Only in agriculture does volume-selling fetch the highest prices. Why? Because we've lost open, competitive markets. The farmer's now the product that's bought and sold.
The worst thing about being a farmer is free clothes.
In the city awhile back I shopped around for new car deals. I was just looking when up walked a salesperson. Once her eyes locked on my corporate logo I received an unsolicited offer right there in the showroom. “Would you like to know more about the fleet discount?” she asked seductively.
Being a city gal, she didn’t realize I was only a sheep in wolf’s clothing.
I should explain: In exchange for buying lots of ‘stuff’ and paying big expenses, farmers get giveaways to sweeten the deal. It helps take their minds off the high price of inputs. Along with outdoor thermometers and rain gauges, some of the most popular giveaways are things we wear.
Need seed? Get a cap. Buying a new tractor? A jacket is mine…even a shirt, the company name and logo of the product I just bought printed across my forehead and patched over my heart. The way the world works, corporate America always has a sweetheart deal for its best customers. The more products we buy the cheaper they all get….right along with free clothes. I’m labeled just like the discounted stuff I use, thus the outfit I had on that day in the showroom.
I thought she was pulling my leg. So I asked my new car dealer friend how she could possibly sell more for less. Shouldn’t it be the other way around?” At first she looked puzzled. That’s when I tried to clarify my remark by explaining the cattle market.
Based on the way fed cattle are bought and sold, a car maker–like GM or Chrysler– should pay more for steel, tires, and plastic in bulk, not less. And fleet cars should cost more than single units.
That formula makes sense to packers and their big feedlot buddies, who say buying that way delivers better uniformity and advantages in the marketplace — just like buying a fleet of overpriced yellow sedans would somehow help keep the cab company from going broke. Based on the U.S. beef trade, giving out big buyer fleet discounts is just the opposite of good business.
“It’s the American way,” I said, “proven in livestock markets year round, across this great land, where real cash trade price discovery takes place for 5 minutes once a week.”
She looked at me like I must be nuts.
“Look,” I said, “you gotta try to understand. The way to make money is by starving your bread and butter clientele into making bad deals. Stop this insanity of staying open 12 hours a day, 7 days a week. Operate like the cash beef trade. Open no more than once a week for just a couple of hours. When customers show up, no negotiation, no bartering, take it or leave it with 5 minutes to decide. Remember, all sales are final, no exceptions (except for just those few customers who help you control the market). Disputes will be settled through mandatory binding arbitration. But all of it has to be kept secret…or else.”
I guess that was enough car shopping for one day. She accused me of being a corporate imposter and had security escort me off the premises.
Of course, GM doesn’t buy the iron it needs from steel mills with the highest bid. Wal-Mart doesn’t stock shelves with the most expensive Asian made TVs. With consumer goods, cars, seed, or commodities, purchasing in bulk always nets savings for buyers.
Well– almost always.
For the biggest meat packers only, selling volume nets big premiums. That’s why packer-friendly feedlots get more bling than littler guys even if though different people’s cattle may all grade just alike. For big packer and retailer profits to come true, cattle need to trade quietly, behind closed doors on hush-hush contracts where no one, especially the cash market, will ever know exactly how they sold. When packers are allowed to own cattle and keep them off the open market, real price discovery, the kind of thing that takes place between seven different automobile dealers when they bargain with the same customer, never happens. Without that, regular cattle producers are never sure exactly how much their cattle should be worth.
Wouldn’t that be a great way to sell cars?
America once had loads of raw food suppliers. Farmers worked hard every day to make sure dinner tables — including their own– were always full. The harder we worked the cheaper food was. Back in the ‘50s and ‘60s, poultry still came from family farmers who produced for competitive markets. Up through the ‘80s we got pork the same way. Into the ‘90s things started to change faster for dairy as food corporations looked for ways to control costs, supplies, and profits. That’s why today fewer family farmers still produce chicken, pork, or milk.
Now the U.S. cowherd is in decline even though beef consumption and consumer numbers are up.
In the meantime producer contracts based on obscure pricing formulas from spotty markets paint a picture of a cattle market that’s anything but pretty. Farmers and ranchers who take pride in safe, healthy, quality products never know for sure if their cattle were purchased fairly or picked off in a secret market.
Agricultural production is becoming a commercial closed-loop farmers can’t seem to break. Now the noose is tightening on beef. That’s why we need government help and voter support for better rules and enforcement of the 90-year-old Packers and Stockyards Act. Without that, independent farmers and ranchers might as well wear corporate uniforms to work every day.
Come to think of it, some of us already do.