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

See Through the Double Talk

Econ101

Well-known member
U.S.D.A. releases livestock and meat marketing study



(MEATPOULTRY.com, February 21, 2007)

by MEAT&POULTRY Staff



WASHINGTON — Complying with a congressional mandate, the Grain Inspection, Packers and Stockyards Administration of the U.S. Department of Agriculture has released the long-awaited Livestock and Meat Marketing Study. The report outlines the analyses of the effects of alternative marketing arrangements for fed cattle and beef, hog and pork, and lamb and lamb meat industries.



The final report focuses on the amount of A.M.A.’s; analyzes price differences and price effects; measures the costs and benefits of A.M.A.’s and assesses the range of implications of using these different marketing agreements.



An A.M.A. includes arrangements such as forward contracts, marketing agreements, procurement or marketing contracts, production contracts, packer ownership, custom feeding and custom slaughter. Cash or spot market transactions refer to transactions that occur immediately, or "on the spot." These include auction barn sales; video or electronic auction sales; sales through order buyers, dealers, and brokers; and direct trades.



The general conclusions of the study are:



• Use of A.M.A.s during October 2002 through March 2005, including packer ownership, is estimated at 38% of the fed beef cattle volume, 89% of the finish hog volume, and 44% of the fed lamb volume sold to packers.



• Packer-owned livestock accounted for a small percentage of transactions for beef and lamb (5% or less), even when the small percentage of partial ownership arrangements is included, but accounted for a large percentage of transactions for pork (20% to 30% depending on assumptions).



• Given the current environment and recent trends, researchers expect moderate increases in use of A.M.A.’s in the lamb industry, but little or no increase in the beef and pork industries.



• Cash market transactions serve an important purpose in the industry, particularly for small producers and small packers. In addition, reported cash prices are frequently used as the base for formula pricing for cash market and A.M.A. purchases of livestock and meat.



• The use of A.M.A.’s is associated with lower cash market prices, with a much larger effect occurring for finished hogs than for fed cattle.



• Many meat packers and livestock producers obtain benefits through the use of A.M.A.s, including management of costs, management of risk (market access and price risk), and assurance of quality and consistency of quality.



• Restrictions on the use of A.M.A.’s for sale of livestock to meat packers would have negative economic effects on livestock producers, meat packers, and consumers.



For more information about the livestock and meat marketing study, go to: http://www.gipsa.usda.gov/GIPSA/webapp?area=home&subject=lmp&topic=ir-mms



meatpoultry.com
 

Econ101

Well-known member
Mike said:
The use of A.M.A.’s is associated with lower cash market prices

Where have I heard this before?

• Restrictions on the use of A.M.A.’s for sale of livestock to meat packers would have negative economic effects on livestock producers, meat packers, and consumers.

You hit it, Mike. The article clearly states that many of the contracts are based on the cash market price. When A.M.A s are linked to the cash market, the total value to producers goes down.

Although it is true that there are negative economic impacts on livestock producers, packers, and consumers, without A.M.A s, the negative impact of the AMA s is greater as evidenced by lower prices.

GIPSA basically validated the Pickett allegations. This article is just trying to spin it by stating something that is true, but leaving out the comparative analysis of producer welfare with and without A.M. A. s.
 

Mike

Well-known member
Econ, I was browsing the "Peer Reviewer's" comments on the study and this one caught my attention:

"2. Section 2.1.1. Despite the survey population potentially eliminating many smallsized
operations, the researchers determined that an insufficient number of larger
sized operations were included. Therefore, they included or substituted several
sample operations with operations on National Cattlemen’s Beef Association
(NCBA) lists. Presumably, this would include only NCBA members. This inherently
biases the sample by excluding non-NCBA members.
Quite likely, cattle producers
would have different views on marketing and contracting according to their
affiliation with various industry associations."

Also this one:

"9. Section 6.1. Most of the beef producer respondents were cow-calf producers, with
relatively few feedlot operators amongst the respondents. Feedlot operations would
be more likely to use AMAs because they routinely purchase and sell cattle
throughout the year. By having a small portion of feedlots in the beef producer
group, the results may show less use of AMAs than actually exists. Further, this
results in having a greater proportion of smaller-sized operations in the respondent
group that are less likely to use AMAs and focuses the attention on the feeder cattle
market rather than the fed cattle market (where more AMAs are likely to exist).
This also seems inconsistent with the researchers’ goals in terms of wanting to select
businesses that are likely to use a variety of AMAs (as they did for the transaction
data collection, see Section 10). It would be helpful to have the cow-calf and feedlot
operator responses separated. Alternatively, the results could be weighted by the
number of head, rather than weighting all producers equally. Doing so would
alleviate the challenge that the results indicate that few producers use AMAs, but a
large number of livestock may be traded by those that do use AMAs."

Here's a goody too: :lol:

"10. Section 6. The problem in #9 would not be as concerning, however, had the
respondents been asked to provide in depth reasoning into their non-use of AMAs
(this applies to all survey segments, not just beef producers). Certainly, the
respondents identified, almost consistently, that they prefer spot market
transactions because it gives them “independence, complete control, and flexibility”.
However, the researchers did not appear to probe deeper into the reason the
respondents felt there was greater independence and control for spot market
transactions. Specifically, how did that benefit their operation? The sensitivity of
these results is further illustrated by the high ranking respondents that used and did
not use AMAs placed on receiving a higher sale price or lower purchase price. It
appears that many respondents felt that they were obtaining more favorable prices
(regardless of whether they used AMAs), but why? The responses to questions 4.1
and 4.2 in Table 6-1 (and analogous questions for other segments) provide very little
useful insight as to why producers, packers, processors, and others use spot market
transactions or AMAs. It does not appear that the respondents were asked how spot
market transactions gave them greater control, or how AMAs managed supply
chains better. These specifics would be helpful in better understanding the issues
surrounding AMAs. Further, it would enrich the discussion of the results in the text
and allow the researchers to discuss potential implications of the results, rather than
simply reporting the numbers that are contained in the tables."

Unbiased? Youbetcha! :shock:
 

Mike

Well-known member
Was nothing verified in this study?????????????????

Peer Reviewer:

"34. The report indicates that data was reviewed for internal consistency and that profit and
loss statements were compared to transactions data. Were any spot checks done internally
such as through a visit to the plant or by sending the information back to the plant in
summary form for them to verify?
RTI Response: Although it would have been desirable to do so, we were unable to visit plants
or send summary data back to plants for verification because of the time constraints of
conducting the study and the additional burden it would have placed on plants."
 

mrj

Well-known member
Mike said:
Econ, I was browsing the "Peer Reviewer's" comments on the study and this one caught my attention:

"2. Section 2.1.1. Despite the survey population potentially eliminating many smallsized
operations, the researchers determined that an insufficient number of larger
sized operations were included. Therefore, they included or substituted several
sample operations with operations on National Cattlemen’s Beef Association
(NCBA) lists. Presumably, this would include only NCBA members. This inherently
biases the sample by excluding non-NCBA members.
Quite likely, cattle producers
would have different views on marketing and contracting according to their
affiliation with various industry associations."

Also this one:

"9. Section 6.1. Most of the beef producer respondents were cow-calf producers, with
relatively few feedlot operators amongst the respondents. Feedlot operations would
be more likely to use AMAs because they routinely purchase and sell cattle
throughout the year. By having a small portion of feedlots in the beef producer
group, the results may show less use of AMAs than actually exists. Further, this
results in having a greater proportion of smaller-sized operations in the respondent
group that are less likely to use AMAs and focuses the attention on the feeder cattle
market rather than the fed cattle market (where more AMAs are likely to exist).
This also seems inconsistent with the researchers’ goals in terms of wanting to select
businesses that are likely to use a variety of AMAs (as they did for the transaction
data collection, see Section 10). It would be helpful to have the cow-calf and feedlot
operator responses separated. Alternatively, the results could be weighted by the
number of head, rather than weighting all producers equally. Doing so would
alleviate the challenge that the results indicate that few producers use AMAs, but a
large number of livestock may be traded by those that do use AMAs."

Here's a goody too: :lol:

"10. Section 6. The problem in #9 would not be as concerning, however, had the
respondents been asked to provide in depth reasoning into their non-use of AMAs
(this applies to all survey segments, not just beef producers). Certainly, the
respondents identified, almost consistently, that they prefer spot market
transactions because it gives them “independence, complete control, and flexibility”.
However, the researchers did not appear to probe deeper into the reason the
respondents felt there was greater independence and control for spot market
transactions. Specifically, how did that benefit their operation? The sensitivity of
these results is further illustrated by the high ranking respondents that used and did
not use AMAs placed on receiving a higher sale price or lower purchase price. It
appears that many respondents felt that they were obtaining more favorable prices
(regardless of whether they used AMAs), but why? The responses to questions 4.1
and 4.2 in Table 6-1 (and analogous questions for other segments) provide very little
useful insight as to why producers, packers, processors, and others use spot market
transactions or AMAs. It does not appear that the respondents were asked how spot
market transactions gave them greater control, or how AMAs managed supply
chains better. These specifics would be helpful in better understanding the issues
surrounding AMAs. Further, it would enrich the discussion of the results in the text
and allow the researchers to discuss potential implications of the results, rather than
simply reporting the numbers that are contained in the tables."

Unbiased? Youbetcha! :shock:



Mike, who was the person giving this 'information'? I was curious about it, so asked NCBA staff. The people who would have to have been involved IF it had been true, say it didn't happen. NCBA did not provide any member lists or names of any sort for that study.

Strict confidentiality of names of people talked with for the study was maintained.

NCBA was not consulted.

Also, the comment that "...cattle producers would have different views...." doesn't jibe with the fact that the study had nothing to do with anyones' "views".......it was about the price of cattle. Period.

The study is 276 pages of detailed, slow reading information regarding cattle marketing and prices. There surely have been/will be 'experts' and others studying it for some time, and there will be many different interpretations of the information depending upon the expertise, or the agenda of the individual commenting, most likely.

Some points and comments I find interesting. No particular order, and several sources:

Some experts say it is very much common sense.

There was found to be a large cash/spot market for cattle and it's NECESSARY to make these "AMA"'s work.

Over the years of this study, only 5% of the cattle were packer owned and the expectation is that this won't change much for years to come.

This study looked at how prices were 'discovered' on 58 MILLION head of cattle, and over 590,000 transactions, easily the most comprehensive study in the history of this topic.

61.7% were marketed via cash/spot market.
28.8% were marketed via marketing agreements.
4.5% were forward contracts.
5.0% were packer owned.

Quoting the study: "A hypothetical 100% restriction in AMA volumes resulted in a DECREASE in cumulative present value surplus of:
15.96% for feeder cattle producers
7.82% for fed cattle producers
5.24% for packers
4.56% for consumers

Darn! No major indictment of anyone as 'the bad guys'. How could they disappoint some of you so badly???

MRJ
 

Mike

Well-known member
MRJ: Mike, who was the person giving this 'information'?

The information I put in my post came directly from the USDA website. Cut and pasted. It was part of the "Peer Reviewers" comments on this particular research.

If you will read the study (I know you won't) you will find that much of the information came from a written "Survey" sent to producers, feeders, and packers. Not real research.

If the NCBA told you that, then somebody is lying. I can't imagine it would be a person who was asked to peer review the research.

Who does that leave?
:lol: :lol: :lol: :lol: :lol: :lol:


Yoo Hooo! Where are you? Come out come out, wherever you are!
 

PORKER

Well-known member
It does not appear that the respondents were asked how spot
market transactions gave them greater control, or how AMAs managed supply
chains better. These specifics would be helpful in better understanding the issues
surrounding AMAs. Further, it would enrich the discussion of the results in the text
and allow the researchers to discuss potential implications of the results, rather than
simply reporting the numbers that are contained in the tables."


Potential Implications Wipe OUT the LITTLE Guys
 

Econ101

Well-known member
MRJ, you are such an idiot, I hesitate to answer you, but I will.

The argument the packers and even agman is trying to make is that the influence that the packers have on the market don't matter in the long run. Their argument is that if the packers are suppressing prices, the market will react and later there will be less supply. When there is less supply for the market, all other things being held equal, the price of cattle will increase. Thus, they say, cattlemen benefit on the upswing and these benefits outweigh the decreases they caused by manipulating the market.

They are correct to a large degree. The only problem is that instead of feeders being able to discern what the market wants via price signals, as is the case in competitive markets (too many people looking out for their self interest to get together and manipulate the market). Unfortunately, these kind of manipulations do not transmit market signals from consumers to cattle producers. Instead, the packers are using their power to become something like a market maker in order to swing the cattle markets. When Tyson can tie up supplies via contracts as they have in the poultry industry, the price cattlemen receive will not be the free market equilibrium, it will be less, just as it is in poultry. Packers will benefit from the swings they themselves artificially create.

Of course, the biggest packer already does that. When they can swing the beef market, they can make a killing in the poultry market as the higher price for beef will be reflected in its substitutes. When poultry goes up, the producers do not share in that increase because of their contracts. The poultry growers have no bargaining power and GIPSA allows some people to be advantaged --new entrants--- over existing growers. Thus, the integrators obtain all of the benefit from an increase in market price for poultry. Another comparative advantage comes from foreign sources of beef the packers control, just as the Canadians are experiencing. Tyson is wracking up Canadian producers. These types of strategies were seen by the court system in times past and addressed in court orders because they were a lot smarter than the current bunch (and I dare say you too) and there wasn't as much corruption in the system.

I know it never helps to explain anything to you, MRJ, because you will not believe anything you don't want to believe in. In short, you are the worst kind of cattle person for the cattle industry. The ignorance you exemplify is what will allow the industry to go the way the poultry industry has.

I know in your mind, you don't have to worry about it because you are just about retired and have your nest egg in place. I still don't see that as a reason for you to sell out the industry for other cattle producers.

As I said, the ignorance you exemplify will be the ruin of the industry for independent cattlemen.
 

DiamondSCattleCo

Well-known member
Econ101 said:
The argument the packers and even agman is trying to make is that the influence that the packers have on the market don't matter in the long run. Their argument is that if the packers are suppressing prices, the market will react and later there will be less supply. When there is less supply for the market, all other things being held equal, the price of cattle will increase. Thus, they say, cattlemen benefit on the upswing and these benefits outweigh the decreases they caused by manipulating the market.

Unfortunately, this type of system is inherently biased towards large producers with sufficient revenue to sustain them during the times of low prices. In other words, it leads to consolidation on the producer front, and eventually, we'll see the small producer die out. Small town USA and Small Town Canada won't be far behind. Then our children can trade their boots and hats for WallyWorld and Rotten Ronnie uniforms.

Its truly unfortunate that more people don't have an appreciation of how important the small town is to the overall economic health of our nations. MRJ, this is where those psycho-babble :roll: matrices come into play.

Rod
 

Mike

Well-known member
Mike said:
MRJ: Mike, who was the person giving this 'information'?

The information I put in my post came directly from the USDA website. Cut and pasted. It was part of the "Peer Reviewers" comments on this particular research.

If you will read the study (I know you won't) you will find that much of the information came from a written "Survey" sent to producers, feeders, and packers. Not real research.

If the NCBA told you that, then somebody is lying. I can't imagine it would be a person who was asked to peer review the research.

Who does that leave?
:lol: :lol: :lol: :lol: :lol: :lol:


Yoo Hooo! Where are you? Come out come out, wherever you are!

Hellooooooooooo?
 

mrj

Well-known member
Boys, obviously I trust my sources, people I know who are concerned with the best interests of production agriculture, and you trust anyone who advances your conspiracy theories.

MRJ
 

mrj

Well-known member
Boys, obviously I trust my sources, people I know who are concerned with the best interests of production agriculture, and you trust anyone who advances your conspiracy theories.

MRJ
 

Econ101

Well-known member
MRJ said:
Boys, obviously I trust my sources, people I know who are concerned with the best interests of production agriculture, and you trust anyone who advances your conspiracy theories.

MRJ

This just proves what I have said all along, MRJ. You are tribal. You can't think for yourself and you have to follow the tribe you are in. To ask you to do more is pure folly.
 

DiamondSCattleCo

Well-known member
Econ101 said:
This just proves what I have said all along, MRJ. You are tribal. You can't think for yourself and you have to follow the tribe you are in. To ask you to do more is pure folly.

Naw, Econ, she only follows those who speak in simple english. Tell me MRJ, if a cattleman uses the term "dystocia" instead of "calving difficulties", do you ridicule him too because he spoke psycho-babble?

Rod
 

PORKER

Well-known member
Complying with a congressional mandate, the Grain Inspection, Packers and Stockyards Administration of the U.S. Department of Agriculture has released the long-awaited Livestock and Meat Marketing Study.

IT was a study of how the GIPSA helps the largests buyers of livestock control the market price in their favor undetected.
 

Econ101

Well-known member
rkaiser said:
Definition of conspiracy theorist - the perfect defense when you are trapped in a tree. :wink:

I think Hillary made this "conspiracy" allegation what it is today with her "vast right wing conspiracy" when her husband was up the tree with Monica.

I think SH, MRJ, agman and others must like the results of that argument because it seemed to work for Hillary (she has brought it up recently and sounded ridiculous).
 

mrj

Well-known member
Boys, I have little time for playing your games.

My 'sources' are not so limited as you claim, and how can you know anything about my sources unless you are gazing into Econ's crystal ball again?

Are you all so narrowly minded as to believe I never disagree with any NCBA policy? I do not take my concerns public, I take them where there is probability of making changes, to my local and state Cattlemens org., or the annual or semi-annual meetings of NCBA. If my was does not prevail, I understand that there are more cattle producers having the opposing view. I am a minority at times. That is fine. NCBA policies are not set in stone. They change at the direction of the members. The overall direction and successes of NCBA have served independent people who make a living producing cattle better than any other national org. has, in my experience over the past 50 years in the cattle business.

Having good friends as our husband and wife veterinarian team, I do understand some Vet. medicial terms, "Diamond SCattleCo", or is it more like "HalfA$$edCattleCo"? No serious offense intended, just wanted to see how it felt to put people down like the rest of you guys do. Not bad, I may do it more often, when the occasion warrants it.

I may change my use of the term "conspiracy theorist", though it does fit under common usage, which is applied to people who try to change the order of business, politics, etc. by means of rumor, unverified false claims or charges, and innuendo to discredit whom or what ever they do not like.

BTW, the term "Conspiracy Theory" as described above, or versions thereof, have been around probably for milleniums and was quite prevalent when I was growing up in the '50's and '60's and mostly applied by John Birch types at the time. So......how many of you subscribe to Lyndon Larouche type politics?

MRJ

The synonym for 'conspiracy', 'intrigue', defined as: "suggesting complicated scheming and clandestine methods, often implying a selfish, rather than a criminal purpose". That surely fits some of the tactics used to discredit NCBA by you boys.

No
 

Mike

Well-known member
MRJ, Looks like you have the "Psycho-Babble" terminology down to a "T".

Back to the subject. Did the NCBA furnish a list of cattle producers for the "Survey" Research on AMA's or not?
 
Top