Sandhusker: "And SH still is can't understand that, no matter how much money is in the treasury, no business is going to pay a red cent more than they have to for supplies."
That's correct but what you can't understand is that there is 5 major packers all in competition for the same cattle. If an individual packer doesn't pay up for the cattle, their competition will. If you own a packing plant and have a labor force to pay and you can't keep the cattle routed through that plant, you are not going to be in business long. That's the real business sense of the packing industry that you can't seem to understand.
On the beef side of the equation, the packers can't hold beef at a certain price until it sells because beef is a perishable item. They either sell the beef or they smell the beef. Beef that won't move at asking prices is sold through featured prices. Look at your grocery fliers if you don't believe me.
The proof of the packer's inability to hold down fat cattle prices is no more apparent than the fact that cattle prices move up and down. It doesn't matter how badly these packers don't want to pay "one more red cent for cattle than they have to".
If they are going to buy cattle, they are going to have to pay close to what their competition is paying or they have an empty packing plant, period. That's exactly why cattle prices rise and fall.
What could be more obvious to prove my point than the fact that cattle prices move up and down?
Sandhusker: "I've asked time and time again for proof of a correalation between packer profits and cattle prices which would prove his point that more efficient packers are good for producer's pocketbooks, but he is unable to bring it. When one can find no proof to back their theory, you would think they would figure out that theory doesn't hold water."
I have told you time and time again that there is no correlation between packer profits and cattle prices. Packer profits are based on the direction of beef demand between the time the cattle are bought and when the beef from those cattle is sold relative to a consistant supply of beef and cattle.
I have also told you time and time again that the correlation that is relative to cattle producers is the correlation between beef prices and live cattle prices but you don't do any research on your own to expand your understanding of this industry. You just keep repeating the R-CALF mantra.
A correlation between packer profits and cattle prices would not prove my theory. That correlation doesn't prove anything. What proves my theory is the simple fact that this industry used to have more packers buying cattle but those smaller, less efficient packers could not compete with the larger more efficient packers so they are no longer in business. In order for a smaller less efficient packing company to compete with a larger more efficient packing company, they would have to have competive processing costs in order to pay the same amount for cattle. They couldn't stay in business because it cost them too much to process cattle to where there was less money available to buy cattle.
Here, let me explain it to you in terms you MIGHT understand.
Little Johnny starts an apple sauce company to sell cinamon flavored apple sauce. Little Johnny pays $.25 per apple to his customers. Little Johnny's total costs are $2.00 per jar to process the apples into a jar of apple sauce including the costs of the apples. Little Johnny charges the consumer $2.50 per jar. His costs include labor to make the sauce and to sell it, the cost of cinamon, and small overhead costs (electricity) and the jars to can his apple sauce.
A larger apple sauce company opened in the same area that little Johnny was selling apple sauce. The bigger company paid $.30 per apple and stole Little Johnny's apple suppliers. This larger company's total costs due to their added efficiencies were $1.50 per jar. Due to plant efficiencies (speed and volume), their costs per apple were greatly reduced. They sold the apple sauce for $2.00 per jar and stole Little Johnny's apple sauce customers.
Little Johnny now runs a lemonade stand at the Sturgis Rally and is thinking about getting into tatoos.
Little Johnny couldn't compete with the larger more efficient company because his per apple costs were too high so he couldn't pay what the larger company was paying for apples. JUST LIKE LARGER MORE EFFICIENT PACKING COMPANIES CAN AND WILL PAY MORE THAN THEIR COMPETITION TO GET THE CATTLE BOUGHT DUE TO THEIR REDUCED PER HEAD PROCESSING COSTS.
Still don't get it huh? I didn't think so since it's been explained to you many times before. You don't want to believe the facts and you don't want to do any research on your own so you don't. You just believe what you are told by those you want to believe. Typical R-CALF.
~SH~