" (NCGA, 2008) The following chart shows the U.S. Corn Supply and Total Use between the years of 1988-1989 and 2008-2009.
Source: NCGA (2008)
U.S. corn growers are stated by the NCGA to have responded to the increase in demand by producing "the five largest corn crops in history over the past five years - with the 2007-08 crop setting an all-time record of 14.4 billion bushels." (NCGA, 2008) Annual production is stated to have averaged 11.3 billion bushels from 2003/04 to 2007/08 compared with an average of 9.5 billion bushels in the previous five crop years." (NCGA, 2008) Acres are planted by corn growers in response to the marketplace signals and when corn demand is high and "revenue per-acres is strong relative to other crops, farmers will plant more corn." (NCGA, 2008) This is precisely what occurred in 2007 as farmers planted "92.9 million acres to corn, a 19% increase over 2006 and the highest levels since 1944." (NCGA, 2008) Farmers planted 87 million acres in 2008 to corn reflecting the rise in prices of other commodities as the basis for this decision. While there are stated to be challenges related to the weather for the 2008/09 corn crop, the report from the USDA predicts "higher-than-expected corn acres planted with an estimated 12 billion bushel harvest..." And "data from ProExporter Network estimates a corn surplus of over one billion bushels in 2008/09 in light of increased demand. There is no shortage of corn in terms of total supply and demand." (NCGA, 2008) The following chart shows the U.S. corn acres 2001-2002 and projected corn acres 2011-2012 as stated by the NCGA.
Source: NCGA (2008)
The National Corn Growers Association states that increase of yield per acre will enable an adequate corn supply to enter all future markets. The average corn yield is stated approximately three bushels per acre each year since the crop year 1995-1006. The ten-year historical trend shows that by 201516 the average corn yield may reach 175 bushels per acres with corn yields advanced at a faster rate due to improvement of the genetics of corn along with biotechnology and practices in management. The following chart shows the U.S. corn yield, 10-year history and trend as stated by the National Corn Grower's Association.
Source: NCGA (2008)
The National Corn Growers Association relates that demand categories for corn "such as livestock production and exports have shown limited future growth- meaning that increased corn supplies will result in more corn available for biofuels production." (NCGA, 2008) The demand in the livestock and poultry sector for corn is stated to have been "relatively flat in the last 10 marketing years." (NCGA, 2008) Additionally, it is stated that the raw field corn fed top livestock is forecast to "decline slightly as more corn is displaced by distiller grains, a co-product of ethanol production." (NCGA, 2008) Also flat ass been the "amount of corn used for human food processing...and corn exports have trended up only slightly." (NCGA, 2008) The following chart shows the ethanol use vs. other corn uses as stated by the National Corn Growers Association.
Source: NCGA (2008)
IV. HUMAN CONSUMPTION FACTS
The National Corn Growers Association states that "Those who say ethanol production is taking food away from humans forget that there are two types of corn growth in the United States. Ethanol is made from field corn, a grain that humans cannot digest in its raw form. It must go through some form of processing first. The corn that humans eat as a vegetable is sweet corn. Some 99% of all corn acres in the U.S. are used to grow field corn." (NCGA, 2008) A mere 1.3% of the corn crop in 2007.08 was used for cereals and approximately 8% of total corn use is accounted for a human food uses. The fact is that "the overwhelming majority of U.S. corn - including exports - is used to feed livestock, not humans." (NCGA, 2008) The following chart shows the U.S. corn usage for the crop year 2007/08.
Source: NCGA (2008)
It is further related by the NCGA, an important fact that the majority of the corn which the U.S. exports is for the purpose of livestock feed instead of food for humans and that the U.S. sent "33% of its corn exports to Japan" in 2006/07 which was used primarily for production of livestock and only on-hundredth of one percent went to the top ten undernourished countries in the world." (NCGA, 2008)
The National Corn Growers Association relates that there is "more food per capital today on a global scale than ever before...the problem is getting the food where it needs to be due to lack of infrastructure, access to capital, political unrest and other factors that result in global hunger. (NCGA, 2008) It is quite often disregarded that "higher global grain prices and the development of a world biofuels trade are creating economic opportunity for small farmers around the world to earn a profit on their crops for the first time in years." (NCGA, 2008) The United Nations' Food and Agricultural Organization reported that bioenergy production "if well managed...can bring new areas of development...new investment, new jobs and new infrastructure that can also benefit the food industry." (NCGA, 2008)
There is quite a bit of confusion it appears as to precisely what biofuels are and the possibilities that biofuels present in terms of economic prosperity and provision of energy. While some believe that biofuels take from the supply of food for human consumption, this is just not the case. In fact, biofuels have the potential to add to the economic well-being of many throughout the world. The response of poultry producers to rising costs of corn include those of: (1) cutting of production; (2) decline in weekly egg sets; and (3) prices responding to the thinning supply lines. These are precisely what have market analysts hopeful that the market for poultry producers is on the rebound. Ethanol policies have added to the challenges presenting to the poultry market and has resulted in prices being driven up for poultry. This has resulted in layoffs for Pilgrim's Pride and others in the poultry industry.
VI. OPERATIONS MANAGER'S PLAN TO ADDRESS THE PROBLEM & CUT COSTS
There are three alternative actions that can be taken without adding additional costs. There would be initial costs with initiation of these plans but these plans would in the long run result in a decrease in costs of operation. The first action that should be taken is:
1) Installation of a fuel tank onsite so that the company could refuel its own trucks.
2) Secondly, the company should invest in pallets used in the warehouses. These pallets are manufactured from recycled materials and are recyclable upon their wearing out. This will serve to conserve the national forest resources while assisting in rectifying problems associated with scrap tires.
3) The recommended changes include establishment of a fuel surcharge on deliveries of more than $200.00 and would establish a minimum of $300 for product delivery or pickup from the distribution center.
4) Trucks would be routed through use of a delivery schedule and would deliver every other weekday, specifically on Monday, Wednesday and Friday to regions north and west of the location and Tuesday, Thursday and Saturday delivery to the regions south and east of the regional location.
The facts facing the poultry industry cannot be changed however, they can be effectively dealt with and overcome. These changes are due to the rise in biofuel production and use and the requirements of the government concerning biofuels however, with proper operations management, these challenges can be met head-on and with strategic operations planning, the Pilgrim's Pride company can overcome these challenges and move forward in a productive manner that is successful of making the most of the opportunities presented in…