agman
Well-known member
Cattleman said:Agman, I agree with large part of your points, but there are a couple of things that still urk me. In your economic model you are not considering risk and uncertainty. Did the packers know with 100% certainty, that if they reduced kills to create a large backlog to decrease prices, that the border would not open and all teh backlog would be lost? NO. So instead they took the guranteed profit, and ran at full capacity to maximaize profit. Not to just operate at full capacity "for the benefit of all the cattle industry".
I am not blaming packers, or mad at how they "screwed the industry" they just practiced profit maxization, for their interest, which is fine by me, but a slightly different point than you are selling.
As far as your argument for short term increase in fixed costs at lower slaughter levels, and decreasing prices in the future, we can not make any conclusive statements without solid emperical analysis. How much are they going to cut slaughter rates, what will be the impact on selling and buying prices, for how long will they operate under these different rates to achieve price impacts, etc. Until this is laid out I am pretty sure we can both spin our numbers to get the answer we are looking for.
I respect the civility of your discussion and assesment of this issue. However, if they had chosen to reduce slaughter rates the uncertainty of the border reopening is not as critical as you suggest. Whether the profits were enhanced only in Canada or Canada and the U.S. with the backlog eventually exported the results would be similar. Total profits would have been enhanced.
I did take the time today to make calls to very appropriate people regarding this issue and its associated economic consequences. The answer was positive and the further enhancement of profits would be the result. The decision to run full blast was determined to be in the best interest of the INDUSTRY.
We can debate the issue of marginal profits. I make this assessment weekly regarding existing slaughter rate versus capacity. I have analyzed this issue for the better part of twenty years and I will stand firm on my assessment, conclusion and results. That is said with all due respect that your opinion may differ. Have a great day.