Dear Sir,
Most would agree that the real power play of captive supply kicked off at the end of March 1994. In about a six-week period, we saw one packer in Texas almost pull totally out of the live market and work completely off of captive supplies. During that short time, the packer single-handedly broke the live market more than $13 cwt. In my opinion, this tactic redefined the power of "captive supply".

Evidence showing the negative impact of captive supplies exists in comparing the live cattle and beef trade on March 31, 1994 to today's trade, the week of September 20, 1999. On March 31, 1994, the lightweight choice boxed beef price was $113.82 with a live cattle price of $75.50. Today, boxed beef at $116.48 is $2.66 higher than in 1994, with a live cattle price $120 per head lower. Meaning, when you compare today to March 1994, before the power of captive supply became so obvious, packers are now receiving about $20 to $25 per head more for the beef while paying $120 per head less for the live animal.

This analysis, showing $145 per head loss to the producer, is simple and easy to understand. It is important to also recognize that this calculation of losses to cattle producers doesn't consider the fact that consumers are paying higher prices today for beef, prices that were set when live cattle reached price levels of $85 cwt.

IBP, the world's biggest meat packer, processes about 11 million cattle per year. The simple calculation of the producer loss of $145 per head represents nearly $1.6 billion dollars per year for just those cattle processed by IBP. The Packers and Stockyards Act of 1921 was legislated to prevent this kind of anti-competitive practice by the big packers. How about enforcing it?

Les Messinger
Chicago, Illinois