Poor Packers?

[wd40]

OK OK - I posted earlier that "Every time a packer opens his mouth - just call him a liar."
1) YOU WILL NOT GET THE REAL GOODS FROM THE PACKER ON MARGINS -PEOPLE GET IT THROUGH YOUR HEADS. THE REAL MARGINS AR CLOSER TO 30%. I worked along side a former CEO of IBP who informed me that their historic margins while he was at the helm of one plant and worked under the arm pit of Bob Peterson were never under 30%.

So go get a life and quite feeling sorry for your packers. To do so is the same as "beaten wife syndrom" you hate the beating but your in love with the old man and keep comming back for more.

stupid

[gwf]

I don’t know if you remember the times when Canada Packers and Swifts were the big players of the day. I remember CP used to advertise that they worked with a margin of 1 or 2 %. The irony was that they did it every week with the same dollar. That maybe wasn’t enough to keep them going.

[cowman]

Well I wasn't feeling sorry for the packers! They are in business and obviously have managed to make a profit that is acceptable to them, whether it is 1% or 30%?
BSE was a wreck, but I don't think we ever got down to 80 cent calves or at least I sure never did! And don't forget everything else has gone up since 2003 and probably won't be coming back down? I sincerely doubt we'll have deflation by 2008?
Can you make an acceptable rate of return with 80 cent calves? I don't think I can...hell I don't think I'm getting enough at $1.30! Maybe I need to get some of these super duper funny cows some of these old boys push on here that don't eat and just put money in the bank?
Maybe this will be all academic by 2008? When the coalbed boys are punching in 5500 wells a year and due to increase...maybe we will just be farming well heads and living off the lease money? Maybe we can rent our cows out for vegetation control to the gas companies!

[farmers_son]

Cowman: I would question whether you ever earned an acceptable rate of return on raising calves, if so only once in twenty years.

Maybe you did not ship 80 cent calves but the feedlots went for extended periods not able to ship anything and suddenly found they were holding a new class of animal called OTM which did sell for below 80 cents. Cows were a wreck and still are for that matter.

I guess for some the answer to diminishing farm gate returns will be hope and pray that you get a well. Really this is what is called magical thinking. Yes some people will find a drilling rig on their property in the next few years but many will not and for those that do the amount received per well is really not that much when everything is considered. In any event it is beyond your control. Whether at the government level or the producer level proposing that surface lease revenue is the solution for diminishing farm gate returns is unacceptable.

A weak Canadian dollar hid some basic harsh realities of our cattle industry for quite a few years. As the dollar strengthens we will again have to face the truth.
We have some fundamental problems in this country regarding the raising of live cattle. Key among those problems is a lack of competition between the two major packers and uncertain access for our live cattle across international borders.

Smcgrath76, the $200 cash to cash spread may be more than the reality of the day. A negative cash to cash spread will remain our fate as long as we do not have sufficient capacity to slaughter all our production within our own borders and as long as we do not have competition between the slaughter plants we do have. Yes the real profits are in the branding and value adding beyond the actual slaughter and packing of the live animal. And that is where producers have some real competitive advantages over Cargill and Tyson.

[smcgrath76]

I'm inclined to agree with you on this one FS.
The bad thing about the $ increasing (which is part of why I am thinking calves will be in the 80's) is the effect it has on cash prices. That said, a high $ may also promote investment in infrastructure (such as packing plants), as long as purchasing power can keep pace with inflation.
I currently think that packing capacity could more readily be added in SK/MB than AB due simply to the economics of construction in AB.
When the border opened these new plant proposals seemed to have any wind sucked right out of them, but poor calf prices may improve the mood of producers towards investing in value added. It seems in my experience that we never want to work together when we can afford to do things, but rather when we have no money left.

[cowman]

Now I can agree you boys might be right...down the road...only history will show if you were right?
Myself I deal with tommorrow...lately I've had a bit of a wakeup call on mortality!
You know I really don't see this "canadian packing" thing as much of a reality? Sorry, but I just don't see it happening? Maybe I need some rose colored glasses or something?
Boys...I just don't think it is going to happen? Pessimist that I am.

[kpb]

I agree with cowman on this one. While smcgrath and myself are in accord on where we think calf prices are headed I cannot agree that this will bring about more investment in packing facilities in this country.

Investment dollars flow only to places where it is perceived that money can be made. And because these dollars have the whole business world to choose from, how likely is it, do you think, that this venture capital will go to the cattle packing business in Canada where there is already well-entrenched competition, a highly cyclical and variable raw product and limited retail channels? I can think of a myriad of places where I'd rather put my money and, believe me, these venture capitalists are a whole lot smarter than me.

If we rule out outside financing for Canadian packer plants, then you have to look at producer-owned plants. But surely this too is a dead issue? Most of the proposed plants could not raise money from producers during the BSE crisis. I see no chance of this happening in the next while.

The fact is, as cowman has pointed out several times, we had a Canadian packing industry in times gone by. They could not compete with the Cargills of the world and they're long gone. Without direct government involvement--something I do not see happening either--we are not going to have a packing industry in this country in 10 years that is much different from the one we have now.

kpb

[cowman]

Well kpb, wouldn't you think 30% return on investment should attract some venture capital? I mean 30% is a pretty good deal?
I wonder why some wizard hasn't gone right ahead and started slapping up packing plants?
If the profits are so great how come so many proposed plants packed it in? Why weren't the bankers jumping all over this one?
Bottom line: It's a tough dirty business and only the very strongest can survive! Look how fast Cargill muscled out the old Canadian packers? And those old Canadian packers were no slouches!

[cswilson]

Tim Horton's shares would probably ring the bell I'm thinking-every hockey mom in Canada is hooked on that place.I still think a chain of rancher owned meat shops selling branded products would be the way to go. Most midsized towns could build a provincially inspected abbatoir and a shop for alot less than a megaplant that imports it's workers. There are two family owned meat markets in our town of 5,000-they are competing against two big box grocery stores and are doing well. I'd invest in something like that as for the other I'll pass.

[farmers_son]

Cswilson: You might be right. In any event there are opportunities out there to move closer to the consumer, as an industry we are still learning how best to do that.

[cowman]

Cswilson: I believe Grant Hershey is doing exactly that? You might want to get in touch with him?
I think Randy is fairly tight with him and may be able to help you there...if you two are on speaking terms this year!
Grant is one heck of a nice guy and a smart businessman.

[blackjack]

...i think we should do a little poll...every 3 bucks we give that good for nothing cattle association we could invest in these rancher owned meat shops...