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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. Outline. Industry Background Ontario Farm Income Database - Preliminary Results
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Ontario Swine FarmsProfitability 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)
Ontario Hog Price vs. Estimated Net Return Source: OMAFRA Swine Budgets
Ontario Producers vs. Hogs Marketed Since 2005: 20-25% reduction in sows / pigs 50% 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 Source: OFID; University of Guelph, Ridgetown Campus calculations.
Estimated Share of Total Ontario Swine, by Farm Size Source: OFID; University of Guelph, Ridgetown Campus calculations.
Estimated Share of Total Ontario Swine, by Production Type 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 Avg Diff: $14 million Range: -$12 to +$44 mill.
Total Operating Revenue – Per Farmby Profitability Quintile Based on: Operating Profit Margin = EBIT / TOR
Total EBITAAll Swine Farms Avg Diff: $9 million Range: -$24 to +$35 mill.
Productivity vs. Profitability Continuous Sample (370 farms)
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
Interest Expense / Swine Sales Ratio 2.5% difference x $150 market hog = $3.75 / head 1.5% difference x $150 market hog = $2.25 / head
Total Feed Expense / Swine Sales Ratio Ratio = (Feed Expense + Crop Expense + Crop Purchase) / Swine Sales 1.5% difference x $150 market hog = $2.25 / head 21.5% difference x $150 market hog = $32.25 / head
ODAPProduction and Financial Data Average vs. 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?