Tam

[Jason]

I can agree with shooting for a high end product. I have always promoted that.

What about the cattle that don't meet (meat for a pun) the high quality specs? Where do they go?


An interesting quote in the article I referenced a while back on the chef at the Black Bear in Denver; he was talking about customers wanting to know where their food came from. He said some felt only big companies would have the resources to make sure food safety was looked after. Not exactly what everyone has been pushing that all consumers want a local product.

The failure of Future Beef needs to be top of mind for any new venture. This isn't an easy business but needs very expert management to survive.

 

[Mike]

Future Beef, was going to fail before it started, with the management attitude they had. They did not fail, because there was not a market for them.

Ben Roberts

Ben, I rode with a Future Beef buyer for a week or two during their first buying spree. I know without a doubt the big boys pushed up the prices on feeder cattle during this time period. Way up.

Whether or not it was an orchestrated event, I have no way of knowing 100%.
But it didn't take a rocket scientist to figure out what was going on.

They did have management issues, but I believe they could have overcome them had it not been for pressure from the industry and bad luck.

 

[Jason]

Future Beef, was going to fail before it started, with the management attitude they had. They did not fail, because there was not a market for them.

Ben Roberts

Ben, I rode with a Future Beef buyer for a week or two during their first buying spree. I know without a doubt the big boys pushed up the prices on feeder cattle during this time period. Way up.

Whether or not it was an orchestrated event, I have no way of knowing 100%.
But it didn't take a rocket scientist to figure out what was going on.

They did have management issues, but I believe they could have overcome them had it not been for pressure from the industry and bad luck.

If a new guy comes into any market the regulars always have some fun.

I have seen a local farmer type wanting some heifers and paying 20 cents a pound more for the ones he buys than anything else sold that day. He was too stupid to stop or back off, the regulars pushed him for a laugh.

I have seen a major purebred outfit bidding against themselves because the manager is so hyperfocused he doesn't realize the other bids are from the auctioneer.

Let the big boys pay too much, they'll stop after a while if they see your buyer has some common sence and won't try to run them on all the cattle.

This is where KNOWING the business is important. If you can't make a buck, you need to know why.

 

[Ben Roberts]

Future Beef, was going to fail before it started, with the management attitude they had. They did not fail, because there was not a market for them.

Ben Roberts

Ben, I rode with a Future Beef buyer for a week or two during their first buying spree. I know without a doubt the big boys pushed up the prices on feeder cattle during this time period. Way up.

They did have management issues, but I believe they could have overcome them had it not been for pressure from the industry and bad luck.

My point exactly, you can't go on a "buying spree" and survive this industry. Mike, we bought thousands of cattle for a major packer a few years ago, and every monday morning we were told by the management of that company, what we could pay for steers of a certain weight range that week. Some weeks we bought alot of cattle, other weeks we were not as aggressive and with the number of cattle we bought we could control the market at any sale barn, when we lowered the market,(after the smaller farmer and rancher feeders filled their needs) we then could step in and buy cattle. Future Beef's management tried to windrow cattle (with a i'll show them attitude) and that cost them their future.

Ben Roberts

 

[Mike]

Future Beef, was going to fail before it started, with the management attitude they had. They did not fail, because there was not a market for them.

Ben Roberts

Ben, I rode with a Future Beef buyer for a week or two during their first buying spree. I know without a doubt the big boys pushed up the prices on feeder cattle during this time period. Way up.

They did have management issues, but I believe they could have overcome them had it not been for pressure from the industry and bad luck.

My point exactly, you can't go on a "buying spree" and survive this industry. Mike, we bought thousands of cattle for a major packer a few years ago, and every monday morning we were told by the management of that company, what we could pay for steers of a certain weight range that week. Some weeks we bought alot of cattle, other weeks we were not as aggressive and with the number of cattle we bought we could control the market at any sale barn, when we lowered the market,(after the smaller farmer and rancher feeders filled their needs) we then could step in and buy cattle. Future Beef's management tried to windrow cattle (with a i'll show them attitude) and that cost them their future.

Ben Roberts

I know what you're saying, but Safeway (a big investor) had put big pressure on them for delivery, plus the 911 downfall of beef sales hurt the guys that were previously buying on borrowed money much more than the established ones with cash.

They HAD to buy when they did.

Just goes to show the market power that can be exerted when necessary.

 

[Jason]

Every buyer that buys anything exerts market pressure.

Notice in Ben's post they had to wait until all the small guys were full. Would the same small guys have paid the same higher price if Ben and co. weren't there waiting in the wings?

The small guys kept the average price higher, if they were making enough why didn't they just buy them all at the price Ben and co. weren't paying? It is easy to see they either were willing to have a lower margin and get what they could, or they just didn't know better.

Human nature is to get what you can for the best price possible. In any system some will pay more if they have a competitative advantage. That advantage might be cash sitting idle and needing an investment. 4% return is cheaper to run on than 6% interest.

If there is so much profit sitting there for the taking, packers should be springing up everywhere. High profits leads to more players. Low profit margins leads to fewer, eventually if enough drop out and the remaining ones take the opportunity at higher profits, new players will enter.

New players are not looking at the packing industry because of tight competitive forces. Anyone looking at a producer owned venture that thinks otherwise will be where Future Beef is.

 

[RobertMac]

Every buyer that buys anything exerts market pressure.

Notice in Ben's post they had to wait until all the small guys were full. Would the same small guys have paid the same higher price if Ben and co. weren't there waiting in the wings?

The small guys kept the average price higher, if they were making enough why didn't they just buy them all at the price Ben and co. weren't paying? It is easy to see they either were willing to have a lower margin and get what they could, or they just didn't know better.

Human nature is to get what you can for the best price possible. In any system some will pay more if they have a competitative advantage. That advantage might be cash sitting idle and needing an investment. 4% return is cheaper to run on than 6% interest.

If there is so much profit sitting there for the taking, packers should be springing up everywhere. High profits leads to more players. Low profit margins leads to fewer, eventually if enough drop out and the remaining ones take the opportunity at higher profits, new players will enter.

New players are not looking at the packing industry because of tight competitive forces. Anyone looking at a producer owned venture that thinks otherwise will be where Future Beef is.

Anyone that thinks they can go up against Tyson, Cargill, and ConAgra and beat them at their game will end up like Future Beef. You are right to have the defeatist attitude.

 

[DiamondSCattleCo]

Every buyer that buys anything exerts market pressure.

SH, are you listening? This is why a two packer system doesn't bring the same level of pricing as a 4, 5 or 20 packer system.

Rod

 

[Ben Roberts]

Every buyer that buys anything exerts market pressure.

Very true



Notice in Ben's post they had to wait until all the small guys were full. Would the same small guys have paid the same higher price if Ben and co. weren't there waiting in the wings?



Yes they would, they were setting the market, bidding against each other until they filled up. Then you could watch the market drop .25 to .50 every time one would fill. I've seen auctions drop $2.00 or more from start to finish, in large runs.

The small guys kept the average price higher, if they were making enough why didn't they just buy them all at the price Ben and co. weren't paying? It is easy to see they either were willing to have a lower margin and get what they could, or they just didn't know better.

The smaller farmer feeders can't buy them all for two reasons,(1) they may not have enough crop, (2) not enough bunk space.


Human nature is to get what you can for the best price possible. In any system some will pay more if they have a competitative advantage. That advantage might be cash sitting idle and needing an investment. 4% return is cheaper to run on than 6% interest.

Investors have always been a factor in the cattle feeding industry, although some of them wish they had taken their money and went to Las Vegas, at least they could have enjoyed loosing their money.

If there is so much profit sitting there for the taking, packers should be springing up everywhere. High profits leads to more players. Low profit margins leads to fewer, eventually if enough drop out and the remaining ones take the opportunity at higher profits, new players will enter.

There is alot of profit in the packing industry, a new player can't survive in commodity meats, unless he can come up with a better mouse trap. Currier Holman(founder of IBP) went broke within the first year, at his first attempt in the meat packing business.

New players are not looking at the packing industry because of tight competitive forces. Anyone looking at a producer owned venture that thinks otherwise will be where Future Beef is.

I have never seen a greater time than now to start, today there is a fast moving train going by. Some will stand and watch it go by, yet others, will jump on for a for a great ride. It just depends on how you see that glass of water, half full or half empty.

 

[Jason]

You call $26 a lot of profit?

I'll stay in the live end where I can make $400 or more per head.

More people get killed trying to jump on a moving train than get a wild ride from it.

 

[Sandhusker]

You call $26 a lot of profit?

I'll stay in the live end where I can make $400 or more per head.

More people get killed trying to jump on a moving train than get a wild ride from it.

Making $26 every two weeks is a heck of a lot better than making $400 a year.

 

[RobertMac]

You call $26 a lot of profit?

I'll stay in the live end where I can make $400 or more per head.

More people get killed trying to jump on a moving train than get a wild ride from it.

Who is making $26.00? Slaughter plant? Fabrication plant? Distributor? Wholesaler? Renderor? Offal? Hides? Feeds?

The trick is knowing when to jump on the train and which one!!!!!

 

[Ben Roberts]

You call $26 a lot of profit?

I'll stay in the live end where I can make $400 or more per head.

More people get killed trying to jump on a moving train than get a wild ride from it.

Jason, I will always respect your opinion, question it at times, but always respect it.

Also, packers can't pay bonus to their top executives of over ten million dollars annually, and millions of dollars annually for up-grades and expansions, with only a $26.00 per head profit.

Ben Roberts

 

[Jason]

If I had the ability to borrow $50-$150 million to build a plant, why would I? Retirement is a much nicer option. Heck even at 1% of the $50 million I could do pretty well with no stress.

 

[DiamondSCattleCo]

You call $26 a lot of profit?

Well, lets see, I keep my calves for 10 months and make, on the average, about $350. Thats $35/mo. Packer turnaround is what? 2 weeks, 3 weeks? Thats $52/mo. They're taking far less risk, yet making more money than I do off that animal.

Rod

 

[Ben Roberts]

If I had the ability to borrow $50-$150 million to build a plant, why would I? Retirement is a much nicer option. Heck even at 1% of the $50 million I could do pretty well with no stress.

True today, but tomorrow, will be different than today.

Ben Roberts

 

[Jason]

You call $26 a lot of profit?

Well, lets see, I keep my calves for 10 months and make, on the average, about $350. Thats $35/mo. Packer turnaround is what? 2 weeks, 3 weeks? Thats $52/mo. They're taking far less risk, yet making more money than I do off that animal.

Rod

Far less risk... unless it spoils, gets recalled, doesn't sell at a profit, the live cattle didn't grade like expected.... yep less risk. The risk is different, and the profit margin is often a loss. Imagine losing money for the first 6 months your plant is open.

 

[Sandhusker]

You call $26 a lot of profit?

Well, lets see, I keep my calves for 10 months and make, on the average, about $350. Thats $35/mo. Packer turnaround is what? 2 weeks, 3 weeks? Thats $52/mo. They're taking far less risk, yet making more money than I do off that animal.

Rod

Far less risk... unless it spoils, gets recalled, doesn't sell at a profit, the live cattle didn't grade like expected.... yep less risk. The risk is different, and the profit margin is often a loss. Imagine losing money for the first 6 months your plant is open.

Unless the cow turns up dry, the calf dies, the cow dies, the neighbor's Char bull gets in, etc.....

 

[Tommy]

Jason...Far less risk... unless it spoils, gets recalled, doesn't sell at a profit, the live cattle didn't grade like expected.... yep less risk. The risk is different, and the profit margin is often a loss. Imagine losing money for the first 6 months your plant is open.


Jason are you factoring in land price, equipment, and hay? Or do you figure everyone has their land donated to them? Point is we all have built in costs, some more than others.

 

[Jason]

Yes Tommy land is a major issue. Some would call it a barrier to entry.

However I have seen guys run 600 cows and only own a few acres, lease land is cheaper.

Nearly every industry is expensive to enter, and the big growth is usually focused on the most lucrative.

More homebuilders have popped up in recent times, but finally an oversupply of houses has done what to them?

Agriculture is one of the last industries to change to a business model. We often hear guys are willing to make less money just to get the lifestyle. Every person that runs as a lifestyle instead of a business just adds numbers to the supply side. Often not high quality on the supply.

Hobby horse people drive the price of hay up to unaffordable prices for the cow/calf sector in some areas. It's reality deal with it.

Too many ranchers just want an easy scapegoat to blame. The big packers are easy to blame. They are faceless corporations. If they make so much money, be one. I for one don't think the grass is always greener on the other side of the fence.