So..............Who does the NCBA really represent ?

[High Plains]

Makes for a nice headline, Haymaker. But read the numbers and paint a picture for the whole period:

Tuesday through Monday:

Live Cattle:
$98.45; 99.35; 100.80; 101.45; 100.93
- advancing quite nicely for a five day period - up $2.48 ($3.91 on a dressed carcass basis of 63.5% yield)

Choice Boxed Beef
$158.11; 159.29; 158.64; 159.14; 160.96
- up $2.85 on five days

Live cattle beat the boxed Choice beef price according to my math when calculating on an apples to apples basis (convert to dressed price on the cattle). The dressed price increase was $3.91 for the period. Select boxes actually weren't as good but I left Select out and gave all advantage to the boxed beef rally. :lol:

The dressed equivalent of a $100.93 live animal is $158.94. That leaves two bucks packer margin when subtracted from $160.96 boxed beef value. Not exactly a get-rich-quick scheme.

Have a great day.

Have you the same examples for a longer time period - say the last 20-30 years or so?

No, I don't have the examples at my fingertips. I'm sure the data exists but I won't benefit much from digging it up. Of course, the math could be done by whomever wishes to do it.

 

[RobertMac]

Sandhusker: "In reality, packers will always pay as little as they possibly can for cattle and and charge as much as they possibly can for beef."

In reality, the only way a processing plant can remain profitable is if they keep their plants full of cattle to process. The only way a packing plant is going to keep their plants full of cattle is to buy them. The only way a packing plant can buy cattle to keep their plants at capacity is to pay more or equal to their competition. The price paid for cattle is determined by the supply of cattle and the demand for beef. Now that's real reality.

Why do packers want access to as much supply as possible?
If the border to S.A. was opened tomorrow, how long would it take our packer friends to start importing? What would happen to the price of cattle?

Try operating a packing plant without cattle to process and remain profitable.

Packing plants running at capacity requires willing buyers and willing sellers.

It's simple business sense and for whatever reason, it escapes you.


~SH~

 

[Anonymous]

RM: "Why do packers want access to as much supply as possible?"

I'm assuming this is a rheotorical question, that you already know the answer, and that you are simply trying to make a point but I will answer it regardless.

Very simple Robert, packers want access to as much supply as possible to keep their plants running at optimum capacity which spreads their overhead costs out over more cattle. In other words, they want more supply to maximize the efficiency of their plants.

You would operate in the same manner if you owned a packing plant or you wouldn't be in business long.

RM: "If the border to S.A. was opened tomorrow, how long would it take our packer friends to start importing? What would happen to the price of cattle?"

That depends on a number of relevant factors Robert. First off, your question assumes that the demand for SA grass fed cattle, which constitutes the majority of the supply of SA cattle, is the same as the demand for NA grain fed cattle, which constitutes the majority of the supply of SA cattle. Is the demand for grass fed SA cattle equal to the demand for NA grain fed cattle or are you comparing apples to oranges again as you so often do?

Let's be fair about this Robert. I answered your questions so it's only fair that you answer mine. Again, Is the demand for SA grass fed cattle the same as the demand for NA grain fed cattle? Hmmmmm???

So to answer your question, if the demand for grass fed SA cattle were equal to the demand for grain fed NA cattle and the SA border was to open tomorrow based on that demand, the demand for NA grain fed cattle would fall and take the price of NA cattle with it. You already know that so what is the point you are trying to make here?

The bottom line on this issue is, if SA cattle were equal to ours from both a health and quality standpoint, WHICH THEY ARE NOT, then it will be up to the consumers to decide whether or not they are imported, not us. Just as the consumers decide whether to eat beef, poultry, or pork. The producer has less than 2% of the vote in contrast with the consumer.


~SH~

 

[Anonymous]

Sandhusker (in response to the notion that packers pay as little as they can for cattle and charge as much as they can for beef): "That's why this notion that higher beef prices are automatically translated into higher cattle prices is rediculous."

Typical Sandhusker. Rather than substantiate his opinion with supporting facts he finds it easier to attempt to discredit any view he disagrees with.

Some things will never change.

No matter how badly you want to believe that packers can control the cattle markets, there is some simple facts that will absolutely destroy that myth.

Let's not even address the most obvious and blatant fact that disproves your cattle market control theory and that is that cattle prices continually move up and down, let's address the facts of the packing industry.

Here is where your logic is so flawed Sandhusker:

1. Packers need to keep their plants at or near capacity to spread their costs out over as many cattle as possible. That is the demand side of the equation from a packer's perspective. Packers can't just simply stop buying cattle because they don't want to pay up because they still have plants to run and employees to pay. Anyone with any business sense can undestand that.

2. Of course packers want to pay as little as possible for the raw product. Every business operates that way BUT any major packer is going to have to pay equal to or more than their competition to get the cattle bought. If you don't believe Excel, USPB, JBS, and Tyson are not in competition for the same cattle you are a flaming idiot. No matter how badly these packers want to pay as little as possible for the cattle they buy, if they don't buy them their competition will. That is an absolute fact.

3. No matter how much they want to charge for the beef from those cattle, they either sell the beef or they smell the beef. That is why you have "featured prices". The consumer demand for beef will dictate the price paid for beef. If the price of beef is too high, the consumer will eat poultry and pork.

Those are the undeniable, unrefuted facts of the business side of the packing industry.

For that reason, any long range chart will show a close correlation to the rising costs of boxed beef and the rising price of fat cattle.

If live cattle prices do not track with boxed beef prices, WHAT MOVES THE MARKETS???? Explain it Sandhusker! You won't explain it because you can't explain it.

This is no different than many other businesses that operate the same way. Every fur buyer wants to pay as little as possible for the animals they buy and sell their finished hides for as much as they can but they are still going to have to pay equal to their competition or they're not going to stay in business. It's that simple.

Why is the price offered by these packing plants so close to the same you may wonder? Because the markets for their products (beef) and their processing costs are so close to the other packers. The bottom line is the markets move up and down. Controlled markets wouldn't move up and down.

The only reason concentration exists in the packing industry is because the larger processers that survived were able to pay more for the cattle than their competition because they were either able to sell their beef at a higher price than their competition or they were able to reduce their processing costs relative to their compeition.

What is ridiculous is the notion that there is not a direct correlation between boxed beef prices and live cattle prices. The only other theory that would fit is "selective periods of market manipulation" and "selected periods of packer generosity". How dumb is that?


~SH~

 

[Anonymous]

Let's address Hayseed's quoted information regarding Captive Supplies.

The Problem of Captive Supplies:
Meat packers acquire 50% to 100% of all cattle and hogs they slaughter through captive supplies.

These are cattle and hogs that are purchased from willing sellers. As a point of clarification, a handful of producers who didn't sell under these arrangements are critical of the producers who did.

Captive supplies are livestock that packers own or control through contracts with farmers, ranchers and feedlot owners.

Once again, these cattle are purchased from willing sellers. These same marketing arrangements are available for anyone wanting to utilize them.

Captive supply is defined by GIPSA as "those cattle owned or otherwise controlled by packers for more than 14 days prior to slaughter". This would include packer owned cattle which are cattle that were purchased from producers as feeder cattle and forward contract cattle which were fat cattle purchased from feeders who wanted to minimize their financial risk through forward contracts. Either way, these are cattle which were sold to packers by willing sellers.

It's funny but I have watched a lot of feeder cattle sell over the years and I have yet to hear anyone stand up and say, "I don't want any packers bidding on my calves because I don't want to contribute to captive supplies when these calves are finished". Why is that??? If producers do not want packers owning cattle why do they sell them?? Funny how that works.

By calling on captive supplies to fill slaughter needs, packers do not have to bid for cattle in an open, public manner.

In other words if Joe and John sell their cattle through forward contracts or sell their calves as feeders to packers, Jim is mad because this particular packer didn't need as many cattle in the cash market. Do you see the "socialist" tone of this rhetoric?? NOT FAIR, NOT FAIR!

This argument is stupid anyway because all of the packers would have to be drawing on all of the captive cattle at the same time to avoid buying cattle in the cash markets. What's the chances of that? In other words, if Packer A is drawing from his captive supplies (CATTLE PURCHASED PREVIOUSLY FROM WILLING SELLERS), then sell your cattle to Packer B or Packer C because it's doubtful that they have all their slaughter needs filled through captive supplies.

A false period of low demand is created and prices are driven even lower.

Yet the market rises as many times as it falls. What happened when the markets were driven higher? Reverse captive supplies??

I've asked the question a hundred times and nobody can give me an answer. What changes with captive supplies to allow the market to go higher??

The use of captive supplies in a highly concentrated market has led to uncompetitive conditions in the markets for fed cattle.

If a packer has their needs filled by captive supply, sell to another packer. It's really that simple. No packer should be forced to buy more cattle in the cash market than they need to maintain their plant flow.

Do you even understand the concept of a Free Market Economy?

Contracting cattle for future delivery, in itself, can be a good thing.

It's a good thing but it's a bad thing. Ahhhh......ok?

However, packers are using a contract method known as "formula pricing" in which feeders are enticed to contract their cattle basing the contract price on the cash market on a delivery date, rather than a firm bid price.

ENTICED???

"Well, ah gee ah, I didn't know what I was doing when I sold those cattle because I was enticed". Hahaha!

Here's the bottom line on formula pricing and I have sold cattle on formula pricing. Everyone that sells under a formula knows how the base price will be derived. The incentive for formula pricing is to get paid for the quality of those carcasses.

I don't need packer blamers to save me from myself when it comes to selling cattle under a formula. I KNOW HOW THE BASE PRICE IS DERIVED which may work for or against me depending on the direction of the market. I don't have blinders on.

For example, a packer might offer the feeder 50 cents per hundred-weight over the cash market price on the day of delivery. Meanwhile, packers have enough cattle committed through captive supply so they do not need to buy on the cash market, driving down the cash price more than the premium offered the seller.

SO SELL TO ANOTHER PACKER!!

If a packer has his needs filled through captive supplies and the price of boxed beef drops at the same time, the cash price is going to drop because of the boxed beef price. This drop in the cash price didn't have a damn thing to do with the captive cattle so how can you isolate one factor (captive supply) and credit it to any move in the markets without considering the other factors that play on the market. The answer is simple, you can't. Only a complete fool would.


~SH~