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How should Tyson and JBS compete with vertical integration?

pointrider

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Mar 20, 2005
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Hi again folks! Well, the last one didn't work on getting comments. Maybe this one will.

9 FEB 09 - Quote: "Maintaining a strategy of vertical integration has been a further ingredient for Teys' success in the beef industry. From grazing properties to our feedlot, company abattoirs and processing of beef, Teys is able to control the production at each stage, including value-adding of product and leather and hide processing."

Allan Teys, Chairman of Teys Bros Pty Ltd, the largest Australian-owned and second-largest beef processing company in Australia

Source: From the "Home" and "About Us" pages on the Teys Bros website, 9 FEB 09

How do you compete with vertical integration?
 
Control the worlds food supply- and you control the world...
With the breakup of the former USSR- and the loss of all regulation/law that went with it- the Russian Mafia/Black Market took over...And the first place they headed toward was the Russian food supply- knowing that was where they could get the most money from folks, since they have to eat.. Controlling it from pasture to plate until prices got so high- and people were screaming so loud- the new Russian government was forced to bring back some of the USSR communist regulations and laws to allow the people to get food....

I believe in corporations. They are indispensable instruments of our modern civilization; but I believe that they should be so supervised and so regulated that they shall act for the interest of the community as a whole.
~Theodore Roosevelt

"Our goal is to spread prosperity and see that prosperity is spread around."
~Theodore Roosevelt
 
Oldtimer,

This is the time for me to make sure that everyone understands where I am coming from in these threads about JBS, Tyson, Teys Bros and all the rest. I am not anti US or Canadian beef. I am not promoting vertical integration. I am not trying to make anyone feel bad or become depressed. I am not promoting corporations, and I am certainly not against every producer out there having an opportunity to start and build his or her own company.

What I am doing is trying to get everyone to understand a little more about the big picture that exists out there today. Then I would hope that most would say, "Am I going to be in this game? If so, what is the best way for me to do it considering the way things are out there today (in terms of free trade agreements, vertical integration in Australia, large banks, holding companies, investment companies et al buying huge tracts of "station land" in Australia, illegal deforestation in Brazil for the purpose of grazing cattle until the land can be improved enough to sell it for a profit to a soybean farmer [even though the rancher does not own the land], and any number of other scenarios that exist today)? Should I do something by myself, or should I join an alliance or other group?

I would hope (based on my understanding of how things are out there today and the intentions of the major players in the beef industry) that every cow-calf producer in the U.S. and Canada would be giving serious consideration to joining a niche market alliance at the very least if he or she does not already belong to one.

I used to be a cow-calf producer. I was a hobby rancher with a small herd of commercial Brangus while I was going to college. I love cow-calf producers. I love farmers. I love everyone who is involved in making food available to all of us. I want cow-calf producers to survive and prosper, and I have done some things that are waiting in the wings in case the time is ever right to help them do that.

It just really concerns me when I see so many producers get hung up on one or two subjects instead of looking at the big picture and putting their time and effort somewhere that has the potential of really helping the individual operator today while the industry hashes out the COOLS of the world.

Example? Okay, here is one. From what I have been able to learn about 1% of cow-calf producers in the U.S. today participate in the IRM-SPA benchmarking program. Why isn't it a lot more than that? I believe that benchmarking is the best management tool available to a cow-calf producer no matter what region or state he or she is in. If you are reading this and you are a cow-calf producer, if it's not too personal, do you participate in IRM-SPA? If so, why do you? If not, why not? I am not directly associated with the IRM-SPA benchmarking program, but I believe in this sort of thing.

U.S. and Canadian producers have an extremely large challenge in front of them in terms of the global beef production industry. Many won't make any changes, and they will be gone. Sad. Some will try and will make it, and that will be great. We need food in this world, and we need producers to produce that food. Unfortunately, many times an individual producer and/or an individual consumer doesn't have much say in what governments do in terms of free trade agreements and things like that, but we still need that food.

Maybe now, Oldtimer, you can explain your "Teddy" quotes to me a little more in terms of how to do those things in today's world, especially in the context of global competition. And maybe some of you will be able to talk a little about IRM-SPA and other programs out there today. That would be great. Let's think about things that can be done and move forward before it is too late.
 
If the hog and chicken industry are any kind of an example of vertical integration- the cattle industry should all be smart to fight it every way they can....
Canada is now down to 2 major packers- and if JBS was allowed to keep rolling- and the hog/chicken industry is any example- pretty soon we wouldn't have to do any discussion on these sites about which bull or breed to breed to....We would all be AIing to or using sons of "El Toro Grande"......
 
Interesting attempt at a discussion, pointrider. Good Luck!

We have not gotten into a IRM-SPA group, but family members have done some study of it and are definitely interested as it looks like invaluable information. What I have seen of the local (not really all that local for us) groups, and that isn't a lot, seems a chore to make it to the meetings, and sharing such personal financial and business information might not be the best idea, if what I've heard is correct.

What do you think of the various alliances? We are slightly acquainted with some people who have participated in them, and are not sure if it is the right thing for us at this point. We may not be getting paid enough extra for the value we add to our calves and maybe an alliance would be the way to improve that situation.

Thanks for an interesting and useful discussion subject.

mrj
 
I don't see how the typical independent producer can have anything happen to them other than be squeezed out of business via vertical integration. Alliances are a different story, but VI is bad news.
 
Hey folks, I appreciate all the comments. Now I have another question for Oldtimer and Sandhusker if you please.

Oldtimer said (in this thread), "If the hog and chicken industry are any kind of an example of vertical integration - the cattle industry should all be smart to fight it every way they can."

Sandhusker said (in this thread), "I don't see how the typical independent producer can have anything happen to them other than be squeezed out of business via vertical integration. Alliances are a different story, but VI is bad news."

Before I ask the question I need to make a few more statements. First of all, in my second post (paragraph one) in this thread I stated, "I am not promoting vertical integration."

Next, the quote at the beginning of this thread states that Teys Bros Pty Ltd, the largest Australian-owned beef processing company in Australia, is vertically integrated according to their website. Other very large companies already exist in Australia, also, and more are being formed at a very rapid pace. Over 30 large ranches were purchased in the past two months by banking conglomerates, holding companies, investment groups and one "secretive company."

One of the other large companies in Australia is Australian Agricultural Company (AA Co). It was started in 1824 with a grant of a million acres from the British Crown, and initial investors in that company included people like the Prime Minister, legislators, "doctors and lawyers." AA Co just sold a lot of land to the above mentioned companies and bought other properties that fit better with their future plans for grassfed beef which they believe will rule the beef world. In so doing they eliminated $435 million in debt. (How many beef producers do you know who have more than $435 million in debt tied to the beef business?)

Okay, enough of that for now. Here is the question. It is the same question I posed in the beginning of this thread. I am asking it again, because I don't believe it has been addressed. Maybe no one will. Maybe someone will. Either way, "What should Tyson and JBS do to compete with vertical integration?" Not just in the global marketplace, but in this country. If I remember correctly, 5 supermarket chains on the East Coast of the U.S. now receive and sell Australian grassfed beef on a regular basis. Wal-Mart is not in the group at this point.

Tyson and JBS represent beef producers in the U.S. (like it or not) in the U.S. market and the global market. How do they compete?

Thanks in advance for your time, your patience and your thoughts.
 

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