Milk Price- Please read Mod note in post #1

Timmaay

Dawggone wrote: »

That's all very fine if you have the scale to ride out the storm...but when you have 3 to 4 months of peak milk and 5 to 8 months of producing very little you are seriously exposed.
What if the lowest prices "happen" to consistently be the peak milk producing months? This is a constant problem with cereals...the smaller producer selling green grain at harvest is constantly shafted.

Forward selling, IMO, must be taken seriously !!!

Sorry for pontificating.

Family farming is the saving grace for most of us, live on beans and toast for a few months if needs be lol. It's the smallish scale farmer who is highly borrowed who will quickly run into trouble, his only escape is interest only repayments, if the banks will even accept that.

Deepsouthwest

My discussion group have banned discussing yield/fat/protein while cows are calving, collections too inconsistent at the moment. We'll talk about it april

mahoney_j

Dawggone wrote: »

That's all very fine if you have the scale to ride out the storm...but when you have 3 to 4 months of peak milk and 5 to 8 months of producing very little you are seriously exposed.
What if the lowest prices "happen" to consistently be the peak milk producing months? This is a constant problem with cereals...the smaller producer selling green grain at harvest is constantly shafted.

Forward selling, IMO, must be taken seriously !!!

Sorry for pontificating.

Fully agree dwag re having all eggs in one basket.i will continue to sell fr Bulls for breeding and carry some blue and Hereford heifers/bullocks to 1.5 years.i will still try and maximise my bull calf and cull sales also.will also be in a position to start selling surplus heifers again in 2 years once milk block is stocked out.unless any of us are at dwags/feazzeld scale having all our eggs in milk will see us dangerously exposed every now and again

Dawggone

Timmaay wrote: »

Family farming is the saving grace for most of us, live on beans and toast for a few months if needs be lol. It's the smallish scale farmer who is highly borrowed who will quickly run into trouble, his only escape is interest only repayments, if the banks will even accept that.

I would consider risk management to be as important as herd fertility.
People should look at minimising exposure and forward selling is a very useful tool.
How many of ye will do this??
I'm not telling you how to run your business but dairy has to be the most protected enterprise left in farming...and that's all about to end...:)

Buford T. Justice XIX

Timmaay wrote: »

Family farming is the saving grace for most of us, live on beans and toast for a few months if needs be lol. It's the smallish scale farmer who is highly borrowed who will quickly run into trouble, his only escape is interest only repayments, if the banks will even accept that.

Borrowings are a necessary evil but should be minimised if at all possible. I have another couple of years of pressure with loans but the system is profitable.

The banks (i was with AIB yesterday) are willing to go interest only for a year or restructure over a longer time span, a lot more willing than they were two years ago. The local branches also have more leeway in offering loans up to 25k without needing to go higher up the chain but the paperwork needed:rolleyes::rolleyes:

On loans, there is a new EIF backed loan package out early next month @ 4.5%, if anyone is looking for a few bob. The only catch is they want the money back:pac:. It is available over 5 years max only.

Greengrass1

mahoney_j wrote: »

Fully agree dwag re having all eggs in one basket.i will continue to sell fr Bulls for breeding and carry some blue and Hereford heifers/bullocks to 1.5 years.i will still try and maximise my bull calf and cull sales also.will also be in a position to start selling surplus heifers again in 2 years once milk block is stocked out.unless any of us are at dwags/feazzeld scale having all our eggs in milk will see us dangerously exposed every now and again

What's stopping you being at frazz or dawgs scale sell up and move plenty have done it.

mahoney_j

Greengrass1 wrote: »

What's stopping you being at frazz or dawgs scale sell up and move plenty have done it.

Same question right back at you.happy where I am but always looking for an opportunity.like most of us here don't currently have the big milk block to go large scale milking nor are we big enough to survive a prolonged exposure to low milk price like dwag described with a single enterprise.

Greengrass1

mahoney_j wrote: »

Same question right back at you.happy where I am but always looking for an opportunity.like most of us here don't currently have the big milk block to go large scale milking nor are we big enough to survive a prolonged exposure to low milk price like dwag described with a single enterprise.

No probs I'd do it as soon as land loan is paid off here. Have the stock built up ready to.
I'll only ever lease enough land for silage and heifers here crazy to go lease it for bullocks

mahoney_j

Greengrass1 wrote: »

No probs I'd do it as soon as land loan is paid off here. Have the stock built up ready to.
I'll only ever lease enough land for silage and heifers here crazy to go lease it for bullocks

So if we get a year of crap prices what's the plan if ur sole income is from milk,and u your mam and dad are drawing an income from the milk cheque as well as paying back loan and running farm????.ill have my bulls,,and decent money from culls and bull calves as well as my blues and Hereford cattle andvthen surplus heifers.no way in hell at my scale I'd want to be fully exposed to just a milk cheque

Greengrass1

mahoney_j wrote: »

So if we get a year of crap prices what's the plan if ur sole income is from milk,and u your mam and dad are drawing an income from the milk cheque as well as paying back loan and running farm????.ill have my bulls,,and decent money from culls and bull calves as well as my blues and Hereford cattle andvthen surplus heifers.no way in hell at my scale I'd want to be fully exposed to just a milk cheque

One yr in how many?
You might be able to get land to lease around you for circa 150 buy your looking at paying 220+ around here
Rearing calves to sell as weanlings is a complete loss you only break even
Yeah need to kill them and that's not going to happen

mahoney_j

Greengrass1 wrote: »

One yr in how many?
You might be able to get land to lease around you for circa 150 buy your looking at paying 220+ around here
Rearing calves to sell as weanlings is a complete loss you only break even
Yeah need to kill them and that's not going to happen

Quotas going and milk will become very volatile with high peaks and low troughs,how long either will last is anyone's guess.if u can get land for 220 snap it up,your talking 300 plus here.and selling outright 3 miles from me for 15k an acre .rearing calves to sell as weanlings been a complete loss is false.never had a bad day out with blues in praticular here and will have Herefords from this year after my stock bull.there is a margin to be made from them ,u won't get rich doing it but definetly won't lose money.

keep going

how is 100 euro profit per bullock going to dig you out of a poor milk price year.guys who say its handy to have them to sell in a bad year are only looking at the check not at the profit.tried it myself and never made more profit overall than when I gave them up.as man said to me "put all your eggs in the one basket but wrap yer 2 hands around that basket and makes sure nothing happens it

Timmaay

keep going wrote: »

how is 100 euro profit per bullock going to dig you out of a poor milk price year.guys who say its handy to have them to sell in a bad year are only looking at the check not at the profit.tried it myself and never made more profit overall than when I gave them up.as man said to me "put all your eggs in the one basket but wrap yer 2 hands around that basket and makes sure nothing happens it

Agreed 100%, I do keep a rainy day fund, but it's totally outside of farming (perhaps in a more profitable enterprise lol), I'm happy to be a one trick pony and stick to just dairying. Last yr was the lowest sales figure we ever had from beef/culls/calves, but the highest overall farm profit by a decent margin, yep not every year will be like that but I'm happy enough with my risk management and to carry over either hard cash, or extra fodder/inputs etc to carry me through years like this year.

Greengrass1

Timmaay wrote: »

Agreed 100%, I do keep a rainy day fund, but it's totally outside of farming (perhaps in a more profitable enterprise lol), I'm happy to be a one trick pony and stick to just dairying. Last yr was the lowest sales figure we ever had from beef/culls/calves, but the highest overall farm profit by a decent margin, yep not every year will be like that but I'm happy enough with my risk management and to carry over either hard cash, or extra fodder/inputs etc to carry me through years like this year.

Take your 300/350 e at 3 wks old.
You'll never get that margin again
We sold weanlings last 3 yrs here and made nothing.
Have 8 AA weanlings this yr and we'll fatten them next autumn and that's the end of it I think.
Might even keep em in shed all yr because I have enough animals on out farm as it is

mahoney_j

Fair point lads but I'm making a margin on my cattle ,nowhere near milk even in a bad price year but I've fragmented land and am glad of the cattle in a bad price year.im talking of blue heifers and bulls weighing 350 to 410 kg at 15 months .these command big money and have many return customers.im only talking of 25 /28 cattle .dairying is my primary focus but what i described earlier gives an income fund in a poor milk price year.pulled my dad out of a hole in 09.i asked question earlier gg in a poor price year with only a milk cheque to fall back on and a wage to be split 3 ways plus run farm and pay land loan what would u do????the bigger guys with big scale are better equipped to ride out such a storm with one some income source but guys at and near our scale need a plan b.

Greengrass1

mahoney_j wrote: »

Fair point lads but I'm making a margin on my cattle ,nowhere near milk even in a bad price year but I've fragmented land and am glad of the cattle in a bad price year.im talking of blue heifers and bulls weighing 350 to 410 kg at 15 months .these command big money and have many return customers.im only talking of 25 /28 cattle .dairying is my primary focus but what i described earlier gives an income fund in a poor milk price year.pulled my dad out of a hole in 09.i asked question earlier gg in a poor price year with only a milk cheque to fall back on and a wage to be split 3 ways plus run farm and pay land loan what would u do????the bigger guys with big scale are better equipped to ride out such a storm with one some income source but guys at and near our scale need a plan b.

If you have the land spare its a no brainer to do as your doing nothing wrong with it but renting land to put on beef which would be my situation if I did it is false economy.
We do a lot of other things here that add to a false economy but that's the system ATM.

Any way to answer your question what to do in a bad yr.
Your just going to have to cut your cloth to your measure. Having your break even at 28/29c would help a lot.
09 which was a bad yr for MP we still averaged 33c for that yr
If we keep that margin if or should I say when it comes again on 740000l which we will send in '17 hopefully it'll be circa 40k
Myself and parents aren't even pulling that Much out yet between us. That's by choice, we could tough it out for a yr

Viewtodiefor

mahoney_j wrote: »

Fair point lads but I'm making a margin on my cattle ,nowhere near milk even in a bad price year but I've fragmented land and am glad of the cattle in a bad price year.im talking of blue heifers and bulls weighing 350 to 410 kg at 15 months .these command big money and have many return customers.im only talking of 25 /28 cattle .dairying is my primary focus but what i described earlier gives an income fund in a poor milk price year.pulled my dad out of a hole in 09.i asked question earlier gg in a poor price year with only a milk cheque to fall back on and a wage to be split 3 ways plus run farm and pay land loan what would u do????the bigger guys with big scale are better equipped to ride out such a storm with one some income source but guys at and near our scale need a plan b.

Keep at it mahony. I reckon there will be a very good return soon on beef cattle all the signs are looking positive, we all don't have to run with the crowd just because its the popular thing to do! Yeah I take the points of others but if a guy is happy at it then no reason to change.

Dawggone

Look Lads, I wasn't trying to stir shyte to get ye sniping at each other.

I'll put you into my position :

The wage bill alone here would take one artic per week, every week, to pay the wages (not inc my own wage).
In tillage terms that's ~450 acres of wheat to pay wages and nothing else. It takes a certain scale to do this...
Now I try to get as much as I can from every inch of land but I also learned the hard way that high yields don't do this on its own. I HAVE to try and cover the risk associated with the inherent volatility in grain prices.
More than one income stream REALLY helps to smooth the bumps.

I'm just pointing out that dairying on its own is about to become the same scenario as tillage. The most affected tillage operation is the smaller family farm that has to sell green grains at harvest time. The larger tillage units can sell x amount of artics per week, every week to smooth out the price volatility.
The spring dairy herd is more exposed than most as 3 months of peak production will probably coincide with the lowest milk price....Murphy's Law.
Looks like NZ have found this out this year.
If your 5000L milk tank is filled for 3month a year you are open to the market having its way with you. A 20000L tank filled ayr stands a better chance. But another income stream helps more...

frazzledhome

Dawggone wrote: »

Look Lads, I wasn't trying to stir shyte to get ye sniping at each other.

I'll put you into my position :

The wage bill alone here would take one artic per week, every week, to pay the wages (not inc my own wage).
In tillage terms that's ~450 acres of wheat to pay wages and nothing else. It takes a certain scale to do this...
Now I try to get as much as I can from every inch of land but I also learned the hard way that high yields don't do this on its own. I HAVE to try and cover the risk associated with the inherent volatility in grain prices.
More than one income stream REALLY helps to smooth the bumps.

I'm just pointing out that dairying on its own is about to become the same scenario as tillage. The most affected tillage operation is the smaller family farm that has to sell green grains at harvest time. The larger tillage units can sell x amount of artics per week, every week to smooth out the price volatility.
The spring dairy herd is more exposed than most as 3 months of peak production will probably coincide with the lowest milk price....Murphy's Law.
Looks like NZ have found this out this year.
If your 5000L milk tank is filled for 3month a year you are open to the market having its way with you. A 20000L tank filled ayr stands a better chance. But another income stream helps more...

Agree, we need to manage risk.

We use some fixed price milk agreements to manage volatility. Glanbia one is index linked so margin is constant

We have a winter contract which was a godsend in 09 as price was still high during 08-09 winter leaving some fat to carry us through the rough ride of summer 09

We'd be extreme with our budgeting and measuring of budget with all agreed payments being made on time

Prudent with investment and not on price but value and a particular eye on return

This allows us to trim the fat in a good year and use to invest in poorer price times. In 09 we managed to secure a lot if good value stock and lease a farm on very favourable terms. We were able to stump up an upfront payment that took the pressure of the landlord.

Sales men are not welcome and nothing is bought unless its needed. One term we cannot use to justify an investment is "handy" as this usually means not necessary

We prioritise spending on land, genetics, roads, soil fertility and labour. Everything else can wait.

We set sales and margin targets for the farm as opposed to a number of cows milking. These are high targets and are monitored. Our 2015 target was reached in 2013 so have readjusted the 2015 and 2020 targets

We find that this really insulates us from the down turns as they arrive.

All debt is measured as being good or bad and bad is not good iykwim

Dawggone

frazzledhome wrote: »

Agree, we need to manage risk.

We use some fixed price milk agreements to manage volatility. Glanbia one is index linked so margin is constant

We have a winter contract which was a godsend in 09 as price was still high during 08-09 winter leaving some fat to carry us through the rough ride of summer 09

We'd be extreme with our budgeting and measuring of budget with all agreed payments being made on time

Prudent with investment and not on price but value and a particular eye on return

This allows us to trim the fat in a good year and use to invest in poorer price times. In 09 we managed to secure a lot if good value stock and lease a farm on very favourable terms. We were able to stump up an upfront payment that took the pressure of the landlord.

Sales men are not welcome and nothing is bought unless its needed. One term we cannot use to justify an investment is "handy" as this usually means not necessary

We prioritise spending on land, genetics, roads, soil fertility and labour. Everything else can wait.

We set sales and margin targets for the farm as opposed to a number of cows milking. These are high targets and are monitored. Our 2015 target was reached in 2013 so have readjusted the 2015 and 2020 targets

We find that this really insulates us from the down turns as they arrive.

All debt is measured as being good or bad and bad is not good iykwim

+1.
Should be recommended reading.

mahoney_j

frazzledhome wrote: »

Agree, we need to manage risk.

We use some fixed price milk agreements to manage volatility. Glanbia one is index linked so margin is constant

We have a winter contract which was a godsend in 09 as price was still high during 08-09 winter leaving some fat to carry us through the rough ride of summer 09

We'd be extreme with our budgeting and measuring of budget with all agreed payments being made on time

Prudent with investment and not on price but value and a particular eye on return

This allows us to trim the fat in a good year and use to invest in poorer price times. In 09 we managed to secure a lot if good value stock and lease a farm on very favourable terms. We were able to stump up an upfront payment that took the pressure of the landlord.

Sales men are not welcome and nothing is bought unless its needed. One term we cannot use to justify an investment is "handy" as this usually means not necessary

We prioritise spending on land, genetics, roads, soil fertility and labour. Everything else can wait.

We set sales and margin targets for the farm as opposed to a number of cows milking. These are high targets and are monitored. Our 2015 target was reached in 2013 so have readjusted the 2015 and 2020 targets

We find that this really insulates us from the down turns as they arrive.

All debt is measured as being good or bad and bad is not good iykwim

Some post going to print it off and stick it on wall in office .as usual lot of good advice In that post

Viewtodiefor

frazzledhome wrote: »

Agree, we need to manage risk.

We use some fixed price milk agreements to manage volatility. Glanbia one is index linked so margin is constant

We have a winter contract which was a godsend in 09 as price was still high during 08-09 winter leaving some fat to carry us through the rough ride of summer 09

We'd be extreme with our budgeting and measuring of budget with all agreed payments being made on time

Prudent with investment and not on price but value and a particular eye on return

This allows us to trim the fat in a good year and use to invest in poorer price times. In 09 we managed to secure a lot if good value stock and lease a farm on very favourable terms. We were able to stump up an upfront payment that took the pressure of the landlord.

Sales men are not welcome and nothing is bought unless its needed. One term we cannot use to justify an investment is "handy" as this usually means not necessary

We prioritise spending on land, genetics, roads, soil fertility and labour. Everything else can wait.

We set sales and margin targets for the farm as opposed to a number of cows milking. These are high targets and are monitored. Our 2015 target was reached in 2013 so have readjusted the 2015 and 2020 targets

We find that this really insulates us from the down turns as they arrive.

All debt is measured as being good or bad and bad is not good iykwim

How about that new kitchen for mrs Frazz ? What class of debt does that come under? ;-)

frazzledhome

Viewtodiefor wrote: »

How about that new kitchen for mrs Frazz ? What class of debt does that come under? ;-)

Lol, good debt it's where most if the planning is done and it keeps her happy so I can continue to act the bollix

Dawggone

mahoney_j wrote: »

Some post going to print it off and stick it on wall in office .as usual lot of good advice In that post

Steady on there Mahoney. Frazz has not eliminated risk but rather given a list of good business practice...
However it should be read by all as it shows that he recognises that there is risk in his system of production and he has a plan to limit his exposure to it.

Different streams of income, imv, are a better hedge....
Over reliance on one income stream always has big risk attached...

frazzledhome

Dawggone wrote: »

Steady on there Mahoney. Frazz has not eliminated risk but rather given a list of good business practice...
However it should be read by all as it shows that he recognises that there is risk in his system of production and he has a plan to limit his exposure to it.

Different streams of income, imv, are a better hedge....
Over reliance on one income stream always has big risk attached...

I agree on over reliance but that's the road I've taken. I cannot find another farming enterprise that can match dairy farming from a profit, planning and income point of view.

That said we would have invested outside the farm in some very liquid assets as well as some medium assets. My thinking was to have an way if releasing assets to educate the kids and give them choices

This doesn't eliminate risk but gives me a little more wriggle room

I think if your finger is on the pulse and your switched on as a manager that in many cases one can manage ones way out of tight spots

Dawg there's more of a case for larger farmers to have a plan B as the smaller Irish family unit can be much more nimble and labour is an immediate cut out ie work for nothing for a year or two?

Blackgrass

**cough ironically enough just the last 10 days word of a farm that grew from 200 cows to 1800 in 20 years gone tits up in the Sw. Bad price and breakdown of tb brought in the bank. Diversified into ad and a few other areas also

Timmaay

As I said before I'm happy to put all my eggs in one basket, what I do generally consider is how effective I could exit dairying if sh#t hits the fan, say China suddenly decides milk and cheese and baby infant formula isn't for them, resulting in a huge long term world oversupply, or say climate change resulting in my farm going into drought a lot more, or simple as is I get bored of dairying ha! I purposely kept the building work with my new dairy/parlour to an utter minimum, all in after grants etc I'll have spent about 50k, of that I can get back 10k for the tank and hopefully 25k for the milking machine quite quickly if I exit dairying and sell both, that would mean only 15k of the initial capital lost. If I'd spent that 50k on a slatted tank etc I would never recover the capital.

Viewtodiefor

Timmaay wrote: »

As I said before I'm happy to put all my eggs in one basket, what I do generally consider is how effective I could exit dairying if sh#t hits the fan, say China suddenly decides milk and cheese and baby infant formula isn't for them, resulting in a huge long term world oversupply, or say climate change resulting in my farm going into drought a lot more, or simple as is I get bored of dairying ha! I purposely kept the building work with my new dairy/parlour to an utter minimum, all in after grants etc I'll have spent about 50k, of that I can get back 10k for the tank and hopefully 25k for the milking machine quite quickly if I exit dairying and sell both, that would mean only 15k of the initial capital lost. If I'd spent that 50k on a slatted tank etc I would never recover the capital.

On the grant point Tim that 35k is taxable afaik

just do it

Dawggone wrote: »

Steady on there Mahoney. Frazz has not eliminated risk but rather given a list of good business practice...
However it should be read by all as it shows that he recognises that there is risk in his system of production and he has a plan to limit his exposure to it.

Different streams of income, imv, are a better hedge....
Over reliance on one income stream always has big risk attached...

One word - diversification.

But then you've to avoid being a jack of all trades and master of none.

Each to their own

keep going

lads I think ye are missing the big one and this is not in jest,the laying hen.outside of farming there very few couples that are relying on one income to live on but in farming there tends to be a fascination with keeping herself at home.