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