Transcript aqfi.uaex.edu

Trade Adjustment
Assistance Training
Carole Engle
UAPB
Outline:
• Economics
• Options to
improve
profitability
• Marketing
Economics:
•Price cycles
•Financial indicators
Catfish Prices & Production
Costs
Production costs
Farm price
$0.90
$0.80
$0.70
$0.60
$0.50
$0.40
$0.30
$0.20
$0.10
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
$0.00
Average Price Paid to
Catfish Producers ($/lb)
0.80
5-yr avg (1996-2000)
0.75
0.70
2001
10-yr avg (1991-2000)
0.65
0.60
2002
0.55
0.50
jan
feb
mar
apr
may
jun
jul
aug
sep
oct
nov
dec
Average Fillet Price
Received by Processors
($/lb)
2.90
2.80
5-yr avg (1996-2000)
2.70
2001 price
10-yr avg (1991-2000)
2.60
2.50
2002 price
2.40
2.30
jan
feb
m ar
apr
m ay
jun
jul
aug
sep
oct
nov
dec
Average Price Paid to
Catfish Producers ($/lb)
0.80
0.75
10-yr avg (1993-2002)
0.70
2001
0.65
5-yr avg (1998-2002)
0.60
2003
0.55
2002 price
0.50
jan
feb
mar
apr
may
jun
jul
aug
sep
oct
nov
dec
Total “Catfish” Imports
1990-2003
160,000,000
140,000,000
120,000,000
lb
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
6
5
4
3
2
1
0
Consum er
spending
2002.3
2002.1
2001.3
2001.1
2000.3
2000.1
1999.3
Real disposable
incom e
1999.1
% change
Sluggish economy/Sept. 11
Strength of U.S. $
Quarterly Exchange Rate
50
Year
EURO
YEN
4
2
00
3
2
00
2
00
2
00
2
00
2
1
0
0
Euro
100
Yen
150
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
2003 QIV
2003 QIII
2003 QII
2003 QI
2002 QIV
2002 QIII
2002 QII
2002 QI
2001 QIV
2001 QIII
2001 QII
2001 QI
2000 QIV
2000 QIII
2000 QII
2000 QI
1999 QIV
$ billion
Quarterly Retail Sales, 19992003
1000
900
800
700
600
500
400
300
200
100
0
Short & long-term financial
decisions:
• Is it profitable in the short run?
• Is it profitable in the long run?
• Can it generate enough cash
when needed to pay the bills
(liquid)?
• Can it generate enough value
over time to pay off the debts
(solvency)?
Breakeven Prices (based on
enterprise budgets)
Above total cost- LONG RUN $0.692
Variable cost – SHORT RUN
$0.567
Above cash costs
$0.518
(no debt capital)
Above cash costs
(100% debt op. capital)
Above cash costs
(50% debt long-term, no land;
100% debt op. capital)
$0.561
$0.572
Breakeven Prices (based on
enterprise budgets)
Above total cost- LONG RUN $0.692
Above variable cost
$0.567
Above cash costs
$0.518
(no debt capital)
Above cash costs
(100% debt op. capital)
Above cash costs
(50% debt long-term, no land;
100% debt op. capital)
$0.561
$0.572
Breakeven Prices (based on
enterprise budgets)
Above total cost
$0.692
Above variable cost
$0.567
Above cash costs
$0.518
(no debt capital)
Above cash costs
(100% debt op. capital)
Above cash costs
(50% debt long-term, no land;
100% debt op. capital)
$0.561
$0.572
Financial Analysis:
the 3 key statements
•
Income Statement
• Balance Sheet
• Cash Flow Statement
How Are These Calculated?
• Floppy disk includes
spreadsheets with: exercise
balance sheet, income
statement, cash flow budgets
• The correct versions, the
financial ratios, &
• Includes a brief interpretation of
each ratio and how to
improve it.
Gross Revenue “Pie”
Short-run profits:
from the income statement
Payments
for
feed, seed,
fuel, etc.
Where
can I
save
money?
Rent to owner
for rented land
Interest to
Wages to
lenders
employees
for borrowed
money
NFI to operator for
unpaid
labor, equity capital, &
management
Monthly Cash Flow Budget
Item
Beginning Cash
Receipts from catfish sold
Cash Inflow
Operating Cash Expenses
Fingerlings
Feed
Gas, Fuel, and Oil
Chemicals
Labor
Harvesting & Hauling
Machine Hire
Office Expenses
Rent
Repairs and Maintenance
Utilities
Other Operating Costs
Total Operating Expenses
Fixed Cash Expenses
Taxes and Insurance
Total Fixed cash Expenses
Living Expenses
Other Expenses
Scheduled Debt Paym ents
Real Estate Principal
Interest (10% APR)
Equipment Principal
Interest (10% APR)
Operating Principal
Interest (10% APR)
Total Cash Outflow
Cash Available
New Borrow ing
Cash Balance
Jan
15,849.00
Mar
42,835.71
15,849.00
Feb
39.79
60,000.00
60,039.79
May
46,466.02
Jun
24,256.90
42,835.71
Apr
12,065.73
60,000.00
72,065.73
3,830.00
380.00
1,000.00
717.39
10.00
360.00
1,310.00
190.00
360.00
8,157.39
Aug
34,568.03
24,256.90
Jul
1,145.96
60,000.00
61,145.96
Oct
36,263.66
34,568.03
Sep
5,806.26
60,000.00
65,806.26
46,466.02
4,790.00
470.00
1,000.00
722.79
10.00
360.00
1,310.00
390.00
360.00
9,412.79
12,415.00
5,750.00
570.00
470.00
1,730.00
806.91
10.00
360.00
1,310.00
970.00
360.00
24,751.91
6,710.00
660.00
1,730.00
692.32
10.00
360.00
1,310.00
1,360.00
360.00
13,192.32
7,670.00
750.00
1,730.00
687.24
10.00
360.00
1,310.00
1,560.00
360.00
14,437.24
8,620.00
850.00
470.00
1,950.00
681.21
150.00
10.00
360.00
1,310.00
2,340.00
360.00
17,101.21
10,540.00
1,040.00
1,950.00
695.49
150.00
10.00
360.00
1,310.00
2,530.00
360.00
18,945.49
11,500.00
1,130.00
620.00
1,950.00
754.85
290.00
10.00
360.00
1,310.00
2,730.00
360.00
21,014.85
14,370.00
1,410.00
1,950.00
701.20
150.00
10.00
360.00
1,310.00
2,920.00
360.00
23,541.20
9,580.00
940.00
1,730.00
729.46
10.00
360.00
1,310.00
2,340.00
360.00
17,359.46
3,000.00
-
3,000.00
-
3,000.00
-
4,760.00
4,760.00
3,000.00
-
3,000.00
-
3,000.00
-
3,000.00
-
3,000.00
-
3,000.00
-
3,000.00
-
265.00
2,368.75
2,018.07
15,809.21
39.79
39.79
665.00
2,108.23
2,018.07
17,204.08
42,835.71
42,835.71
1,000.00
2,018.07
30,769.98
12,065.73
12,065.73
265.00
2,364.33
2,018.07
25,599.72
46,466.02
46,466.02
665.00
2,097.14
2,009.73
22,209.11
24,256.90
24,256.90
1,000.00
2,009.73
23,110.94
1,145.96
1,145.96
265.00
2,357.71
2,009.73
26,577.93
34,568.03
34,568.03
665.00
2,080.52
2,001.40
28,761.77
5,806.26
5,806.26
1,000.00
2,001.40
29,542.60
36,263.66
36,263.66
265.00
2,351.08
2,001.40
24,976.94
11,286.72
11,286.72
36,263.66
Cash inflow
- Cash outflow
(Operating expenses)
(Fixed cash expenses)
(Debt payments)
= Cash available
+ New borrowing
= Cash balance
Cash Flow Coverage Ratio (Cash
available/interest & principal
payments)
Scheduled Debt Paym ents
Real Estate Principal
Interest (10% APR)
Equipment Principal
Interest (10% APR)
Operating Principal
Interest (10% APR)
Total Cash Outflow
Cash Available
New Borrow ing
Cash Balance
1,060.00
9,441.88
2,660.00
8,349.78
4,000.00
33,475.29
291,534.65
(5,685.65)
187,573.51
181,887.85
Cash Flow Coverage Ratio = (0.26)
Debt-Servicing Ratio (interest &
principal payments/cash inflow)
Total Cash Inflow = $285,849
Scheduled Debt Paym ents
Real Estate Principal
Interest (10% APR)
Equipment Principal
Interest (10% APR)
Operating Principal
Interest (10% APR)
Total Cash Outflow
Cash Available
New Borrow ing
Cash Balance
Debt-Servicing Ratio = 0.21
1,060.00
9,441.88
2,660.00
8,349.78
4,000.00
33,475.29
291,534.65
(5,685.65)
187,573.51
181,887.85
Cash Flow Scenarios
Farm A
Farm B
Sept.
$60,000
Feb.
$60,000
Oct.
$90,000
April
$60,000
Nov.
$60,000
July
$60,000
Dec.
$60,000
Sept.
$60,000
Nov.
$30,000
Liquidity Measures for Two
Scenarios
Indicator
A
B
Cash Flow Coverage (0.26)
0.17
Debt-Servicing
0.17
0.21
Cash avail./cash
(0.02)
inflow
Cash avail./op.
(0.03)
expenses
Cash avail./liabilities (0.01)
0.01
0.02
0.01
How
much
debt is
too
much?
Year 1
Year 2
Assetscurrent
277,287 217,868
Non-current
475,213 356,410
Total
752,500 574,278
Liabilitiescurrent
242,168 411,686
Non-current
179,079 179,079
Total
421,247 590,765
Net Worth
331,253 -16,487
Debt/asset
0.56 1.03
How
much
debt is
too
much?
Year 1
Year 2
Assetscurrent
277,287 217,868
Non-current
475,213 356,410
Total
752,500 574,278
Liabilitiescurrent
242,168 411,686
Non-current
179,079 179,079
Total
421,247 590,765
Net Worth
331,253 -16,487
Debt/asset
0.56 1.03
How
much
debt is
too
much?
Year 1
Year 2
Assetscurrent
277,287 217,868
Non-current
475,213 356,410
Total
752,500 574,278
Liabilitiescurrent
242,168 411,686
Non-current
179,079 179,079
Total
421,247 590,765
Net Worth
331,253 -16,487
Debt/asset
0.56 1.03
How
much
debt is
too
much?
Year 1
Year 2
Assetscurrent
277,287 217,868
Non-current
475,213 356,410
Total
752,500 574,278
Liabilitiescurrent
242,168 411,686
Non-current
179,079 179,079
Total
421,247 590,765
Net Worth
331,253
-16,487
Debt/asset
0.56
1.03
Questions?
Discussion?
Options to Improve
Profitability
•Maximum production vs.
maximum profit
•Stocking densities/strategies
•Feeding strategies
-every other day vs. every day
-feed prices
•Producing optimal sizes of
fish
Maximum profit
Stage II
Yield
Stage
I
Maximum yield
Input level
Stage III
Studies at UAPB Identified
Economic Relationship
Between Feeding and Stocking
• Estimated a production
function.
• Profit-maximizing stocking
rates ranged from 6,500 8,500, depending upon
feed and fish prices.
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.
How low should you go?
• Model results dropped profitmaximizing stocking rates to
5,000/ac at $0.60/lb.
• At very low prices, may not be
possible to calculate true
profit-maximizing stocking rate.
• Farmers need to stock at rates that
ensure financial payments
are met.
Optimal stocking densities
with high feed prices
• Fish prices have larger
effect than varying feed
prices.
• Fish prices of $0.70/lb (from
$0.65/lb) nearly offset
$45/ton increase in feed
price in terms of optimal
stocking density.
Feed Prices
$290
$270
$230
Feed Price
$210
$190
$170
2001
1998
1995
1992
1989
1986
1983
1980
$150
1977
$/ton
$250
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
Jan-01
Sep-00
May-00
Jan-00
Sep-99
May-99
Jan-99
Sep-98
May-98
Jan-98
Sep-97
Monthly Average Price of 28% Catfish
Feed ($/ton)
$300.00
$250.00
$200.00
$150.00
$100.00
Breakeven prices as feed
price increases
$/ton
TC
VC
240
0.645
0.520
260
0.668
0.543
280
0.692
0.567
300
0.716
0.591
320
0.740
0.615
Current Feeding Strategies
• Every other day feeding
– Carryover fish may be small
following year
• Restricted daily feedings
– May equal thin fish
• Catfish exhibit
compensatory gain
• Can gain weight extremely
fast, at low FCR when full
feeding resumed.
Processing Cost by Size
0.6 lb
1.5 lb
2.5 lb
9.6
24
40
Labor
$0.08
$0.03
$0.02
Fixed
overhead
Total
expenses
$0.25
$0.10
$0.06
$0.33
$0.13
$0.08
Wt. (oz)
Factors Impacting Costs
• Economies of Scale: higher throughput
will help to reduce unit costs by
spreading fixed costs over more units.
• Technology/processing practices:
– Automatic presorting of fish by weight
– Chilling/cleaning fish between deheader &
fillet line
– Reduction in trim operation
– Interfacing trim, grading to reduce handling
– Online monitoring and control of
productivity.
Factors Affecting Costs
• Production Impacts
– Characteristics of fish received have
large impact.
– Off-flavor, disease, weight to yield
ratios, weight distributions
– 2% normal seasonal variation in yield
– Distribution of fish sizes received from
each pond varies widely.
lb/acre
8,000
6,000
4,000
2,000
0
3.0
2.0
1.0
0.0
1
2
3
4
Treatment
Net Yield
Final Weight
8,000
6,000
4,000
2,000
0
3.0
2.0
1.0
0.0
1
2
Treatment
3
lb/fish
lb/acre
•Big Fish I
–4,500/acre, 0.6 lb
–FCR 1.8-2.0
–Survival 83-94%
–32% protein
•Big Fish II
–4,500/acre, 0.5 lb
–FCR 1.7-1.9
–Survival 87-91%
–32% protein
–No impact of
fingerlings
Final Weight
lb/fish
Big Fish Studies
Net Yield
Net Yield (lb/acre)
Stocker Net Yield
6,000
5,533
5,000
4,802
4,591
4,000
3,500
4,500
Stocking Rate (fish/acre)
5,500
Individual Weight (lb/fish)
Individual Weight
2.5
2.3
2.2
2.0
1.9
1.8
1.8
1.5
1.3
1.0
3,500
4,500
Stocking Rate (fish/acre)
5,500
Management for Larger Mesh Sizes?
Fingerlings
Single batch
Yr 1
0.8-1.16 lb
4,700-7,900
Multiple batch
0.6-1.01 lb
6,500 lb/yr
For stockers
Growout
0.25-0.80 lb
10,000 lb/yr
0.5-0.6 lb stockers
1.3-2.6 lb
6,300 lb/yr
Questions?
Discussion?
Catfish Markets and
Marketing
U.S. per capita consumption
seafood, beef, pork, broilers
100.0
90.0
80.0
60.0
50.0
40.0
30.0
Seafood
Beef
Pork
Broilers
20.0
10.0
0.0
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
lb / person
70.0
U.S. Per Capita
Consumption of Catfish
1.20
1.00
0.80
lb 0.60
0.40
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0.00
1990
0.20
U.S. consumption of top 6
seafood products
Tuna
Shrimp
Cod
Pollock
1994
1996
Salmon
Catfish
1998
2000
lb/person
4.00
3.00
2.00
1.00
0.00
1990
1992
Consumer Food Expenditures at
Home and Away from Home
1,000,000
600,000
400,000
200,000
At home
Away from home
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
0
1980
$ million
800,000
Increasing consolidation in
food industry
• Beef, pork, poultry all have
consolidated.
• From mid-1990s to 2000, market
share held by nation’s top four food
retailers (4-firm ratio) increased from
17% to 34%. In cities, reached 72%.
• Broadline distributors have
concentrated food buying power.
Product Life Cycle
Financial Performance
Introduction
Growth
Maturity
Decline
Sales revenue
Time
Which strategy?
• Compete on price in commodity
markets with a product very
similar to other products?
• Create unique identity
(differentiate product) to
capture higher consumer price?
That thing got a Hemi?
That thing got a hemi?
That thing got a Hemi?
The key to higher prices is to
convince the consumer that your
product is different and worth more.
Quality/Price Matrix
Low Price
High Price
High Quality
Low Quality
New Product Development
• When existing products decline
phase, replaced with new products.
• Failure rate is high for new products.
• Must maximize idea generation &
• Effectively screen
ideas to ensure that
only best concepts
go to market launch.
Value-Added Product Initiative:
Turning Nuggets into Gold
• Value-Added Products may
have potential to re-position
the catfish industry into retail
sales away from commoditybased sales.
• New products expensive to
develop and market. Much
research needed to provide
guidance.
The U.S. Consumer Wants
•
•
•
•
•
Good flavor
Convenient food
Healthy food
Safe food
To know where their food comes
from
• Food free of chemicals and drugs
The catfish industry should be well
positioned to supply what U.S.
consumers want.