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The Penny

The Penny - How It Relates to Turkey Production | via MinnesotaTurkey.com #turkeyeveryday #agchat #MNAg #minnesotaturkey

Santa brought my daughter, Abby, the “Game of Life” board game this past Christmas and let’s just say we have played a few games the last few weeks. I remember playing the same game when I was growing up but the new version has definitely changed with the times. You can choose to go to the “Career Route” or “College Career Route”.  Pretty normal decision made by most graduating high schoolers. And just like in real life, the College Career Route takes half your money instantly but your income come payday is hopefully a little higher for the rest of the game.

There are other decisions you need to make on the way such as choosing to go to night school to change careers half-way though, or just continue on the life path you were on.  Also, choosing to take what is called a “Family Route”, which increases your chance of having children, or continuing again on the life path you are on.  The last decision you have to make is whether or not to choose a risky path, where quite a bit of money can be made or lost, somewhat like investing money, or the safe path which is status quo. At the end you count the money and whoever has the most, wins the game. Pretty neat concept to teach children about the flows of life.

The Penny - How It Relates to Turkey Production | via MinnesotaTurkey.com #turkeyeveryday #agchat #MNAg #minnesotaturkey

My wife, Brenda, two older children, Abby and Wyatt, and I were playing a game the other day and we were counting our money at the end when our youngest child, Isaac, just happened to come to the table with an actual penny in his hand. I decided he won the game since he was the only one who had any money on the table with actual value.

A penny…our smallest unit of currency won the game!  I have heard many reports of why we should stop making pennies since they cost more to mint than they are is worth.  There are a lot of people who won’t bend over to pick one up when found on the ground and most convenience stores have a “take one, leave one” container at their counters so you don’t have to have a few cents making noise in your pockets.  What role does the penny have in our society?  I don’t have the slightest idea but I can tell you what it means in our business.

Our marketing contracts with our processor are all based on net pounds of live production.  This means we get paid a certain amount for every “useable” pound of bird we sell.  We talk in tenths and hundredths of a cent daily.  It is very common to get hung up on one or two tenths of a cent when it comes to negotiating these contracts.  Yes, that’s right, $.001.  It won’t go a long way in filling your gas tank but when you multiply it out over a couple million net pounds of turkey processed it adds up fast.

Our contract pays us what formulas say it SHOUD cost for certain thing such as feed cost, poult cost, heating cost, and then there is a classification called “Other Growing Cost”.  These are exactly what the words say, all the other costs associated with raising birds such as: labor costs, electric expenses, medication costs, loan and interest payments, and bedding costs to name a few.  This whole portion is called the Base portion of the contract. Then there is a Market portion of the contract that adds to or takes away from the Base portion depending on what the Base value is compared with the Market value.  If the Market value is higher, it pays a premium and if it is lower, some is taken away.  At the end there are a few incentives or deductions based of performance and we have our value we get paid per net pound of bird.

It is so interesting to look at how a tenth of a cent savings here or a quarter of a cent there can make a huge difference on the bottom line. It so easy to say we should have done this or that looking back at a flock after processing but a little harder to see when the birds are in the barns.  I guess the best thing to do is to just keep “picking up the pennies” when we see them during the flock and hopefully they will add up at the end.  A few examples are things like not running too much heat and wasting fuel, leaving lights on during summer days, having feed spills all over the barn, and most importantly keeping the birds comfortable with optimal growing conditions.  Each difference might only make a fraction of a difference but when added together can mean a lot.

That is why I always will bend down to pick up a penny when I see one on the ground. It might be the difference in winning or losing the game whether it is business or Life.

Happy New Year to All!

Pete