Tam said:
1) No Rod I don't deny the producers lost but is that not what happens when the supply side of things is way out of line with the demand side?
2) Maybe before you blame the packers for taking advantage of the markets in Canada, you should take a look at the other side of the equation.
3) Tell me Rod if the tables were turned and the Canadian producers had the packers over the barrel would you be laughing all the way to the bank like the US producers are or would you limit the amount the packers paid you for your cattle as not to put the packer out of business?
4) Actually Rod what Randy posted said the total additional cost was $25 to $50 dollars but on pages 37 to 43 of the report the additional cost to packers was broke down and more in the range of $49.81 to $88.95/head
5) One more thing the report points out is that the packers hold all the risk when they buy the live older cattle as if they are condemned the packers is out the price they paid plus the cost of disposal as with the new rules these animals can't even be made in to pet food.
6) It did not cover any other cost brought on by BSE as in plant upgrades to handle the new regulations that these plants have to abide by if they care to stay in business.
7) Rod let me remind you where you read about the 20% It was posted by SH on Friday, November 10
8) Just wondering Rod if there is so much profit in the packing industry why haven't you and Randy invested YOUR money in a packing plant? Could it be because they are not always profitable? :?
1) One of the things that I'd hoped you might take from the report were the following lines:
"If there is a demand for a certain quantity of product at a certain price and a supplier is prepared to supply that quantity at that price then supply and demand are at an equilibrium. This requires a willing buyer and a willing seller."
"As a principle of the supply-demand concept each party to a component part of the final demand will act in their own self-interest ... As such, both will seek alternative buyers or sellers until they are satisfied with the outcome. With many participants an equilibrium point will be reached where both the buyer and the seller will be satisfied with the outcome, or if not satisfied, accept the outcome ie: Price Discovery. To reach equilibrium requires a market mechanism without artificial barriers."
In other words Tam, what we have in the cull animal market is no longer a free market mechanism due to artificial trade barriers and packer concentration. The packers are taking advantage of that and raking in money hand over fist, all while crying about losing money.
BTW, SH, pay close attention to the "Price Discovery" quote.
As an aside, Tam: I was a 10 percentile double major at the U of R. Computer Science AND Agricultural Economics. This is why I find the forums discussions of free markets to be laughable at best (especially SH's). We have nothing remotely close to a free market in either the US or Canada. Even pre-BSE, the "free market" was a joke.
2) Apples and oranges Tam. The packers are taking advantage of artificial barriers and packer concentration. The US producers are simply taking advantage of a high point in their boning cow market. The Canadian border closure is having a nil effect on the US boning cow market. The ABP report was one of the highest I'd seen at $2/cwt. Other reports fix the Canadian influence at $0.
3) Since you ask, I am opposed to any artificial trade barrier or ruling, whether it be to the advantage of the packer OR the producer and would work to eliminate it. The only time I ask for government intervention is when a market power is exercising an artificial barrier to the detriment of the cattle producer. If the high prices were a natural function of supply and demand, of course I'd take advantage of it. We're not facing that situation right now.
As an aside Tam, I am not "blaming" packers for taking advantage of the prices. I am however debating SH's claims that packers aren't making a killing during this BSE crisis. And this report has handily demonstrated it, which the Ag Canada fluff report did not do.
I am however soundly criticizing the packers for their collusion in their purchasing. Since the overall producer price of cull animals is a direct function of consumer demand (for a simplistic view, see the graph in the ABP report), we should not be seeing such a massive reduction in income from those cull animals. A 20% retail price drop should not carry with it a 75% reduction in cull animal prices.
4) Actually what Randy posted was the SRM removal costs that he made reference to in an earlier thread, not the $88 total costs in the report. I also find it interesting that you point out their high side range, but fail to mentioned that producers lost up to $547/animal average, with high side losses of $740/hd. Why is that Tam?
5) Risk? Oie. Auction markets don't ship suspect cows, feedlots aren't allowed to ship suspect animals. Shipping losses to packing plants are so slim as to be ignored.
6) Plant upgrades are an investment and as such, cannot be considered costs. Each plant will continue to make use of those upgrades into the future. Those investments also improved processing efficiency, something the report didn't mention.
7) Not quite. I read the 20% two years ago in a Canfax report. SH is posting old news.
8) How do you know I haven't Tam? The last place I'll be discussing any of my investments is on this forum. BTW, you asked a while back what I was doing to correct problems and advance producer positions within Canada? Does supporting upstart plants and helping prep business plans count?
Rod