SH - Help me understand!

[agman]

If they know the biggest cattle buyer isn't going over $66, why would they?

How damn elementary!

Because they need cattle to fill their kill. How elementary is that if you run a business?

It seems that if Tyson had their over 100% quota for their kill fill they most certainly did not need to even buy from the grid or formula cattle supplies. What is your reason for this piece of evidence, Agman?

The needs for each packer vary for many reasons. Supply and demand is not static for all packers. Cattle type needs vary and quantity of various types differ dependent upon their customer needs and the quantity and price level of forward priced product. Once again your question demonstrates how truly shallow your knowledge is of the beef industry.

 

[Econ101]

Kindergarten: "With the captive cattle arangement the price setting cash market is thinned. With that thinning there is a possiblity of market manipulation. Pickett proved it where it counted in court to 12 jurors. There has been no evidence to the contrary."

Possibilities of market manipulation won't earn a valid conviction.

When cattlemen have numerous marketing options available to them from different packers all competing for the same cattle, there is no chance for market manipulation.

If a feeder does not like Tyson's cash price due to Tyson having their needs filled with formula cattle, they have other market options.

To take a price that is unsatisfactory without looking at any other marketing alternatives would be self manipulation.

Pretty hard to make an argument for cash cattle markets being manipulated by captive supply cattle when there is times that the cash cattle market is higher than the formula market.


You said there was no evidence to the contrary while you have admitted that you have not read the court proceedings.

HOW THE HELL WOULD YOU KNOW?????

Secondly, it is not Tyson's responsibility to prove their innocense. It is the Plaintiff's responsibility to prove Tyson's guilt.

Kindergarten: "With the type of grid and formula pricing, and I don't care about what terminology you use, the cattle coming off of the market could not push the price of cattle up."

Then how do you explain those times when the cash price is higher than the formula price?

Kindergarten: "What would make the price of cattle go up with formula and grid pricing?"

Do you really have to ask?

NORMAL SUPPLY AND DEMAND FACTORS!

Kindergarten: "The more formula and grid pricing, the easier it was to push down the cash price with inventory management."

Lowering your price as your needs are met is not market manipulation particularly when you have many other marketing options available.


You got nothing again!



~SH~

The assertion was never that Tyson had COMPLETE control of the cattle markets, the assertion was that they had enough to depress the cash price and hence all cattle prices. That was shown to be the case by Pickett and even Dr. Azzam agreed that captive supplies depress cattle prices (there is a negative correlation between increased captive supplies and price).

You really like to skew the argument so you can make a case. Please stop mischaracterizing the case and what the econometric analysis proved.

If Tyson had COMPLETE control of the cattle market you would get a price where marginal expenditure and marginal value intersect. This is the economic limit of the possible price manipulation (this does not take into consideration the substitutes that the packers have). Interestingly enough, any price discrimination brings on the possiblity that more of the producer surplus can be taken by the packers. Because of this reason I have tried to limit my arguments to things that affect the producer surplus that create economic ineficiencies.

For those that do not understand what the producer surplus is, I will try to explain using Jason as an example. Suppose that Jason could get $3,000.00 for each of his bulls and that was what the market was for his product. If it cost Jason $3,000.00 to produce those bulls then he just made even. If Jason's neighbor could produce the same bull for $2,700.00 then his profit would be an extra $300.00. If another neighbor could produce the same bull for $2,500.00 then his producer surplus would be $500.00. This goes on until you get all of the producers on the supply curve. All of the extra money that is made above the individual break evens is part of the producer surplus.

The problem with discrimination:

Let us suppose that Jason came into his operation and it was just a financial mess. The bulls produced were costing over the $3,000.00 the market was paying so on average every year the operation was losing money. Jason came in and saw some of the problems that were costing too much changed his business around and brought his average cost down to $2,300.00 each for each bull. In this case his producer surplus was $700.00 instead of a negative number.

The problem with market power and the producer surplus is that with market power, the buyer can figure out what Jason can go down to, in this case $2,300.00, and buy his bulls at this price. This leaves Jason with no extra profit for his efforts of cost cutting in his business. Sure, the bull buyer monopsonist (one buyer) was paying other people more money for their bulls because they needed that many extra bulls up to $3,000.00, but with their market power they were able to force Jason down to $2,300.00 and still get his bulls. This is how discrimination can allow a monopsonist or oligopsonist to capture ALL of the profits in a business. It is unfair to Jason, but hey, they are in it to make money, not look out for Jason.

The Packers and Stockyards Act of 1921 was written just so this type of discrimination would be illegal. It allows producers to retain the profits of their part of the business and not allow someone with market power to take it all. Jason, I have already gone over an example of how you could be discriminated against.

Economists looking at the enforcement of the PSA should understand that this is what it is all about. It brings fairness to the marketplace. Too many economists get caught in the fish that SH and Agman bring to the argument.

 

[Anonymous]

Kindergarten: "The assertion was never that Tyson had COMPLETE control of the cattle markets, the assertion was that they had enough to depress the cash price and hence all cattle prices. That was shown to be the case by Pickett and even Dr. Azzam agreed that captive supplies depress cattle prices (there is a negative correlation between increased captive supplies and price)."

Dropping your price as your needs are met is not market manipulation but rather a normal reaction of supply and demand.

You cannot explain the times when the formula price is higher than the cash price can you?

It just shatters your argument.


Your bull sale analogy does not apply because producers have more marketing options available to them than one packer who has dropped their price because most of their needs were filled with formula cattle.


YOU STILL GOT NOTHING!


~SH~

 

[Econ101]

Kindergarten: "The assertion was never that Tyson had COMPLETE control of the cattle markets, the assertion was that they had enough to depress the cash price and hence all cattle prices. That was shown to be the case by Pickett and even Dr. Azzam agreed that captive supplies depress cattle prices (there is a negative correlation between increased captive supplies and price)."

Dropping your price as your needs are met is not market manipulation but rather a normal reaction of supply and demand.

You cannot explain the times when the formula price is higher than the cash price can you?

It just shatters your argument.


Your bull sale analogy does not apply because producers have more marketing options available to them than one packer who has dropped their price because most of their needs were filled with formula cattle.


YOU STILL GOT NOTHING!


~SH~

Jason can sell his bulls to what was it, Korea and Japan? His other options do not dismiss arguments of market manipulation.

Dropping your price as needs are met argument does not hold water. It is an argument that price manipulation is occurring in a thinned cash market, not an excuse for it. Since the cash market is the place where prices are pegged, it had sure better be reflective of the whole market and it was not. "There is a negative correlation between captive supplies and cash price".

Your repeated statements of "YOU STILL GOT NOTHING!" is more reflective of the space between your ears, not my arguments.

 

[Anonymous]

Kindergarten: "Dropping your price as needs are met argument does not hold water."

To someone like you who has no understanding of this issue, I suppose that would be right.

Kindergarten: "It is an argument that price manipulation is occurring in a thinned cash market, not an excuse for it."

Nobody has offered any proof of market manipulation. It is nothing more than a baseless conspiracy theory supported by packer blamers who need someone or something to blame.

There is no supporting evidence. NONE!

Kindergarten: "Since the cash market is the place where prices are pegged, it had sure better be reflective of the whole market and it was not."

Oh listen to you!

You don't even know what supply and demand factors affect cattle prices from week to week so how the hell would you know what is reflective of the market?

Give me a break!

Kindergarten: "There is a negative correlation between captive supplies and cash price".

That's right, as packers needs are met in the formula market, they lower their price in the cash market just like feeder calf buyers drop their price as their needs are met.

As long as there is many packers buying cattle under many different pricing mechanisms, nobody is locked into one marketing alternative.

You can't begin to make an intelligent argument to the contrary.

Kindergarten: "Your repeated statements of "YOU STILL GOT NOTHING!" is more reflective of the space between your ears, not my arguments."

Keep telling yourself that. You've already proven that you can convince yourself of just about anything without any proof.

Par for the conspiring mind.


~SH~

 

[Jason]

Big problems with your "theories" Econ.

#1 How does the 1 and only bull buyer find out my bottom line is $2300 when he is still paying $3000 to everyone else?

#2 Why would I make the necessary changes to efficiency, then sell for the new cost of production?

#3 How is the 1 and only bull buyer going to get his needed number of bulls without mine when I refuse to sell below what I know others are getting?

#4 What would that said buyer do if I chose to lease more land and run extra cows and use the bulls normally sold to the buyer myself?

It all comes back to 2 parties to every transaction. Both have to accept the deal, and ultimately both have to profit for the transactions to continue. If one suffers they make changes. Pickett believed he was suffering, but many others said he was just complaining. He never made an attempt to sell under the supposed higher prices contract cattle received. Instead he opted for a law suit to avoid his responsibility to make sound business decisions.

 

[Econ101]

Big problems with your "theories" Econ.

#1 How does the 1 and only bull buyer find out my bottom line is $2300 when he is still paying $3000 to everyone else?

#2 Why would I make the necessary changes to efficiency, then sell for the new cost of production?

#3 How is the 1 and only bull buyer going to get his needed number of bulls without mine when I refuse to sell below what I know others are getting?

#4 What would that said buyer do if I chose to lease more land and run extra cows and use the bulls normally sold to the buyer myself?

It all comes back to 2 parties to every transaction. Both have to accept the deal, and ultimately both have to profit for the transactions to continue. If one suffers they make changes. Pickett believed he was suffering, but many others said he was just complaining. He never made an attempt to sell under the supposed higher prices contract cattle received. Instead he opted for a law suit to avoid his responsibility to make sound business decisions.

1. There are many ways. I hope you never experience them.

2. Exactly the point.

3. Holdout. Ask Pickett cash sellers about that one. You still have to sell your bulls to pay your bills.

4. Not buy your calves.


Pickett had the choice of selling to captive supplies or the cash market. Selling under captive supplies never makes markets go up. Captive supplies always has the potential to make cash prices go down. By discriminating against the cash market, the ologopsonists pushed the cattle markets down. In the short run this does not affect the supply of cattle, it just allows some of them to "overripen" where they can pick them up "on the cheap". In the long run, this is a movement down the supply curve. This makes the oscillations of the cattle market more pronounced and the substitutes, pork and chicken, gain more market share. With knowledge of the timing of this oscillation, the companies are able to strategically gain market power in those substitutes, poultry and pork. Do you get it?

 

[Jason]

Big problems with your "theories" Econ.

#1 How does the 1 and only bull buyer find out my bottom line is $2300 when he is still paying $3000 to everyone else?

#2 Why would I make the necessary changes to efficiency, then sell for the new cost of production?

#3 How is the 1 and only bull buyer going to get his needed number of bulls without mine when I refuse to sell below what I know others are getting?

#4 What would that said buyer do if I chose to lease more land and run extra cows and use the bulls normally sold to the buyer myself?

It all comes back to 2 parties to every transaction. Both have to accept the deal, and ultimately both have to profit for the transactions to continue. If one suffers they make changes. Pickett believed he was suffering, but many others said he was just complaining. He never made an attempt to sell under the supposed higher prices contract cattle received. Instead he opted for a law suit to avoid his responsibility to make sound business decisions.

1. There are many ways. I hope you never experience them.

2. Exactly the point.

3. Holdout. Ask Pickett cash sellers about that one. You still have to sell your bulls to pay your bills.

4. Not buy your calves.


Pickett had the choice of selling to captive supplies or the cash market. Selling under captive supplies never makes markets go up. Captive supplies always has the potential to make cash prices go down. By discriminating against the cash market, the ologopsonists pushed the cattle markets down. In the short run this does not affect the supply of cattle, it just allows some of them to "overripen" where they can pick them up "on the cheap". In the long run, this is a movement down the supply curve. This makes the oscillations of the cattle market more pronounced and the substitutes, pork and chicken, gain more market share. With knowledge of the timing of this oscillation, the companies are able to strategically gain market power in those substitutes, poultry and pork. Do you get it?

Ya I got it.

#1 you believe in physics

#2 anyone that knows his costs never sells for cost.

#3 if I hold out longer than the buyer I win. If he holds out too long he has no cows bred. I hold the cards because I own the bulls.

#4 I sell my calves to buyers who want home raised beef and make all the money in the chain, the equivilant of 20 calves per bull, and I retire to Mexico a wealthy man.

You got nothing

 

[Econ101]

Big problems with your "theories" Econ.

#1 How does the 1 and only bull buyer find out my bottom line is $2300 when he is still paying $3000 to everyone else?

#2 Why would I make the necessary changes to efficiency, then sell for the new cost of production?

#3 How is the 1 and only bull buyer going to get his needed number of bulls without mine when I refuse to sell below what I know others are getting?

#4 What would that said buyer do if I chose to lease more land and run extra cows and use the bulls normally sold to the buyer myself?

It all comes back to 2 parties to every transaction. Both have to accept the deal, and ultimately both have to profit for the transactions to continue. If one suffers they make changes. Pickett believed he was suffering, but many others said he was just complaining. He never made an attempt to sell under the supposed higher prices contract cattle received. Instead he opted for a law suit to avoid his responsibility to make sound business decisions.

1. There are many ways. I hope you never experience them.

2. Exactly the point.

3. Holdout. Ask Pickett cash sellers about that one. You still have to sell your bulls to pay your bills.

4. Not buy your calves.


Pickett had the choice of selling to captive supplies or the cash market. Selling under captive supplies never makes markets go up. Captive supplies always has the potential to make cash prices go down. By discriminating against the cash market, the ologopsonists pushed the cattle markets down. In the short run this does not affect the supply of cattle, it just allows some of them to "overripen" where they can pick them up "on the cheap". In the long run, this is a movement down the supply curve. This makes the oscillations of the cattle market more pronounced and the substitutes, pork and chicken, gain more market share. With knowledge of the timing of this oscillation, the companies are able to strategically gain market power in those substitutes, poultry and pork. Do you get it?

Ya I got it.

#1 you believe in physics

#2 anyone that knows his costs never sells for cost.

#3 if I hold out longer than the buyer I win. If he holds out too long he has no cows bred. I hold the cards because I own the bulls.

#4 I sell my calves to buyers who want home raised beef and make all the money in the chain, the equivilant of 20 calves per bull, and I retire to Mexico a wealthy man.

You got nothing

Jason, if the buyer has market power he can hold out longer than you. He could buy those $3,000.000 bulls from your neighbor and let you get nothing. You have no market power, you are one of many. You will get nothing until you go down to the price he wants. Sure it is discrimination, but he doesn't care. He wants your bulls at 2300 or you get nothing. You have no marketing power.

If you sell your calves to buyers, they have to butcher them. It costs them more to buy them from you and butcher them than they can get at the store. As a matter of fact, the monopsonist is having a sale on freezer beef in your area everytime he sees your calves are ready to be slaughtered. Besides, your customers don't want a whole beef, they just want some steaks and hamburgers every now and then.

You got nothing.

 

[Jason]

So the problem comes back to me raising a product there are already too many of. I shouldn't be raising bulls if the buyers aren't there.

If I sell at $2300 someone else loses a sale. If their sale was at $3000 they would be mad. But I won't be in business long selling at cost.

So in Picketts case he was flooding the market. Selling below what others were getting and he sued. Your words not mine.

This comes back to the real problem with the cattle biz. Stores only buy what they can sell. Packers only buy what they can sell. Producers raise what they want and b*tch about the price.

 

[Econ101]

So the problem comes back to me raising a product there are already too many of. I shouldn't be raising bulls if the buyers aren't there.

If I sell at $2300 someone else loses a sale. If their sale was at $3000 they would be mad. But I won't be in business long selling at cost.

So in Picketts case he was flooding the market. Selling below what others were getting and he sued. Your words not mine.

This comes back to the real problem with the cattle biz. Stores only buy what they can sell. Packers only buy what they can sell. Producers raise what they want and b*tch about the price.

Jason, I know that you have not been schooled in economics so I will not hold that against you in these arguments. The the $3000 is what it cost the monopsonist to get the next bull in the market from a new entrant. He is willing to pay a new person that much but not you. After doing a budget, you know that you can go down to your average variable cost. Your average variable cost is the $2300. You will go down to that figure and not make the producer surplus and still stay in business. Anything below the 2300 does not allow you to pay for the average variable costs and you would start going in the hole deeper and deeper. Sure you have lost the $700 that a non-discriminating buyer would have paid, but you are not dealing with a non-discriminating buyer, you are dealing with a monopsonist with market power. If I were you, I would want to get the $3000 that the monopsonist has to pay the next new guy to get bulls. Pickett never flooded the market, it was thinned with captive supply. The only choice you have is finding other ways to cut your costs to $2200. You do that and the cycle starts all over again.

If markets were competitive, there would be no market power and you would get what the going rate was for the next new bull because there would always be someone else to sell to. That is the problem with market concentration and market power. It is not about crying about the money you get, it is about getting what everyone else gets for the same product.

 

[Jason]

If markets were competitive, there would be no market power and you would get what the going rate was for the next new bull because there would always be someone else to sell to. That is the problem with market concentration and market power. It is not about crying about the money you get, it is about getting what everyone else gets for the same product.

Which price Pickett got. The same cash price paid that week for that type of cattle.

You are a very condecending person. I have been "schooled" in economics, running a business for the better part of 25 years. The real world is much different from a classroom.

Which takes us back to the supposed question, why would I sell my bulls for less than everyone else gets? I wouldn't. You keep changing the rules... there is only so many bulls, then there is a new seller. The fact is the new seller floods the market. Either that or he thinks he can sell for less than $3000 and make money. That is called competition, and he would lower the price for all bulls not just mine.

 

[Anonymous]

You guys are dealing in a different world when you are talking registered, purebred and seedstock, compared to fats and feeders-- I'm in the same world that Soapweed is in-- where you can go out and buy groups of sons by 6807 out of daughters of Blockbuster ( a great frame moderater and carcass bull that wasn't discovered until dead) that may trace back to Rito and 234-D- and hopefully Diamond D and Shoshone breeding- out of good quiet cows that you see in the pasture, rather than seeing the bulls on the video net that sell for 10 times the price--even without the magic of the EPD and those magical registration papers- and paying $4-5 thousand a bull....AI over the last 40 years has opened up a lot of options for the commercial breeder... Instead of looking at the (?) EPD's and the paperwork he can still get the top breeding- from the type of cows he wants without paying the whores price.....

So if the seedstock guy thinks he will hold out- he may be eating a lot of burger....

I probably am wrong- but why go out and spend $3-5,000 on bulls when there are $2000 bulls out there bred the same or better- that will do you as good- except they have not spent a fortune on advertising, buddy buying, and commercialization- many of these old outfits have a much better and sounder reputation- and are much more trustworthy and honest......

 

[S.S.A.P.]

You guys are dealing in a different world when you are talking registered, purebred and seedstock, compared to fats and feeders-- I'm in the same world that Soapweed is in-- where you can go out and buy groups of sons by 6807 out of daughters of Blockbuster ( a great frame moderater and carcass bull that wasn't discovered until dead) that may trace back to Rito and 234-D- and hopefully Diamond D and Shoshone breeding- out of good quiet cows that you see in the pasture, rather than seeing the bulls on the video net that sell for 10 times the price--even without the magic of the EPD and those magical registration papers- and paying $4-5 thousand a bull....AI over the last 40 years has opened up a lot of options for the commercial breeder... Instead of looking at the (?) EPD's and the paperwork he can still get the top breeding- from the type of cows he wants without paying the whores price.....
So if the seedstock guy thinks he will hold out- he may be eating a lot of burger....

I probably am wrong- but why go out and spend $3-5,000 on bulls when there are $2000 bulls out there bred the same or better- that will do you as good- except they have not spent a fortune on advertising, buddy buying, and commercialization- many of these old outfits have a much better and sounder reputation- and are much more trustworthy and honest......

Hold-up, Oldtimer - you're talking to fast and lost me, your jumping all over with numbers:
1...... are you saying that bulls that sell on the video net for $4-5 thousand are only worth a tenth of that ??? $400 - 500? And bulls that sell for $3-5000 are wh**** prices?
2.... what do you mean by commercialization?
3.... are you saying that the breeders of 6807, Blockbuster, Rito, 234-D, Diamond D and Shoshone never progressively promoted these cattle with some $ on advertising, record keeping, reg. papers, performance & carcass data, etc.
4 .... what level of promotion (from your point of view) moves a breeder from better and sounder reputation to not trustworthy or not honest?
5.... if your $2000 bull adds more value to your calves than the $4000 bull would you not expect more $ for those calves? Why then, can't the breeder of a quality bull (for example the $4000 bull) expect more $'s.

I do agree with the basis of your argument - that there are some darn good $2000 bulls out there ....... But there are also some $4000 bulls that will do twice as much for someone's herd as a $2000 bull.

Oldtimer you must believe in advertising - you do have your horses on your website. Why the insinuation that those that spend $ on advertising are also into buddy-buying and dishonesty. (and commercialization, but I'm not clear what you mean by that)

 

[Econ101]

If markets were competitive, there would be no market power and you would get what the going rate was for the next new bull because there would always be someone else to sell to. That is the problem with market concentration and market power. It is not about crying about the money you get, it is about getting what everyone else gets for the same product.

Which price Pickett got. The same cash price paid that week for that type of cattle.

You are a very condecending person. I have been "schooled" in economics, running a business for the better part of 25 years. The real world is much different from a classroom.

Which takes us back to the supposed question, why would I sell my bulls for less than everyone else gets? I wouldn't. You keep changing the rules... there is only so many bulls, then there is a new seller. The fact is the new seller floods the market. Either that or he thinks he can sell for less than $3000 and make money. That is called competition, and he would lower the price for all bulls not just mine.

Jason, the one buyer has the option of buying your bulls or any other bulls at any other price he/she wants. The problem is that it is not your choice to sell to the one buyer unless the one buyer wants to buy. There is no more real market, there is really just market power.

Do you want to just eat your bulls or will you sell to the buyer for $2800?
So what if he is willing to pay someone else $3000, he is only willing to pay you $2800. Will you take it and go home and pay some bills or will you eat some bull?

If you would take $2800 then why not $2500? If you would take $2500, why not $2300? Of course in the long run, you know that you can not go under $2300 and pay all of your bills. If you do that too long you will go bankrupt.

If you think this is a wacky scenerio, just go ask your electric company if you can reduce your electrical rates. They will laugh at you. You either pay what they want or they cut the electricity off. They have complete market power; they are a monopsony. There is no bargaining power on your end.

Of course market power has varying degrees. In this example, the buyer had COMPLETE market power. In Pickett's case the market power increased as the captive supply increased. In Pickett, the buyers only had to depress the cash market one week by not buying on the cash market as much that week. After that, they could maintain the lower cash price by playing an inventory game. The cattlemen could sell through the captive supply channel at an already depressed price, or sell in the cash market where the price could potentially move up. Of course anytime there were not as many formula, grid, or any other type of captive supply, the buyer had to only use inventory already boxed to sell to the market and or call in some of the formula cattle whose delivery was under their control. They could have captive supplies that they owned to fill kill slots. In that case, the cash cattle, over a period of 3 weeks would become "over ripe" and the cash sellers would have to sell on the next cash or grid pricing or continue to lose money feeding ripe cattle.

Any cattle sold on the grid or on formula could never move the market up. It could only keep prices the same. The more captive supply cattle, the more inventory the packer has to play the game on the next week's cash market.

Of course, all of this has limits. The limiting factor in this is the competition of the little guys. Suppose the little guys saw what was happening and decided that the big guys were depressing the current cash price with this method. In this case they could go into the cash market and buy their cattle. This could have the effect of pushing the price up in the cash market. Suppose they did this one time. The big boys could then just sell more of their inventory they had accrued and keep the boxed beef price low. Then the little guys would really be out some money. Here they bought a lot of cash cattle at a higher price and boxed beef prices actually went down a little because the big guys wanted to move inventory. It would not take long for the little guys to know that they had to follow the lead of the big guys. Then the effect the little guys have on market prices would be reduced.

The only way you could find out if this game was being played, is if you could look at the market and tell that the cash guys were being discriminated against compared to the captive supply. In truely competitive markets there would be no difference in price because everyone would seek the lowest price they could get --- whether it was in the cash market or the captive supply market. Both the captive supply and cash market delivery was essentially the same. There should be no real difference in price, except for an occaisonaly anomoly here or there. Statistically there should be no difference. This would be the case even if the market was moving either up or down.

Formula, grid, and captive supply pricing where the price is based on a non-negotiated number of a previous week's price, can never move a market up. All it can do is to capture the supply that is available and allow for potential market power plays on the cash market. Of course market power plays do not have to occur, such as the period of time that SH points out where captive supply did not depress the cash market. It is all up to the big boys with the market power.

 

[Anonymous]

Kindergarten Econ.:

In Pickett's case the market power increased as the captive supply increased. In Pickett, the buyers only had to depress the cash market one week by not buying on the cash market as much that week. After that, they could maintain the lower cash price by playing an inventory game. The cattlemen could sell through the captive supply channel at an already depressed price, or sell in the cash market where the price could potentially move up. Of course anytime there were not as many formula, grid, or any other type of captive supply, the buyer had to only use inventory already boxed to sell to the market and or call in some of the formula cattle whose delivery was under their control. They could have captive supplies that they owned to fill kill slots. In that case, the cash cattle, over a period of 3 weeks would become "over ripe" and the cash sellers would have to sell on the next cash or grid pricing or continue to lose money feeding ripe cattle.

Any cattle sold on the grid or on formula could never move the market up. It could only keep prices the same. The more captive supply cattle, the more inventory the packer has to play the game on the next week's cash market.

Of course, all of this has limits. The limiting factor in this is the competition of the little guys. Suppose the little guys saw what was happening and decided that the big guys were depressing the current cash price with this method. In this case they could go into the cash market and buy their cattle. This could have the effect of pushing the price up in the cash market. Suppose they did this one time. The big boys could then just sell more of their inventory they had accrued and keep the boxed beef price low. Then the little guys would really be out some money. Here they bought a lot of cash cattle at a higher price and boxed beef prices actually went down a little because the big guys wanted to move inventory. It would not take long for the little guys to know that they had to follow the lead of the big guys. Then the effect the little guys have on market prices would be reduced.

The only way you could find out if this game was being played, is if you could look at the market and tell that the cash guys were being discriminated against compared to the captive supply. In truely competitive markets there would be no difference in price because everyone would seek the lowest price they could get --- whether it was in the cash market or the captive supply market. Both the captive supply and cash market delivery was essentially the same. There should be no real difference in price, except for an occaisonaly anomoly here or there. Statistically there should be no difference. This would be the case even if the market was moving either up or down.

Formula, grid, and captive supply pricing where the price is based on a non-negotiated number of a previous week's price, can never move a market up. All it can do is to capture the supply that is available and allow for potential market power plays on the cash market. Of course market power plays do not have to occur, such as the period of time that SH points out where captive supply did not depress the cash market. It is all up to the big boys with the market power.

Here is the facts that shatter Kindergarten Economic's market manipulation conspiracy theories:

1. For a packing plant to drop their price as their needs are met is not market manipulation. Differences in bids occur weekly between Cargill, Tyson, Swift, and USPB depending on their needs. If dropping your price as your needs are met was truly market manipulation and not simply a function of supply and demand, it would have consequences in many other areas of the cattle business. Any cattle buyer that dropped their price as their needs were met would face the same market manipulation allegation. You cannot have one set of cattle buying rules that applys to packers and not everyone else.

2. Formula cattle are sold on a grade and yield basis. Cash cattle are priced on a "BEST GUESS" of their value. The two will not necessarily be priced the same for that very reason. In most situations, the quality of the formula cattle is superior to the cash market because producers that are willing to sell on grade and yield believe their cattle have enough quality to make the grid premiums based on genetics and proper feeding. Packers have reduced risk with formula cattle because the formula assures that the cattle will be priced on their TRUE CARCASS VALUE, not a guess of that value.

3. Tyson is not the only market out there. Cargill and Swift are buying cattle on a daily basis. If Tyson has their needs met in the formula market, that doesn't mean that Cargill and Swift doesn't need cattle. Nobody is locked into one packer or one marketing alternative which shatters the notion that there is market manipulation occuring. To suggest that Tyson, Cargill, Swift, and USPB are not all in competition for the same cattle is the epitomy of ignorance.

4. Whether or not feeders sell on the formula market is determined by whether or not the feeders agree to the price. Tyson does not determine how many formula cattle they are going to get unless they have willing sellers.

5. There is times when the formula price is lower than the cash price because the supply and demand factors that affect the market are pushing the market higher.

6. Kindergarten Economics does not know more about selling fat cattle than those who actually sell fat cattle.

7. There is pricing grids that allow feeders to bid the formula base price if they are unwilling to take the weekly weighted average week prior. This totally defeats Kindergarten's argument that formula cattle cannot move the market higher.

8. Supply and demand factors drive the price of boxed beef and boxed beef drives the price of fat cattle in the U.S. market and always will. Canada's situation of having more cattle than slaughter capacity due to BSE is not the U.S.'s situation because most cattle born in the U.S. are killed in the U.S. To draw a comparison between the two situations is also the epitomy of ignorance.

9. GIPSA has conducted literally hundreds of investigations into "alleged market manipulation", "price fixing" and other "alleged" PSA violations and normally over 95% are nothing but the same conspiracy theories we are dealing with here.

10. The Judge in Pickett had every legal right to overturn the jury's verdict when he failed to see any evidence worthy of supporting the jury's decision. If the jury's decision was always final, there would be no reason for an appeals process. The 11th circuit UNANYMOUSLY supported his decision. Packer blamers scream foul in that situation but find no problems in Judge Cebull regurgitating R-CULT's position word for word including the same mispelled words and/or typos.

11. We saw a 60% change in the price of fat cattle within a single year with virtually the exact same levels of captive supplies and the same level of packer concentration.

12. The Pickett era of "alleged market manipulation" is well documented to be a time within the cattle cycle of increased supplies and reduced consumer demand. This is documented by Universities, Cattle FAX, and numerous ag. economists.

Kindergarten Economics will not be able to refute a single argument that I have just made WITH FACTS TO THE CONTRARY. What he will do is present "theories" and "opinions" in response just as he always has.


Observe............




~SH~

 

[agman]

Big problems with your "theories" Econ.

#1 How does the 1 and only bull buyer find out my bottom line is $2300 when he is still paying $3000 to everyone else?

#2 Why would I make the necessary changes to efficiency, then sell for the new cost of production?

#3 How is the 1 and only bull buyer going to get his needed number of bulls without mine when I refuse to sell below what I know others are getting?

#4 What would that said buyer do if I chose to lease more land and run extra cows and use the bulls normally sold to the buyer myself?

It all comes back to 2 parties to every transaction. Both have to accept the deal, and ultimately both have to profit for the transactions to continue. If one suffers they make changes. Pickett believed he was suffering, but many others said he was just complaining. He never made an attempt to sell under the supposed higher prices contract cattle received. Instead he opted for a law suit to avoid his responsibility to make sound business decisions.

1. There are many ways. I hope you never experience them.

2. Exactly the point.

3. Holdout. Ask Pickett cash sellers about that one. You still have to sell your bulls to pay your bills.

4. Not buy your calves.


Pickett had the choice of selling to captive supplies or the cash market. Selling under captive supplies never makes markets go up. Captive supplies always has the potential to make cash prices go down. By discriminating against the cash market, the ologopsonists pushed the cattle markets down. In the short run this does not affect the supply of cattle, it just allows some of them to "overripen" where they can pick them up "on the cheap". In the long run, this is a movement down the supply curve. This makes the oscillations of the cattle market more pronounced and the substitutes, pork and chicken, gain more market share. With knowledge of the timing of this oscillation, the companies are able to strategically gain market power in those substitutes, poultry and pork. Do you get it?[/quote

Your comment...Pickett had the choice of selling to captive supplies or the cash market. Selling under captive supplies never makes markets go up. Captive supplies always has the potential to make cash prices go down.

Response....Are you suggesting cash markets have never gone up since marketing agreements began? Once again you show your extremely limited knowledge if any of the markets. Let me review a little history. Marketings agreements began to surface in 1988. Record prices were recorded going into 1990. With even more captive supply cattle those records were eclipsed in 2003-2004. It appears one should argue that the higher percentage of captive supply cattle has led to higher (record) cash prices for producers. If captive supply cattle never make the market up then they must by default always go sideways or down!!! You might be the only person left in the world who could actually believe that total nonsense. How far out of touch can one person such as yourself be?

A little more history for you since your seem to be totally absent any real knowledge of the beef industry. The loss in beef's market share began a long time before marketing agreements were conceived by approximately eighteen years. Do you get it, your paranoia and fantasies are transparent for all to see.

 

[Econ101]

Agman said:

Response....Are you suggesting cash markets have never gone up since marketing agreements began? Once again you show your extremely limited knowledge if any of the markets. Let me review a little history. Marketings agreements began to surface in 1988. Record prices were recorded going into 1990. With even more captive supply cattle those records were eclipsed in 2003-2004. It appears one should argue that the higher percentage of captive supply cattle has led to higher (record) cash prices for producers. If captive supply cattle never make the market up then they must by default always go sideways or down!!! You might be the only person left in the world who could actually believe that total nonsense. How far out of touch can one person such as yourself be?

No, I do not suggest that.


Agman, I have never argued that the captive supply and price suppression would permantly depress the cattle markets. That is your inaccurate inference of my arguments. It does so over the short run where supply is rather inelastic. Over the long run, almost all things are elastic, as my water example of a previous post has illustrated. Yes, I said illustrated, SH and Agman. Are you going to make that into an "illustion" critque?

Agman--

No, but that sounds par for you R-Laugh sheep. I guess you stuck your foot in your mouth again. Assumptions, assumptions.....

It looks like you have the foot in mouth disease that you diagnosed someone else having earlier.


I suggest that the captive supply has added a variable (a moving constant, if you will) to the market. This accentuation in prices makes the price cycle more pronounced. That effect is whether the market goes up or down. I do not believe that price supression out of the normal supply/demand equilibrium can be maintained without affecting the cattle cycle. This affect actually increases the volitility of the cattle markets. All of the packers that have substitutes of beef, namely pork and chicken, have a competitive advantage if they know the pulse of this cycle. This allows them to gain more market power in these industries, which they certainly have over the past 10 to 20 years.

Just open your eyes, step back, and see the forest.

Of course, with these types of market manipulation and a greater varience between the high and low of the cattle cycle, the substitutes, pork and chicken, will gain more market share in comparison over the long run. That is exactly what has happened. Why shouldn't a company focus more of its energy on higher profit businesses? In the cattle market with its structure today, the benefits of higher prices goes mostly to cattle producers. In pork an chicken it does not. It goes to the the integrators. Tyson is the largest poultry integrator. In North Carolina, I believe (going off of memory, not an actual fact I know) Swift is the largest pork integrator.

One of the problems with international trade is that these packer companies can manipulate the supply of cattle in one country and use international sources to capitalize on that manipulation. That is exactly what happened recently with foreign meat supplies in the U. S. One of the reasons I supported NAFTA is that the producers in Mexico would be able to bring themselves up with more trade with the U.S. If global U.S. companies obtain all of the benefits of trade, and not the producers of other countries, we have not gained much. Producers in Canada did not gain when boxed beef prices went up. It just helped that country's packer industry consolidate. Of course, as was pointed out earlier, Canada's packers are the U.S. packers.

Now that I have explained a little more about my arguments, Agman,

How far out of touch can one person such as yourself be?

 

[Econ101]

Agman:

A little more history for you since your seem to be totally absent any real knowledge of the beef industry.

Would you care to go into a REAL historical look at the beef industry? I believe Domina published something on that in Azzan's publication. Anyone interested in reading this article can get it from Dr. Azzan at the University at Lincoln, NE.

Matthew Josephson published "The Robber Barrons" in 1934 on the same economic games played last historical go round. Josephson's book encompasses all industrialization, not just the beef business but beef is in there also.

There are many more published books on these issues and anyone interested could look them up with ease. You may have to do this to see the forest.

Agman and SH, I have dared you a lot of times to take up REAL FACTS as it relates to either the Pickett case, the beef industry, or even a less emotionally charged mathematics to take you up on your points. Are you as full of hot air as SH?

 

[Econ101]

9. GIPSA has conducted literally hundreds of investigations into "alleged market manipulation", "price fixing" and other "alleged" PSA violations and normally over 95% are nothing but the same conspiracy theories we are dealing with here.

GIPSA is constantly defrauding the producers of the meats industry with bogus or slanted investigations or market analysis. They have the power of investigating but the way the cases for investigations are done, they will never find the truth. Would you like to talk about a few of them? They might be a little more technical than you can handle, SH. GIPSA is in the hands of the packers right now and EVERYONE who knows anything about these industries knows it.