Milk Price- Please read Mod note in post #1

Dawggone

kowtow wrote: »

It's difficult to imagine the producer preferring today's returns over those referred to above? And is the consumer really more comfortable with agri-business and it's output - especially when you consider the hidden costs in healthcare & taxation he / she has to shell out to support it?

I think you are right though that neither consumer nor producer will make a change happen in their own right.

But that doesn't mean that the market itself won't.

A farm in today's world trades almost as if it was risk negative - millions invested, together with a significant quantity of valuable labour, to obtain a return which may well be less than the value of the labour itself. Even on a big farm, the returns are at or below what we would normally consider risk free assets, long duration bonds etc.

The financial return is the "price" of the risk, when you accept a low return you are paying a high price for the risk asset -

Just as we under-priced (overvalued) subprime in 2007/8 by paying 5x what we should have for baskets of rubbish debt, farmers today are holding and financing farms at imputed valuations, including their own labour, which would shame a gold plated sovereign debt - albeit that most of them are doing so from their own pockets with their own labour for perfectly admirable reasons.

But Eventually risk must re-price. A debt crisis among farmers? (imagine interest rates at 14% with land at today's prices..), a rapid collapse in land prices? A big collapse in a part of the processing chain when they finally run out of room to manoeuvre? A processed food scare/health crisis on a grand scale?

Any of them would have massive political consequences as well as economic.

* I should add that it is just about possible that farms are not overvalued, but in fact are the only thing that is correctly valued. It may be that the market is telling us that everything else is actually much riskier than we think. After all, when all the sovereign nations collapse and their debt goes up in flames, the farm and the skills you use to run it will at least feed you - provided that you are prepared to drink raw milk of course. And the processor / co-op / supply chain & the IFA will no longer be a problem.

Good points.
I've spent the last few days kicking this post around in my head...

You're right that risk will have to re-price. Now think back on the subprime/financial crisis and ask what has changed? Not much only sovereign debt has skyrocketed.
Big AG would get bailed out by politicians just like the car manufacturers did and food is more important than private transport, so they are very secure knowing that it (Big AG) is too big to fail.


Now a processed food health scare could turn this whole world of Big agri on its head. Makes the hair stand on the back of my neck thinking of the consequences.

kowtow

Dawggone wrote:

You're right that risk will have to re-price. Now think back on the subprime/financial crisis and ask what has changed? Not much only sovereign debt has skyrocketed. Big AG would get bailed out by politicians just like the car manufacturers did and food is more important than private transport, so they are very secure knowing that it (Big AG) is too big to fail.

Sub prime collateral of the type that low grade banks were made of certainly collapsed compared to sovereign. .. and it hasn't really recovered fully since although many underlying property assets have. What is and isn't subprime is a movable feast of course

On big ag I suppose you could argue that the support mechanism is already there in the form of the CAP.

So perhaps the question is how far can the cap go before it becomes untenable?

Dawggone

kowtow wrote: »

On big ag I suppose you could argue that the support mechanism is already there in the form of the CAP.

So perhaps the question is how far can the cap go before it becomes untenable?

Yes, big ag is being supported by the CAP.

However if we see a major black swan type event, like a severe public health scare, I don't want to be around to see the fall out....scary!

boggerman1

Gdt up a bit at around 3.6%.however volumes offered way down to 28,000 tons approximately.

atlantic mist

ornua setting up plant in nigeria, glanbia exited the country for a reason it was an unstable market place with huge fluctuations in currency

they seem to be setting up plants all over the place latest two in spain and nigeria

is it only irish produce they sell or are they buying from external sources? if they buy from external sources is our kerrygold brand being used on produced not produced here?

Milked out

http://www.agriland.ie/farming-news/no-major-milk-price-rise-until-2021-says-eu-outlook-report

mahoney_j

Milked out wrote: »

http://www.agriland.ie/farming-news/no-major-milk-price-rise-until-2021-says-eu-outlook-report

Some ****e and speculation been written re milk price and when it'll rise lately ,earlier in week rabbi bank predicted a significant rise in second half of 16 and now this saying it'll be 2021...........

mf240

mahoney_j wrote: »

Some ****e and speculation been written re milk price and when it'll rise lately ,earlier in week rabbi bank predicted a significant rise in second half of 16 and now this saying it'll be 2021...........

It will be on a tueday..

frazzledhome

mf240 wrote: »

It will be on a tueday..

At 3.35pm

whelan2

mf240 wrote: »

It will be on a tueday..

They are probably the graphs for the glanbia price, everyone else will be paying more

atlantic mist

just got the gii fixed price scheme

there is a cost of 0.1cent a liter on all milk put into scheme to cover cost of developing and administrating scheme so actual price is 27.75cent (net), devil is always in the detail

on a 10m liter pool thats 100k cost for running the scheme, value for money?? why was it not lumped on the buyer? need to start tendering for this sort of work if its costing that much to get done by plc computer share services

out of interest what have they developed? they are hardly inventors of fixed price selling.

Sam Kade

mahoney_j wrote: »

Some ****e and speculation been written re milk price and when it'll rise lately ,earlier in week rabbi bank predicted a significant rise in second half of 16 and now this saying it'll be 2021...........

Saw that earlier, 6 years :eek:

stretch film

Sam Kade wrote: »

Saw that earlier, 6 years :eek:

Twill fly by...

Sam Kade

stretch film wrote: »

Twill fly by...

Twill surely, look back 6 years and ask where the fcuk did they go?

mf240

atlantic mist wrote: »

just got the gii fixed price scheme

there is a cost of 0.1cent a liter on all milk put into scheme to cover cost of developing and administrating scheme so actual price is 27.75cent (net), devil is always in the detail

on a 10m liter pool thats 100k cost for running the scheme, value for money?? why was it not lumped on the buyer? need to start tendering for this sort of work if its costing that much to get done by plc computer share services

out of interest what have they developed? they are hardly inventors of fixed price selling.

Its just spin. Heres a **** price for you milk. If you sigh up for this fixed price you can get a less **** price for a tiny bit. Now dont be whinging about geting the worse price in ireland for you milk. We have a fixed price scheme in place .

kowtow

atlantic mist wrote:

on a 10m liter pool thats 100k cost for running the scheme, value for money?? why was it not lumped on the buyer? need to start tendering for this sort of work if its costing that much to get done by plc computer share services

atlantic mist wrote:

out of interest what have they developed? they are hardly inventors of fixed price selling.

Are they selling the milk on to a customer at a fixed price or putting together some sort of financial scheme?

atlantic mist

on the milk side (our side) of it its being sold to one customer the consumer foods division of the plc, nice simple and straight forward transaction, its a gii fixed price scheme not a coop scheme no financial package that i read about.

the meal offer is from the plc and 1c charge is on all milk supplied regardless of taking up meal offer

the only extra admin charges i can think of is the splitting of the milk on our milk cheque and im sure a computer programmer spent a few hours developing add on tool for milk statements

100k extra admin charge on 4500 suppliers for such a small portion of our total supply seems excessive and raises questions to me about our admin efficiency, time to start outsourcing work

wonder what was cost of new glanbiaconnect system which replaced agrilink was?

kowtow

On the subject of "2020" and milk price recovery I am sure we covered this several pages up the thread but these forecasts are based on a widely held public long term forecast that covers the entire commodity complex.

From memory it currently has the oil price recovering to 2010 levels approximately by 2020, in which case it's not unreasonable to expect that milk price recovery might be along the same trajectory (albeit that supply peaks / shortages would likely cause sharper oscillations along the way).

However - long term forecasts of that nature are notoriously unreliable. This is ironically the same forecast set which was used by Ireland in formulating the original plans for growth & wealth which would flow from expected consumption growth in China. Forecasts like this are updated on a more or less continuous basis and as a result can be misused, as in the case of Harvest 2020 I would suggest. It is a schoolboy error to take a forecast and repeat it as fact, let alone to build a National strategy on it without acknowledging that market conditions might change entirely along the way.

What the updated forecast really tells us is that commodities are no longer behaving in the way they did between 2007-2014, and that there is a new game in town - unsurprisingly, because the same story is borne out by both the fundamentals and the price behaviour of the commodities themselves.

We might yet be wrong - and some shock or another might give the great commodity bull run one last breath - but by and large the markets seem to be telling us that the seven years of madness were the aberration, and that prices will be in retreat until the rest of the world catches up with (farmers) expectations.

kowtow

If you read the report in detail, on China and New Zealand, you find a possible explanation for the relative silence in Ireland recently on the "potential" of the Chinese market and the emphasis on alternative developing markets. If you give them any credence, these findings suggest that NZ growth alone will exceed the rise in demand in China by about 400 million litres of milk a year.

In China too, consumption should grow faster and it is expected to import around 400 000 t extra per year (in milk equivalent). This is much less than the increase registered over the last 10 years when Chinese imports increased by close to 1 million t per year (Graph 3.4).

and

Nevertheless, any additional litre of milk produced in New Zealand is sold on the world market and its exports are expected to grow by 440 000 t a year (in milk equivalent).

keep going

did a simple sum divided the money from the checks by the number of litres and it came to 32.5 cent approx,not bad foronly 5 %je cross in the herd.on the prediction front i threw a stab at it a few pages back but theres no accounting for political factors but commodities across all sections are on the floor so you have to wait until you see others rise

yosemitesam1

kowtow wrote: »

If you read the report in detail, on China and New Zealand, you find a possible explanation for the relative silence in Ireland recently on the "potential" of the Chinese market and the emphasis on alternative developing markets. If you give them any credence, these findings suggest that NZ growth alone will exceed the rise in demand in China by about 400 million litres of milk a year.



and

Would you think south America will keep expanding production? weren't mentioned at all in that report

kowtow

yosemitesam1 wrote: »

Would you think south America will keep expanding production? weren't mentioned at all in that report

They were mentioned but not in connection with dairy - interesting because the report assumes continued relative devaluation of the Euro / dollar and the same conditions - actually bigger devaluation - apply to South America, which becomes relatively more competitive vs EU...

atlantic mist

id imagine dairy will meet our harvest 2020 targets 50% increase, supplies up 15% on last year, trend will continue, no farmer paid any attention to the 2020 targets over here, gov claim credit when we meet targets.

i think south america and eastern eu will become bigger players in future years

in eu, we need russian market to open back up, its a substantial market for eu cheese, need agriculture to be removed as a war tool servers nobody any good

in china nz and oz have trade agreements with china, were at a disadvantage entering the market without a similar type agreement, we can only target the premium market there,

dont think china will be our answer regardless of their internal consumption rate, difficult market to enter as a foreign company our only presence is in formula boosted as a result of health scares of home and nz product in last 3 years, but our drive to be a low cost producer/cheap milk is my future worry as it increases the risk of health scares due to increased cost cutting

WheatenBriar

Regarding liquid milk
At a time when the Irish economy is growing faster than any in the world even China,when our population is the highest its ever been, when the lorries are collecting at times every day because Drogheda and Ballytore can't be kept in milk,farmers are being paid one of the lowest prices for their liquid contract milk I ever remember, what does that tell you?

In the words of a Canadian Stockbroker,no prizes for guessing who's the fcuker and who's the fcukee in this business :mad:

whelan2

WheatenBriar wrote: »

Regarding liquid milk
At a time when the Irish economy is growing faster than any in the world even China,when our population is the highest its ever been, when the lorries are collecting at times every day because Drogheda and Ballytore can't be kept in milk,farmers are being paid one of the lowest prices for their liquid contract milk I ever remember, what does that tell you?

In the words of a Canadian Stockbroker,no prizes for guessing who's the fcuker and who's the fcukee in this business :mad:

wait until this time next year they really will be looking for milk, wonder will they pay better then.

Timmaay

atlantic mist wrote: »

but our drive to be a low cost producer/cheap milk is my future worry as it increases the risk of health scares due to increased cost cutting

I don't think we've ever been more heavily regulated than we are now in terms of milk quality? I'd certainly disagree that low cost means reduced quality. It simple means that us farmers are willing to be bent over a barrel even more often ha.

WheatenBriar

GII 24c again plus 1c of our own money

whelan2

WheatenBriar wrote: »

GII 24c again plus 1c of our own money

That will keep us at the bottom of the milk league again

milkprofit

great news.

again[/IFA: Agreed FMP/CFI. Jan/Feb/Mar price increase of 1/2 cent p/lt Further 1/2 cent p/lt on Jan/Feb/Mar paid into Agri in Feb. Fxd milk price scheme will go ahead
Why bother
What the f✌

whelan2

What are lakelands and everyone else paying?