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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
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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)
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Industry Background
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Ontario Hog Price vs. Estimated Net Return Source: OMAFRA Swine Budgets
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Ontario Producers vs. Hogs Marketed Since 2005: 20-25% reduction in sows / pigs 50% reduction in producers
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Ontario Farm Income Database Swine Farms
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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
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OFID – Swine - Limitations Completeness of production / inventory schedules Declining swine farm numbers Estimated Debt proxy
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Estimated Share of Ontario Industry CategoryAll FarmsContinuous Sample Avg03102010Avg03102010 Number of Farms1,059666370 Sow Inventory79%85%37%44% Market Hogs Sold63%74%32%45% *Grow Corn for Feed58%66%69%75% Source: OFID; University of Guelph, Ridgetown Campus calculations.
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Estimated Share of Total Ontario Swine, by Farm Size Category Number of Farms Total Operating Revenue Estimated Total Debt 200320102003201020032010 $0-$100,00013%6%1%<1%2%<1% $100,000-$300,00031%15%8%2%10%4% $300,000-$500,00020%18%10%6%13%8% $500,000-$1,000,00019%27%18%15%22%25% > $1,000,00016%34%63%77%53%62% All Farms1,330666$978 m$897 m$938 m$845 m Source: OFID; University of Guelph, Ridgetown Campus calculations.
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Estimated Share of Total Ontario Swine, by Production Type Category Number of Farms Total Operating Revenue Estimated Total Debt 200320102003201020032010 Farrow to Finish44%49%37%49%40%53% Finish38%27%35%30%27%23% Farrow to Wean8%6%12%4%18%6% Farrow to Feeder7%14%8%13%10%13% Mixed3%4%8%4%6%4% All Farms1,330666$978 m$897 m$938 m$845 m Source: OFID; University of Guelph, Ridgetown Campus calculations.
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OFID Preliminary Results – All Swine Farms 2003-2010 Profitability Quintiles Operating Profit Margin = EBIT / TOR
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Total Operating Revenue All Swine Farms Avg Diff: $14 million Range: -$12 to +$44 mill.
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Total Operating Revenue – Per Farm by Profitability Quintile Based on: Operating Profit Margin = EBIT / TOR
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Total EBITA All Swine Farms Avg Diff: $9 million Range: -$24 to +$35 mill.
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EBITA – Per Farm by Profitability Quintile
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Productivity vs. Profitability Continuous Sample (370 farms)
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EBITA Per Pig Sold
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Pigs Sold Per Sow
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Health Expense / Swine Sales Ratio 1.5% difference x $150 market hog = $2.25 / head 1.5% difference x $150 market hog = $2.25 / head
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Interest Expense / Swine Sales Ratio 1.5% difference x $150 market hog = $2.25 / head 2.5% difference x $150 market hog = $3.75 / head
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Total Feed Expense / Swine Sales Ratio 1.5% difference x $150 market hog = $2.25 / head 21.5% difference x $150 market hog = $32.25 / head Ratio = (Feed Expense + Crop Expense + Crop Purchase) / Swine Sales
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ODAP Production and Financial Data Average vs. Top 50%
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Pigs Weaned Per Sow
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Feed Cost Per Pig
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NFI Per Pig
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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
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The End Thank you. Any questions?
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