!
Financial Performance of Ontario Agricultural Sectors: Field Crop
*
Alfons Weersink (University of Guelph)
∗!Kenneth Poon (University of Guelph)
∗!Glen Manjin (University of Guelph)
Draft – Comments Welcome
August 2012
Working Paper Series – !12-02
Institute for the Advanced Study of Food and Agricultural Policy
Department of Food, Agricultural and Resource Economics
OAC!
University of Guelph
*
Alfons Weersink, Professor, Department of Food Agricultural and Resource Economics,
University of Guelph ([email protected]). Kenneth Poon, Research Associate, Department
of Food Agricultural and Resource Economics, University of Guelph ([email protected]).
Glen Manjin, Undergraduate Research Assistant, Department of Food Agricultural and Resource
Economics, University of Guelph (Glen Manjin [email protected]). The authors wish to
thank Stephen Duff and Greg Pate from OMAFRA for their technical support and efforts in
ensuring the formation of the Ontario Farm Income Database (OFID). In addition, they
acknowledge the helpful comments of Terry Daynard, Ray Bollman, Ken McEwan and Ahmed
Chilmeran. The authors also gratefully acknowledge the financial support provided by the
Ontario Ministry of Agriculture Food and Rural Affairs (OMAFRA).
Executive!Summary!
The financial performance of the Ontario field crop sector has been analyzed using the
Ontario Farm Income Database (OFID), which contains all Ontario farm tax filers that
reported farming income as part of either the Canadian Agricultural Income Stabilization
(CAIS) program which ended in 2007 and since 2007 either the AgriInvest or AgriStability
programs. . OFID is collected by OMAFRA in administering these programs. The program
data on inventory and government payments provides the opportunity for a unique
assessment on financial viability not available with traditional datasets on the farm sector.
It should be noted that starting in 2007, Ontario offered the cost of production based Risk
Management Program for grains and oilseed producers and participating farms must also
participate in AgriStability.
Revenues have increased since 2006 consistent with the trends in crop prices. Sales are
concentrated in the largest group of farms. In 2003, around 2/3 of the farms sold less than
$100k and they represented around 1.5% of total sales in the data sample. In contrast,
farms selling more than $1 million represented 1% of all farms but sold 55% of all crops.
The largest 8% of farms had more than 90% of all field crop sales in 2003. The same trends
were apparent in 2010 but there is less concentration. There were fewer about 1500 fewer
farmers in the OFID database and the reduction occurred in the small farm category.
The cost of goods sold for field crop operations increased with revenue but not at the same
rate. The result was an increase in gross margin for the OFID farms from a low of less
than $0.5 billion in 2005 to a high of close to $0.9 billion in 2009.
The Operating Profit Margin (OPM) provides a measure of relative profitability. For all
sales classes that have revenues greater than $100,000, the OPM increased from a low of
around 5% in 2005 to approximately 20% in the last several years. An OPM of 10% is
considered to be the minimum threshold for financial health. As with the OPM, the
Operating Expense Ratio (OER) has moved in a positive direction with crop prices as it has
fallen from a high in 2006. With the exception of the smallest revenue class, the average OER
was consistently below 65%, which is considered financially healthy. Thus, field crop operations
have adjusted expenses according to market conditions even during years of low prices.
Debt Coverage Ratio (DCR) is another financial viability measure that has improved over the
last several years. However before the turnaround in crop prices, DCR values averaged 110%
implying a difficulty to pay debt.
There was not an improvement in profitability across all field crop farms. In comparison to the
average, the bottom profitability quintile had sales approximately one-quarter of the average
farm across time, while the top profitability quintile were also smaller than the average but only
by around $50,000. Thus, while the most profitable farms are not necessarily the largest, the
most unprofitable farms are likely to be small. The farms consistently in the bottom
profitability quintile are most likely to be those selling less than $100,000 (i.e. 95% in 2003
and 85% in 2010), but they are also likely to dominate the most profitable category. The
share of farmers in the top quintile from the smallest sales category is close to 80% whereas
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a random draw would have them at 64%. Thus, there is heterogeneity even within this
sales grouping.
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Table!of!Contents!
1.
Introduction ......................................................................................................................... 1
2.
Overview of Field Crop Sector ............................................................................................ 2
3.
Methods ................................................................................................................................ 4
3.1. Data ................................................................................................................................. 4
3.2. Financial Performance Measures…………………………………………………………5
4.
Results .................................................................................................................................. 7
4.1 Farm Characteristics ........................................................................................................ 7
4.2 Financial Performance Measures by Sales Class - Cash ................................................ 8
4.3 Financial Performance Ratios by Sales Class - Cash ................................................... 10
4.4 Financial Measures - Cash versus Accrual ................................................................... 15
4.5 Financial Performance by Profitability Quintile........................................................... 15
5.
Summary ............................................................................................................................ 20
6.
References .......................................................................................................................... 21
Appendix A: Results from Ontario Farm Income Database, Tables by Sales Class ............... 1
Appendix B: Results from Ontario Farm Income Database, Tables by Profitability Quintile 1
!
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List!of!Figures!
Figure'1.''Harvested'Acres'of'Ontario'Crops'from'1981'to'2011'........................................................'2'
Figure'2.'Total'Revenue,'Cost'of'Goods'Sold,'and'Gross'Margin'for'OFID'Field'Crop'
Operations'from'2003'to'2010'...........................................................................................................................'8'
Figure'3.''Average'EBIT'and'Gross'Margin'of'Ontario'Field'Crop'Operations'from'2003'to'
2010''.............................................................................................................................................................................''9'
Figure'4.''Share'of'Total'Operating'Revenue'and'Farm'Numbers'by'Revenue'Class'for'2003'
and'2010'....................................................................................................................................................................'10'
Figure'5.''Average'Estimated'Debt'for'Ontario'Field'Crop'Sector'by'Revenue'Class'from'
2003'to'2010'...........................................................................................................................................................''12'
Figure'6.''Debt'Coverage'Ratio'for'Ontario'Field'Crop'Sector'by'Revenue'Class'from'2003'to'
2010''...........................................................................................................................................................................''13'
Figure'7.''Total'Operating'Revenue'for'Botton'and'Top'Profitability'Quintile'and'All'OFID'
Field'Crop'Farms'from'2003'to'2010'...........................................................................................................''15'
Figure'8.'EBIT'for'Botton'and'Top'Profitability'Quintile'and'All'OFID'Field'Crop'Farms'from'
2003'to'2010'...........................................................................................................................................................''16''
Figure'9.''Share'of'Revenue'Categories'in'Total'Farm'Number'and'Profitability'Quintiles'for'
2003'and'2010''......................................................................................................................................................''17'
Figure'10.''Estimated'Debt'for'Botton'and'Top'Profitability'Quintile'and'All'OFID'Field'Crop'
Farms'from'2003'to'2010'.................................................................................................................................''18'
Figure'11.''Debt'Coverage'Ratio'for'Botton'and'Top'Profitability'Quintile'and'All'OFID'Field'
Crop'Farms'from'2003S2010'...........................................................................................................................''19'
'
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List!of!Tables!
!
Table'1.''Average'Price,'Yield,'and'Revenue'for'Major'Ontario'Field'Crops,'2003S2010'.........'2'
Table'2.''Number'of'Operations'and'Gross'Total'Operating'Revenue'in'Ontario'in'2005'
Captured'by'Three'Major'Datasets'...................................................................................................................'5'
Table'3.'Characteristics'of'Field'Crop'Operation'in'Ontario'Farm'Income'Database'…............'7'
Table'4.''Total'Numbers'(and'Percentages)'of'Farms'by'Sales'Class'for'the'Ontario'Field'
Crop'Sector,'2003S2010'…....................................................................................................................................'8'
Table'5.''Operating'Profit'Margin'(%)'for'Ontario'Field'Crop'Sector'by'Sales'Class'from'
2003'to'2010''...........................................................................................................................................................'11'
Table'6.'Operating'Expense'Ratio'(%)'for'Ontario'Field'Crop'Sector'by'Sales'Class'from'
2003'to'2010'……………………………………………………………………………………………………………....'11'
Table'A1.'Cash'&'Accrual'S'Total'Operating'Revenue'for'Ontario'Field'Crop'Sector'by'Sales'
Classes'(2003S2010)'............................................................................................................................................'A1'
Table'A2.'Cash'and'Accrual'S'Operating'Expense'Ratio'for'Ontario''Field'Crop'Sector'by'
Income'Range'(2003S2010)'.............................................................................................................................'A2'
Table'A3.'Cash'&'Accrual'S'EBIT'for'Ontario'Field'Crop'Sector'by'Profitability'Quintile'
(2003S2010)'............................................................................................................................................................'A3'
Table'A4.'Cash'&'Accrual'S'Operating'Profit'Margin'for'Ontario''Field'Crop'Sector'by'Sales'
Classes'(2003S2010)'............................................................................................................................................'A4'
Table'A5.'Cash'&'Accrual'S'Operating'Expense'Ratio'for'Ontario'Field'Crop'Sector'by'
Profitability'Quintile'(2003S2010)'................................................................................................................'A5'
Table'A6.'Cash'S'Average'Estimated'Debt'for'Ontario'Field'Crop'Sector'by'Income'Range'
(2003S2010)'............................................................................................................................................................'A6'
Table'A7.'Cash'SDebt'Coverage'Ratio'for'Ontario'Field'Crop'Sector'by'Sales'Classes'(2003S
2010)'..........................................................................................................................................................................'A6'
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Table'B1.'Cash'&'Accrual'STotal'Operating'Revenue'for'Ontario''Field'Crop'Sector'by'
Profitability'Quintile'(2003S2010)'................................................................................................................'B1'
Table'B2.'Cash'&'Accrual'STotal'Operating'Expense'for'Ontario''Field'Crop'Sector'by'
Profitability'Quintile'(2003S2010)'................................................................................................................'B2'
Table'B3.'Cash'&'Accrual'S'EBIT'for'Ontario'Field'Crop'Sector'by'Profitability'Quintile'
(2003S2010)'............................................................................................................................................................'B2'
Table'B4.'Cash'&'Accrual'S'Operating'Profit'Margin'for'Ontario'Field'Crop'Sector'by'
Profitability'Quintile'(2003S2010)'................................................................................................................'B3'
Table'B5.'Cash'&'Accrual'S'Operating'Expense'Ratio'for'Ontario'Field'Crop'Sector'by'
Profitability'Quintile'(2003S2010)'................................................................................................................'B3'
Table'B6.'Cash'S'Estimated'Debt'for'Ontario'Field'Crop'Sector'by'Profitability'Quintile'
(2003S2010)'............................................................................................................................................................'B4'
Table'B7.'Cash'S'Debt'Coverage'Ratio'for'Ontario'Field'Crop'Sector'by'Profitability'Quintile'
(2003S2010)'............................................................................................................................................................'B4'
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1. Introduction!
The apparent fortunes of field crop operations in Ontario have swung significantly
over the course of the last decade. The second millennium began with a continuation
of a long downward trend in real crop prices that reversed itself dramatically in the
fall of 2006. Average prices for the major crops have since doubled, but have also
experienced much more volatility than in the past. Field crop input prices have risen
along with output prices partially due to the link between oil, ethanol and corn
markets. The net result is that some farmers could have benefited significantly from
the price changes, but others may have suffered by selling their output in the valleys
and purchasing their inputs at peak price periods. The financial performance
between operations will have varied between farm types and time periods.
The purpose of this report is to:
a) compare differences in financial performance for Ontario field crop farms
across different farm types and time; and to
b) provide benchmarks for comparisons of performance across farm types.
The report begins by describing the changes in prices, yields, and sales for the major
field crops. The next section describes the unique dataset used to assess financial
performance. The Ontario Farm Income Database (OFID) which contains all Ontario
farm tax filers that reported farming income as part of either the Canadian
Agricultural Income Stabilization (CAIS) program which ended in 2007 and since
2007 either the AgriInvest or AgriStability programs. . OFID is collected by
OMAFRA in administering these programs. The program data on inventory and
government payments provides the opportunity for a unique assessment on financial
viability not available with traditional datasets on the farm sector. It should be
noted that starting in 2007, Ontario offered the cost of production based Risk
Management Program for grains and oilseed producers and participating farms
must also participate in AgriStability.
Section 4 presents revenue and net farm income estimates for the years 2003
to 2010 along with financial performance measures. The report concludes with a
summary of the changes in the financial viability of the Ontario field crop sector by
farm type.
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2. Overview!of!the!Field!Crop!Sector!
Source: OMAFRA
Figure!1.!Harvested!Acres!of!Ontario!Crops!from!1981!to!2011
The three major field crops in Ontario are soybeans, grain corn, and winter wheat. The
area allocated to grain corn increased significantly during the 1970s due to the
development of early maturing varieties and peaked in 1981 at 2.2 million acres (see
Figure 1). Since 1994, soybeans have been the dominant crop in Ontario with total area
planted reaching a record level of nearly 2.5 million acres in 2011. Area planted to winter
wheat has averaged nearly 1 million acres over the last several years in Ontario. The area
allocated to small grains such as barley has declined steadily over time while the acreage
for edible beans has averaged close to 100,000 acres over the last 30 years.
'
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Table!1.!Average!Price,!Yield,!and!Revenue!for!Major!Ontario!Field!Crops!from!
2003Gto!20102!
2003
2004
2005
2006
2007
2008
2009
2010
Corn
Price ($/bu)
Yield (bu/acre)
Revenue ($/acre)
3.62
127.0
460
2.94
131.3
386
2.71
145.0
393
3.78
150.5
569
4.58
133.8
613
4.71
156.1
735
4.14
142.6
590
5.25
164.0
861
Soybeans
Price ($/bu)
Yield (bu/acre)
Revenue ($/acre)
9.87
31.9
315
7.69
39.6
305
6.78
41.0
278
7.23
46.0
333
10.12
33.0
334
11.30
43.4
490
10.59
40.2
426
11.10
46.0
511
Winter Wheat
Price ($/bu)
Yield (bu/acre)
Revenue ($/acre)
4.04
76.3
308
3.54
72.4
256
3.41
70.0
239
3.27
83.9
274
5.63
73.6
414
4.69
80.2
376
4.31
73.1
315
5.25
79.5
417
Barley
Price ($/bu)
Yield (bu/acre)
Revenue ($/acre)
2.76
63.5
175
2.47
63.7
157
2.22
53.6
119
2.89
63.6
184
4.19
60.6
254
4.28
60.7
260
3.31
63.1
209
4.16
65.5
272
Edible Beans
Price ($/bu)
Yield (bu/acre)
Revenue ($/acre)
30.1
41.0
1234
28.8
39.5
1138
23.4
41.6
973
28.2
29.7
838
28.2
29.7
838
37.0
42.8
1584
34.0
36.9
1255
32.2
42.0
1352
Source: OMAFRA
Table 1shows the swing in major field crop prices over the last decade. For
example, corn pricessurpassed $4 per bushel only twice between the early 1980s and
2006, but have been well above that since then. Corn yields also increased over the last
several years,reflecting a continued strong upward trend in productivity. Soybean yields
continue to fluctuate around the 40 bushels per acre mark, and in contrast to corn, do not
demonstrated any significant growth increase over time. Thus, while soybean prices have
risen along with corn prices, corn’s revenue per acre has gone up by a much more
significant percentage. Winter wheat revenues have also risen since 2006 but not to the
same extent as the other two major field crops. Edible beans were the only field crop to
have experienced a decline in revenues during 2007 but this doubled 2008. This swing is
reflective of the higher relative variability in prices and yields for edible beans in
comparison to other field crops.
2
Revenue for Table
1is the product of price and yield for the respective period.
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3.
Methods!
3.1.!!Data!
The farm financial data used here is from the Ontario Farm Income Database
(OFID), which contains all Ontario farm tax filers that reported farming income as
part of either the Canadian Agricultural Income Stabilization (CAIS) program,
which ended in 2007 and since 2007 either the AgriInvest or AgriStability programs.
OFID is collected by OMAFRA in administering these programs. The program data
on inventory and government payments provides the opportunity for a unique
assessment on financial viability not available with traditional datasets on the farm
sector. It should be noted that starting in 2007, Ontario offered the cost of
production based Risk Management Program for grains and oilseed producers and
participating farms must also participate in AgriStability.
The dataset consists of five parts: (1) non-financial characteristics of the
operator; (2) income and expense data from tax files between 1998 and 2010; (3)
program payment data between 2003 and 2010; (4) beginning and ending inventory
data of commodities for each year between 2003 and 2010; and (5) production data
(i.e. estimated acreage) generated from the inventory data. Note that tax filers are
assumed to be farm operators, and these terms are used interchangeably in this
report. This is a standard assumption for reporting on tax-based datasets.
Two criteria are used in the sample selection, based on the completeness of
the data associated with each farm operation. The data are from operators who: (1)
filed taxes between 2003 and 2010, and (2) from operators who applied for CAIS or
AgriStability during those years. Operators are not included in the sample if the
operators did not participate in the stabilization programs or did not have inventory
or production level information.
A unique feature of the OFID is its ability to link operators with their
respective operations. As such, the database makes it possible to convert operatorlevel data into farm-level aggregations. Therefore, results obtained from this dataset
may be different from those generated from other large agricultural datasets that
only report findings at the operator level, such as Census Data and the Taxation
Data Program. The main example being that in the Taxation Data Program a
husband-wife partnership is represented as two farms and will be in corresponding
lower income classifications while in this dataset, the single farm can be created.
The differences in a selected number of measures between the OFID, Census of
of Agriculture, and the Taxation Database Program (TDP) for the year 2005 are
given in !
!
Table 2. The year 2005 is selected because it is the only year when data exist
from all three datasets, as the Census of Agriculture is only conducted once every
five years. The number of observations in OFID is less than half of the number
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reported in the Census of Agriculture, but the former is farm-based while the latter
is operator-based. The number of operations in OFID is 20,266 while the number of
operators is 26,379. The average total operating revenue (TOR) of $233,215.19 per
operator is similar to the average per operator from the TDP. Thus, the numbers
generated from the OFID are representative and close to the average of the other
datasets but permit closer examination of farm-specific financial performance.
Revenue and expenses of each operation are taken from the income tax file of
the taxfilers associated with the operation and then aggregated to the farm level.
Revenue and expenses are also explicitly identified by commodity. Expense items
from the tax files are broken down further into four categories: (1) labour expenses,
(2) custom work expenses, (3) interest expenses, and (4) capital and depreciation
expenses. Labour expense represents all hired labour expenses but not those paid to
family members (dependents and spouses), as family labour expenses may not
accurately reflect actual labour costs. Custom work expenses are payments for
custom or contract work hired by the farm. Interest expenses are the interest paid
to farm and non-farm long-term loans, including real estate and mortgage payments.
They do not include the costs of short-term loans, such as the interest portion of
payment plans for feed and fertilizer, since these are generally included with their
respective input expenses. Capital and depreciation expenses are obtained directly
from the tax files and are used to proxy the value of asset depreciation.
!
!
Table!2.!Number!of!Operations!and!Gross!Total!Operating!Revenue!in!Ontario!
in!2005!as!Captured!by!Three!Major!Datasets!
Variables
Datasets
Ontario Farm
Income Database
(OFID)
Census of
Agriculture
Taxation Database
Program (TDP)
$20,266
$57,211
$44,615
$26,379
-
-
Total Operating
Revenue (TOR)4
$6,151,983,438
$10,342,031,229
$8,974,096,000
Average TOR per
Observation
$303,561
$180,770
$201,145
Average TOR per
Operator
$233,215
-
-
Number of
Observations3
Number of
Operators
3
The unit of observation for the Ontario Farm Income Database is farms; for Census of Agriculture and Taxation Database Program, it
is operators
4
For the Census of Agriculture and Taxation Database Program, Total Operating Revenue is taken as Gross Farm Receipt
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Source:
3.2.!!Financial!Performance!Measures!
The OFID is used to calculate three measures related to revenue, expense and
net income for farm operations. The three values are calculated for both cash and
accrual reporting. There is no balance sheet information available on assets and
liabilities.
1. Total Operating Revenue (TOR)= revenue from commodity sales, crop
insurance payments and production related revenue.
2. Cost Of Goods Sold (COGS) = expenses related to production. Mainly reflects
variable costs.
3. Total Operating Expense (TOE) = all expenses incurred by the farm less
salary paid to family members, quota rentals, and other tax-adjusting items
on tax form.
4. Estimated Debt = Interest Expense / Prime Rate5 + 1%.
5. Gross Margin (GM) = Total Operating Revenue – Cost of Goods Sold. A
measure of net operating income generated from commodity sales
6. Earnings Before Interest and Tax (EBIT) = Total Operating Revenue – nonoperating revenue6 -(Total Operating Expense- interest expenses).
Both GM and EBIT are calculated to give a clearer picture of financial
performance of farms. EBIT is a standard accounting measure of firm profit and is
often considered a more accurate measure of net income.
Government payment data for each operation are kept in a separate data set
from the income and tax file data. The government data are based on actual,
calculated payments from OMAFRA rather than those reported by the operators.
Payments are linked to the year in which they are triggered and not the year the
operator receives the funds.
The above revenue and expense measures are used to calculate four ratios,
which assess financial performance of the farm operation, calculated for both cash
and accrual reporting.
1. Operating Profit Margin
= profit as a percentage of sales revenue
5
The average prime rates used are 4.69% for 2003, 4.00% for 2004, 4.42% for 2005, 5.81% for 2006, 6.10% for 2007,
4.73% for 2008, and 2.40% for 2009. The prime-rates are calculated as the average of the month-end business prime
rates from Bank of Canada.
6
Non-operating revenue includes farm-related revenue reported in the tax-file not directly related to commodity production. This
category includes expense rebates and sales of goods and services such as gravel and custom work
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= EBIT / TOR.
2. Operating Expense Ratio
= expenses required to generate a $1 of revenue
= TOE / TOR.
3. Debt Coverage Ratio
= farm’s ability to generate sufficient cash to
cover debt payments
= EBIT / Interest Expense
4. Results!
4.1!Farm!Characteristics!
!
The number of field crop farmers in the OFID drops from 8,765 in 2003 to 7,969 in
2009 (see Table 3). This decline is significantly less than the drop that occurs in
other farm types within the OFID, meaning that field crop operations now represent
over half of the database’s total observations. Over 95% of these operations file taxes
with a cash accounting system regardless of size. Increases in size, however, are
associated with a higher likelihood of the operation being incorporated.
Table!3.!Characteristics!of!Field!Crop!Operations!in!Ontario!Farm!Income!
Database!(OFID)!
2003!
2004!
2005!
2006!
2007!
2008!
2009!
2010!
Number'of'
farms'
8,765'
8,330'
8,744'
8,464'
8,397'
8,297' 7,968'
7,319'
'
'
'
'
'
%'of'total'
farms'in'OFID'
41.5%' 42.0%' 43.1%' 45.4%' 47.2%' 49.8%' 52.5%' 54.1%'
!
'
'
'
'
'
%'Filing'taxes'
using'cash'
accounting'
96.4%' 96.6%' 96.3%' 96.7%' 96.5%' 97.0%' 96.9%' 97.2%'
%'of'
incorporated'
farms'
16.1%' 17.6%' 17.7%' 18.4%' 19.6%' 20.5%' 22.4%' 24.2%'
%of'Total'
Crop'Area'
41.1%' 41.3%' 41.7%' 43.1%' 45.5%' 48.4%' 51.1%' 53.3%'
'
'
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The number of farm operators in OFID is decomposed into revenue categories in
Table 4. From 2003 to 2010, there was a decline in the number of field crop
operations within OFID with the majority the decline in the smallest revenue size
category (see Table 4). The absolute number of farms and percentage of total farms
in the <$100K category declines throughout this same period. The remaining classes
are have increased throughout the period in terms of both absolute numbers and
percentage of total farms. The overall trends between 2003 and 2010 of a decline in
the total number of field crop farms in Ontario made up exclusively from a decrease
in the smallest size farms while other sales classes increase is consistent with total
farm numbers from the recent Canadian census. In addition, the smaller farms are
less likely to participate in AgStability due to the hassle of completing forms for
enrolment.
!Table!4.!Total!Numbers!(and!Percentages)!of!Farms!by!Sales!Class!for!the!
Ontario!Field!Crop!Sector,!from!2003!to!2010!
Sales Classes ($’000)
Year
< $100
>$100 - <$300
>$300 - <$500
>$500 - <$1,000
2003 5,642 (64%)
2253 (26%)
475 (5%)
290 (3%)
2004 5,438 (65%)
2052 (25%)
448 (5%)
292 (4%)
2005 5,861 (67%)
2062 (24%)
468 (5%)
266 (3%)
2006 5,532 (65%)
2075 (25%)
459 (5%)
302 (4%)
2007 4,842 (58%)
2358 (28%)
612 (7%)
413 (5%)
2008 4,188 (50%)
2582 (31%)
728 (9%)
537 (6%)
2009 4,023 (50%)
2420 (30%)
661 (8%)
562 (7%)
2010 3,473 (47%)
2343 (32%)
701 (10%)
524 (7%)
Source: Calculations using the Ontario Farm Income Database, OMAFRA
> $1,000
105 (1%)
100 (1%)
87 (1%)
96 (1%)
172 (2%)
262 (3%)
303 (4%)
278 (4%)
!
4.2!Financial!Variables!by!Sales!Class!I!Cash!
The three financial measures are calculated for the OFID operations over the time
period of analysis by sales class category. The measures are initially calculated
using a cash method of accounting. Thus, revenues and expenses are counted for the
year in which they are received or paid. Agriculture is one of the few sectors that
can use cash accounting to determine income tax levels.
Total Operating Revenue (TOR) for all farms in the OFID from 2003 to 2010 is
illustrated inFigure 2. The trend in sales is consistent with the changes noted for
revenue by individual crop in Table 1. Crop sales were approximately $1.1 billion
for these farms from 2003 to 2006 and then increased sharply to a high of close to
$1.8 billion in 2009.
The cost of goods sold for field crop operations increased with revenue but not at the
same rate. The result was an increase in gross margin for the OFID farms from a
low of less than $0.5 billion in 2005 to a high of close to $0.9 billion in 2009.
University of Guelph: Department of FARE
Page | 8
Source: OFID, internal calculations
Figure!2.!Total!Revenue,!Costs!of!Goods!Sold,!and!Gross!Margin!for!OFID!Field!
Crop!Operations!from!2003!to!2010!
University of Guelph: Department of FARE
Page | 9
Source: OFID, internal calculations
Figure!3.!Average!of!EBIT!and!Gross!Margin!of!OFID!Field!Crop!Operations!
from!2003!to!2010
Figure 3 shows a rise in EBIT similar to Gross Margin. However, the rate of the rise in
EBIT for 2009 and 2010 is of a lower rate that the rise in Gross Margin. This suggests
non-production expenses, such as interest payments, have risen higher than production
related expenses, such as seed and fertilizer, resulting in EBIT increasing at a slower rate
than Gross Margin.
'
University of Guelph: Department of FARE
Page | 10
Source: OFID, internal calculations
Figure!4.!Share!of!Total!Operating!Revenue!and!Farm!Numbers!by!Revenue!
Class!for!2003!and!2010!
!
The shares of total operating revenue comprised by each sales class are illustrated
in bar graphs for 2003 and 2010 in Figure 4. In addition, the shares of total farm
numbers in OFID (see Table 4) are also given for 2003 and 2010 in Figure 3. In
2003, around 2/3 of the farms sold less than $100k and they represented around
1.5% of total sales in the province (in red). In contrast, farms selling more than $1m
represented 1% of all farms but sold 55% of all crops (in purple). The largest 8% of
farms had more than 90% of all field crop sales in 2003. The same trends were
apparent in 2010 but there is less concentration. There were fewer about 1500 fewer
farmers in the OFID database and the reduction occurred exclusively in the smallest
size category (see Table 4).
4.3!Financial!Performance!Ratios!by!Sales!Class!I!Cash!
The Operating Profit Margin (OPM) is a relative measure of profitability and its
value reflects the trends noted in Figure 2. For all sales classes that have revenues
greater than $100,000, the OPM drops considerably from values around 14% in 2003
to a low of around 5% in 2005 and 2006 (see Table 5). The returns have increased to
around 20% in the last several years. Note that for all revenue classes, the average
OPMwere below the ‘minimum healthy’ level of 10%. Even in 2009 and 2010, where
OPM are highest on average for all revenue classes, their average OPM do not peak
above 25%, a value considered to be healthy. Furthermore, on average field crop
University of Guelph: Department of FARE
Page | 11
farms with sales below $100,000 did not have an OPM of over 10% within the study
period, meaning that these operations are on-average very unprofitable.
The operating profit margins are very similar across sales classes with the exception
of the smallest category. The OPM trends over time are the same for all farms but
the absolute values are significantly less for those farms with less than $100,000 in
revenues. The margins are negative for several years due to negative farm profits
during those periods. The OPM values reported in Table 5 are calculated using
aggregate profit and sales measures. These are very similar to averaging the individual
OPMs for all operations within a sales class. The exception is the small sales category
where the averages of individual OPMs are large negative values due to the influence of
some very unprofitable farms. Negative profits that are large compared to a small
revenue base can result in large negative OPMs. The variability in financial performance
for this smallest sales group is discussed further below.
Table!5.!Operating!Profit!Margin!(%)!for!Ontario!Field!Crop!Sector!by!Sales!
Class!from!2003!to!2010.!
Year
2003
2004
2005
2006
2007
2008
2009
2010
< $100
4
-11
-12
-9
-3
4
0
9
Avg
-3
Sales Classes (Thousands of $)
>$100 - <$300 >$300 - <$500
>$500 - <$1,000
15
15
14
9
9
9
5
5
6
3
6
6
12
13
13
19
21
16
15
18
20
17
18
18
12
14
> $1,000
14
11
6
6
11
17
17
17
14
14
Source: OFID, internal calculations
Table!6.!Operating!Expense!Ratio!(%)!for!Ontario!Field!Crop!Sector!by!Sales!
Class!from!2003!to!2010.!
Year
2003
2004
2005
2006
2007
2008
2009
2010
< $100
63
83
78
75
71
63
67
56
Avg
70
Sales Classes ($ 000’s)
>$100 - <$300 >$300 - <$500 >$500
47
47
51
50
56
55
56
55
53
52
49
49
51
48
48
48
51
50
- <$1,000
45
48
52
53
51
50
48
48
49
> $1,000
46
47
52
53
51
49
47
46
48
Source: OFID, internal calculations
University of Guelph: Department of FARE
Page | 12
The Operating Expense Ratio (OER) is listed by sales category over the last 8 years in
Table 6. The OER increased to a high in 2006 and has fallen since that time reflecting
the profitability trends discussed with the OPM. As with the OPM, the values of the
OER are very similar for a given year across the sales classes with the exception of the
smallest category. The OER for farms with sales less than $100,000 is approximately 20
percentage points higher than the average OER for other farms. With the exception of the
lowest revenue class, all revenue classes an average had their operating expenses ratio
below 65%, which is considered financially healthy. Even for the lowest revenue class,
the OER was consistently above 80%. This means that field crop operations are very
good at adjusting expenses according to market and growing conditions, even during
years of low prices.
Source: OFID, internal calculations
Figure!5.!Average!Estimated!Debt!for!Ontario!Fiend!Crop!Sector!by!Revenue!
Class!from!2003!to!2010!
University of Guelph: Department of FARE
Page | 13
Estimated debt is calculated as interest expense divided by the prime interest rate plus
one. Estimated debt is therefore positively (negatively) related with interest rate (interest
expense). Interest expense for farms in OFRID increases starting in 2003, peaks in 2006,
and steadily declines thereafter. The interest rate incurred (by producers holding debt)
decreases from 2003 to 2004 and increases from 2005, peaking in late 2007. The interest
rate plummets in 2008 through 2009, and increases slightly in 2010. Estimated debt as
illustrated in Figure 5appears to be negatively correlated with the interest rate. Debt
levels fall when interest rates are decreasing and bottom out in 2007 (highest rates). In
contrast, producers increase their debt load in 2008 and 2009 with the decrease in rates.
These trend sare fairly consistent and uniform across the sales categories.
Source: OFID, internal calculations
Figure!6.!Debt!Coverage!Ratio!for!Ontario!Field!Crop!Sector!by!Revenue!Class!
from!2003!to!2010.
The ability to finance the increase in estimated debt levels is proxied by the Debt
Coverage Ratio (DCR), which is illustrated in Figure 6. Before 2006, the average of all
revenue classes had a DCR of lower than 110%, meaning that these operations had a hard
time repaying their debt. Starting from 2007 onwards, which the exception of the lowest
University of Guelph: Department of FARE
Page | 14
revenue class, debt coverage ratio has improved. However, none of the revenue classes
has a sustained average DCR of over 110% even after the improvement, leading to some
concerns. The DCR appears to mirror the changes in debt load over time. The decrease
in profitability as reflected in declining EBIT values and increasing interest rates, results
in a smaller debt load. Since it falls faster than gross margins, the DCR falls. In contrast,
debt levels increase greater than EBIT values in the last part of the decade resulting in
higher DCR values.
4.4!Financial!MeasuresI!Cash!versus!Accrual!
The financial variables and performance measures given in sections 4.2 and 4.3
respectively used a cash method of accounting. Thus, revenues and expenses are
reported in the year in which they are received or paid. In contrast, accrual
accounting reports sales by the year in which they were generated and not the year
in which payment was actually obtained. There are three reasons why
reportedaccrual values may deviate from reported cash values:
1. Absolute annual inventory changes, in the form of either additions or
reductions, to producers’ crop inventories.
2. Changes to the nominal value of absolute amounts of yearly inventory
held by producers in the form of crop inventory.
3. A combination of addition or reduction of producers’ absolute annual
inventory and a change in the nominal value of said inventory.
Accrual sales are generally higher than cash sales for all years across revenue
categories with the exception of 2009 (see Table A.1). Crop prices fell after the
dramatic climb in the two previous years followed by a jump back again in 2010.
When crop prices increase, the accrual values are overall higher than their cash
counterparts, suggesting that producer inventories have a higher nominal value and/or
that producers hold higher absolute volumes of crop inventory
Operating expenses are relatively similar between cash and accrual methods across
years and sales categories (see Table A.2). The net result is that profits are higher
with the accrual system with the exception of 2004 and 2009 (see Table A.3).
Accrual and cash gross margins averaged across all farms are illustrated in Figure 4.
4.5!Financial!Performance!by!Profitability!Quintile!
The difference in financial performance is examined further by breaking up the
OFID farms into quintiles on the basis of profitability. Profitability is measured by
operating profit margin (OPM) since it is a relative term that allows for comparison
across different size units. The OPM is calculated for each farm in a given year and
then the farms ranked upon that measure. The focus in the discussion below is on
University of Guelph: Department of FARE
Page | 15
those operations in the bottom and top 20% of farms in terms of OPM as compared
to the average across all farms
Total Operating Revenue (TOR) calculated using cash and accrual is illustrated for
the bottom, top and average farms in Figure!7. The trends across time coincide with
the trend in crop prices discussed earlier but the increase in revenue from 2006 is
strongest for the top 20%. Average sales for this most profitable quintile are
approximately $50,000 less than the sales for all operations on average. However,
the least profitable farms have revenues that are approximately one-quarter of the
average farm across time. Thus, while the most profitable farms are not necessarily
the largest, the most unprofitable farms are likely to be small.
Source: OFID, internal calculations
Figure!7.!Total!Operating!Revenue!for!Bottom!and!Top!Profitability!Quintiles!
and!All!OFID!Field!Crop!Farms!from!2003!to!2010.
University of Guelph: Department of FARE
Page | 16
Source: OFID, internal calculations
Figure!8.!EBIT!for!Bottom!and!Top!Profitability!Quintiles!and!All!OFID!Field!
Crop!Farms!from!2003!to!2010!
Profits as given by EBIT are illustrated in Figure 9 for the different profitability
groups. Profits for the top 20% quintile remain relatively stable between 2003 and
2005 while the average for all farms declines. The increase from 2006 onwards is
greater for this top quintile than for all farms. In contrast, the EBIT for the bottom
20% fall consistently over time and does not increase despite the increase in crop
prices. The net returns are consistently negative for the bottom quintile with net
losses approximately $30,000 over the time period.
The results suggest the most unprofitable farms are likely to be the smallest farms.
However, one cannot conclude that all small farms are unprofitable. As illustrated
in Figure!9, the smallest farms in terms of sales are also likely to be the most
profitable as well as least profitable. The first and fourth bar graphs represent the
share of farms in each sales class. As noted earlier, around 2/3 of the farms in 2003
sold less than $100,000 and this dropped to less than 50% in 2010. The other two
bar graphs for each year indicate the percentage of farms that were consistently in
the top 20% and bottom 20% in terms of operating profit margin. While the smallest
category are most likely to be the farmers in the bottom 20% (i.e. 95% in 2003 and
University of Guelph: Department of FARE
Page | 17
85% in 2010), they are also likely to dominate the most profitable category. The
share of farmers in the top quintile from the smallest sales category is close to 80%
whereas a random draw would have them at 64%. Thus, there is heterogeneity even
within this sales grouping.
Source: OFID, internal calculations
Figure!9.!Share!of!Revenue!Categories!in!Total!Farm!Number!and!Profitability!
Quintiles!from!2003!to!2010!
University of Guelph: Department of FARE
Page | 18
Source: OFID, internal calculations
Figure!10.!Estimated!Debt!for!Bottom!and!Top!Profitability!Quintiles!and!All!
OFID!Field!Crop!Farms!from!2003!to!2010!
Estimated Debt by profitability quintile follows the same pattern and reasoning as
Estimated Debt by sales class. The top 20% of producers almost always seems to operate
at a higher estimated level of debt when compared to the bottom 20% or the industry
average.
University of Guelph: Department of FARE
Page | 19
Source: OFID, internal calculations
Figure!11.!Debt!Coverage!Ratio!for!Bottom!and!Top!Profitability!Quintiles!and!
All!OFID!Field!Crop!Farms!from!2003!to!2010!
The Debt Coverage Ratio (DCR) for the highest profitability quintile of farms is
significantly higher than that of the bottom 20% and any of the sales classes as a whole.
However, the DCR by sales class follows a trend similar to that of the DCR for the top
20%, as does the bottom quintile. The DRC for the bottom 20% is consistently negative,
reiterating the fact that the bottom quintile has an average negative EBIT and therefore
any interest expense incurred would yield a negative DCR.
5. Summary!
The financial performance of Ontario field crop farms has improved with the
significant increase in crop prices since 2007. Average values temper the positive
changes noted for most commercial field crop farms. The reduction in financial
viability measures for the average is due to the high percentage of farms selling less
than $100,000 of crops. However, while these farms dominate the most unprofitable
quintile of farms, they also are some of the most profitable.
University of Guelph: Department of FARE
Page | 20
6. References!
Ontario Ministry of Agriculture, Rood and Rural Affairs. Ontario Farm Income Database.
Various years.
Ontario Ministry of Agriculture, Food and Rural Affairs. Field Crops, 1981-2010.
http://www.omafra.gov.on.ca/english/stats/crops/index.html
University of Guelph: Department of FARE
Page | 21
Appendix(A:!Results!from!Ontario!Farm!Income!Database,!Tables!by!Sales!Class(
Table A1. Cash & Accrual - Total Operating Revenue for Ontario Field Crop Sector by Sales Classes (2003-2010)
Sales(Classes(
>!$0!&<!$100,000!
Cash!
Accrual!
>!$100,000!&<!$300,000!
Cash!
Accrual!
>!$300,000!&<!$500,000!
Cash!
Accrual!
>!$500,000!&<!$1,000,000!
Cash!
Accrual!
>!$1,000,000!
Cash!
Accrual!
Total!Average!Cash!
Total!Average!Accrual!
2003(
2004(
2005(
2006(
2007(
2008(
2009(
2010(
!
!
!
!
!
!
!
!
$42,012!
$40,543!
$41,018!
$41,929!
$44,334!
$47,697!
$47,978!
$50,246!
$45,020!
$42,977!
$45,009!
$46,985!
$49,090!
$53,224!
$50,350!
$57,503!
!
!
!
!
!
!
!
!
$170,739!
$171,275!
$167,894!
$168,224!
$171,753!
$175,502!
$175,226!
$174,328!
$169,990!
$167,145!
$175,456!
$183,298!
$184,847!
$186,363!
$173,154!
$190,229!
!
!
!
!
!
!
!
!
$380,778!
$384,737!
$380,445!
$378,852!
$384,454!
$384,414!
$381,471!
$387,506!
$384,817!
$384,984!
$399,089!
$407,659!
$402,039!
$410,874!
$374,042!
$425,319!
!
!
!
!
!
!
!
!
$662,183!
$677,004!
$671,525!
$679,938!
$676,918!
$697,724!
$697,743!
$693,366!
$678,889!
$669,609!
$701,071!
$737,054!
$719,574!
$749,968!
$679,801!
$766,317!
!
!
!
!
!
!
!
!
$1,556,477! $1,605,982! $1,619,175! $1,589,721! $1,652,373! $1,600,375! $1,663,289! $1,634,698!
$1,578,401! $1,622,190! $1,611,310! $1,692,268! $1,704,543! $1,712,270! $1,644,562! $1,780,886!
$131,886!
$131,972!
$123,320!
$130,885!
$168,311!
$206,764!
$220,318!
$227,308!
$134,672!
$132,533!
$129,603!
$142,606!
$179,159!
$222,137!
$218,307!
$250,185!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
Table A2. Cash and Accrual - Operating Expense Ratio for Ontario Field Crop Sector by Income Range (20032010)
Sales(Classes(
>!$0!&<!$100,000!
Cash!
Accrual!
>!$100,000!&<!$300,000!
Cash!
Accrual!
>!$300,000!&<!$500,000!
Cash!
Accrual!
>!$500,000!&<!$1,000,000!
Cash!
Accrual!
>!$1,000,000!
Cash!
Accrual!
Total!Average!Cash!
Total!Average!Accrual!
2003(
!
2004(
!
$58,488!
$58,887!
!
!
$64,262!
$64,538!
!
$189,952!
$190,649!
!
$797,653!
$812,322!
$887,845!
$894,181!
$1,791,463!
$1,790,374!
$158,689!
$159,722!
$983,344!
$987,550!
$1,863,619!
$1,912,806!
$172,539!
$173,921!
$964,066!
$962,059!
$2,157,194!
$2,159,261!
$174,648!
$175,305!
$2,051,243! $1,935,362!
$2,037,824! $1,973,053!
$183,147!
$211,762!
$182,862!
$215,893!
$205,311!
$206,058!
$428,533!
$434,755!
$839,466!
$852,190!
$418,967!
$422,161!
$781,898!
$800,129!
$444,227!
$450,638!
!
$761,604!
$768,187!
!
$1,800,900!
$1,840,962!
$239,200!
$242,675!
$193,780!
$195,951!
!
!
!
$71,342!
$71,956!
!
!
!
!
$69,261!
$69,081!
$198,116!
$199,623!
$449,082!
$458,651!
2010(
!
!
!
!
!
$67,154!
$67,293!
$214,142!
$219,197!
$510,637!
$512,837!
2009(
!
!
!
!
!
$67,037!
$68,129!
$225,763!
$225,651!
$497,458!
$502,184!
2008(
!
!
!
!
!
$66,117!
$65,898!
$223,205!
$224,164!
$472,551!
$475,864!
2007(
!
!
!
!
!
$66,880!
$66,943!
$211,281!
$212,338!
$452,916!
$455,586!
2006(
!
!
!
!
2005(
$784,226!
$793,571!
!
$1,917,303!
$1,928,496!
$257,340!
$258,599!
$1,844,628!
$1,872,414!
$263,388!
$266,673!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
University of Guelph :FARE Department
P a g e A| 2
Table A3. Cash & Accrual - EBIT for Ontario Field Crop Sector by Profitability Quintile (2003-2010)
Sales(Classes(
>!$0!&<!$100,000!
Cash!
Accrual!
>!$100,000!&<!$300,000!
Cash!
Accrual!
>!$300,000!&<!$500,000!
Cash!
Accrual!
>!$500,000!&<!$1,000,000!
Cash!
Accrual!
>!$1,000,000!
Cash!
Accrual!
Total!Average!Cash!
Total!Average!Accrual!
2003(
(
$1,572!
$4,161!
!
$25,371!
$24,042!
!
$56,871!
$58,500!
!
$92,211!
$94,078!
!
$225,318!
$248,759!
$16,333!
$18,084!
2004(
(
L$4,647!
L$2,497!
!
$16,180!
$11,100!
!
$33,931!
$30,714!
!
$63,467!
$49,933!
!
$183,202!
$152,964!
$7,157!
$6,308!
2005(
2006(
2007(
2008(
(
(
(
(
L$4,935! L$3,798!
L$1,110!
$1,772!
L$999!
$1,486!
$2,571!
$7,101!
!
!
!
!
$7,942!
$4,990!
$20,483! $32,675!
$14,523! $20,251! $28,639! $42,015!
!
!
!
!
$18,497! $21,269! $48,238! $80,904!
$32,680! $47,734! $56,567! $101,355!
!
!
!
!
$43,468! $41,038! $90,109! $112,658!
$67,821! $100,768! $120,258! $146,376!
!
!
!
!
$91,125! $96,774! $186,224! $267,816!
$80,793! $210,488! $201,527! $339,972!
$1,741!
$2,416!
$16,795! $33,677!
$7,327! $14,422! $23,606! $45,470!
2009(
(
$27!
$2,555!
!
$26,713!
$23,907!
!
$69,445!
$58,859!
!
$136,668!
$112,191!
!
$277,682!
$247,596!
$33,876!
$30,576!
2010(
(
$4,331!
$10,901!
!
$29,274!
$42,886!
!
$71,013!
$101,621!
!
$122,985!
$186,761!
!
$277,557!
$396,310!
$37,371!
$56,767!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
University of Guelph :FARE Department
P a g e A| 3
Table A4. Cash & Accrual - Operating Profit Margin for Ontario Field Crop Sector by Sales Classes (2003-2010)
Sales(Classes(
>!$0!&<!$100,000!
Cash!
Accrual!
>!$100,000!&<!$300,000!
Cash!
Accrual!
>!$300,000!&<!$500,000!
Cash!
Accrual!
>!$500,000!&<!$1,000,000!
Cash!
Accrual!
>!$1,000,000!
Cash!
Accrual!
Total!Average!Cash!
Total!Average!Accrual!
2003(
!
L540%!
L545%!
!
15%!
12%!
!
15%!
13%!
!
14%!
12%!
!
15%!
15%!
L342%!
L346%!
2004(
!
L575%!
L561%!
!
9%!
2%!
!
9%!
5%!
!
10%!
5%!
!
13%!
9%!
L373%!
L365%!
2005(
!
L496%!
L476%!
!
4%!
5%!
!
5%!
7%!
!
6%!
7%!
!
7%!
4%!
L331%!
L317%!
2006(
!
L470%!
L481%!
!
3%!
7%!
!
6%!
11%!
!
6%!
10%!
!
5%!
11%!
L306%!
L312%!
2007(
!
L412%!
L404%!
!
12%!
L10%!
!
12%!
12%!
!
14%!
16%!
!
12%!
12%!
L233%!
L234%!
2008(
!
L295%!
L280%!
!
18%!
20%!
!
21%!
23%!
!
16%!
18%!
!
18%!
20%!
L140%!
L132%!
2009(
!
L347%!
L166%!
!
15%!
10%!
!
18%!
13%!
!
20%!
18%!
!
18%!
13%!
L168%!
L78%!
2010(
!
L10%!
3%!
!
16%!
25%!
!
19%!
21%!
!
18%!
22%!
!
17%!
21%!
4%!
14%!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
University of Guelph :FARE Department
P a g e A| 4
Table A5. Cash & Accrual - Operating Expense Ratio for Ontario Field Crop Sector by Profitability Quintile
(2003-2010)
Sales(Classes(
>!$0!&<!$100,000!
Cash!
Accrual!
>!$100,000!&<!$300,000!
Cash!
Accrual!
>!$300,000!&<!$500,000!
Cash!
Accrual!
>!$500,000!&<!$1,000,000!
Cash!
Accrual!
>!$1,000,000!
Cash!
Accrual!
Total!Average!Cash!
Total!Average!Accrual!
2003(
!
63%!
62%!
!
47%!
49%!
!
47%!
48%!
!
45%!
47%!
!
46%!
46%!
57%!
57%!
2004(
!
83%!
67%!
!
51%!
54%!
!
50%!
54%!
!
48%!
51%!
!
47%!
50%!
72%!
62%!
2005(
!
78%!
66%!
!
56%!
55%!
!
55%!
55%!
!
52%!
51%!
!
52%!
53%!
70%!
62%!
2006(
!
75%!
61%!
!
56%!
53%!
!
55%!
51%!
!
53%!
49%!
!
53%!
50%!
68%!
58%!
2007(
!
71%!
63%!
!
53%!
65%!
!
52%!
53%!
!
51%!
51%!
!
51%!
52%!
63%!
62%!
2008(
!
63%!
53%!
!
49%!
48%!
!
49%!
48%!
!
50%!
50%!
!
49%!
48%!
56%!
50%!
2009(
!
67%!
55%!
!
51%!
54%!
!
48%!
52%!
!
48%!
49%!
!
47%!
51%!
58%!
54%!
2010(
!
56%!
49%!
!
48%!
49%!
!
48%!
47%!
!
48%!
46%!
!
46%!
45%!
52%!
48%!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
University of Guelph :FARE Department
P a g e A| 5
Table A6. Cash - Average Estimated Debt for Ontario Field Crop Sector by Income Range (2003-2010)
Sales(Classes(
>!$0!&<!$100,000!
>!$100,000!&<!$300,000!
>!$300,000!&<!$500,000!
>!$500,000!&<!$1,000,000!
>!$1,000,000!
Total!Average!
2003(
$113,380!
$261,362!
$486,787!
$757,569!
$1,478,084!
$225,861!
2004(
$127,769!
$299,341!
$562,297!
$921,028!
$1,755,509!
$259,870!
2005(
$118,534!
$295,248!
$549,140!
$850,548!
$1,912,893!
$241,818!
2006(
$102,128!
$243,320!
$489,282!
$793,285!
$1,670,296!
$217,841!
2007(
$95,663!
$223,913!
$430,949!
$689,852!
$1,593,458!
$236,259!
2008(
$106,880!
$236,151!
$446,049!
$733,801!
$1,625,463!
$289,537!
2009(
$156,693!
$351,447!
$650,931!
$1,049,336!
$2,132,981!
$430,473!
2010(
$136,366!
$308,780!
$599,601!
$944,332!
$2,039,544!
$399,529!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
Table A7. Cash -Debt Coverage Ratio for Ontario Field Crop Sector by Sales Classes (2003-2010)
Sales(Classes(
>!$0!&<!$100,000!
>!$100,000!&<!$300,000!
>!$300,000!&<!$500,000!
>!$500,000!&<!$1,000,000!
>!$1,000,000!
Total!Average!
2003(
19!
62!
88!
172!
44!
43!
2004(
18!
60!
76!
192!
93!
42!
2005(
5!
37!
60!
31!
11!
18!
2006(
1!
29!
48!
42!
46!
14!
2007(
3!
111!
91!
64!
163!
52!
2008(
40!
102!
174!
199!
89!
89!
2009(
9!
130!
111!
115!
74!
71!
2010(
55!
97!
81!
118!
155!
82!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
University of Guelph :FARE Department
P a g e A| 6
Appendix(B:!Results!from!Ontario!Farm!Income!Database,!Tables!by!Profitability!Quintile!
able 5. Total Farm Numbers and Percentages for Ontario Field Crop Sector by Income Range and Profitability Quintile (2003-2010)
Sales(Classes(
>!$0!&<!$100,000!
2003(
!!
2004(
!!
!!
2005(
!!
!!
2006(
!!
!!
2007(
!!
!!
2008(
!!
!!
2009(
!!
!!
2010(
!!
!!
!!
Top!20%!!
372,!
77%!
285,!
76%!
277,!
81%!
261,!
80%!
236,!
73%!
209,!
65%!
197,!
59%!
204,!
58%!
Bottom!20%!
468,!
96%!
325,!
97%!
313,!
98%!
289,!
98%!
308,!
96%!
335,!
92%!
331,!
89%!
354,!
86%!
>!$100,000!&<!$300,000!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
Top!20%!!
93,!
19%!
74,!
20%!
50,!
15%!
49,!
15%!
66,!
20%!
73,!
23%!
96,!
29%!
99,!
28%!
Bottom!20%!
15,!
3%!
8,!
2%!
4,!
1%!
4,!
1%!
11,!
3%!
24,!
7%!
34,!
9%!
49,!
12%!
>!$300,000!&<!$500,000!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
Top!20%!!
9,!
2%!
7,!
2%!
8,!
2%!
9,!
3%!
10,!
3%!
21,!
7%!
16,!
5%!
28,!
8%!
Bottom!20%!
3,!
1%!
1,!
0%!
1,!
0%!
2,!
1%!
2,!
1%!
5,!
1%!
5,!
1%!
5,!
1%!
>!$500,000!&<!$1,000,000!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
Top!20%!!
7,!
1%!
5,!
1%!
4,!
1%!
6,!
2%!
10,!
3%!
10,!
3%!
16,!
5%!
15,!
4%!
Bottom!20%!
1,!
0%!
2,!
1%!
0,!
0%!
0,!
0%!
1,!
0%!
2,!
1%!
1,!
0%!
2,!
0%!
>!$1,000,000!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
Top!20%!
2,!
0%!
3,!
1%!
1,!
0%!
3,!
1%!
3,!
1%!
8,!
2%!
10,!
3%!
6,!
2%!
Bottom!20%!
0,!
0%!
0,!
0%!
0,!
0%!
0,!
0%!
0,!
0%!
0,!
0%!
2,!
1%!
1,!
0%!
Total!Farms!
8738!
8305!
8719!
8445!
8374!
8269!
7946!
7295!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
University of Guelph:Department of FARE
P a g e B| 1
Table B1. Cash & Accrual -Total Operating Revenue for Ontario Field Crop Sector by Profitability Quintile
(2003-2010)
Quintile!
Top!20!%!L!Cash!
Top!20!%!LAccrual!
Bottom!20%!LCash!
Bottom!20%!LAccrual!
Total!Average!L!Cash!
Total!Average!L!Accrual!
2003!
$81,740!
$87,127!
$27,939!
$30,238!
$131,886!
$134,672!
2004!
$83,551!
$85,472!
$24,983!
$27,909!
$131,972!
$132,533!
2005!
$77,796!
$80,849!
$18,500!
$20,802!
$123,320!
$129,603!
2006!
$90,777!
$96,043!
$22,619!
$24,277!
$130,885!
$142,606!
2007!
$111,485!
$119,306!
$32,454!
$32,188!
$168,311!
$179,159!
2008!
$138,997!
$138,596!
$45,045!
$42,749!
$206,764!
$222,137!
2009!
$168,661!
$155,531!
$56,705!
$53,178!
$220,318!
$218,307!
2010!
$159,861!
$190,311!
$61,118!
$61,863!
$227,308!
$250,185!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
Table B2. Cash & Accrual -Total Operating Expense for Ontario Field Crop Sector by Profitability Quintile (20032010)
Quintile!
Top!20!%!LCash!
Top!20!%!LAccrual!
Bottom!20%!LCash!
Bottom!20%!LAccrual!
Total!Average!L!Cash!
Total!Average!L!Accrual!
2003!
$110,923!
$123,306!
$66,975!
$65,033!
$158,689!
$159,722!
2004!
$138,712!
$148,732!
$71,339!
$69,389!
$172,539!
$173,921!
2005!
$143,421!
$165,093!
$57,282!
$56,001!
$174,648!
$175,305!
2006!
$152,552!
$177,841!
$70,578!
$62,790!
$183,147!
$182,862!
2007!
$176,137!
$204,286!
$86,221!
$80,929!
$211,762!
$215,893!
2008!
$199,570!
$239,267!
$97,654!
$87,007!
$239,200!
$242,675!
2009!
$231,237!
$274,404!
$121,813!
$114,607!
$257,340!
$258,599!
2010!
$232,660!
$287,734!
$116,744!
$122,273!
$263,388!
$266,673!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
Table B3. Cash & Accrual - EBIT for Ontario Field Crop Sector by Profitability Quintile (2003-2010)
Quintile!
Top!20!%!LCash!
2003!
$59,920!
2004!
$61,384!
2005!
$59,294!
University of Guelph:Department of FARE
2006!
$63,798!
2007!
$81,511!
2008!
2009!
2010!
$106,405! $118,060! $116,643!
P a g e B| 2
Top!20!%!LAccrual!
Bottom!20%!LCash!
Bottom!20%!LAccrual!
Total!Average!L!Cash!
Total!Average!L!Accrual!
$67,508!
L$25,721!
L$25,063!
$16,333!
$18,084!
$67,246! $67,331! $73,962! $93,020! $108,498! $118,577! $145,909!
L$34,155! L$28,757! L$32,463! L$36,595! L$36,496! L$45,969! L$36,513!
L$30,770! L$25,839! L$27,455! L$33,991! L$30,113! L$46,262! L$39,447!
$7,157!
$1,741!
$2,416!
$16,795! $33,677! $33,876! $37,371!
$6,308!
$7,327!
$14,422! $23,606! $45,470! $30,576! $56,767!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
Table B4. Cash & Accrual - Operating Profit Margin for Ontario Field Crop Sector by Profitability Quintile (20032010)
Quintile!
Top!20!%!LCash!
Top!20!%!LAccrual!
Bottom!20%!LCash!
Bottom!20%!LAccrual!
Total!Average!L!Cash!
Total!Average!L!Accrual!
2003!
158%!
201%!
L6180%!
L6723%!
L342%!
L346%!
2004!
134%!
151%!
L8273%!
L9015%!
L373%!
L365%!
2005!
127%!
140%!
L8601%!
L8886%!
L331%!
L317%!
2006!
139%!
161%!
L8323%!
L8757%!
L306%!
L312%!
2007!
184%!
205%!
L6182%!
L6060%!
L233%!
L234%!
2008!
144%!
130%!
L3389%!
L3414%!
L140%!
L132%!
2009!
125%!
150%!
L1733%!
L1789%!
L168%!
L78%!
2010!
183%!
262%!
L253%!
L302%!
4%!
14%!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
Table B5. Cash & Accrual - Operating Expense Ratio for Ontario Field Crop Sector by Profitability Quintile
(2003-2010)
Quintile!
2003!
2004!
University of Guelph:Department of FARE
2005!
2006!
2007!
2008!
2009!
2010!
P a g e B| 3
Top!20!%!LCash!
Top!20!%!LAccrual!
Bottom!20%!LCash!
Bottom!20%!LAccrual!
Total!Average!L!Cash!
Total!Average!L!Accrual!
46%!
13%!
118%!
103%!
57%!
57%!
51%!
45%!
253%!
152%!
72%!
62%!
57%!
32%!
205%!
125%!
70%!
62%!
51%!
36%!
145%!
162%!
68%!
58%!
57%!
46%!
140%!
121%!
63%!
62%!
60%!
47%!
95%!
87%!
56%!
50%!
43%!
33%!
119%!
112%!
58%!
54%!
44%!
43%!
91%!
108%!
52%!
48%!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
Table B6. Cash - Estimated Debt for Ontario Field Crop Sector by Profitability Quintile (2003-2010)
Quintile!
Top!20!%!LCash!
Bottom!20%!LCash!
Total!Average!L!Cash!
2003!
$284,868!
$116,600!
$225,861!
2004!
2005!
2006!
2007!
2008!
2009!
2010!
$305,158! $295,212! $240,954! $266,575! $271,011! $486,218! $405,566!
$104,987! $80,456! $67,162! $88,072! $134,216! $238,613! $189,164!
$259,870! $241,818! $217,841! $236,259! $289,537! $430,473! $399,529!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
Table B7. Cash - Debt Coverage Ratio for Ontario Field Crop Sector by Profitability Quintile (2003-2010)
Quintile!
Top!20!%!LCash!
2003!
214!
2004!
349!
University of Guelph:Department of FARE
2005!
355!
2006!
396!
2007!
304!
2008!
471!
2009!
359!
2010!
327!
P a g e B| 4
Bottom!20%!LCash!
Total!Average!L!Cash!
L55!
43!
L61!
42!
L111!
18!
L73!
14!
L134!
52!
L99!
89!
L145!
71!
L111!
82!
Source: Calculations using the Ontario Farm Income Database, OMAFRA
(
(
(
University of Guelph:Department of FARE
P a g e B| 5