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Captive Supply..To be (lieve) or not to be (lieve)!

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Agman, "Why should the producer have any control over product pricing when his risk ends the minute those cattle are shipped to slaughter? As an R-Calf parrot you should not argue this point since you have been brainwashed to believe that you are only in the "cattle" business, not the "beef" business. Is that not the war cry of R-Calf and its members? Why should you benefit beyond any participation of risk taking at your level of production? If you take no risk upstream why would you expect to benefit from upstream profits?"

Agman, you're starting to follow SH's footsteps of typing before thinking. My comment should of been easy to understand. CATTLE is a rancher's product. I don't know about where you live, but around here, ranchers don't get to pick the price they sell CATTLE at. It's generally a take it or leave it proposition.

Are ranchers in the hide business as well? How about the cosmetics business?

As far as your "R-CALF parrot" juvinile attack; I sat back a few years and took in what everybody said - R-CALF, NCBA, Nebraska Cattlemen, etc... I made my own mind up how things were working before joining R-CALF. I've disagreed with a few things R-CALF has said and done and have said so on the forum. On the parrot subject, how many times have you not taken the AMI line?

Agman, "As a banker, your phony illustration of packer profits earned in two weeks of ownership defies belief. What are their annual profit margins versus sales compared to a producer's annual profits verus sales? BTW, the most producers prosper even in the toughest of times. I am certain you do not only finance the worst 20% of producers, or do you? Perhaps that is why you fail to see opportunity in the "beef" business as so many other intelligent and good cattle producers do. Have a great day."

You have two job choices. One will send you a $100 check each October. The other one will send you a $26 biweekly. What job do you choose? SH claims you have to figure it by the head. This is by the head. If this isn't the way to do it, you need to clue your deciple in.

I think you need to get out of the boardrooms and into real life. You should ask those good producers about how they "prospered" during those toughest of times. My Grandpa was a very good producer. He started with nothing and retired 40 years later with 5000 acres, cows to stock it, a couple pivots and no debt. He talked of thinking about giving up and moving to town several times during "lean years". What is your definition of "prosperity"?

When did I ever claim to not see opportunity in the "beef" business? I've posted here more than once that I was a Tyson stockholder. Would someone who fails to see opportunity in the beef business buy packer stock? Maybe, just maybe, you don't know as much as you think you do.
 
I have worked in agricultural benchmarking for 15 years so far. Some rules of thumb never seem to change. One rule of thumb is that the size of the operation is very seldom related to rank in profitability. There have always been large operations in the Top Third, the Middle Third and the Bottom Third, and there have always been small and medium sized operations in all three, also.

Operating profitability is related primarily to operating efficiency and the marketing function. Both play a major role. Operating efficiency is usually more important between the two, but not always. Very good niche marketing programs have overcome differences in operating efficiency and then some.

My guess is that all sizes of operations will continue to show up in the Top Third, the Middle Third and the Bottom Third. The very large operations that have many plants usually end up in the Middle Third on a combined basis, because they just can't manage all those locations the way good managers can manage operations that don't have so many plants. Most of the companies with multiple plants also do benchmarking within their companies, and any location that stays in the Bottom Third for more than a year or two is usually eliminated or downgraded to "core operations."

I would welcome your comments.
 
pointrider said:
I have worked in agricultural benchmarking for 15 years so far. Some rules of thumb never seem to change. One rule of thumb is that the size of the operation is very seldom related to rank in profitability. There have always been large operations in the Top Third, the Middle Third and the Bottom Third, and there have always been small and medium sized operations in all three, also.

Operating profitability is related primarily to operating efficiency and the marketing function. Both play a major role. Operating efficiency is usually more important between the two, but not always. Very good niche marketing programs have overcome differences in operating efficiency and then some.

My guess is that all sizes of operations will continue to show up in the Top Third, the Middle Third and the Bottom Third. The very large operations that have many plants usually end up in the Middle Third on a combined basis, because they just can't manage all those locations the way good managers can manage operations that don't have so many plants. Most of the companies with multiple plants also do benchmarking within their companies, and any location that stays in the Bottom Third for more than a year or two is usually eliminated or downgraded to "core operations."

I would welcome your comments.
Click to expand...

Nice post. What do you think about Agman's and my sparring over whether or not factoring time (turnover) is fair in comparing profitability? It's apparent neither of us is going to change the other's mind. Perhaps an intermediary would be helpful and you appear to be as qualified as anybody here.
 
Sandhusker: "You're telling me the person who has virtually no control on product pricing has the "big club"? I need further convincing"

The producer has the "big club" with the PER HEAD equity he has tied up in land, livestock, and machinery which dwarfs the PER HEAD equity of a packing plant.

Remember the golden rule, the one with the gold makes the rules.

What I am saying is that it's much easier for producers to own a packing plant than it is for packers to own the land, livestock, and machinery that is required to produce cattle.

Look no further than USPB as proof of that.

More directly to your question/comment on controlling pricing, if a procucer is driven by the blaming mentality of R-CALF/LMA and actually beleives that packer parasite lawsuits will return more profitability to our industry than obtaining more of the consumers dollar through value added products derived from beef research, promotion, and education dollars, then your point is taken.

Yeh, the arrogant LMA will try to assure that producers do not have input into the price of our final product.


Sandhusker: "I, as a lender, understand return on equity. That is what it all comes down to - how much do I have to put in how much can I take out. I don't know what ROE on a packing plant would be, but compare that to buying 500 head of cows @ $800, 20 bulls @ $1500, 8000 acres @ $200, etc... Ranching is not a huge money making deal."

Well at least you admit how naive you are about processing plant ROE even though you would like others to believe that you know something about it.

Ranching is not a huge money making deal for SOME for many reasons two of which are.......

#1. We have to compete with cheaper poultry and pork.

#2. There is many investors that buy up ranches for a tax shelter or hunting purposes and they do not concern themselves with being profitable.

We compete against both and will continue to do so. Neither of which has a damn thing to do with imports, packer concentration, or captive supplies.


Sandhusker: "Packers don't have to own the land and cows to control the industry."

You are wrong!

Any producer can feed his own calves, slaughter his own cattle, and market his own beef. Nobody is forced to sell their cattle if they don't want to. USPB has provided the blueprint for how producers can join together to control their industry. Of course that leaves out those precious sale barn commission dollars though.


Sandhusker: "I won't even bother to try to explain this to you because you don't want to understand it. Just look at the chicken industry. Don't tell me the big chicken outfits dont' control the industry - do they own the barns?"

This is the lamest comparison that the packer blamers always use. What are they going to do Sandhusker? BUILD A CONFINEMENT OVER THE SANDHILLS?????? You think you can run cattle in confinement as cheaply as you can run them on grass???? Think those yearlings are going to hold up on concrete slats like hogs do????

You continually parrot the blaming R-CULT lines when you don't stop to think about it.

If beef cattle could be confined with economic efficiency, THEY WOULD BE but it's cheaper to let them graze than feed them in confinement.

How much land does Tyson own in the Sandhills?


Sandhusker: "Your implications that companies buying out their competiton being a direct link to unprofitability is absurd."

What's absurd is you pretending to understand packer motives for buying out other packers. You don't have a clue.

Did Creekstone buy out Future Beef because it was their competition or because Future Beef couldn't compete with the larger more efficient packing companies??? Creekstone was a start up company.

Tyson tried to back out of buying ibp. If a company as large as ibp was so profitable, why would they sell out to Tyson?

Once again you place your ignorance on display.

What's also absurd is your implication that the packing industry is so profitable when you just admitted you don't know much about their ROE.

Need I say more?


Sandhusker: "There is a lot to stop producers from investing in their own plants - it's called huge start-up costs."

But those "HUGE PROFITS" that you believe are there should make it a slam dunk. You want it both ways. You want to bitch about packer profits and you want to bitch about start up costs. My conclusion is that you just want to bitch.

Those "huge start up costs" didn't stop USPB did they?


Sandhusker: "So packers ONLY make $26/head? Not bad comparing that to ranchers. $26 turned in two weeks vs $100 in a year?"

Wrong again!

The large packers do not average $26 per head. ibp averaged $26 per head IN THEIR BEST YEARS FINANCIALLY. The average per head profit for the 5 major packers through the ninties was $3.88 per head. NOT BAD YOU SAY??????

How many loans are you going to hand out at a $3.88 per head return? Never mind, that would depend on how much equity they have to cover their loss. Silly me, forgot who I was talking to!




~SH~
 
SH, "The producer has the "big club" with the PER HEAD equity he has tied up in land, livestock, and machinery which dwarfs the PER HEAD equity of a packing plant. "

Equity does not give you pricing power.

SH, "This is the lamest comparison that the packer blamers always use. What are they going to do Sandhusker? BUILD A CONFINEMENT OVER THE SANDHILLS?????? You think you can run cattle in confinement as cheaply as you can run them on grass???? Think those yearlings are going to hold up on concrete slats like hogs do???? "

Did I mention anything about confinements? I simply said that packers do not need to own the land to control the market. The chicken barn was an example. I'll make it simple as I can for you; The chicken barn = pasture land. Who owns the chicken barn and who controls that industry? Hint: they are two different entities. If someone can control the chicken industry without owning the barn, don't you think they can control the beef industry without owning the pasture? Yes, they can, SH.

SH, "You continually parrot the blaming R-CULT lines when you don't stop to think about it."

This coming from somebody who has been put in a tree time after time for parroting the USDA and AMI without thinking for himself? :roll:

SH, "What's absurd is you pretending to understand packer motives for buying out other packers. You don't have a clue. Tyson tried to back out of buying ibp. If a company as large as ibp was so profitable, why would they sell out to Tyson? Once again you place your ignorance on display."

There are many reasons one company might buy out another. One would have be a complete idiot to assume buyout = low profitability. Complete idiot. A bank that I used to work for was recently swallowed up by a larger bank. Would you like me to send you the financial information of the smaller bank prior to the buyout? I can assure you they were in the top third of thier group for profitability.

SH, "What's also absurd is your implication that the packing industry is so profitable when you just admitted you don't know much about their ROE. Need I say more? "

I never said the packing industry was "so profitable". I simply said that compared to the ranching side, I didn't see where they had much room to complain.

SH, "The large packers do not average $26 per head. ibp averaged $26 per head IN THEIR BEST YEARS FINANCIALLY. The average per head profit for the 5 major packers through the ninties was $3.88 per head. NOT BAD YOU SAY?????? "

$4 turnaround in two weeks compared to $100 turnaround in a year? Looks pretty close.

SH, "How many loans are you going to hand out at a $3.88 per head return? Never mind, that would depend on how much equity they have to cover their loss. Silly me, forgot who I was talking to! "

Believe me, the guy who makes $3.88 every two weeks will get a better rate than they guy who makes $3.88 / year.




~SH~
 
Sandhusker: "Equity does not give you pricing power."

It sure as heck does!


Sandhusker: " If someone can control the chicken industry without owning the barn, don't you think they can control the beef industry without owning the pasture?"

No I don't!

The beef industry will continue to integrate from the producer up, not the packer down. Write it down and hold me to it.


Sandhusker: "One would have be a complete idiot to assume buyout = low profitability. Complete idiot."

Yes, to assume that buyout means low profitability IN EVERY SITUATION would be just as absurd as assuming that a buyout is never mutually beneficial.


Sandhusker: "A bank that I used to work for was recently swallowed up by a larger bank. Would you like me to send you the financial information of the smaller bank prior to the buyout? I can assure you they were in the top third of thier group for profitability."

Then why did they sell???

MUTUALLY BENEFICIAL??????


Sandhusker: "I never said the packing industry was "so profitable". I simply said that compared to the ranching side, I didn't see where they had much room to complain."

They're not complaining! You are the one always complaining about the major packers!


Sandhusker: "Believe me, the guy who makes $3.88 every two weeks will get a better rate than they guy who makes $3.88 / year."

Believe me that anyone that bitches about packers slaughtering cattle for $3.88 and wants to break up the major packers is begging for lower cattle prices as a result.



~SH~
 

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