The Livestock Producer and Armour 4

The Livestock Producer and Armour 4

For example, the beef department buys its cattle to the best possible

advantage in competition with other buyers, and sells the beef at the

best price obtainable. The hides go to the tannery at prices ruling on

the open market. If the Armour tannery cannot pay this price the hides

go to outside buyers. To sell at less would be favoring the tannery at

the expense of the beef department, or robbing Peter to pay Paul.

 

The same business methods are pursued with every scrap of the animal,

whether used in making glue, soap, sand-paper, drugs, fertilizers, or

any other commodity.

 

While on this basis Armour and Company sustained heavy losses in their

meat departments, the by-product industries showed profits, as they

usually do, because their products are not so perishable and are not so

much influenced by market fluctuations.

 

These by-product industries are, in short, the insurance of the packers

against crippling losses, and may be likened to the activities of the

up-to-date livestock farmer, who diversifies his operations by feeding

cattle and hogs and by keeping fowls, sheep and dairy cows, so that if

he loses on cattle or hogs he may offset his losses by better prices

for lambs, wool, butter, eggs, poultry, or a money crop.

 

 

 

 

Why Prices Fluctuate

 

 

PRICES for livestock are not controlled by packers, and only to a

limited extent by the supply of cattle in the market. They go up or

down in response to the price the consumer is willing to pay for meat.

 

Note how closely the two lines in the chart, representing prices of

cattle and dressed beef, follow each other through the two and a half

years covered by the graph. America’s twenty million food shoppers

determine the dressed beef price, by their willingness or refusal to

accept beef at the price asked in competition with other food. And

naturally dressed beef prices react directly and at once on cattle

prices.

 

It is often necessary for the packer to take a marginal loss on beef in

order to stimulate demand, but he must at once hedge against this loss

by buying cattle cheaper. He tries to fit the price he pays for cattle

each day to the price he is obtaining for beef. Only by so doing can he

maintain his business on present small margins. Large receipts of fish,

poultry, game, eggs, vegetables or fruit at certain seasons also affect

the price the public is willing to pay for beef, and this is reflected

in the price the packer can afford to pay for the live animal.

 

It is plain that the packer cannot determine retail meat prices, simply

because he cannot say to the consumer at the butcher’s counter, “You

must buy meat and you must pay such and such a price.” Because he

cannot do this he cannot control the prices of livestock.

 

[Illustration: WHAT MAKES THE PRICE OF CATTLE

 

THIS CHART SHOWS THAT DEMAND BY CONSUMERS IS THE BIG FACTOR]

 

 

 

 

What Efficient Distribution Means

 

 

LIVESTOCK producers are, of course, engaged in an absolutely

indispensable industry. Of scarcely less importance is the packing

business. For upon food production and preparation depend all other

industries and activities.

 

But it is profitable and enlightening to ask, of what use would be

production and preparation without means for delivering the food to the

consumer? The mere asking brings realization of the prime importance

of ample and uninterrupted transportation and distribution of packing

house products to consumers through the retailers of the country.

 

And this, in turn, brings us to the consideration of the packers’

salesmen in the hundreds of cities and towns throughout America, which

as a whole make up the final market for the producer’s livestock.

 

With the sale of his meat animals by the commission man at the primary

market, the owner seems to witness the end of the transaction as far as

he is concerned. But does he?

 

Could the commission man sell and the packer buy the livestock if it

were not for another salesman and another buyer out at the farthest end

of the market system transacting business with each other in the retail

market?

 

Again the question answers itself. For the packer’s salesman is

literally the salesman of the livestock producer at the final market,

upon which all other markets depend. The advertising and educational

activities conducted by the packer continuously broaden and intensify

the ultimate market for the products which the livestock man produces.

It devolves upon these agencies to keep the meat products moving

towards final consumption, just as the man at the measuring spout of

the old-fashioned threshing machine had to keep the grain out of the

way and prevent congestion.

 

There are two distinct divisions of the process of turning livestock

into available meat supplies. First, the production, shipment and sale

of livestock. Second, the preparation, transportation and distribution

of meat products to retailers. The two are interrelated and absolutely

dependent one upon the other.

 

The opportunity for organized producers to take complete possession

of their end of the process by assuming control of the stockyards, is

offered in the passing of that control from the packing industries by

virtue of the recent understanding with the U. S. Government.

 

[Illustration: The packer’s salesman is literally the farmer’s salesman

in the thousands of “final markets” throughout the land.]

 

 

 

 

Farming as a Business

 

 

ALL business undertakings are ventures. Under the best of conditions

there are fat and lean years, and the possibility of failure, due to

poor management, lack of capital, or adversity, is always present.

 

Farming is no exception. It is in essence a business proposition, and

should be so regarded.

 

A knowledge of crops, of soils and tillage, of livestock breeding

and feeding and other purely agricultural subjects constitutes but

one side of the farming industry. On top of this come the important

matters of business management—the buying of seeds, fertilizers, feed

stuffs, livestock and general equipment and supplies; the erecting

and maintenance of buildings; the arrangements for necessary credit;

keeping in touch with market conditions and prices; the hiring of

help, and finally the establishing and operation of an accurate

cost-accounting system.

 

Yet when all is said and done, records indicate that farming offers

more chances of success than almost any other line of business

endeavor. A retail merchant, according to statistics, has from two

to four chances in ten to conduct his business successfully for

fifteen years; a manufacturer has from two to seven chances to do the

same. Farming is conspicuous for its small percentage of out-and-out

failures. Living is practically assured, which gives the farmer a

distinct working advantage to begin with. He enjoys a cash market and

is not called upon to suffer bad debt losses. He is in an industry that

is absolutely essential, which cannot be destroyed by any shifting of

circumstances.

 

The greatest need is doubtless for cost-accounting systems which will

serve as a guide, not only to prevent unwise purchases, but to indicate

wise expenditures in improvements that will bring a good return on

investment, and to show definitely the amount of profit obtained on

each transaction. Next to this in importance is perhaps the need

for a thorough understanding of crop rotation and the principle of

diversified farming as a means of offsetting losses in one line with

gains in another. The securing of credit to enable expansion, and the

adoption of labor-saving devices are also essential.

 

Profits and losses in farming must be reckoned, as in all other

businesses, on averages over a term of years. But the future

offers better assurance than ever before to the man who is a good

agriculturist and at the same time a skillful business manager.

 

 

 

 

We Stand or Fall Together

 

 

WITH some elements of the American public there seems to persist the

conviction that the great packing concerns are seeking the injury of

livestock producers to their own enrichment. How such an idea can be

seriously harbored by thinking men is hard to understand. For the

packing industry to plan for the farmer anything but prosperity is to

endanger or destroy the source of supply of the raw material by which

it lives and grows.

 

It should be perfectly plain that the packers are selfishly interested

in encouraging the producer. Their selling efforts are directed towards

disposing of the largest possible volume of meat products, at the best

price obtainable in competition with other foods, in order that they

may maintain large volume of livestock purchases at prices that will

encourage both quantity and quality of production.

 

Between the producer and the consumer, between the buying and the

selling price, the packers operate upon a smaller margin of profit than

any other large industry. On invested capital they have realized an

average of about 9 per cent over a term of years, on volume of sales

about 2 per cent, and on each pound of meat less than one-half of a

cent.

 

At the same time the risks of the business are greater than in other

lines, both on account of the perishable nature of the product and the

violent fluctuations of food prices, the causes for which cannot always

be foreseen.

 

The comparative low prices of hogs and pork products at the end of 1919

is a case in point. The packing business entered upon the year in the

belief that the world shortage of food would maintain pork prices at