For over 25 years, I have participated in The Executive Program for Agricultural Producers (TEPAP). The brain child of Danny Klinefelter of Texas A&M University, this program provides an executive approach to farming, ranching, and agribusiness that is now known worldwide as a proven tool for lifelong learning and development. Among its many benefits, TEPAP provides opportunities for exceptional networking, expert instruction and data exchange. Of course, these opportunities also lend themselves to comparison; especially for lifelong learners who are familiar with the practice of benchmarking.
Dick Wittman, the highly respected farm consultant out of Idaho, conducted his annual financial and business performance assessment of this year’s TEPAP participants. As always, his information and analysis provided some interesting perspective. Let’s take a look at what he found. Keep in mind: These areas are certainly not the only performance measures, but they provide a great snapshot of the lifelong learners and executive producers that attended TEPAP. With this insight into their numbers, it may be helpful to run your own. How do you compare?
This year’s TEPAP group represented over 30 states, five Canadian provinces and Australia. The profitability analysis of the group found the median ROA (return on assets) was 6%. The average ROA was 7.5%. The median and average returns on equity were both 8.2%. Remember, the term “median” means that 50% of the participants were above the metric (8.2 percent for return on equity), and 50% were below. Comparing this year’s group to previous years, the current median and average returns are down approximately 2%. However, these numbers still meet muster, so to speak, because the ROA is above the long-term rate of inflation of 4%, and above most business’ cost of borrowing money, which is running about 5-6%.
The median debt to asset ratio for this year’s TEPAP group was 36%. This is generally within the range for commercial agriculture producers, but above the average for all producers, which is approximately 14%. When the debt to asset ratio exceeds 50%, the proficiency in management execution must be high for the business to be resilient, and even higher for it to be agile.
The ability to service debt is measured by the coverage ratio. The median debt coverage ratio for the group was 161%, which is well above the minimum or breakeven point of 100%. Even so, it is interesting to note this metric was often above 200% during the commodity super cycle. Yes, the economic reset even influences this group of progressive, executive producers, narrowing their margins with which to service debt.
Compensation and living expense
The median family living expense was just under $90,000 annually. Generally, this is consistent with most farm record data summaries. In comparison to recent groups, this number reflects family budget reductions as well as increased expenses such as healthcare.