Packers are our allies?

[Jinglebob]

I've seen it stated on here somewhere, that if the packers make more money then he will pay more for the next cattle that he buys to butcher. And the feedlots pay more as they make a bigger profit on the ones they just sold to the packer. So they pass it on to the stocker operators or cow/calf producers for the next cattle they buy.


If this is , why when live cattle prices raise, the grocers raise the price of beef in the grocery store and when the live cattle come down in price, thus insuring lower costs to the whole sector, don't beef prices at the grocery store drop, until they have trouble selling the meat at the given price. When they lower their input costs of new beef they can afford to sell for less. Or they will take a loss.The grocery stores never lower prices until they have to and never pay more than they have to, thus insuring their profits. I think it's called good business.

I just don't see the conection of someone paying more because he makes more. The only reason I can see to pay more is to out bid someone else that is your competitor. And still buy as cheap as possible to improve your profit margin.

I've never seen anyone go to a sale to pay the highest price, unless they just wanted to make everone think they were a big wheel or wealthy. Seems like most folks try to buy something as cheap as possible, to save money for other purchases or put in their savings account. I don't see why packers would be any different. Or feedlot owners. Or stockers. Or ranchers.

Did you ever have anyone tell you about the deal they got at the sale and paid way more than anyone anywhere else did? Or brag on overspending on a new purchase of a car or pickup or tractor.

But I guess I could be wrong. :wink:

Afer all, I'm just a dumb ol' country boy who didn't go to an Ivy leauge college and study economics. I had to learn them from the live market and my banker while going to the school of hard knocks! :shock: :lol: :wink:

 

[HAY MAKER]

Thats not a bad school jinglebob,same one I went to...............good luck

 

[Jinglebob]

Hay Maker;

Don't get me wrong. There ain't nuthin' wrong with goin' to one of them pinko, commie spewin' schools back east. Shoot most of our presidents have been graduates. Shoot, I got a good buddy who went to Yale and it didn't ruin him or nuthin"! Of course his Dad and Mom gave him a real good start from the time he was little. Why they even taught him to read and everything!

I'm proud of having graduated Magnum Cam Loud'y from my school, tho' I would have gone somwhere else if I could have afforded it! :lol:

Nothin' wrong with sweat equity in one of these ol'places is there?

 

[Jason]

I've seen it stated on here somewhere, that if the packers make more money then he will pay more for the next cattle that he buys to butcher.... So they pass it on to the stocker operators or cow/calf producers for the next cattle they buy.


If this is , why when live cattle prices raise, the grocers raise the price of beef in the grocery store and when the live cattle come down in price, thus insuring lower costs to the whole sector, don't beef prices at the grocery store drop, until they have trouble selling the meat at the given price....

I just don't see the conection of someone paying more because he makes more. The only reason I can see to pay more is to out bid someone else that is your competitor. And still buy as cheap as possible to improve your profit margin.

I've never seen anyone go to a sale to pay the highest price, unless they just wanted to make everone think they were a big wheel or wealthy. Seems like most folks try to buy something as cheap as possible, to save money for other purchases or put in their savings account. I don't see why packers would be any different. Or feedlot owners. Or stockers. Or ranchers.

Did you ever have anyone tell you about the deal they got at the sale and paid way more than anyone anywhere else did? Or brag on overspending on a new purchase of a car or pickup or tractor.

JB you answered some of your own questions. Packers will pay more if they are more efficient, not because of charity, but to outbid their competition. If they bid cheap they leave room for others to outbid them, and take the profit even if it is less than a desired amount of profit.

If there was $100 per head profit all the time why wouldn't everyone build a slaughter house? Because there isn't always that level of profit. Someone would do it for $90 then $80 then all the way to $10 or even $3.88 over a number of years. Want to build a 50 million dollar facility on a $3.88 per head margin? I didn't think so.

As for retail prices, consumers have little tolerance for price swings. If beef at the store fluctuated as live cattle or even as wholesale cutouts do, consumers would be tempted to wait on their beef purchases as it might drop next week. If it climbs they are put off. Retailers keep prices reasonably constant making more some weeks than others even losing money at times. Beef isn't a commodity you can keep on the shelf indefinately until you get your price.

You say you've never seen anyone at a sale pay the highest price. By defination, each sale done by auction goes to the highest bidder. If a limited quantity is for sale and you want it, and a competitor is bidding against you, you pay as much as you can to get it. If the competition goes higher they own said quantity. In the case of cattle, if buying some cattle at a higher than profitable price is cheaper than getting none, buyers have been known to over pay for said cattle.

Have I ever heard people say they got a deal but paid way more than anywhere else? Yes all the time. Some have no idea what the market is. I have also seen real deals at auction, where sellers get no where near the value they should have.

Jason

 

[Jinglebob]

OK Jason.

Your post sound reasonable.

So where does any of this show that packers will pay more unless they are forced to it by the competition?

Or anyone else for that matter?

 

[Jason]

So where does any of this show that packers will pay more unless they are forced to it by the competition?

Or anyone else for that matter?

Exactly true JB, competition forces them to pay more. The margins get tighter so only the most efficient survive.

80% of the cattle are slaughtered by 4 packers. That is competition. Many industries are down to 2.

If an industry ever got to 1 player and that player started taking excessive profits, a new competitor would spring up to take some of those profits.

The packing industry has become the most efficient way to move the number of cattle and pounds of beef producers supply. When IBP invented a newer more effecient way to box beef, others had to follow or they would have let IBP own the entire industry, they wanted their share. When all use the same techniques, they bid the profits down to wire to get the cattle they need to stay full. Even in Canada, they were only able to pull big profits for a short while. As soon as feedlots pulled the supply down the packers had to increase bids to draw cattle forward.

Is it the packers job to keep us in business? No! Do they want to put us out of business? No! They assume we can watch our bottom line ourselves. Some can, some can't.

Jason

 

[Jinglebob]

Jason

Very good post. I agree with all of yopur statements except "If an industry ever got to 1 player and that player started taking excessive profits, a new competitor would spring up to take some of those profits."

And I don't even totally disagree, but wonder, what if they were so powerful as to stop all competition? And if it got to be just two, wouldn't they act as if they were competiters, when in fact they would colude to force the costs of their inputs higher? I've heards of this rumor used in a city with two salebarns that are openly owned by two people, but in reality are owned by just one person. That way he can cuss the other guy and either way get all of the business.

An older rancher told me he was talking to a man one time, who was Jewish. The rancher stated that he wished he could find a ranch that would "pencil". Thje old Jewish man told him, "When ranches pencil, two Jews will own them all."

And I'm not being racist, just relatng a story I heard, as it was told to me. Sure made me think.

But.......

Again I ask, where does any of this show that packers will pay any more than they are forced to?

 

[rkaiser]

You are expalining the situation we have here in Canada right now Jingler. Two packers - no competition. Our fat price is moving up and down with no consideration for supply and demand. Of course Jason will argue with me, just like a whole bunch more insulated ranch folks here in Alberta who will admit times are tough but have the equity to ride this storm. We have been getting raped by Cargil and Tyson since the border opend to boxed beef in Sept. 2003. If you are a cagey feedlot operator, dealing simply with margins, you may have gotten lucky on a few cattle, but in every one of these situations, it has been a matter of one producer making it off the back of another.

We have to have someone up here in Canada defending the poor old packers, and that somebody is more often than not our Jason.

I am a packer myself, in a way. We have found a way to involve producer, processors, and retailers in an integrated way without capitalizing on one another. I realize that this is near impossible to acheive in the conventional marketplace with nothing but profit on everyone's brain.

Congradulations to you Jason, for finding your own way to make it in this disfunctional world of the Canadian Beef Industry.

 

[Sandhusker]

I've seen it stated on here somewhere, that if the packers make more money then he will pay more for the next cattle that he buys to butcher. And the feedlots pay more as they make a bigger profit on the ones they just sold to the packer. So they pass it on to the stocker operators or cow/calf producers for the next cattle they buy.


If this is , why when live cattle prices raise, the grocers raise the price of beef in the grocery store and when the live cattle come down in price, thus insuring lower costs to the whole sector, don't beef prices at the grocery store drop, until they have trouble selling the meat at the given price. When they lower their input costs of new beef they can afford to sell for less. Or they will take a loss.The grocery stores never lower prices until they have to and never pay more than they have to, thus insuring their profits. I think it's called good business.

I just don't see the conection of someone paying more because he makes more. The only reason I can see to pay more is to out bid someone else that is your competitor. And still buy as cheap as possible to improve your profit margin.

I've never seen anyone go to a sale to pay the highest price, unless they just wanted to make everone think they were a big wheel or wealthy. Seems like most folks try to buy something as cheap as possible, to save money for other purchases or put in their savings account. I don't see why packers would be any different. Or feedlot owners. Or stockers. Or ranchers.

Did you ever have anyone tell you about the deal they got at the sale and paid way more than anyone anywhere else did? Or brag on overspending on a new purchase of a car or pickup or tractor.

But I guess I could be wrong. :wink:

Afer all, I'm just a dumb ol' country boy who didn't go to an Ivy leauge college and study economics. I had to learn them from the live market and my banker while going to the school of hard knocks! :shock: :lol: :wink:

You're right, Bob. It is a rediculous notion that packers will pay more for cattle if they have more money. Have you ever heard of a packer's tithe?

 

[HAY MAKER]

I've seen it stated on here somewhere, that if the packers make more money then he will pay more for the next cattle that he buys to butcher. And the feedlots pay more as they make a bigger profit on the ones they just sold to the packer. So they pass it on to the stocker operators or cow/calf producers for the next cattle they buy.


If this is , why when live cattle prices raise, the grocers raise the price of beef in the grocery store and when the live cattle come down in price, thus insuring lower costs to the whole sector, don't beef prices at the grocery store drop, until they have trouble selling the meat at the given price. When they lower their input costs of new beef they can afford to sell for less. Or they will take a loss.The grocery stores never lower prices until they have to and never pay more than they have to, thus insuring their profits. I think it's called good business.

I just don't see the conection of someone paying more because he makes more. The only reason I can see to pay more is to out bid someone else that is your competitor. And still buy as cheap as possible to improve your profit margin.

I've never seen anyone go to a sale to pay the highest price, unless they just wanted to make everone think they were a big wheel or wealthy. Seems like most folks try to buy something as cheap as possible, to save money for other purchases or put in their savings account. I don't see why packers would be any different. Or feedlot owners. Or stockers. Or ranchers.

Did you ever have anyone tell you about the deal they got at the sale and paid way more than anyone anywhere else did? Or brag on overspending on a new purchase of a car or pickup or tractor.

But I guess I could be wrong. :wink:

Afer all, I'm just a dumb ol' country boy who didn't go to an Ivy leauge college and study economics. I had to learn them from the live market and my banker while going to the school of hard knocks! :shock: :lol: :wink:

You're right, Bob. It is a rediculous notion that packers will pay more for cattle if they have more money. Have you ever heard of a packer's tithe?

Are you reading this BIG DUMMY maybe if you hear it enough it will sink in that hard canuckle head,then you wont be so eager to enroll in these packer programs.................good luck

 

[Big Muddy rancher]

I've seen it stated on here somewhere, that if the packers make more money then he will pay more for the next cattle that he buys to butcher. And the feedlots pay more as they make a bigger profit on the ones they just sold to the packer. So they pass it on to the stocker operators or cow/calf producers for the next cattle they buy.


If this is , why when live cattle prices raise, the grocers raise the price of beef in the grocery store and when the live cattle come down in price, thus insuring lower costs to the whole sector, don't beef prices at the grocery store drop, until they have trouble selling the meat at the given price. When they lower their input costs of new beef they can afford to sell for less. Or they will take a loss.The grocery stores never lower prices until they have to and never pay more than they have to, thus insuring their profits. I think it's called good business.

I just don't see the conection of someone paying more because he makes more. The only reason I can see to pay more is to out bid someone else that is your competitor. And still buy as cheap as possible to improve your profit margin.

I've never seen anyone go to a sale to pay the highest price, unless they just wanted to make everone think they were a big wheel or wealthy. Seems like most folks try to buy something as cheap as possible, to save money for other purchases or put in their savings account. I don't see why packers would be any different. Or feedlot owners. Or stockers. Or ranchers.

Did you ever have anyone tell you about the deal they got at the sale and paid way more than anyone anywhere else did? Or brag on overspending on a new purchase of a car or pickup or tractor.

But I guess I could be wrong. :wink:

Afer all, I'm just a dumb ol' country boy who didn't go to an Ivy leauge college and study economics. I had to learn them from the live market and my banker while going to the school of hard knocks! :shock: :lol: :wink:

You're right, Bob. It is a rediculous notion that packers will pay more for cattle if they have more money. Have you ever heard of a packer's tithe?

Are you reading this BIG DUMMY maybe if you hear it enough it will sink in that hard canuckle head,then you wont be so eager to enroll in these packer programs.................good luck

Yea I read it you Texas midget. What packer programs am I enrolled in. Come on tell me if you know so much.
And how many cattle are you feeding? How do you market them. Are you like Randy and into vertical integration? Oh no you take you calves to a sale barn. Hope someone bids on them. Have you ever asked that no one feeding for a packer buys your calves. .Maybe you should fatten them your self and peddle meat out of the trunk of your car at a truck stop along the hiway. :cowboy:

 

[Jason]

You are expalining the situation we have here in Canada right now Jingler. Two packers - no competition. Our fat price is moving up and down with no consideration for supply and demand. Of course Jason will argue with me, just like a whole bunch more insulated ranch folks here in Alberta who will admit times are tough but have the equity to ride this storm. We have been getting raped by Cargil and Tyson since the border opend to boxed beef in Sept. 2003. If you are a cagey feedlot operator, dealing simply with margins, you may have gotten lucky on a few cattle, but in every one of these situations, it has been a matter of one producer making it off the back of another.

We have to have someone up here in Canada defending the poor old packers, and that somebody is more often than not our Jason.

I am a packer myself, in a way. We have found a way to involve producer, processors, and retailers in an integrated way without capitalizing on one another. I realize that this is near impossible to acheive in the conventional marketplace with nothing but profit on everyone's brain.

Congradulations to you Jason, for finding your own way to make it in this disfunctional world of the Canadian Beef Industry.

Randy you make me laugh. We have more than 2 packers, although numbers 3-5 are much smaller than the big 2.

They pay as little as they can, but when they get so low cattle stop moving. Supply and demand still affect their bids, but with too much supply they can be choosy with what they buy. How do you explain the packers only killing 3 days a week earlier this year?

Feedlots have been margined since mid summer 2003 and have made money on each turn of the cattle for the most part. I talked with one small feeder (1000 hd) and he made $180 on some calves he bought in 2004. He lost $40 on some when he panicked after the border stayed closed in March and sold right then.

This is in our dysfunctional market. As well what is happening? Packers are springing up to take some of those profits. YOU are prooving my point as you work on setting up a vertical system.

In the States where things are more balanced as far as supply and kill space, the price has moved in response to competition.

If you really knew my situation you wouldn't say I was insulated. Far from it. I just watch signals and adjust as best I can. I agree many are living on equity, but not all of us. Some of us have just dug in and reduced expenses as best as possible and hope for a resolution to this mess.

 

[Jinglebob]

I did not mean to impune any packers or anyone else in the production chain. All need to make a profit or they will not survive. We are all allies, but sometimes it seems we have a pretty shakey alliance.

We all work towards the raiseing and selling of beef, but it doesn't become beef untill they cut it's head off and cut it up. So what is good for some in the industry is not good for others. We all just need a few good years to offset the bad.

Rain is wonderful stuff in our part of the country, but can you imagine what this 'ol country would look like if we got the rain that they do in Seattle? Everything in moderation. As the Ian Tyson song says. "Give me clear blue skies and 18 inches of rain."

Oh, and no one so far has shown me why a packer, or anyone else would pay more for anything, unless forced to do so. I try to buy the cheapest cost inputs while maintaining the most efficiant and effective and productive inputs, so as to hopefully make a profit.

 

[Soapweed]

Jinglebob: "Oh, and no one so far has shown me why a packer, or anyone else would pay more for anything, unless forced to do so. I try to buy the cheapest cost inputs while maintaining the most efficiant and effective and productive inputs, so as to hopefully make a profit."

You are right, Jinglebob. We all try to buy as cheap as we can and sell as high as we can, but do we need more government intervention to keep packers from screwing the cattle producers? The more rules and regulations that any parts of the industry have to contend with just cuts into the profits that are available.

It is just like running water through a long hose. The longer the hose, the more friction, and the less water that comes out at the end. I regard excessive government regulation as just extra hose, and there will be that much less water (profit) coming out at the end.

 

[Jinglebob]

Soapweed;

Well I sure ain't for more government!

All tho', in someways the government got us into this mess, so it ought to get us out! :shock: :lol:

Free enterprise should be left alone, but there have to be rules and it's sure a bitch when the big guys with more money and pull in Washington can get more out of the politico's than the little guy.

Kind of like subsidies. Get rid of them all and see how many family farms and ranches are left. I am for it if everyone else is.

Wish the feds would pay me for never plowing up the grass if they are going to pay those who did for putting it back into grass.

When the government puts it's finger into the lake, it's makes far reaching ripples that no one can predict, what the ripples will cause other things to do.

Next time you see me, ask me about why our eggs have 33% more cholesterol than they used too! :shock: :lol:

It's quite a story.

 

[HAY MAKER]

Are you reading this BIG DUMMY maybe if you hear it enough it will sink in that hard canuckle head,then you wont be so eager to enroll in these packer programs.................good luck

Yea I read it you Texas midget.

What packer programs am I enrolled in. Come on tell me if you know so much.

And how many cattle are you feeding? How do you market them. Are you like Randy and into vertical integration? Oh no you take you calves to a sale barn. Hope someone bids on them. Have you ever asked that no one feeding for a packer buys your calves. .Maybe you should fatten them your self and peddle meat out of the trunk of your car at a truck stop along the hiway. :cowboy:

MY mistake BDR,I just naturally assumed the way you kiss packers you would be enrolled in at least a dozen packer programs,sorry.........good luck

 

[Andy]

Everyone wants to pay as little as possible and make as much money as possible, but those are to different things.
If a packer has X overhead they need to run X number of cattle through in a week. So they may be better off to pay a couple dollars more per hundered wt to get more cattle. It is just like buying a hundred cows for 1000 dollars and turning around and selling them for 1100 dollars. (profit=$10,000-cost) Or would you be better of buying 500 cows for 1050 dollars and turing around and selling them for 1100 dollars? (profit=25,000-cost)
Packers don't look at a profit per head on the the production side of the plant, they do on the buying side. If they can make more money per week but less per head they are happy to do it.

 

[Jason]

Well I sure ain't for more government!

All tho', in someways the government got us into this mess, so it ought to get us out!

The gov't got US ranchers in the mess of record prices so should get you out?

Supporting legislation that limits who can own cattle sounds like more gov't to me.

 

[Mike]

Andy:"Packers don't look at a profit per head on the the production side of the plant, they do on the buying side. If they can make more money per week but less per head they are happy to do it."
__________________________________________________________
But Andy, are you saying the bigger, more efficient packers don't necessarily pay more? Wouldn't "efficiency" be on the "production side?

Your statement seems to say that the way for packers to profit is by paying as little as possible for fats.

 

[Jinglebob]

Jason'

I meant they got us into this mess by running all of the tribes onto a rez and opening up all of this country for settlement! Thats why there was the little smiley face icon. Like this :lol:

I was making a joke.

Sorry, didn't think everyone was that seriuos!

Mike;

Surely your logic must be wrong. Paying as little as possible for fats???? No, no, tell me it;s not true! :shock: :shock: :???: :?