trade adjustment assistance training
DESCRIPTION
Trade Adjustment Assistance Training. Carole Engle UAPB. Outline:. Economics Options to improve profitability Marketing. Economics:. Price cycles Financial indicators. Catfish Prices & Production Costs. Average Price Paid to Catfish Producers ($/lb). - PowerPoint PPT PresentationTRANSCRIPT
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Trade Adjustment Assistance Training
Carole EngleUAPB
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• Economics
• Options to improve profitability
• Marketing
Outline:
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Economics:Economics:
•Price cycles•Financial indicators
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Catfish Prices & Production Costs
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
Production costs Farm price
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Average Price Paid to Catfish Producers ($/lb)
0.50
0.55
0.60
0.65
0.70
0.75
0.80
jan feb mar apr may jun jul aug sep oct nov dec
10-yr avg (1991-2000)
5-yr avg (1996-2000)
2001
2002
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Average Fillet Price Received by Processors
($/lb)
2.30
2.40
2.50
2.60
2.70
2.80
2.90
jan feb mar apr may jun jul aug sep oct nov dec
2001 price
5-yr avg (1996-2000)
10-yr avg (1991-2000)
2002 price
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Average Price Paid to Catfish Producers ($/lb)
0.50
0.55
0.60
0.65
0.70
0.75
0.80
jan feb mar apr may jun jul aug sep oct nov dec
5-yr avg (1998-2002)
10-yr avg (1993-2002)
2001
2003
2002 price
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0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
lbTotal “Catfish” Imports
1990-2003
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Sluggish economy/Sept. 11
0
1
2
3
4
5
6
1999
.1
1999
.3
2000
.1
2000
.3
2001
.1
2001
.3
2002
.1
2002
.3
% c
ha
ng
e Consumerspending
Real disposableincome
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Strength of U.S. $
Quarterly Exchange Rate
0.60.70.80.9
11.11.21.3
Year
Eu
ro
0
50
100
150
Ye
n
EURO YEN
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Quarterly Retail Sales, 1999-2003
0
100
200
300
400
500
600
700
800
900
1000
1999
QIV
2000
QI
2000
QII
2000
QII
I
2000
QIV
2001
QI
2001
QII
2001
QII
I
2001
QIV
2002
QI
2002
QII
2002
QII
I
2002
QIV
2003
QI
2003
QII
2003
QII
I
2003
QIV
$ b
illi
on
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Short & long-term financial decisions:
• Is it profitable in the short run?• Is it profitable in the long run?• Can it generate enough cash when
needed to pay the bills (liquid)?• Can it generate enough value over
time to pay off the debts (solvency)?
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Breakeven Prices (based on enterprise budgets)
Above total cost- LONG RUN $0.692
Variable cost – SHORT RUN $0.567
Above cash costs (no debt capital)
$0.518
Above cash costs (100% debt op. capital)
$0.561
Above cash costs (50% debt long-term, no land; 100% debt op. capital)
$0.572
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Breakeven Prices (based on enterprise budgets)
Above total cost- LONG RUN $0.692
Above variable cost $0.567
Above cash costs (no debt capital)
$0.518
Above cash costs (100% debt op. capital)
$0.561
Above cash costs (50% debt long-term, no land; 100% debt op. capital)
$0.572
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Breakeven Prices (based on enterprise budgets)
Above total cost $0.692
Above variable cost $0.567
Above cash costs(no debt capital)
$0.518
Above cash costs(100% debt op. capital)
$0.561
Above cash costs(50% debt long-term, no land;100% debt op. capital)
$0.572
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Financial Analysis: the 3 key statements
• Income Statement
• Balance Sheet
• Cash Flow Statement
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How Are These Calculated?• Floppy disk includes spreadsheets
with: exercise balance sheet, income statement, cash flow budgets
• The correct versions, the financial ratios, &
• Includes a brief interpretation of each ratio and how to
improve it.
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Gross Revenue “Pie”
NFI to operator for unpaid labor, equity capital, & management
Interest to lenders for borrowed money
Payments for feed, seed, fuel, etc.
Rent to owner for rented land
Wages to employees
Where can I save
money?
Short-run profits: from the income statement
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Monthly Cash Flow BudgetItem Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Beginning Cash 15,849.00 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 Receipts from catf ish sold 60,000.00 60,000.00 60,000.00 60,000.00
Cash Inflow 15,849.00 60,039.79 42,835.71 72,065.73 46,466.02 24,256.90 61,145.96 34,568.03 65,806.26 36,263.66 Operating Cash Expenses
Fingerlings - - 12,415.00 - - - - - - - Feed 3,830.00 4,790.00 5,750.00 6,710.00 7,670.00 8,620.00 10,540.00 11,500.00 14,370.00 9,580.00 Gas, Fuel, and Oil 380.00 470.00 570.00 660.00 750.00 850.00 1,040.00 1,130.00 1,410.00 940.00 Chemicals - - 470.00 - - 470.00 - 620.00 - - Labor 1,000.00 1,000.00 1,730.00 1,730.00 1,730.00 1,950.00 1,950.00 1,950.00 1,950.00 1,730.00 Harvesting & Hauling 717.39 722.79 806.91 692.32 687.24 681.21 695.49 754.85 701.20 729.46 Machine Hire - - - - - 150.00 150.00 290.00 150.00 - Off ice Expenses 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 Rent 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 Repairs and Maintenance 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 1,310.00 Utilities 190.00 390.00 970.00 1,360.00 1,560.00 2,340.00 2,530.00 2,730.00 2,920.00 2,340.00 Other Operating Costs 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00 360.00
Total Operating Expenses 8,157.39 9,412.79 24,751.91 13,192.32 14,437.24 17,101.21 18,945.49 21,014.85 23,541.20 17,359.46 Fixed Cash Expenses
Taxes and Insurance - - - 4,760.00 - - - - - - Total Fixed cash Expenses - - - 4,760.00 - - - - - - Living Expenses 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 3,000.00 Other Expenses - - - - - - - - - - Scheduled Debt Payments
Real Estate Principal 265.00 - - 265.00 - - 265.00 - - 265.00 Interest (10% APR) 2,368.75 - - 2,364.33 - - 2,357.71 - - 2,351.08
Equipment Principal - 665.00 - - 665.00 - - 665.00 - - Interest (10% APR) - 2,108.23 - - 2,097.14 - - 2,080.52 - -
Operating Principal - - 1,000.00 - - 1,000.00 - - 1,000.00 - Interest (10% APR) 2,018.07 2,018.07 2,018.07 2,018.07 2,009.73 2,009.73 2,009.73 2,001.40 2,001.40 2,001.40
Total Cash Outflow 15,809.21 17,204.08 30,769.98 25,599.72 22,209.11 23,110.94 26,577.93 28,761.77 29,542.60 24,976.94 Cash Available 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 11,286.72 New Borrowing - - - - - - - - - - Cash Balance 39.79 42,835.71 12,065.73 46,466.02 24,256.90 1,145.96 34,568.03 5,806.26 36,263.66 11,286.72
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Cash inflow- Cash outflow (Operating expenses) (Fixed cash expenses)
(Debt payments)= Cash available+ New borrowing
= Cash balance
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Cash Flow Coverage Ratio (Cash available/interest & principal
payments)
1,060.00 9,441.88 2,660.00 8,349.78 4,000.00
33,475.29 291,534.65
(5,685.65) 187,573.51 181,887.85
Scheduled Debt PaymentsReal Estate Principal
Interest (10% APR)Equipment Principal
Interest (10% APR)Operating Principal
Interest (10% APR)Total Cash OutflowCash AvailableNew BorrowingCash Balance
Cash Flow Coverage Ratio = (0.26)
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Debt-Servicing Ratio (interest & principal payments/cash inflow)
1,060.00 9,441.88 2,660.00 8,349.78 4,000.00
33,475.29 291,534.65
(5,685.65) 187,573.51 181,887.85
Scheduled Debt PaymentsReal Estate Principal
Interest (10% APR)Equipment Principal
Interest (10% APR)Operating Principal
Interest (10% APR)Total Cash OutflowCash AvailableNew BorrowingCash Balance
Debt-Servicing Ratio = 0.21
Total Cash Inflow = $285,849
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Cash Flow Scenarios
Farm A Farm B
Sept. $60,000 Feb. $60,000
Oct. $90,000 April $60,000
Nov. $60,000 July $60,000
Dec. $60,000 Sept. $60,000
Nov. $30,000
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Liquidity Measures for Two Scenarios
Indicator A B
Cash Flow Coverage (0.26) 0.17
Debt-Servicing 0.21 0.17
Cash avail./cash inflow
(0.02) 0.01
Cash avail./op. expenses
(0.03) 0.02
Cash avail./liabilities (0.01) 0.01
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How much debt is too much?
Assets-current
277,287 217,868
Non-current 475,213 356,410
Total 752,500 574,278
Liabilities-current
242,168 411,686
Non-current 179,079 179,079
Total 421,247 590,765
Net Worth 331,253 -16,487
Debt/asset 0.56 1.03
Year 1 Year 2
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How much debt is too much?
Assets-current
277,287 217,868
Non-current 475,213 356,410
Total 752,500 574,278
Liabilities-current
242,168 411,686
Non-current 179,079 179,079
Total 421,247 590,765
Net Worth 331,253 -16,487
Debt/asset 0.56 1.03
Year 1 Year 2
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How much debt is too much?
Assets-current
277,287 217,868
Non-current 475,213 356,410
Total 752,500 574,278
Liabilities-current
242,168 411,686
Non-current 179,079 179,079
Total 421,247 590,765
Net Worth 331,253 -16,487
Debt/asset 0.56 1.03
Year 1 Year 2
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How much debt is too much?
Assets-current
277,287 217,868
Non-current 475,213 356,410
Total 752,500 574,278
Liabilities-current
242,168 411,686
Non-current 179,079 179,079
Total 421,247 590,765
Net Worth 331,253 -16,487
Debt/asset 0.56 1.03
Year 1 Year 2
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Questions?
Discussion?
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Options to Improve Profitability
Options to Improve Profitability
•Maximum production vs. maximum profit•Stocking densities/strategies•Feeding strategies
-every other day vs. every day -feed prices•Producing optimal sizes of fish
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Yie
ld
Stage I
Stage II Stage III
Maximum yieldMaximum profit
Input level
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Studies at UAPB Identified Economic Relationship
Between Feeding and Stocking
• Estimated a production function.
• Profit-maximizing stocking rates ranged from 6,500 - 8,500, depending upon feed and fish prices.
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What would happen with different feed and catfish
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.
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How low should you go?• Model results dropped profit- maximizing
stocking rates to 5,000/ac at $0.60/lb.
• At very low prices, may not be possible to calculate true
profit-maximizing stocking rate.
• Farmers need to stock at rates that ensure financial payments
are met.
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Optimal stocking densities with high feed prices
• Fish prices have larger effect than varying feed prices.
• Fish prices of $0.70/lb (from $0.65/lb) nearly offset $45/ton increase in feed price in terms of optimal stocking density.
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Feed Prices
$150
$170
$190
$210
$230
$250
$270
$2901
97
7
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
$/t
on
Feed Price
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Monthly Average Price of 28% Catfish Feed ($/ton)
$100.00
$150.00
$200.00
$250.00
$300.00S
ep-9
7
Jan
-98
May
-98
Sep
-98
Jan
-99
May
-99
Sep
-99
Jan
-00
May
-00
Sep
-00
Jan
-01
May
-01
Sep
-01
Jan
-02
May
-02
Sep
-02
Jan
-03
May
-03
Sep
-03
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Breakeven prices as feed price increases
$/ton TC VC
240 0.645 0.520
260 0.668 0.543
280 0.692 0.567
300 0.716 0.591
320 0.740 0.615
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Current Feeding Strategies• Every other day feeding
– Carryover fish may be small following year
• Restricted daily feedings– May equal thin fish
• Catfish exhibit
compensatory gain• Can gain weight extremely fast, at
low FCR when full feeding resumed.
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Processing Cost by Size0.6 lb 1.5 lb 2.5 lb
Wt. (oz) 9.6 24 40
Labor $0.08 $0.03 $0.02
Fixedoverhead
$0.25 $0.10 $0.06
Totalexpenses
$0.33 $0.13 $0.08
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Factors Impacting Costs
• Economies of Scale: higher throughput will help to reduce unit costs by spreading fixed costs over more units.
• Technology/processing practices:– Automatic presorting of fish by weight
– Chilling/cleaning fish between deheader & fillet line
– Reduction in trim operation
– Interfacing trim, grading to reduce handling
– Online monitoring and control of productivity.
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Factors Affecting Costs
• Production Impacts– Characteristics of fish received have
large impact.– Off-flavor, disease, weight to yield
ratios, weight distributions– 2% normal seasonal variation in yield– Distribution of fish sizes received from
each pond varies widely.
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Big Fish Studies•Big Fish I
–4,500/acre, 0.6 lb–FCR 1.8-2.0–Survival 83-94%–32% protein
•Big Fish II–4,500/acre, 0.5 lb–FCR 1.7-1.9–Survival 87-91%–32% protein–No impact of fingerlings
02,0004,000
6,0008,000
1 2 3 4
Treatment
lb/a
cre
0.0
1.0
2.0
3.0
lb/f
ish
Net Yield Final Weight
02,0004,0006,0008,000
1 2 3
Treatment
lb/a
cre
0.0
1.0
2.0
3.0
lb/f
ish
Net Yield Final Weight
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Stocker Net Yield
5,533
4,8024,591
4,000
5,000
6,000
3,500 4,500 5,500
Stocking Rate (fish/acre)
Ne
t Y
ield
(lb
/ac
re)
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Individual Weight
1.81.9
2.2
1.0
1.3
1.5
1.8
2.0
2.3
2.5
3,500 4,500 5,500
Stocking Rate (fish/acre)
Ind
ivid
ual
Wei
gh
t (l
b/f
ish
)
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Management for Larger Mesh Sizes?
Fingerlings
Single batch
Multiple batch
Yr 10.8-1.16 lb
0.6-1.01 lb
For stockers 0.25-0.80 lb
Growout
1.3-2.6 lb0.5-0.6 lb stockers
10,000 lb/yr
4,700-7,900
6,500 lb/yr
6,300 lb/yr
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Questions?
Discussion?
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Catfish Markets and Marketing
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0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
lb /
per
son
Seafood Beef Pork Broilers
U.S. per capita consumptionseafood, beef, pork, broilers
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U.S. Per Capita Consumption of Catfish
0.00
0.20
0.40
0.60
0.80
1.00
1.20
lb
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
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U.S. consumption of top 6 seafood products
0.00
1.00
2.00
3.00
4.00
1990 1992 1994 1996 1998 2000
Tuna Shrimp Cod Pollock Salmon Catfish
lb/p
ers
on
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Consumer Food Expenditures at Home and Away from Home
0
200,000
400,000
600,000
800,000
1,000,0001
98
0
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
$ m
illio
n
At home Away from home
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Increasing consolidation in food industry
• Beef, pork, poultry all have consolidated.
• From mid-1990s to 2000, market share held by nation’s top four food retailers (4-firm ratio) increased from 17% to 34%. In cities, reached 72%.
• Broadline distributors have concentrated food buying power.
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Product Life Cycle
Growth Maturity Decline
Introduction
Time
Fin
an
cia
l P
erf
orm
an
ce
Sales revenue
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Which strategy?
• Compete on price in commodity markets with a product very similar to other products?
• Create unique identity (differentiate product) to capture higher consumer price?
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That thing got a Hemi?
That thing got a hemi?
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That thing got a Hemi?
The key to higher prices is to convince the consumer that your
product is different and worth more.
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Quality/Price Matrix
Low Quality
Lo
w P
rice
High Quality
Hig
h P
rice
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New Product Development• When existing products decline phase,
replaced with new products.• Failure rate is high for new products.• Must maximize idea generation &• Effectively screen
ideas to ensure that
only best concepts
go to market launch.
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Value-Added Product Initiative: Turning Nuggets into Gold
• Value-Added Products may have potential to re-position the catfish industry into retail sales away from commodity-based sales.
• New products expensive to develop and market. Much research needed to provide guidance.
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The U.S. Consumer Wants• Good flavor• Convenient food• Healthy food• Safe food• To know where their food comes from• Food free of chemicals and drugsThe catfish industry should be well
positioned to supply what U.S. consumers want.
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