Will cattle go the way of hogs?

[Busterz]

What if any rules are there regarding captive supply? Anyone know?

I don't disagree with most of Bez's post but I do wonder about a couple of things.

For the packers to contract directly with a producer/rancher, someone has to feed the cattle out. Fewer and fewer people retain ownership through that process now. I'm wondering what the reaction of the feedyards would be to that and how it would work.

Also the chicken/hog business model hasn't been working real well for the packers lately. Is that really the path they want to pursue with beef?

Also as to the second job/hobby ranchers, I've wondered if the large percentage of these types of producers actually helps prevent coprate domination/takeover/etc. I agree that most probably oerate at a loss which means they probably aren't "rational" (I'm using the term how they used it in economics class). Corporations are rational entities, they are an-made entities with the sole purpose of earning a profit. Therefore you have people willing to do business at a loss because of an irrational attachment to their business in the same market with a purley rational entity. It seems to make for unpredictability in the future of the industry.

 

[robert]

cows always do best in the shade of an oil well.

 

[VanC]

Also as to the second job/hobby ranchers, I've wondered if the large percentage of these types of producers actually helps prevent coprate domination/takeover/etc.

Excellent point. I would think that the folks who have had cattle as their sole source of income, and been profitable until recently, would be more susceptible to what Bez is talking about. Great discussion by all, by the way.

 

[ddg1263]

Read this boys.. if you do not understand what is going on in the industry.... It is what I have been saying for a long time now on this very board. Someone needs to pay aattention!



7/1/2009 2:55:00 PM


R-CALF: Consumers Pay Near Record Beef Prices



Billings, Mont. – While meatpacker giant Tyson Fresh Meats (Tyson) continues its legal action to seize the home of Herreid, S.D., rancher Herman Schumacher, consumers pay near record beef prices and cattle ranchers like Schumacher receive below cost-of-production prices for their cattle.



In 22 of the past 23 months, U.S. cattle ranchers like Schumacher suffered horrendous losses, which exceeded $300 per head in late 2008 and early 2009 (see Fed Cattle Returns chart below). But, while cattle ranchers reel from low cattle prices, consumers continue to pay at or near record retail prices for beef, with Choice beef prices jumping over the $4 mark in February 2007 and reaching all-time highs in late 2008 and early 2009 (see Retail Choice Beef Prices chart below).



According to U.S. Department of Agriculture (USDA) data, in the first quarter of 2009 U.S. cattle ranchers received the smallest share of the consumer's beef dollar in seven years. The price paid to U.S. cattle ranchers in May 2009 for raising a Choice beef steer from birth to about 18 months of age was approximately $1,059. Consumers, however, who purchased the Choice beef after the packer slaughtered the animal, paid about $2,168 for the meat.



"In other words, the markup on beef was more than twice the value received by the rancher after he or she had raised the animal for about a year and a half, which means the middlemen – the packers and retailers that only held the beef for a matter of days – captured unjust profits away from the rancher and exploited the consumer," pointed out R-CALF USA CEO Bill Bullard. "In May 2009, the producer received only 43 percent of the consumer's beef dollar.



"In a competitive marketplace, consumers would not pay long-term record beef prices while cattle producers suffer long-term, below cost-of-production prices," he continued. "However, the fact this is happening demonstrates that U.S. cattle producers and consumers have lost their competitive marketplace.



"Schumacher dared to do what USDA failed to do for more than a decade," emphasized Bullard. "He took Tyson to task and filed a lawsuit alleging that Tyson and other packers had taken unlawful advantage of cattle producers by violating the Packers and Stockyards Act (PSA)."



A federal jury charged with deciding the facts in the case agreed with Schumacher, finding that Tyson and other packers violated the PSA and finding that the damages were not small. The jury awarded Schumacher and other cattle producers $9.25 million. However, on appeal the jury's verdict was overturned – not because Tyson and the other packers did not damage cattle producers, but rather, because the court found that it must be proven that packers intentionally violated the PSA in order for producers to receive any protection.



"Schumacher proved, by a jury's decision – the anchor in our Constitution - that Tyson's actions in the marketplace damaged U.S. cattle ranchers, and the fact that an appellate court refused to sanction Tyson does not lesson the harmful impact on ranchers like Schumacher and on consumers," said Bullard.



Bullard said the group is calling on USDA and the U.S. Department of Justice to take immediate steps to protect U.S. family farmers and ranchers from the ongoing, anticompetitive practices that are disrupting the competitive market, both for consumers and producers.

 

[Frankie]

You post a "news" blub from R-Calf as proof of what?

In 22 of the past 23 months, U.S. cattle ranchers like Schumacher suffered horrendous losses, which exceeded $300 per head in late 2008 and early 2009 (see Fed Cattle Returns chart below). But, while cattle ranchers reel from low cattle prices, consumers continue to pay at or near record retail prices for beef, with Choice beef prices jumping over the $4 mark in February 2007 and reaching all-time highs in late 2008 and early 2009 (see Retail Choice Beef Prices chart below).

That's a shame. But the packers have also lost big bucks the last few years. Why aren't you pointing that out?

Tyson Foods, Inc. reported diluted earnings per share of $0.03 for the fiscal quarter ended June 28, 2008, compared to $0.31 diluted earnings per share in the same quarter last year. Third quarter 2008 sales were $6.8 billion compared to $6.6 billion for the same period last year. Operating income for the third quarter of fiscal 2008 was $45 million compared to $212 million, and net income was $9 million compared to $111 million, for the same period last year...

Tyson Foods missed Wall Street profit projections by a substantial amount in the first quarter ended Dec. 31, in large part because of "ugly" results in its beef business...

US-based Tyson Foods, the world's largest meat producer, has seen soaring grain costs hit its first-quarter profits - and force the company to withdraw its earnings guidance for the rest of the year.

As for Mr. Schumacher, there are many types of lawsuits where the loser has to pay the winner's legal fees. It should have been no surprise to him when the court ruled that he owed court costs.

 

[Brandonm22]

That's a shame. But the packers have also lost big bucks the last few years. Why aren't you pointing that out?

Frankie, I don't buy that. If you are a small packer you pay what the market pays for cattle and you get what the market is willing to pay you for the finished product. A big packer on the other hand KNOWS what his costs are, has forward contracted a price with Wal-Mart and the other big buyers (who set the base price for the small buyers). You simply subtract your operating costs AND profit margin from the selling price to come up with the number you are willing to pay for the cattle, then you forward contract (or even buy feeders yourself) to get that fed cattle price where you want it. One of the big 3 has enough clout to move the market. There are only three unknown variables the cash market for beef (and most of your production is forward contracted so your exposure to that market is limited), the price of corn (your exposure to that is limited to just the cattle you own), and the price of energy (which almost everyone is exposed to). For Tyson, Swift (JBS), or Excel (Cargill) to lose money they have to be incompetent or are feuding amoung themselves.

 

[hillsdown]

That's a shame. But the packers have also lost big bucks the last few years. Why aren't you pointing that out?

What corporation has not been in decline mode due to the economy, the fact is they gauged the consumer and ripped off the producer when times were good and made a h@ll of alot of money while doing it just because their profits are down now H@ll will freeze over before I feel sorry for them.

Also here in Canada all the packers got a sh#t load of my money and every other tax payers money when BSE hit , the producer got NOTHING !!!!!!!

BEZ, we have seen this coming for a while but still do not have any viable options. I fear we are all just digging ourselves in deeper and with the drought and economic hardships in my area I know alot of producers would take that money in a heart beat from a packer and not think twice about it or the future consequences of it.

 

[Frankie]

That's a shame. But the packers have also lost big bucks the last few years. Why aren't you pointing that out?

Frankie, I don't buy that. If you are a small packer you pay what the market pays for cattle and you get what the market is willing to pay you for the finished product. A big packer on the other hand KNOWS what his costs are, has forward contracted a price with Wal-Mart and the other big buyers (who set the base price for the small buyers). You simply subtract your operating costs AND profit margin from the selling price to come up with the number you are willing to pay for the cattle, then you forward contract (or even buy feeders yourself) to get that fed cattle price where you want it. One of the big 3 has enough clout to move the market. There are only three unknown variables the cash market for beef (and most of your production is forward contracted so your exposure to that market is limited), the price of corn (your exposure to that is limited to just the cattle you own), and the price of energy (which almost everyone is exposed to). For Tyson, Swift (JBS), or Excel (Cargill) to lose money they have to be incompetent or are feuding amoung themselves.

Are you suggesting I made those quotes up? Take a look for yourself. They're all online from reputable sources. The packers have been losing money, or least saw a big drop in profits the last few years. They don't forward contract anywhere near all their cattle. :roll: If it were up to R-CALF, producers wouldn't be allowed to enter into any kind of forward contracting with the packers. Thats "captive supply." They're not in the feeding business; why would they buy feeders? That's a whole different business.

Tyson, Swift and EXCEL are always fueding among themselves.

 

[Brandonm22]

No, the quotes you put up are REAL quotes from the corporations but I do believe that large corporations tell us what they want us to believe. Beef is also just a SMALL part of Tyson.....dittoe with Cargill and the U.S. is not the biggest piece of JBS. A division can "lose" money.....borrowing it from another division at an interest rate that you or I could beat on the open market ditto the other way. Just because an accounting statement says it doesn't necessarily mean that it is true.

 

[Bez+]

BEZ, we have seen this coming for a while but still do not have any viable options. I fear we are all just digging ourselves in deeper and with the drought and economic hardships in my area I know alot of producers would take that money in a heart beat from a packer and not think twice about it or the future consequences of it.

Well, we just rented out 200 acres of good tiled bottom land at 120 bucks an acre

We will clear more money on that land than we ever would have with cows in the market today

I have known this family for years and they do a fine job - so it is theirs for the next five years

We have gone from running hundreds of cows with calves at side and are now down to the winter plan for 2009 / 2010 - 7 cows with calves at side. Enough for the family and close friends to eat home grown beef.

We will clear more under this arrangement than we have any year since BSE hit

I am quite comfortable with this - whiskey corn, some beans and whatever else they want to grow - makes for a good income - plus I get paid cash when I get home from here to drive the combine.

Going to see a lot of folks reduce their herds or get out pretty soon. Best be the first in that line if you figure to do it.

Those with off farm income will eventually get tired of burning the candle at both ends and one line of work will have to go.

Sometimes the light at the end of the tunnel is a train.

Not too many youngsters in the biz any more - those big boys come looking to hire you and your land to run THEIR cows - a lot of folks will take them up on it.

For you - well, it may be better to take cows to the feed than it is to take feed to the cows when you are talking big numbers - but in the long run - you be the FIRST to SELL your cows and sit on cash - do not do what we did and sit on cows and try to find cash - that is a fools game - nearly broke us and we are still behind because of it. Way behind.

You can always buy cows but you cannot always afford to buy land.

Can't afford the loss on the cows? Well, the first loss is almost always the BEST loss - wait too long and you will often be in a bigger loss position - I have that T-shirt.

Let someone grow grain on that land - you take the money - no matter the size - and sit on it.

Or let the land just sit - it will not go bad.

In closing - if you were to walk up this lane way and tell me you were a manager for a major packer - well, I might not be able to guarantee you could get out of here safely - nuff said on that one after BSE and what they did to us.

Take care

Bez+

 

[ddg1263]

Frankie, I can not believe you are taking up for those thieves. It plainly states that they have huge margins in the beef packing houses.

The price paid to U.S. cattle ranchers in May 2009 for raising a Choice beef steer from birth to about 18 months of age was approximately $1,059. Consumers, however, who purchased the Choice beef after the packer slaughtered the animal, paid about $2,168 for the meat.

(18 month old cattle are cattle coming out of the feed lots)

Now if you can not make it on those margins, it is not because market conditions are against you. In corporations you can accelerate depreciation, salary out heavy wages to slim down your bottom line. But when we are talking about a stable income stream such as the food supply and then still have an operating profit of over 100%, it is UNREAL... The only reason they won the second case is because they are claiming it was due to natural market conditions that they made so much money. They fully admit to making a boat load of money, and they realise that many farmers are going out of business because of it, but what they are saying is that it is just because of natural business cycles are causing the increase in profits.

I want to add that Tyson foods have operations beyond cattle.... so I am sure they are spreading out losses incurred from other ventures where they are establishing footholds. I know losses in chicken facilities were big last year.

This is plain for everyone to see. These packers are putting farmers out of business, how long do you think this will continue before the food supply is disrupted? It is probably why it caught the attention of the government because if you can not feed the citizens of you have big problems on your hands. It is not like the bail out of the banks where they can print more money. You can not print a calf crop.... The people in the packing house should be ashamed. By the way I sold a nice load of calves the other day for an average of little over 300 dollars. I want to see anyone produce good looking Angus for that little of money.

If you work for the packing industry, you need to communicate to them in the most direct way to stop squeezing the farmers out of business.

 

[ddg1263]

I also need to add that we sold a load of goats and they brought more money than my calves. People have made fun of me ever since telling me I need to be in the goat business. Now you tell me would you rather eat a goat or a black angus steak? it is unreal!!!! Why are there not more of the big money guys involved into solving this problem? Someone, somehwere needs to stand up for this injustice.

 

[dun]

I get a real kick out of the conspiricy theoriests that believe that the packers are out to steal all they can and always make huge profits.
Deep dpwn inside people have to not really believe that they are the ogre that is out to rape the producers. At least I hope don;t.

 

[Red Bull Breeder]

Just a thought i wonder who owns 5Rivers. Last i knew it was JBS, i beleive 5Rivers is the largest feeder in the US.

 

[ddg1263]

Dun why did this catch the attention of the court system and federal agencies? Look at what was going on with the Rockefellers and standard oil in the early 1900's. These things happen and it is why anti trust laws are on the books today. Once you have organization of money at the top end of the spectrum, they can control the markets pretty much at will. The article is clear and there is no conspiracy theory. They fully admit to making huge profits at the expense of farmers. Their lawyers just say that well we were in the right place at the right time. However poor ole bez+ was at the wrong place at the wrong time. When enough Bez+ go bust and bail, it will catch the attention of federal authorities. I am sure they will quietly act as if they accomplished something, but the power that the packers have in place is unbreakable.

 

[Busterz]

http://www.fiveriverscattle.com/Index.aspx

 

[Busterz]

http://www.fiveriverscattle.com/Index.aspx

 

[Busterz]

BEZ, we have seen this coming for a while but still do not have any viable options. I fear we are all just digging ourselves in deeper and with the drought and economic hardships in my area I know alot of producers would take that money in a heart beat from a packer and not think twice about it or the future consequences of it.

Well, we just rented out 200 acres of good tiled bottom land at 120 bucks an acre

We will clear more money on that land than we ever would have with cows in the market today

I have known this family for years and they do a fine job - so it is theirs for the next five years

We have gone from running hundreds of cows with calves at side and are now down to the winter plan for 2009 / 2010 - 7 cows with calves at side. Enough for the family and close friends to eat home grown beef.

We will clear more under this arrangement than we have any year since BSE hit

I am quite comfortable with this - whiskey corn, some beans and whatever else they want to grow - makes for a good income - plus I get paid cash when I get home from here to drive the combine.

Going to see a lot of folks reduce their herds or get out pretty soon. Best be the first in that line if you figure to do it.

Those with off farm income will eventually get tired of burning the candle at both ends and one line of work will have to go.

Sometimes the light at the end of the tunnel is a train.

Not too many youngsters in the biz any more - those big boys come looking to hire you and your land to run THEIR cows - a lot of folks will take them up on it.

For you - well, it may be better to take cows to the feed than it is to take feed to the cows when you are talking big numbers - but in the long run - you be the FIRST to SELL your cows and sit on cash - do not do what we did and sit on cows and try to find cash - that is a fools game - nearly broke us and we are still behind because of it. Way behind.

You can always buy cows but you cannot always afford to buy land.

Can't afford the loss on the cows? Well, the first loss is almost always the BEST loss - wait too long and you will often be in a bigger loss position - I have that T-shirt.

Let someone grow grain on that land - you take the money - no matter the size - and sit on it.

Or let the land just sit - it will not go bad.

In closing - if you were to walk up this lane way and tell me you were a manager for a major packer - well, I might not be able to guarantee you could get out of here safely - nuff said on that one after BSE and what they did to us.

Take care

Bez+

Got any solutions or should we all just roll up the tent?

 

[hillsdown]

I get a real kick out of the conspiricy theoriests that believe that the packers are out to steal all they can and always make huge profits.
Deep dpwn inside people have to not really believe that they are the ogre that is out to rape the producers. At least I hope don;t.

Be a producer in Canada and the bullsh@t we have had to put up with the last 6-7 years and you will sing a different tune. AND yes they pilfered and stole, while taking every penny they could from hard working taxpayers . They bought our beef for pennies on the dollar and did not give the consumer a break at all. The consumer payed top dollar like they would have before BSE devastated our industry. This was the starting block that they needed and believe me they ran with it ,never looking back.

 

[Frankie]

Just a thought i wonder who owns 5Rivers. Last i knew it was JBS, i beleive 5Rivers is the largest feeder in the US.

Cactus Feeders at Amarillo claims to be the largest cattle feeder in the US.

http://www.cactusfeeders.com/about/history.html