Vertical integration coming soon to a packer near you

[don]

i get a kick out of the people who think that a huge investment would have to be made to have great power in the market. somebody like tyson, cargill or any number of other big operators in other industries know they just have to situate themselves in the value chain where they can create a bottleneck and it gives them market leverage disproportionate to their investment. what they do is get you to make the investment and they'll take the return off your equity. with legislation and politicians working for them they'll eventually wind up with your equity too.

 

[Texan]

Econ, it looks pretty simple to me. Granted, I haven't analyzed it nearly as thoroughly as you have, so maybe I'm oversimplifying it. But it just seems to me that if someone has that much principle-based objections to the way that TSN does business, they should put their money where there mouth is. Demand that your cattle never spill blood in a Tyson plant.

Don't say that it can't be done. It's not that difficult. It's just that most people would rather bench and piss and moan about it than take the discounts that would come from taking Tyson out of the bidding.

 

[Econ101]

Econ, it looks pretty simple to me. Granted, I haven't analyzed it nearly as thoroughly as you have, so maybe I'm oversimplifying it. But it just seems to me that if someone has that much principle-based objections to the way that TSN does business, they should put their money where there mouth is. Demand that your cattle never spill blood in a Tyson plant.

Don't say that it can't be done. It's not that difficult. It's just that most people would rather bench and p*** and moan about it than take the discounts that would come from taking Tyson out of the bidding.

When Tyson or other companies break the law in order to win at the competition game, they should have to pay for the damages they cause to the market. We have developed a system of payoffs to politicians and the judges corporations control (they are former corporate attorneys many times) so that this doesn't happen.

Texan, I never condone illegal activity with the excuse of "just don't do business with them" although that is part of it. I want to see justice. Clinton pardoned Archie Schaffer so it would not expose the frauds of politicians being paid off in the USDA. I don't think we solve that through just the market, we solve that by putting people in jail, not pardoning them.

Pres Bill Clinton issues pardons to 59 people; included on list are Dan Rostenkowski, once-powerful chairman of House Ways and Mean Committee who was convicted for mail fraud, and Archibald R Schaffer 3rd, executive with Tyson Foods who was convicted for role in scheme to illegally influence former Agriculture Secretary Mike Espy
December 23, 2000 U.S. News
MORE ON AGRICULTURE DEPARTMENT AND: UNITED STATES POLITICS AND GOVERNMENT, ETHICS, AMNESTIES AND PARDONS, ROSTENKOWSKI, DAN, ESPY, MIKE, CLINTON, BILL, SCHAFFER, ARCHIE III, CONGRESS
National News Briefs; Tyson Foods Executive Draws a Year's Sentence

Politicians are whoring out their responsibility of oversight for campaign donations. They were democrats (Clinton) and recently they have been republicans.

All of this mess needs to be cleaned out, not swept under the rug.

There needs to be Congressional Hearings on the money Tyson has given to politicians by the ethics and agriculture committees and the policies they have bought to cheat producers illegally.

 

[Sandhusker]

i get a kick out of the people who think that a huge investment would have to be made to have great power in the market. somebody like tyson, cargill or any number of other big operators in other industries know they just have to situate themselves in the value chain where they can create a bottleneck and it gives them market leverage disproportionate to their investment. what they do is get you to make the investment and they'll take the return off your equity. with legislation and politicians working for them they'll eventually wind up with your equity too.

You're exectly right, Don. You don't need to own the 100 miles of road if you own the 100 feet of bridge.

 

[Econ101]

I know a little about the economics of vertical integration in the poultry business. When beef prices went up, a large part of the increase was because their substitutes increased in price also. Chicken went from around 52 cents per lb. to over 90 cents per lb. Did the poultry producers share in that wealth? No. The integrators took all that money. That is what happens when there is no price determination of your contract based on the free market. In fact, a lot of the integrators were busy cheating producers out of less than a penny or two a lb.--enough to make a difference between a profit and a loss.

What did the poultry companies do with this money and market conditions? They increased poultry production to get more of the pie. Facilities that were recently mothballed were put back into production, production lines increased in speed and volume, and the extra production took part of the profits from cattle producers with their increased poultry supplies.

Texan, you need to look at the whole picture before you buy it.

 

[Jason]

What everyone forgets, producers own the cattle and can feed and slaughter them if they desire to do so.

Smithfield sees that producers aren't willing to follow BQA and ID their calves, so the best way for them to provide a consistant product is to buy the calves and do it themselves.

Tyson, Smithfield, Cargill and all the other packers combined don't have the assests to own the national cowherd of either the US or Canada, let alone the land.

As for chicken, what did producers change to make chicken increase in price from 52 cents to 90 cents? Wasn't it better processing and more convienient servings?

Beef is at a new plateau again, the whole meat complex is going to rise because of energy costs etc. The main thing is most ranchers still don't know if they are making money or not.

 

[Econ101]

As for chicken, what did producers change to make chicken increase in price from 52 cents to 90 cents? Wasn't it better processing and more convienient servings?

Nothing. The packers manipulated supplies through the mechanisms expressed in the Pickett case.

It was market manipulation so chicken prices would go up and they would reap windfall profits off of chicken.

There is no free market price determination in poultry anymore for producers. It is a rigged game.

New supplies are induced through fraud. GIPSA is part of that fraud by not enforcing the law and their intentional incompetence concerning the frauds.

There are several lawsuits alleging these actions. As long as the judges are not incompetent or corrupt, there will be a price to pay.

If you don't think this can happen to the cattle industry, it already has.

 

[Sandhusker]

Jason, "Tyson, Smithfield, Cargill and all the other packers combined don't have the assests to own the national cowherd of either the US or Canada, let alone the land."

They don't need to Jason. Go back and read the prior posts on this thread. Tyson doesn't own any land that their chickens are grown on. They don't own the barns. They don't own the equipment in the barn. The biggest asset they have that makes everything work for them is a piece of paper. Documents don't cost much.

If Tyson has chicken growers by the nards without owning a dang thing, what makes you think they need to own the assests in the cattle business?

 

[Econ101]

Jason, "Tyson, Smithfield, Cargill and all the other packers combined don't have the assests to own the national cowherd of either the US or Canada, let alone the land."

They don't need to Jason. Go back and read the prior posts on this thread. Tyson doesn't own any land that their chickens are grown on. They don't own the barns. They don't own the equipment in the barn. The biggest asset they have that makes everything work for them is a piece of paper. Documents don't cost much.

If Tyson has chicken growers by the nards without owning a dang thing, what makes you think they need to own the assests in the cattle business?

It is estimated that the capital used in the poultry industry is over half owned by producers. They do not receive half the profits due to the frauds the companies commit. Without independent and fair market price determination mechanisms, producers are cheated. GIPSA, by hiding the frauds in the industry, make it look like there are not any. They actually subsidize the risks by not reporting the number of complaints and not doing adequate investigations into the complaints.

This gives the integrators an easier supply of new growers willing to share in the elusive profits of the industry.

This is a government backed fraud on farmers greased with the donations the integrators have made on the hill. Go read the other thread on it for but one example.

 

[Red Robin]

If you don't like the VI deal, go talk to your friend on the big corporate ranches. I don't see smithfield starting VI with the middle America family ranches. We're too independant as a whole to make much headway. I forsee them going to the Deseret and such, making deals which actually profit them and smithfield. 30 or so of the largest ranches under one packer in a VI deal will put some pressure on the cash market I guess. The could do the reverse and start with the little cow herd back east (like here) which they did in the Chicken deal. I don't know a single chicken farmer that was in the chicken business before their Tyson contract.

 

[Red Robin]

i get a kick out of the people who think that a huge investment would have to be made to have great power in the market. somebody like tyson, cargill or any number of other big operators in other industries know they just have to situate themselves in the value chain where they can create a bottleneck and it gives them market leverage disproportionate to their investment. what they do is get you to make the investment and they'll take the return off your equity. with legislation and politicians working for them they'll eventually wind up with your equity too.

You're exectly right, Don. You don't need to own the 100 miles of road if you own the 100 feet of bridge.

Great power in the market and vertical integration are two different things. I would assume they already have great power in the market. If you believe they can control the market by controlling the feed lot or the kill floor, this would be much easier than VI. Why won't they just do more of that?

 

[Red Robin]

Jason, "Tyson, Smithfield, Cargill and all the other packers combined don't have the assests to own the national cowherd of either the US or Canada, let alone the land."

They don't need to Jason. Go back and read the prior posts on this thread. Tyson doesn't own any land that their chickens are grown on. They don't own the barns. They don't own the equipment in the barn. The biggest asset they have that makes everything work for them is a piece of paper. Documents don't cost much.

If Tyson has chicken growers by the nards without owning a dang thing, what makes you think they need to own the assests in the cattle business?

It is estimated that the capital used in the poultry industry is over half owned by producers. They do not receive half the profits due to the frauds the companies commit.

Where do you get your data? I'd like to see it.

 

[Econ101]

If you don't like the VI deal, go talk to your friend on the big corporate ranches. I don't see smithfield starting VI with the middle America family ranches. We're too independant as a whole to make much headway. I forsee them going to the Deseret and such, making deals which actually profit them and smithfield. 30 or so of the largest ranches under one packer in a VI deal will put some pressure on the cash market I guess. The could do the reverse and start with the little cow herd back east (like here) which they did in the Chicken deal. I don't know a single chicken farmer that was in the chicken business before their Tyson contract.

There were three main regions for chicken production and their consequent development. One is the east coast where Perdue is the largest. Next is Tyson based in Arkansas. The largest farmer owned cooperative was Goldkist around Alabama and Georgia, NC. The other one of note is Pilgrim's Pride of Texas. There are other companies but these are really the big boys with Tyson having about 40 to 50 percent of the market share in poultry.

Because of the necessity for processing facilities and feed facilities for growing factory type production (considerable investment in single use facilities) in chickens, there is more of an incentive for growers/processors to have a closer relationship than that in the beef industry where your cattle can be moved and sold, your feed can come from anywhere, etc.

The vertical integration of beef will not be the same as that of the chicken or pork industries. With captive supplies and supplies of substitutes, the big packers need only sway the beef markets and make their money in the substitutes. The beef industry is only the bell weather of the meats.

 

[Jason]

This thread started as Smithfield working a vertical deal with feedlots they own. Somehow it is sidetracked to Tyson controls the chicken industry and will do the same to the beef industry.

E con has no data like his grass fed cattle have no e-coli :roll:

Cattle producers need to understand the markets and know their costs, fearing a working relationship with a packer isn't high on the radar for progressive producers.

Don't like the deal offered, don't sign it.

Somehow in Texas people have no free will and big corps can force them into slavery. :roll:

 

[Econ101]

This thread started as Smithfield working a vertical deal with feedlots they own. Somehow it is sidetracked to Tyson controls the chicken industry and will do the same to the beef industry.

E con has no data like his grass fed cattle have no e-coli :roll:

Cattle producers need to understand the markets and know their costs, fearing a working relationship with a packer isn't high on the radar for progressive producers.

Don't like the deal offered, don't sign it.

Somehow in Texas people have no free will and big corps can force them into slavery. :roll:

Vertical integration is the gaining of market power, Jason. Tyson was able to alter the cash market by an estimated 2.8 billion with just their market power and control and captive supplies. It was an economic fraud.

Go on and talk about corn yields again, Jason, something else you know little of.

 

[Sandhusker]

Jason, "Cattle producers need to understand the markets and know their costs, fearing a working relationship with a packer isn't high on the radar for progressive producers. "

There's a difference between a working relationship and a dictatorial relationship.

Yeah, I know, you don't have to sign the papers..... Try to get in the chicken business without signing a contract. What do you think happened to the guys who thought they would stay independant and never sign a contract? Is that how you want the future of the cattle business to go?

 

[andybob]

You could be right , if so , I'm not in and neither are you and neither is anyone else I know. I doubt they could control much just by dipin' their toe in the water like that . I think it'll take more investment. I really have no idea. Smithfield is sharper and more on the edge than tyson. It won't be tyson . You need to look to smithfield for your model and I don't know how they work the sow deal. Do you?

Smithfield own all their genetics and improve each genetic line so rapidly that multiplyer farms turn sows around at the rate of 2,2 litters per sow to keep from holding obsolete genetics on the farms, the commercial sows will breed up to 10 parities, with a herd average of 6. Very few sows are under contract breeders, most nurseries and finishers are contract with stict guidelines on all aspects of raising, and constant monitoring by Smithfield staff.
As little as three years ago, the company farms were giving away or even burning hay grown on the fields used to dispose of waste water from the lagoons. These fielde are now utilised by grazing company cattle, mostly Hereford and Angus at present, but some farms still have several hundred acres each which is not fenced or being utilised for cattle.
I would guess there is enough grazing to establish neucleus breeding herds, if need be by implanting top genetics into existing commercial cows, then contractors can be found to breed the terminal calves to supply the company owned feedlots. By owning specific brand names associated with specific company owned genetics, only those contracted into the system will be able to benefit, then at a loss of your freedom to farm as you feel is right, as with the pigs, it will all be 'raise by number' type farming, step outside the parameters, lose your contract!
If this is a little confusing,I will clarify any points anyone is unsure of.

 

[Anonymous]

Sandbag: "Why would the packers need any great amount of capital in integrating beef?"

Because there is far more equity tied up in land, livestock, and machinery than there is in packing plants.

Secondly, vertical integration in this industy is occuring more from the bottom up (producer up) than from the top down (packers down). USPB, Oregon Country Beef, Harris Ranches, and Creekstone Farms are all examples of producers owning their own packing plant.

Can you give me an example of where Tyson, Swift, or Excel are buying pastures, machinery, or breeding cattle?

I can't believe all this "CHICKEN LITTLE" fear mongering in this thread. POOR YOU!

Most of the vertically integrated branded beef programs that the large packers participate in WERE PRODUCER DRIVEN!

If you packer blamers weren't such thumbsuckers, you'd know that.


~SH~

 

[Sandhusker]

SH, "Because there is far more equity tied up in land, livestock, and machinery than there is in packing plants."

They don't have any equity tied up in land, barns, equipment, etc.... in chickens, why do you think they will need it in beef? Open your eyes before opening your maw.

 

[Anonymous]

Sandbag: "They don't have any equity tied up in land, barns, equipment, etc.... in chickens, why do you think they will need it in beef?"

It's not cost effective to confine beef cattle you moron.


~SH~