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

Market manipulation at the local salebarns

Help Support Ranchers.net:

A

Anonymous

Guest
An order buyer had an order of feeder cattle to buy for a large feedlot from Iowa. The order was for 50,000 head of feeder cattle at a pre-determined price for certain weights which was flexible based on changes in the fat cattle futures market and corn markets. Due to concerns about procuring enough cattle at a price that could assure him a reasonable profit on the CME board, the buyer headed out earlier than normal to try to procure a portion of his needs. At first, he simply could not get enough cattle bought at the price he was willing to pay so he was forced to pay more than he wanted until he had 35,000 head procured through forward contracts. As is the case in most years, as the large runs of feeder cattle tapered off, the demand decreased as orders were filled all other market factors being equal. Due to the amount the order buyer paid for the cattle he bought early in the year through forward contracts with the sellers, he was not willing to pay as much for the last 15,000 head he bought in the sale barn so he dropped his price accordingly to average the price out for the entire 50,000 head and eventually filled his order.


My question is this, due to the fact that this order buyer paid more than he would have liked for the 35,000 head he bought through forward contracts and dropped his price accordingly for the 15,000 head he bought in the sale barn to average the price out, IS THIS MARKET MANIPULATION OR THE FREE ENTERPRISE SYSTEM WORKING AS IT SHOULD????

Don't be afraid to answer the question. Either this common cattle procurement practice in the cattle feeding industry is market manipulation or it's not.


~SH~
 
I am not sure what you are trying to show SH. Maybe I am missing something. I really can't see where there is any manipulation. The sellers of the contract must have thought the markets would go higher, so they held out for a better price.

If these cattle were delivered to the feedlot, it took 35,000 head from the market, if supply and demand works it could increase prices. The question that I would ask is: How many buyers were at the sale barn?
 
It depends on whether or not the moon was waning or waxing and what color of a hat the buyer wore.
 
if you had a 1000 dollars a cow to buy 30 cows and you bought 15 for 900 hundred a cow cant you pay 1100 a head for 15 more with out pissing somebody off
 
It's very simple Clarence. As VB Ranch pointed out correctly, this is the Free Enterprise Market working as it should but cattle procurement rules cannot be different for different segments of the industry.

The R-CALF supporting packer blaming market manipulation conspiracy theorists would like to assign a different set of cattle procurement rules to the purchase of fat cattle to save the feeders from themselves. The above feeder cattle procurement situation is the exact same cattle procurement situation that was the basis for the Pickett vs. IBP lawsuit.

Due to the fact that packers bought fat cattle FROM WILLING SELLERS through forward contracts and grid pricing, at times they would drop their price accordingly for the balance of their needs. This was considered market manipulation due to a lower cash market (even though there is just as many times that the reverse is true when the cash market is higher than the grid or forward contract price). Dropping the price in the fat cattle cash market to reflect purchases made through forward contracts and grid pricing was deemed as market manipulation by the packer blaming conspiracy theorists yet the same practice during the purchase of feeder cattle is considered THE FREE ENTERPRISE SYSTEM WORKING AS IT SHOULD. GO figure!

This is why the short sighted actions of the packer blaming segment of our industry, in their quest to punish that which they do not understand, will create unintended consequences for the entire cattle/beef industry. You cannot impose cattle procurement restrictions on one segment of the industry without having it also affect other segments of the industry.

Look no further than Country of Origin labeling to see the results of short sighted emotional based legislation absent the logic needed to support it. Labeling "US BEEF" sounds good until you realize just what a small percentage of our beef AT THE RETAIL LEVEL is foreign beef. Then to prove origination for an enforceable rule, you have to have traceability. Those who insisted on proving where beef was "BORN, RAISED, AND PROCESSED" did not want traceability. The epitomy of hypocrisy. So what did we end up with? Beef labeled as "CAN-MEX-USA" because the origination could not be proven. What's the value in that? This added expense to the industry with no gain and the packer blamers still claim it as a victory.

Same thing will happen with the GIPSA rules. The end result will be a socialized cattle market where cattle are priced the same regardless of quality due to concerns with legal action taken against cattle procurement situations that suggest "favoritism".

Bottom line, you cannot impose fat cattle buying restrictions on packers unless you are willing to impose those same cattle procurement restrictions on the purchase of feeder cattle.


~SH~
 
Rules for trading stock in a company are not the same as rules that apply to cattle procurement. Nice diversion! I'll take that as you don't have an answer for the hypocrisy of applying rules to the purchase of fat cattle without it affecting the purchase of feeder cattle. As expected.

"WHERE THERE'S SMOKE THERE'S ARSON"

Same-O, Same-O!


~SH~
 
~SH~ said:
Rules for trading stock in a company are not the same as rules that apply to cattle procurement. Nice diversion! I'll take that as you don't have an answer for the hypocrisy of applying rules to the purchase of fat cattle without it affecting the purchase of feeder cattle. As expected.

"WHERE THERE'S SMOKE THERE'S ARSON"

Same-O, Same-O!


~SH~
Click to expand...

You're right, rules for stocks are different than for cattle - which actually is the problem. You missed the point completely. Let me explain; Those markets have created different classes of investors and identified certain problems that they would cause because of who they are, how they operate, what they can know and when, etc.... and then those markets have created the rules they feel appropriate towards those different classes - all in an effort to make their markets as fair and transparent as possible.

It comes down to priorities. Every major market that I know of has placed the highest priority on running as fair of market as possible - and has created rules to ensure that fairness as best they can.
 
Sandhusker,

If the GIPSA rules are adopted as proposed by you and your fellow packer blamers, they will be ruled unconstitutional in a court of law.

WRITE IT DOWN!

You read it here first.

The forward thinking segment of the cattle/beef industry will not tolerate a "socialized" cattle marketing agenda where all cattle are priced the same regardless of quality.


~SH~
 
I was thinking this morning about the hypocrisy of the GIPSA rules as they COULD apply to salebarn marketings.

What about the price discrimination for the odd colored calves unnecessarily sorted out at the sale barn so the buyer could have all like colored calves??? This has cost me $5/cwt on 100 head just for calves of a different color that would feed the same and hang the same. Don't tell me they wouldn't because the most profitable pen of cattle I fed were put together odd colored calves.

What about the meek and mild producer with 40 head that had to wait until the wee hours of the evening to sell his cattle after most of the orders were filled and the price dropped accordingly?

What about the price discrimination for loads of cattle that don't fit the semi load weight amounts?

What about the price discrimination for calves that haven't had their fall shots?

What about the preferential treatment for sellers of large volumes of cattle?

What about the price incentive for source verified cattle?

What about the price incentive for BQA certification?

What about the price discrimination for frozen ears and calves with no tails?

What about the lost value to extra shrink from cattle that stood too long before they were sold or run up and down the alleys by the "whistling whipper snappers" to shrink them out.

What about the price discrimination for calves with runny noses and coughing?

What about the price discrimination for the calf that comes in with it's neck cranked because the salebarn help slammed the gate on it?

Oh, I know they are all "FANCY" and "OUTSTANDING" and from "REPUTATION OUTFITS" but the price differentiation would suggest otherwise.

If you want to socialize the fat cattle markets to create a disincentive for quality cattle in the feedlot the same rules better apply to sale barn marketings of feeder cattle. Oh, but that's different isn't it? Hypocrites!

Yeh, as a matter of fact, I did wake up on the wrong side of the bed.


~SH~
 
~SH~ said:
Sandhusker,

If the GIPSA rules are adopted as proposed by you and your fellow packer blamers, they will be ruled unconstitutional in a court of law.

WRITE IT DOWN!

You read it here first.

The forward thinking segment of the cattle/beef industry will not tolerate a "socialized" cattle marketing agenda where all cattle are priced the same regardless of quality.


~SH~
Click to expand...

I "Wrote it down" when you predicted that the Japanese would fall all over themselves to get our non-tested beef, too. A prognosticator you're not.
 
~SH~ said:
I was thinking this morning about the hypocrisy of the GIPSA rules as they COULD apply to salebarn marketings.

What about the price discrimination for the odd colored calves unnecessarily sorted out at the sale barn so the buyer could have all like colored calves??? This has cost me $5/cwt on 100 head just for calves of a different color that would feed the same and hang the same. Don't tell me they wouldn't because the most profitable pen of cattle I fed were put together odd colored calves.

What about the meek and mild producer with 40 head that had to wait until the wee hours of the evening to sell his cattle after most of the orders were filled and the price dropped accordingly?

What about the price discrimination for loads of cattle that don't fit the semi load weight amounts?

What about the price discrimination for calves that haven't had their fall shots?

What about the preferential treatment for sellers of large volumes of cattle?

What about the price incentive for source verified cattle?

What about the price incentive for BQA certification?

What about the price discrimination for frozen ears and calves with no tails?

What about the lost value to extra shrink from cattle that stood too long before they were sold or run up and down the alleys by the "whistling whipper snappers" to shrink them out.

What about the price discrimination for calves with runny noses and coughing?

What about the price discrimination for the calf that comes in with it's neck cranked because the salebarn help slammed the gate on it?

Oh, I know they are all "FANCY" and "OUTSTANDING" and from "REPUTATION OUTFITS" but the price differentiation would suggest otherwise.

If you want to socialize the fat cattle markets to create a disincentive for quality cattle in the feedlot the same rules better apply to sale barn marketings of feeder cattle. Oh, but that's different isn't it? Hypocrites!

Yeh, as a matter of fact, I did wake up on the wrong side of the bed.


~SH~
Click to expand...

I hear a lot of debate regarding the impact of the proposed rule on calves / salebarns. Even though the proposed rule might not mention calves, they are not mentioned in any exclusions. As such, anyone in your mention above might be able to use the proposed rule as grounds for a complaint.

What is mentioned in the rule, is procurement of cull cows and bulls.Check out section 3.3 found on page 8 at
http://beefusa.org/uDocs/Gipsa-Report_2010-11-09.pdf

We've all attended sales where an order buyer is holding a "deck of cards", buying cull beef cows for packer A, bulls for packer B, and dairy cows for packer C. As written in the proposed rule, this same person must whittle his deck down to one. Proponents of the rule claim this will force more buyers to attend the auction. Care to take a bet on this happening? Is it more likely that in this scenario the order buyer will be forced to spend his time elsewhere? It is mentioned on page 48 in the link above 150-200 sale barns will be forced out of business due to the rule.
 
Good points SH and Beefman.

Those order buyers just might give up the travel, cronyismc and favoritism of too many of the sale barns and spend their time on the internet buying direct from ranchers.

mrj
 
Sandhusker: "I "Wrote it down" when you predicted that the Japanese would fall all over themselves to get our non-tested beef, too."
Click to expand...

Show me where I ever said, "Japan would fall all over themselves to get our non-tested beef".

Watch this readers .........

Diversion of the question or avoidance of the question, take your pick but you don't hold your breath waiting for Sandhusker to bring a quote to back his position.

My point on bse testing was and still is this, it's stupid to cave to the perception that testing of cattle under 20 months of age is justified when bse prions don't show up in cattle that young with the tests that were available at the time of the debate. You're such a fool to cling to such worthless arguments but that's exactly what I have come to expect from you.


Sandhusker: "A prognosticator you're not."
Click to expand...

The "CAN-MEX-USA" beef labels at the local supermarket from your worthless "M"COOL law would strongly suggest otherwise. You haven't played a winning hand yet Sandhusker.


~SH~
 
sh are you back around again comparin apples to oranges,winter is settin in,reckon the gophers hard to trap in all that snow,so you think you will settle in for the winter huh.................welcome :wink:
but dont be surprised if the out come mimics the last :D
good luck
 
Back to the original question. I don't think that the order buyer is manipulating the market at all. He bought the first set of cattle on one day (or week or few weeks) and he bought the next set of cattle on another day (or week or few weeks). Who expects the market to be the same for all cattle that were sold from one year's calf crop across the board? That's crazy. The market changes and you're either in or you're out. As well, this order buyer can't control the market because someone else will outbid him on those cheaper calves when he tries to back off his price. He'll only be able to lower his average purchase price if the market allows him to.

An individual has the opportunity to contract the calves at any given time, just like the buyer can contract them at any given time. If I like the price and I can make a profit today, then it might make sense to sell today. If I don't like the price then I wait. Hopefully a guy gives himself some time to do this instead of waiting until the cattle just have to go down the road.

Right now, today, I can trade the November 2011 Feeder Cattle contract on the CME. If I like the price of feeder cattle today for Nov. '11, I can sell calves (i.e. sell the Nov. '11 Feeder contract) that aren't even born yet, RIGHT NOW. I've got an opportunity all the way up until November '11 to price the cattle on the board!! If I don't raise enough calves to fulfill a contract, then I can go deal with a feedlot directly instead or partner with my neighbor to get enough cattle together to create a marketable unit. Otherwise, I can head to the sale barn and play roullette without all of the trouble.

Laziness is something that I battle once in awhile too, but there's no excuse for my laziness and there's no excuse for those that can do a better job of marketing. Asking the government to ensure that I don't get left in the dust is like asking the preacher if he'd make some change for me in the collection plate. Bad idea and I won't like the "fair" outcome.

The reason the sale barns sort off the different colored cattle and the one with a kink in his tail, etc., is because they are choosing to cater to the buyers. Go in the sale barn manager's office and give him the what-for! He's not the only guy that can sell your cattle and he needs to know it!

:cboy:
 
Hayseed: ".... but dont be surprised if the out come mimics the last"
Click to expand...

I wouldn't expect anything less than the same outcome. Blamers will never face the consequences of their short sighted emotioanally driven decisions. They just find something or someone else to blame for their lack of foresight. It's never been any different.

I just like to show up occassionally and banter with packer blamers who are clueless as to how the packing industry operates.

R-CALF's dismal 0 & 9 record pretty much defined, as you say, "the outcome" of those previous debates.



~SH~
 

Latest posts

Top