Answer for Econo re packer subsidy question

[Jason]

No Econ the packer is not the producer, but they are margin operators. How do they arrive at the price of cattle except by knowing their costs of processing and what they will get for their finished product(boxed beef)?

In an extreme case like Canada experienced, they made more than the market would normally allow for a short period of time. They offered a price and feeders sold at that price. They still knew their costs and their boxed beef price. They would not raise their price above that level no matter what as there was no other place to sell the number of finished cattle we had. Thus the gov't programs to slow the supply of finished cattle.

 

[Econ101]

No Econ the packer is not the producer, but they are margin operators. How do they arrive at the price of cattle except by knowing their costs of processing and what they will get for their finished product(boxed beef)?

In an extreme case like Canada experienced, they made more than the market would normally allow for a short period of time. They offered a price and feeders sold at that price. They still knew their costs and their boxed beef price. They would not raise their price above that level no matter what as there was no other place to sell the number of finished cattle we had. Thus the gov't programs to slow the supply of finished cattle.

You seem to want to argue that packers "deserve" thier margins and producers like yourself do not. I argue that is wrong. If you do not "deserve" your profitability margins, why do they?

You never answered my question of what would happen to those packer plants if Tyson/Cargill lost a lot of money on their owned cattle because of BSE instead of being bailed out by Canadian taxpayers. Think it through.

 

[rkaiser]

Jason -

Posted: Fri Oct 28, 2005 10:06 am Post subject:

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No Econ the packer is not the producer, but they are margin operators. How do they arrive at the price of cattle except by knowing their costs of processing and what they will get for their finished product(boxed beef)?

In an extreme case like Canada experienced, they made more than the market would normally allow for a short period of time. C They still knew their costs and their boxed beef price. They would not raise their price above that level no matter what as there was no other place to sell the number of finished cattle we had. Thus the gov't programs to slow the supply of finished cattle.

Funny how this works - The packer is a margin operator, knows his cost and what he will get for his end product. The feeder is also a margin operator who knows his cost and sometimes, what he will get for his end product. The producer knows his cost, and knows that he hasn't got a hope in hell of making a red cent if he takes what the folks above him give, and includes every item that makes up expense for his operation.
Just wondering Jason, if the margin operator sees a chance for a profit, does he automatically send it down the line?

Jason -

They offered a price and feeders sold at that price.

I thought that you told us before that desperate feeders offered their cattle lower than the price offered by Cargill and Tyson, and that was how price was established. Now you are saying that Tyson and Cargill offered a price. Which is it Jason, and if it was Cargill and Tyson offering, how did they come up with the price they offered?

 

[Jason]

Most producers don't even know their costs so how could they possibly know what their margins are?

Those that do know their costs, how do you extract more money from your cattle? Only if the consumer will buy the same or greater amounts of beef at higher prices. Recent events have proven that if beef goes too high consumption declines.

The only other option is for producers to cut their costs. If they can't they go out of business.

What industry garantees you a living wage no matter how good, bad, or indifferent you are at it?

If Cargill/Tyson were faced with a period of losses greater than overhead costs they could have simply stopped processing all together and that would really have killed our industry. All the fat cattle would have been destroyed with no cash to feedlots. Break the feedlots, see what the producers would have got. Cargill/Tyson were not the only feeders that got a subsidy. Everyone with cattle on feed did.

Do packers deserve their margins? Would you work for free? Everyone is entitled to what they can earn.

 

[rkaiser]

Your first statement is very true Jason, and most of us are truely scared to even want to know. Alberta has the advantage of a lucrative real estate market, and likely 90% of operators with less than 200 cows have off farm income. Great stuff hey.

Yip, beef prices go up, consumption declines. Somehow beef in Europe and Japan is priced up to ten times higher than in Canada, yet they continue to find buyers. Go figure.

Go ahead and tell me how to reduce my costs any further Jason.

Jason -

What industry garantees you a living wage no matter how good, bad, or indifferent you are at it?

We have been discussing margin players Jason, they seem to be quaranteed a living these days. Are you saying no one on earth could never process beef better than Cargill and Tyson? They might be good, but are they as good as we can get. And are they good for the whole industry or simply Good for themselves?

I always like the idea that you guys come up with about Cargill and Tyson closing their doors. Give me a break. The border opened to boxed beef because it was an opportunity. An opportunity for the USA and an opportunity for Cargill and Tyson(and anyone else who was in the right place at the right time).

 

[Anonymous]

Kindergarten Economics: "I have already shown you that supply/demand is the real market equilibrium determinate. Do you disagree?"

YOU showed ME that supply/demand is the real market equilibrium determinate??????? Hahaha!

You are the one arguing your baseless market manipulation conspiracy theories while I'm pointing out the obvious supply and demand factors and now you think you taught me about supply and demand. You're real funny! Your arrogance knows no bounds does it????

If boxed beef prices are not a reflection of the supply/demand equilibrium, WHAT THE HELL IS??????


Great posts Jason!

You are dead on the money! This is nothing but common sense.


Want to see a typical Kindergarten Economics diversion?

Here it is:

Jason: "Sheesh Econ, how do you suppose supply/demand in the packing industry is measured except through the boxed beef/cutout prices?"

Kindergarten Economics (in response): "As you should surely know by now, Jason, the packer is not the producer. Don't you have enough local, recent examples of that? Think about it."

Kindergarten diverts the question with an unrelated statement. SAME-O, SAME-O!

Kindergarten (to Jason): "You seem to want to argue that packers "deserve" thier margins and producers like yourself do not. I argue that is wrong."

Jason never argued anything of the sort. Another bullsh*t argument you just made up Kindergarten. Whether or not someone "DESERVES" to be profitable is irrelevant to whether or not an opportunity exists for them to be profitable. Everyone deserves to be profitable but not everyone is going to be profitable.

Randy Kaiser: "The producer knows his cost, and knows that he hasn't got a hope in hell of making a red cent if he takes what the folks above him give, and includes every item that makes up expense for his operation."

So what's your point Randy? That the packers should sacrifice $10 head so you can make $10 more dollars per head? If there is so much money to be made in the packing industry there would be packing plants cropping up all over.

Most producers don't have a clue what it costs them to raise a pound of calf. Harlan Hughes data shows a $250/head spread between the most profitable and least profitable producers. The least profitable are probably attending blamers conventions and chasing brandings and rodeos when they should be putting in a rotational grazing system, working on marketing their calves, OR DETERMINING THEIR COST OF PRODUCTION.

This attitude that the packing industry owes you a living is bullsh*t.

Randy Kaiser: "Just wondering Jason, if the margin operator sees a chance for a profit, does he automatically send it down the line?"

WOULD YOU????

If the profit is there for the taking, anyone is going to take it BUT WHEN THAT PROFIT BECOMES TOO GREAT, COMPETITION WILL STEP IN AND SEIZE THAT OPPORTUNITY AS WELL which reduces the opportunity for profit.

You act like there is no competition between Cargill and Tyson. You're such a whiner.


Randy Kaiser,

Allow me to introduce you to yourself.

First you say: "The producer knows his cost, and knows that he hasn't got a hope in hell of making a red cent if he takes what the folks above him give,........."

Jason's first statement in the following post: "Most producers don't even know their costs so how could they possibly know what their margins are?"

Randy Kaiser (in response): "Your first statement is very true Jason, and most of us are truely scared to even want to know."

FIRST YOU SAY THE PRODUCER KNOWS HIS COSTS THEN YOU AGREE WITH JASON WHEN JASON SAYS MOST PRODUCERS DON'T KNOW THEIR COSTS! Make up your mind.

Randy Kaiser: " Are you saying no one on earth could never process beef better than Cargill and Tyson? They might be good, but are they as good as we can get. And are they good for the whole industry or simply Good for themselves?"

Tyson and Cargill offer quantity but there is certainly room for improvement from the standpoint of quality. We can always do beef better.



~SH~

 

[Econ101]

Jason, economists look at things a little differently than others. Economists can come up with scenarios that may seem dire in the short term but work out quite well for their clients. Happens all the time. You sometimes have to look past the little things that are being played out and see the big picture. See the result. Think about it. How did it really get there?

 

[rkaiser]

When I said that a producer knows his costs, I was creating an example. I agree that very few producers know their costs. And it doesn't matter anyway. Even the lowest cost producer will struggle in our current system. Why do you trap gophers SH, or whatever it is you do? Why don't you show us all how to survive in this perfect setting that you so proudly support?

Pretty good theory of yours that high cost producers are the packer bwamers SH. I would like to suggest that it is the low cost producers who question the current system. The high cost producer is already teid in with Cargill and Tyson. The little guy is wondering how he can drop his cost of production to such an efficient level and still not survive in the conventional market. Thus the niche market cattlemen. Thus maybe even USPB.

But SH will continue to defend the packer with his red cape and gopher trapping job on the side.

 

[Anonymous]

Randy Kaiser: "Pretty good theory of yours that high cost producers are the packer bwamers SH."

Randy Kaiser: "But SH will continue to defend the packer with his red cape and gopher trapping job on the side."

Gosh Randy, only two lies in a single post?

That's quite an improvement for you!



~SH~

 

[rkaiser]

SH

The least profitable are probably attending blamers conventions and chasing brandings and rodeos when they should be putting in a rotational grazing system, working on marketing their calves, OR DETERMINING THEIR COST OF PRODUCTION.

I guess I dreamed this up hey SH.

What do you trap then ya old prarie dog, besides yourself. :lol: :lol:

Why don't you simply use something as childish as Liar liar pants on fire, the next time you see something you don't like wimp.