Nothing makes most cattlemen more fidgety than someone defending the packing industry, but I must interject when an industry leader recently made the public case that the recent downturn in prices was a result of packer manipulation of the marketplace. I doubt there will ever be a time when blaming the packers isn't a well-received refrain in cattle country, but the latest financials from Tyson tell the real story.
Tyson's profits shriveled in the first quarter of 2006 when the firm posted a $12-million loss. Poultry margins went to almost zero and, though pork didn't do too bad, the beef side of Tyson's business lost $188 million. In the past six months, Tyson has lost more than $250 million in its beef sector.
That is real money, and Swift's recent sale of its cow-processing business to XL Foods Inc., of Alberta, Canada, (April 21 BEEF Cow-Calf Weekly) was also done to shore up what is an increasingly weak bottom line. It may sell organizational memberships to argue that packers are profiting at the expense of producers, but the numbers -- historically and in the short run -- absolutely defy such claims.
I still find it comforting to occasionally blame the packing industry, but even more comforting to know today's prices, like prices in the past, can be explained by the far more mundane but manageable concept of supply and demand. -- Troy Marshall