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<blockquote data-quote="Bez+" data-source="post: 691800" data-attributes="member: 6797"><p>I wrote this some time back - you can argue the finer points if you like - but having been associated with a few packers and a couple of major buyers I have the gist pretty well on target.</p><p></p><p>1. Packer starts by purchasing lots of cattle and holding them - arguably to guarantee a steady supply of beef for future kill. And they will tell you that is why they buy large lots and hold them. We call this retained cattle - often on contract. Remember - contract - so someone is already getting into bed with the packers - so it starts.</p><p></p><p>2. Packer buyer buys cattle on the open market to kill - those go straight to the plant and enter the kill line - price starts to get up as buyer pressure drives it up - and when it is out of the purchase price range the packer is willing to pay - packer stops buying and runs their own retained cattle into the kill line. Packers know to the fraction of a penny when they will start to buy on the open market and when they will stop buying on the open market - well in advance of the time the do the actual buying.</p><p></p><p>3. Prices start to drop when no major buyers pull the trigger at the sale. Bringing the packers back into the game.</p><p></p><p>4. Prices drop to the buy price the packer is willing to pay (all planned ahead of time - they know to the decimal point what price they need to make on a buy to make a profit) and the packer will buy. Packer buys to refill the hold overs and to fill the kill line.</p><p></p><p>5. Price starts to rise - packer stops buying and uses those retaned cattle until price drops.</p><p></p><p>They have been doing this for several years now to refine the process and have taken out a lot of competition. There are - from memory only folks - about three companies that now control more than 85% of the market - they are not concerned about the other 15% until they have the initial cut under control. The remainder will come.</p><p></p><p>In the process they have also taken out a lot of smaller producers - and you might see a consolidation of larger operations over the next few years - in my mind that has already started. All it takes is a contract to provide beef to a packer as per their specifications. Just like the hogs folks. Then the packer has the producer bound by a contract - as the contract nears the end - if the contract is not renewed the producer is in trouble - businesses get bought for pennies on the dollar for reasons of financial hardship. </p><p></p><p>Suck in the larger producer - nail their foot to the floor and and the legal process can be used to help acquire that business. </p><p></p><p>Ownership of land and infrstructure is not even needed - a lease or rental situation is better for the corporation as it is 100% tax deductible - making it more profitable.</p><p></p><p>In the end one should never EVER doubt the will of a corporation when it has billions - yes billions - of dollars at its' disposal and reams of accountants and lawyers and finally - politicians who believe consolidation is better - and those exist - and usually they are voter based - urban folks - who really do not care about the health of YOUR business - as long as there is safe beef on the table 2.3 times per week. The corporation now has the power to decide what the public will eat, what the public will pay for it and finally - how much you, the producer gets for your labours.</p><p></p><p>Remember the hog producers........</p><p></p><p>Not as far fetched as it might seem.</p><p></p><p>Bez+</p></blockquote><p></p>
[QUOTE="Bez+, post: 691800, member: 6797"] I wrote this some time back - you can argue the finer points if you like - but having been associated with a few packers and a couple of major buyers I have the gist pretty well on target. 1. Packer starts by purchasing lots of cattle and holding them - arguably to guarantee a steady supply of beef for future kill. And they will tell you that is why they buy large lots and hold them. We call this retained cattle - often on contract. Remember - contract - so someone is already getting into bed with the packers - so it starts. 2. Packer buyer buys cattle on the open market to kill - those go straight to the plant and enter the kill line - price starts to get up as buyer pressure drives it up - and when it is out of the purchase price range the packer is willing to pay - packer stops buying and runs their own retained cattle into the kill line. Packers know to the fraction of a penny when they will start to buy on the open market and when they will stop buying on the open market - well in advance of the time the do the actual buying. 3. Prices start to drop when no major buyers pull the trigger at the sale. Bringing the packers back into the game. 4. Prices drop to the buy price the packer is willing to pay (all planned ahead of time - they know to the decimal point what price they need to make on a buy to make a profit) and the packer will buy. Packer buys to refill the hold overs and to fill the kill line. 5. Price starts to rise - packer stops buying and uses those retaned cattle until price drops. They have been doing this for several years now to refine the process and have taken out a lot of competition. There are - from memory only folks - about three companies that now control more than 85% of the market - they are not concerned about the other 15% until they have the initial cut under control. The remainder will come. In the process they have also taken out a lot of smaller producers - and you might see a consolidation of larger operations over the next few years - in my mind that has already started. All it takes is a contract to provide beef to a packer as per their specifications. Just like the hogs folks. Then the packer has the producer bound by a contract - as the contract nears the end - if the contract is not renewed the producer is in trouble - businesses get bought for pennies on the dollar for reasons of financial hardship. Suck in the larger producer - nail their foot to the floor and and the legal process can be used to help acquire that business. Ownership of land and infrstructure is not even needed - a lease or rental situation is better for the corporation as it is 100% tax deductible - making it more profitable. In the end one should never EVER doubt the will of a corporation when it has billions - yes billions - of dollars at its' disposal and reams of accountants and lawyers and finally - politicians who believe consolidation is better - and those exist - and usually they are voter based - urban folks - who really do not care about the health of YOUR business - as long as there is safe beef on the table 2.3 times per week. The corporation now has the power to decide what the public will eat, what the public will pay for it and finally - how much you, the producer gets for your labours. Remember the hog producers........ Not as far fetched as it might seem. Bez+ [/QUOTE]
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