How do you value your beef?

[cowman]

I think your average consumer has been raised on cheap food and considers it their right. And if the old pay check is a little short this month then guess where the cut back occurs? You guessed it...a little less steak and a little more tuna helper! Lets face it beef is a luxury item, not a staple! Maybe Ian can give us some kind of idea about beef consumption in Britain. My mother, who travels to England quite often, says meat just is a very small part of the diet(especially beef!).
Personally I eat out a lot, because I have little time to cook, and I will admit I treat myself pretty good...or at least I did! Now I'm sort of on a "special diet" which truly sucks. Health reasons...I am not fat! Also my hobby is gardening and I am a prolific little veggie and herb grower! I give away a lot more than I ever eat but still you would not believe the tomatoes I grow!!

[topper]

Pandiana: It's not that I think that the beef industry should not get more for their product but I have problems with the method of price setting that you seem to be suggesting. If the individual producer added on extra charges for costs incurred he probably wouldn't sell too many cows. Therefore the only way of adding those costs would be to create a wheat board like marketing board or something like it. I still think that the market if not interfered with should in the end supply those costs and at the same time keep us efficient.

[pandiana]

I am not suggesting that we could realistically set prices that actually reflect input costs based on the fact that we have overhead and might be worth a salary. That is obviously the case. I guess the issue is, why? If food is valued, then it should provide leverage to demand higher prices as is seen in other sectors where services are valued.

[jmillang]

There are a whole host of reasons that agriculture does not command or set prices. The first has to do with the entire market. There are very few entry barriers to the ag industry (I know you want to say money but that is will all businesses). But more fundamentally we have an industry based on perfect competition at the cow calf level. We have many many sellers, and many buyers (although there are less and less each year). In perfect competition the market is driven to averages. Average selling prices where supply meets demand. There is always someone who can sell for less than you no matter how low you can go.

No one business can influence the demand or supply of the industry. If they should ever have much influence the market forces from outside this country trigger and we now have even more buyers and sellers trying to sell the same product.

Looking at the dairy industry that is what they try to due is to regulate supply and restrict supply, this causes a shift in the supply curve and an increase in price. The catch here is to be in the dairy industry you have to pay for that right (quota) to produce. But again they can not set prices. Years ago when milk was in the public utility regulatory system prices were set based on averages of costs and returns for the dairy farm. Even then not all the dairy producers all made the same amount of profit.

Another reason for ag commodities being a price taker is the goods and service that you produce are perishable. Grain will go bad eventually, beef gets too fat, old, discolored, rots etc. If your goods and services were able to hold their shelf life that would help with price stability. But remember food is traded on a global basis and some countries have no storage at all. Ask a canola grower about Argentina/ Brazil soyabean crops and how they flood the market when harvest is on for them.

Contrary to popular belief there is no such thing as a cheap food policy. There may be a food security policy but there is no such thing as cheap food.

In other posts it was mentioned that if the consumers paycheck takes a dip that ends the T-bone or prime rib for the week. This is very true ask the hotel and restaurant industry how things went when the stock market corrected a couple of years ago. The beef sales dived, demand (true economic demand) shrunk and we are back where we were 4 years ago.

There is no simple answer to the commodity business. Follow two basic strategies for commodities - least cost, or you concentrate on making your product different from the competition in either service (product) or price. The poultry industry has used the product concept (every chicken breast tastes the same every time I buy one from the grocery store). But our organic and free range people have decided to make a different product.

There is no easy answer and only you can decided how to run/manage your business when faced with these issues.

[cowman]

Personally pandiana I would like to see a system like the dairy industry. The original players in the dairy industry paid nothing for their quota. So likewise you and I would pay nothing. When they brought in the quota system they basically froze out the small guy. Now if they froze out all the little guys you and me would get a quota...which we could either keep, expand, or sell. Not so good for the little guy or the guy entering the business: but definitely good for you and me!
Supply management allows the price to be set that does reflect the true costs of doing business. Unfortunately we will never see it because the people who make the laws also work for the food corporations! The dairy and chicken thing work because the food corps. are massively subsidized by the taxpayer. Not enough money in the old coffers to subsidize beef consumption I'm afraid!

[ianben]

Cowman
Beef here is still the most expensive meat, Supermarkets maintain differentials between meats no matter what market price does. Our customers don't like fluctuating prices they say.
We had BSE of course so all beef on sale is still under 30 months old. Anything older is bought at about half meat value and burnt.
Red meat sales are falling as chicken and vegie is seen as healthier.
My son did a project on that fungus stuff. We ate it as a chicken casserole. It was pretty good I must admit
People are definatlely changing their eating habits so we will have to change to meet them.
Rice and pasta seem to be in demand, but our climate does not suit either.
We have reduced our beef numbers from 400 to 30 and our potatoes from 50 to 10. Can't seem to find anything I can grow which is in demand!!!
Jeff
I do not agree that our products are perisable today. Dry grain can be stored for long periods The old grain montains of the EU prooved that. Meat can be frozen also. There is a cost I agree but we should realize we no longer need to sell at any price.

The line about there always being someone who will sell lower is true,while we blindly market without knowing the other guys costs and the price the customer is willing to pay.
With the internet we can now ask if the other guy is making money at this level.

Multi-nationals employ thousands of people studying trends, estimating demand,monitoring prices,before they fix different prices for the same product depending on location.
A recommended price negociable to a point but it at least gives everyone buyer seller and competition the region trade can be done.
I dont see why with a little help from people like you farmers could not publish recommened prices for our products.

[topper]

I find it hard to believe that anyone would want to trade our relatively unregulated system of marketing for a beef marketing board just to make a few more dollars(maybe). Along with your newly acquired quota will be a list of rules for you to follow. A government inspector will come to your ranch and tell you what to do and when to do it and if you don't comply well there goes your quota. Not for me thankyou very much!!!

[wilagro]

Cowman...The next time that you take your calves to market...Why don't you put a 'suggested sale price' on them. If you don't get it...take them home.
When you take your grain to the elevator put a'suggested selling price on it'. When you buy a new truck there is a suggested price...and just about any mass produced hardware item. How come these marketers get their price but farmers don't have any say in what they get?

[cowman]

Why would we want supply management versus the free market? The times they are achanging. The world is literally awash with meat...a lot of it looking for a home. Now we are lucky because we live beside the strongest market in the world and we've had access to it.
But when it comes right down to it there is no way you or I will ever be able to compete with New Zealand or Brazil when it comes to beef. So realize in a true free market you are dead in the water.
Without supply management a commodity must be exported. Also in a true "free" market we must allow in imports...therefore you are out of business.
Wilagro: Okay, I take my calves into the mart. Put a price on them...say $1.75/lb. They run them through the ring. State the suggested price is $1.75. No one bids. I take them home. Now what do I do with them? Teach them to sing? Feed them for ten years until I get my suggested price or until they die?
Isn't supply management a "suggested price"? If the buyers won't pay that suggested price the govt. buys them and sends them abroad as food aid...reduces the quota to reflect the smaller demand. No other product enters the country so either the consumer pays the price or there is no product for sale. Seems fairly simple to me.

[pandiana]

I do not have a problem with the following statement. It is the establishment of an average price where 'most' farmers can make a living and know with some certainty that they will be able to maintain a reasonable standard of living.

Yes, we will still have weather, and some market forces affected by retail demand but adjustments can be made across the sector and not individually. "Looking at the dairy industry that is what they try to due is to regulate supply and restrict supply, this causes a shift in the supply curve and an increase in price. The catch here is to be in the dairy industry you have to pay for that right (quota) to produce. But again they can not set prices. Years ago when milk was in the public utility regulatory system prices were set based on averages of costs and returns for the dairy farm. Even then not all the dairy producers all made the same amount of profit."

Another problem with the beef industry is that, although a broiler chicken can hit the market in 49 days with only a couple of players (breeder and producer) involved, it takes 13-14 months to produce a steer. This lag time increases the risk, as we can see from the recent 'cattle cycle' where we should have been at the top of the cycle but are experience severe depression in prices. It is almost impossible to predict market forces this far ahead. With control of market supply we could, I think, more closely predict market demand and smooth out some of the extremes in the cattle cycle.