Let's stir it up some...

[Red Robin]

how much money would those large chicken producers be making if there was a viable cash market?

Without the added consistency, efficiency, cohesion, and planning that VI brings into the chicken business, there wouldn't be a sole making the kind of money these fellas make in my state off of chickens.

quote sandhusker: I can also tell you as a businessman, I don't want to be trying to do business in an area full of ranch workers and no ranch owners.


Sandhusker have you ever been to northwest Arkansas? It's a very booming economy. Some of that is wal-mart based but before wal-mart was a household name, tyson was creating wealth in Springdale/Rogers area.

 

[RobertMac]

I would really enjoy a producer driven VI venture but as a lot, ranchers are too conservative and independent to start such a deal. It could be done though and if it happened, would you be as nervous about the health of the packers?

There are two kinds of VI, top now or bottom up. Look at Riceland Foods to see what producers CAN accomplish. The only difference between these rice producers and cattlemen is attitude and leadership!

Generations ago a group of Arkansas rice farmers banded together to market their crops. They created a farmers cooperative business group in 1921 now known as Riceland Foods, Inc., headquartered at Stuttgart, Arkansas. Since then, Riceland has grown to become the world's largest rice miller and rice marketer.

http://www.riceland.com/

 

[RobertMac]

Sandhusker have you ever been to northwest Arkansas?

What about the hog producers up there when Tyson shut down their processing plant?

Profit from rural America is being transferred to Tyson and Wal-Mart headquarters. Do you think those two headquarters being located in NW Ark. has something to do with your economy?

 

[RobertMac]

Why would you be convinced Tyson [et al] would do anything differently for beef than they are doing in pork and poultry?

I'm convinced because of the differences in concentration of production between cattle and chickens, RM. A poultry complex around here contains everything needed to operate a chicken plant within a 60 or 70 mile radius. Breeders laying eggs, hatcheries, feed mill, all of the growing houses - everything needed is all concentrated in a small area. From conception to chicken nuggets on a reefer, it all happens in that small area. Not so with cattle.

One point here...if poultry demand drops, Tyson simply shuts down their least efficient plants. What then do the producers in that poultry complex do?

And the geographic concentration that the integrators can do with chickens - the way they divvy up their territories - is something that just isn't going to work with cattle - or cattlemen.

Not to mention the fact that they don't want the expense of providing all of the genetics. Not to mention the fact that they have a certain amount of market leverage already. Not to mention the fact that there is a much friendlier business environment south of here...

Texan, granted the beef industry will be structured differently than pork or poultry, but one thing will be the same...control! All dollars in this industry start with the consumer. The packer concentration is the bottleneck in the hour glass that controls the flow of dollars from the consumer to the producer. That bottleneck expands as the retail side and feedlot side concentrates...more control. The large packers bought up and shut down independent processors as an investment in market power AND to limit or eliminate producer access to the consumer. My niche is worthless, even if I have strong consumer demand, if I have no way to have my cattle processed! Supporting independent processors is the most important issue we face because through them is the only way we have any market leverage.

Prices may be good now, but what happens when the multi-national are established in S.A. and have direct access to the USA market. There is going to be a lot of cattlemen that wished they had thought differently!

 

[Ben Roberts]

Texan- " those things- the changing market place and the global economy- are facts that we have to deal with- like them or not. History tell us that in most cases, no matter if were talking about a species or an industry, the survivors are the ones who are willing to adapt to change not the ones who resist it at all cost."

Texan, you are not going to survive in the cattle industry, because of the very reason you just gave. You are not willing to adapt to change, and you are going to resist it at all cost.

Best Regards
Ben Roberts

Gee, Ben - I'm glad my bankers have a different outlook on my future. If you had read THE VERY NEXT SENTENCE after what you quoted from me, you would have seen this statement:

I'm always agreeable to changing my ways if I think my profitability depends on it.

A little further, you would have seen this one:

...it might be ME that has to change my thinking and ways of doing business.

I hope you do better presenting facts in your book than you've done in attempting to quote me.

Texan, Ask hundreds of farmers in the mid-west about the bright future bankers had in them, and then foreclosed on them when the markets fell. Banks, are the ones with the bright future.

No attempt was made at quoting you, I did quote you, on the paragraph you wrote. I have no doubts, that you are open minded enough to make adjustments in your ranching practices. How far does one have to reduce their net-worth though, before they decide to make those changes. It reminds me of the old farmer that died and his family wanted an autopsy done to see what he had died from, the autopsy revealed that, he was full of next years.

Best Regards
Ben Roberts

 

[Ben Roberts]

Robin, "VI is the only thing I can think of to keep the cattle business viable on a large scale in America. Sandhusker, you guys keep saying we won't have any other options, why? Would we not be allowed to sell beef to our neighbors as Ben and RobertM suggest?"

I disagree that it is the only way to keep the cattle business viable. I just have to ask what value the cattle business will be to you if it goes V.I.? I mean, what good is it to you and yours when people worldwide are eating US beef if you only get workers wages for your part in creating that beef? Not only haven't you gained, you lost.

Look at it from a risk/reward standpoint. You're taking emerging markets risk for CD returns. Why?

Selling beef to your neighbors is an alternative if you have more human neighbors than bovine neighors. Cherry County, NE has a cow population of 170,000 and a human population of 6100. Even in the entire state of Nebraska, cattle outnumber people 4 - 1. How much beef can one person eat a year? Ben and RM are operating in a niche. A niche is a niche.

What have "YOU to gain. If you are asking about me personally, nothing really if the beef industry was static. It's not. I personally think the U.S. beef industry is sitting precariously on the edge of rising costs in low cost producer driven market. I don't think it's viable in it's present state. They (the big packers) are going to go somewhere else for cheaper beef. Our land prices, exposure to litigation, environmental oversight, etc. is going to be our death nail. Through VI there is more profit at least available. I think I have a better chance of getting some profit if there is at least some profit available somewhere in the beef chain. I am a risk taker by nature Sandhusker. I kind of enjoy it but as any fool like me knows, and I'd dare say any banker knows, there's a lot of exposure for the return in todays beef business. I don't know how much more the industry or I can stand. 2 or 3 really bad years and lots of people go out of business. Look at Canada and their BSE crash. There is no doubt that some good sound ranchers are tits up because of the way the old ball bounced. I don't know how it is in Cherry county Neb. Sandhusker but considering the money invested, not very many ranchers around here get workers wages. They could all sell out, put the money in the market or even the bank and play golf and make a bigger income. Most people are in the beef business because it's in their blood. Like a fella told me today at the hardware store , he said the fescue seed business is an addiction and the only known cure is 3 bad years in a row. The cow business is much the same. I would really enjoy a producer driven VI venture but as a lot, ranchers are too conservative and independent to start such a deal. It could be done though and if it happened, would you be as nervous about the health of the packers?

I agree with alot of what you say in this post. And the packers would be better off by working for us.

Best Regards
Ben Roberts

 

[Sandhusker]

Robin, "They (the big packers) are going to go somewhere else for cheaper beef. Our land prices, exposure to litigation, environmental oversight, etc. is going to be our death nail. Through VI there is more profit at least available."

Those issues you brought up are certainly weight we carry, but how does V.I. change any of them?

Robin, "I think I have a better chance of getting some profit if there is at least some profit available somewhere in the beef chain. I am a risk taker by nature Sandhusker. I kind of enjoy it but as any fool like me knows, and I'd dare say any banker knows, there's a lot of exposure for the return in todays beef business. I don't know how much more the industry or I can stand. 2 or 3 really bad years and lots of people go out of business."

But, Robin, V.I. isn't lowering your risk and is putting a cap on the upside. You're giving big, but getting virtually nothing. Two or three bad years and the integrators pull out - you're still hung with nothing to show for it. Don't think they won't do it because they already have. If you can't make your payments, your place gets sold out from under you, and since ranches can only operate now under contract - and nobody is offering any contracts - your ranch isn't worth much. You'll be selling discounted property who's sale might not even be enough to cover the debt. To make matters worse, the scenario that takes you out takes a bunch of people out and the market is flooded with limited-usage property which drives prices down further.

 

[Red Robin]

Robin, "They (the big packers) are going to go somewhere else for cheaper beef. Our land prices, exposure to litigation, environmental oversight, etc. is going to be our death nail. Through VI there is more profit at least available."

Those issues you brought up are certainly weight we carry, but how does V.I. change any of them?

I can see ways where VI could be structured and change some of those things. My main point is that if there's more profit in the chain there is possibly more for me.

But, Robin, V.I. isn't lowering your risk and is putting a cap on the upside. You're giving big, but getting virtually nothing. Two or three bad years and the integrators pull out - you're still hung with nothing to show for it. Don't think they won't do it because they already have. If you can't make your payments, your place gets sold out from under you, and since ranches can only operate now under contract - and nobody is offering any contracts - your ranch isn't worth much. You'll be selling discounted property who's sale might not even be enough to cover the debt. To make matters worse, the scenario that takes you out takes a bunch of people out and the market is flooded with limited-usage property which drives prices down further.

That's your opinion Sandhusker. I see much more stability with a steady supply of females that work for example or a guaranteed contract at a certain price or a steady target for feeder calves or finished steers or what ever. I have a buddie running commercial charolais. He is being hounded by the barns here and another friend or two that have a small group deal to switch to blacks. He has 200 or 300 functional cows and is sickened by the thought of trying to find an equal amount of blacks that are as even tempered and functional. He usually is a couple cents back of the top of the market but his calves are heavier . Everyone is telling him to switch because in a few years he can't move the whites. In a VI deal he would have a contract on feeders or fats. He'd know where he is at and know what to do. As it is now, he takes a discount on his white cows , buys blacks, and in 5 more years they want reds or something. That's risk in the market that I am talking about sandhusker but just in one area.

 

[RobertMac]

Robin, "They (the big packers) are going to go somewhere else for cheaper beef. Our land prices, exposure to litigation, environmental oversight, etc. is going to be our death nail. Through VI there is more profit at least available."

Those issues you brought up are certainly weight we carry, but how does V.I. change any of them?

I can see ways where VI could be structured and change some of those things. My main point is that if there's more profit in the chain there is possibly more for me.

RR, it depends on the VI system...

If you are in Tyson's VI system, you're at the very end of the chain and your chances of getting part of the "more profit" are slim or none.

If you're in a VI system where you a part owner, as in a co-op, you will consistently get your share of the "more profit".

 

[Ben Roberts]

Robin, "They (the big packers) are going to go somewhere else for cheaper beef. Our land prices, exposure to litigation, environmental oversight, etc. is going to be our death nail. Through VI there is more profit at least available."

Those issues you brought up are certainly weight we carry, but how does V.I. change any of them?

I can see ways where VI could be structured and change some of those things. My main point is that if there's more profit in the chain there is possibly more for me.

RR, it depends on the VI system...

If you are in Tyson's VI system, you're at the very end of the chain and your chances of getting part of the "more profit" are slim or none.

If you're in a VI system where you a part owner, as in a co-op, you will consistently get your share of the "more profit".

Very well said RobertMac, very well said indeed.

Ben Roberts

 

[Red Robin]

Robin, "They (the big packers) are going to go somewhere else for cheaper beef. Our land prices, exposure to litigation, environmental oversight, etc. is going to be our death nail. Through VI there is more profit at least available."

Those issues you brought up are certainly weight we carry, but how does V.I. change any of them?

I can see ways where VI could be structured and change some of those things. My main point is that if there's more profit in the chain there is possibly more for me.

RR, it depends on the VI system...

If you are in Tyson's VI system, you're at the very end of the chain and your chances of getting part of the "more profit" are slim or none.

If you're in a VI system where you a part owner, as in a co-op, you will consistently get your share of the "more profit".

You're guessing about the outcome, tyson doesn't have a VI beef chain and there isn't a viable , large scale VI beef chain owned by producers. Judging from the way I know cattlemen to be, I'll see an ant eat a bale of hay and drink a tub of water before I see producer owned VI. I'll take the sure bet of Smithfield.

 

[Sandhusker]

Robin, "My main point is that if there's more profit in the chain there is possibly more for me."

I'd say the bigger possibilty is that they'll tell you to take what they give you and like it. You have absolutely no leverage to get any bigger piece of the pie than the integrators are willing to give you.

 

[Red Robin]

Robin, "My main point is that if there's more profit in the chain there is possibly more for me."

I'd say the bigger possibilty is that they'll tell you to take what they give you and like it. You have absolutely no leverage to get any bigger piece of the pie than the integrators are willing to give you.

How much will the brazilians let me have? You guys start a producer driven VI and I'll sure try to help you be successful.

 

[Sandhusker]

Robin, "My main point is that if there's more profit in the chain there is possibly more for me."

I'd say the bigger possibilty is that they'll tell you to take what they give you and like it. You have absolutely no leverage to get any bigger piece of the pie than the integrators are willing to give you.

How much will the brazilians let me have? You guys start a producer driven VI and I'll sure try to help you be successful.

Seems to me that you've got a tremendously pessimistic view of our future, Robin. If the only options you see is being undercut by the Brazilians or going tits up on V.I., I'd say you need to get out while there's any getting out.

Personally, I think there is great potential in supplying the world's needs for high quality beef and we can do it.

 

[DiamondSCattleCo]

and there isn't a viable , large scale VI beef chain owned by producers. Judging from the way I know cattlemen to be, I'll see an ant eat a bale of hay and drink a tub of water before I see producer owned VI. I'll take the sure bet of Smithfield.

Unfortunately, I feel Red is mostly correct with this statement, at least insofar as North American producers are concerned. There are large scale producer driven co-ops in Australia and New Zealand that are functioning very very well, including one that is a major supplier of alternative meats (mutton) to the world.

But it takes alot of co-operation and several hundred producers with nearly the exact same vision to make something like this work. In North America, I see producer co-ops fall apart rapidly over the smallest thing. Or the co-op has a single bad year, so members jump ship and sell on the open market. Unfortunately doing this will only put another nail in the coffin and ensure the co-op has another bad year the next.

Or, in the case of the very successful co-ops, the board of directors gets greedy and turns the co-op into publicly held corporation and the producers needs become secondary to a faceless shareholder.

You know what I think would work? A privately held, not-for-profit VI company in which producers would have an opportunity to voice their concerns during general meetings, but there would be a small KNOWLEDGEABLE board of directors who make the final decisions. This board of directors would be owners of the company and would receive an appropriate wage for their work. All profits generated by the company would then be returned back to the producers on a pound delivery basis (or something along those lines, I've got some ideas that would take too much time to explain right now). The company would of course have to retain some monies for re-capitalization, but it wouldn't have an expansionist view like Tyson or Cargill, so the producers wouldn't be footing the bills for expansions into other countries or buying competitors plants.

Rod

 

[Ben Roberts]

and there isn't a viable , large scale VI beef chain owned by producers. Judging from the way I know cattlemen to be, I'll see an ant eat a bale of hay and drink a tub of water before I see producer owned VI. I'll take the sure bet of Smithfield.

Unfortunately, I feel Red is mostly correct with this statement, at least insofar as North American producers are concerned. There are large scale producer driven co-ops in Australia and New Zealand that are functioning very very well, including one that is a major supplier of alternative meats (mutton) to the world.

But it takes alot of co-operation and several hundred producers with nearly the exact same vision to make something like this work. In North America, I see producer co-ops fall apart rapidly over the smallest thing. Or the co-op has a single bad year, so members jump ship and sell on the open market. Unfortunately doing this will only put another nail in the coffin and ensure the co-op has another bad year the next.

Or, in the case of the very successful co-ops, the board of directors gets greedy and turns the co-op into publicly held corporation and the producers needs become secondary to a faceless shareholder.

You know what I think would work? A privately held, not-for-profit VI company in which producers would have an opportunity to voice their concerns during general meetings, but there would be a small KNOWLEDGEABLE board of directors who make the final decisions. This board of directors would be owners of the company and would receive an appropriate wage for their work. All profits generated by the company would then be returned back to the producers on a pound delivery basis (or something along those lines, I've got some ideas that would take too much time to explain right now). The company would of course have to retain some monies for re-capitalization, but it wouldn't have an expansionist view like Tyson or Cargill, so the producers wouldn't be footing the bills for expansions into other countries or buying competitors plants.

Rod

Rod, is this not the same plan that i've laid out for everyone on this board just before Randy's sale, and went over it with him several times on the phone. What has happened to Celtic Beef?

Best Regards
Ben Roberts

 

[Mike]

A producer owned beef company:

http://www.uspremiumbeef.com/

4th or 5th largest in the USA.

Have you joined up with these folks Robin?

 

[DiamondSCattleCo]

Rod, is this not the same plan that i've laid out for everyone on this board just before Randy's sale, and went over it with him several times on the phone. What has happened to Celtic Beef?

I'm sorry Ben, I must have missed your post and Randy never got into to many specifics with me of what you and he had talked about. To be honest, I never talked to Randy a whole big bunch about how they planned to distribute profits in Celtic Beef (which is still alive and well, if somewhat changed over the past few weeks). No plagarism intended. This has been something I've been mulling over for a couple years now, and as I've had the time, I've tried to solve a variety of business problems that have cropped up during the creation of the model.

I ran my old diesel performance shop under the same sort of the same principles, only the employees received the excess profits at the end of the year versus producers. One of the biggest hurdles was determining fair and equitable distribution of the profits. In the case of the shop, I based it on raw hours worked, with a modifier thrown in for 'exceptional performance that helped expand the business'. It worked well, and none of my employees ever complained about their bonuses, but then they also never shared with one another what they had received. You and I both know that producers will be sharing with one another what they've recieved at year end, so profit distribution will need to laid out clearly long before the company is ever formed. And since I believe that North American producers need to move away from commodity beef to niche and high end product to ensure their survival over the next century, I'd want to keep the niche and high end suppliers separated from commodity suppliers and distribute profits accordingly. Those profits would be published and it is hoped that when producers see the differential in profit, they'd be willing to switch over to high end. The Cargills and Tysons of the world are bound to import cheap commodity beef from South America, and I don't think as producers we'll be able to stop them. Government will drop import quota tariffs in a few years, and we'll need to find new ways to compete or close up shop.

Rod

 

[Red Robin]

Robin, "My main point is that if there's more profit in the chain there is possibly more for me."

I'd say the bigger possibilty is that they'll tell you to take what they give you and like it. You have absolutely no leverage to get any bigger piece of the pie than the integrators are willing to give you.

How much will the brazilians let me have? You guys start a producer driven VI and I'll sure try to help you be successful.

Seems to me that you've got a tremendously pessimistic view of our future, Robin. If the only options you see is being undercut by the Brazilians or going tits up on V.I., I'd say you need to get out while there's any getting out.

Personally, I think there is great potential in supplying the world's needs for high quality beef and we can do it.

I like the cow business sandhusker. I'm a lifer. I am optimistic about the beef industry. I welcome VI by smithfield and think it'll change the industry like fencing the west did but I think it's going to prevent our business from going to south america.

 

[RobertMac]

I can see ways where VI could be structured and change some of those things. My main point is that if there's more profit in the chain there is possibly more for me.

RR, it depends on the VI system...

If you are in Tyson's VI system, you're at the very end of the chain and your chances of getting part of the "more profit" are slim or none.

If you're in a VI system where you a part owner, as in a co-op, you will consistently get your share of the "more profit".

You're guessing about the outcome, tyson doesn't have a VI beef chain and there isn't a viable , large scale VI beef chain owned by producers. Judging from the way I know cattlemen to be, I'll see an ant eat a bale of hay and drink a tub of water before I see producer owned VI. I'll take the sure bet of Smithfield.

I'm guessing and you're not???

Poultry is VI.
Pork is quickly becoming VI.
The question you have to answer is...why are these packers going to change their method of operation?