,000
400,000
2003 2004 2005 2006 2007 2008 2009 2010
Bottom 20% Average Top 20%
Productivity vs. Profitability
Continuous Sample (370 farms)
EBITA Per Pig Sold
Bottom 20%
Bottom 20-40%
Middle 40-60%
Top 20-40%
Top 20%
Avg0.0
10.0
20.0
30.0
40.0
50.0
60.0
13.5 12.5
22.2
31.7
50.2
25.8
Avg0310
Pigs Sold Per Sow
Bottom 20%
Bottom 20-40%
Middle 40-60%
Top 20-40%
Top 20%
Avg18.018.519.019.520.020.521.021.522.022.523.0
20.4
22.5
19.9 19.6
20.5 20.6
Avg0310
Health Expense / Swine Sales Ratio
1.5% difference x$150 market hog = $2.25 / head
2%
3%
4%
5%
6%
7%
8%
9%
2003 2004 2005 2006 2007 2008 2009 2010
Bottom 20% Average Top 20%
1.5% difference x$150 market hog = $2.25 / head
Interest Expense / Swine Sales Ratio
1.5% difference x$150 market hog = $2.25 / head
2%
4%
6%
8%
10%
12%
14%
16%
18%
2003 2004 2005 2006 2007 2008 2009 2010
Bottom 20% Average Top 20%
2.5% difference x$150 market hog = $3.75 / head
Total Feed Expense / Swine Sales Ratio
1.5% difference x$150 market hog = $2.25 / head
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008 2009 2010
Bottom 20% Average Top 20%
21.5% difference x$150 market hog = $32.25 / head
Ratio = (Feed Expense + Crop Expense + Crop Purchase)/ Swine Sales
ODAPProduction and Financial Data
Average vs. Top 50%
Pigs Weaned Per Sow
2001-05 2006-0918.018.519.019.520.020.521.021.522.022.5 21.58
21.921.52
22.09
Avg Top 50%
Feed Cost Per Pig
2001-05 2006-09$70
$75
$80
$85
$90
$95
$100
88
95
81
88
Avg Top 50%
NFI Per Pig
2001-05 2006-09-$40-$30-$20-$10
$0$10$20$30$40$50$60
16
-23
36
-5
Avg Top 50%
Preliminary Key Learning Points
Productivity vs. Cost Control Distribution of profitability
Variability Regardless of farm size, production type, debt level, year Top 20% very profitable, Bottom 20% not profitable** Ability to stay in the Top 20%** Top 60% okay, Bottom 40% struggle (depends on year)
Size doesn’t matter Debt not the deciding factor
The End
Thank you.
Any questions?