Better Pork - 2016 December

Better Pork

December 2016

AGRI-FOOD

MANAGEMENT

Dollar$ and Sense study

commissioned by Agri-food

Management Institute (AMI)

and Farm Management Canada,

included 604 farms nationwide of all

types and sizes in grains and oilseeds,

beef, hogs, poultry and eggs, dairy,

and horticulture, and farmers of all

ages. Ipsos Ag and Animal Health

completed the study and the research

was released earlier this year.

The study results show that Ca-

nadian farm businesses in the top

25 per cent financially out-perform

those in the bottom 25 per cent by a

wide margin: 525 per cent increase

in Return on Assets (ROA), 155 per

cent increase in Gross Margin Ratio,

and 100 per cent increases in Return

on Equity (ROE) and Asset Turn-

over.

In the top quartile of farm busi-

nesses surveyed, 13 per cent were

hog operations. By comparison, hog

farms represented 11 per cent of farm

businesses in the bottom quartile.

“This study clearly identifies the

connection between farm business

management practices and better

financial outcomes on-farm,” says

Ashley Honsberger, AMI executive

director.

“For the first time, there is proof

that the top management habits

directly impact a farm’s profitability

and income.”

Continuous learning is by far the

leading driver of farm financial suc-

cess, according to the study results.

Farms in the bottom 25 per cent are

three times less likely to look for

training, new information or learning

opportunities.

“It’s no surprise that training and

a lifelong commitment to personal

development was at the top of the

list,” says Colin Siren, vice president

of Ipsos Ag and Animal Health.

“People who are willing to make

change are more likely to be finan-

cially successful.”

Second is having current finances

so that key farm decisions are made

based on an accurate financial picture

of the business. Farms in the bottom

quartile are three times more likely to

have out-of-date financial records.

The third driver is seeking out

professional business advisers or

consultants. Farms in the top quartile

are 30 per cent more likely to work

regularly with a farm business adviser

or a team of advisers.

Four other drivers also ranked

highly: having a formal business plan,

knowing and monitoring cost of

production, assessing and managing

risk, and using budgets and financial

plans.

Three-quarters of the 56 hog farm-

ers surveyed felt the financial health

of their farm was a little or much

better now than five years ago.

Nationwide, the top 25 per cent

of hog farms showed a 21.5 per cent

ROA compared to 2.7 per cent in

the bottom 25 per cent; 31.6 per

cent Gross Margin Ratio compared

to 13.5 percent; 123.1 per cent ROE

compared to 21.4 per cent; and 69.6

per cent Asset Turnover compared to

18.9 per cent.

According to the study results,

fifty-nine per cent of hog farmers use

cost of production for benchmarking

and decision-making, higher than the

average of 50 per cent for all farmers.

The study also showed 63 per

cent of hog farmers use structured

production planning processes, com-

pared to 57 per cent of all farmers,

and 38 per cent use farm business

advisers, again higher than farmers as

a whole at 31 per cent.

“A list of seven habits can seem

overwhelming, so consider tack-

ling just one item per season to get

started,” advises Honsberger.

A helpful tool is Pledge to Plan, a

website with business management

activities for each season, resources,

and stories of producers who’ve gone

through the process.

To access this information, visit

www.pledgetoplan.ca

The

Dollar$ and Sense study

was

funded through Growing Forward 2,

a federal-provincial-territorial initia-

tive.

The Agri-food Management Institute

(AMI) aims to increase awareness,

understanding and adoption of ben-

eficial business management practices

by Ontario agri-food and agri-based

producers and processors.

There’smoney inbusinessmanagement activities for

hog farmers

First-of-its-kind research has identified the top seven habits of Canada’s most financially successful farmers

and connected those businessmanagement activities to higher farm income and profitability.

by LILIAN SCHAER for the AGRI-FOOD MANAGEMENT INSTITUTE

Farm Type

Median Ratio

Total

(n=512)

Grain &

Oilseed

(n=162)

Beef Cattle

(n=126)

Hogs

(n=48*)

Poultry &

Eggs

(n=40*)

Dairy

Cattle

(n=87)

Horticulture

(n=49*)

Asset

Turnover

Top 25%

20.0% 28.6% 17.7% 69.6% 13.6% 16.7% 27.8%

Bottom 25%

9.7% 7.2% 5.6% 18.9% 10.1% 13.2% 9.7%

Gross

Margin

Ratio

Top 25%

50.0% 47.6% 50.0% 31.6% 37.7% 59.7% 55.6%

Bottom 25%

19.6% 21.6% 19.6% 13.5% 0% 16.0% 24.7%

Return on

Assets

Top 25%

10.0% 10.8% 8.1% 21.5% 5.0% 9.9% 14.6%

Bottom 25%

1.6% 1.4% 1.2% 2.7% 0% 2.3% 1.3%