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

Joe Luter is after your industry

MRJ, you are so factually void when it comes to vertical integration that it makes me laugh. Why don't you learn something about it before posting an opinion that is based off of nonsense. Vertical integration is like loss leaders at grocery stores. The deal looks good and gets you in and gets you hooked. You then end up with only going to the one store.

You will never be convinced of what is happening until it is too late. That is the disservice you do to the other producers. It is not like you do not have other examples by the same company in the other proteins that have gone vertical. By the time you have 3 strikes, you are out. There is no fourth chance to hit the ball.
 
MRJ wrote:
BTW, who 'forced' the beef producers into the deal with Smithfield? It appears they believe it is going to be more profitable for them than what they had done before.
Click to expand...

No one forced the poultry producers into a contract with Tyson and Purdue either. They were "enticed" into a great deal, and once the big 2 owned a majority of the birds, they were able to put tougher requirements onto the producers and forcing them into "virtual slavery."
I'm sure some will say that not all producers feel that way and you will be right. I'm not going to nit pick over one or two "company boys" but a majority will tell you the deal is not as good as promised.

MRJ wrote:
We still have choices and some of us still are reluctant to ask government to say who can and who cannot own cattle, or to whom cattle producers may sell their cattle
Click to expand...
.

Yes, MRJ, you still have choices. I will tell you though that once Murphy/Smithfield and others started signing up hog producers to work for them, it didn't take long to eliminate most people's choices.

You are "reluctant" to ask govt. to say who can and cannot sell cattle? Guess what, most hog producers felt the same way in the hog industry. I guess you can ignore history if you want. Go ahead, bury your head in the sand. That is definitely your choice and I will not deny you the experience. But believe me, there is no more of a humbling occurence when one realizes how naive we were to think our commodity group wouldn't turn on the people who built it into a major player and back the "big boys" as they watched family farmers fall by the wayside.
And if I hear one a'hole say "well, you just weren't efficient enough to compete, I will know how far up the company rectum you truly are." :!:
 
What we have here is a socialist production system. Each sector following the requirements of the enitity that started the vertical intergation for production costs with noreturn for labor and investments to help the intergator achieve finaical securty for investors and themselves.
 
PORKER said:
What we have here is a socialist production system. Each sector following the requirements of the enitity that started the vertical intergation for production costs with noreturn for labor and investments to help the intergator achieve finaical securty for investors and themselves.
Click to expand...

Like anyone is going to sign a contract that doesn't give them a profit.

Swift owns the feedlots, they aren't going to pay the workers there? They aren't going to bid for the calves to fill the lots?

For every horror story about the evils of integration, someone else will tell you how good it is.

Each person has to make his/her own choices. No one has a gun to their head.
 
the chief said:
MRJ wrote:
BTW, who 'forced' the beef producers into the deal with Smithfield? It appears they believe it is going to be more profitable for them than what they had done before.
Click to expand...

No one forced the poultry producers into a contract with Tyson and Purdue either. They were "enticed" into a great deal, and once the big 2 owned a majority of the birds, they were able to put tougher requirements onto the producers and forcing them into "virtual slavery."
I'm sure some will say that not all producers feel that way and you will be right. I'm not going to nit pick over one or two "company boys" but a majority will tell you the deal is not as good as promised.

MRJ wrote:
We still have choices and some of us still are reluctant to ask government to say who can and who cannot own cattle, or to whom cattle producers may sell their cattle
Click to expand...
.

Yes, MRJ, you still have choices. I will tell you though that once Murphy/Smithfield and others started signing up hog producers to work for them, it didn't take long to eliminate most people's choices.

You are "reluctant" to ask govt. to say who can and cannot sell cattle? Guess what, most hog producers felt the same way in the hog industry. I guess you can ignore history if you want. Go ahead, bury your head in the sand. That is definitely your choice and I will not deny you the experience. But believe me, there is no more of a humbling occurence when one realizes how naive we were to think our commodity group wouldn't turn on the people who built it into a major player and back the "big boys" as they watched family farmers fall by the wayside.
And if I hear one a'hole say "well, you just weren't efficient enough to compete, I will know how far up the company rectum you truly are." :!:
Click to expand...
I'm sitting right in the middle of Tyson Chicken country. I know for a fact, while lots of growers gripe about the contracts with Tyson etc, most of the growers have made alot more money than they could have growing chickens on their own. I dare say 99% of the growers in my area could have never made their money back on their investment, much less a living . I know lots and lots of people who invested in the houses and machinery to grow chickens for Tyson 15 or 20 years ago. They have made money. Several of them didn't have anything and now have put together quite a sum of money and holdings. It's been a good deal for our area.
 
Thanks for moving beyond the normal "SPECULATION" and "THEORY" from these integration fear mongerors Red Robin. It's nice to see a new shot of common sense on these threads.

My brother-in-law raised contract hogs. Says he'd never go back to the volatility price waves of days gone by. I know, I raised hogs for many years and it was a feast and famine deal. We finally sold the hogs because we liked working with cattle better.

SUPPLY AND DEMAND!


~SH~
 
For every one chicken grower that likes his setup with the packers down here, there's another that don't. There are an awful lot of chicken houses sitting empty now because they either (1) can't afford the upgrades or (2) they don't want to commit for that many years because of age.

The price of LP gas killed them down here this winter.

The biggest game I see the chicken processors play with the growers is the long wait between deliveries for chicks when chicken demand is down. When Russia embargoed U.S. chickens a few years back, it was sometimes months after harvest before the growers would get chicks. When it opened up, they all filled up again.

Of course the turn around is a lot faster with chickens than it is cattle.

But can the processors influence the price of chickens by controlling the supply? I think they can. My brother-in-law who is a chicken broker in Atlanta definitely thinks so.
 
How much market is left for people growing chickens on their own in large enough scale to make a living Mike. If the market changes to where increased effeciencies are required to compete, (south american imports) how can we do it individually?
 
Red Robin said:
How much market is left for people growing chickens on their own in large enough scale to make a living Mike. If the market changes to where increased effeciencies are required to compete, (south american imports) how can we do it individually?
Click to expand...

I think if the price of transportation keeps rising as it has for the last year or so, we will go back to a "Community" supply arrangement with local processors serving local areas.

Think about how much transportation is involved in beef today. Our cattle have to be trucked to the midwest to the feedyards and packers. The meat then has to be trucked back. At $3.00 per mile that little 2500-3000 mile trek has added a $.15 to $.25 per lb. expense to a 50,000 lb load of meat. That would knock a $150 hole in a 800 lb carcass.

I'm not for vertical integration whatsoever. Just let the packers give me the specs to meet and I will attempt to meet them. If not, I go out of business.
 
Mike said:
I think if the price of transportation keeps rising as it has for the last year or so, we will go back to a "Community" supply arrangement with local processors serving local areas.

Think about how much transportation is involved in beef today. Our cattle have to be trucked to the midwest to the feedyards and packers. The meat then has to be trucked back. At $3.00 per mile that little 2500-3000 mile trek has added a $.15 to $.25 per lb. expense to a 50,000 lb load of meat. That would knock a $150 hole in a 800 lb carcass.
Click to expand...
I'll agree with a hundred percent of that Mike. I've noticed the same opportunity here. I think it'll work.
 
Jason said:
PORKER said:
What we have here is a socialist production system. Each sector following the requirements of the enitity that started the vertical intergation for production costs with noreturn for labor and investments to help the intergator achieve finaical securty for investors and themselves.
Click to expand...

Like anyone is going to sign a contract that doesn't give them a profit.

Swift owns the feedlots, they aren't going to pay the workers there? They aren't going to bid for the calves to fill the lots?

For every horror story about the evils of integration, someone else will tell you how good it is.

Each person has to make his/her own choices. No one has a gun to their head.
Click to expand...

Jason, vertical integration would not be that bad if the economic protections of the PSA were followed. In the case of some of the hog business, Tyson induced some of the farmers/ranchers to invest in hog production facilities and then pulled out, not honoring their contracts and creating a huge problem of these farmers not being able to pay for the facilities. They tried to play the arbitration game with the farmers and that was thrown out. Tyson settled the case for I think somewhere over 160 million dollars, but the hog farmers still lost money on the deal.

These facilities pay off, but over the long term. The contracts are almost always short term. Regular banks will not touch these deals because they know the risks that Tyson brings but agribusiness was able to get Farm Service Agency to back the loans for the banks so the risk was not born by the market participants (agribusinesses and banks) but by the govt.s.

Tysons has been allowed to pay new entrants more per lb. for the same lb. of product produced to farmers. By allowing this to happen, the business is like a big ponzi scheme. To get new people in, they pay more or give better inputs so as to subsidize new entrants. The old farmers are paid less per lb. for the same product because GIPSA allows them to get away with it. In the poultry business, farmers get paid through a formula that can have rampant fraud in it. The companies just give substandard birds to the people they can give them to and good birds to the people just getting into the business. The formula of pay will then give some of the money from the old growers to the new growers.

I will try to pull an article on this from the web somewhere. It is just a little too late for me to go into all of this right now.
 
How much market is left for people growing chickens on their own in large enough scale to make a living Mike. If the market changes to where increased effeciencies are required to compete, (south american imports) how can we do it individually?
Click to expand...

Red Robin is telling the beef industry what is right around the corner. You will become a hired man, just like his neighbors. That is what the post stated at the beginning, didn't it? :roll:
 
What we have here is a socialist production system. Each sector following the requirements of the enitity that started the vertical intergation for production costs with noreturn for labor and investments to help the intergator achieve finaical securty for investors and themselves.

Transportation is involved in beef today. Our cattle have to be trucked to the midwest to the feedyards and packers. The meat then has to be trucked back. At $3.00 per mile that little 2500-3000 mile trek has added a $.15 to $.25 per lb. expense to a 50,000 lb load of meat. That would knock a $150 hole in a 800 lb carcass

Thats why we are going to see a big jump in local and regional growing ,feeding,and packing systems.When fuel got past $30 bucks a barrel it started to happen.
 
PORKER said:
What we have here is a socialist production system. Each sector following the requirements of the enitity that started the vertical intergation for production costs with noreturn for labor and investments to help the intergator achieve finaical securty for investors and themselves.

Transportation is involved in beef today. Our cattle have to be trucked to the midwest to the feedyards and packers. The meat then has to be trucked back. At $3.00 per mile that little 2500-3000 mile trek has added a $.15 to $.25 per lb. expense to a 50,000 lb load of meat. That would knock a $150 hole in a 800 lb carcass

Thats why we are going to see a big jump in local and regional growing ,feeding,and packing systems.When fuel got past $30 bucks a barrel it started to happen.
Click to expand...

The sustainable agriculture people have made these same arguments and they are probably right to a large degree. Everything will change with an increase in energy costs. This may be one of them.

If only Ford and some of the other U.S. automakers wouldn't have lobbied against higher fuel efficiency standards, they may not have had the problems that have been recently posted on this site. Sometimes what looks good in the short run isn't a long run benefit. I think you could make some strong parallels to vertical integration.
 
the chief said:
You will become a hired man, just like his neighbors. That is what the post stated at the beginning, didn't it? :roll:
Click to expand...
What is dishonorable about being a hired man? None of them (that I am aware of ) are company employees. Lots of them I know have made a very much better way of life for themselves than otherwise would have been possible and it has put millions of dollars into the Arkansas economy. To say it's socialist is silly. If you don't want to contract , don't. All I am saying is that soon, the vertical integration market might be the only one able to compete with the third world imports for price in the volume of our retail beef business. There will always be other markets. I think its rediculious to make the business that promote a vertical integration plan , out to be villins. I'd move the market the same direction if I was in their shoes.
 
Red Robin said:
the chief said:
You will become a hired man, just like his neighbors. That is what the post stated at the beginning, didn't it? :roll:
Click to expand...
What is dishonorable about being a hired man? None of them (that I am aware of ) are company employees. Lots of them I know have made a very much better way of life for themselves than otherwise would have been possible and it has put millions of dollars into the Arkansas economy. To say it's socialist is silly. If you don't want to contract , don't. All I am saying is that soon, the vertical integration market might be the only one able to compete with the third world imports for price in the volume of our retail beef business. There will always be other markets. I think its rediculious to make the business that promote a vertical integration plan , out to be villins. I'd move the market the same direction if I was in their shoes.
Click to expand...

Red Robin, vertical integration can be a very good thing for farmers/ranchers. Unfortunately, vertical integration gives much more market power to the integrators. Currently they are using that power to cheat farmers and make the value of their assets work for the integrator, not the farmer. It is a term I call captive capital. The value of the capital investment is usually harnassed by those who own the capital, but with captive capital, the value of the assets are controlled by the one with market power.

It is like you investing in real estate in the hopes of one day paying off the real estate and getting the rents off of the assets for your retirement. With the real estate, you have many, many renters and no one controls the rental market. With a vertically integrated outfit, the "renters" are controlled by the company. You don't get your check from the renters (or the market) anymore, you get your check from the integrator. The integrator can decrease the amount of rent you get from your assets and pocket them. They have complete market power and there is nothing you can do if they decide to pocket more of the rent themselves. There is no other rental base. Your assets then work for the average variable costs, as that is the theoretical and long term and realistic long term limit to you staying in the business and providing housing for the vertical integrator to put renters in. Your business deal, which you invested in to help pay for your retirement, is captive capital, with all profits going to the integrators, not your retirement.

It may seem to you all along the way that you are building up your equity and that equity position makes you "feel" rich. That is how many farmers feel with the vertical integration deals. As soon as some of the variable costs are gone (mortgage pmt. to bank for property), the integrators capture the value of that cash flow by either making you upgrade and go into debt again, or by paying you less per lb. compared to new entrants. Your capital is just captive to the market power abuses that the integrators exercise.
 
Mrs.Greg said:
I cannot believe how much B.S can come out of one mans mouth,yes thats you Econ :?
Click to expand...

mrs. greg, you do not even have vertical integration in your poultry business in Canada. Tyson would not go into Canada until they were able to vertically integrate.

Why do you say what you say? Do you even know how it is? Do you say this about everything you know nothing about?
 
Mrs. Greg, I am waiting for your reply. Did you have a basis for saying what you said?
 
Actually Econ 101,Greg didn't log me out when he logged in,I'm sorry you will have to wait for his answer.If I knew what it was about I would answer you.
 

Latest posts

Back
Top