~SH~ said:
[Rod, you never mentioned anything about "GROSS" or "NET" profit. You said "PROFIT" and now you are trying to cover your tracks.
As I mentioned SH, I thought it was obvious that I had calculated gross profits. You'll notice there was no mention of packer expenses once I had arrived at the $400 mark. This is gross profits, and I assumed that everyone would understand that. I even asked if the packer was so inefficient that it would cost him $396 to process that beef (to arrive at your $3.88 number). Obviously a gross profit calculation.
You and Jason provided with some additional numbers so I could attempt to arrive at a net profit, and yet we're still sitting at $92 more profit than whats been reported as average. I only ask for more expenses to net off.
~SH~ said:
DSCC: "I did learn that people are using a 36% (come on man, 36%?) red meat yield on HAMBURGER cows to try and justify packer profit margins."
Let's not misinterpret what I stated. If 36% of LIVE ANIMAL WEIGHT is not representative of RED MEAT YIELD, tell me what the number is Rod?
No SH, I used a 50% carcass yield to arrive at my initial estimation of the number of pounds of hamburger that the packer would obtain from that live animal. You called me on it, and I agreed that it was an error, and went with your 36% red meat yield to get 410 pounds to prevent further debate. Since I was calculating based on cheap hamburger, you and I both know that a certain percentage of the trim would be returned back to make the ground beef. As such, we'd end up with a > 36% yield on that animal.
~SH~ said:
The point that you are missing is that this ofal (both edible and inedible) has more value to the larger packer and they pay for cattle accordingly. The smaller less efficient packer that does not utilize the value of ofal pays accordingly.
SH, I won't deny that the ofal has a certain value to the packer, but I didn't calculate that into the revenue from the animal, just to make things a little easier. You then told me that the ofal needed to be subtracted from the packer revenue. Since I only gave the packers revenue on 36% of the live carcass (410 lbs), that ofal value would be ADDED to packer revenue, not subtracted. You've went both ways on me. I also won't deny that they may pay the producer/feedlot a little more based on the ofal value, that only amplifies my position.
~SH~ said:
Contract markets do not DRIVE DOWN cash markets. If that was the case, the cash market would always be lower than the formula and forward contract markets.
So if thats the case, why have they driven down cash market values in the grain industry? I already said that the cash market could be higher than formula over the short term, but longer term you will see a downward pressure on the cash market. Its undeniable. Its already happened to one industry.
~SH~ said:
History has already proven you wrong Rod. Currently, there is more cattle sold on formula and grid pricing in the U.S. than ever before and guess what? That's right, highest feeder cattle prices ever recorded.
Consumer demand is also at an all time high, at least in my country and overseas markets. China had opened their doors to trading beef, opening up a HUGE market. I say if we had open bid systems and full transparency in the system, our feeder and fat prices would be even higher than they are today.
~SH~ said:
DSCC: "The packer doesn't owe me a living, however I am captive to one packing plant, and he is exercising his market power to block my entry to that market."
That's not true!
You have two large packing companies in Canada both wanting your cattle and you also have the option of combining loads with another producer to ship to packing plants in the United States.
No, I have one company in my area, and he's already stated he doesn't want my small lots. He's also already stated that he doesn't want several people to band together and send in a consolidated load. So I no longer have that option. My next closest option is to truck an additional 4 hours away, and by the time I've done that, my profits are eaten up by trucking costs. Ditto to the US.
~SH~ said:
Don't be such a defeatist.
I'm not a defeatist. They beat me in every way I've looked thus far, but I've kept looking. And I'll keep looking. I have other options available to me. But it doesn't change the fact that they've used their market position to reduce my options.
~SH~ said:
No it's not. The cash market for feeder cattle is driven by the price of corn and the futures market. Those are the factors that play on the market, not how many cattle were sold previously.
If thats the case, when sale barn prices are higher than the feedlot buyers maximums, they wouldn't be bother to call the feedlot and see what to do. I don't know about your barns, but when prices are on the climb, the buyers get pretty busy on those cell phones. When prices are depressed, no calling. If the maximum a feedlot will pay is purely based on corn costs and futures, there would be no need for the calls. They'd know exactly what the maximum is and be done with it.
Perhaps things are different in your area because producer contracts have already skewed the system. In my area, virtually all FEEDERS are still sold through the barns.
~SH~ said:
There is no need to estimate. On any given day you can see what corn and futures prices are which drive cattle prices.
It must be nice to have a simplified market then. Up here, we need to watch YOUR corn markets, YOUR futures markets, our own barley/wheat/oat/corn markets, our futures, sileage prices, and a few other countries prices.
~SH~ said:
Order buyers can relay "QUALITY" information but the futures market is the same for every feeder and the corn prices vary based on basis only.
I disagree with the quality statement. With a minimum sale of 2500 head, and sale numbers often into the 3500 head range, your quality spread from sale to sale is going to be minimal. These are presort sales I'm talking about.
Rod