Clement Ward on Captive Supply

[Mike]

"It seems to me that increasingly our findings in the research is that there are small negative price impacts from increasing concentration and the moves to captive supplies. In my "American Journal of Agricultural Economics" article, I looked at this issue. Over a one-month period the big three packers paid $.20 per hundred lower prices than their competitors for cattle purchases. The point that I want to make if you take that $.20 per cwt , $2.20 per head approx, that is about a 25% increase in profitability for the packer. Again, what is economically significant and what is statistically significant may not always be the same."

"I argue that one of the places that you are going to find differences from captive supplies and concentration is going to be in transaction prices. Transaction prices are very difficult to get. I am convinced, based on the last piece of work that I've done, that I won't be able to get that data. Probably no one will be able to go out and collect the kinds of transaction price data that we really need. We can't get all the information that you need on captive supply concentrations given all of the quality factors that affect prices."

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Haymaker, sounds like you have a case for "Captive Supply Reform"
Forward contracting prices would be made on the auction block AND be made public.[/i]

 

[HAY MAKER]

"It seems to me that increasingly our findings in the research is that there are small negative price impacts from increasing concentration and the moves to captive supplies. In my "American Journal of Agricultural Economics" article, I looked at this issue. Over a one-month period the big three packers paid $.20 per hundred lower prices than their competitors for cattle purchases. The point that I want to make if you take that $.20 per cwt , $2.20 per head approx, that is about a 25% increase in profitability for the packer. Again, what is economically significant and what is statistically significant may not always be the same."

"I argue that one of the places that you are going to find differences from captive supplies and concentration is going to be in transaction prices. Transaction prices are very difficult to get. I am convinced, based on the last piece of work that I've done, that I won't be able to get that data. Probably no one will be able to go out and collect the kinds of transaction price data that we really need. We can't get all the information that you need on captive supply concentrations given all of the quality factors that affect prices."

-------------------------------------------------------------------------------
Haymaker, sounds like you have a case for "Captive Supply Reform"
Forward contracting prices would be made on the auction block AND be made public.[/i]

I believe that would be a good thing ,never did understand why it all had to be so secret,of course SH will say "HAY MAKER do you want every body to know your buisness".....typical sh smoke screen ...........good luck

 

[agman]

"It seems to me that increasingly our findings in the research is that there are small negative price impacts from increasing concentration and the moves to captive supplies. In my "American Journal of Agricultural Economics" article, I looked at this issue. Over a one-month period the big three packers paid $.20 per hundred lower prices than their competitors for cattle purchases. The point that I want to make if you take that $.20 per cwt , $2.20 per head approx, that is about a 25% increase in profitability for the packer. Again, what is economically significant and what is statistically significant may not always be the same."

"I argue that one of the places that you are going to find differences from captive supplies and concentration is going to be in transaction prices. Transaction prices are very difficult to get. I am convinced, based on the last piece of work that I've done, that I won't be able to get that data. Probably no one will be able to go out and collect the kinds of transaction price data that we really need. We can't get all the information that you need on captive supply concentrations given all of the quality factors that affect prices."

-------------------------------------------------------------------------------
Haymaker, sounds like you have a case for "Captive Supply Reform"
Forward contracting prices would be made on the auction block AND be
made public.[/i]

I will give Dr Ward a call. I believe I see a problem in the data which would easily explain the price discrepancy he detects. Again, you must understand that he has not examined the the "full cycle" of captive supply for its benefits. His study is similar to the Assam/Schroeder study. It only checked for negative impact .

 

[Mike]

"It seems to me that increasingly our findings in the research is that there are small negative price impacts from increasing concentration and the moves to captive supplies. In my "American Journal of Agricultural Economics" article, I looked at this issue. Over a one-month period the big three packers paid $.20 per hundred lower prices than their competitors for cattle purchases. The point that I want to make if you take that $.20 per cwt , $2.20 per head approx, that is about a 25% increase in profitability for the packer. Again, what is economically significant and what is statistically significant may not always be the same."

"I argue that one of the places that you are going to find differences from captive supplies and concentration is going to be in transaction prices. Transaction prices are very difficult to get. I am convinced, based on the last piece of work that I've done, that I won't be able to get that data. Probably no one will be able to go out and collect the kinds of transaction price data that we really need. We can't get all the information that you need on captive supply concentrations given all of the quality factors that affect prices."

-------------------------------------------------------------------------------
Haymaker, sounds like you have a case for "Captive Supply Reform"
Forward contracting prices would be made on the auction block AND be
made public.[/i]

I will give Dr Ward a call. I believe I see a problem in the data which would easily explain the price discrepancy he detects. Again, you must understand that he has not examined the the "full cycle" of captive supply for its benefits. His study is similar to the Assam/Schroeder study. It only checked for negative impact .

Let me know what he says. You are correct. No "Long term" effects have been studied for +'s or -'s and he admitted it in his "conference", from which the quotes were taken.
He was also very negative toward using "price per head" in any packer studies. He had rather use percentages and profit margins instead because the inherent business platform of packers is "high volume - low per head profits".

 

[agman]

"It seems to me that increasingly our findings in the research is that there are small negative price impacts from increasing concentration and the moves to captive supplies. In my "American Journal of Agricultural Economics" article, I looked at this issue. Over a one-month period the big three packers paid $.20 per hundred lower prices than their competitors for cattle purchases. The point that I want to make if you take that $.20 per cwt , $2.20 per head approx, that is about a 25% increase in profitability for the packer. Again, what is economically significant and what is statistically significant may not always be the same."

"I argue that one of the places that you are going to find differences from captive supplies and concentration is going to be in transaction prices. Transaction prices are very difficult to get. I am convinced, based on the last piece of work that I've done, that I won't be able to get that data. Probably no one will be able to go out and collect the kinds of transaction price data that we really need. We can't get all the information that you need on captive supply concentrations given all of the quality factors that affect prices."

-------------------------------------------------------------------------------
Haymaker, sounds like you have a case for "Captive Supply Reform"
Forward contracting prices would be made on the auction block AND be
made public.[/i]

I will give Dr Ward a call. I believe I see a problem in the data which would easily explain the price discrepancy he detects. Again, you must understand that he has not examined the the "full cycle" of captive supply for its benefits. His study is similar to the Assam/Schroeder study. It only checked for negative impact .

Let me know what he says. You are correct. No "Long term" effects have been studied for +'s or -'s and he admitted it in his "conference", from which the quotes were taken.
He was also very negative toward using "price per head" in any packer studies. He had rather use percentages and profit margins instead because the inherent business platform of packers is "high volume - low per head profits".

My question was: Did you differentiate between the required cattle types (quality) for for those using captive supply cattle as opposed to those who used fewer captive supply cattle? The answer was no.

I believe you understand that a packer like Gt Omaha who serves a high-end market and buys on the open market and limited captive supply, would have an average price above the industry average captive supply price due to the quality types of cattle they buy. Therefore, a comparison of their average cost to average captive supply cost would have a price differential which can be accounted for by the cattle type needed for the market they serve. He also confirmed he did look for or analyze positive attributes of captive supply. It was strictly a price differential analysis.

 

[Mike]

I will give Dr Ward a call. I believe I see a problem in the data which would easily explain the price discrepancy he detects. Again, you must understand that he has not examined the the "full cycle" of captive supply for its benefits. His study is similar to the Assam/Schroeder study. It only checked for negative impact .

Let me know what he says. You are correct. No "Long term" effects have been studied for +'s or -'s and he admitted it in his "conference", from which the quotes were taken.
He was also very negative toward using "price per head" in any packer studies. He had rather use percentages and profit margins instead because the inherent business platform of packers is "high volume - low per head profits".

My question was: Did you differentiate between the required cattle types (quality) for for those using captive supply cattle as opposed to those who used fewer captive supply cattle? The answer was no.

I believe you understand that a packer like Gt Omaha who serves a high-end market and buys on the open market and limited captive supply, would have an average price above the industry average captive supply price due to the quality types of cattle they buy. Therefore, a comparison of their average cost to average captive supply cost would have a price differential which can be accounted for by the cattle type needed for the market they serve. He also confirmed he did look for or analyze positive attributes of captive supply. It was strictly a price differential analysis.

Another reason for Captive supply price reporting. At least get it out in the open so's we can understand better. The big 3 being a public companies already are required to keep the books open. Why not categorize the figures so that they may be used in analysis. Why all the secrets?

 

[agman]

Let me know what he says. You are correct. No "Long term" effects have been studied for +'s or -'s and he admitted it in his "conference", from which the quotes were taken.
He was also very negative toward using "price per head" in any packer studies. He had rather use percentages and profit margins instead because the inherent business platform of packers is "high volume - low per head profits".

My question was: Did you differentiate between the required cattle types (quality) for for those using captive supply cattle as opposed to those who used fewer captive supply cattle? The answer was no.

I believe you understand that a packer like Gt Omaha who serves a high-end market and buys on the open market and limited captive supply, would have an average price above the industry average captive supply price due to the quality types of cattle they buy. Therefore, a comparison of their average cost to average captive supply cost would have a price differential which can be accounted for by the cattle type needed for the market they serve. He also confirmed he did look for or analyze positive attributes of captive supply. It was strictly a price differential analysis.

Another reason for Captive supply price reporting. At least get it out in the open so's we can understand better. The big 3 being a public companies already are required to keep the books open. Why not categorize the figures so that they may be used in analysis. Why all the secrets?

The grids are available. You will not know the exact cost until cattle on the grid are killed.