• If you are having problems logging in please use the Contact Us in the lower right hand corner of the forum page for assistance.

Don't confuse me with the facts ..........

A

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~
 

PORKER

Well-known member
SH, Is the lean trimmings supply going up as the US is selling off 500,000 cull dairy cows trying to bring the milk supply back to balance?
 
A

Anonymous

Guest
Porker: "Is the lean trimmings supply going up as the US is selling off 500,000 cull dairy cows trying to bring the milk supply back to balance?"

I can't answer that but it's an excellent point/question.

If the domestic beef market is flooded with cheap US dairy cull cows for grinding, it will certainly reduce the need for imported lean trimmings if the prices are competitive. With a glut of dairy cull cows on the market, the value of that beef might be competitive to the foreign trim markets.

US beef cattle producers often forget the role that dairy cows fill in the US hamburger market.

Good point!


~SH~
 
A

Anonymous

Guest
Sandhusker: "US beef producers don't forget what dairy cattle do - they depress cull prices, same as imported trim."


Wrong!

Imported lean trim that is blended with domestic 50/50 trim and adds value to that 50/50 trim does not depress cull prices. It creates a price positive situation for US producers because US beef products are being sold at a premium to the cost of imported lean trimmings.


~SH~
 

Sandhusker

Well-known member
The US cattleman doesn't sell burger, SH, they sell cattle and packers don't tithe. 15-25% of the cattle that producers sell are culls. Imported trim REPLACES culls, which lowers the demand for them. Lower demand means lower prices. Lower prices mean lower profits FOR PRODUCERS.
 
A

Anonymous

Guest
Sandhusker: "The US cattleman doesn't sell burger, SH, they sell cattle and packers don't tithe."

Cattle values are based primarily on the value of beef. Increase the beef value, cattle prices rise. Decrease the beef value and cattle prices fall ALL OTHER FACTORS BEING EQUAL.


Sandhusker: "15-25% of the cattle that producers sell are culls."

Understood!


Sandhusker: "Imported trim REPLACES culls, which lowers the demand for them. Lower demand means lower prices. Lower prices mean lower profits FOR PRODUCERS."

There is not enough lean trim produced domestically (domestic culls) to supply the need for blending with all of the available 50/50 trim.

That is a fact that you will not refute!

What you want to believe will not trump what the facts will support.


~SH~
 

Sandhusker

Well-known member
SH, "Cattle values are based primarily on the value of beef. Increase the beef value, cattle prices rise. "

Beef prices are right at all time highs. Are cattle prices?

Are you going to tell me that if half of the imported lean supply was suddenly cut off that cull prices wouldn't rise?
 
A

Anonymous

Guest
Sandhuskers: "Beef prices are right at all time highs. Are cattle prices?"

That statement says nothing. Which retail beef prices? Ground beef prices? Chucks and rounds? Middle meats? You have to value the entire carcass, not use the value of one product to set a value for the entire carcass.


Sandhusker: "Are you going to tell me that if half of the imported lean supply was suddenly cut off that cull prices wouldn't rise?"

That is correct!

Why would we want to devalue domestic trim to the value we can buy imported trim at?

You just can't get past the word "IMPORT" can you?

The next time you go to your local supermarket, price the 90/10, 80/20, and 70/30. If our current cull cow beef is worth more than we can buy imported lean trim, why would we devalue the domestic trim to blend with our 50/50 trim?

If you can buy imported lean trimmings to blend with our 50/50 trim to add value to it and sell our domestic trim at a premium to the 70/30 we made by blending imported lean to our 50/50, why wouldn't we add value to both?

I know, I know, you'd rather grind chucks and rounds to make 70/30 lean ground beef than import lean trimmings. That's why you are not in the beef fabrication and processing business.


~SH~
 

Sandhusker

Well-known member
And here we go again and again and again. SH, until you are able to differentiate between how a packer makes their money and what they sell and what a producer sells, there's no talking to you.

A producer doesn't own any trim. Trim is not our problem - making the land payments, the cattle payments and cash flowing a ranch is. When you talk about "we" or "our trim", you're not talking about producers.
 

PORKER

Well-known member
Cattle on feed report should show lowest numbers in 10 years, analysts say
Friday’s cattle on feed report should show the total numbers on feed as of July 1 to be the lowest in 10 years, a news service poll of analysts showed. Their average estimate for that number was 9.79 million head, the lowest since the 9.6 million as of July 1, 1999. The number of cattle marketed out of feedlots could have reached a record low for the month since the compiling of this data began in 1996, they said.
Analysts said they are especially interested in the number of cattle placed on feed in June because that data will dictate potential cattle price levels this fall and winter. Bob Price, president of North America Risk Management Services said June placements “were likely the lowest…going back to 1996. This was on the heels of a very light May placement number – and reports indicate that July (placements) may also be down sharply.”
Despite plenty of empty pens, feeders continue to lose large sums of money feeding cattle, and that should keep placements down for some time. “June’s losses were about $65 per head,” said Ron Plain, extension economist at the University of Missouri.

But Beef is still high in the grocers shelf !
 

RobertMac

Well-known member
Sandhusker said:
And here we go again and again and again. SH, until you are able to differentiate between how a packer makes their money and what they sell and what a producer sells, there's no talking to you.

A producer doesn't own any trim. Trim is not our problem - making the land payments, the cattle payments and cash flowing a ranch is. When you talk about "we" or "our trim", you're not talking about producers.
To buy into what SH is selling, you have to believe that when beef packers improve their margins, they are going to turn around and pay producers more for live cattle...but, of course, ALL FACTORS ARE NEVER EQUAL!!

Question SH...where is the loyalty of the beef processing segments of these large corporations...with the cattle producers or with the corporation?? Wouldn't an improved profit margin be used to pay bonuses and increased dividends to stockholders? Why would packers simply turn around and decrease their profit margins by paying more for live cattle if there was adequate supply to meet demand? Could it be that the price of live cattle is based on supply/demand instead of the price of boxed beef and packer's margins? ALL OTHER FACTORS BEING EQUAL :???:

Tell me this...If USDA dropped the restrictions on the import of fresh beef from South America, would not the global packers import as much beef from S.A. as possible, flooding the N.A. beef supply until N.A. live cattle prices reached equilibrium with world market prices for live cattle...$40.00 to $60.00/cwt?????? The profitability of the N.A. beef industry would certainly improve...for somebody!!!!!!
 
A

Anonymous

Guest
Sandhusker: "A producer doesn't own any trim. Trim is not our problem - making the land payments, the cattle payments and cash flowing a ranch is. When you talk about "we" or "our trim", you're not talking about producers."

Within that statement lies the ignorance of how cattle prices are derived. As if the value of "BEEF" has no impact on "CATTLE" prices. Yet, you and your fellow packer blamers cannot explain why live cattle prices track with boxed beef prices can you??

Ignoring this obvious fact in favor of what YOU WANT TO BELIEVE.

Using this same shallow "increasing the value of beef only benefits the packer" logic, increasing the value of beef through the beef checkoff is a waste of time since it only benefits the packer. Same packer blaming mindset. Is that what you really believe?

If that's what you believe, how do you explain the fact that boxed beef prices track with live cattle prices all other factors being equal??? Hmmm??? How do you explain that price relation Sandhusker?? You can't, because you don't deal in facts and logic. You deal in the need to blame and favor populist opinions over what can be supported factually. 0&9 in court! GO R-CALF!

When you've diverted that question, try this one on for size. If you don't believe beef values affect cattle prices, then why would you promote COOL??? Using the same logic, you'd have to believe that any value in US beef would benefit the packers, not the producers.

Rattle that R-CALF contradiction around in your head for awhile.


~SH~
 
A

Anonymous

Guest
RM: "To buy into what SH is selling, you have to believe that when beef packers improve their margins, they are going to turn around and pay producers more for live cattle...but, of course, ALL FACTORS ARE NEVER EQUAL!!"

We've been over this and over this yet the obvious is simply too obvious for you.

1. Do you not believe Excel, Tyson, USPB, JBS, etc. etc. are in competition with eachother for the same cattle?

2. If you do not believe they are in competition with eachother for the same cattle, why do live cattle prices fluctuate? Do you deny that cattle prices fluctuate? If you do not deny that cattle prices fluctuate, then how do you explain those price fluctuations if not being driven primarily by beef demand? Corn has no bearing on what PACKERS pay for fat cattle, so what's affecting fat cattle prices if not beef prices???

Answer the question Robert, what factors affect the fluctuation in fat cattle prices??? What do you WANT TO BELIEVE???

The fact is, these packers are competing with eachother for the same cattle. The fact is, what they can pay for cattle is based primarily on what they receive for the beef. Bottom line, the more beef value increases, the more cattle prices increase relative to the supply. This can be proven easily with any beef demand chart relative to live cattle prices.


RM: "Question SH...where is the loyalty of the beef processing segments of these large corporations...with the cattle producers or with the corporation??"

It doesn't matter how much money they WANT TO MAKE, what matters is how much money they are ALLOWED TO MAKE relative to their competition.

They can WANT to make all the money they possibly can but if Tyson's supply is low and Excel is paying more for fat cattle, Tyson is going to have to pony up the cash or the feedlots will sell to Excel. It's that simple and it too is easily proven. It's called competition and it exists and if it didn't exist, there would be no obvious relation between live cattle prices and boxed beef prices. A relationship that is as old as the cattle industry.

You have it in your head that their is no competition in the packing industry because that's what you want to believe. Yet, you cannot explain the obvious fact that live cattle prices fluctuate with boxed beef prices. That would not occur if there was no competition. Packers would pay what they WANT TO PAY, not what they HAVE TO PAY against their competition to get the cattle bought.

You can't deny the obvious fact that cattle prices fluctuate. So if you don't think there is any competition, tell me Robert, what do you believe is affecting the fluctuation in live cattle prices or will you go so far as to deny the fluctuations in live cattle prices in favor of what you WANT TO BELIEVE???


RM: "Wouldn't an improved profit margin be used to pay bonuses and increased dividends to stockholders? Why would packers simply turn around and decrease their profit margins by paying more for live cattle if there was adequate supply to meet demand?"

Packer profit margins are determined by how efficiently they can run a plant relative to their competition. Packer margins are also determined by the price they HAVE TO PAY for cattle relative to the price they receive for the beef relative to what their competition can pay for cattle. Again, they can WANT TO make all kinds of profit but if their competition is caught short of cattle and paying accordingly, they are going to have to pay what their competition is willing to pay or they don't get any cattle. Trying making a profit without cattle going through the plant. It's basic business Robert.

Packer profit margins are effected by the following:

1. Available cattle relative to slaughtering capacity.

2. The prices they pay for cattle relative to the price they receive for the beef from those cattle. THEY SELL IT OR THEY SMELL IT. There is a lag time between what they pay for cattle and what they receive for beef. Beef prices can go either way during that lag time affecting packer profits.

3. The quality of the cattle they buy relative to beef demands.

4. To a lesser degree than beef prices, the prices they pay for cattle relative to what they receive for beef by-products. The value of ofal and hides. They sell everything from the tongue to the rectums and price your cattle accordingly while your local locker plant has to pay someone to haul their ofal away. Think those smaller plants can pay the same for cattle as larger more efficient plants? You're only kidding yourself if you do.

5. Plant efficiency! Chain speeds, labor costs, overhead costs, etc.


RM: "Could it be that the price of live cattle is based on supply/demand instead of the price of boxed beef and packer's margins? ALL OTHER FACTORS BEING EQUAL "

DEMAND FOR WHAT ROBERT?????

What is the demand for?? Explain it! You throw out common catch phrases like "supply and demand". Let's see if you know what it means.

DEMAND FOR WHAT ROBERT????

Plant demand for cattle is basically static considering that fluctuations in supply are adjusted for with chain speeds and additional plant shifts.


RM: "Tell me this...If USDA dropped the restrictions on the import of fresh beef from South America, would not the global packers import as much beef from S.A. as possible, flooding the N.A. beef supply until N.A. live cattle prices reached equilibrium with world market prices for live cattle...$40.00 to $60.00/cwt?????? The profitability of the N.A. beef industry would certainly improve...for somebody!!!!!!"

Apples to oranges Robert!

We are not talking about "CHEAP lean trim" anymore of which there is a shortage in the US, you are now talking about a different topic which is "all SA beef products". Nice job of switching horses.

Of course SA imports produced below our costs would compete with domestic beef if there was not a shortage of those products domestically relative to demand. That's not what we are talking about here. Apples to oranges.

We are talking about adding value to domestic chucks and rounds while we import lean trim to blend with our surplus 50/50 trim to add value to it creating a price positive situation for US producers. The reason we have a shortage of domestic lean trim is because we are making more money by not grinding the chucks and rounds as Sandhusker would have us doing which leaves us in a lean trim deficit situation. That's a good thing.

You don't want to get it but you won't take the time to learn about beef fabrication and processing on a large scale either.


~SH~
 

Latest posts

Top