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Vertical Integration of the Beef Industry
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<blockquote data-quote="Brandonm2" data-source="post: 185950" data-attributes="member: 2095"><p>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).</p><p></p><p>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.</p></blockquote><p></p>
[QUOTE="Brandonm2, post: 185950, member: 2095"] 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. [/QUOTE]
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