Ontario Pork

 Industry Partners


Prairie Swine Centre is an affiliate of the University of Saskatchewan


Prairie Swine Centre is grateful for the assistance of the George Morris Centre in developing the economics portion of Pork Insight.

Financial support for the Enterprise Model Project and Pork Insight has been provided by:



Author(s): Randy Duffy and Ken McEwan
Publication Date: November 1, 2011
Reference: University of Guelph
Country: Canada

Summary:

Canadian farmers carry a lot of debt, total farm debt for all Canadian farms was 66.4 billion in 2010. Pork producers make up about 6% of this debt, with each farms average debt being $850 435. Hog producers faced difficult financial times from 2006-201o where they experienced sustained losses which increased their debt loads. Fortunately interest rates have remained low for the same period helping farmers avoid paying more interest. But now with speculation of interest rates rising, farms carrying large debt loads could find themselves once again in financial trouble. This paper attempts to help Ontario pork producers understand how they compare to other producers in different regions and of other commodities in terms of debt levels and their ability to meet financial repayments should interest rates rise from their current historically low levels. Some objectives of this paper are to: 1) Calculate Ontario industry averages for debt‐related financial ratios using a variety of data sources. 2) Calculate financial ratios for pig producers in other provinces and the U.S. 3) Identify differences, if any, in farm debt repayment ability for the various production stages or for different farm sizes. 4) Develop a tool that producers and industry partners can use to input individual farm data that allows for comparison to the industry averages. Using multiple data sources the authors were able to determine that Ontario hog farms have higher debt to asset ratios than those of Manitoba and the US but still lower than farms in Quebec. Ontario pork farsm have more long term structured debt than other farm types in Ontario. Debt to total revenues averaged 1.25 during the period of 2007-2009 which is higher than all other Ontario farm types except dairy. Debt to equity ratios, % equity positions, and current ratios all worsened in 2009 compared to the 2003 to 2008 levels.Return on assets was in the 3‐7% range from 2003 to 2008 but dropped to slightly above 0% in 2009. The data revealed many other statistics about how debt loads increased from 2006. Some summaries that the authors came up with include: Ontario swine operations have a total debt and interest expense of $1.1 billion. Larger farmers carried more debt, but debt was not tied to profit. On an aggregate industry level, debt levels and debt servicing requirements on average do not appear to be the major determining factor in profitability. For farms of any gross revenue size or production type it is important to not extend their debt servicing capacity beyond levels that are sustainable.

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