DSCC: "With all due respect, I'm not attempting to tell Coke how to operate, just pointing out a flaw in the market mechanism that you thus far have not been able to refute."
You've presented your opinion of Coke's failure to meet consumer demands. I pointed out the fact that if Coke doesn't meet consumer demands, their product will suffer accordingly. Nobody has a gun to the consumer's heads forcing them to buy Coke that they don't believe tastes like Coke.
DSCC: "Doesn't matter if its name recognition or genuine taste, but when a company has this much power they can ignore consumer demand secure in the knowledge that they are still the second choice, and as such, their profits will not be affected."
That is absolutely untrue. If Coke doesn't taste like Coke to the consumer, they have many other alternative beverages to choose from. If Coke doesn't meet their consumer's demands, their sales will suffer regardless of their market share.
DSCC: "I think its a shame that producers have been expected to get more and more efficient and productive, while the fruits of their labor are sucked up into a non-competitive industry."
The fruits of their labor are not being sucked into a non competitive industry. That is simply untrue. The profits at the packing and retail end of this industry are not what you believe them to be and this industry is competitive.
This industry is competitive and it always has been with the exception of the closing of the Canadian border in Canada. When the Canadian border was closed, Canada found themselves in a situation of having more cattle than slaughter capacity but that is not the situation now.
If you believe it is, where is your proof?
DSCC: "Maybe in the US. I'm Canadian. Our calf prices are finally starting to come around, thanks to the open border, but our fats and culls are still being stolen. You seem to forget that a multinational corporation operates in more than the just the US. They can take reduced profits in one country when their margins in another are massive."
Why are your fats being stolen? If you don't like the price in Canada, who is stopping you from selling fats in the U.S.????
You don't know what the packer profit margins are in Canada. There was actually a quarter, while the border was closed, that Tyson showed a loss in their Lakeside plant. I suppose you are going to tell me that they are lying to their shareholders to hide their profits huh? LOL!
The Canadian government conducted a study on packer profits while the border was closed. Most of this "so called profit taking" was gobbled up by the costs of SRM removal. You don't know what you are talking about. You are speculating. You have no proof of what packer profits are.
DSCC: "Not conspiracy theory. Those numbers are accepted by many economists, and are used by government agencies in competition analyses. Of course, I painted a pretty broad picture there. There have been some extraordinarily well run companies that were able to manipulate market pricing while their market shares were considerably lower. Of course, they did it gracefully, with superior products at lower prices, versus the hamhanded approach that multi-nationals use."
Look at the obvious Diamond S, packer concentration in the United States has never been higher and cattle prices in the United States has never been higher. How do you explain that in light of your beliefs? You can't!
Tyson has about 1/3, and Swift & Co. and Excel have a little less than 1/4 each and we have never had higher cattle prices.
THE OBVIOUS IS TOO OBVIOUS FOR YOU ISN'T IT?????
DSCC: "Certainly. 4 years ago, I was able to get 80 cents on old cull cows. My 8 weight steers were selling for $1.375. Todays market: 27 cents on the culls, and the top pen of 8 weights sold for $1.1895. Not quite record prices."
What does that have to do with packer concentration?
4years ago you had access to the U.S. market with your cull cows. Today you don't. That doesn't have anything to do with packer concentration it has to do with less demand for your cull cows.
DSCC: "The price is no longer set by consumer demand. Its much the same as my oil/gas company example. Packers 1 - 5 are going to charge X dollars per pound, knowing full well that their neighbor is charging the same amount, and knowing full well that Small Packer 1 - 5 cannot undercut them either, because of economies of scale."
You are absolutely wrong about that. Supply and demand has everything to do with live cattle prices. Live cattle prices in the U.S. and Canada under normal trade situation, track with boxed beef prices and the value of beef by products.
The reason there is very little difference between the cattle prices offered by the major packers is due to their similar costs and similar boxed beef markets.
I have sold fat cattle to Excel and Swift and have also taken bids from ibp. What they are willing to pay is based on their needs at the time. If they have most of their needs filled, the price they are willing to pay falls. If they do not have most of their needs filled, they are more aggressive. SUPPLY AND DEMAND!
DSCC: "SH, you make friends with an accoutant who works for a large corporation. Your head would spin at the number of ways a good accountant can hide profit from auditors and the taxman, all the while turning those numbers around for the shareholders. Hell, my cattle company is incorporated. My actual reported profits to Canada Revenue are much lower than my actual cash profits, and best of all, its completely legal."
There is no incentive to hide your profits in a publicly traded company. Who is going to invest in a company that doesn't show a profit if they made a profit? Use your head here Rod. Tyson is not privately owned so they have more incentive to show a profit than hide one.
DSCC: "I'm Canadian. The cheap crap sells for a buck 99. The good lean ground beef is $3.50/lb. You know where that lean ground beef comes from? Gummy culls that are stolen for 10 cents/lb."
I'm U.S. Most U.S. cull cow beef sells for around $1.00 per pound.
DSCC: "Ok, we'll use your 410, even though I know its closer to 450 or 460 on the buck 99 junk. I do apologize for my 570. Brain fart.
Thats still $815.90. Co-ops 20% profit margin means that they paid 679.92 for that beef. Minus my 260, the buyers 6.92 and the exorbitant trucking of $15. So we're still at $397.99, and we still haven't counted the pooch food and other value added markets. I remember reading a Cargill newsletter once that said they made use of over 80% of an animal. They've got a profit of $397.99 on the first 40%.
And we still haven't counted the 2 yr olds who likely would have graded and went for roasts (poor roasts - $5.00 lb up here) or poor steaks ($3.99).
Sorry SH. You're a long ways off from the $3.88/animal."
Your brain is still farting. First off, the $3.88 per head profit was for the packing industry, not the retail industry.
The packer buys the fat cattle at x dollars. It costs them x dollars to process. If I remember right that cost is about $130 per head. They sell the boxed beef and beef by products of ofal and hides. What's left is about a $3.88 per head margin for the 5 major packers through the 90's.
When ibp's records were subpoenoed into court, they made $26 per head during this era of "SUPPOSED" market manipulation. Nowhere close to what you believe they made.
Then they sell the boxed beef, they have transportation costs to the retail outlets, they have wage earners that handle the beef, they have retail counter space, packaging, trimming, and retail stores have featured prices (2 for one sales) to move product because they sell it or they smell it. What doesn't sell by expiration date is discarded. Did you factor any of that in? NO! BECAUSE YOU ARE SPECULATING! You don't know and are using elementary math to try to figure it out.
I already told you that the bone and fat is only worth about $.08 per pound and you still have shipping and handling costs associated with it.
Go to your local locker plant and find out what it costs to process an animal. They are probably paying someone to haul their ofal away while the larger packer is paying you for it's value.
Your numbers are way, way off of reality. You didn't even seperate processing and fabrication from retail. Some packers have seperate fabrication plants that break down the carcass.
Did you factor in the trim? There is a considerable amount of trim that comes off each carcass during fabrication leaving less saleable beef.
You absolutely don't know what you are talking about like so many producers that want to blame packers for profitting at their expense.
Jason knows what it costs because he's actually done it. You are speculating.
You missed seperating the bone and fat from the meat.
You missed the price because you didn't factor "featured prices" to move product.
You missed the trim.
You missed the transportation costs and handling.
You didn't seperate processing and fabrication costs from retail costs.
You didn't consider discarded prodcuct that was not moved by expiration date.
You don't have a clue!
Jason is right. Packer and retail profits run around 1% - 2%.
Mike Callicrate was the packer blamer's spokesperson in the United States. Mike told packer blamers that packers and retailers were making $400 per head profits off the backs of producers. Well guess what, Mike decided to enter into the packing industry. He only paid a top premium of $50 per head for fat cattle above the market. He charged consumers 10% - 20% more for his product than the commodity beef market. Yet, at the time he was featured in R-CULT's publication, he had yet to realize a profit.
HOW CAN HE NOT BE PROFITABLE CHARGING CONSUMERS 10% to 20% MORE FOR THE BEEF IF COMMODITY BEEF PACKERS AND RETAILERS WERE MAKING $400 PER HEAD??????
He was lying about the $400, that's how. He didn't know any better and you are using the same fuzzy math he did. Now he knows but I doubt he'll ever admit it because of all the people he lied to.
Bring me some actual numbers not what you BELIEVE they are.
~SH~