Milk Price- Please read Mod note in post #1

Bass Reeves

Water John wrote: »

I see from the IFJ, Cork farmers have the best and the worst of prices.
A 100 cow dairy farmer in mid cork had a difference of €2,600 in his cheque in mid May from his neighbour. Depended on who was lucky to be the West Cork supplier.
That is shocking. The management and board members of Dairygold are directly responsible for extra hardship on those farm families. There is no shirking that.
There is a reponsibility that they must be held accountable for.

Not really sure if it is all D fault. Could the farmer have moved processors. Happens all the time with beef we move from one ball@x to another

Water John

That's a core problem Bass. Prior to quota end there was a 'gentlemens agreement' nobody to go to. Any one that tried was blocked generally.

Since the end of quotas, there was a small window of changes. DG and Glanbia took some suppliers from Arrabawn. However, In return Arrabawn indicated they were willing to accept supplies and they got more than had left.

ICOS then negotiated a new ' 'gentlemens agreement' that requires 90 day notice of move.

BTW most suppliers of DG and Glanbia had already been signed up to MSA's long term prior to the end of quotas.
Most farmers locked into whoever they supply at whatever price the processor decides from time to time.

Milked out

What were solids of both farms and what portion of carbery price was in fixed price scheme? Was the comparison solely on base price and solids adjustment nothing else? It's already been done how carberys other interests are supporting milk price. More power to them and I do envy them, but we dont have that cushion. if we could all make the correct decisions life would be dandy. We were toe to toe with them at the top in 14, and ahead of many others.

Milked out

What were solids of both farms and what portion of carbery price was in fixed price scheme? Was the comparison solely on base price and solids adjustment nothing else? It's already been done how carberys other interests are supporting milk price. More power to them and I do envy them, but we dont have that cushion. if we could all make the correct decisions life would be dandy. We were toe to toe with them at the top in 14, and ahead of many others.

Water John

Better buy your own copy of IFJ Milked Out.
You can do the sums any way you wish. West Cork top of the league, Dairygold at the bottom.
May be Boherbue and North Cork have a sideline fund too.

Milked out

http://www.agriland.ie/farming-news/wheat-production-to-again-outstrip-use-as-dairy-prices-set-to-remain-weak

Water John

Nobody can or is expected to buck a trend. Milk prices are low.
That makes it more important that whatever that whatever price can be squeezed out of the market at this time is destined to support the farmer.

Bass Reeves

Water John wrote: »

Nobody can or is expected to buck a trend. Milk prices are low.
That makes it more important that whatever that whatever price can be squeezed out of the market at this time is destined to support the farmer as long as processors can maintain there margin or at least have the same profit on greater volumes .

I corrected that for you

Water John

That's fair Bass, every business must have a base profit level. Nobody asks or expects any business to beggar itself.

We know quite well that Dairygold price to the farmer is affected at this time by the capital spend on Mallow. They have not any leeway from the banks.
They are putting 25/30M per year into it at this time.
That is over 2 cent per litre. Bad decisions, very bad timing on expansion. Jumped without a parachute.

Milked out

Water John wrote: »

That's fair Bass, every business must have a base profit level. Nobody asks or expects any business to beggar itself.

We know quite well that Dairygold price to the farmer is affected at this time by the capital spend on Mallow. They have not any leeway from the banks.
They are putting 25/30M per year into it at this time.
That is over 2 cent per litre. Bad decisions, very bad timing on expansion. Jumped without a parachute.

What would milk price be if we were to depend on others to process our milk

Bass Reeves

Water John wrote: »

That's fair Bass, every business must have a base profit level. Nobody asks or expects any business to beggar itself.

We know quite well that Dairygold price to the farmer is affected at this time by the capital spend on Mallow. They have not any leeway from the banks.
They are putting 25/30M per year into it at this time.
That is over 2 cent per litre. Bad decisions, very bad timing on expansion. Jumped without a parachute.

TBH DG whole business plan is based on WMP. It failed to diversify into cheese or other products. If you look back historically back nearly 30 year they were the first to diversify from butter to spreads. Do you remember Dairygold spread Which was a just adding a bit of veg oil to as little butter as possible. Kerry group knew that butter was on the decline but refused to be the first to break the cycle even though they had Low Low and Dawn low fat butter brand names trade marked. But DG again with no plan in place saw what they taught was a market and jumped.

So will you tell me what is new

Yes DG have nothing to support milk price after all they sold all there beautiful brand names Galtee, Mitcheltown, etc. To ere is human totally f@@kup it take DG

einn32

Bass Reeves wrote: »

Water John wrote: »

That's fair Bass, every business must have a base profit level. Nobody asks or expects any business to beggar itself.

We know quite well that Dairygold price to the farmer is affected at this time by the capital spend on Mallow. They have not any leeway from the banks.
They are putting 25/30M per year into it at this time.
That is over 2 cent per litre. Bad decisions, very bad timing on expansion. Jumped without a parachute.

TBH DG whole business plan is based on WMP. It failed to diversify into cheese or other products. If you look back historically back nearly 30 year they were the first to diversify from butter to spreads. Do you remember Dairygold spread Which was a just adding a bit of veg oil to as little butter as possible. Kerry group knew that butter was on the decline but refused to be the first to break the cycle even though they had Low Low and Dawn low fat butter brand names trade marked. But DG again with no plan in place saw what they taught was a market and jumped.

So will you tell me what is new

Yes DG have nothing to support milk price after all they sold all there beautiful brand names Galtee, Mitcheltown, etc. To ere is human totally f@@kup it take DG

Did Kerry not buy that Dairygold spread brand? It's a shame to think of all those brands were sold alright. But diets change, would/are these brands doing as well nowadays?

whelan2

kowtow wrote: »

No.

The coop is raising funds with a bond exchangeable for the plc shares it still holds.

What I didn't see were the terms upon which it was exchangeable and whether by the issuer (coop) or the subscriber (lender) and under what circumstances... they could be anything from at will by the subscriber to only upon default by the issuer.... would be interested to see their approach.

What I suspect it does mean is that those plc shares held by the coop can't be spun out or otherwise dealt with during the life of the bond.

Edit: the milk price around which the automatic payout / payback revolves is also important. Unless the co-op is taking a mighty double down gamble one would imagine that they expect milk to return to that price in due course so that the funds raised by the bond can be recirculated and serviced.

In the meantime it's a way of giving producers the 'use' of the plc share capital + income, at a price for the coop and it's members. The funds may be interest free for those that use them but the coupon on the bond must be paid by the coop membership from profits which would otherwise be distributable.

Difficult to be more precise with the limited information in the press yesterday.

would this new scheme not be better for farmers than the milk flex scheme? Why announce it after people have signed up? Could you part take in both?

Water John

Yes Bass, DG have a long history of bad decisions.

Milked Out, that's the line that has been fed to DG suppliers. 'What would we do with your milk if we don't put up this state of the art plant?'

There was already a 5 ton/hour drier in Mallow. If Mallow is put up to take peak supply at a cost of €83.5M, that's not good use of scarce resources.
Carbery put in plant to cater for peak supply for less than €5M.

Don't be niaive. The raid on Arrabawn suppliers was to get milk supply to justify the plant in Mallow and to make it more efficient to run the Mallow plant.

It was bad timing to take a risk on such a high capital outlay. A high capital outlay not based on a long term financing arrangement. €100M due back by the end of 2017. Banks have them by the short and curlies.
Banks are calling the shots here.

Farmer suppliers are being screwed on way by Dairygold and another way by Glanbia.

Farmer Ed

einn32 wrote: »

Did Kerry not buy that Dairygold spread brand? It's a shame to think of all those brands were sold alright. But diets change, would/are these brands doing as well nowadays?

Last i heard Dairygold spread is the most profitable product Kerry sell on the Irish market

jaymla627

whelan2 wrote: »

would this new scheme not be better for farmers than the milk flex scheme? Why announce it after people have signed up? Could you part take in both?

Scheme isn't activated till base price drops below 24 cent, reckon we will see a cent pulled in may and June but this will be subbed by above scheme, smokes and daggers move on their part to keep lads from shouting to much...
If a farmer where to take on a sizeable loan from milk flex and avail of this aswell, their future milk cheques would be fairly decimated would be easily 5-7 cent being deducted in peak months for repayments, which is totally unsustainable if prices keep bouncing around the mid 20s

atlantic mist

whelan2 wrote: »

would this new scheme not be better for farmers than the milk flex scheme? Why announce it after people have signed up? Could you part take in both?

ya you could avail of both. Coop is interest free....nothing is ever free is this world there will be a cost...trigger havent been announced.... i think this has been tabled as many trading accounts are under serious pressure and banks and finance ireland will not provide finance to unprofitable enterprises, agri business has started taking farmers to court down this neck of the woods which wouldnt look great on the pr side of things, the interest rate the charged by agri business to date is like getting finance from a sub prime lender, gii needs continued supply and agri business the same otherwise cash flows wouldnt meet loans, its important for them to keep supplies up

Milk flex is a loan suited to your volatile milk price (well they allow volatility twice in 10 years...not too much scope but something at least, land not used as collateral but personal gaurentee given so you might as well have land on table) reduced payments where milk price below 28c but after using 2 volitality movement you must make full/additional payment to make up for low priced periods...potential to increase tax from additional payments required.... they do a full credit check on you. will coop do the same ...doubt it....

who is providing the bond? at what rate?
farmers who recieve funds going to pay back on time to release our shares after bond completes or are we effectively spinning out more shares to fund trading accounts out of control? Are shares if spun out at todays rate or at the date bond ceases?

interesting how our industry/processor reacts, milk volumes across the globe are over produced were producing under cop and were pushing cheap finance to keep supplies up, expanding production facilities.

Glanbia coop now following tesco, moving away from kerry at the min, into finance well be selling fuel yet...boats of milk powder to nigerian and returning diesel for us

coop seems to be doing everything within its power to support suppliers but dont seem to be able to find any improvements from within gii to bring our base price in line with EU average, strategic drift has developed with in coop half now looking for capital appreciation due to large shareholding while other half trying to run business requiring best return from raw produce supplied

Bass Reeves

Farmer Ed wrote: »

Last i heard Dairygold spread is the most profitable product Kerry sell on the Irish market

Is that on volume or margin. Kerry have such a diverse number of brands it hard to get detail. Dairygold spread had the biggest market share, however Low Low brand competes with Flora and Kerrymaid replaced dawn butter as the dawn brand was more or less sold to GII. Ig you look you will no longer see the Dawn milk on sale in shops so GII is slowly replacing those brands.

The bond is a three card trick all it is doing is making sure that risky credit is secured elsewhere. It is also in GII interest it always wanted to reduce the farming shareholding down to the 10-20% bracket if not into single figures. It also guarantee's them milk supply from those that have this credit. What is the betting that the loan is defaulted on in 6-10 years time and a chunk of the shares are sold to finance those farmers who's cost is too high.

Farmer Ed

Bass Reeves wrote: »

Is that on volume or margin. Kerry have such a diverse number of brands it hard to get detail. Dairygold spread had the biggest market share, however Low Low brand competes with Flora and Kerrymaid replaced dawn butter as the dawn brand was more or less sold to GII. Ig you look you will no longer see the Dawn milk on sale in shops so GII is slowly replacing those brands.

I'm not sure but I was told that by someone who attended a Kerry agm and came home with the impression that Dairygold spread was performing really well for Kerry

kowtow

Bass Reeves wrote: »

What is the betting that the loan is defaulted on in 6-10 years time and a chunk of the shares are sold to finance those farmers who's cost is too high.

I doubt very much that they would let a default event occur, which begs the question what are the conversion terms against the plc shares in the bond?

Agree that they won't have been able to secure the bond without resorting to plc shares, but that's not surprising given the artificial / captive nature of the business. Note that part of the proceeds were for coop working capital, be interesting to see how big a part.

And where does the term of the bond fit with the buyout option on the 50%? I'd have thought that was the logical long term plan for the shares until now.

Still, all this is detail - what makes me uncomfortable is the idea of farmers being lent money (even if it is their own) rather than paid for milk, the true underlying market picture, and the danger of distorting the price signals at this point in the cycle.

Timmaay

kowtow wrote: »

Still, all this is detail - what makes me uncomfortable is the idea of farmers being lent money (even if it is their own) rather than paid for milk, the true underlying market picture, and the danger of distorting the price signals at this point in the cycle.

I know I'm one of the lucky ones to have fairly low borrowings, but 2bh I'd nearly rather not avail of any of these "liquidity loans" and go broke and stop producing milk now rather than have a slow painful drawing out realisation over the next 5years that milk isn't going to provide me the standard of living I'd hoped. (would I have the same opinion if the wolves at the door in the morning with the liquidity loan my only escape haha, prob not!!)

Buford T. Justice XIX

Timmaay wrote: »

I know I'm one of the lucky ones to have fairly low borrowings, but 2bh I'd nearly rather not avail of any of these "liquidity loans" and go broke and stop producing milk now rather than have a slow painful drawing out realisation over the next 5years that milk isn't going to provide me the standard of living I'd hoped. (would I have the same opinion if the wolves at the door in the morning with the liquidity loan my only escape haha, prob not!!)

I finished off a loan last year and it's more or less balanced out the fall in milk price for me so far. And improved the summer cash flow enormously as well:)

I sometimes wonder if we are addicted to borrowings and access to easy credit. All's well until the ar$e drops out of milk price and then we struggle to do without?

mf240

It appears Glanbia will do anything bar pay for milk.

whelan2

mf240 wrote: »

It appears Glanbia will do anything bar pay for milk.

I think they are realising how bad things are on farm level (alot of which is their own doing) and are trying to rectify it with numerous schemes that are just confusing the confused farmer even more

jaymla627

whelan2 wrote: »

I think they are realising how bad things are on farm level (alot of which is their own doing) and are trying to rectify it with numerous schemes that are just confusing the confused farmer even more

Would reckon it's more a case they're owed a small fortune for feed/fert etc that's climbing every day as suppliers who have probably maxed out credit at independent merchants start doing all their business with glanbia as it's more then likely their only way of accessing supplies , milk flex will help alleviate this somewhat.....
The new scheme is simply to help keep milk supplies up heading into the autumn/winter and stop lads taking drastic actions in selling/culling cows....
Talbot and Bergin never in their worst nightmares thought that heading into a quota free era that they would be faced with the prospect of a stagnet/declining milk pool all their projections going forward are based on us increasing supply year on year and allowing them to cream their 3% margin of the top of a increasing supply meaning more profits/higher share prices and most importantly the ability to pay back debt if 200-300 million litres less milk then they had penciled in where to be supplied in say 2017/2018 it would cause them some serious headaches

Sam Kade

Buford T. Justice V wrote: »

I finished off a loan last year and it's more or less balanced out the fall in milk price for me so far. And improved the summer cash flow enormously as well:)

I sometimes wonder if we are addicted to borrowings and access to easy credit. All's well until the ar$e drops out of milk price and then we struggle to do without?

Borrowing is a necessary evil for instance I was going to buy a secondhand mower this year for 3.5k or 3 yearly payments of almost €1300. The contractor would be charging €1500 a year for mowing so after 3 years you own the mower instead of paying the contractor dead money. As for reckless borrowing we all know how that works out.

Timmaay

Sam Kade wrote: »

Borrowing is a necessary evil for instance I was going to buy a secondhand mower this year for 3.5k or 3 yearly payments of almost €1300. The contractor would be charging €1500 a year for mowing so after 3 years you own the mower instead of paying the contractor dead money. As for reckless borrowing we all know how that works out.

How much per year for diesel, tractor depreciation and yourown time driving for the mowing out of interest?? In fairness a borrowing of 3.5k which is say 350/cow if ya got 100cows, I'm more talking about trying to service 2/3k per cow which is a very realistic minimum figure for anyone who has heavily expanded over the last few years.

Bass Reeves

jaymla627 wrote: »

Would reckon it's more a case they're owed a small fortune for feed/fert etc that's climbing every day as suppliers who have probably maxed out credit at independent merchants start doing all their business with glanbia as it's more then likely their only way of accessing supplies , milk flex will help alleviate this somewhat.....
The new scheme is simply to help keep milk supplies up heading into the autumn/winter and stop lads taking drastic actions in selling/culling cows....
Talbot and Bergin never in their worst nightmares thought that heading into a quota free era that they would be faced with the prospect of a stagnet/declining milk pool all their projections going forward are based on us increasing supply year on year and allowing them to cream their 3% margin of the top of a increasing supply meaning more profits/higher share prices and most importantly the ability to pay back debt if 200-300 million litres less milk then they had penciled in where to be supplied in say 2017/2018 it would cause them some serious headaches

This is the real issue have the co-op a serious issue with debt. Is this an attempt by GI of a market share grab at the expense of independent merchants. The other issue is will you be tied to buying off GI or can you spread thsi money around.

Sam Kade wrote: »

Borrowing is a necessary evil for instance I was going to buy a secondhand mower this year for 3.5k or 3 yearly payments of almost €1300. The contractor would be charging €1500 a year for mowing so after 3 years you own the mower instead of paying the contractor dead money. As for reckless borrowing we all know how that works out.

You are mowing about 60-70 acres/year. 3.5K is not an huge amount to spend on a mower. However you also have maintenance on the mower. However the real issue is will you present tractor be capable of running the machine. With a mower I expect yer where the real issue is where farmers start to factor the projection on slurry tankers and other farm machinery. At the moment in may area contractors have started to charge 2/ bale for mowing. I be afraid that they might start to pump out bales.

Timmaay wrote: »

How much per year for diesel, tractor depreciation and yourown time driving for the mowing out of interest?? In fairness a borrowing of 3.5k which is say 350/cow if ya got 100cows, I'm more talking about trying to service 2/3k per cow which is a very realistic minimum figure for anyone who has heavily expanded over the last few years.

It is 35/cow tbh if anything I think he may have under spend.on the mower. Good mowers are rare enough. If you are doing that acreage I be looking at a conditioner mower, biggest issue is that you need a 100+HP tractor.

Farmer Ed

I often heard my parents tell stories of how at the time of the setting up of the co op movement, a lot of farmers were so dependant on their local merchant for credit, they couldn't supply the co op. In effect they were slaves to the local huckster. The trading in butter and eggs in exchange for what ever supplies they were getting from the huckster became so complex, farmers were always suspicious they were being short changed. Being able to sell you milk and getting paid the next month was revolutionary.
100 years on as the trading relationship with the co op becomes more and more complex and farmers become more and more indebted to the co cops. Have we really progressesd that much in 100 years?

Sam Kade

Timmaay wrote: »

How much per year for diesel, tractor depreciation and yourown time driving for the mowing out of interest?? In fairness a borrowing of 3.5k which is say 350/cow if ya got 100cows, I'm more talking about trying to service 2/3k per cow which is a very realistic minimum figure for anyone who has heavily expanded over the last few years.

My tractor is depreciated twice over Wouldn't I be better off mowing it myself besides watching someone else doing it. In fact I didn't buy the mower after I just repaired the old one if it goes belly up I can bring the contractor.