What factors affect cattle prices?

[Anonymous]

Sand: "As usual, you put words in my mouth."

Sand: "I'll donate $20 to NCBA if you can post my quote where I said packers make more on a per head basis."

I see you are still the master of illusion. I know exactly what you said and I put your quote in bold letters for that very reason. I never quoted you as saying "on a per head business". "On a per head basis" were my words in response to your statement because comparing overall profits of a large corporation to an individual ranch would be a poor comparison particularly when individual ranch profits can vary $250 head between low cost and high cost producers accordig to Harlan Hughes data.

Sand: "If you'll pick up a a shareholder's report from Tyson, earnings are not reported on a per/head basis. Do you report per head on your taxes?"

How can you possibly know how Tyson's profits affect individual producers unless you measure their profits in the beef sector on a per head basis? You can't!

Their total profit picture is meaningless to individual producers unless you know how many cattle they are processing.

Do you think consumers are more concerned with what Walmart's PER PRODUCT PROFIT is or their total profit picture? Their concern is with Walmart's per product profit because that is how it affects them as consumers not what Walmart makes on all the products they sell.

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

Sand: "Neither does hormone free, according to the USDA's experts. Yet, hormone free can be marketed but BSE tested can't."

I'll take that as an admission that bse testing of cattle under 30 months of age has no scientific justification. That is exactly why I do not support bse testing cattle under 30 months of age.

In contrast, as you say, "hormone free" can be marketed just as "organic" crops can be marketed. In order for "hormone free" beef to be marketed legitimately, it has to be free of hormones whereas "bse tested beef" is not necessarily "bse free" if bse cannot be detected in cattle under 30 months of age. One is false advertising and the other is not. Apples to oranges.

No sense in beating this to death. You see it as a double standard and I don't because "hormone free" has to be free of hormones. "bse tested" is not necessarily "bse free" when bse prions cannot be detected in most cattle under 30 months of age.

Sand: "You claim that I want to tell people how they can and can't market their cattle, but here you are supporting telling producers "Thou will not.....".

You do want to tell feeders how they can and cannot market their cattle. There is nothing illegal about marketing cattle through contracts and grid pricing but you would like to change that in your arrogant "save the feeders from themselves" attitude. In contrast, that has nothing to do with supporting false advertising because "bse tested" implies "bse free" and that is not the case.

As always, you got nothing.


~SH~

 

[Sandhusker]

SH, "How can you possibly know how Tyson's profits affect individual producers unless you measure their profits in the beef sector on a per head basis? You can't! "

Yet again putting words in my mouth. Never once have is mentioned anything about the effect Tyson's profits have on producers. I'm just saying that getting paid $20/hour is better than $40/day.

SH, "I'll take that as an admission that bse testing of cattle under 30 months of age has no scientific justification."

Depends on which scientist you talk to. However, I'm not trying to win a science fair, I'm trying to move beef. If a customer wants their beef hormone free, BSE tested, free range, never branded, only from steers named "Scotty" - and they will pay the producer for the trouble, I say "Seal the deal".

SH, "whereas "bse tested beef" is not necessarily "bse free"

That's probably why the plan was to put "BSE TESTED" instead of "BSE FREE" on the label.

SH, "You do want to tell feeders how they can and cannot market their cattle"

No, I don't, although you're doing exactly that with your rediculous BSE arguements. I just know enough about markets to know that basing the purchase price on a benchmark that one of the participants can manipulate is a situation that can not exist in a free market.

 

[Anonymous]

Sand: "I'm just saying that getting paid $20/hour is better than $40/day."

This assumes that all producers are making the same amount of money. That is hardly the case.

Harlan Huge's data shows a $250 PER HEAD difference between high cost and low cost cattle producers. So how could you possibly assume most cattlemen are only making $40 per day? If they retained ownership on their cattle they would have gained from recent feedlot profits. If they are part of a branded beef program they would have gained from that. One ranch is loaded with green paint and the other is grazing year round. There are huge differences in profit levels from one producer to the next. You of all people should know that.

Another obvious fact is that some producers are expanding their operations while others are selling out. Explain that in light of MOST producers only making $40 per day.

Your assumption assumes that MOST (giving you the benefit of the doubt rather than stating "ALL") producers are making the same profit levels and utilizing that income in the same manner. A ridiculous assumption.

Sand: "That's probably why the plan was to put "BSE TESTED" instead of "BSE FREE" on the label."

I have no problem with bse testing if and where it has legitimacy. If the bse test being used is used on cattle under 30 months of age and that test will not detect bse prions in cattle under 30 months of age the test is misleading and fraudulent. As one person put it, it's like testing 12 year old boys for prostate problems.

You obviously support fraudulent testing to move beef and I don't because it's dishonest. You place money ahead of principle and I don't. In contrast to your typical "apples to oranges" comparison, "Hormone Free" is not fraudulent because it has to be free from hormones.

Sand: "I just know enough about markets to know that basing the purchase price on a benchmark that one of the participants can manipulate is a situation that can not exist in a free market."

As I stated, you packer blamers think you need to save feeders from themselves and their marketing arrangements. That is incredibly arrogant. You also don't know near as much as you think you do about fat cattle marketing. You have obviously never sold fat cattle on a grid because if you did you would know that the seller knows exactly how the base price is established. I have sold fat cattle on grids and in the cash market. Establishing a base price on the weekly weighted average of the week prior can work for you or against you depending on which way the market is moving and that is a fact. You know that when you sell the cattle.

More importantly, if you do not like the base price arrangement with grid pricing, you can sell in the cash market or you can forward contract your cattle, or you can sell to another packer. NOBODY HAS A GUN TO ANYONE'S HEAD FORCING THEM TO SELL UNDER A PARTICULAR MARKETING ARRANGEMENT.

This is exactly why you don't see many feeders supporting this "socialized cattle marketing agenda" as opposed to packer blaming cow/calf men and packer blaming sale barn managers. Feeders actually sell fat cattle under the same marketing arrangements that the packer blamers want to end based on their market manipulation conspiracy theories.

As far as "alleged market manipulation", you have no proof that market manipulation is occuring. What you packer blamers are calling "market manipulation" is nothing more than supply and demand functions of any cattle market. As buyers fill their orders, what they are willing to pay declines accordingly whether you are buying feeder calves, yearlings, or fat cattle. Some producers will receive less as orders are filled and that is a fact. That is SUPPLY AND DEMAND, not market manipulation and that is why Pickett lost, lost on appeal, and lost at the supreme court level.

I can absolutely guarantee you that if you tried to apply your "socialized cattle marketing" agenda to the sale of feeder calves and yearlings the same manner in which you are trying to manipulate fat cattle marketing arrangments, it would never fly.

As packers get their cattle needs met by various purchasing mechanisms (forward contract, grid pricing, cash markets, etc.) they are going to drop the price they are willing to pay for the balance of their needs JUST LIKE YOU OR I WOULD IF WE WERE BUYING FEEDER CALVES, YEARLINGS, STOCK COWS, HEIFERS, OR BULLS. That is not market manipulation but rather a normal function of any supply and demand market.

You packer blamers also want to eliminate what you call "sweetheart deals to larger feeders". That too is "socialism". If I have a large feedlot and I am willing to purchase and feed those cattle in such a manner as to fill a particular void for a packer that is normally a difficult time for them to procure enough cattle due to the supplies at that particular time of the year, what is wrong with them paying an incentive for me to fill that void?? More importantly, who the heck are you to tell that feeder and packer that the packer cannot offer financial incentives for large volumes of cattle to fill particular voids?? Don't envy and regulate those marketing arrangements out of existence, PARTICIPATE IN THEM!

A free market economy works best when buyers and sellers can determine for themselves how they will buy and sell cattle without regulations standing in their way. They don't need you to save them from themselves.
The only way you packer blamers are going to see the disincentive problems associated with your "socialized cattle marketing" agenda is if those same principles apply to the sale of feeder calves and yearlings. Then let the bloodbath begin.

I HOPE THIS "SOCIALIZED CATTLE MARKETING" LEGISLATION IS SHOT DOWN IN FLAMES!!!!


~SH~

 

[Sandhusker]

SH, "So how could you possibly assume most cattlemen are only making $40 per day"

Ummm, I didn't? I thought I was being as simple as I could, but....

SH, "You obviously support fraudulent testing to move beef and I don't because it's dishonest."

Haven't you stated that hormone free is no safer than "regular beef"? If so, why wouldn't your "dishonest" arguement apply just as well considering you're selling people a product they believe to be safer when it really is not? Unless, of course, you would care to go on record as saying that hormone free beef IS safer than "regular" beef.

SH, " What you packer blamers are calling "market manipulation" is nothing more than supply and demand functions of any cattle market."

All of the big packers publicly saying they are going to reduce the kill, prices go down, and they actually kill more is simply supply and demand?

You have a fair market when one of the participants can lower the market with a simple press release, let alone bringing in product from the competitor or their own supply?

 

[Anonymous]

Sand: "Haven't you stated that hormone free is no safer than "regular beef"? If so, why wouldn't your "dishonest" arguement apply just as well considering you're selling people a product they believe to be safer when it really is not? Unless, of course, you would care to go on record as saying that hormone free beef IS safer than "regular" beef."

Science says that "hormone free" beef is no safer than regular beef IF ALL WITHDRAWL TIMES ARE PROPERLY ADHERED TO.

Would you care to go on record as saying that all producers adhere to proper withdrawl times?

I'll go on record stating that most do.

In addition, as science advances, some consumers are not willing to take a chance that science might someday find other reasons not to eat hormone enhanced beef. At this time there is nothing to suggest that hormone enhanced beef in unsafe if proper withdrawl times are adhered to.

Sand: "All of the big packers publicly saying they are going to reduce the kill, prices go down, and they actually kill more is simply supply and demand?"

Yet another SINGLE FACTOR MARKET ANALYSIS as if the packers making that statement is the only factor playing on the market. That is why you packer blamers are so lost when it comes to this issue. You don't have a clue as to all the factors that affect cattle markets and to what degree.

In order to have any meaningful debate on the impact one factor could have on the market you would have to isolate all other factors that affect the markets. Did you do that? Of course you didn't.

It's just like saying "packer concentration", "captive supplies", and "imports" are the reason for lower cattle prices without understanding how $1 per bushell corn cost can impact feeder cattle prices.


~SH~

 

[Sandhusker]

I'll go on record as saying that if a customer wants his beef hormone free, BSE tested, only from animals bottle fed by virgins named Annabelle, etc.... then I don't give a crap what a scientist says, a producer should be allowed to meet those demands. That's how things work in a free enterprise economy.

If somebody wants something, somebody can provide, and nobody else is harmed - then there is no problem.



A single factor? When the markets drop IMMEDIATELY after that single factor comes into play, it doesn't take a rocket scientist to figure out that you don't have to look any further.

 

[RobertMac]

Does it really matter Robert? Bottom line is the $16 per head figure is not even close to what the ignorant packer blaming pied pipers were saying about "HUGE PACKER PROFITS" of $300 per head ON UP.

No, it really doesn't matter because the $16/head figure is no more accurate than the $300/head figure without defining "profit". The $300/head figure is probably more accurate for "profit over direct cost"...the $16/head figure is probably more accurate for "profit reported to the IRS". It's the same thing you and I do if we get a good price for our cattle...we invest any extra money over direct cost back into our operation and it is deducted from our gross as an expense.

If you want to know where money is to be made in the beef industry, watch what the large packers integrate...they want nothing to do with cow/calf and they want nothing to do with retail...but in between, there is money to be made.

 

[Anonymous]

Sand: "A single factor? When the markets drop IMMEDIATELY after that single factor comes into play, it doesn't take a rocket scientist to figure out that you don't have to look any further."

You can never credit any single factor for moving the market unless you can determine that no other market factors changed.

If you are talking about the faulty USDA price reporting that you blamed packers for, how did that case turn out? Another loss for the R-CALF packer blamers huh?


~SH~

 

[Anonymous]

RM: "No, it really doesn't matter because the $16/head figure is no more accurate than the $300/head figure without defining "profit"."

Profit is simply defined as the value of an entire beef carcass including edible and inedible ofal minus the purchase cost of the animal minus the processing costs. That's all there is to it.

RM: "The $300/head figure is probably more accurate for "profit over direct cost"...the $16/head figure is probably more accurate for "profit reported to the IRS". It's the same thing you and I do if we get a good price for our cattle...we invest any extra money over direct cost back into our operation and it is deducted from our gross as an expense."

You discredit the figures for no other reason than that you do not want to believe them. Go ask your local locker plant what it costs to process an entire beef carcass. Then find out what the value of the entire carcass is including edible and inedible ofal. Then find out what is left after you subtract the purchase price of the animal. It's not rocket science.

RM: "If you want to know where money is to be made in the beef industry, watch what the large packers integrate...they want nothing to do with cow/calf and they want nothing to do with retail...but in between, there is money to be made."

If you make $10 per head as a packer and you slaughter 1,000,000 head anuualy, you have made $10 Million dollars. That's plenty of profit to invest and expand. The bottom line is that they only made $10 per head to process that animal much cheaper than the smaller less efficient packing plants that would replace them and they sold everything from the tongue to the rectum and priced the cattle accordingly.

A couple years back I posted an indepth breakdown of the entire beef carcass and the values designated to each product. Anyone who wants to know the truth about packer profits can dig this information up themselves.

Packer blamers are a cancer on this industry. I wish all the packer blamers had the opportunity to sell their fat cattle to smaller less efficient plants that paid less for cattle due to being less efficient.


~SH~

 

[RobertMac]

You discredit the figures for no other reason than that you do not want to believe them. Go ask your local locker plant what it costs to process an entire beef carcass. Then find out what the value of the entire carcass is including edible and inedible ofal. Then find out what is left after you subtract the purchase price of the animal. It's not rocket science.

I've been doing this for almost 10 years...maybe you should take your own advice!!!!!

 

[Anonymous]

RM: "I've been doing this for almost 10 years...maybe you should take your own advice!!!!!"

Take my own advise? You haven't disproven a thing I have stated nor have you brought anything relevant to support what you want to believe about packer profit margins. A couple years back I broke down the entire carcass and assigned retail value to it which did not include the "featured price" factor or the discarded beef factor. What did you bring to support what you want to believe? Nothing, that's what!

You of all people should have a better idea than most what it costs to process a carcass and what the RETAIL value of those products are. Yet you refuse to believe the profit margins can be so tight in the commodity beef industry.

Perhaps your confusion comes from the standpoint of comparing the value of your niche market beef (grass fed / hormone free) to commodity beef which is like comparing the value of a Ferrari to the value of a slug bug.

On top of that, you should also understand that retail beef prices in the commodity beef industry are adjusted until the beef clears the hurdle ("featured prices"). You don't have that problem because you slaughter beef according to the orders you receive, correct? The retail beef prices that are listed can be misleading because the actual "featured prices" that a lot of beef is sold at are not always reported. In addition, commodity beef that is not sold by expiration date is discarded. All of that cuts into the profit margins that you mistakenly believe are there. Go ahead, pick me apart and disprove any aspect of what I have just stated.

I'm sure you have a good handle on what it costs you to produce niche market beef but you are obviously clueless from the standpoint of what the profit level opportunities are in the commodity beef industry.

A local locker plant here told me they have to pay $40 per head to haul the ofal away. In contrast, the large packers market virtually every bit of the carcass and price cattle accordingly.

Why don't you take a shot at this Robert, if the money exists in the packing industry that you believe exists, why isn't USPB making more than $25 per head patronage dividends? How do you explain that? If there is no "unit retain" as an investment, the patronage dividends is company profit sharing. Why can't smaller packing companies compete if those profits are there to be had?

You refuse to answer those questions because you can't. You'd rather believe the profit margins are larger because that's what you want to believe making you your textbook packer blamer. "Don't confuse me with the facts".

Bottom line, if there was so much money in the packing industry, smaller packing companies could compete.

Back what you want to believe Robert! Bring it to the table. I won't hold my breath.


~SH~