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2006RegFarmFinAgProfSC

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					Farm Financial Conditions
  South Central Kansas


   Pratt County Ag Profitability Conference
              February 8, 2006
       Samuel M. Funk, Administrator
Kansas Farm Management Association Program
Using Information to Move Forward

• Review of Current Conditions and
  Benchmarks
• Influencing factors: Now and in the Future
• Competitiveness in the Limelight
• Considerations in Decisions
Farm Incomes: The Past 5 Years
                              Net Farm Income
                                 KFMA-SC

  $200,000




  $150,000




  $100,000
                                                      Average of All Farms
                                                      High 25% Farms by NFI
                                                      Low 25% Farms by NFI
   $50,000




       $0
              00




                    01




                          02




                                           03




                                                 04
             20




                   20




                         20




                                         20




                                                20




  -$50,000
                  Farm Production
                          Value of Farm Production
                                  KFMA-SC


$600,000



$500,000



$400,000

                                                            Average of All Farms
                                                            High 25% Farms by NFI
$300,000
                                                            Low 25% Farms by NFI



$200,000



$100,000



     $0
           2000    2001   2002            2003       2004
                  Farm Expenses
                          Total Farm Expenses
                                KFMA-SC

$400,000


$350,000


$300,000


$250,000

                                                        Average of All Farms
$200,000                                                High 25% Farms by NFI
                                                        Low 25% Farms by NFI

$150,000


$100,000


 $50,000


     $0
           2000    2001    2002           2003   2004
   Debt-to-Assets Load
                     Debt to Asset Ratios
                          KFMA-SC

0.60




0.50



0.40


                                                   Average of All Farms
0.30                                               High 25% Farms by NFI
                                                   Low 25% Farms by NFI


0.20



0.10




0.00
       2000   2001   2002       2003        2004
   Debt-to-Assets Load
                     Debt to Asset Ratios
                          KFMA-SC
                                                   One occurrence
0.60                                               from 2000-04
                                                   where D:A
                                                   higher for 25%
0.50                                               NFI Farms than
                                                   average of all
0.40
                                                   farms

                                                    Average of All Farms
0.30                                                High 25% Farms by NFI
                                                    Low 25% Farms by NFI


0.20



0.10




0.00
       2000   2001   2002       2003        2004
              Current Ratios
                         Current Ratios
                           KFMA-SC

3.00




2.50



2.00


                                                 Average of All Farms
1.50                                             High 25% Farms by NFI
                                                 Low 25% Farms by NFI


1.00



0.50




0.00
       2000    2001   2002       2003     2004
         Utilization of Assets
                       Asset Turnover Ratio
                             KFMA-SC

0.5000


0.4500


0.4000

0.3500


0.3000
                                                     Average of All Farms
0.2500                                               High 25% Farms by NFI
                                                     Low 25% Farms by NFI
0.2000


0.1500

0.1000

0.0500


0.0000
         2000   2001   2002        2003       2004
Using Assets Productively
                        Percent Return on Assets
                               KFMA-SC

10.00%


 8.00%


 6.00%


 4.00%


 2.00%                                                    Average of All Farms
                                                          High 25% Farms by NFI
 0.00%                                                    Low 25% Farms by NFI
          2000   2001      2002        2003        2004

 -2.00%


 -4.00%


 -6.00%


 -8.00%
Future Considerations

Energy?
Drought?
      KFMA Data Utilization
An Assessment of the State of the Agricultural
 Economy in Increase Energy Prices Associated
         with Hurricanes Katrina and Rita
 Testimony to the U.S. House of Representatives,
Committee on Agriculture, Subcommittee on General
     Farm Commodities and Risk Management
  Prepared by Kevin Dhuyvetter, Samuel Funk,
      Terry Kastens and Michael Langemeier
               September 23, 2005
       What We Could Say
From data current as of September 22, 2005
based on KFMA 2004 Dryland and Irrigated
Crop Summaries:
“Assuming that producers do not make major
production changes, land rents would need to
decrease by $14.16 per acre for dryland acres
and $48.49 for irrigated acres from 2004 to
2006 in order to offset the impact of higher
energy costs alone.”
“Holding prices, yields and other factors
constant; if the 2004 KFMA Summary dryland
producers were to absorb the increase in the
energy expense complex alone, they would
reduce Net Farm Income by $22,227 from
2004 to 2006. For irrigated producers in the
2004 KFMA Summary the reduction in Net
Farm Income would be $51,832 in 2006.
These figures would represent a reduction in
net farm income respectively of 39.8% and
93.6% from 2004 levels.”
 As of December 1, 2005
 Holding prices, yields and other factors
constant; if the 2004 KFMA Summary dryland
producers were to absorb the increase in the
energy expense complex alone, they would
reduce Net Farm Income by $19,230 from 2004
to 2006. For irrigated producers in the 2004
KFMA Summary the reduction in Net Farm
Income would be $49,242 in 2006. These
figures would represent a reduction in net farm
income respectively of 34.4% and 88.9% from
2004 levels.
And the cash rent difference Dec1?

To remain whole to 2004 levels, cash rents
statewide in 2006 would need to decrease
per acre:

•Dryland: $11.91
•Irrigated: $47.13
What kind of an impact is Energy?
                       Statewide

 Energy Expense Complex as      Dryland   Irrigated
 % of Total Operating Expense

        2000 - 2004             22.8%      29.9%
         Projected
                                   32%      41%
           2006
What kind of an impact is Energy?
                       South Central
Energy Expense Complex     Average         High    Low
 as % of Total Operating
        Expense
                           (All Farms)   25% NFI 25% NFI
     2000 - 2004           23.7%         24.4%    22.9%
   Energy in the South Central
• The highest quarter of farms by NFI were
  typically the largest users of energy and
  fertilizer in the SC Association.
• Not unexpected for returns consistently
  higher with more acres.
• Not unexpectedly they will face cost
  pressures in the future.
Energy Expense Complex Outlays
                         Energy Expense Complex per Crop Acre
                                      KFMA-SC

  $45.00


  $40.00


  $35.00


  $30.00


  $25.00                                                               Average of All Farms
                                                                       High 25% Farms by NFI
  $20.00                                                               Low 25% Farms by NFI


  $15.00


  $10.00


   $5.00


   $0.00
           2000   2001            2002          2003            2004
Energy Expense Complex Outlays
                         Energy Expense Complex per Crop Acre          Revenues/Acre can
                                      KFMA-SC                          compensate for
                                                                       higher EEC/Acre
  $45.00


  $40.00


  $35.00


  $30.00


  $25.00                                                                   Average of All Farms
                                                                           High 25% Farms by NFI
  $20.00                                                                   Low 25% Farms by NFI


  $15.00


  $10.00


   $5.00


   $0.00
           2000   2001            2002          2003            2004
Crop Value in Excess of Cost
                         Net Return per Crop Acre
                                KFMA-SC

 $120.00



 $100.00



  $80.00


                                                           Average of All Farms
  $60.00                                                   High 25% Farms by NFI
                                                           Low 25% Farms by NFI


  $40.00



  $20.00



   $0.00
           2000   2001      2002           2003     2004
              Tradeoffs
• Energy price concerns must be balanced
  with productivity issues.
• Expectations of net returns will be
  essential to consider in the immediate
  future.
                 The KFMA
• Because now, possibly more than ever,
  we need to know the details of our
  financial positions.
  – Lenders
  – Decisions
  – Overall Profitability
On-Farm Visits

Whole Farm Analysis with Financial and
 Production Information

Evaluation of Farm Enterprises
            Here for You
Providing assistance with:
  – Record Keeping Strategies
  – Financial Analysis
  – Cash Flow Strategies
  – Capital Investment
  – Tax Management
  – Business Structure
Enhanced Record Keeping
    Computerized Records
         On-Farm PC Based Windows Program
         In-Office System with Monthly Reports
    Classic Account Book
    Annual Farm Summary

Financial Reports
     Balance Sheets
     Cash Flow Statements
     Income Statements
Tax Management and Planning
     Depreciation Schedules
          Tax-Basis
          Management-Basis
     Capital Investment Planning
     Inventory and Sales Management Information

Accrual and Cash Basis Information
   Independent Assessment
   Structured Analysis with Professional Economist
Benchmarking Financial and
Production Information
     Compare Farms
           by Enterprise
           by Location
     Providing a History of Financial Performance

 "Farm Management identifies the true costs in
  your operation and reveals what enterprises
  are profitable and which are not. Being in
  Farm Management for over 45 years has been
  a real benefit to my bottom line.“
      -- Kenneth Pike,
       Farm Management Member for over 45 years
            Working With You
• To compile farm-level Data
• With directed Economic Analysis tailored to
  Individual Operations
• Providing information in a format that can be
  utilized in Management Decisions for Your
  Farm or Ranch
• To make the best use of valuable data that
  comes from Your Individual Operations
      Working With Extension to
• Compile REGIONAL DATA (County-Level)
• Provide ECONOMIC INSIGHTS
• Enhance Information for PUBLIC POLICY
  issues
• Build a STRONG NETWORK of
     multi-disciplinary professionals assisting You
             2006 is Here
• Summary data for 2005 will be presented
  in May around the state
• May/June Summary Books to the Internet
• Contact your County Extension Office,
  local KFMA Economist or Sam Funk for
  information on participating in the KFMA
        Further Information
Corresponding papers will be on

    www.AgManager.info
  – Every KFMA Association
  – Other Presentations
  – Key Summary Materials

				
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