Using Enterprise Budgets and Income Statements to Improve

Using Enterprise Budgets and Income Statements to Improve Efficiencies and Profitability of Catfish Farms Carole R. Engle Aquaculture/Fisheries Center University of Arkansas at Pine Bluff

Income Statement: Cash-based Accounting Item Revenue Cash expenses Depreciation Total operating expenses Cash interest paid Total expenses Net farm income from operations Value $403, 200 $610, 322 $42, 707 $653, 029 $150, 579 $803, 608 - $400, 408 Engle, UAPB

Income Statement: Cash-based Accounting Item 2010 2011 Revenue $403, 200 $1, 209, 600 Cash expenses $610, 322 $42, 707 Total operating expenses Cash interest paid $653, 029 $150, 579 Total expenses $803, 608 - $400, 408 $405, 992 Depreciation Net farm income Engle, UAPB

Income Statement: Accrual-based Accounting Item 2010 2011 Revenue $403, 200 $1, 209, 600 Change in fish inventory $403, 200 - $403, 200 Total Farm Revenue $806, 400 Total operating expenses $653, 029 Cash interest paid $150, 579 Total expenses $803, 608 $2, 792 Net farm income Engle, UAPB

What does it take to survive 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. Engle, UAPB

Fish Feed Prices Engle, UAPB

Realities of $300/ton Feed UAPB Base Budgets: 431 -acre farm ($300/ton feed) Farm Size 131 -acre farm 256 -acre farm 431 -acre farm 1, 007 -acre farm Cost/ VC $0. 63/lb $0. 64/lb Cost/ TC $0. 83/lb $0. 79/lb $0. 78/lb Engle, UAPB

Realities of $350/ton Feed UAPB Base Budgets: 431 -acre farm ($350/ton feed) Farm Size 131 -acre farm 256 -acre farm 431 -acre farm 1, 007 -acre farm Cost/ VC $0. 69/lb $0. 70/lb Cost/ TC $0. 88/lb $0. 85/lb $0. 84/lb $0. 83/lb Engle, UAPB

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

What would happen with different feed and catfish prices? To maximize profits: é At low fish prices, feed rates and stocking rates would decrease. é At low feed prices, feed and stocking rates would increase. é At high feed prices, feed and stocking rates would decrease. Engle, UAPB

Effects of Higher Fish Prices & Higher Feed Prices Higher feed prices $$$ Lower stocking & feeding Higher fish prices $$$ Higher stocking & feeding Engle, UAPB

Profit-maximizing stocking densities at different fish & feed prices. Engle, UAPB

How low should you go? Model results dropped profitmaximizing stocking rates to 5, 000/ac at $0. 60/lb. Farmers need to stock at rates that ensure financial payments are met. Engle, UAPB

Fish grow faster at lower densities. Engle, UAPB

Higher stocking rates produce higher yields of smaller fish. May June Engle, UAPB July August Sept. Oct.

Densities need to stay within a feasible range. Difficult to get good growth, turnover 7, 500/acre 5, 500/acre Difficult to make debt payments on ponds Engle, UAPB

With High Feed Prices, Essential to get as much gain out of every pound of feed as possible. Engle, UAPB

Feed Prices, Economics, & Profitability: Feed Studies Engle, UAPB

Breakeven prices across farm sizes, 2009 feed costs. Farm size 32% protein ($343/ton) 28% protein ($322/ton) 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 Feeding? UAPB study: ØYield of carryover fish was 757 lb/ac less when fed every other day. ØFeed fed was 4, 778 lb/ac less. Engle, UAPB

What About Every Other Day Feeding? Feed cost $250/ton $275/ton $300/ton $325/ton $350/ton Net Net benefit Benefit ($0. 65/lb) ($0. 70/lb) ($0. 75/lb) $106/ac $68/ac $30/ac $165/ac $127/ac $89/ac $225/ac $187/ac $149/ac $285/ac $247/ac $209/ac $344/ac $306/ac $268/ac Engle, UAPB

What’s the Down Side to Every Other Day Feeding? Ø Understocked fish grow very poorly. Ø Every other day feeding better strategy for ponds with fish that are closer to market size. Engle, UAPB

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. Engle, UAPB

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. Engle, UAPB