Randy Duffy and Ken McEwan from University of Guelph, Ridgetown Campus released a comprehensive report looking at the impact of farm debt on the industry in the past few years using a variety of data sources.
- The total debt estimated for the Ontario swine industry in 2009 ranged from $944 million to $1.1 billion of debt, with interest expenses of $74 million to $38 million. A significant portion of swine debt would be in long term assets (ie. land and buildings) which would have a higher interest rate than that which was used in the calculation.
- Overall, the detailed data by farm size (gross revenue) seems to indicate that debt levels increase as farm size increases, debt levels do not necessarily relate to profitability, and the relative balance between manageable debt levels and farm size is important.
- In general, the detailed data by production type seems to indicate that debt levels do not necessarily relate to production type or profitability. In 2009, 87% of industry debt was carried by the following production types: farrow to finish (48%), finish (22%) and farrow to feeder (17%).
- There is a great deal of variability in terms of debt, Earnings (Earnings Before Interest, Tax, and Amortization (EBITA)) and profitability. As a result, there are no clear patterns or statistically significant differences between farms of different sizes or production types. When EBITA per farm was analyzed, the farm with sales between $500,000 and $1,000,000 performed best financially through the tough 2007 to 2009 time period.
- On an industry level, debt levels and debt servicing requirements on average do not appear to be the major determining factor in profitability. Within each size or production type category, there are farms struggling financially as well as those that are doing very well financially, regardless of the year. The 40% least profitable farms are facing a lot of financial pressure. This may be a result of high debt levels, low equity positions, high debt servicing requirements, swings in hog prices and revenue, swings in costs of production, or a combination of these factors.