certherfbeef
Well-known member
mwj":1349uacm said:
And that puts a halt to the progression and improvement of the beef industry.
Vertical Integration of the Beef Industry
- Thread starter ollie'
- Start date
Help Support CattleToday:
And that puts a halt to the progression and improvement of the beef industry.
andybob
Well-known member
Bandonm2; I agree this has been the case untill recently, my point is that from this springboard of cattle kept on the pig farms, expansion into the cattle business is now being seriously persued under a different company name, but still an integral part of the overall company. Packing plants, feedlots and grazing are all being purchased, mill capacity already exists, but can quickly be expanded,and , following the pattern seen in the pig and poultry industry,the purchase of, and controll of in-house genetics will be a logical step in a few years time.
This is not some evil conspiracy, just a large company expanding its resources, my point is, what steps do existing cattle breeders take now in order to have their own businesses in 15-20 years time?
Contract to the company in the early stages.
Form your own branded product with like minded prodcers.
Accept you may just end up working for a large company as a manager.
Relatively few ranches are big enough to stand alone, small and medium producers need to be proactive in order to retain their own and their heir's future independence in the industry.
This is not some evil conspiracy, just a large company expanding its resources, my point is, what steps do existing cattle breeders take now in order to have their own businesses in 15-20 years time?
Contract to the company in the early stages.
Form your own branded product with like minded prodcers.
Accept you may just end up working for a large company as a manager.
Relatively few ranches are big enough to stand alone, small and medium producers need to be proactive in order to retain their own and their heir's future independence in the industry.
andybob
Well-known member
No, Ollie, this is part of a well considered,planned, investment oppertunity which is to be expanded according to a business plan. I have no complaint about their expansion, I just want to insure a future for my children, not having to 'farm by the book'
in order to do what I enjoy. I need to ensure a market for the breed I like to work with, that will be sustainable in the future.
in order to do what I enjoy. I need to ensure a market for the breed I like to work with, that will be sustainable in the future.
OP
OP
ollie'
Well-known member
- Joined
- Sep 20, 2005
- Messages
- 979
- Reaction score
- 4
No one will make you farm by the book. If you want to run cows to make a profit currently, you had better be raising what the establishment wants and doing it (sort of) as the establishmens says. You can raise Dexters (no offense Gale) or horns or something else but you'll be a discount to the market. I think it'll be you'll still have a market and row your own boat if you choose. It'll be a discount to the market which will be provided by the VI people.Andybob":2yyndstf said:
mwj
Well-known member
Andybob the biggest prob. that I see with your scenerio is the lack of forage. As has been stated on the board many times we are in the buisness of marketing forage. If we have to buy all of the forage inputs it eats into the profit. A lot of the cattle in this country utalize forage growing in small or odd areas. The big operators would need it to be in large blocks so it could be managed easily. This still leaves the door open for the majority of the cattlemen in this country. If the packers do this on a big scale my guess is they would do it in Brazil where they can control huge tracts of grazing land with a mild climate and cheap labor.
farmer rich
Well-known member
Vertical integration/consolidation good or bad?
I think that depends on where in the food chain the power is concentrated. By food chain I mean the great food chain of the beef industry where the majority of producers are the small fry and the multiple retailers are the sharks, the processers are of course somewhere in the middle.
Getting bigger will lead to greater efficiencies and economys of scale, it may also lead to greater power when marketing stock if you are big enough. It also means that smaller inefficient producers are squeezed out, a good thing some might say. But, getting bigger in the beef industry requires large capital investments in land and equipment, I doubt many producers have much spare capital for land purchases. Certainly the potential return on investment is not that great.
In my opinion, due to the nature of beef production consolidation of primary production has only limited potential. Simply put the fractured nature of land ownership and the unwillingness of producers to co-operate on a meaningful scale limits the size of individual operations and marketing schemes.
Consolidation in the processing industry will deliver the same benefits of increased efficiency resulting in large finantial savings, will those savings be passed down the food chain? My experience says not. Do you think fewer buyers round the sale ring wll result in increased prices for fat cattle? I think not.
What about the retailers, the Walmarts of this world whose moto is pile em high sell em cheap. In the UK the retail market is dominated by just four companies, each in open warfare for market share. There imense buying power puts huge downward pressure on prices, particularly comodities such as beef. They manipulate imports to drive down home markets and cancel contracts with proccessers with impunity. This in turn forces processers to relentlessly drive down the cost of their raw materials in desparation to retain supermarket contracts.
I read an article recently that described the way we as food producers are treated, it struck a chord. "Like farmers keep cows to produce milk, the supermarkets and the processers keep us to produce beef ". We are paid derisory sums for our product giving the most efficient a tiny margin, just sufficient to keep us holding on, waiting for promises of better times to come. Yet always the price is talked down, "there are too many cattle forward" "consumption has dropped" "imports are up" All these excuses have been used over the last year, yet consumption has shown year on year increases, imports are at a lower level than the previous year and kill numbers are unchanged.
I expect that after you have read that last part, you know where I stand on vertical integration, great if you are a shareholder of a major multiple, not so good for those at the bottom of the food chain.
I think that depends on where in the food chain the power is concentrated. By food chain I mean the great food chain of the beef industry where the majority of producers are the small fry and the multiple retailers are the sharks, the processers are of course somewhere in the middle.
Getting bigger will lead to greater efficiencies and economys of scale, it may also lead to greater power when marketing stock if you are big enough. It also means that smaller inefficient producers are squeezed out, a good thing some might say. But, getting bigger in the beef industry requires large capital investments in land and equipment, I doubt many producers have much spare capital for land purchases. Certainly the potential return on investment is not that great.
In my opinion, due to the nature of beef production consolidation of primary production has only limited potential. Simply put the fractured nature of land ownership and the unwillingness of producers to co-operate on a meaningful scale limits the size of individual operations and marketing schemes.
Consolidation in the processing industry will deliver the same benefits of increased efficiency resulting in large finantial savings, will those savings be passed down the food chain? My experience says not. Do you think fewer buyers round the sale ring wll result in increased prices for fat cattle? I think not.
What about the retailers, the Walmarts of this world whose moto is pile em high sell em cheap. In the UK the retail market is dominated by just four companies, each in open warfare for market share. There imense buying power puts huge downward pressure on prices, particularly comodities such as beef. They manipulate imports to drive down home markets and cancel contracts with proccessers with impunity. This in turn forces processers to relentlessly drive down the cost of their raw materials in desparation to retain supermarket contracts.
I read an article recently that described the way we as food producers are treated, it struck a chord. "Like farmers keep cows to produce milk, the supermarkets and the processers keep us to produce beef ". We are paid derisory sums for our product giving the most efficient a tiny margin, just sufficient to keep us holding on, waiting for promises of better times to come. Yet always the price is talked down, "there are too many cattle forward" "consumption has dropped" "imports are up" All these excuses have been used over the last year, yet consumption has shown year on year increases, imports are at a lower level than the previous year and kill numbers are unchanged.
I expect that after you have read that last part, you know where I stand on vertical integration, great if you are a shareholder of a major multiple, not so good for those at the bottom of the food chain.
Andybob":atyvuhsf said:
I USED to be a big time predicter of Vertical Integration in the beef biz; but that was back in the day when $450 an acre bought good rangeland property in Alabama all day long and then some, $300 an acre bought anything you wanted in Missouri, and West Texas ranches could be had for an extremely reasonable price. Land demand is too high. People buy range just to hunt for rabbits today and a $2 million ranch might just be able to support 250 cows today. People are scared of stocks, make nothing in banks, and land rises in value at ~7-10% a year over time. There is too much cash in the United States right now looking for a safe harbor. I don't believe any corporation can buy enough land to have 20% of the beef biz. This forces them too deal with private landowners. In hogs and chickens, you get some little dude with ~30 to 200 acres to put his place in hock too build expensive buildings with the promise that he can make a living off his place. A farm will only carry so many cows unless you start trucking in feed. I can't imagine a corp making a profit on contracting anybody with less than a 100 cow capacity (the real number is probably closer to 500). The big problem is that anybody who owns 100+++ cows grazing units+++ out right and has the abilitiy to ranch is that they can borrow money and buy their own cows right now so you will have to be offering a very lucrative deal to convince those ranchers to give up their independence to some corporation. Any time that a contract rancher got in a dispute with the corps serviceman, they EASILY could tell the corp to come get their cows and go buy some heifers of his own (not really an option for a dude who owes $3 million on some hog finishing houses).
IF I was advising a big corp, right now on where to place $400 million in the beef biz I would tell them to put the money in Brazil, Argentina, Paraguay, and Uraguay. Land is a heck of a lot cheaper, labor costs are virtually nonexistent. You can sell to Europe in most of those countries and MAYBE one day to the United States; but there is the potentional for political instability.
Texas PaPaw
Well-known member
ollie'":2bzyqt56 said:
Ollie'
Good points. Sorry, I did not make it clear that I was referring mostly to the cow-calf sector. And yes, I can see the scenario like you described as being a possibility. I guess in my mind this is forward contracting as opposed to VI. Guess it depends upon the definition of VI. Usually I think of the VI as owning the animal from birth to beef. IMO-when you get down to the specs they will require for breeding season, vacs, weaning, preconditioning, truckload lots, etc it will could much of the shine out of their $750 price. It could be very attractive for some & a nightmare for others. Under this scenario only the contract would bind the calves to the VI. This is why I would classify it as a forward contract. Lots of forward contracting already being done in the stocker/feeder business. In the hog & poultry VI the cooperators have huge illiquid, facility investments that require the income from the VI for a return on investment. I think it will take VI ownership of the cows at a minimum to truly bind a rancher to them. As in poultry & hogs the VI could own the animals but not the real estate. This would reduce the VI's capitol investment considerably, however just the cow herd would take a huge amount of capitol. I seem to recall that the largest sow operator has around 200,000 sows. At $150/sow that would be only $30 million. We currently have over 33 million beef cows in the US. At $1000/cow this would be $33 Billion. To control even 10% of the cow herd would require a mere $3.3 billion-over 10 times the investment of the largest sow herd. In addition to the huge investment in cows, the slow reproductive cycle(capitol turnover) of cattle will make the corporate beancounter types have great reservations about huge investments in beef cows. It takes about 2 years from the time a cow is bred until the calf has been born, grown, fed & slaughtered. With hogs this process takes less than a year & with chickens it takes only a few months. Slow capitol turnover gives corporate beancounters heartburn because their investors, stock analysts & pension fund managers demand results next quarter at the latest, not 2 years down the road. It's the old "What have you done for me lately" mentality.
As the average beef cow herd is less than 50 head, I can't see much VI in this sector. Not sure how the Smithfields, Tysons, etc can economically deal with these smaller operations. Can see them possibly doing some 500+ cow deals with larger ranches. Seems that most of the eastern 1/2 of the US has been carved up into relatively small tracts, which makes any significant number of these large operations very unlikely in this area.
Again-IMO-the small cow-calf operator will probably be around for a long time due to the above reasons. No corporate best-management-practices can economically speed up the bovine reproductive cycle or eliminate grazed forage as the least cost feedstuff for a beef cow. Lots of good food for thought in these posts.
Just another 2 cents worth.
Good luck & happy trails
Brock
Smithfield Foods Sees Building Beef-Processing Plant In US
DES MOINES, Iowa (Dow Jones)--Smithfield Foods Inc. (SFD), the nation's largest pork processor, said Wednesday it intends to build at least one beef-processing plant in the U.S. Southwest soon.
The plant would be supplied from cattle feedlots that Smithfield and a partner already operate. Those feedlots are in Texas, Oklahoma, Colorado, Kansas and Idaho.
The facility is expected to cost about $150 million, half of which is likely to be assumed by an unnamed partner, Smithfield Chief Executive Joseph W. Luter III said during a conference call.
"We'll be applying for permits very shortly," he said. Luter indicated that a second processing facility could be added later if financially justified.
"We have enough cattle
under feed to supply two plants," Luter said.
Smithfield has secured land in the Southwest close to its feedlots for processing facilities, he said.
"It might sound crazy today," Luter said, referring to poor profit margins in the beef business now. "But," he added, "I do believe the cycle will turn around.
Source: Richard Gibson, Dow Jones Newswires; 515-282-6830; [email protected]
DES MOINES, Iowa (Dow Jones)--Smithfield Foods Inc. (SFD), the nation's largest pork processor, said Wednesday it intends to build at least one beef-processing plant in the U.S. Southwest soon.
The plant would be supplied from cattle feedlots that Smithfield and a partner already operate. Those feedlots are in Texas, Oklahoma, Colorado, Kansas and Idaho.
The facility is expected to cost about $150 million, half of which is likely to be assumed by an unnamed partner, Smithfield Chief Executive Joseph W. Luter III said during a conference call.
"We'll be applying for permits very shortly," he said. Luter indicated that a second processing facility could be added later if financially justified.
"We have enough cattle
under feed to supply two plants," Luter said.
Smithfield has secured land in the Southwest close to its feedlots for processing facilities, he said.
"It might sound crazy today," Luter said, referring to poor profit margins in the beef business now. "But," he added, "I do believe the cycle will turn around.
Source: Richard Gibson, Dow Jones Newswires; 515-282-6830; [email protected]
tapeworm
Well-known member
- Joined
- Jan 9, 2005
- Messages
- 627
- Reaction score
- 0
This is a good subject ollie...lots of real good things here to think about. I like this kind of stuff a lotbetter than some of the worthless stuff on here...*Look at my pretty new cow..her name is Bessie* LOL
I wish more people would focus on importatn stuff and less on petting cows or even hide color...hide colors not gunna make or break nobody. Buta cattle industry that runs over you whikle your standing still will break the bank. Integration is coming in some way...tahts my opinion. The world is a changing place and the cattle business isnt any differnt. We dont have to like all the changes but its foolish to try to buck it just to keep living in the past
Weve got to change a little with the times if we ever want to findthe MOST profitable place to be..not sure where that place is but I know everbody better get there place figured out and hunker down if they dont want to get left behind
I wish more people would focus on importatn stuff and less on petting cows or even hide color...hide colors not gunna make or break nobody. Buta cattle industry that runs over you whikle your standing still will break the bank. Integration is coming in some way...tahts my opinion. The world is a changing place and the cattle business isnt any differnt. We dont have to like all the changes but its foolish to try to buck it just to keep living in the past
Weve got to change a little with the times if we ever want to findthe MOST profitable place to be..not sure where that place is but I know everbody better get there place figured out and hunker down if they dont want to get left behind
andybob
Well-known member
Smithfield quarterly profits are postsed on; http://www.thepigsite.com
(Including cattle)
(Including cattle)
I leant my Stevenson-Basin catalog to a neighbor, so I still can't come up with what exactly ORIgen was planning on.
Don't know if it relates directly to VI, but I do know that with all the ethanol plants planned for here in Iowa, there has been some discussion on what on how to add value to the byproducts. A thought I have heard twice now, by two different people, is bringing the cattle to the byproduct instead of the other way around. There seems to be some willingness for investors to attempt to finish cattle on concrete near these ethanol plants. The byproduct of the ethanol would go to the cattle, the byproduct of the cattle (manure) would be sent back to the farmer. Don't know what will come of up, but it seems alot of people are beginning to do the math on it.
Back to VI, somone else that really seems to be at the forefront of some interesting things in the beef industry is Creekstone. I would think they will have a role to play as well.
Really learning alot here, so let's keep this post going.
Don't know if it relates directly to VI, but I do know that with all the ethanol plants planned for here in Iowa, there has been some discussion on what on how to add value to the byproducts. A thought I have heard twice now, by two different people, is bringing the cattle to the byproduct instead of the other way around. There seems to be some willingness for investors to attempt to finish cattle on concrete near these ethanol plants. The byproduct of the ethanol would go to the cattle, the byproduct of the cattle (manure) would be sent back to the farmer. Don't know what will come of up, but it seems alot of people are beginning to do the math on it.
Back to VI, somone else that really seems to be at the forefront of some interesting things in the beef industry is Creekstone. I would think they will have a role to play as well.
Really learning alot here, so let's keep this post going.
I thought I would bring this back to the top - I have stolen an article that was posted on Ranchers. It is a long read, but it does show there is a move afoot to get there - despite the potential costs. It is coming and it will happen - JMO.
And, I think I will live to see it happen.
Here it is for those who might be interested.
Luter has a plan and I believe he will bring it to fruition.
Bez!
-----------------------------------------------------
THE VOCAL POINT
THE VOCAL POINT: Secretary charms, Luter disarms, competitors alarmed
by Dan Murphy on 3/10/2006 for Meatingplace.com
SAN FRANCISCO — If ever someone needed a quick study in contrast between government and the private sector, Exhibits A and B were on display at the National Meat Association's 60th Annual Convention held here last week.
Two well-known, high-profile speakers book-ended the three-day meeting: USDA Secretary Mike Johanns at the beginning, and Smithfield Foods Chairman and CEO Joe Luter III to wrap things up.
Talk about an odd couple.
Of course, one wouldn't expect a boatload of similarities between a button-down Cabinet officer whose primary role revolves around delivering carefully crafted messages to assuage often antagonistic constituencies, and a hard-driving, no-nonsense business leader famous for his blunt analysis and bold risk-taking in pursuit of nothing less than a reinvention of the business model for pork production.
Any such expectations wouldn't have been shattered in this case.
Johanns, who has certainly made himself much more accessible than his media-phobic predecessor, Ann Veneman, is a very likeable guy. Partly because he's a former Nebraska governor who won two statewide elections, and partly because that's apparently the way he's put together, Johanns works a roomful of reporters like a Chicago alderman at a campaign fund-raiser.
But although the human touch is a welcome change from official Washington's practiced indifference to the media (unless your business card happens to include the phrase Wall Street Journal), what Johanns actually said in nearly an hour of talking and responding to questions was about as credible as those Oscar night acceptance speeches noting just how much the recipient (sob) "believed in this film," even when the rest of Hollywood said it would never get made.
Right.
In the case of Johanns' speech, it was longer but apparently as tightly scripted as the Oscar "patter" the award presenters — who are supposed to be top-tier actors! — woodenly recite before opening the envelope. I say that because a veteran Capitol Hill reporter sitting behind our table during his keynote address was actually reciting the Ssecretary's speech word-for-word as he delivered it.
For a public official charged with projecting credibility among the very businesspeople his agency regulates, that ain't good.
Let me hasten to add that Johanns never gives the appearance of being scripted. Like most seasoned politicos, he's at home in front of a crowd, liberal with his name dropping — if not his views on trade policy — and quick with a self-deprecating anecdote (in Johanns' case, a too-long tale about mistakenly crashing a private wedding reception during a gubernatorial campaign swing in 2002).
But for all the D.C. dark-suit-and-rep-tie respectability, for all the glad-handing, photo-op sincerity — which seems genuine, by the way — Johanns' remarks could have been stocked next to the Campbell's soup, they were so canned.
Which makes them suspect.
On the tough issues, we've come to expect our politicians to say little and to do next to nothing. But Cabinet leaders are supposed to function as ... well, leaders.
Happy talk about how hard everyone's working back in Washington to solve all those tough problems is center-of-the-plate stuff for candidates on the stump.
It's a lot less appetizing when it's delivered by officials who do, in fact, have the power to effect changes that might mitigate those tough issues.
Case in point: In addition to tap-dancing around a question whether meat and poultry industry officials should just assume that federal subsidies for program crops like corn and soybeans will "stay the course" over the next few farm-bill funding cycles, Johanns dodged an even more pointed question about a much more immediate issue: Should USDA appoint a special negotiator to head up its trade mission to Japan? In other words, does the department have leadership with the right skill set spearheading the effort to reopen our nation's largest and most profitable beef export market?
That's a legitimate question, and more than one industry insider privately criticized USDA's stubborn insistence that ag economists and career administrators are the best they could get to handle sensitive, complex negotiations with the government of Japan.
Johanns' response: "We've got the right people in place."
He didn't add that they were all doing "a heckuva job," but since when is it politically incorrect for a top administration official to tell his largest single constituency that we're going to bring in some top-flight talent to help solve the most important economic issue you have on the table right now?
To pretend that interminable delays in resuming beef exports is the fault of Japanese "sensitivities" is playing politics. And it's a stance that can only be characterized as unacceptable for anyone with a stake in somehow bringing the rest of the world around to the idea that international scientific standards can — and must — be the criteria by which animal and human health issues related to food exports are judged.
Bold new business model
By contrast, Joe Luter III took the podium for the final NMA session looking like the hapless attendee whose luggage got lost on the fight into town. His faded jeans, off-the-rack blazer and shirt-sans-tie "look" fit perfectly with his down-on-the-farm, good ol' Southern gentleman conversational style that many might mistakenly be considered a liability in the hard-charging, hard-edged world of big business deal-making.
They'd do so at their own peril.
For starters, Luter has taken a modest regional meat company and turned it into the industry's premier pork company and its most striking financial success story. As big-name competitors all around him have sold off brands and business lines, merged themselves out of existence or simply cut loose their meatpacking operations to be scooped up by the nearest available bidder — Luter — Smithfield Foods has shrewdly created and quietly perfected a vertical integration model that the "smart people" in the industry and on Wall Street were certain would never work.
News flash: It's working.
Now, Luter plans to develop and implement a vertical integration model for the beef industry, and again, the chorus of naysayers was in full throat mere minutes after he candidly discussed exactly how and why Smithfield felt confident it could reshape the beef industry as the company has done with pork production.
It's a bold vision, no doubt, to attempt to do what every industry analyst I've ever heard has dismissed as economically impossible. But the truth is that a quick check of beef-industry players shows that, profit-wise, most of them aren't exactly hanging around the Exxon-Mobil lounge of late.
Moreover, as Luter so bluntly — and accurately — put it: "I'm the only packer around who gets excited when hog prices rise. Why wouldn't I want to have similar leverage in beef?"
Good question. And one that his competitors ought to be very, very nervous in contemplating.
The bottom line to this little comparative study seems obvious. Convention attendees who listened to both Luter and Johanns hold forth on the industry's future would be well-advised in either case: Don't judge a man by his appearance.
Dan Murphy is a freelance writer and former editor of MMT magazine based in the Pacific Northwest . His column, THE VOCAL POINT, appears in this space each Friday.
And, I think I will live to see it happen.
Here it is for those who might be interested.
Luter has a plan and I believe he will bring it to fruition.
Bez!
-----------------------------------------------------
THE VOCAL POINT
THE VOCAL POINT: Secretary charms, Luter disarms, competitors alarmed
by Dan Murphy on 3/10/2006 for Meatingplace.com
SAN FRANCISCO — If ever someone needed a quick study in contrast between government and the private sector, Exhibits A and B were on display at the National Meat Association's 60th Annual Convention held here last week.
Two well-known, high-profile speakers book-ended the three-day meeting: USDA Secretary Mike Johanns at the beginning, and Smithfield Foods Chairman and CEO Joe Luter III to wrap things up.
Talk about an odd couple.
Of course, one wouldn't expect a boatload of similarities between a button-down Cabinet officer whose primary role revolves around delivering carefully crafted messages to assuage often antagonistic constituencies, and a hard-driving, no-nonsense business leader famous for his blunt analysis and bold risk-taking in pursuit of nothing less than a reinvention of the business model for pork production.
Any such expectations wouldn't have been shattered in this case.
Johanns, who has certainly made himself much more accessible than his media-phobic predecessor, Ann Veneman, is a very likeable guy. Partly because he's a former Nebraska governor who won two statewide elections, and partly because that's apparently the way he's put together, Johanns works a roomful of reporters like a Chicago alderman at a campaign fund-raiser.
But although the human touch is a welcome change from official Washington's practiced indifference to the media (unless your business card happens to include the phrase Wall Street Journal), what Johanns actually said in nearly an hour of talking and responding to questions was about as credible as those Oscar night acceptance speeches noting just how much the recipient (sob) "believed in this film," even when the rest of Hollywood said it would never get made.
Right.
In the case of Johanns' speech, it was longer but apparently as tightly scripted as the Oscar "patter" the award presenters — who are supposed to be top-tier actors! — woodenly recite before opening the envelope. I say that because a veteran Capitol Hill reporter sitting behind our table during his keynote address was actually reciting the Ssecretary's speech word-for-word as he delivered it.
For a public official charged with projecting credibility among the very businesspeople his agency regulates, that ain't good.
Let me hasten to add that Johanns never gives the appearance of being scripted. Like most seasoned politicos, he's at home in front of a crowd, liberal with his name dropping — if not his views on trade policy — and quick with a self-deprecating anecdote (in Johanns' case, a too-long tale about mistakenly crashing a private wedding reception during a gubernatorial campaign swing in 2002).
But for all the D.C. dark-suit-and-rep-tie respectability, for all the glad-handing, photo-op sincerity — which seems genuine, by the way — Johanns' remarks could have been stocked next to the Campbell's soup, they were so canned.
Which makes them suspect.
On the tough issues, we've come to expect our politicians to say little and to do next to nothing. But Cabinet leaders are supposed to function as ... well, leaders.
Happy talk about how hard everyone's working back in Washington to solve all those tough problems is center-of-the-plate stuff for candidates on the stump.
It's a lot less appetizing when it's delivered by officials who do, in fact, have the power to effect changes that might mitigate those tough issues.
Case in point: In addition to tap-dancing around a question whether meat and poultry industry officials should just assume that federal subsidies for program crops like corn and soybeans will "stay the course" over the next few farm-bill funding cycles, Johanns dodged an even more pointed question about a much more immediate issue: Should USDA appoint a special negotiator to head up its trade mission to Japan? In other words, does the department have leadership with the right skill set spearheading the effort to reopen our nation's largest and most profitable beef export market?
That's a legitimate question, and more than one industry insider privately criticized USDA's stubborn insistence that ag economists and career administrators are the best they could get to handle sensitive, complex negotiations with the government of Japan.
Johanns' response: "We've got the right people in place."
He didn't add that they were all doing "a heckuva job," but since when is it politically incorrect for a top administration official to tell his largest single constituency that we're going to bring in some top-flight talent to help solve the most important economic issue you have on the table right now?
To pretend that interminable delays in resuming beef exports is the fault of Japanese "sensitivities" is playing politics. And it's a stance that can only be characterized as unacceptable for anyone with a stake in somehow bringing the rest of the world around to the idea that international scientific standards can — and must — be the criteria by which animal and human health issues related to food exports are judged.
Bold new business model
By contrast, Joe Luter III took the podium for the final NMA session looking like the hapless attendee whose luggage got lost on the fight into town. His faded jeans, off-the-rack blazer and shirt-sans-tie "look" fit perfectly with his down-on-the-farm, good ol' Southern gentleman conversational style that many might mistakenly be considered a liability in the hard-charging, hard-edged world of big business deal-making.
They'd do so at their own peril.
For starters, Luter has taken a modest regional meat company and turned it into the industry's premier pork company and its most striking financial success story. As big-name competitors all around him have sold off brands and business lines, merged themselves out of existence or simply cut loose their meatpacking operations to be scooped up by the nearest available bidder — Luter — Smithfield Foods has shrewdly created and quietly perfected a vertical integration model that the "smart people" in the industry and on Wall Street were certain would never work.
News flash: It's working.
Now, Luter plans to develop and implement a vertical integration model for the beef industry, and again, the chorus of naysayers was in full throat mere minutes after he candidly discussed exactly how and why Smithfield felt confident it could reshape the beef industry as the company has done with pork production.
It's a bold vision, no doubt, to attempt to do what every industry analyst I've ever heard has dismissed as economically impossible. But the truth is that a quick check of beef-industry players shows that, profit-wise, most of them aren't exactly hanging around the Exxon-Mobil lounge of late.
Moreover, as Luter so bluntly — and accurately — put it: "I'm the only packer around who gets excited when hog prices rise. Why wouldn't I want to have similar leverage in beef?"
Good question. And one that his competitors ought to be very, very nervous in contemplating.
The bottom line to this little comparative study seems obvious. Convention attendees who listened to both Luter and Johanns hold forth on the industry's future would be well-advised in either case: Don't judge a man by his appearance.
Dan Murphy is a freelance writer and former editor of MMT magazine based in the Pacific Northwest . His column, THE VOCAL POINT, appears in this space each Friday.
OP
OP
ollie'
Well-known member
- Joined
- Sep 20, 2005
- Messages
- 979
- Reaction score
- 4
Since I was right about smithfield wanting to VI beef, I'll now predict they will start putting together a seedstock herd . I would imagine they have or will contact Circle A and make a play for their commercial herd. I hear their bulls are good and the numbers are fairly large. They also have more data than any other set of cows I am aware of . Anyone heard anything else on the VI deal?
The "Future Beef" business model was filled with VI in the plan.
They had picked out bull and cow producers and contacted them for supply and even wanted to lock in prices for a few years out.
They wanted all Cont X Brit crosses. I went to some meetings with them and showed the buyer around and became good friends with him. He is at Camp Cooley now.
They had plans to not buy any cash cattle after the 3rd year. The investors were the ones driving the VI. They were all cattle folks.
They had picked out bull and cow producers and contacted them for supply and even wanted to lock in prices for a few years out.
They wanted all Cont X Brit crosses. I went to some meetings with them and showed the buyer around and became good friends with him. He is at Camp Cooley now.
They had plans to not buy any cash cattle after the 3rd year. The investors were the ones driving the VI. They were all cattle folks.
