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ANALYSIS SHOWS ELITE AG PRODUCERS' FINANCIAL RATIOS ARE ALSO WEAKENING
Source: blog by Dr. Dave Kohl, Professor, Emeritus, Virginia Tech University as it appeared in Corn + Soybean Digest

One of the highlights of my travel season is lecturing at The Executive Program for Agricultural Producers (TEPAP) in Austin, Texas. Producers participating in this intense, week-long educational venue not only gain cutting edge information, but are engaged with other lifelong learners that are carving their way into the next decade in agriculture.

Each year Dick Wittman, a highly respected agriculture consultant and business person, conducts a survey of key financial and management metrics. These results can be used to benchmark your operation to the TEPAP participants that represent over 25 states, Canada, Africa, South America and Australia.

Dick and I have had some of our best discussions surrounding this year's survey results that included some surprises, but also the reality of the times. The group had a median return on assets (ROA) of 4.4%. Return on equity (ROE) had similar results with a return of 4.4%. When compared to historical trends, both the ROA and ROE were down by over 50%. This group of TEPAP participants had median revenue of $2.3 million and assets of nearly $8 million.

What surprised both of us was that the operating profit margin was 12.4% for the median producer. This was significantly lower than the profit margins during the economic super cycle from 2007 to 2012. The TEPAP participants also exhibited a median debt to asset ratio of 40%, which is much higher than previous years.

Another surprise was that the capital debt repayment capacity ratio had a median level of 2.25 or 225%. This may have been the result of utilizing assets, specifically land, to stretch out debt repayment terms to provide a greater financial cushion for servicing debt.

Regarding the management metrics in the survey, the median hours worked by this group of producers was 2,658 hours per year. The annual hours worked was down significantly from previous decades which ranged from 2,800 hours to 3,400 hours per year. This was surprising because TEPAP participants are often in growth-oriented businesses. The balance between business and personal life appears to be gaining momentum even with some of these "hard charging" business people.

The effects of the economic times are clearly being exhibited amongst this group of elite and engaged learners. The data from this survey can be useful in benchmarking your business to some of the best businesses not only in the United States, but all over the globe.


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