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The management decision process is often complex and multidimensional with various competing factors. The type of leadership, the approach for analysis, and a priori beliefs factor into decision making. This case provides an example of how multifaceted management decisions are in the context of profitability, risk, uncertainty, succession, and leadership frameworks using a comprehensive economic analysis for a fictional poultry operation. Students are asked to apply concepts in financial analysis, risks analysis, and critical thinking to provide a realistic management decision based on all these concepts. The issues in the case relate to natural disasters, farm succession planning, leadership frameworks, and farm survivability. The case provides flexibility in approach and concept rigor based on the course., Request Teaching Notes/Supplemental Materials: https://form.jotform.com/91565767216163

This study compares profitability and risk of conventional and cage-free egg production in the United States. Evaluating cage-free production is particularly relevant given ongoing consumer driven changes and new cage-free legislation. Results show that while the Modified Internal Rate of Return (MIRR) for conventional production is above an estimated industry opportunity cost of capital, cage-free production���s MIRR does not fully satisfy investors��� expectations. The MIRR of cage-free investment, between 5.6% (deterministic model) and 8.0% (stochastic) per 15-month flock, is below the 9.4% opportunity cost of capital. In addition, the simulations show that there is a 90% probability of conventional production���s MIRR falling between 18.5 and 20.3% per 15-month flock, and cage-free egg production���s MIRR ranging from 6.8 to 9.4%. In order for cage-free to be as equally profitable as conventional production, cage-free egg prices at the farmer gate should be 74% over conventional egg prices. Such high cage-free egg prices are highly unlikely to occur given recent cage-free price premia and consumer willingness to pay estimates from recent research. This study provides a framework egg producers can use to evaluate the potential effects of changes in their portfolio of products (i.e. conventional and cage-free mix) as they accommodate production schedules in this evolving industry.

Replacing breeding females or growing the beef cattle herd with heifers is a frequent decision for beef cattle producers, and it has long-term profitability implications. Producers understand replacement heifers require a substantial financial investment and the return on an animal is uncertain. Previous studies report a heifer’s lifetime profitability primarily depends on cattle prices and development costs (Mathews & Short, 2001; Ibendahl et al., 2004; Mackay et al., 2004; Clark et al., 2005). Cattle producers commonly raise their own replacement heifers. The alternative of purchasing heifers may come with the advantages of: • Introducing improved genetics to increase productivity; • Reducing labor and feed costs from managing heifers separately from the cow herd; and • Confirmed pregnancy at the time of purchase. These potential advantages along with heifer physical characteristics, reproductive management characteristics and cattle market prices influence the value of these animals. What has not been evaluated is how reproductive management characteristics and feeder cattle prices impact bred heifer value. It is important to understand if other factors influence bred heifer value and what total impact those factors may have. The objective of this project is to determine how reproductive characteristics and feeder cattle prices influence bred heifer prices. By reporting the results from the following study this publication should provide information to assist buyers and sellers of bred beef heifers in determining the value of the animal.

In today’s globalized world, some agribusinesses are diversifying to other agricultural and non-agricultural products to combat the inherent risks associated with marketing agricultural goods, while others have intensified in one particular area. For example, Tyson Foods, Incorporated, one of the largest publicly-traded and globally recognized agribusinesses, began making poultry products in the 1930s and has since diversified to market beef, pork, and other food products through either acquisitions or expansion of core business strategy, while Cal-Maine Foods has continued to stay true to its core business of egg production and marketing. A diversified portfolio is expected to alleviate the effects of business disrupting events such as product recalls, droughts, or animal disease events. Protein companies specifically face risks associated with feed sourcing, animal health and welfare, and food safety. The aim of this work is to analyze the value of product diversification on an agribusiness’ worth using stock prices to value each of the top 100 meat companies that are publically traded in the United States. Daily stock prices from 2007-2016 have been collected and are used to identify the factors that contribute to the value of a company, while accounting for the heterogeneity of agribusiness management and strategy.

Beginning October 2015, McDonalds restaurants offer a limited breakfast menu all day in hopes of catalyzing business growth in the United States. The decision to expand the menu comes at a time when key breakfast menu inputs, i.e. eggs, are in shortage due to the outbreak of highly pathogenic avian influenza (HPAI) in U.S. layer flocks. The first case of HPAI was announced December 2014 with the last reported detection occurring June 2015 affecting more than 48 million birds. The outbreak led to depopulation of millions of infected birds, limiting supply, which has led to higher retail prices to consumers both direct and indirect consumption. The increase in demand by McDonalds is expected to further exacerbate this issue. Using a partial equilibrium model of U.S. layer flocks, the welfare impacts of an increase in demand coupled with a decrease in supply can be estimated. By using HPAI outbreak supply shocks and a stochastic estimation of demand increases due to all day breakfast by McDonald’s, the total welfare are estimated to have an additional negative $220 thousand marginal impact to consumers and a positive $33 thousand impact to producers.

Many factors influence a country’s international poultry market accessibility, including freedom from diseases such as highly pathogenic avian influenza and highly pathogenic strains of Newcastle disease. This study examines OIE-reported events of these two diseases over a 16-year period to determine the factors that contributed significantly to trade revenue recovery time. Results indicate that the elements influencing a measurable negative export revenue effect due to disease—including risk perceptions and whether the disease is zoonotic—differ from the elements that influence the length of revenue recovery, such as product affordability. In addition, overall global economic health and growing meat demand are elements that matter at the time an event occurs. The magnitude of elements influencing trade revenue during disease events suggests that recovery from HPAI and ND events may take months, not years., The International Food and Agribusiness Management Review is published quarterly by the International Food and Agribusiness Management Association. www.ifama.org