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AFBF on Eminent Domain of Ag Land

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AFBF President Testifies Before Senate Task Force on Eminent Domain
08/25/05 13:25

OMAHA (DTN) -- Agricultural land is extremely vulnerable to condemnation by government entities under the guise of economic development, said American Farm Bureau Federation President Bob Stallman, during testimony before an Oklahoma state senate task force.

The U.S. Supreme Court earlier this summer ruled land can be confiscated for economic benefit, in its landmark case of Kelo v. the City of New London, Conn.

AFBF is encouraging state Farm Bureaus to lead urban and rural property owners to support changes in state laws that remedy this problem. For that reason, a Stop Taking Our Property (STOP) initiative was rolled out this week by AFBF, Stallman said.

"By holding that the U.S. Constitution does not forbid the use of eminent domain to take private property and give it to another party for its own private economic gain, the Supreme Court has essentially put all of our property up to the highest bidder," Stallman told the senators.

Agricultural lands, especially those in expanding urban areas, provide a ready source for potential shopping malls, industrial parks and housing complexes. Condemnation of this land also results in farmland that has been in a family for several generations simply being taken away, Stallman said.

In the Supreme Court ruling, the court said the Constitution allows states and local governments to take private property for economic development projects, but the court also said that states can enact laws disallowing the taking of private property for economic benefit. Passage of a state law to limit the use of eminent domain is what the Oklahoma Farm Bureau and AFBF are supporting.

Stallman said AFBF saw a major need to initiate the STOP campaign to assist Farm Bureaus to overcome the effects of Kelo. Many states are similar to Oklahoma in not currently protecting residents against use of eminent domain for economic gain by local governments.

In wrapping up his testimony, Stallman said, "The solution lies in your hands and other state legislatures around the country."
 

ocm

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"The city has carefully formulated an economic development that it believes will provide appreciable benefits to the community, including — but by no means limited to — new jobs and increased tax revenue."

Change a couple of words and it could apply to Tyson v. Pickett.

Tyson has carefully formulated an economic justification that it believes will provide appreciable benefits to the shareholders, including — but by no means limited to — new jobs and increased tax revenue.


“… there are two kinds of plunder: legal and illegal. … Sometimes the law defends plunder and participates in it. Thus the beneficiaries are spared the shame, danger, and scruple which their acts would otherwise involve. Sometimes the law places the whole apparatus of judges, police, prisons, and gendarmes at the service of the plunderers, and treats the victim--when he defends himself--as a criminal.” Frederick Bastiat, The Law, 1850
 
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ocm,

It was the feeders that went to the packers and asked the packers to forward contract with them for risk management purposes.

Pretty hard to make a case for your market manipulation conspiracy theory when feeders have other marketing options.

Perhaps you have heard how the feeders are being held at gunpoint and being forced into forward contracts with packers?

How ironic the feeders asked the packers to forward contract their cattle. The packer then turns around and protects their investment at the CME with long protection. The conspiracy theorists, like OCM, accuse the packers of market manipulation at the CME and accuse them of market manipulation with these captive supply arrangements that the feeders themselves requested. An investigation is conducted on the trading practices of ibp at the CME and it is discovered that the feeders had far more short positions than the packers. This investigation found no wrong doing. Then the market manipulation conspiracy theories are buried in a court of law. Yet the "perceived" packer victims like OCM persist in their baseless conspiracy theories. The most ironic part is that the packer stands the basis risk with the forward contract not the feeder.

I wouldn't expect you to understand this much common sense in one shot OCM.


~SH~
 
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~SH~-- You believe in this legislation? Isn't this more government interference?- or could this be plugging some loopholes in existing law that have came to light ? :???: :wink:
 

ocm

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It was the feeders that went to the packers and asked the packers to forward contract with them for risk management purposes.

Clarification--It was Paul Engler who went to IBP to propose formulas contracts. And he did it for market access reasons, not risk management. This is the same Paul Engler who became a vp at IBP. This is the same Paul Engler who gets preferential contracts with Tyson, his cattle don't have to grade more than 20% choice for the same money.

Tyson was the first to do these contracts. No "keeping up with the competition "reason there.

You are also connecting these contracts with the futures market. Only a few of these are futures based. Not all of them by a long shot.
 

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ocm said:
It was the feeders that went to the packers and asked the packers to forward contract with them for risk management purposes.

Clarification--It was Paul Engler who went to IBP to propose formulas contracts. And he did it for market access reasons, not risk management. This is the same Paul Engler who became a vp at IBP. This is the same Paul Engler who gets preferential contracts with Tyson, his cattle don't have to grade more than 20% choice for the same money.

Tyson was the first to do these contracts. No "keeping up with the competition "reason there.

You are also connecting these contracts with the futures market. Only a few of these are futures based. Not all of them by a long shot.

Value-based marketing


“Cussed and discussed” is a good characterization for the “formula” method Cactus Feeders, Inc., uses to market fed cattle to Tyson Fresh Meats, formerly IBP. Paul Engler, founder and chairman of Cactus, the nation's largest cattle feeding company, says formula pricing has been good for Cactus.

“We are in about our 18th year in our arrangement with Tyson,” he says. “Formula pricing has met the test of time.”

Developed in the 1980s, formula pricing was likely the industry's first large value-based marketing program. The objective was for a feedyard to provide high-quality beef to the packer, which then provided financial incentives to generate a true value for each animal fed. That true value is something many producers and feeders feel is missing in the final closeout.

“I understand and am fully aware of the criticism of formula and captive supply,” Engler says. “The industry will always have an argument dealing with negotiated sales to get a true market. But, remember, if you're on a formula arrangement, you're just as aggressive in trying to get the most for your cattle as the guy selling on a cash basis.”

The formula program was born out of a need to force packers to pay for higher quality. One of Engler's customers was feeding an excellent set of cattle penned adjacent to some rough Mexican Corrientes. When it was time to sell his higher quality steers, Engler told him the price. The feeder then asked what the Corrientes sold for.

“I was embarrassed to tell him,” Engler says. “The price was close to his cattle because they had been packaged together for the packer. That situation helped to establish the formula pricing method.”

O'Brien says the formula “hasn't been completely positive for the industry” because such locked-in supplies drag down cash and other grid prices.


Clement Ward (Oklahoma State Univ. Livestock Marketing Specialist) says the formula has “both helped and hurt” the industry.
“It enables people who use it to focus on things other than the base price. They can manage the cattle to make them work best for a grid formula. A disadvantage is that it takes a number of people out of the cash market and perhaps gives packers more leverage to bid down the cash market,” he says.
 

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The objective was for a feedyard to provide high-quality beef to the packer, which then provided financial incentives to generate a true value for each animal fed.

This is not a correct statement, though I'm not surprised to see Engler promoting this idea. We've done business with him and know personally how "truthful" he is.

The data collected from Tyson for the Pickett trial easily disproves this statement.
 

Beefman

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ocm said:
The objective was for a feedyard to provide high-quality beef to the packer, which then provided financial incentives to generate a true value for each animal fed.

This is not a correct statement, though I'm not surprised to see Engler promoting this idea. We've done business with him and know personally how "truthful" he is.

The data collected from Tyson for the Pickett trial easily disproves this statement.

ocm, You just cut and pasted a story which contains the following copy:

The formula program was born out of a need to force packers to pay for higher quality. One of Engler's customers was feeding an excellent set of cattle penned adjacent to some rough Mexican Corrientes. When it was time to sell his higher quality steers, Engler told him the price. The feeder then asked what the Corrientes sold for. “I was embarrassed to tell him,” Engler says. “The price was close to his cattle because they had been packaged together for the packer. That situation helped to establish the formula pricing method.”

ocm, I didn't see you tear the story you posted apart, yet you are predictably fast to call for a dog pile directed towards Engler. Also to be expected, is calling his character into question without evidence. The proof source you posted claims Engler was pursuing value based marketing.

Was that not the case?

Which is it?

Beefman
 

ocm

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Based on personal business experience with Engler I would not trust him as far as I could throw him.

The data from Tyson presented at the Pickett trial showed that cattle puchased through marketing agreements over an eight year period of time averaged lower quality than cash market cattle.

Formula deals were started by Engler at a time of high supply (of fat cattle) and guaranteed him "shackle space".

The interim GIPSA study just out (which has plenty wrong with it) has some results from interviews with packers and feeders asking why they enter into formula agreements. They listed
1. to obtain market access,
2. to better manage price risk,
3. to assure high and consistent quality and
4. to reduce transactions costs.”

The last three primarily apply to packers. Only the first one solely applies to feeders. I remember being told at the time (or shortly afterwards) when Engler started the practice of formula contracts that he was doing it for shackle space.

The fact that he now claims it is for value based market is false. What Engler is talking about is GRID PRICING--WHICH IS ALSO AVAILABLE ON THE CASH MARKET. He's not telling the truth. Grid pricing and formula marketing agreements are two different things, although formula agreements typically contain grid pricing.
 

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Clement Ward (Oklahoma State Univ. Livestock Marketing Specialist) says the formula has “both helped and hurt” the industry.
“It enables people who use it to focus on things other than the base price. They can manage the cattle to make them work best for a grid formula. A disadvantage is that it takes a number of people out of the cash market and perhaps gives packers more leverage to bid down the cash market,” he says.

Clement Ward (above)was part of the GIPSA study.
 

Beefman

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ocm said:
Based on personal business experience with Engler I would not trust him as far as I could throw him.

The data from Tyson presented at the Pickett trial showed that cattle puchased through marketing agreements over an eight year period of time averaged lower quality than cash market cattle.

Formula deals were started by Engler at a time of high supply (of fat cattle) and guaranteed him "shackle space".

The interim GIPSA study just out (which has plenty wrong with it) has some results from interviews with packers and feeders asking why they enter into formula agreements. They listed
1. to obtain market access,
2. to better manage price risk,
3. to assure high and consistent quality and
4. to reduce transactions costs.”

The last three primarily apply to packers. Only the first one solely applies to feeders. I remember being told at the time (or shortly afterwards) when Engler started the practice of formula contracts that he was doing it for shackle space.

The fact that he now claims it is for value based market is false. What Engler is talking about is GRID PRICING--WHICH IS ALSO AVAILABLE ON THE CASH MARKET. He's not telling the truth. Grid pricing and formula marketing agreements are two different things, although formula agreements typically contain grid pricing.

For the purposes of the points you brought up, your personal business experience with Engler is useless, meaningless information. No doubt the feeling is more than mutual. To accuse him of lying based on his value based marketing comments is a check you certainly can't cash.

Whether market access, or value based marketing, bottom line, he's looking for a way to extract more value. You are the one that posted the article from BEEF. That's a reputable proof source. We all know the quote of good cattle bringing at or near the same money on the cash market is very real. Happens all the time. If I'm Engler's customer, and realize my cattle are are used to subsidize the Corrientes, where's my incentive to get better in the future?

Beefman
 
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The data from Tyson presented at the Pickett trial showed that cattle puchased through marketing agreements over an eight year period of time averaged lower quality than cash market cattle.

First of all that is a deceptive statement because "quality" is a relative term. From a "quality grade standpoint" Yeh, during those years there maybe was more choice cattle in the cash market BECAUSE A LOT OF THEM WERE OVERFED.

Do you know what that means? It means a narrow choice select spread which decreases the value of choice cattle.

Secondly, the cash cattle that were not as current as the contract cattle also contained more Yield grade 4's further devaluing the cattle.

Third, when cattle are backed up in the feedlot, cost of gains reach a point of diminishing returns and the increase in production yields a lower over all price.

I would welcome you to challenge any one of these points OCM.


OCM: "What Engler is talking about is GRID PRICING--WHICH IS ALSO AVAILABLE ON THE CASH MARKET. He's not telling the truth. Grid pricing and formula marketing agreements are two different things, although formula agreements typically contain grid pricing."

Grid pricing and formula pricing are two different things although formula agreements typically contain grid pricing??????

Ah.....ok?

I hope that made sense to you.

I'd love to hear your explain the difference between formulas and grid pricing.

There is a difference between forward contracts and grid pricing but formula pricing and grid pricing are the same thing.

Once again, you don't know what you are talking about.



~SH~
 

ocm

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There is a difference between forward contracts and grid pricing but formula pricing and grid pricing are the same thing.


I can get grid pricing on the cash market.

What typically goes by the name of "formula pricing" is when there is a marketing agreement to sell on a grid with a base price not set at the time the agreement is made but the base with be figured out based on "plant average" or some other "to be determined" price at the time of (or a week before ) delivery.

NOBODY is trying to do away with grid pricing---NOBODY.

Grid pricing is available on the cash market. Nobody wants to change that.

I would welcome you to challenge any one of these points OCM.

The data was the average of an eight year period. Tyson paid over $5 cwt MORE for lower quality with yield grade difference of only 1% on marketing agreement cattle than on the cash market. This contradicts their one of their stated "reasons" for using marketing agreements.
 

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Beefman, " If I'm Engler's customer, and realize my cattle are are used to subsidize the Corrientes, where's my incentive to get better in the future?"

I don't understand your logic, Beefman. You ALREADY are better - and you're not profiting from it.
 

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Beefman said:
ocm said:
Based on personal business experience with Engler I would not trust him as far as I could throw him.

The data from Tyson presented at the Pickett trial showed that cattle puchased through marketing agreements over an eight year period of time averaged lower quality than cash market cattle.

Formula deals were started by Engler at a time of high supply (of fat cattle) and guaranteed him "shackle space".

The interim GIPSA study just out (which has plenty wrong with it) has some results from interviews with packers and feeders asking why they enter into formula agreements. They listed
1. to obtain market access,
2. to better manage price risk,
3. to assure high and consistent quality and
4. to reduce transactions costs.”

The last three primarily apply to packers. Only the first one solely applies to feeders. I remember being told at the time (or shortly afterwards) when Engler started the practice of formula contracts that he was doing it for shackle space.

The fact that he now claims it is for value based market is false. What Engler is talking about is GRID PRICING--WHICH IS ALSO AVAILABLE ON THE CASH MARKET. He's not telling the truth. Grid pricing and formula marketing agreements are two different things, although formula agreements typically contain grid pricing.

For the purposes of the points you brought up, your personal business experience with Engler is useless, meaningless information. No doubt the feeling is more than mutual.
To accuse him of lying based on his value based marketing comments is a check you certainly can't cash
.

Whether market access, or value based marketing, bottom line, he's looking for a way to extract more value. You are the one that posted the article from BEEF. That's a reputable proof source. We all know the quote of good cattle bringing at or near the same money on the cash market is very real. Happens all the time. If I'm Engler's customer, and realize my cattle are are used to subsidize the Corrientes, where's my incentive to get better in the future?

Beefman

And your check cashing logic is just another packer employee trying to justify packer actions,I would say "OCM"s check is better than any packer employee's will ever be.......................good luck
 

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Sandhusker said:
Beefman, " If I'm Engler's customer, and realize my cattle are are used to subsidize the Corrientes, where's my incentive to get better in the future?"

I don't understand your logic, Beefman. You ALREADY are better - and you're not profiting from it.

Sandhusker...you already answered your own question.

From the story posted by ocm:

One of Engler's customers was feeding an excellent set of cattle penned adjacent to some rough Mexican Corrientes. When it was time to sell his higher quality steers, Engler told him the price. The feeder then asked what the Corrientes sold for. “I was embarrassed to tell him,” Engler says. “The price was close to his cattle because they had been packaged together for the packer. That situation helped to establish the formula pricing method.”

At the time formulas were established, the cash market didn't care how the cattle were. Good cattle, penned next to "rough Mexican Corrientes" bring at, or near the same cash money on finished cattle. Still happens today.

If you're attempting to raise "Cadillacs" and getting "Chevy" pricing, what's your incentive to improve? You are correct Sandhusker, you already are better, and are not profitting from it. Engler's answer (per the story posted by ocm) was formula pricing.


Beefman
 

Mike

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Beefman wrote:
At the time formulas were established, the cash market didn't care how the cattle were. Good cattle, penned next to "rough Mexican Corrientes" bring at, or near the same cash money on finished cattle. Still happens today.


Beefman, The problem lies with the fool who packaged the cattle together for the packer. Not the cash market.
The feeder then asked what the Corrientes sold for. “I was embarrassed to tell him,” Engler says. “The price was close to his cattle because they had been packaged together for the packer.
If Engler himself packaged the cattle together he SHOULD be embarrassed.
 

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If somebody packaged my baldies with roping steers, that would tell me volumes about who I was dealing with. He wouldn't get a second chance.
 

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Mike said:
Beefman wrote:
At the time formulas were established, the cash market didn't care how the cattle were. Good cattle, penned next to "rough Mexican Corrientes" bring at, or near the same cash money on finished cattle. Still happens today.


Beefman, The problem lies with the fool who packaged the cattle together for the packer. Not the cash market.
The feeder then asked what the Corrientes sold for. “I was embarrassed to tell him,” Engler says. “The price was close to his cattle because they had been packaged together for the packer.

If Engler himself packaged the cattle together he SHOULD be embarrassed.

Sandhusker said:
If somebody packaged my baldies with roping steers, that would tell me volumes about who I was dealing with. He wouldn't get a second chance.

Then you’d better be able to feed your baldies at home. If you’re lucky, you might get close to the same cash price as the feedlot.

Pick any feedlot you want. Call them. Ask them about their experience the past 20-30 years selling in the cash market, either in the beef, or live. Ask:
1. From week to week, what is the monetary average difference between your best pen, and your very worst pen when sold on the cash market.
2. Do customers who place plain, put together cattle expect to get the same cash price on their finished cattle as higher quality cattle?
3. How much negotiation does the cash market really offer?
4. When the weekly cash trade starts, how long do you have to make up your mind?
5. Do you price each pen individually?

Look at the way the bulk of the finished cattle are sold on the cash market. Frankly, those that raise and feed better quality cattle are tired of subsidizing junk cattle. Unless you elect to use a formula / grid on your baldies, chances are you are getting the same cash price as all other showlist cattle that week.

Don’t like this system? Who should you get mad at?

Everyone.

Prior to formulas / grids, the best way to make money feeding cattle was to upgrade put together types, and sell for the average. Twenty years ago, there were very few, if any opportunities for marketing on a formula / grid. Every year, magazines like BEEF and Drovers Journal publish the list of companies offering grids / formulas / value based marketing. Last count, there were over 50 different offerings.

I'm not writing the obituary for the cash market. What I'm saying is give Engler credit for figuring out a better way of individually marketing each pen. He obviously has a rather large show list each week. His crime with several on this board is that he went from pitching silage with a fork in northeast Neb to running one of, if not the largest cattle feeding company in the world. This didn’t happen because he made bad decisions and didn’t take care of his customers.

Beefman
 

ocm

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Beefman,
There is a lot of misinformation in what is being posted here.

1. Grade and Yield (the forerunner of the grid--the grid today just has more categories) existed LONG ago. Paul Engler did not invent it. It was not invented by feeders.

2. Formula is different than grid. Formula refers to the formula used to determine the BASE PRICE, not the discounts and premiums on the grid.

3. Engler was already selling on G&Y when he came up with the formula. G&Y already allowed quality to be rewarded (though the discounts frequently more than offset the premiums)

4. The cash market has contained MORE quality cattle than the formula market.


Your questions

1. From week to week, what is the monetary average difference between your best pen, and your very worst pen when sold on the cash market.

Answer. Depends on whether you sell live, in the meat, or on the grid. All three are an option in the cash market

2. Do customers who place plain, put together cattle expect to get the same cash price on their finished cattle as higher quality cattle?

Answer. I've seen cattle that you would call "very plain" outgrade and outyield "quality" cattle. Customers expect value for value.

3. How much negotiation does the cash market really offer?

Answer. Only a tiny bit more than the formula market.

4. When the weekly cash trade starts, how long do you have to make up your mind?

Answer. Varies greatly. From 30 minutes to three days.

5. Do you price each pen individually?

Answer. Not usually. Usually the buyer sets a price and we take it or leave it, or we sell part of the show list instead of all of it, or we talk about "in the meat" or "the grid."
 

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