Transcript Characteristics of top producers National Farm & Ranch Conference June 13-17, 2010 Presented by: Al Brudelie.

Characteristics of top producers
National Farm & Ranch Conference
June 13-17, 2010
Presented by:
Al Brudelie
FBM Database…At a Glance…
 Average age of farmer/student
 Years farming
 Gross Farm Income
 Total Cash Expense
 Net Farm Income
 Farm Assets
(market)
 Farm Liabilities (excl deferred)
 Change in Net Worth
 Number of operators
 Spending in Greater Comm.
47.3
24
612,651
508,273
53,704
1,761,595
684,253
59,000
1.2
691,704
The State FBM Database includes:
• 2323 farms
• 50% Crop
• 20% Livestock
• 15% Livestock/Crop
• 15% Other/Diversified
What about the Top Producers?
405650
356464
293997
339613
337238
247370
178382
130213
All Farms
Crop
Livestock
Average
264644
178835
Lvstk/Crop Diversified
Median
Key Financial Factors and a look at
the Top Producers…
Net Farm Income (Ave)
149,940
139,986
106,964
99,323
68,693
52,979
52,118
61,350
37,188
20,074
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
South East, South Central & South West Minnesota
Corn Fertilizer Costs in Southern Minnesota
Per Acre
180
160.44
160
140
116.31
Dollars
120
100
81.18
80
72.48
65.91
58.91
60
50.08
45.75
40.72
35.44
40
30.97
25.06
39.68
40.35
40.97
39.19
36.45
32.41
38.11
36.63
37.23
37.73
38.15
32.66
26.81
20
0
Year
39.60
52.49
50.82
49.45
45.75
45.11
52.19
48.50
Land Rents in Southern Minnesota Per Acre
180
170
170
160
160
155
151
150
148
144
Dollars
140
130
126
125
124
120
112
110
108
106
103
106
103
102
100
100
95
107
105
102
105
101
112
112
107
106
106
115
112
111
93
90
80
1999
2000
2001
2002
2003
2004
2005
2006
Year
Average
High Return
Low Return
2007
2008
2009
Major Costs in Corn Production
in Southern Minnesota
600
500
37.00
400
90.12
Dollars Per Acre
27.03
73.63
300
200
5.86
7.52
34.70
24.91
5.95
34.18
23.11
10.12
37.83
5.67
36.56
21.56
13.89
37.70
7.75
41.78
26.01
45.04
12.58
49.98
12.19
23.45
60.54
160.44
54.06
23.85
21.42
23.81
23.3
24.87
25.43
52.19
58.91
65.91
72.48
48.50
20.36
28.66
116.31
81.18
49.45
45.75
45.11
50.82
100
103
102
103
105
107
107
112
115
125
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
100
148
160
2008
2009
0
Year
Rent
Fertilizer
Chemicals
Seed
Drying
Current Ratio (Liquidity)
Current farm assets / current farm liabilities
3
2.41
2.5
2.2
2.04
2.01
2
1.5
1.88
1.78
1.69
1.67
1.2
1.29
1.37
1.98 1.74
1.87
1.43
1.41
2.18
1.45
1.56
1.61
1.45
1.25
1
1.07
0.95
0.99
0.99
1.04
2003
2004
2005
0.98
2006
1.17
0.83
0.5
0
2000
2001
2002
Low 20%
Average
2007
2008
High 20%
2009
Rate of Return on Farm Assets (Profitability)
[Net farm income from operations + farm interest expense minus value of
unpaid labor & mgmt] / avg. farm assets
Mostly owned
>5 % Green
1 % to 5 % Yellow
<1 % Red
25
20
15
10
5
Mostly Rented/Leased
>12 % Green
3 % to 12 % Yellow
<3 % Red
0
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
-5
-10
Low 20 %
Average
High 20 %
Debt to Asset Ratio (Solvency)
Total farm liabilities / total farm assets
70
•Red
>70 % in Debt
65
60
55
Yellow
30 to 70 % Debt
50
45
40
•Green
<30 % Debt
35
30
25
20
'00
'01
'02
'03
Low
'04
'05
'06
'07
Average
'08
'09
High
Working Capital to Gross Income
All Farms
45
40
35
30
25
20
15
10
5
0
-5
42.8
42.5
37
32
28
20
32.9
29
28.3
23
15.8
9
2
2005
6.9
-1
2006
Average
2007
Low 20%
2008
2009
High 20%
Working Capital to Gross Income
Crops
70
57
60
50
40
30
20
10
0
-10
44
29
18
33
42
50.4
50.7
40.4
38
28
20.5
20
11.7
6
-1
2004
-4
-4
2005
2006
Average
2007
Low 20%
2008
High 20%
2009
Working Capital to Gross Income
Dairy
20
15
18
11
10
5
0
-5
15.6
15
11
16
15
12.4
9
10
-1
-1
2004
2005
9
9.4
4
-1.5
-5
2006
2007
2008
-10
Average
Low 20%
High 20%
0.4
2009
Working Capital to Gross Income
Hogs
40
35
30
25
20
15
10
5
0
-5
-10
34
34
26
22
32
26
21.6
21
13
17
8
5
0
2004
2005
Average
2006
15.4
9.8
2.3
1.7
2007
Low 20%
2008
High 20%
-6.6
2009
Term Debt Coverage Ratio
500%
400%
300%
200%
100%
0%
-100%
'00
'01
'02
'03
Avarage
'04
'05
'06
Low 20 %
'07
'08
'09
Heigh 20 %
Operating Expense Ratio (Financial Efficiency)
[Total operating expenses minus depreciation] / gross revenue
120
>85 % is Red
75 % to 85 % Yellow
100
80
60
20
Low
Average
'0
8
'0
6
'0
4
'0
2
0
'0
0
<65 % is Green
40
High
New Economic RealitiesFinancial Metrics Source Dr. Kohl
Measure
Code
Red
Code
Yellow
Code
Green
Working
Capital/Rev.
<15%
15-33%
>33%
Debt/Asset
Ratio
>60%
40-60%
<40%
Credit Score
<650
650-700
700+
Op. Exp.
Revenue
(Excluding Depr.
& Int.)
>80%
70-80%
<70%
Coverage Ratio
<125%
125- 200%
>200%
What are the top producers doing?
 Conduct sensitivity analysis to cash flows
 Increases in interest rates
 Decreases in prices
 Annual Analysis for benchmarking
 Aspire to be a top half marketer by having a written




marketing plan
Form peer advisory groups
Form strategic alliances
Capture economics of scale, reducing costs, improving asset
utilization
Analyze the business to find out what to stop doing.
What are the top producers doing?
 Conduct a variance analysis each year. (Planned vs Actual)
 Set a financial liquidity plan
 Working capital of 30% or greater
 Credit card debt under $2000
 Conservative life style
 Developed Business Plan with many scenarios
 Five year plan on equipment purchases
 Quarterly communications with lenders
Remember, Good managers do 100 tasks
1% better, not 1 task 100% better
Remember, the runway behind you is
not useful!
Have a Great Year in
2010 !