~SH~ said:Just look at the desperation in you packer blamers. You post something so elementary and so easily refuted and you think you have finally found the gold strike. LOL!
What a bunch of followers!
If I have learned one thing from these debates it's the extreme lengths that packer blamers will go to have someone or something to blame for lower cattle prices. I didn't believe it was as bad as it is. I thought most producers would want to know the truth.
The normal supply and demand factors that absolutely drive cattle prices are never even discussed in the realm of packer blaming or import blaming.
I suppose this will be puzzling scientists for years.
Quote: "Marketing agreements with a base price tied to a cash market price drives prices down."
The very first statement in the post is false.
Does anyone want to bet me $100 that I can prove that there is just as many times where the formula/grid price is lower than the the following week's cash market?
You packer blamers are all patting yourselves on the back thinking you have found a new weapon and you didn't even get past the very first sentence. LOL!
Unless the formula/grid pricing is always higher than the cash price, the adverse would also have to be true.
For every time that marketing agreements with a base price tied to a cash market price drives prices lower, marketing agreements with a base price tied to a cash market price drives prices higher.
$100 ........any takers?
The bet is that I can prove where the formula/grid price was lower than the cash price the following week?
Hey, COME BACK, WHERE ARE YOU GOING?
THIS IS ONLY THE FIRST SENTENCE!
"… an IBP cattle buyer … looked at high quality cattle we had on our show list for sale. The market was about $66/cwt in the cash market, based on live weight. (He) was very complimentary of our cattle's quality. He said his hands were tied and he could not offer more for the cattle, despite their above average quality. (He) said 'In the old days I would have been able to offer $67.50 for these cattle, but now paying more would screw up 20,000 formula cattle.' It was completely clear to me that (the buyer) was telling me paying a higher price for out cattle would influence prices for cattle bought on a formula contract basis, off the cash market, before the transaction involving our cattle occurred. We lost money in this deal because IBP would not allow its buyer to engage in competitive bidding."
I'm assuming the words "out cattle" was a typo. I am assuming that "out cattle" should have read "our cattle". I'll proceed based on that assumption. Since Randy was dealing in the cash market, he shouldn't have any "out cattle" which is a term used for those cattle that do not fit a particular grid.
This paragraph is even easier to refute than the opening statement.
Randy has no idea what he's talking about. Unlike Econ., OCM, or Sandman, I'll not just say that Randy Stevenson doesn't know what he's talking about IN THIS PARTICULAR SENTENCE, I'll prove it beyond the shadow of a doubt.
Randy's words were "....a higher price for our cattle WOULD INFLUENCE prices for cattle bought on a formula contract basis, off the cash market, BEFORE the transaction involving our cattle occured...."
Based on Randy's "BEFORE the transaction involving our cattle occure", I have to assume that Randy believes that last week's formula cattle are based on this week's cash cattle sales price. This is absolutely false.
READ THIS VERY CAREFULLY GUYS.....The formula cattle price is based on the weekly weighted average THE WEEK PRIOR, NOT THE WEEK FOLLOWING.
On the other hand, if Randy is referring to next weeks formula cattle (20,000 head), which are based on this week's cash price, WHICH I AM QUITE SURE HE'S NOT, those formula cattle are not even purchased yet so how can this weeks cash purchases SCREW THEM UP? IBP has no idea how many cattle they are going to get bought next week on the formula.
I have to assume that Randy is simply mistaken on how formula cattle are priced.
Randy is a heck of a guy when it comes to supporting our troops but he doesn't know what he's talking about on formula cattle pricing.
I'll ask anyone to refute the fact that this weeks formula cattle base price is based on the average price of the cash market the week prior.
Another problem is that this statement is made as if ibp was the only buyer out there. I don't know a single large feedlot in Nebraska that hasn't sold cattle to Swift, ibp, and Excel.
What is far more likely is that ibp already had last weeks formula cattle scheduled for slaughter for this week's delivery. If ibp goes out and buys more cattle at $67 in the cash market, they are going to have to reschedule the formula/grid cattle for slaughter. Hence "screwing their slaughter schedule up on 20,000 cattle.
That makes perfect sense!
This goes right back to suggesting that a company lowering it's price after their needs are met, is market manipulation.
Did you guys honestly believe you had a winner this time?
The fact that last weeks formula cattle were based on the weekly weighted average of the cash price THE WEEK PRIOR, the fact that next weeks formula/grid cattle are not even purchased yet, the fact that there is two other major buyers for Randy to sell to (particularly Swift in Greely, CO), and the fact that next weeks cattle could be bought on the cash market as an alternative to the formula/grid absolutely absolutely shatters Randy's speculation.
Quote: "Suppose that the base price for the 20,000 formula contract cattle was the "top-of-the-market" price. We know such contracts exist. Also suppose that another packer – maybe a very small but competitive packer – had already established the weekly top-of-the-market price at $66.00. If the Tyson buyer pays Randy an additional $1.50/cwt ($18/head) for his pen of 1,000 high quality cattle, then the "additional cost" is the extra $18,000 for Randy's cattle, plus an extra $360,000 on the 20,000 head of formula cattle. Paying Randy an extra buck fifty on 1,000 head would have cost Tyson an extra $378,000. Offering $67.50 for Randy's 1,000 high quality cattle in a market with captive supply is the equivalent of offering $117.00/cwt in a cash market without captive supply – both increase Tyson's cattle costs $378,000."
The opening line in this statement is so easily refuted.
Once again, next weeks formula price will be based on this weeks cash price. If Randy would have received $67.50 for his cattle, that would affect the formula price for next week, NOT LAST WEEK.
Go ahead, any one of you try to refute this point. You won't because you can't.
Next week's feeders have the cash market as an option to the formula market. ibp doesn't care how they get the cattle bought, just so they get enough cattle bought to fill their slaughtering schedule.
If Randy would have sold his cattle at $66 in this weeks cash price and $66 was the bid the entire week, $66 would also be the base price for next weeks formula base price. That is a fact!
With that in mind, how could next weeks formula cattle receive "top-of-the-market price"?
Another conspiracy theory absolutely shattered by the facts.
Quote: "Captive supply contracts provide packers committed cattle so they are not as hungry to increase bids to fill out their plant capacity, and also create extreme incentives to underbid, costing Randy $18,000 in this illustration and gaining Tyson $378,000."
Certainly when ibp has a large portion of their needs already filled there will be less incentive to pay the same amount for the balance of their needs. That is simple economics. Any company is more aggressive in pricing when their needs have not been fulfilled.
What's so revolutionary about that? Call another packer, perhaps they don't have their needs filled yet.
Many has been the time when I would call packer A and receive a bid then call packer B and receive a higher bid. The next time, packer A might have the higher bid. Depends on who is needing cattle the worse.
This is not rocket science and it damn sure isn't market manipulation.
If it was, every time the price dropped off at the end of a salebarn feeder calf sale as buyers met their needs, this would be considered market manipulation.
Why do you think ranchers are always upset when their cattle sell late in the sale? MARKET MANIPULATION!
Randy is totally wet on his $378,000 figure based on the simple fact that formula cattle are priced on the weekly weighted average of the week prior, not the week following.
Come on guys, is this all you got?
I challenge any one of you packer blaming followers to contradict anything I have stated in this post.
Now don't get angry just because another of your conspiracy planes was shot down in flames from the truth. You always have eachother for support. LOL!
NEXT!
~SH~
Move those shells around so no one will know where the pea is.
For every time that marketing agreements with a base price tied to a cash market price drives prices lower, marketing agreements with a base price tied to a cash market price drives prices higher.
This looks like the argument my broker gave me when they sold my stock not at the market, but in their own portfolio. In fact, they acted likd a bookie with their internal spread between sellers. They lost that case. It is too bad you know the games played in New York but the appellate judges do not.
Stocks (whether cattle or stock certificates) taken out of the market thin the market. With thin markets, there is more of a chance that they can be manipulated (or in this case lowered by those with market power). You can not deny that to be the case, SH. It is a fact. You have even argued so yourself.
Marketing agreements with prices not based on a negotiated amount at the time always have a chance of manipulating markets. They don't always do it, but the chance is always there. Pickett proved to the jury that the cash price was depressed because of "captive supply". Even the judges agreed to that one. Dr. Azzam also stated that there is a negative correlation between "captive supplies" and cash price-- and you quoted him, Agman.
SH, you came up with a lot of extraneous garble that said nothing. Would you like to try again? Take one point and let us argue one point at a time.
I would still like you to answer my question on Mike the perjurer, or is that just more quantity? Your crediblity is at stake.