Economics

SwineCast 0306 for May 28 2008

SwineCast 0306 Show Notes:

  • Recapping the farm bill outcomes for pork producers and a preview of World Pork Expo with NPPC's David Warner
  • China figures to be a bright spot in world pork import needs. Bruce Cochrane has more
  • Economist says higher gas prices could help to level the biofuels playing field. However, he's not running for office...
  • Food prices increase 40% around the world over the past year

2008 NIAA Animal Care and Well-Being: EU Consumer driven animal welfare and food safety

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2008 NIAA Animal Care and Well-Being: OIE Animal Welfare Perspective

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OIE Animal Welfare Perspective

2008 NIAA Animal Care and Well-Being: Comprehensive USDA Business Plan Review

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Opportunity Costs

Its time to revisit the notion of opportunity costs. Opportunity costs are measured by the value of the next best alternative that you rejected when you make a decision. Opportunity costs and in fact all costs predate the invention of money. Even in our religious and wisdom writings, opportunity costs abound. For instance, what was the cost to humanity of Eve eating the apple? No money exchanged hands but the cost was the loss of paradise in exchange for knowledge. What is the current (and on-going costs) of choosing your current spouse, if you have one? That usually gets the point across.

Costs arise out of scarcity. Since you cannot be married to two people at the same time unless you move to the panhandle of Texas and join a certain religion, you are a scarce resource. When you commit to one, the cost is all you left behind.

Assume you interview two managers for a key position and both have decent resumes but one is clearly more creative, careful and likely to perform above expectations.  You know that you will have to pay her 20% more than the other one or she will be bid away to another farm in a year or two.  You decide to hire the cheaper one at "industry average cost" for managers.  How long will it take for the "average performer" to kill the advantage in salary reduction you received.  On most farms of any size it can be a matter of days.  The opportunity cost of hiring the "cheaper" one is the classic mistake that "cost only" producers constantly make.  Granted it is difficult to know the outcomes in advance on hiring decisions.   

SwineCast 0297 for April 22 2008

SwineCast 0297 Show Notes:

  • Looking to cut costs in your ingredient sources may expose you to more risk than you think. A conversation with John Ratcliff of the Food and Agriculture Consultancy of the United Kingdom
  • Genetics are driven by data but who determines the direction? PIC's Technical Services Director for Genetics joins us
  • Employee relations and recruitment questions continue to be heavily attended workshops. Don Tyler recounts a session at the Responsible Pork Symposium

2008 NIAA Animal Care and Well-Being: The US Political Arena

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2008 NIAA Animal Care and Well-Being: Protecting Our Freedom to Operate

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Swine Industry Update: It is worse in the EU

Mark Greenwood
March 2008
 

It is not getting any better – The losses are continuing in the swine industry. This past month feed prices kept going up while hog prices improved some but not near enough. Losses in the open market are still close to $40 a head and everyone keeps wondering when will it get better and what do prices have to get to before we start getting profitable? Well, the first thing we need to do is to somehow get supply reduced. The last cold storage report shows that we have an abundant supply of product. Even though exports have been very good we need to reduce supply to get any significant improvement in prices.

Swine Industry Update: Producers are Nervous


 
 

Mark Greenwood
February 2008

Producers are Nervous – I attended both the Minnesota and Iowa Pork shows this month and there are a lot of producers that are nervous about the future of the Pork industry. I spoke to several groups and outlined what I am currently seeing in the countryside. There are very few systems that locked in 4th quarter and 1st quarter of 2008 margins. I have been asked to give an estimate on margins that were covered and I would say 30-35% have feed coverage and hog coverage through that time period. These producers that locked in that amount of coverage are still losing over $20 per head. Even if you locked in the futures on hogs, the basis widened dramatically because of the large slaughter numbers. In summary, swine economics are ugly and people are hoping that we will see some liquidation.

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