Production

So we are talking about not adding to the fundamental problems which biological production systems deal out just because of their nature. Some of those problems include seasonality, the complexity of growth mechanisms as a key variance enhancer (compared to non-biological production—like automobile manufacture etc.) and the fixed periods of production which cannot be speeded up with an extra shift (like gestation). I’m contending that the next major movement forward in competitiveness is the producer’s ability to manage (certainly never eliminate!) variation more effectively. There is lots of money on that table.

Agricultural production is kind of a strange bird compared to other business processes. In economic terms, one of the real challenges is something called “asset turnover”. Asset turnover is the time it takes to generate the value of all assets used in the production process through sales of finished products. Asset turnover is a key determinate of Return on Equity along with net income and level of leverage employed (see the Dupont Equation if you are a budding MBA).

If you think about it, crop producers purchase a $400,000 combine which they operate a few weeks a year and then it is a high-priced bird perch for the next 10 or so months. This is the killer of asset turnover in most biological production processes since many of them are not continuous.

Dr. Tom Gillespie, veterinarian with Rensselaer Swine Services in Rensselaer, Ind., and past president of the American Association of Swine Veterinarians, discusses porcine respiratory and reproductive syndrome (PRRS) management and its impact on porcine circovirus associated disease (PCVAD).

Dr. Dennis DiPietre, economist, provides an outlook on production costs and how producers can prioritize various input costs in order to maintain profit levels.

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