Put Up or Shut Up: Wanted, Documented Evidence of the Existance of Competition

by Randy Stevenson, President

We have listened for quite a long time to a number of experts expound on the virtues and flaws of the cattle market. We’ve seen surveys (some masquerading as “studies”) that purport to give us a picture of what is happening in the cattle market. But we have a couple of questions we would like to put out to the public to see what kind of response we can get.

The important issue in the cattle market is competition. So therefore, we would like to ask those who actually observe competition taking place in the fat cattle market to step forward and make note of it. We want them not just to stand up and declare that it does, but also to make known the specific instances when they have observed two different packers make differing bids on the same lot of cattle. List those instances. We allege that they hardly ever take place, and when they do, they are for smaller quantities that hardly make a ripple in the market.

On the other hand, we have recorded data that we have been provided with that shows purchases from Consolidated Beef, a co-op seller to packers. Data over the last three years shows a diminishing number of buyers per week in negotiated cash sales of over 4,000 head per packer. In a market with four major packers, weekly buying activity by packers went from an average of 2.4 packers per week to only 1.67 packers per week in the three year period. There were actually four weeks in 2010 that no packer bought any cattle through negotiated sales. In eighteen more weeks only one packer participated. That makes 42% of the time that there was absolutely no competition at all in negotiated sales.

The data is incomplete and does not indicate whether, when there was more than one buyer, that those multiple buyers were bidding on the same or different lots of cattle as one another. This would be a good opportunity for an academician to do something unique. He could go out into the field and actually observe and measure negotiated sales taking place. The data collected from sellers would be a more reliable measure of competition than data collected from buyers. Armchair economists, take note!

So here we repeat our challenge. Can someone come forward documenting the experience of a significant seller of fat cattle repeatedly receiving multiple bids on fat cattle? Is there competition in the fat cattle market? If so, we would like to see it documented. Some people believe in Santa Claus, but documented sightings are hard to come by in real life.RS


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