Transcript Using Income Statements to Improve Efficiencies and

Using Enterprise Budgets and
Income Statements to Improve
Efficiencies and Profitability
of Catfish Farms
Carole R. Engle
Aquaculture/Fisheries Center
University of Arkansas at Pine Bluff
Income Statement:
Cash-based Accounting
Item
Revenue
Cash expenses
Depreciation
Total operating expenses
Cash interest paid
Total expenses
Net farm income from
operations
Value
$403,200
$610,322
$42,707
$653,029
$150,579
$803,608
- $400,408
Engle, UAPB
Income Statement:
Cash-based Accounting
Item
2010
2011
Revenue
$403,200
$1,209,600
Cash expenses
$610,322
$610,322
$42,707
$42,707
Total operating
expenses
Cash interest paid
$653,029
$653,029
$150,579
$150,579
Total expenses
$803,608
$803,608
- $400,408
$405,992
Depreciation
Net farm income
Engle, UAPB
Income Statement:
Accrual-based Accounting
Item
2010
2011
Revenue
$403,200 $1,209,600
Change in fish inventory
$403,200
- $403,200
Total Farm Revenue
$806,400
$806,400
Total operating expenses
$653,029
$653,029
Cash interest paid
$150,579
$150,579
Total expenses
$803,608
$803,608
$2,792
$2,792
Net farm income
Engle, UAPB
What does it take to
survive the short run?
•Must be able to sell fish at a
price that covers its variable
costs, not necessarily all its
total costs.
•Must have adequate liquidity.
•Enough cash revenue to make
payments when due.
•Must have adequate cash flow.
Engle, UAPB
Fish Feed Prices
$450
$400
$/ton
$350
$300
$250
$200
$150
Engle, UAPB
Realities of $300/ton Feed
UAPB Base Budgets:
431-acre farm ($300/ton feed)
Farm Size
131-acre farm
256-acre farm
431-acre farm
1,007-acre farm
Cost/
VC
$0.63/lb
$0.64/lb
$0.64/lb
$0.64/lb
Cost/
TC
$0.83/lb
$0.79/lb
$0.78/lb
$0.78/lb
Engle, UAPB
Realities of $350/ton Feed
UAPB Base Budgets:
431-acre farm ($350/ton feed)
Farm Size
131-acre farm
256-acre farm
431-acre farm
1,007-acre farm
Cost/
VC
$0.69/lb
$0.70/lb
$0.70/lb
$0.70/lb
Cost/
TC
$0.88/lb
$0.85/lb
$0.84/lb
$0.83/lb
Engle, UAPB
Breakeven Prices (based on
budgets for 256-acre farm; $300/ton)
Above total cost
$0.79
Above variable cost
$0.64
Above cash costs
$0.60
(no debt capital)
Above cash costs
(100% debt op. capital)
Above cash costs
(50% debt long-term, no land;
100% debt op. capital)
$0.65
$0.70
Engle, UAPB
What would happen with
different feed and catfish
prices?
To maximize profits:
At
low fish prices, feed rates and
stocking rates would decrease.
At low feed prices, feed and
stocking rates would increase.
At high feed prices, feed and
stocking rates would decrease.
Engle, UAPB
Effects of Higher Fish Prices &
Higher Feed Prices


Higher feed prices
$$$
Lower stocking & feeding
Higher fish prices
$$$
Higher stocking & feeding
Engle, UAPB
fish/acre
Profit-maximizing stocking
densities at different fish &
feed prices.
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
$0.70/lb
$0.75/lb
$0.80/lb
$/ton
Engle, UAPB
How low should you go?
 Model
results dropped profitmaximizing stocking rates to
5,000/ac at $0.60/lb.
 Farmers
need to stock at rates that
ensure financial payments
are met.
Engle, UAPB
Fish grow faster at lower
densities.
Engle, UAPB
Higher stocking rates produce higher
yields of smaller fish.
May
June
Engle, UAPB
July
August
Sept.
Oct.
Densities need to stay within
a feasible range.
Difficult to get
good growth,
turnover
7,500/acre
5,500/acre
Difficult to make
debt payments on
ponds
Engle, UAPB
With High Feed Prices,
Essential to get as much
gain out of every pound
of feed as possible.
Engle, UAPB
Feed Prices, Economics,
& Profitability:
Feed Studies
Engle, UAPB
Breakeven prices across farm
sizes, 2009 feed costs.
Farm size
32% protein
($343/ton)
28% protein
($322/ton)
BEP/VC
BEP/TC
BEP/VC
BEP/TC
60-acre
$0.67
$0.89
$0.65
$0.87
131-acre
$0.68
$0.88
$0.66
$0.86
256-acre
$0.69
$0.84
$0.67
$0.82
431-acre
$0.69
$0.83
$0.67
$0.81
1,007-acre
$0.69
$0.83
$0.67
$0.81
Engle, UAPB
Breakeven prices across farm
sizes, 2009 feed costs.
Farm size
32% protein
($343/ton)
28% protein
($322/ton)
BEP/VC
BEP/TC
BEP/VC
BEP/TC
60-acre
$0.67
$0.89
$0.65
$0.87
131-acre
$0.68
$0.88
$0.66
$0.86
256-acre
$0.69
$0.84
$0.67
$0.82
431-acre
$0.69
$0.83
$0.67
$0.81
1,007-acre
$0.69
$0.83
$0.67
$0.81
Engle, UAPB
What About Every Other
Day Feeding?
UAPB study:
Yield of carryover fish was 757
lb/ac less when fed every other
day.
Feed fed was 4,778 lb/ac less.
Engle, UAPB
What About Every Other Day
Feeding?
Feed
cost
$250/ton
$275/ton
$300/ton
$325/ton
$350/ton
Net
Net
Net
benefit
benefit
Benefit
($0.65/lb) ($0.70/lb) ($0.75/lb)
$106/ac
$68/ac
$30/ac
$165/ac
$127/ac
$89/ac
$225/ac
$187/ac
$149/ac
$285/ac
$247/ac
$209/ac
$344/ac
$306/ac
$268/ac
Engle, UAPB
What’s the Down Side to
Every Other Day Feeding?
 Understocked fish grow
very poorly.
 Every other day feeding
better strategy for ponds
with fish that are closer to
market size.
Engle, UAPB
How do I look at my costs?
• Use the budget spreadsheets
included in the training materials.
• Need to have EXCEL installed on
your computer.
• Substitute your costs in and see
the change in the breakeven costs
and net returns.
Engle, UAPB
THERE ARE EXERCISES
AVAILABLE ON THIS SITE IF
YOU WISH TO PRACTICE
WHAT YOU HAVE LEARNED
ABOUT INCOME
STATEMENTS BEFORE
MOVING ON TO THE LAST
SEGMENT IN THIS MODULE.
Engle, UAPB