The Ontario Ministry of Agriculture, Food & Rural Affairs is engaged in two benchmarking initiatives which aim to improve the quality of information comparing Ontario farms.
Why it matters: Benchmarking can be an important tool to help farmers gauge costs and evaluate management practices.
The new OMAFRA program involves working with the Ontario Farm Income Database to generate farm financial performance measures using farm tax data and farm business insurance data from AgriStability.
The reporting and benchmarking structures are based on those created by the consulting firm Agri-food Management Excellence, said OMAFRA business analysis and cost of production specialist John Molenhuis.
“These benchmarks reflect financial performance, and there are many other production-related benchmarks, along with additional business information that farmers can use as management tools, that can all complement each other,” Molenhuis said.
“Publicly available benchmarking data has been difficult to obtain for farmers, and we expect that this data will help Ontario farmers in their farm business decisions and highlight areas they can focus on in managing their farm operations.”
Work by OMAFRA over the last 15 years where income tax data was used to produce a cash-based analysis called the TIP Report (Towards Increased Profits) was only available to AgriStability participants. These annual reports compare an individual farm business’s financial performance to its five-year average and an industry benchmark for the appropriate farm type.
“TIP was limited to cash-based analysis but the AgriStability program application contains the information needed for an accrual financial analysis,” Molenhuis said.
“The decision was therefore made to develop benchmarks by farm type in the standardized financial reporting format that would be publicly available.”
The first major performance results are being posted this fall to the OMAFRA website for 10 Ontario farm types: cash crop, swine farrow-to-finish, beef feedlot, beef cow-calf, sheep, dairy goat, apple, and greenhouse cucumbers, tomatoes and peppers.
Data will include different costs and margin levels, including contribution margin, gross margin, earnings before interest, depreciation, amortization, operating profit and net farm income. Several ratios focusing on some key cost areas such interest, energy, labour and feed, will also be posted.
Accounting firm BDO is also providing individualized benchmarking reports for its clients in a partnership with Agri-food Management Excellence, using the same reporting format and benchmark categories as OMAFRA. For a full explanation visit www.agrifoodtraining.com/white-papers-think-pieces.
The reports contain five years of individual data relating to benchmarks for grain/oilseed and dairy operations, along with guidance of how to apply results to diagnose management issues and other factors.
Ontario is providing data for cash crop, swine and beef feedlot operations, and the Western provinces continue to submit data for cash crop and beef. Molenhuis said AAFC and agribenchmark, along with Farm Management Canada, are working to encourage more Canadian participation and expand the network to more provinces and farm types.
When asked how agribenchmark data from recent years provides insight into international competitiveness, Molenhuis pointed to the cost of producing corn as an example. He noted off the top that China is by far the highest-cost producer of corn, and that direct input costs (seed, fertilizer and pesticides) for Ontario farms were higher than Argentina and Ukraine and lower than the United States.
“This data will allow analysis of the production system to determine if the cost differences were a result of the amount of the input they used, the price they paid, or both,” he said. “Understanding why these cost differences exist can hopefully lead to boosting our competitiveness. Presently, limiting factors to competitiveness are transportation and logistics in some areas such as eastern Europe and South America.”
In addition, the global agribenchmark data enables AAFC and OMAFRA personnel to conduct competitiveness research analysis related to policy development.
Molenhuis said that understanding the differences in cost of production of key competing exporting nations can provide insights to government and commodity groups on market opportunities, if it’s the case that Ontario or Canada can produce commodities more cost-effectively than other countries.