using enterprise budgets and income statements to improve efficiencies and profitability of catfish...

Using Enterprise Budgets and Using Enterprise Budgets and Income Statements to Improve Income Statements to Improve Efficiencies and Profitability Efficiencies and Profitability of Catfish Farmsof Catfish Farms

Carole R. EngleAquaculture/Fisheries Center

University of Arkansas at Pine Bluff

Income Statement:Income Statement:Cash-based AccountingCash-based Accounting

Item Value

Revenue $403,200

Cash expenses $610,322

Depreciation $42,707

Total operating expenses $653,029

Cash interest paid $150,579

Total expenses $803,608

Net farm income from operations

- $400,408

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Income Statement:Income Statement:Cash-based AccountingCash-based Accounting

Item 2010 2011

Revenue $403,200 $1,209,600

Cash expenses $610,322 $610,322

Depreciation $42,707 $42,707

Total operating expenses

$653,029 $653,029

Cash interest paid $150,579 $150,579

Total expenses $803,608 $803,608

Net farm income - $400,408 $405,992

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Income Statement:Income Statement:Accrual-based AccountingAccrual-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

Net farm income $2,792 $2,792

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What does it take to survive What does it take to survive the short run?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.

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Fish Feed PricesFish Feed Prices

$150

$200

$250

$300

$350

$400

$450

$/to

n

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Realities of Realities of $300$300/ton Feed/ton FeedUAPB Base Budgets:UAPB Base Budgets:

431-acre farm ($300/ton feed)431-acre farm ($300/ton feed)

Farm Size Cost/VC

Cost/ TC

131-acre farm $0.63/lb $0.83/lb

256-acre farm $0.64/lb $0.79/lb

431-acre farm $0.64/lb $0.78/lb

1,007-acre farm $0.64/lb $0.78/lb

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Realities of $350/ton FeedRealities of $350/ton FeedUAPB Base Budgets:UAPB Base Budgets:

431-acre farm ($350/ton feed)431-acre farm ($350/ton feed)

Farm Size Cost/VC

Cost/ TC

131-acre farm $0.69/lb $0.88/lb

256-acre farm $0.70/lb $0.85/lb

431-acre farm $0.70/lb $0.84/lb

1,007-acre farm $0.70/lb $0.83/lb

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Breakeven Prices Breakeven Prices (based on (based on budgets for 256-acre farm; $300/ton)budgets for 256-acre farm; $300/ton)

Above total cost $0.79

Above variable cost $0.64

Above cash costs (no debt capital)

$0.60

Above cash costs (100% debt op. capital)

$0.65

Above cash costs (50% debt long-term, no land; 100% debt op. capital)

$0.70

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What would happen with What would happen with different feed and catfish different feed and catfish

prices?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.

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Effects of Higher Fish Prices & Effects of Higher Fish Prices & Higher Feed PricesHigher Feed Prices

Higher feed prices $$$ Lower stocking & feeding

Higher fish prices $$$ Higher stocking & feeding

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Profit-maximizing stocking Profit-maximizing stocking densities at different fish & feed densities at different fish & feed

prices.prices.

01,0002,0003,0004,0005,0006,0007,0008,0009,000

fis

h/a

cre

$/ton

$0.70/lb $0.75/lb $0.80/lb

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How low should you go?How low should you go?

Model results dropped profit- maximizing stocking rates to 5,000/ac at $0.60/lb.

Farmers need to stock at rates that ensure financial payments

are met.

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Fish grow faster at lower Fish grow faster at lower densities.densities.

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Higher stocking rates produce higher Higher stocking rates produce higher yields of smaller fish.yields of smaller fish.

May June July August Sept. Oct.

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Difficult to get good growth,

turnover

Densities need to stay within a Densities need to stay within a feasible range.feasible range.

5,500/acre

7,500/acre

Difficult to make debt

payments on ponds

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With High Feed Prices,With High Feed Prices,

Essential to get as much gain out of every pound of

feed as possible.

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Feed Prices, Economics, & Profitability:

Feed Studies

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Breakeven prices across farm Breakeven prices across farm sizes, 2009 feed costs.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 Breakeven prices across farm sizes, 2009 feed costs.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 What About Every Other Day Feeding?Feeding?

UAPB study: UAPB study: Yield of carryover fish was 757Yield of carryover fish was 757 lb/ac less when fed every otherlb/ac less when fed every other day.day.

Feed fed was 4,778 lb/ac less. Feed fed was 4,778 lb/ac less.

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What About Every Other Day What About Every Other Day Feeding?Feeding?

Feed cost

Net benefit

($0.65/lb)

Net benefit

($0.70/lb)

Net Benefit

($0.75/lb)

$250/ton $106/ac $68/ac $30/ac

$275/ton $165/ac $127/ac $89/ac

$300/ton $225/ac $187/ac $149/ac

$325/ton $285/ac $247/ac $209/ac

$350/ton $344/ac $306/ac $268/ac

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What’s the Down Side to What’s the Down Side to Every Other Day Feeding?Every Other Day Feeding?

Understocked fish growUnderstocked fish grow very poorly.very poorly. Every other day feedingEvery other day feeding better strategy for pondsbetter strategy for ponds with fish that are closer towith fish that are closer to market size.market size.

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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.

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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.

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