AgTalk Home
AgTalk Home
Search Forums | Classifieds (144) | Skins | Language
You are logged in as a guest. ( logon | register )

Economics 101, Beef and Cattle
View previous thread :: View next thread
   Forums List -> Stock TalkMessage format
 
Jim
Posted 5/3/2021 12:09 (#8984989)
Subject: Economics 101, Beef and Cattle


Driftless SW Wisconsin

I'm a retired engineer with some cows and not a trained economist but I have picked up a few things about econ and the business world over the years. For what it's worth:

  • Ever since about the mid 1970s, public (stock issuing) corporations work to maximize profits for the STOCKHOLDERS. They do not operate in the best interests of their employees, suppliers, dealers or even their customers except as necessary to maximize profits for their STOCKHOLDERS. This is a basic concept that explains a lot of corporate behavior.
  • US companies traditionally have looked to increase profits by selling higher volumes of products which usually resulted in keeping product selling prices low to keep volume up.
  • European and especially German companies take a different approach to the US high volume theory. European companies would rather sell 10 products at $10 each to produce $100 in sales where American companies in the past strove to sell 100 products at $1 each to produce $100 in sales. An extreme example but hopefully shows the idea.
  • American companies in many industries are finding it is a lot easier to produce fewer products and sell each at a higher price than to work hard to produce a lot of lower cost product.
  • In a real, free, capitalist economy the thing that is supposed to keep prices in check and stop them from going through the roof is COMPETITION. If you charge too much you theoretically invite new competitors into your market.
I read on this board that fed cattle prices are going to up on such and such a date if I can just hang on until then, etc, etc.
The fact is that the 4 major packers can source all the raw material (fats) that they need at current prices. They can also bring in low cost imports without having to label them as such.
Beef demand is strong, especially after Covid, so they can raise box beef prices. While with just 4 main suppliers, all operating under the same tacit "maximize stockholder return" rules, there really is little to no competitive pressure to limit prices, at least until the restaurant or grocery store customer backs off due to prices.
There is absolutely no "fairness factor" which is going to make packers share their profits with anyone, suppliers, employees, distributors, etc.
As cattlemen, anywhere in the chain from cow/calf to feeder we are all just suppliers. The big 4 will keep the status quo of relatively low fat prices relative to box beef prices as long as they can get supply of raw material from either the US or overseas. Nothing will change until it has to. Box beef prices will continue to climb without bringing fats with it.
An additional benefit of the current situation to big 4 shareholders is that rising box beef prices will tend to make their fake beef investments more attractive as the prices of real beef rise to get closer to artificial beef.
The only way to change this spiral of high box beef to low real cattle prices is for the US federal government to step in and invoke anti monopoly laws which were intended to protect the public from consolidation which results in a lack of competition.
Hoping for a change is not going to do it. A concentrated group effort to get the US government to take a variety of steps to bring competition back into the US beef and cattle industry, for the good of all, is the only thing that will cause a change to the death spiral we are now on.
My humble opinion.


Edited by Jim 5/3/2021 13:31
Top of the page Bottom of the page
Hedge Post
Posted 5/3/2021 12:25 (#8985016 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


Iowa
Good post.
Top of the page Bottom of the page
4JFarms
Posted 5/3/2021 12:25 (#8985017 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


I’m with the government and I’m here to help
Top of the page Bottom of the page
Jim
Posted 5/3/2021 12:28 (#8985019 - in reply to #8985017)
Subject: RE: Economics 101, Beef and Cattle


Driftless SW Wisconsin

4JFarms - 5/3/2021 12:25 I’m with the government and I’m here to help

Do you have any other constructive solution?

Top of the page Bottom of the page
redrobin
Posted 5/3/2021 15:40 (#8985290 - in reply to #8985019)
Subject: RE: Economics 101, Beef and Cattle


Any idiot like me ( not an engineer) can see onerous epa, osha, usda, etc with excessive rules , fees, taxes , prohibit capital expansion and new start processors in our industry. Get our playing field level with foreign countries or ban their import

I think I used too many commas.
Top of the page Bottom of the page
garvo
Posted 5/3/2021 16:07 (#8985323 - in reply to #8985290)
Subject: RE: Economics 101, Beef and Cattle


western iowa,by Denison
nah your fine redrobin-it doesn't take long to separate the chaff from the feed
as some other poster said box beef has nothing to do with the fat cattle price
tax's are paid with or without a gun-just depends where you live
Top of the page Bottom of the page
garvo
Posted 5/3/2021 12:51 (#8985071 - in reply to #8985017)
Subject: RE: Economics 101, Beef and Cattle


western iowa,by Denison
4JFarms - 5/3/2021 12:25

I’m with the government and I’m here to help

troll
Top of the page Bottom of the page
4JFarms
Posted 5/3/2021 12:58 (#8985085 - in reply to #8985071)
Subject: RE: Economics 101, Beef and Cattle


There you go again Gravy hurting my feelings again
Top of the page Bottom of the page
garvo
Posted 5/3/2021 13:27 (#8985131 - in reply to #8985085)
Subject: RE: Economics 101, Beef and Cattle


western iowa,by Denison
you should publish your neighbors public information troll-oh that's right I forgot I'm a hyprocrite
Top of the page Bottom of the page
timbernt
Posted 5/3/2021 13:28 (#8985132 - in reply to #8985085)
Subject: RE: Economics 101, Beef and Cattle


West central missouri
If you are real, put your name in your profile.
Top of the page Bottom of the page
garvo
Posted 5/3/2021 13:34 (#8985139 - in reply to #8985132)
Subject: RE: Economics 101, Beef and Cattle


western iowa,by Denison
timbernt - 5/3/2021 13:28

If you are real, put your name in your profile.

from past post's he said he was a feed sales guy-somewhere around Wisconsin that runs a 3,000 head feedlot
guess you can be anyone you want
Top of the page Bottom of the page
4JFarms
Posted 5/3/2021 13:39 (#8985148 - in reply to #8985139)
Subject: RE: Economics 101, Beef and Cattle


Wrong on all accounts except Wisconsin you can have your ID stolen I’ll keep mine such a little baby when someone questions you and your constant complaining
Top of the page Bottom of the page
timbernt
Posted 5/3/2021 14:05 (#8985182 - in reply to #8985148)
Subject: RE: Economics 101, Beef and Cattle


West central missouri
I think the real reason is you are a chicken$hit!
Top of the page Bottom of the page
Jim
Posted 5/3/2021 14:54 (#8985234 - in reply to #8985132)
Subject: RE: Economics 101, Beef and Cattle - trolls


Driftless SW Wisconsin

timbernt - 5/3/2021 13:28 If you are real, put your name in your profile.

Corporations often hire PR (public relations) firms to monitor internet discussion boards related to their business.

Often these PR firms also offer "services" which include hiring nameless posters whose job is to cast doubt on threads and contributors which the corporation paying the bills doesn't like. Their job is at times also to divert the discussion away from the topics that corporation does not like.

The best antidote is to ignore these posts and posters.



Edited by Jim 5/3/2021 14:55
Top of the page Bottom of the page
timbernt
Posted 5/3/2021 14:57 (#8985242 - in reply to #8985234)
Subject: RE: Economics 101, Beef and Cattle - trolls


West central missouri
How about calling them out to clarify the post?
Top of the page Bottom of the page
Jim
Posted 5/3/2021 15:06 (#8985258 - in reply to #8985242)
Subject: RE: Economics 101, Beef and Cattle - trolls


Driftless SW Wisconsin

They probably won't do it and in fact that further diverts the discussion from the topic at hand

Top of the page Bottom of the page
matt suco
Posted 5/3/2021 12:28 (#8985020 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


Rome, KS
Jim,

This may get moved to TPP because of what I am about to say. I agree with most of your points. As far as getting the govt. to enforce antitrust laws from a grass roots level, you are correct. The question is how? Some current state and national beef organizations leadership is just rolling over and letting it go. The problem is replacing that leadership. The presidents of those organizations that will be in there 10 years from now have been groomed by the good old boys club for the last 25 years. The same line of thinking will continue. I know you will say get involved. I have tried. Was blatantly rejected because I was not part of the good old boys club. What say you?
Top of the page Bottom of the page
Jim
Posted 5/3/2021 12:34 (#8985030 - in reply to #8985020)
Subject: RE: Economics 101, Beef and Cattle


Driftless SW Wisconsin

Ignore the good old boys club and go right to Congress, your representative and senators.  They will respond if enough people contact them.

Top of the page Bottom of the page
3Sfarms
Posted 5/3/2021 12:47 (#8985058 - in reply to #8985030)
Subject: RE: Economics 101, Beef and Cattle


South Carolina
Jim - 5/3/2021 13:34

Ignore the good old boys club and go right to Congress, your representative and senators.  They will respond if enough people contact them.



Unfortunately, so basically the middle of the country must take the lead as there are few of us on the east and the west to get the attention of our elected officials. Personally my representation in the House wouldnt even bother to listen to me.... I sent him an email earlier this year and couldn't even get a canned response. Regarding government intervention, we need less of it to make it possible for smaller packers to be viable from what I have read, though it would be helpful if they did some trust-busting.
Top of the page Bottom of the page
garvo
Posted 5/3/2021 12:49 (#8985067 - in reply to #8985030)
Subject: RE: maybe tex will add in-he is teaching a beef class


western iowa,by Denison
The sad fact is they can get away with it-price gouging-the American way-with the government mindset to destroy are industry-hopefully they don't choke on that fake crap
Top of the page Bottom of the page
Gearclash
Posted 5/3/2021 14:12 (#8985188 - in reply to #8985030)
Subject: RE: Economics 101, Beef and Cattle


Sioux County, NWIA
Jim - 5/3/2021 12:34

Ignore the good old boys club and go right to Congress, your representative and senators.  They will respond if enough people contact them.



LOL. [Bitterly] Congress IS the good ol boys club. You can get any number of producers together to complain that you want. The packers have enough money to blow them all away. I was not a big fan of Rush Limbaugh but he was oh so right about ‘follow the money’. Money talks, bs walks.

I’m not disagreeing that the US government should enforce some antitrust action against the packers. But I am under no illusion of just how much headwind there will be. First off is getting enough money and voices together to bend the ears of the Congress critters, and if that is successful, then how to deal with the fact that packers can suppress the domestic prices by importing meat. This is a real thorny problem in my opinion because the packers can argue (and with some grounds) that keeping prices ‘lower’ is in the interest of the retail consumer. The packers can argue that the US live beef producer is not the lowest cost producer globally so why should they pay more for US live cattle. That global competitiveness, or lack thereof, is in my opinion another can of worms . . .
Top of the page Bottom of the page
garvo
Posted 5/3/2021 14:23 (#8985203 - in reply to #8985188)
Subject: RE: Economics 101, Beef and Cattle


western iowa,by Denison
Think Jim is spot on -the sad fact is the goal is to have cheap meat or such that meat can be import and turn USA in to a green climate-we could take all the cattle out of the usa-but if some other country would put the squeeze on we could end up with starvation-

We have a walking food supply with cattle that can be shelved till its needed-other countrys cattle have to be shipped in-here we can slaughter from walking to the plate in a few days-if for any other reason-the food security trumps all and any greenhouse-climate agenda along with feeding Americans a wholesome protein source
The economics you would think would be to have a strong troop of cattle and cattlemen there to insure a steady supply of protein-the path of bleeding off cattlemen to no return will lead to a nation that very well will be in deep trouble in 2 generations
Top of the page Bottom of the page
Gearclash
Posted 5/3/2021 16:32 (#8985354 - in reply to #8985203)
Subject: RE: Economics 101, Beef and Cattle


Sioux County, NWIA
You are quite right. We are on the wrong side of political winds, in more than one way. I will say no more about it.

As far as having a domestic food supply -- agree completely, within reason. But good luck trying to get the voters to grasp the concept of thinking ahead and rationally at that.

Edited by Gearclash 5/3/2021 16:32
Top of the page Bottom of the page
redoak
Posted 5/3/2021 12:48 (#8985060 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


deep SW On.
Jim , you are correct. Same for hogs , limited hook space so they can get as much product as they need with out a bidding war...

Hog prices are good right now so not sure what is going on.

Myself , IDK how high stock prices help the average Joe that doesn't have a big stockmkt. based pension plan or stocks as ,and I may be 100% wrong , high stock price = company /investor wants more $$ for there roi.
Top of the page Bottom of the page
2 Bravo
Posted 5/3/2021 12:49 (#8985065 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


You are exactly right. And guys better figure out that trying to win the public argument by saying “ I deserve a bigger piece of the pie” is not going to cut it. The public flat out does not and never will care about our portion size. It needs to be framed as a supply chain problem waiting to happen. Direct to consumer matched with carcass quality will probably be the way forward, cause its going to be tough row to hoe to try to crank out more pounds at a lower cost than the people to our South can.
Top of the page Bottom of the page
Jim
Posted 5/3/2021 15:04 (#8985253 - in reply to #8985065)
Subject: RE: Economics 101, Beef and Cattle


Driftless SW Wisconsin

Boxed beef prices and retail prices far above the actual costs of production at some point qualify as "price gouging" and, along with obviously limited competition, is grounds for federal government action.

A groundswell of constituents (cattlemen and wholesale and retail beef customers) calling for action by their congressmen and senators can get something done and existing anti-monopoly laws enforced.



Edited by Jim 5/3/2021 15:08
Top of the page Bottom of the page
MU1979
Posted 5/3/2021 15:15 (#8985271 - in reply to #8985253)
Subject: RE: Economics 101, Beef and Cattle


Missouri
Never underestimate pay to play and our Gov more than willing to pick winners and losers, especially if it works into there agenda. Politics are involved today in lots of aspects of our lives.
Top of the page Bottom of the page
Galaxie64
Posted 5/3/2021 15:26 (#8985285 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


WY, OK
100 years of regulation has birthed today's market. You aren't regulating yourself out of this.

I guess that makes me a Corporate Op, convenient how everyone who disagrees with you is a paid shill.

If you ever want something over thought and never realized but an Engineer on the job.
Top of the page Bottom of the page
Jim
Posted 5/3/2021 16:25 (#8985347 - in reply to #8985285)
Subject: RE: Economics 101, Beef and Cattle


Driftless SW Wisconsin

Galaxie64 - 5/3/2021 15:26 ... If you ever want something over thought and never realized but an Engineer on the job.

Engineers put men on the moon, Perseverance and helicopters on Mars, made breatheable oxygen from Mars atmosphere, and created the tools we're conversing on now, among other things.

Engineers don't start wars.

Most of the engineers I know are also good beef customers!

Good day sir.



Edited by Jim 5/3/2021 16:26
Top of the page Bottom of the page
Brown Cow
Posted 5/3/2021 17:03 (#8985396 - in reply to #8985285)
Subject: RE: Economics 101, Beef and Cattle


SW Wisconsin
Jim is right. Lack of regulation got us to The Jungle, which got us antitrust and the FDA. Another century or so of gradually weakening regulation got us where we are now.
Top of the page Bottom of the page
Emken
Posted 5/3/2021 19:27 (#8985621 - in reply to #8985285)
Subject: RE: Economics 101, Beef and Cattle


Flat rock, Illinois
I am as conservative as it gets politicly but I am also a student of history. Rockefeller created the largest monopoly ever in a completely wild west unregulated economy. It doesn't matter how or why we got here, regulations or completely free market. What matters is how to handle the problem at hand. Breaking up the packers into 10 or 12 smaller companies seems like a logical solution and would probably get us by for another 100 years or so.
Top of the page Bottom of the page
timbernt
Posted 5/3/2021 20:39 (#8985793 - in reply to #8985621)
Subject: RE: Economics 101, Beef and Cattle


West central missouri
Breaking the monopolies is the only solution. All these fancy formulas to make the packers accountable are unenforceable. Consumers and producers alike should demand divestiture. The politicians are scared to talk about it, but the justice department must if we are to have a future for our industry.
Top of the page Bottom of the page
ntexcotton
Posted 5/3/2021 21:32 (#8985994 - in reply to #8985621)
Subject: RE: Economics 101, Beef and Cattle


North Central Texas
Most experts would agree that if the government would have let standard go, Teaxaco, gulf and others would have taken the market and been major players without help. The same scenerio was seen in the packer market. Liberal progressives that couldn't break those industries on the union side attacked them through government regulation. No wrong doing in oil or Packers was ever found after. Folks that could make a buck on the demise pushed it hard and they profited. We ended up with stagnate prices for decades later.
Top of the page Bottom of the page
garvo
Posted 5/3/2021 21:42 (#8986014 - in reply to #8985994)
Subject: RE: Economics 101, Beef and Cattle


western iowa,by Denison
well there ntex you cant have a positive without a negative-
the latest study says box beef price has no bearing on fat cattle price!
the byproduct of the cattle carcass is up $4.75 a 100cwt over last year-with hide trading at almost $45 a head for non branded hide of good color
The $170 drop value above the carcass price doesn't effect the price of fat cattle or so the study's sa
I'd kick my dog if I had one!-Class musta got out early
experts have never had a clue!

Edited by garvo 5/3/2021 21:49
Top of the page Bottom of the page
ntexcotton
Posted 5/3/2021 22:27 (#8986121 - in reply to #8986014)
Subject: RE: Economics 101, Beef and Cattle


North Central Texas
I left you a spot to argue that a few threads up.
Top of the page Bottom of the page
redrobin
Posted 5/4/2021 05:05 (#8986267 - in reply to #8985285)
Subject: RE: Economics 101, Beef and Cattle


Galaxie64 - 5/3/2021 15:26

100 years of regulation has birthed today's market. You aren't regulating yourself out of this.

I guess that makes me a Corporate Op, convenient how everyone who disagrees with you is a paid shill.

If you ever want something over thought and never realized but an Engineer on the job.
deregulate America and regulate imports at least equally. For example , tariff Namibia Africa imports an amount equal to the additional depressing costs that our epa, osha, and other government oversight entities stifles business here.
Top of the page Bottom of the page
Macttle
Posted 5/3/2021 16:33 (#8985358 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


I believe it’s gonna fuel some opportunities in rural America. Every small packer is busy and providing jobs. A new one opened last summer a town to my south, he’s rolling at it.
I can buy beef raised in my county in a store on Main Street, opened in the last year.
More out there working towards it. Things change, people adapt.

https://mobile.twitter.com/mokanjim?lang=en
^thats a good follow
Top of the page Bottom of the page
Direct Injected
Posted 5/3/2021 16:46 (#8985380 - in reply to #8985358)
Subject: RE: Economics 101, Beef and Cattle


SW, Missouri
Macttle - 5/3/2021 16:33

I believe it’s gonna fuel some opportunities in rural America. Every small packer is busy and providing jobs. A new one opened last summer a town to my south, he’s rolling at it.
I can buy beef raised in my county in a store on Main Street, opened in the last year.
More out there working towards it. Things change, people adapt.

https://mobile.twitter.com/mokanjim?lang=en
^thats a good follow
and locally they can't keep help in all the plants. I hope Jim and his bunch does well with their plant, they appear to have a top notch facility in the works. Lack of workers is the PANDEMIC in this country. I'm all for having a plant in every town but there isn't people to do that work.. Maybe it's a "here" thing idk.
Top of the page Bottom of the page
Macttle
Posted 5/3/2021 16:57 (#8985388 - in reply to #8985380)
Subject: RE: Economics 101, Beef and Cattle


And maybe it’s a here thing too on labor at some point, the ones that are good to work for don’t have problems finding workers.
I went down packer lane to the metal place couple weeks ago, during a shift change. Lots of nice vehicles. The processor I use is right by the packing plants. He has quite a few of the same employees year after year. I’m more worried when he retires. Half the problem for young people is capital. Takes dime to buy out a business with its customer list that is that successful.
Top of the page Bottom of the page
Macttle
Posted 5/3/2021 17:07 (#8985405 - in reply to #8985380)
Subject: RE: Economics 101, Beef and Cattle


Labor problem probably sooner than later, hauled some to Woodward couple weeks ago and coming home noticed the training drill rig was lit up. That’s a business hard for anyone to compete with when it comes to hard working individuals.
Top of the page Bottom of the page
taloga
Posted 5/3/2021 18:03 (#8985487 - in reply to #8985358)
Subject: RE: Economics 101, Beef and Cattle


Kolorado
Macttle - 5/3/2021 16:33

I believe it’s gonna fuel some opportunities in rural America. Every small packer is busy and providing jobs. A new one opened last summer a town to my south, he’s rolling at it.
I can buy beef raised in my county in a store on Main Street, opened in the last year.
More out there working towards it. Things change, people adapt.

https://mobile.twitter.com/mokanjim?lang=en
^thats a good follow




Guy's little plant looks really nice.


Building a plant like that is the only way i think that we could ever make a go on our place.

We could have a little cow herd and maybe make a little money. But feeding cattle and being at the mercy of the packers, i just don't see a future.



Edited by taloga 5/3/2021 21:16
Top of the page Bottom of the page
Radiehl
Posted 5/3/2021 16:40 (#8985369 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle



Colorado

Might be a logical path if the .gov critters wanted a thriving beef industry. Indications are they don’t.

They seem perfectly ok with making us dependent on foreign oil again. Why not meat also?

If the current market structure produces foreign dependency on meat, the goal is achieved without the culpability legislation may bring.



Top of the page Bottom of the page
buckmaster
Posted 5/3/2021 17:42 (#8985464 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


ND
We import to much. Imports set the price and how much does it cost to raise beef in a south American rainforest. We are paying dearly for all this free trade and we can't even get MCOOL so imports will keep setting the price until something changes
Top of the page Bottom of the page
Schram Cattle Co
Posted 5/3/2021 20:49 (#8985830 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


MB, Canada
Good post--I think you're bang-on here and make an important point that a lot of people on here seem to want to ignore, which is that the packers are violating laws against monopolies (or oligopolies technically), so anyone who says to nut up because the world isn't fair is essentially saying that they're fine with a status quo that is at its roots very illegal. It's like someone in 1980s New York just saying 'Well the mob runs things and that's how life works so if you don't like it I guess you should leave". There's a lot of talk on here about ignoring the markets and just putting your head down and going to work but these days it's sounding less like a tough talk from good old boys and more like a bunch of folks with Stockholm Syndrome.

I'm a relatively young guy in the game. I've taken over an established family ranch, I keep my pencil very sharp, and I don't run any equipment that isn't at least a decade older than me, and I'm getting by so far. But I'm watching a lot of other people my age taking over their family ranches and either working full time on the side or just hemorrhaging equity.

Those who are saying that the market should just take its course better be ready to face the reality that there just won't be a lot of ranches left in the end. What they call a correction in the markets is going to be an erasure of a lot of the people, lifestyle, and ideas that make family ranches so great. As I write this, I can look out at the 130 year-old gable roof barn in my yard with the 806 parked in front of it and a post pounder behind. That 806 has a little metal seat on the fender (with a seatbelt). I sat on that seat as a kid while my dad worked, and my 15 month-old son is going to sit on that seat soon, and I don't want to be the one to eventually break it to him that he'd be better of to sit in some office somewhere than be on the land the way every last one of his forefathers were. Because our generation didn't have the guts to stand up to a broken system.
Top of the page Bottom of the page
GCAT
Posted 5/3/2021 21:39 (#8986008 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


Eastern Kansas
I wish KLA would step up and lead the charge to a solution. Whatever it is. However I'm afraid we'll still be talking about this in 5 yrs with no solutions.





(20210503_213011 (full).jpg)



Attachments
----------------
Attachments 20210503_213011 (full).jpg (113KB - 499 downloads)
Top of the page Bottom of the page
UNL96
Posted 5/3/2021 22:14 (#8986094 - in reply to #8984989)
Subject: Read this portion again


What Jim has stated here and I’ve copied below contains more truth than many people know. Unless you have worked for a large publicly traded company you would not believe the lengths these co’s will go to maintain short term quarterly profits. These practices are preached through the business schools most c-suite executives have all attended. All these companies will have glorious mission, vision and value statements to con their employees into believing what they are told by management is necessary. Companies actions speak louder than all the virtue signaling they can spew via their corporate communications departments. I’m no longer involved in livestock production but I understand your plight. I don’t know exactly what the solution is but I do know the packers don’t give a dang about the producer. It will be up to you to defend your interests.


• Ever since about the mid 1970s, public (stock issuing) corporations work to maximize profits for the STOCKHOLDERS. They do not operate in the best interests of their employees, suppliers, dealers or even their customers except as necessary to maximize profits for their STOCKHOLDERS. This is a basic concept that explains a lot of corporate behavior.
Top of the page Bottom of the page
Brian Smith
Posted 5/4/2021 07:19 (#8986432 - in reply to #8986094)
Subject: Yes and no


I would argue the heads of these companies and their ol' boys club boards of directors maximize revenue to:

In order:

1. Increase Stock price - to increase their wealth
2. Increase Stock price - public perception - to increase their wealth
3. Create bonus situations in conjunction with their ol' boys board of directors - to increase their wealth. Remember they sit on each others boards to maximize each others pockets.
4. Create many $s to lobby congress
5. Increase Stock price to benefit stock holders.

Edited by Brian Smith 5/4/2021 07:19
Top of the page Bottom of the page
UNL96
Posted 5/4/2021 22:55 (#8987987 - in reply to #8986432)
Subject: RE: Yes and no


You are spot on. The stock price will have a direct financial impact on the executives since many are rewarded with stock options (they usually hold large blocks of stock) and cash bonuses for short term profitability and stock price increases.
Top of the page Bottom of the page
Douglas
Posted 5/4/2021 11:03 (#8986855 - in reply to #8986094)
Subject: RE: Read this portion again


Central North Carolina

UNL96 - 5/3/2021 23:14 What Jim has stated here and I’ve copied below contains more truth than many people know. Unless you have worked for a large publicly traded company you would not believe the lengths these co’s will go to maintain short term quarterly profits. These practices are preached through the business schools most c-suite executives have all attended. All these companies will have glorious mission, vision and value statements to con their employees into believing what they are told by management is necessary. Companies actions speak louder than all the virtue signaling they can spew via their corporate communications departments. I’m no longer involved in livestock production but I understand your plight. I don’t know exactly what the solution is but I do know the packers don’t give a dang about the producer. It will be up to you to defend your interests. • Ever since about the mid 1970s, public (stock issuing) corporations work to maximize profits for the STOCKHOLDERS. They do not operate in the best interests of their employees, suppliers, dealers or even their customers except as necessary to maximize profits for their STOCKHOLDERS. This is a basic concept that explains a lot of corporate behavior.


I agree with others that Jim conclusion is on target and is basically what others have been saying on here for years. The problem is that not increasing capacity is not an anti-competitive crime. There is nothing illegal occurring - no collusion, no price fixing, no restraint of trade. Processors are simply taking advantage of under capacity in the beef processing plants of the nation by letting producers drop asking prices to a point where they can buy a slaughter slot. And i don't see anything preventing new start up but money. 

But i take exception to the notion that only S-T profits matter.

Companies of any size today are struggling to keep trained quality employees. Companies that don't consider the needs of their suppliers, labor, and customers will not stay profitable for very long. That is basic business training today. That may not be true of the packing industry, i don't know, but it is not true of most well run US businesses today. I believe at least 2 of the packers are not pubically traded. 



Edited by Douglas 5/4/2021 14:12
Top of the page Bottom of the page
Douglas
Posted 5/4/2021 11:19 (#8986876 - in reply to #8986855)
Subject: RE: Read this portion again


Central North Carolina

Industries tend to move away from good competition when there are significant barriers to entry like high start up capital costs, high regulatory costs, etc. 

Barriers to entry

Here is the packing industry:


Oligopoly Structure

In an oligopoly market structure, a few large firms dominate the market, and each firm recognizes that every time it takes an action it will provoke a response among the other firms. These actions, in turn, will affect the original firm. Each firm, therefore, recognizes that it is interdependent with the other firms in the industry. This interdependence is unique to the oligopoly market structure; in perfect and monopolistic competition, we assume that each firm is small enough that the rest of the market will ignore its actions.

Increasing Returns to Scale

The existence of oligopoly requires that a few firms are able to gain significant market power, preventing other, smaller competitors from entering the market. One source of this power is increasing returns to scale. Increasing returns to scale is a term that describes an industry in which the rate of increase in output is higher than the rate of increase in inputs. In other words, doubling the number of inputs will more than double the amount of output. Increasing returns to scale implies that larger firms will face lower average costs than smaller firms because they are able to take advantage of added efficiency at higher levels of production.

Types of Returns to Scale

Most industries exhibit different types of returns to scale in different ranges of output. Typically in competitive markets, there could be increasing returns at relatively low output levels, decreasing returns at relatively high output levels, and constant returns at one output level between those ranges. Monopolies and oligopolies, however, often form when an industry has increasing returns to scale at relatively high output levels. When a few large firms already exist in this type of market, any new competitor will be smaller and therefore have higher average costs of production. This will make it difficult to compete with the already-established firms. Therefore, the oligopoly firms have a built-in defense against new competition.

Take the example of the cell phone industry in the United States. As of the fourth quarter of 2008, Verizon, AT&T, Sprint, and T-Mobile together controlled 89% of the U.S. cell phone market. The cell phone industry has increasing returns to scale: the cost of providing cellular access to 100,000 people is more than half the cost of providing cellular access to 200,000 people. Any new entrant into the cell phone market will either need to pay one of the larger companies for access to its already-existing network, or try to build a network from scratch. Both options result in higher costs, higher prices, and difficulty in competing with the major networks.

https://courses.lumenlearning.com/boundless-economics/chapter/prerequisites-of-oligopoly/



Edited by Douglas 5/4/2021 11:24
Top of the page Bottom of the page
dairyman78
Posted 5/4/2021 07:28 (#8986458 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


S.C. Wisconsin
I am no longer in the cattle business, but due to my age I have observed cycles in business. Jim is correct in his assessment in my opinion. Usually when a sector in business becomes popular a lot companies and people jump on board usually leading to excess production, Then there is a race to the bottom with very little or slim profits. A good share of the companies in this business either go bankrupt or exit the business. Then there are only a few players in the business that pretty well control business. In a lot of cases the companies that survive are not always the most efficient but have a lot of capital to out capitalize the competitors.
Top of the page Bottom of the page
BillinKY
Posted 5/4/2021 08:13 (#8986557 - in reply to #8984989)
Subject: RE: Economics 101, Beef and Cattle


Jim, good post, and I agree with most of it. The government can regulate this but in a way that encourages competition. Competition is what built this country. Right now the buy in to play with the big four is impossible. A lot of people laugh at the smaller plants that have tried to open or failed. But if I think I can do it better than you I have the right to try, not the guarantee to succeed. We need more of a can do attitude, and less of the Debbie downers that seem to jump on this type thread. I used to be able to take cattle and hogs to three abattoirs within twenty miles now there is one. There were three packing plants forty miles up the road, killed hogs and cattle, (five, if you added the guy who killed sheep, 100 per year and biggest in KY). Now there is just one hog plant. All these plants that are gone were old and out of date and no one wanted to invest in new upgrades. The slaughter house business has been historically high volume low markup, today due to a lack of facilities and competition it is high margin and volume. Somebody needs to take a piece of that pie not just sit here and bitch about it, or laugh at those that are marketing grass fed, home raised, or and other label you want to put on what you are selling. If you differentiate yourself and can sell, go for it! That is what makes the USA great. The Government should use guidance, not control.
Top of the page Bottom of the page
Jump to forum :
Search this forum
Printer friendly version
E-mail a link to this thread

(Delete cookies)