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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
Engle, UAPB
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
Engle, UAPB
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
Engle, UAPB
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.
Engle, UAPB
Fish Feed PricesFish Feed Prices
$150
$200
$250
$300
$350
$400
$450
$/to
n
Engle, UAPB
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
Engle, UAPB
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
Engle, UAPB
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
Engle, UAPB
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.
Engle, UAPB
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
Engle, UAPB
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
Engle, UAPB
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.
Engle, UAPB
Fish grow faster at lower Fish grow faster at lower densities.densities.
Engle, UAPB
Higher stocking rates produce higher Higher stocking rates produce higher yields of smaller fish.yields of smaller fish.
May June July August Sept. Oct.
Engle, UAPB
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
Engle, UAPB
With High Feed Prices,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 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.
Engle, UAPB
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
Engle, UAPB
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.
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