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Packers WILL Lower Cash Bids To Increase Margins

Mike

Well-known member
LIVE CATTLE

Live cattle futures drifted lower on Thursday with the front month Dec closing near its session low. While no technical damage was sustained, it appears the down trend will remain intact. A few thousand cattle traded in TX on Thursday at lower money, 92.5 as reported by the USDA. No trading was reported in KS and NE. The wholesale beef appears to be running out of gas which is not a positive sign for the bullish trader or feedlot owner/operator. Beef packers, who continue to operate at poor margins, are looking for a path to profitability. If they can't achieve this through higher beef prices, they WILL eventually achieve positive margins through lower cash bids. I'm expecting the latter. Most of my hedgers are short the Dec, Feb and Apr. However, the fact that several of my hedgers are not "short one cow" underscores the bullish attitude that prevails in the country. These attitudes contribute to heavy weight cattle. Currently average dressed cattle weights are running well above last year and record large. The cattle-on-feed should show active placements during Oct and I believe will be negative to the board next week. My spec trade is short the Dec with stops at 9620, short a few Feb and short Jan feeders with a stop at 10990. My opening call is mixed to lower.

If you're not currently satisfied with your trading results and your brokerage relationship, I invite you to give me a call or send and email to explore what full service brokerage can do for you. 877.377.7905 [email protected] .

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Tex

Well-known member
That is how supply/demand free markets work.

What is necessary is competition on their side to make sure they are not increasing margins and increasing their profitability because of market power, not because they can't get enough money for beef from the market.
 
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Anonymous

Guest
Yep-- and they don't have to worry about running out as then they just start calling in some of their "owned" cattle to keep things rolling until the the folks in feedlot land have to sell at their price- and they have their lower prices and higher margins...

But- Mike remember--old SH and some of the NCBAers told us this can't/doesn't happen....That their "poor packer buddies" have to take what they can... :roll:
 
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Anonymous

Guest
Looks like the Packer plan to raise boxed beef prices and margins is working...Boxed beef rose over $6 in a week.....Cattle purchases are called "weak"....

Kind of reminds me of the oil Cartels...... :(


http://www.cattlenetwork.com/content.asp?contentid=178575
 

Brad S

Well-known member
I am THE ORIGINAL person SH labled "Packer Blamer," but I will tell you that I believe cattle feeders need an exit strategy in place at the time cattle are placed on feed. ESPECIALLY WHEN PACKERS ARE BLEEDING RED INK. You see when margins are negative, packers an't endlessly lose money. I may get a little chancier when packers are in the black. This feeding game doesn't favor beginners, and only beginners are placing cattle without a net (especially right now).

I can buy/lease USPB shares for a pittance of what is required to raise a calf to $650#. There may be a thousand excuses to fail, but I only need a single avenue for success.



"Looks like the Packer plan to raise boxed beef prices and margins is working...Boxed beef rose over $6 in a week.....Cattle purchases are called "weak"

So packers are price fixing at the boxed beef level instead of sniding feeders. What you are citing is an example of oligopoly competition working. Its so curious you mention SH, when I've spent so much time criticizing competition at the packer level with SH, but that dog don't hunt right now.
 

Sandhusker

Well-known member
Brad, "I am THE ORIGINAL person SH labled "Packer Blamer," "

The first one of thousands! :shock: You ought to have a plaque or something!
 

Tex

Well-known member
Brad S said:
I am THE ORIGINAL person SH labled "Packer Blamer," but I will tell you that I believe cattle feeders need an exit strategy in place at the time cattle are placed on feed. ESPECIALLY WHEN PACKERS ARE BLEEDING RED INK. You see when margins are negative, packers an't endlessly lose money. I may get a little chancier when packers are in the black. This feeding game doesn't favor beginners, and only beginners are placing cattle without a net (especially right now).

I can buy/lease USPB shares for a pittance of what is required to raise a calf to $650#. There may be a thousand excuses to fail, but I only need a single avenue for success.



"Looks like the Packer plan to raise boxed beef prices and margins is working...Boxed beef rose over $6 in a week.....Cattle purchases are called "weak"

So packers are price fixing at the boxed beef level instead of sniding feeders. What you are citing is an example of oligopoly competition working. Its so curious you mention SH, when I've spent so much time criticizing competition at the packer level with SH, but that dog don't hunt right now.

I hope they are successful on raising prices. I also hope there is enough competition between them to increase prices for cattle when there are extra profits to be passed down the supply chain.
 
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Anonymous

Guest
Why am I not getting a "warm fuzzy feeling" that the packers will pass these price raises down the line to feeders-cow/calf folks..... :???:
 
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