EquALLity wrote:
If what is cutting into profits? Vegans and vegetarians?
Cutting into profits means hurting them, right?
It's like this:
You sell a widget for $10. It costs you $6 to make the widget (this is cost). $4 is your profit.
Now, if nobody is buying the widgets, they might be too expensive. So, in order to make them cheaper, you can only make the widgets more cheaply (cut costs), or sell them closer to cost (cut into your profits).
Meat is already produced as cheaply as possible. That's where a large part of the cruelty to animals comes in. The factory farming. They can't reduce the price anymore, they're at the bottom of the barrel. They're already hiring illegal aliens and not giving them healthcare or proper wages. They're already packing the animals so tight they're all mutilating themselves. There's nothing else to give.
So, the only way they can reduce the price of meat is to cut into their own profits.
But profit margins (that's the amount of profit you make on the meat after cost) are not high on meat.
This isn't a $10 widget with a $6 cost and $4 profit. It's more like a $10 widget with a $9.90 cost and a $0.10 profit (profit margin of 1% is pretty typical).
Why?
Well, meat is a competitive industry. They don't have any patents. There's no copyright on cows. Cost of entry is pretty low. Regulatory standards are minimal.
Producing meat makes just
barely enough money, as it is, for the owners to see viable dividends.
So, in investment there's something called ROI. That's Return on Investment.
You're a millionaire, or billionaire perhaps. Or a hedge fund manager.
If Company A says they'll give you a 200% annual ROI
And Company B says they'll only give you a 150% annual ROI
Who do you invest in?
Company A, of course. Company B can't get money. Not from you, not from
anybody. Their ROI (depending on the economy at the time), is under the typical return from any number of freely available investments.
This is the beauty (and terror) of capitalism. If you offer a percentage point of return lower than the next guy, he gets all the money, and you get nothing (unless your risk is lower; those cases have to be seen as comparable risk).
The animal agriculture industry, like any industry, is accountable to its owners and investors.
If they cut into profits in order to drop the price of meat, their ROI goes down, and the industry basically crashes due to lack of investment. Everybody pulls their money out and sells stock from these companies.
The absolute minimum ROI you can conceivably get money for is equivalent to FDIC insured bank interest, and farms barely make that. Anything less than that isn't investment, it's charity.
How many people do you know who consider slaughter houses and meat packing plants to be high priority charities?
EquALLity wrote:
When you say that's not an economic possibility, do you mean it's literally impossible or just highly undesirable?
They're not allowed to do it, their investors won't let them. But if they did, they'd lose all of their money. You can't cut into profits like that in a competitive industry with such low margins.
There ARE situations where you want to cut into your profits temporarily to do something.
For example, there are two widget producers in the country. Your competition is harsh, but you've been in the business longer, and you have some savings. You cut into profits for a few months and sell your widgets At cost, or even below cost (giving them away and losing money), which puts your competition out of business. They go bankrupt, you buy their company, then you start selling widgets at a premium (ten times cost!) because you're the only widget maker in town now and you control the market through a monopoly.
Aggressive business practices like that. There are no normal situations where you would want to cut into your profits. And most of those are illegal today anyway. You need to be able to offer as high an ROI as possible to get investment. And in a competitive industry with low margins, you just can't afford to do it. You get ahead by cutting costs, not cutting into profits.
Anyway, even if they lost all of their profits, meat would be a few cents cheaper. So, yeah, there's a real limit to the amount that is even literally possible.
The argument is really fractal wrongness:
http://rationalwiki.org/wiki/Fractal_wrongness
It's wrong on every conceivable level and scale.
EquALLity wrote:
Ever convince any of them?
Not on the spot, but you can make them think, and leave them with some lingering questions they'll never be able to really answer, which might help fix them a few months or years down the line.