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Where's It All Going!

I had another neighbor stop over last night-they run a big outfit that they grew from nothing alot of hard work-ran coyotes all winter with hounds etc to get some cash in the earlier days. A self proclaimed management guru was expounding to him one day but how he was mismanaging his resources-needed more cross fences blah blah etc. My buddies answer was 'Sometimes you just need to go buy some shells and go hunt some moose' he said that shut that SOB right up. As far as getting farmers to unite you could have a breed of cow that ate dead trees and s...t gold nuggets and there still wouldn't be a consensus that she'd be the best to run.
 
Northern Rancher said:
I had another neighbor stop over last night-they run a big outfit that they grew from nothing alot of hard work-ran coyotes all winter with hounds etc to get some cash in the earlier days. A self proclaimed management guru was expounding to him one day but how he was mismanaging his resources-needed more cross fences blah blah etc. My buddies answer was 'Sometimes you just need to go buy some shells and go hunt some moose' he said that shut that SOB right up. As far as getting farmers to unite you could have a breed of cow that ate dead trees and s...t gold nuggets and there still wouldn't be a consensus that she'd be the best to run.
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Well she would be if she was BLACK!!!! :lol2: :lol2: :lol2:
 
Actually, there's been a few pretty good peaks in the cattle and grain markets the last few years, and I sure don't want the government stooges messing things up worse than they do. Lots of industries are having a tough time, lately.....while government is doing everything in it's power to saddle us with a mountain of debt that needs serviced, for generations to come. :mad: The direction the country is going scares the hell out of me, too, Horseless.
 
Copied from MeatingPlace.com today...

Cutting to the Chase
By: Raoul Baxter



(The views and opinions expressed in this blog are strictly those of the author.)
A car manufacturer starts with a frame then adds tires, an engine, battery, windshield and so on until the car is completed. They know the price of every component that goes into that car, including all labor costs. They have a finished car of an absolutely certain price.

In the meat business we do the reverse. We start out with a whole bird or animal at a known cost and disassemble it. We break a pig carcass, for example, into all its individual parts. We separate the hair, the blood and inedible parts for rendering. Then we have a clean carcass that has passed all USDA inspections and review.

This carcass is then cut into hams, loins, shoulders, butts and picnics. The offal, such as stomachs and hearts, were taken the day before, boxed and frozen. So now we hope that all these pieces, which move in different sequences to different types of customers, somehow add back up to more than what we paid for the live animal when we sell them.

Usually the price of hams and loins can carry a cutout with a lot of help from the belly. Many of these items are boned, which can add significant costs, so you need to get higher prices to cover those costs.

Today, with very limited export demand to help add value, the resulting parts are not coming close to the price of the original walking pig. As this pushes the value of the meat back, this also puts a severe downward pressure on the price farmers and ranchers get.

Which, unfortunately, is where we are now.
 
Hmmm....Raoul Baxter, VP of Smithfield isn't he? Do folks really believe that the poor processors and retailers are suffering so badly they have to reduce the price they pay producers for their live animals?
If they do it's no wonder we are in the mess we are as producers. :roll: :roll:
 
Oh, I wouldn't cry around for Raoul Baxter for very long, but he brings up a good point. "Supply and Demand" typically rules the day. If you believe that packers have it so good, I'm sure you could purchase one of them for a very fair price today. No American company was brave enough to purchase Swift and Co., so the Brazilians came in and bought it. Smithfield was glad to sell them their beef operations, and National Beef was very excited to sell their packing company to them too, until the government slapped their hand. Tells you what an attractive business that is. I'm told that retail grocery stores make about 5% margin, net on the whole store. I don't have any idea what margin they make on beef, specifically. I'd like to dig into the dollars and sense of the retailer a bit more sometime if I could find a good and honest resource.

Commodity producers are price takers, plain and simple. Several on this board have beat the system somewhat with niche markets. I think the rule to play by is "add value and diversify". Either that or marry someone that has the place paid for. :nod:
HP
 
Here are some more Canadian NFU figures for you HP, can't provide US ones but I think the following demonstrate my point.
Figures showing revenue, profit, return on shareholders equity for 2004 plus return of stockholders equity over the previous 5 years (2000-2004).
Figures are shown in Canadian $ millions;

Farmers/ranchers revenue (returns from market) $31,641, profit $-7,750, return on equity -5.09%, 5 year return unavailable.

Tyson Foods Inc. revenue $34,375, profit $524, return on equity 9.39%, 5 year return on equity 7.59%.

Cargill Inc. revenue $92,389, profit $2,734, return on equity 17.16%, 5 year return on equity 11.44%.

I could go on but won't - the same pattern applies to every sector of agriculture. Banking, machinery companies, seed companies, agrochemical companies, grain handlers all running at or near record profitability at a time when producer losses are at record highs. Just look at the profitability relative to turnover of the processors compared to producer returns. These figures are unsustainable for primary producers. I suspect most reports of processors suffering huge losses are much exaggerated - they certainly deserve no sympathy from farmers and ranchers.
 
The NFU was running around spreading their doom and gloom back in the 60's when things were supposedly not all that bad. I remember when the recruiters came by in '68 the old man got so pissed off at them he had a heart attack shortly after running them off. Creating a bureacracy to fight another bureacracy to combat some more bureacracy never has worked very darned good. I'll think I'll find my own way to keep dodging the bullet. If they'd get rid of a bunch of damned regulations we could all go about making a living a whole lot better.
 
Northern Rancher said:
The NFU was running around spreading their doom and gloom back in the 60's when things were supposedly not all that bad. I remember when the recruiters came by in '68 the old man got so p****d off at them he had a heart attack shortly after running them off. Creating a bureacracy to fight another bureacracy to combat some more bureacracy never has worked very darned good. I'll think I'll find my own way to keep dodging the bullet. If they'd get rid of a bunch of damned regulations we could all go about making a living a whole lot better.
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Amen. :clap: :clap: :clap: :tiphat:

That's twice this year I've agreed with you NR. :wink:
 
Like I said, Grassfarmer, I'm not shedding any tears for the big companies that make money off of producers while the producers lose money. That's surely not my point. At the same time, I don't know how you could take Tyson or Cargill's overall profitability and equate that back to what they should be paying for live cattle. Heck, Cargill is so huge and diversified that they could stop killing cattle tomorrow and it wouldn't matter. Simply put, costs have increased throughout any kind of business that you want to discuss. The price of beef has not even come close to keeping pace. If you think that the people that take a beef animal, harvest it, cut it up and make edible and other products from it are your enemy, then I guess I don't understand the logic. Guess you had better take out your skinning knife and set to work.

You are welcome to your suspicions and opinions, of course. My opinion is that a producer is best off to figure out how to make the system work instead of placing blame and being upset. That won't change a single thing. Just look at COOL, how's that been goin' for us here in the States? Created by producers and forced on our packing PARTNERS who didn't want it. It drives a bunch more cost into the system and it hasn't increased the price of cattle has it? Superb plan, just real genius.

Alright, I'm getting political. I'll quit.

Thanks and good night.
 
HP, I would disagree with your comment
Simply put, costs have increased throughout any kind of business that you want to discuss. The price of beef has not even come close to keeping pace.
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As I pointed out to Burnt.
.... In Canada today consumers pay roughly the same as they have done for beef (maybe slightly less) over the last 33 years. Producers are getting paid half as much for their live cattle.
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Each to their own opinions though and I thank you for the discussion.
 
Better get ready to duck, High Plains! Several people who post on these sites don't treat with kindness anyone who does not bash packers.

Your posts have some great points too many people ignore about the other businesses involved in getting beef from the ranch to the plate, areas most of us in production agriculture are too ignorant of.

mrj
 
We don't need more megapackers-what we do need is more locally based slaughter plants-there are tons of buildings in small town canada and the United States that could be converted to a local butcher shop. I know there is a third generation one in Meadow Lake still going strong. When I was a kid they were on the local market every sale buying finished cattle that were fed locally-kept alot of money circulating in our community and you damn straight knew who raised what you were eating. I remember in the late 60's we shipped one of the first charolais bulls ever ran up here-he sold for what was then a record price at the salebarn-it was Stampede week and they were needing hamburger. Government regs have pretty much made these ventures untenable. What would do your state or province more good-one plant built by an already overcrowded city that kills X number of cattle a week or 50 local butchershops and small slaughter houses spread throughout the state. Going head to head with the big established companies is economic suicide as the few knee jerk BSE built plants in Canada have shown.
 
I agree with you, Northern. We do need more packers, and not more of the same big companies. Economies of scale and regulations have pretty much put the k-bosh on that theory. Here's a link to a short article on a very good small packer here in Nebraska that has seen this play out, much to it's disdain... These guys were good competitors in the market for cattle, and one more bid that will probably no longer exist.

Can't figure out how to make it a URL, so you'll have to cut and paste in your browser.

http://journalstar.com/articles/2009/06/26/news/local/doc4a43f6e9aff8c805475026.txt

HP
 
No indication in the story of how much beef or other meat was processed there. So how big does a small plant have to be to be viable?

Apparently something went wrong with one in Bridgewater, SD (eastern, most populous part of SD). Don't know the size, but apparently the owner turned off the power,shut the doors and left town. The neighborhood noticed a stench, and some 50,000 pounds of rotted beef was found to be the source. Makes one wonder why he did that, as it should have had some value when edible.

There are quite a few very small plants across western SD. I know of three within 70 miles of me, and they all are quite busy. But it does cost quite a bit to have a critter processed there, maybe close ot $300.00. But worth it to have one's own beef processed reasonably close to home. Don't know how much business any of them do outside of families getting their own critters processed, but believe they do supply some local restaurants. Don't know if that is from local beef, or if they buy it somewhere else. Probably some of each.

mrj
 
Northern Rancher said:
We don't need more megapackers-what we do need is more locally based slaughter plants-there are tons of buildings in small town canada and the United States that could be converted to a local butcher shop. I know there is a third generation one in Meadow Lake still going strong. When I was a kid they were on the local market every sale buying finished cattle that were fed locally-kept alot of money circulating in our community and you damn straight knew who raised what you were eating. I remember in the late 60's we shipped one of the first charolais bulls ever ran up here-he sold for what was then a record price at the salebarn-it was Stampede week and they were needing hamburger. Government regs have pretty much made these ventures untenable. What would do your state or province more good-one plant built by an already overcrowded city that kills X number of cattle a week or 50 local butchershops and small slaughter houses spread throughout the state. Going head to head with the big established companies is economic suicide as the few knee jerk BSE built plants in Canada have shown.
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Right on Northern. Well for the most part, I don't know anything about the Charolois bull . . . . :wink:

But what you are talking about with more local capacity meeting local supply, it's kinda the ultimate in traceability, isn't it!
 
I certainly agree with NR's post suggesting we need more small, local plants and butcher shops. Unfortunately it is not the way things are going, here or in Europe. Most consumers especially the urban ones (which most are) seem to want to buy their food, meat included, at a Costco or Walmart type store.
It is true that going up against the handful of corporate packers is economic suicide but do we just accept that as the future for our industry and society?
I like the small plant we work with for our custom kill (dearer up here mrj - a basic kill, cut and wrap would cost us $430 on a 600lb hanging weight animal and that is before you talk about making sausage etc) There are still quite a few of these plants but it seems that there are few in between this size and the mega-plants. That indicates to me the problem - small plants get by because they are doing custom for guys that eat their own or direct retail. They are not going head to head with the big packers and their customers direct marketing aren't going head to head with the big box stores to sell beef. The problem is lack of competition at the processing and retailing level caused by out of control corporate concentration.
So unless something changes we will continue to have a few small custom kill facilities and a few mega-packers.
Why should this be so? some suggest over regulation - I would suggest unfair regulation. Not surprising really given that the big packers have their hand in the politicians pockets and unduly influence the rules as they are being drawn up. The rules unfairly over regulate and financially penalize the small plants versus the mega-plants. Call this conspiracy theory if you like but if you do and are not prepared to fight it nothing will change. Producers will not see the benefits of competition driving up their live cattle prices until more plants are competing. There should be no reason why plants of larger than custom kill size can't make money - despite all their BS the mega packers are doing OK at it.
 

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