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Two Peas in a Pod---They Ain't"

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.

"Don't Let Your Assets...,Well, Sit on Their Assets"

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.

Risk based inspection series, segment 01

This multi part risk based inspection series provides you information on what issues are important to risk based inspection (RBI).

This epsiode is about 90 minutes long and features Dr. Barbara Masters, Administrator, of Food Safety and Inspection Service (FSIS) discussing the vision of RBI.

SwineCast RBI segment 01 . Click to listen or right click to download mp3 file to your computer.

If You Must Forecast, Forecast Often

            Pass-through is the economic term for how higher (or lower) prices in a chain wind up effecting prices up-chain, say at retail. All outcomes are possible for a price rise such as we have experienced in the corn market due to the government transfer payments for corn producers. Input price increases can lead to complete pass through up chain, more than complete pass through or something less than complete pass through.

Part of the problem in the meat case at retail is there is so much special pricing, loss leader pricing and the like that it is hard to tell exactly what happens for every input price change down the chain. In addition, price changes at retail for products made from agricultural products tend to be very small compared to the change at the production level. This is due in part to all of the value added as the chain progresses (i.e., a few cents worth of wheat in a $4.00 box of wheat breakfast cereal.) Small changes are sometimes unnoticed by consumers as they are lost in the noise of other price changes, the hassles of shopping and plain inattention.

With Hu You Get Egg Roll (But the One Made from Pork is Getting More Expensive)

You’ve no doubt heard the ethanol policy slogan, “Food or Fuel” to describe the tradeoff between using traditional feedstuffs for energy production vs. feed for livestock and the hundreds of other food products made from corn. In China, we now have the first major world economy deciding that containing food prices is more important than creating fuel from corn. The restriction recently put in place prohibits additional expansion of ethanol production from corn but allows it from grasses, corn stalks and other agricultural products which would not affect the price of food. Existing plants using corn are currently grandfathered in.