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Anonymous
Guest
RM: "Scott, I think we all understand that when 50/50 trim is turned into "beef" by mixing it with lean trim, the packers margin is improved."
But what you don't understand is that when packer margins are improved and they are in competition with other packers for the same cattle, they either pay up according to the competition or the competition buys the cattle. If that was not the situation, then the cattle markets would not move in harmony with the boxed beef prices ALL OTHER FACTORS BEING EQUAL.
RM: "When the same packer docks the cattle for yield grade, that also improves their margin...same for adding water and increasing its value to that of meat."
If one packer docks you more for yield grade than another packer, are you going to continue to sell to the same packer ALL OTHER FACTORS BEING EQUAL???
RM: "Why will packers pay more for cattle simply because they are improving their margins?"
Because they have to buy those cattle against their competition. Do you think they can remain profitable without procuring a steady supply of cattle?
RM: "On the other end, the pounds of 50/50 trim that becomes "beef" adds to the supply of beef(as does the imported lean trim), which reduces the demand for live cattle having a negative effect on prices paid to USA producers."
WRONG! The imported supply of lean trimmings does not have a negative affect on prices paid to US producers because it is filling a particular void that is missing domestically. To supply that market domestically would require devaluing a domestic product which would result in lower cattle prices.
Pretend you are a beef processor yourself. You have all the meat from a single carcass laying in front of you. You have the middle meats, you have the chucks, you have the rounds, you have the lean ground beef from that carcass and you have the 50/50 trim. Each of those products is valued differently with the least value given to 50/50 trim ($.08 per pound). You are going to try to obtain as much value as you can for each of those products.
Are you better off to sell the 50/50 trim at $.08 per pound, or buy imported lean trimmings for $.99 per pound to blend with it and sell 70/30 ground beef for $2.00 per pound????
The alternative is to grind the chucks and round and devalue them.
You do that, and you're not a very smart businessman when you can make more money for the entire carcass by buying imported lean trimmings. The only way a domestic product can compete with imported lean trimmings to add value to 50/50 trim is to devalue it. How smart is that???
RM: "If USA chuck and round are ground to fill the need for lean trim, that is a reduction in packer margins, but also has the effects of reducing beef supply(because lean trim isn't imported) and increasing demand for live USA cattle(which improves prices for producers)."
Gosh, you are so far off base here. With all other factors being equal, packers are going to pay for cattle based on what they receive for beef. If they devalue the chucks and rounds by grinding them so they don't have to upset you by importing lean trim, they are going to reduce the price of fat cattle accordingly. If they get less for the beef, they pay less for the cattle just as you would in their shoes. That's business.
Prices are not going to be improved for US cattlemen by grinding chucks and rounds to meet the demand for domestic lean trim. That would be absolutely foolish.
RM: "If I was a packer, I would be importing all the cheap beef I could to improve my margins and lower my cost of procurement of raw product (and use my market power to eliminate my competition)!!!! Isn't that what the big packers are doing?????"
No, what they are doing is importing a product worth about $.99 per pound to add value to a product that is worth about $.08 a pound so they can continue selling chucks and rounds as products worth about $2.50 - $3.00 per pound as opposed to devaluing those products so you don't have to cuss them for importing beef.
Do yourself a big favor, go visit with a hamburger patty company that blends imported lean trimming to US 50/50 beef and ask them why they don't buy lean trim domestically. ASK THEM because you sure as heck don't want to believe me.
~SH~