What factors affect cattle prices?

[Bullhauler]

Gee SH are you channeling your inner Flounder?

 

[Anonymous]

Ha ha ha!

I have a ways to go to catch Flounder.

Point taken!



~SH~

 

[Sandhusker]

SH, do you understand the concept of time value of money?

 

[RobertMac]

SH, I have to agree with Bullhauler and just as I don't read Flounder's post, I didn't read all of yours...will try to later.

Let's look at one point...$16 per head profit.

This reminds me of Clinton's...what the meaning of IS is?
How was this figure developed? Because it was used in a court of law, does that make it unquestionable truth?

If my business was grossing large sums of money(which I'm not), the first thing I would do is to hire an accounting firm to help me manage my income. The goal is that come tax day, the smallest amount of my gross will come under the heading of TAXABLE INCOME. Nothing wrong with doing this because I certainly would as would you, but that is what this figure represents. If I wanted to be cynical, I would say that the figures used in court might not stand the scrutiny of the IRS.

How many million $$$ did/does John Tyson take out of his corporation? Where does that money come? Is it there for the taking because there is a Tyson "stash"? No, all those dollars come from one place...the consumer! Does he deserve that paycheck? Yes, it's his company and managers of large corporations deserve good salaries...but isn't that an expense that comes out of the gross that lowers the "net profit"?

I do from birth to the consumer...my processing and packaging cost are probably double Tyson's...no income what so ever from hide and offal. I sell at about 20% above wholesale prices and below retail prices(given 100% utilization by the retailer and no discount pricing).
I know there is $200 to $500 per head(depending on quality and market) that the accountants have to "hide" so it doesn't show as taxable income.

To blindly believe and accept "$16 per head profit" insults your intelligence.

Robert

 

[Anonymous]

To blindly believe and accept "$16 per head profit" insults your intelligence.

Robert

I've been on this site for 7-8-9 years-- and old SH's packers only making $16 a head profit never changes- even tho during that time they keep buying up new investments and foreign plants- and the CEO (John) retires with a $33.6 MILLION dollar retirement package+ already retired Daddy (Don- the old Senior Member of the Board) gets a flat $1.2 Million a year retirement plus all the little benis- like company jets, free tax planning services :???:, acess to all the sports sky boxes- and 1500 hundred hours of security services .....

Yep-- poor packers.......

 

[RobertMac]

OT, unlike you, I don't begrudge the Tyson's from reaping the benefits of the company they built...just don't try to tell me there is no profit.

SH, there is more to competition than simply another buyer with the same system offering a similar price...both with the goal of buying as cheap as possible. When larger corporation use their power and market power to prevent new competition from different systems...that is anti-competitive. I'm sure Ben talked to you about the large packers buying up their "competition".

 

[mrj]

RobertMac, how is that different from one rancher or farmer, or any other businessman "buying up" additional property/land/or inventory from a 'smaller' one in order to make his/her own business more 'profitable'?

Have you never done that?

Whether the plan succeeds or not maybe another matter entirely!

mrj

 

[Anonymous]

RM: "Let's look at one point...$16 per head profit."

RM: "How was this figure developed? Because it was used in a court of law, does that make it unquestionable truth?"

Just because you don't want to believe it, does that make it unquestionably false?

Was evidence presented to the contrary?

This is a classic example of how you guys operate (RM, Sandhusker, OT, and other packer blamers). You can't provide one stitch of evidence to prove that packers are making the "HUGE PROFITS" that you want to believe they are making, so your only option is to question or discredit what you don't want to believe. Same-O, Same-O!

Why don't you do some research Robert? Why don't you find out the truth for once? Are you afraid of what you might learn? Are you worried that there might be nothing left to blame?

I'll play your game Robert. Let's assume for the sake of argument that the $16 per head figure is questionable. Let's look at what is not questionable. The fact that Tyson, JBS, Excel, and USPB are all in competition for the same cattle is not questionable. It's a cold hard unrefuted fact. Therefore, if one packer is making excessive profits, the other packers can offer a higher price for the cattle and still be profitable. If they are not competitive, THEY DON'T GET ANY CATTLE BOUGHT.

This simple logical fact defeats anything you can throw out to question the level of profitability. If the beef processing business was as lucrative as you want to believe it is, beef processing plants would be cropping up all over.

We've been down this road a hundred times. I don't intend to change your blaming mind. You won't believe it until you've been in the beef processing business and met the same fate as Future Beef. If the beef processing business was as lucrative as you want to believe, Future Beef would still be going great guns with some of the best minds in the industry.

I'm typing for the sake of those who can think for themselves and are willing to sort fact from fiction. I know you won't question what you want to believe.

You simply cannot argue the fact that these packers are in competition with eachother for the same cattle. Until you are willing to debate that fact, you will offer nothing credible to the contrary.

RM: "How many million $$$ did/does John Tyson take out of his corporation?"

What's your point? The only way to measure the impact of John Tyson's salary on individual livestock producers is to divide that salary PROPORTIONATELY TO THE COSTS OF PROCESSING by the total number of chickens and cattle that are processed. If you knew those figures it would be meaningless in the big picture.

RM: "I do from birth to the consumer...my processing and packaging cost are probably double Tyson's...no income what so ever from hide and offal. I sell at about 20% above wholesale prices and below retail prices(given 100% utilization by the retailer and no discount pricing)."

That doesn't even make sense. If you are selling "below retail prices" and your processing costs are "probably double Tyson's" and you have no ofal and hide value, then you would have to be losing your butt unless I am misunderstanding something here.

RM: "I know there is $200 to $500 per head(depending on quality and market) that the accountants have to "hide" so it doesn't show as taxable income."

Since you haven't explained the $200 - $500 figure, I will have to assume it's retail beef and beef by product value (including hide and ofal) value minus livestock purchasing costs. From that you deduct processing costs and overhead costs. What remains is profit to be invested or it becomes taxable income.

When Andy did some extensive research a few years ago, a 9 year average per head profit (beef and beef by product value minus purchasing costs minus processing costs = per head profit) for the 5 largest packers was $3.38 per head. I'm sure you don't want to believe that either.

RM: "To blindly believe and accept "$16 per head profit" insults your intelligence."

Not at all. What requires a real leap of faith is to believe that Tyson, JBS, Excel, and USPB are not in competiton with eachother and that they would allow their competition to make huge profits without undercutting them.

If they were not in competition, they would be in collusion. Bet that would go over real well with their investors wouldn't it?


When are you going to stop ignoring the obvious?

If the "HUGE" profits are there to be made, someone is going to step in and make them by undercutting the competition. That's how big business works.


~SH~

 

[Anonymous]

Sandhusker: "SH, do you understand the concept of time value of money?"

If you have a point, MAKE IT.


~SH~

 

[Anonymous]

OT: "I've been on this site for 7-8-9 years-- and old SH's packers only making $16 a head profit never changes- even tho during that time they keep buying up new investments and foreign plants- and the CEO (John) retires with a $33.6 MILLION dollar retirement package+ already retired Daddy (Don- the old Senior Member of the Board) gets a flat $1.2 Million a year retirement plus all the little benis- like company jets, free tax planning services , acess to all the sports sky boxes- and 1500 hundred hours of security services ....."

Why should it change? The $16 per head profit from the pickett case won't change until you can offer something meaningful to the contrary. Fat chance of that huh?

Do you actually believe TYSON'S CEO's salaries, pensions, and benie package is proof to the contrary of IBP's per head profit level stated in the pickett case?

You do? I'm sorry, that's going to make you look awful foolish.

Comparing Tyson profits to ibp profits is the classic apples to grapefruits comparison.

First off, ibp stands for Iowa "BEEF" Processors. The $16 per head profit was only for beef. Tyson, who bought ibp out after the time period of the pickett case, also processes chicken so you would need to sort chicken profits from beef profits to have any meaning to your ILLUSION OF PROFIT. Can you do that? Of course you can't.

Second, any salaries and benefits that were derived from the beef industry would have to be pro-rated by the number of head they processed to determine what affect it has on a PER HEAD BASIS. Can you do that? Of course you can't.

Third, $16 per head is not their average profit, $16 per head was the profit they made during the period of "ALLEGED" market manipulation during the pickett case. Their average PER HEAD profit would be less.

Here is your homework assignment OT, I want you to find out what Tyson's average annual profit levels are and find out how much of that profit is derived from beef as opposed to poultry. Then you can deduct the poultry profits from the total profits so we know what percentage of their profits are derived from beef. Then you can divide the beef processing profit that remains by the cattle slaughter numbers and see what the beef processing profit level is ON A PER HEAD BASIS. Then, take a percentage of the salary and benies figures your threw out, that is equal to the percentage of their profits that is derived from beef, and divide that by the total slaughter numbers to see how that plays out on a PER HEAD BASIS. Then, and only then, can we OBJECTIVELY measure the impact of their total profit picture. Fat chance of you doing that huh?

Until you do this math, you got nothing more than an illusion of what you want to believe is being made on beef processing based on a CEOs salary and benefits that was derived from beef and poultry sales.

Yeh, poor packers is right! Why did Future Beef close their doors in such a short period of time if there was such "HUGE PROFITS" to be made? Huh? Sometimes the obvious is just to obvious for a packer blamer.


~SH~

 

[Anonymous]

RM: "OT, unlike you, I don't begrudge the Tyson's from reaping the benefits of the company they built...just don't try to tell me there is no profit."

Nobody said there was no profit Robert.

I'm simply stating the processing and retail profit levels on a PER HEAD BASIS are not what some in this industry are stating. Not even close. Some of the fools that are claiming these "SUPPOSED" $300 per head NET processing and retail beef profits are crediting retail beef values to the percentage of the carcass that is fat and bone.

Think about that. Here are these "self proclaimed" industry experts from the blaming segment of our industry that are so naive about beef processing that they are giving retail beef value to bone and fat that is worth $.08 per pound. What about the beef that is discarded if not sold by the expiration date? When is that ever deducted in this "fuzzy math"?

To them I say, "don't let the facts stand in the way of a good story".

RM: "SH, there is more to competition than simply another buyer with the same system offering a similar price...both with the goal of buying as cheap as possible. When larger corporation use their power and market power to prevent new competition from different systems...that is anti-competitive. I'm sure Ben talked to you about the large packers buying up their "competition".

Tyson, Excel, and JBS have not bought eachother out.

How did producer owned USPB survive in this "supposed" anti - competitive environment? Care to deny the obvious?

Larger more efficient companies are buying out smaller less efficient companies IN EVERY FACET OF BUSINESS. Concentration is the result of competition rather than the result of a lack of competition. If buying out smaller less efficient companies was truly "anti competitive", then business as we know in the US would cease to exist in favor of a socialist agenda where every company was treated the same REGARDLESS HOW INEFFICIENT THEY WERE.

God help us if the socialists ever have their way.

Yours is the classic self defeating argument. On one hand you believe there is not enough competition in the packing industry. On the other hand, you say smaller companies cannot compete. You don't even realize how those two statements contradict eachother.

If the profit levels are what you wanted to believe they were, smaller packing companies could compete even if they were less efficient. Smaller packing companies can't compete because they can't pay what the larger packing companies can pay for cattle and still remain profitable because the larger packing companies can process cattle more efficiently.

That is an undeniable fact.

If the packer blamers are successful in breaking up the large packers into more smaller less efficient packers, we will receive less money for our cattle as a result. Unfortunately, the packer blamers never have to face the consequences of their short sighted decisions. They just blame someone or something else.


~SH~

 

[Anonymous]

And my point is that Tysons can take that $300 a head you say they never make-- and pay out huge amounts for golden parachutes-and retirements- and buy up more feedlots in Brazil and Australia- and make that profit figure come out to be $16 any time they want to....
But that doesn't mean they are only making $16 a head.....

 

[Anonymous]

OT,

You didn't make a point. You simply stated a factually void opinion.

Why haven't you invested in the packing industry?

If you are so convinced they are making those "HUGE PROFITS" that Callicrate & Co. keeps telling you about, why not put your money where your packer blame is?

Hmmm???

Do the research I mentioned above then lets have a meaningful discussion on packer profitability.

Or.....

You can just mindlessly keep repeating the packer blaming mantra like you've always done.



~SH~

 

[Sandhusker]

Sandhusker: "SH, do you understand the concept of time value of money?"

If you have a point, MAKE IT.


~SH~

Ranchers own the cow for a year and MIGHT make $100 on the calf. Some years a little more, some years much less. For this example, $100/head will work. The packer ONLY makes $16/head, but they ONLY own the animal for a few days, generally less than a week. Let's be generous and say they hang the carcass for 21 days before sale - that gives them ownership for 1 month.

Now, you do the math and tell me who is making more money. What you're doing is telling the guy making $50/day that the other guy is ONLY making $20/hour.

 

[Anonymous]

Sandhusker: "Ranchers own the cow for a year and MIGHT make $100 on the calf. Some years a little more, some years much less. For this example, $100/head will work. The packer ONLY makes $16/head, but they ONLY own the animal for a few days, generally less than a week. Let's be generous and say they hang the carcass for 21 days before sale - that gives them ownership for 1 month.

Now, you do the math and tell me who is making more money. What you're doing is telling the guy making $50/day that the other guy is ONLY making $20/hour."

The packers are not making $16 per head Sandhusker so you didn't even start your assumed point on solid ground.

ibp made $16 per head IN THE YEARS OF "ALLEGED" MARKET MANIPULATION. That is not to say that ALL PACKERS in ALL YEARS are making $16 per head. Comprende'?

Can we start this discussion on a factual basis or would you prefer to continue taking statements out of context in your typical deceptive manner?

Andy's research showed the 5 major packers for a 9 year average making $3.38 per head. I have no doubts that this figure is very close to being accurate considering the competition between the major packers that you will not admit to and considering the volatility of the commodity beef industry which is evident in boxed beef price fluctuations. The very real situation of "selling it or smelling it" does not guarantee any packer or retailer a profit relative to competitive meat prices. You know, our real competition POULTRY AND PORK????

Now if you have solid proof of packer profits to the contrary, bring it Sandhusker. That would be a first for you to actually back your views with supporting facts. I won't hold my breath.

Since we still live in a FREE MARKET ECONOMY, you don't get to determine how much money packers are entitled to make so you don't have a point from that standpoint either. Since when does one segment of the industry get to determine what the next segment of the industry gets to make after they sell the cattle? What you are able to do is process your own cattle if you think packers are making too much money and capture that profit center for yourself. Rather than putting your money where your packer blame is and investing in the industry you believe is so lucrative, you have chosen a far easier path of trying to regulate the livestock feeding industry into a "socialized cattle marketing" structure where you and other packer blamers who don't feed cattle determine for those who do feed cattle the manner in which they can market their cattle to the packers.

For the sake of this industry, I hope you and yours fail in your effort to socialize fat cattle marketing.

Bottom line, as usual, you have no point!


~SH~

 

[Sandhusker]

So Andy (the same guy who said the Japanese would rush to buy our beef once it was made available to them) claims the longer-term average packer profits/head is $3.38. OK, lets go with that. During the years of the alleged manipulation, profits were $16/head. Perhaps you haven't noticed that their profits/head during that time period was almost 5x the "average" - and that taking the larger numbers out of the average would lower that even further, thus even widening the gap? Nope, nothing unusual there..... :roll:

I'm not saying that the packers are making obscene profits, and I'm not trying to determine what they are "entitled" to make, so you putting words in my mouth isn't appreciated. I'm just saying that they're making more money than producers are, and to attempt this "poor packers" schpeel doesn't fly.

I'm also not impressed with your attempt to classify me a "fat cattle socialist". I believe in free markets and capitalism. You're the one that only talks the talk per your comments about free markets, and then your packer backer stance of supporting the ban on private BSE testing.

One of the many things that you don't understand is that, in order to have a functioning and fair marketplace and for capitalism to flourish, there must be transparancy and none of the participants should be able to muscle out any of the others with anything other than a bigger check.

 

[RobertMac]

I'm not saying that the packers are making obscene profits, and I'm not trying to determine what they are "entitled" to make, so you putting words in my mouth isn't appreciated.

That's why these debates don't go anywhere..SH creates a straw man by misrepresenting what is said and then debates with himself...and then expects us to defend what we didn't say.

SH, let's get to the factual basis...
What does Andy's $3.38/head and the $16/head profit include?
Is it just turning live cattle into hanging carcasses or boxed beef?
Does it include fabrication to a case ready product?
Does it include transportation, cold storage, and distribution?
How about packer owned fed calves...their increase in value while on the feedlot?
Profits from packer owned feedlots?
Does it include the profit from when a packer buyer buys calves off a ranch all the way until the product is unloaded on the Wal-Mart dock?
That last question is where I'm talking about $200 to $500 profit.

What you are able to do is process your own cattle if you think packers are making too much money and capture that profit center for yourself.

That's what I do, but you are telling me I don't know what my profits are!!!
If there is no profit, why is direct marketing/buying local the growing segment of the beef industry? Why are the large packers supporting increased HACCP regulations that will further burden the small packers...run more of them out of business...which will eliminate the producers direct access to consumers????
You are right that Tyson gains much/maybe most of their profit from pork and poultry and can survive off that profit while tightening the margins on beef so much that it will drive independent processors(their 'beef' competition) out of business. But then they have already done that.

 

[Anonymous]

Sand: "Perhaps you haven't noticed that their profits/head during that time period was almost 5x the "average" - and that taking the larger numbers out of the average would lower that even further, thus even widening the gap? Nope, nothing unusual there....."

We are talking about a measly difference between $16 per head and $3.38 per head between the average of the 5 major packers for 9 years and an average per head profit for ibp during their years of "SUPPOSED" market manipulation.

On a per head basis, WHICH IS HOW PACKER PROFITS AFFECT INDIVIDUAL PRODUCERS, isn't squat in the big picture. If you packer blamers had your way in decreasing their market share, we would receive less for our cattle. Unfortunately, you don't have enough business sense to realize how efficient packers return more profit to producers than inefficient packers.

Want to put that $16 per head into perspective? I can recieve $30 - $40 per head premium just to source verify my cattle.

Want to put that $16 per head into perspective? Harlan Huge's data showed a difference of $250 per head between low cost and high cost producers and your whining about $16 per head?

Sand: "I'm not saying that the packers are making obscene profits, and I'm not trying to determine what they are "entitled" to make, so you putting words in my mouth isn't appreciated. I'm just saying that they're making more money than producers are, and to attempt this "poor packers" schpeel doesn't fly."

As usual, you are wrong again. The packers are not making more money than MOST producers are on a PER HEAD BASIS.

How many ranchers are going to survive netting $16 per head?

Sand: "I believe in free markets and capitalism."

No you don't. You support regulating packers and regulating how feeders can sell their cattle. That's socialism!

Believing in free markets and capitalism would have you investing in the packing industry rather than trying to regulate it out of existence.

Sandhusker: "You're the one that only talks the talk per your comments about free markets, and then your packer backer stance of supporting the ban on private BSE testing."

BSE testing of cattle under 30 months has no scientific justification therefore I don't support it.

Sandhusker: "One of the many things that you don't understand is that, in order to have a functioning and fair marketplace and for capitalism to flourish, there must be transparancy and none of the participants should be able to muscle out any of the others with anything other than a bigger check."

One of the many things I don't understand??? Haha! Aint you the tomcat?

Talk certainly is cheap.

One of the many things you don't understand is that you don't have any right to accuse anyone of market manipulation unless you have the facts to back up what your saying. You sir, are factually void in that department which is why you support 0 & 9 R-CALF.

As far as "transparency" that's what you packer blamers were demanding BEFORE YOU GOT MANDATORY PRICE REPORTING and now you're still demanding it. I'm sure some shrink somewhere could find some logic in it but not me. I don't know how the markets could be any more transparent and btw, what I get paid for fat cattle is nobody elses damn business. SOCIALIST!


~SH~

 

[Anonymous]

RM: "That's why these debates don't go anywhere..SH creates a straw man by misrepresenting what is said and then debates with himself...and then expects us to defend what we didn't say."

No, the reason these debates never go anywhere is that you refuse to bring anything to the table to support what you want to believe, you question and attempt to discredit or create doubt in what you don't want to believe, and you refuse to do any research on your own.

Ok, so you don't want me to categorize either of you in the packer blaming group that continually talks about "HUGE PACKER PROFITS" which has been speculated to be $300 + per head.

Ok, so let's clarify your position. How much money do you think packers are making per head? Second, how much money do you think packers should be making per head?

You don't want to be categorized with those who suggest packers are making $300+ per carcass so WHAT DO YOU BELIEVE? Better yet, what can you prove?

The next time Mike Callicrate or another R-CALF spokesperson talks about "HUGE PACKER PROFITS" will either of you correct that information??? Hmmmm??? Until you are ready to question some of the anti packer rhetoric ("HUGE PROFITS"), don't expect me to believe you don't buy into all the anti packer rhetoric.

RM: "What does Andy's $3.38/head and the $16/head profit include?
Is it just turning live cattle into hanging carcasses or boxed beef?
Does it include fabrication to a case ready product?
Does it include transportation, cold storage, and distribution?
How about packer owned fed calves...their increase in value while on the feedlot?
Profits from packer owned feedlots?
Does it include the profit from when a packer buyer buys calves off a ranch all the way until the product is unloaded on the Wal-Mart dock?"

Excellent questions. Let me know what you find out when you conduct your own research.

I don't have the data in front of me nor am I going to go to the effort to try to find it for someone who probably wouldn't believe it anyway.

RM: "That's what I do, but you are telling me I don't know what my profits are!!!"

I'm telling you that you don't know what the large packing industry's profits are.

RM: "If there is no profit, why is direct marketing/buying local the growing segment of the beef industry?"

Please show me where I stated "there is no profit". Is this where you lecture me on putting words in other people's mouths?

RM: "Why are the large packers supporting increased HACCP regulations that will further burden the small packers...run more of them out of business...which will eliminate the producers direct access to consumers????"

Where is your proof that the large packers are supporting increased HACCP? I wasn't aware that any packers felt their beef was unsafe and needed higher safety standards.

Let's assume for a minute that Tyson is supporting higher HACCP safety standards. Isn't that ironic in light of the packer blamers claiming that the large packers don't care about food safety considering all the recalls??? Haha! The conflicting arguments never end.

RM: "You are right that Tyson gains much/maybe most of their profit from pork and poultry and can survive off that profit while tightening the margins on beef so much that it will drive independent processors(their 'beef' competition) out of business. But then they have already done that."

There is a textbook Robert Mac statement. DID TYSON RUN EXCEL, JBS, AND USPB OUT OF BUSINESS?????? YES OR NO????

You believe Tyson's profits in the poultry and pork sectors allow them to operate on tighter margins in the beef sector but why would any company invest in beef processing to subsidize it?? How much business sense does that make? Is that a company you would invest in?

Use your head Robert. You are a potential Tyson customer and you receive a flier in the mail that says, "please invest in Tyson stock. We are currently expanding our beef processing capacity so we can subsidize it with our pork and poultry processing facilities".

ABSOLUTELY RIDICULOUS!

Right there is the reason these debates never go anywhere. You are so conspiracy minded that you can't even use logic.


~SH~

 

[RobertMac]

SH, let's get to the factual basis...
What does Andy's $3.38/head and the $16/head profit include?
Is it just turning live cattle into hanging carcasses or boxed beef?
Does it include fabrication to a case ready product?
Does it include transportation, cold storage, and distribution?
How about packer owned fed calves...their increase in value while on the feedlot?
Profits from packer owned feedlots?
Does it include the profit from when a packer buyer buys calves off a ranch all the way until the product is unloaded on the Wal-Mart dock?
That last question is where I'm talking about $200 to $500 profit.

How can you make any meaningful statements about "packer profits" if you don't already know the answer to these questions? Or are you just blowing smoke?

In case you missed it, the bold is my position on profits...of course I have my accountant minimize taxable profits!