Downwards Price Pressures Of Cash Basis Contracts

[Econ101]

Pickett proved that cash prices were lower than formula prices.

There's what I was looking for. Cash prices were lower than formula prices. If next weeks formula prices were based the lower cash prices, wouldn't that mean that they'd be lower than this weeks? Manipulation or not, formula prices based on past cash market prices are bad news. As more and more producers go to the cash market basis contracts, there is even less and less competition at the cash market level, further depressing the formula.

SH, as producers we need to be concerned about the market, not restrictions on our freedoms. I understand the need for risk management tools, and how attractive contracts are, but there are better ways to manage risk.

Rod

Did you not read from the Appellate Court decision the footnote #7 on page 13?

One question: If you are correct with your assumption then why do prices go up over time as opposed to down?

These judges don't know the difference between "or" and "and" and the reason that the law was written as it was. Their Robinson Patman argument was their "tell". How they have the credibility still to judge any case in light of this major blunder is beyond me. Oh, thats right, they have friends in high places. Doesn't have anything to do with merit.

 

[DiamondSCattleCo]

1) Sellers that sell on the formula price know that the base price is a weekly weighted average of the cash market the week prior to delivery BEFORE THEY AGREE TO SELL THAT WAY.

2) There can be no market manipulation with WILLING PARTICIPANTS and OTHER MARKETING OPTIONS.

3) Don't you think it is ironic that the feeders who actually sell to the packers are not the ones complaining but rather packer blaming conspiracy theorist producers that don't even sell to the packer but rather to the feeder?

SH LISTEN!

:lol: Sorry, couldn't resist.

1) I'm not denying that the the sellers know they are selling based on cash market basis, but they don't know they are undermining their very own market. Like I said before, its up to people who do understand how these cash basis contracts hurt to educate the guys who are using them. If they still don't listen, then its time to outlaw the contracts to prevent idiots from doing irreverable damage to the system.

Our entire justice system and our freedoms are based on us having the freedom to do as we choose as long as long as we don't trample on someone else's freedom. By signing these sorts of contracts, they are damaging the market and trampling on a market that feeds 10's of thousands of people.

2) I never said the manipulation was intentional. These contracts are bad for the market, but perhaps the packers sending them out don't even realize what they're doing. And second, if there is intentional market manipulation going on, and if the participants don't know about it, they may not exercise their other options. So they're willing, but UNWITTING participants.

3) Oddly enough, the grain guys selling on cash basis forward contracts didn't complain either, until the bank rolled in a took their farms away because the downwards pricing pressure of the contracts was actually strong enough to hold grain prices level for years, while their expenses shot up.

Rod

 

[DiamondSCattleCo]

Did you not read from the Appellate Court decision the footnote #7 on page 13?

One question: If you are correct with your assumption then why do prices go up over time as opposed to down?

Agman, I haven't had a chance to read anything about Pickett. Until I signed onto this forum, I'd never even heard of the case up here in sticks. I've been sent links to some of the documents, and plan to read them when I get some time. I actually had to go buy bulls today. I hear that even with a good understanding of the markets, you need a couple bulls around to make things work.

Anyway, onto the prices going up. I mentioned in a thread (maybe not this one) that the contracts only provide downwards price PRESSURE. This pressure may not be enough to prevent rising pricings due to increased demand, reduced supply, inflation, falling feed costs, opening of new markets, etc etc etc, but they are enough to slow increases down, possibly to the point where the commodity price is no longer keeping pace with inflation. This is what happened in the grain market, and if even more producers insist on signing cash market basis contracts, we're going to see it in the cattle markets too.

Rod

 

[agman]

Agman, " How much does it cost per head to shut a plant down for one day as opposed to feeding cattle another week? Do you know?"

You could answer that question with a definite dollar figure for each party and you still have not learned or solved a dang thing.

Your response shows just how little you know about the market for both producers and packers.

Really? I think your response shows how little you can see the big picture, and your packer-backer bias.

How much it costs either the packer to feed an extra week or Tyson to shut down a plant for one day means very little if you don't know their checkbooks - it's all reletive. Can the feeder feed another week without getting pinched? How much will it effect his bottom line? What about Tyson? SH donating that $100 to R-CALF may of done him more financial injury than somebody else losing a $10,000 bet.

You are right for once. The cost is relative. Do you know where the highest relative cost is? Quit dancing, how much does it cost to feed an animal one more week, especially with current genetics? Holding cattle to force prices higher is precisely what is going on now. How much does it cost the producer currently to hold fed cattle one more week? The answer: The producer makes money by holding cattle as the gain cost is significantly below the selling price. Why are packers reducing hours - from 40 to 32 hours per week. What does that cost per head?

Relative cost does matter and it costs the packer much more than the producer. It is too bad you know so little regarding operational costs that your only comment is to say "packer bias".

 

[Sandhusker]

Agman, "Relative cost does matter and it costs the packer much more than the producer. It is too bad you know so little regarding operational costs that your only comment is to say "packer bias"."

Could Tyson take a $500,000 hit to their books? Yes. How many feeders could do the same? Not many.

Reletive costs are different for each feeder and each packer.

You are also forgetting that feeding cattle longer put more pounds on the market, which has a negetive effect on prices.

And please, don't try to tell us you don't have a packer bias.

 

[Anonymous]

Conman: "I guess you had no valid point so it was just garbage."

I'll take that as an admission to your inability to correct anything that has been stated. More cheap talk from the biggest liar on this forum, EVER.


Sandbag,

How can Tyson manipulate the markets when they are not even 1/3 of the market? To believe that is to believe that Excel, Swift, and USPB are not competing for the same cattle. Do you honestly believe such nonsense?

You have nothing to back your position here other than the desire to blame packers for problems on the producer side of the equation.

Conman: "As they go further down the line (towards the cattleman) by getting rid of the feeders or having them under their control, they will be able to differentiate and discriminate (hence SH's little "who asked you to save the feeders" quote). A cattleman can always get the results from the local auctions. If there are no feeders to buy at those auctions, and only a few packers, the auction results will be less indicative of the real value. Packers will be able to hide what they really paid to producers for their cattle and the packers will be able to do what is done in commodity markets: They will be able to differentiate and discriminate. That is how they will get more of the producer surplus and hence make more money for themselves. The markets will go to the theoretical place where monopsonist go. Where their marginal revenue equals their marginal costs."

WHAT A BUNCH OF CONSPIRACY BULLSH*T!

Feeders greatly outnumber packers. What planet are you from? Packer owned cattle has remained relatively stable over the years constituting about 8% of the total. That's a hell of a long ways from getting rid of the feeders. You are such a conspiracy idiot!

Are you Robert Taylor?

Because you are unquestionably "NUTS".

Conman: "The appellate court made their judgement "independent" of that conclusion and changed the "or"s into "and"s, saying that the PSA was meant to insure that there was competition only on the oligopoly side of the packers, not the oligopsony side. Probably too many hundred dollar words for them to swallow at one meal. And yet, you argued both of these arguments of Daubert issues and that the PSA was meant for oligoposonies."

BRING THE PROOF OF MARKET MANIPULATION OR SHUT UP!!!

Your psychobabble "theories" and "statements" are nothing but empty BS!

Conman: "SH can't see. He doesn't want to. He will remain blind. It is kind of interesting to see who will follow the blind."

More cheap talk from the empty unsupported position of Conman.

ZZZZZZZZZZZZZZzzzzzzzzzzzzzzzzzzzz!

DSCC: "1) I'm not denying that the the sellers know they are selling based on cash market basis, but they don't know they are undermining their very own market. Like I said before, its up to people who do understand how these cash basis contracts hurt to educate the guys who are using them. If they still don't listen, then its time to outlaw the contracts to prevent idiots from doing irreverable damage to the system."

No it's up to each individual to decide what is the best marketing alternative for him not some conspiracy theorist who thinks he knows more about the cattle market than he does.

DSCC: "Our entire justice system and our freedoms are based on us having the freedom to do as we choose as long as long as we don't trample on someone else's freedom. By signing these sorts of contracts, they are damaging the market and trampling on a market that feeds 10's of thousands of people."

Your dictating to a feeder how they can sell their cattle is trampling on someone else's freedom. That is exactly what you are doing and there is no justification because there is more than 1 packer to sell to under more than one marketing scheme. Packers will buy cattle in the cash market, on pricing grids with both negotiated and non negotiated base prices, and under forward contracts.

The only advantage to forward contracting your cattle to a major packer rather than simply buying a futures contract is because the packer stands the basis risk, not the feeder.

DSCC: "And second, if there is intentional market manipulation going on, and if the participants don't know about it, they may not exercise their other options. So they're willing, but UNWITTING participants."

Dropping your price in the cash market to reflect your purchases in the formula market is not market manipulation.

To force everyone to sell in the same market is "socialism".

Sandbag (advising one of the brightest ag economists in the industry): "You are also forgetting that feeding cattle longer put more pounds on the market, which has a negetive effect on prices."

ROTFLMAO!

Gee Sandbag, thanks for the tip! How revolutionary!

Please don't try to tell us you don't have a blamer's bias.



~SH~

 

[Sandhusker]

SH, "How can Tyson manipulate the markets when they are not even 1/3 of the market? To believe that is to believe that Excel, Swift, and USPB are not competing for the same cattle. Do you honestly believe such nonsense?"

You're not much of a business man are you? Put yourself in Swift's or any of the other's shoes. Tyson buys nearly a third of all the cattle. Don't you think that maybe, just maybe, it would be a good idea to watch them closely and monitor their bids so you know what they are paying/ will not pay? You see, that way, you won't be paying any more for cattle than you have to. If they stop at a certain number, you can too.

 

[Jason]

SH, "How can Tyson manipulate the markets when they are not even 1/3 of the market? To believe that is to believe that Excel, Swift, and USPB are not competing for the same cattle. Do you honestly believe such nonsense?"

You're not much of a business man are you? Put yourself in Swift's or any of the other's shoes. Tyson buys nearly a third of all the cattle. Don't you think that maybe, just maybe, it would be a good idea to watch them closely and monitor their bids so you know what they are paying/ will not pay? You see, that way, you won't be paying any more for cattle than you have to. If they stop at a certain number, you can too.

What if that number is 2 cents past your break even? Do you still pay it?

What if their number is 5 cents below your break even? Do you sit back and just buy what cattle are left?

Tyson doesn't control what other packers can or will pay for cattle. They compete for cattle that they can make money on. Do you ever see them placing top bids for Mexican roping steers when some source verifyed Angus based cattle are up for bid?

 

[Econ101]

Conman: "I guess you had no valid point so it was just garbage."

1. I'll take that as an admission to your inability to correct anything that has been stated. More cheap talk from the biggest liar on this forum, EVER.


Sandbag,

How can Tyson manipulate the markets when they are not even 1/3 of the market? To believe that is to believe that Excel, Swift, and USPB are not competing for the same cattle. Do you honestly believe such nonsense?

You have nothing to back your position here other than the desire to blame packers for problems on the producer side of the equation.

Conman: "As they go further down the line (towards the cattleman) by getting rid of the feeders or having them under their control, they will be able to differentiate and discriminate (hence SH's little "who asked you to save the feeders" quote). A cattleman can always get the results from the local auctions. If there are no feeders to buy at those auctions, and only a few packers, the auction results will be less indicative of the real value. Packers will be able to hide what they really paid to producers for their cattle and the packers will be able to do what is done in commodity markets: They will be able to differentiate and discriminate. That is how they will get more of the producer surplus and hence make more money for themselves. The markets will go to the theoretical place where monopsonist go. Where their marginal revenue equals their marginal costs."

2. WHAT A BUNCH OF CONSPIRACY BULLSH*T!

Feeders greatly outnumber packers. What planet are you from? Packer owned cattle has remained relatively stable over the years constituting about 8% of the total. That's a hell of a long ways from getting rid of the feeders. You are such a conspiracy idiot!

Are you Robert Taylor?

Because you are unquestionably "NUTS".

Conman: "The appellate court made their judgement "independent" of that conclusion and changed the "or"s into "and"s, saying that the PSA was meant to insure that there was competition only on the oligopoly side of the packers, not the oligopsony side. Probably too many hundred dollar words for them to swallow at one meal. And yet, you argued both of these arguments of Daubert issues and that the PSA was meant for oligoposonies."

3. BRING THE PROOF OF MARKET MANIPULATION OR SHUT UP!!!

Your psychobabble "theories" and "statements" are nothing but empty BS!

Conman: "SH can't see. He doesn't want to. He will remain blind. It is kind of interesting to see who will follow the blind."

More cheap talk from the empty unsupported position of Conman.

ZZZZZZZZZZZZZZzzzzzzzzzzzzzzzzzzzz!

DSCC: "1) I'm not denying that the the sellers know they are selling based on cash market basis, but they don't know they are undermining their very own market. Like I said before, its up to people who do understand how these cash basis contracts hurt to educate the guys who are using them. If they still don't listen, then its time to outlaw the contracts to prevent idiots from doing irreverable damage to the system."

4. No it's up to each individual to decide what is the best marketing alternative for him not some conspiracy theorist who thinks he knows more about the cattle market than he does.

DSCC: "Our entire justice system and our freedoms are based on us having the freedom to do as we choose as long as long as we don't trample on someone else's freedom. By signing these sorts of contracts, they are damaging the market and trampling on a market that feeds 10's of thousands of people."

5. Your dictating to a feeder how they can sell their cattle is trampling on someone else's freedom. That is exactly what you are doing and there is no justification because there is more than 1 packer to sell to under more than one marketing scheme. Packers will buy cattle in the cash market, on pricing grids with both negotiated and non negotiated base prices, and under forward contracts.

The only advantage to forward contracting your cattle to a major packer rather than simply buying a futures contract is because the packer stands the basis risk, not the feeder.

DSCC: "And second, if there is intentional market manipulation going on, and if the participants don't know about it, they may not exercise their other options. So they're willing, but UNWITTING participants."

6. Dropping your price in the cash market to reflect your purchases in the formula market is not market manipulation.

To force everyone to sell in the same market is "socialism".

Sandbag (advising one of the brightest ag economists in the industry): "You are also forgetting that feeding cattle longer put more pounds on the market, which has a negetive effect on prices."

ROTFLMAO!

Gee Sandbag, thanks for the tip! How revolutionary!

Please don't try to tell us you don't have a blamer's bias.



~SH~

1. You like "taking" things, don't you SH? If you can not win an argument, declare yourself the winner over garbage.

2. You left out "control", SH. Tyson doesn't own a whole lot of poultry farms compared to the number of farmers, but they sure do control a lot of them. It is cheaper for them to use farmer's capital than to use their own.

Am I Taylor? Why do you ask? Does it matter? Logic should win no matter who I am. Argue with points, not name calling and opinions. Can you do that?

3. It was already presented to the jury, SH, and they saw it to be a fact. No one can convince you of anything, but they can see that you don't have very many valid points or that you bring up points that do not apply to the discussion. Fish, diverticuli. Just stinky arguments from a scarecrow on the yellow brick road.

4. And it is against the PSA for packers to use these as a deceptive device to manipulate the markets. Go read the law again, SH.

5. No one is dictating to the feeders. The PSA dictates to the packers. Are you confused on that one again, SH? Maybe you should read the law again before show how little you know.

 

[Sandhusker]

SH, "How can Tyson manipulate the markets when they are not even 1/3 of the market? To believe that is to believe that Excel, Swift, and USPB are not competing for the same cattle. Do you honestly believe such nonsense?"

You're not much of a business man are you? Put yourself in Swift's or any of the other's shoes. Tyson buys nearly a third of all the cattle. Don't you think that maybe, just maybe, it would be a good idea to watch them closely and monitor their bids so you know what they are paying/ will not pay? You see, that way, you won't be paying any more for cattle than you have to. If they stop at a certain number, you can too.

What if that number is 2 cents past your break even? Do you still pay it?

What if their number is 5 cents below your break even? Do you sit back and just buy what cattle are left?

Tyson doesn't control what other packers can or will pay for cattle. They compete for cattle that they can make money on. Do you ever see them placing top bids for Mexican roping steers when some source verifyed Angus based cattle are up for bid?

I didn't say Tysonc controlled what other packers pay. I say that the influence what other packers pay. I don't see why that is so hard to understand.

 

[Jason]

Every packer influences what other packers pay for cattle. It is called C O M P E T I T I O N.

Why not answer the questions about what would you do if the price paid was higher or lower than your break even?

 

[DiamondSCattleCo]

No it's up to each individual to decide what is the best marketing alternative for him not some conspiracy theorist who thinks he knows more about the cattle market than he does.

No conspiracy theory, just market facts. Its odd how cash basis forward price contracts aren't really used in any other markets. A question SH: When packers are selling to Safeway or another retail chain, do they ever end up signing some kind market average basis contract?

Your dictating to a feeder how they can sell their cattle is trampling on someone else's freedom. That is exactly what you are doing and there is no justification because there is more than 1 packer to sell to under more than one marketing scheme. Packers will buy cattle in the cash market, on pricing grids with both negotiated and non negotiated base prices, and under forward contracts.

If someone shoots someone else, we lock them up, even though we've trampled on their personal freedom to shoot someone else. Same idea here. Cash basis formula depress prices for everyone. If someone is going to insist on signing them and destroying everyone's future, they need to be prevented from doing it.

Rod

 

[Econ101]

Every packer influences what other packers pay for cattle. It is called C O M P E T I T I O N.

Why not answer the questions about what would you do if the price paid was higher or lower than your break even?

Jason, you don't know a thing about the economics of the cattle business. Why are you fighting reason so hard? Do you just not understand or is there something else?

 

[Sandhusker]

Every packer influences what other packers pay for cattle. It is called C O M P E T I T I O N.

Why not answer the questions about what would you do if the price paid was higher or lower than your break even?

It's not much of a question, Jason. If you're going off your breakeven costs, it doesn't matter what anybody else is paying. If they're in your range, you buy - if not, you don't.

 

[Jason]

If your in your range you buy.... so what does a packer do if their competition is paying more then?

Maybe you forgot already Agman has posted a query about the costs of slowing or stopping the chain?

How can a packer be accused of manipulation if the competition forces them to lose money for a period?

Conman my credentials are well known. I have been posting on Ranchers.net since before it was popular. I was very likely one of the first 5 to ever post.

The fact that I still make my living from cattle shows I know real world cattle economics.

Care to share any of your credentials conman? or is it Taylor? Or do you have any credentials?

 

[Econ101]

If your in your range you buy.... so what does a packer do if their competition is paying more then?

Maybe you forgot already Agman has posted a query about the costs of slowing or stopping the chain?

How can a packer be accused of manipulation if the competition forces them to lose money for a period?

Conman my credentials are well known. I have been posting on Ranchers.net since before it was popular. I was very likely one of the first 5 to ever post.

The fact that I still make my living from cattle shows I know real world cattle economics.

Care to share any of your credentials conman? or is it Taylor? Or do you have any credentials?

Gason, BMR has credentials in the Canadian cattle business and it hasn't helped the Canadian cattle business any.

If you make your living by sucking up to Cargill and other packers against the interests of producers, you should have started posting on packers.net instead of ranchers.net.

Credentials? I would say you have nothing over mine. People looking at these discussions should be able to see the logic (or lack thereof) instead of knowing someone's "credentials". Credentials are for royalty, something I don't believe in.

 

[Sandhusker]

If your in your range you buy.... so what does a packer do if their competition is paying more then?

Maybe you forgot already Agman has posted a query about the costs of slowing or stopping the chain?

How can a packer be accused of manipulation if the competition forces them to lose money for a period?

Conman my credentials are well known. I have been posting on Ranchers.net since before it was popular. I was very likely one of the first 5 to ever post.

The fact that I still make my living from cattle shows I know real world cattle economics.

Care to share any of your credentials conman? or is it Taylor? Or do you have any credentials?

The packer has to make the decision where the least loss is, buying cattle they don't want or slowing the chain.

What does that have to do with any of Tyson's competitors knowing where Tyson's top is, so that can be their top as well? You're tangenting.

 

[Jason]

If your in your range you buy.... so what does a packer do if their competition is paying more then?

Maybe you forgot already Agman has posted a query about the costs of slowing or stopping the chain?

How can a packer be accused of manipulation if the competition forces them to lose money for a period?

Conman my credentials are well known. I have been posting on Ranchers.net since before it was popular. I was very likely one of the first 5 to ever post.

The fact that I still make my living from cattle shows I know real world cattle economics.

Care to share any of your credentials conman? or is it Taylor? Or do you have any credentials?

The packer has to make the decision where the least loss is, buying cattle they don't want or slowing the chain.

What does that have to do with any of Tyson's competitors knowing where Tyson's top is, so that can be their top as well? You're tangenting.

It is easy to assume you know a competitors top price by looking at what they paid.

As you have often said packers want to buy cattle as cheaply as possible.

If Tyson pays a top of $1 does that automatically mean they are at their limit? Obviously not, they might be over their limit and losing $3 or $23 or they might be making $3 per head, or maybe $23.

Packers will compete the hardest for the most profitable cattle in their area, but there are not enough high quality cattle to fill out their needs. The competition would be less intense on a pen of over feds or underfeds.

To understand where prices are going you have to track the data. Agman has shared some trends and yearly percentages that hold true year after year and have become very accurate in predicting how much prices will move.

Would you rather make a descision off that kind of data or the whiny packers manipulate everything we are doomed scenario?

The real problem is that not all cattle are equal and every producer assumes his cattle are better than they really are. Then they get jealous when they hear their neighbor got a penny more than they did. Without all the facts on each set of cattle the price is merely 1 part of the equation.

I would rather see producers learn how packers really operate and work with them than just gripe and avoid changing and blame others when they go out of business.

 

[Jason]

Credentials? I would say you have nothing over mine. People looking at these discussions should be able to see the logic (or lack thereof) instead of knowing someone's "credentials". Credentials are for royalty, something I don't believe in.

Credentials are accreditations that give others confidence that what you say is backed up with experience or education etc.

A conman tries to gain confidence of others by implying he has credentials, or lying about his education.

The majority of readers of Ranchers.net can seperate real cattle people from the whiners and blamers.

Just because you don't believe in royalty doesn't mean they don't exist.

That is what you wrote, but you more likely meant you don't believe in credentials. That would be reasonable because you have none as regards the beef industry.

 

[Econ101]

Credentials? I would say you have nothing over mine. People looking at these discussions should be able to see the logic (or lack thereof) instead of knowing someone's "credentials". Credentials are for royalty, something I don't believe in.

Credentials are accreditations that give others confidence that what you say is backed up with experience or education etc.

A conman tries to gain confidence of others by implying he has credentials, or lying about his education.

The majority of readers of Ranchers.net can seperate real cattle people from the whiners and blamers.

Just because you don't believe in royalty doesn't mean they don't exist.

That is what you wrote, but you more likely meant you don't believe in credentials. That would be reasonable because you have none as regards the beef industry.

Then why are you so concerned? You have proven that you do not know even the economic terms used to describe the cattle industry and yet you profess you do not know the "hundred dollar" terms used to describe the structure of the industry.

Just because you are a cattle rancher does not mean you are smart about the industry. You are proof of that fact.

Yes, there is royalty, but our country was founded on the belief that every man was created equal. Because there is royalty in the world, does not necessarily mean you have to believe all the stuff that goes with it. You don't have to be a catholic to believe in God. Etc.......

I believe most people that want to understand something can learn about it. You haven't even taken the little steps to get yourself there.

I hope you get your operation reversed, Gason.