PERFORMANCE OF ALTERNATIVE PRODUCTION-MARKETING SYSTEMS IN THE SHELL EGG SUBSECTOR

JAMES HERMAN HILKER, Purdue University

Abstract

This study compares the performance which results when vertically-related stages in the shell egg subsector are organized in different ways. Its purpose is to identify those organizational forms which are preferred in terms of pecuniary cost efficiencies and net returns and to indicate the probable direction in which the structure of the subsector will evolve. An economic engineering stochastic simulation model was developed to compare alternative production-marketing systems. The systems compared in the model included the production, assembly, grading-packing, and distribution stages with the last three being considered as one unit in this study. The simulation covered 130 twenty-eight day periods with prices, costs, production, and demand varying each period. This allowed the variation in, as well as the average, period costs and returns of various systems to be analyzed and compared. The study considered systems which were differentiated by size combinations, types of coordination, number of shifts in grader-packer plants, elimination of assembly stage, and by various supply-demand balances. All of the above considerations were shown to have an impact on costs and net revenues. Economies of size indicate a continued trend towards larger production and grader-packer units, given a consistent flow of eggs. As desired plant capacity increases double shifts become more economical than increased plant size. The trend toward large integrated production-grader-packer units is likely to continue due to the large savings of no assembly costs. The study also showed that a good marketing policy is to have an equal to or larger committed demand than committed supply.

Degree

Ph.D.

Subject Area

Agricultural economics

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