The threat of cheap grain

bob charles

I read an opinion piece about that threat that Irish farmers faced to cheap grains for the foreseeable future. I felt the opinion was well lopsided to suit an agenda and readers but how do people on here view the threat of cheap grains throughout the rest of the world, given our supposed cheap grass based farming systems. Its around 4 years ago since the last swing of cheap grains and during that era it was telling on our markets

kowtow

bob charles wrote: »

I read an opinion piece about that threat that Irish farmers faced to cheap grains for the foreseeable future. I felt the opinion was well lopsided to suit an agenda and readers but how do people on here view the threat of cheap grains throughout the rest of the world, given our supposed cheap grass based farming systems. Its around 4 years ago since the last swing of cheap grains and during that era it was telling on our markets

From a milk perspective, in so far as I understand it :-

As long as the milk we produce as a nation leaves Ireland as an homogeneous commodity, we are at risk from the same being produced anywhere else in the world with cheaper inputs. That our milk was produced by healthy cows and milked by God-fearing Irish Mammies with a glint in their eye and a spring in their step, off green pastures, matters not a whit once it is dried bulked and shipped. There is a good reason why markets demand fungible, homogenous commodities and that same reason demands that all the uniqueness and advantages of provenance and origin are left at the door of the pit.

So presumably, in the near term, cheap grain without the protection of quotas and without wrapping our output in an added layer of value in the shape of identifiably Irish products, with sufficient world demand, means a considerable price risk for dairy farmers relying on a world bulk market. This risk is compounded by the relative inflexibility of a grass based system particularly where the majority of a dairy business' equity is tied up in grassland.

In the longer term we might learn that free trade, like most religions, is enjoyed mostly by it's own high priests. In Europe + the US our generation grew up enjoying the financial benefits of open world markets which we dominated largely thanks to macro historical factors - the aftermath of British and European Empires which provided quasi-captive markets and preferential inputs.

The time may well come again when the world decides again that countries should consume their own food and that protectionism isn't all bad. To some extent this is happening already - it might be bad form to talk about import tariffs, but if you call them "food miles" everyone shakes your hand. This would, of course, have other massive consequences for Ireland partly dependent on the shape the EU takes in future generations. Who would chew up all our milk powder then?

Of course whether or not we are going to get cheaper grain (in real terms), and from where, is the near term issue. Today a good Irish acre costs about 1000 bushels of Chicago Soy - that's the ratio to watch.

delaval

1000 bushels of Soy??
Can you expand as I haven't heard of this before

mf240

Lads it supply and demand it's nothing new.

Price of grain will fall milk will fall production will fall. Price will increase production will increase and the whole things starts again.

It's only 4 years since milk and grain were on the floor.

kowtow

delaval wrote: »

1000 bushels of Soy??
Can you expand as I haven't heard of this before

Sure

If we're comparing (as extremes) an intensive concentrate based producer in the US and an Irish farmer both supplying commodity milk to a world market, the fundamental difference is that the Irish supply is coupled, relatively firmly, to the price of an Irish acre (in Euros), and the grass it produces. The intensive US dairy produces at a margin over concentrate (in dollars). If he can buy 2000 bushels for the price you pay for an acre of grass (ie. twice what he can buy today) - and he gears up to do so - then our milk becomes relatively more expensive to produce.

It's a very rough comparison - and Soy may not be the best contract to pick, just happened to be near the top of my screen.. but the important point is that it takes account of currency movements as well. If the Euro strengthens against the dollar and the price of grain and land stays the same, the ratio will also change (although we might see other benefits, reduced fuel / fert prices etc. from dollar weakness)

It's interesting to consider whether, committed to producing from our own grassland and therefore able to minimise imported inputs, Irish dairy farmers wouldn't be better off outside the Euro altogether.

The unconventional and dirty looking municipal debt swap which helped Italy get into the Euro years ago (and is now the subject of a lot of attention) was always rumoured to be connected to pressure from Bavarian dairy farmers who were sick of being bound to a strong DM & about to be bound to a DM inspired Euro, desperate to ensure that Italians would be able to pay in Euros. If Ireland were outside, it would be the exact situation in reverse.

bob charles

when looking a corn under $5 dollars a bushel its going to have a serious effect on production costs elsewhere. I see Merrill Lynch a predicting corn to the mid $4 a bushel for this harvest. Can grass systems at this side of the world compete at that sort of price. Has the end of cheap money in the states caused the funds to run from commodities dragging prices down further. Or maybe these prices were way overinflated to begin with. Interesting times with poorer prices

And we still havnt talked about the cereal farmers in Ireland, will they even cover the cost of production at current price?

kowtow

bob charles wrote: »

when looking a corn under $5 dollars a bushel its going to have a serious effect on production costs elsewhere. I see Merrill Lynch a predicting corn to the mid $4 a bushel for this harvest. Can grass systems at this side of the world compete at that sort of price. Has the end of cheap money in the states also drag commodity prices down further. Interesting times with poorer prices

And we still havnt talked about the cereal farmers in Ireland, will they even cover the cost of production at current price?

I have two charts on my screen, can't think of an easy way to put them up here, but in essence the US money supply (QE driven since 2008/9) and soft commodity prices. Unsurprisingly it would be easy to mistake one for another - since 2007 milk prices and other ags have risen quite predictably in lockstep with the printing of money.

So has the price of Irish agricultural land, and for the very same reason.

Money is a commodity like any other. For the last few years it's been better to be short paper money and long land (+whatever debt you could get) since money is losing it's value. This situation will have to change eventually, although whether and when the tap will really be switched off is another matter. If it is, Ireland could suffer painfully and rapidly as interest rates rise and other European economies try to look after their own people. That in itself is a reason to hope that the QE tap might remain open, storing up - of course - problems in the longer term.

Out of interest, does anyone remember what the margin of milk price over concentrate was before the money tap distorted nominal prices - between, say, 2004 and 2008? I ask this question because in times of money printing there are unique attractions to low input agricultural production from pasture (the "Irish" system), since the price of land is inelastic and most producers already had the land before the money started printing.

bob charles

with QE back in the lime light in the US it must be putting serious fear into the market, not thats any harm. But I just think us guys at this side of the water are very optimistic about the short to medium future term, but when a little scratching under the surface is done its hard to be bullish.

Ah sure farming is a grand way of life if it all goes pear shaped :mad:

kowtow

bob charles wrote: »

But I just think us guys at this side of the water are very optimistic about the short to medium future term, but when a little scratching under the surface is done its hard to be bullish.

If I see any profit monitors or models on Wednesday, I'll be expecting to see an annual land charge which reflects the present price of con-acre.

We'd all see this much more clearly if we realised that we run two businesses, one as landowner and one as farmer.

If a cheese producer who was milking told you all he was selling milk for €1.20 a litre, because he "had the milk already" you'd all laugh - but we do that every day with land.

bob charles

kowtow wrote: »

If I see any profit monitors or models on Wednesday, I'll be expecting to see an annual land charge which reflects the present price of con-acre.

You might as well stay at home if you think you will be presented with accurate figures etc.

freedominacup

kowtow wrote: »

If I see any profit monitors or models on Wednesday, I'll be expecting to see an annual land charge which reflects the present price of con-acre.

We'd all see this much more clearly if we realised that we run two businesses, one as landowner and one as farmer.

If a cheese producer who was milking told you all he was selling milk for €1.20 a litre, because he "had the milk already" you'd all laugh - but we do that every day with land.

You have a better chance of getting an accurate labour cost. All national expansion plans are based on an assumption that the land is for nothing i.e it's there already.

freedominacup

Cheap grain will have a serious impact on milk price no doubt about it. Our grass based system still has health advantages and we can still get the first thousand gallons/cow from a relatively low cost source but we'll have to increase output per cow to pay for all this free land. There's been some talk lately abot 29c being the new 22c/litre based on the higher grain prices over the past few years. How cheap is cheap bob/kowtow? You're both talking about corn @ $180/tonne what is that back from a peak of?

blue5000

http://nogger-noggersblog.blogspot.ie/

Well worth a look here, unless you grow a lot of grain.

newholland mad

blue5000 wrote: »

http://nogger-noggersblog.blogspot.ie/

Well worth a look here, unless you grow a lot of grain.

Not saying he's wrong but Nogger has a reputation for been bearish just click onto any of his adverts, they are almost all feed mills and grain traders , he is well remarked over the years for helping to "guide" the English grain farmer towards a preferred direction. I wouldn't be takeing heed to everything he writes when deciding when to sell my grain, still an interesting read though, great humour

delaval

Totally agree land charge cannot understand why it's not there. Mostly leased here so I have to include in my fixed costs only way to get true pic. All our drawings are actually taken as salary so we can keep track of labour costs most importantly what we cost the business

Farmer Pudsey

Hard to see grain being cheap long term. Oil is the key at present is at a stable price it is unlikely to drop it is around $96/barrel with a predicted price heading towards $110 in the next year.

This will increase cost pressure on grain prices again next year. Will we ever see Barley below 170/ton longterm. As oil creeps up it will force up fertilizer prices as land will be in demand for energy crops. At present as the world continues in recession oil is at a quite a high price (this has translated into strong prices for timber remember the cost of post peeling for outwintering pads now compared to 8-10 years ago) so if grain gets too cheap it will be in demand as a cheap alternative fuel. I think that a ton of grain is equivalent to about 500L of oil.

kowtow

Farmer Pudsey wrote: »

Hard to see grain being cheap long term. Oil is the key at present is at a stable price it is unlikely to drop it is around $96/barrel with a predicted price heading towards $110 in the next year.

This will increase cost pressure on grain prices again next year. Will we ever see Barley below 170/ton longterm. As oil creeps up it will force up fertilizer prices as land will be in demand for energy crops. At present as the world continues in recession oil is at a quite a high price (this has translated into strong prices for timber remember the cost of post peeling for outwintering pads now compared to 8-10 years ago) so if grain gets too cheap it will be in demand as a cheap alternative fuel. I think that a ton of grain is equivalent to about 500L of oil.

With respect, all of the above is true provided that QE continues and the money supply is expanded. If - as has been suggested above and elsewhere - the threat of monetary tightening is driving the fall off in grains then both grains & milk (+ indeed oil) can fall significantly in nominal price.

The important comparison would be milk price vs grain price in this case / otherwise margin over concentrate which is why I asked above whether anyone could recall the figures from 2005-08.

bob charles

I was paying €8500 per load of wheat in start of 08 and selling cattle at €3 a kilo. Losing money hand over fist I must have been. 2008 took a number of years to recover from if im not mistaken. grain price rose quickly during Dec 07 and Jan 08 and stayed high till the end of April while beef prices either stagnated or decreased. I had allot of cattle inside on adlib meal and the bank manager was making daily phone calls:(. hence, I said never again would I feed animals adlib grain

Tipp Man

I think some of you are making this way too complicated and completely unnecessarily.

Kowtow, I think your link of Soy price in USA to land price in Ireland means nothing to the vast majority of farmers in this country - you are linking a highly liquid and large sales volume commodity produced in another country with a highly illiquid, very low sales volume asset in this country - I really don't see the point.

The best way imo for Irish farmers to judge this is compare cost of growing grass versus cost of grain/corn/soy/whatever. Or basically what it boils down to at the end of the day is how much it costs to produce each litre

2 people in this thread have summed up the situation

• MF240 called it right - its all about supply and demand - always has been and always will be
• Farmer Pudsey has also called it right in that the long term trend for grain is high prices, which is directly linked to what MF240 said

We can all be too smart for our own good sometimes and try to react/predict events which are completly out of our control. There are 4 or 5 things which make smart farmers imo and they are:

• be able to grow and manage grass cheaply
• be on top of your breeding
• control costs as much as possible especially meal and fertiliser
• when prices are good put some money aside for the rainy day
• manage your borrowings and cash flow

In my opinion it is more than enough to worry about and manage those few things - thinks like the supply of money, price of corn in Chicago etc etc are completly out of our control so why even worry about them. Control your own ship and let others look after theirs is how i tend to look at it.

Anyway I reckon agriculture is going to boom for the next 30 or 40 years - possibly 1 of the greatest and long lasting booms ever seen, what is important for farmers is that they get their rewards for their work and investment

kowtow

Tipp Man wrote: »

Kowtow, I think your link of Soy price in USA to land price in Ireland means nothing to the vast majority of farmers in this country - you are linking a highly liquid and large sales volume commodity produced in another country with a highly illiquid, very low sales volume asset in this country - I really don't see the point.

Where was it we were planning to sell all this milk we produce? The world market for milk, into which we are hoping to sell, is liable to move with the price of US soy (+ also the dollar to some extent). If you think the moves since 2008/9 in agricultural commodities have anything to do with supply and demand you are very much mistaken - rather the fact that Western economies have been printing money like it's going out of fashion - this situation is far from certain to continue, and wheat prices have begun falling along with other commodities (gold, oil..) on the basis that the money supply will tighten.

Comparing the no. of bushels of US soy to the price of an Irish acre is simply a handy way of visualising our cost base, on the world stage where we all hope to make our money, so we can understand our competitors and market free of the distorting influence of money printing.

freedominacup

kowtow wrote: »

Where was it we were planning to sell all this milk we produce?

In de shops.

Tipp Man

kowtow wrote: »

Where was it we were planning to sell all this milk we produce? The world market for milk, into which we are hoping to sell, is liable to move with the price of US soy (+ also the dollar to some extent). If you think the moves since 2008/9 in agricultural commodities have anything to do with supply and demand you are very much mistaken - rather the fact that Western economies have been printing money like it's going out of fashion - this situation is far from certain to continue, and wheat prices have begun falling along with other commodities (gold, oil..) on the basis that the money supply will tighten.

Comparing the no. of bushels of US soy to the price of an Irish acre is simply a handy way of visualising our cost base, on the world stage where we all hope to make our money, so we can understand our competitors and market free of the distorting influence of money printing.

Sorry I think your talking crap here

For starters nz is the worlds largest exporter and they don't give a damn about USA soy prices, we'd be much better comparing our cost base to nz cost base rather than to a fictional US one

Secondly china is the worlds biggest importer of milk products and they are driving world demand and YES demand is increasing worldwide. The volume of milk and milk products traded globally is increasing year on year and will continue to increase. More people and more well off people.

Farmer Pudsey

kowtow wrote: »

Where was it we were planning to sell all this milk we produce? The world market for milk, into which we are hoping to sell, is liable to move with the price of US soy (+ also the dollar to some extent). If you think the moves since 2008/9 in agricultural commodities have anything to do with supply and demand you are very much mistaken - rather the fact that Western economies have been printing money like it's going out of fashion - this situation is far from certain to continue, and wheat prices have begun falling along with other commodities (gold, oil..) on the basis that the money supply will tighten.

Comparing the no. of bushels of US soy to the price of an Irish acre is simply a handy way of visualising our cost base, on the world stage where we all hope to make our money, so we can understand our competitors and market free of the distorting influence of money printing.

Kowtow what we have out there at present is Chicken Licken syndrome. Just like in the boom there were those that figured that it would never end there are those that also think that the recession will never end. Ad night follows day and visa versa the recession will end but it is unlikely we will go back to the heady days of the mid noughties.

If oil gets cheap it will drive production of consumer products as this happens it will cause oil to again get expensive we may be entering a continuous mini recovery/small recession type economy. However over the last 50 years we had cheap food this has now ended as demand from the Asian economies drives a demand for western type food. Did I see somewhere that if every child in China eat a yogurt once a day or week (not sure which)it would use up the Irish milk supply(my quote may not be quite accurate but it give a message).

Also as grain get more expensive grass based milk and beef will become very profitable. Ten years ago in France there milk and beef was cheaper than Ireland in the shops it is now getting more expensive, Cooked chickens are 12 euro/KG. Two burgers over 3 euro, milk over 1 euro/litre. I cannot see food droping in price and at present Irish and English consumers have been sheltered from the price rise. We have seen a rise in Supermarket milk price by 10cent/litre and this may be the start of a trend over the next ten years.

kowtow

Tipp Man wrote: »

Sorry I think your talking crap here

For starters nz is the worlds largest exporter and they don't give a damn about USA soy prices, we'd be much better comparing our cost base to nz cost base rather than to a fictional US one

Secondly china is the worlds biggest importer of milk products and they are driving world demand and YES demand is increasing worldwide. The volume of milk and milk products traded globally is increasing year on year and will continue to increase. More people and more well off people.

US exports are not far behind New Zealand (about 10%) {Yes they are, I was wrong here because I was blinded by cheese], but overall the US produces at least five times as much milk as New Zealand. China produces more than twice what New Zealand does, and India three times. It's a mistake to think that NZ is the only country in the world we should look at. There's an understandable focus in Ireland on New Zealand because of grass based production, when you have a hammer in your hand everything looks like a nail.

But more importantly - of course demand is increasing, and increasing fastest (above production) in China - but that doesn't account for most of the growth in commodity prices since 2008. We're printing money, and when we print money real things (food, land, gold etc.) increase in price precisely because they are real.

I hope we will have a great 20 or 30 years in farming*, and particularly in our particular system of grass based dairy - but somehow I dont think those years will pass without hearing the complaint that "Irish farmers are being priced out of the market by the intensive feedlots and factory farms"

* Edited - btw, if we do have a farmers boom it will likely be because money printing carries on and gets faster - despite recent signals from the fed. Inflation means riots tomorrow, deflation means riots today - so it's no surprise that when push comes to shove governments print.

20silkcut

Where is all this money that is being printed????

If anything over the last few years money has been vanishing and there is much less of it around????? In this country anyway.

jaymla627

kowtow wrote: »

US exports are not far behind New Zealand (about 10%), but overall the US produces at least five times as much milk as New Zealand. China produces more than twice what New Zealand does, and India three times. It's a mistake to think that NZ is the only country in the world we should look at. There's an understandable focus in Ireland on New Zealand because of grass based production, when you have a hammer in your hand everything looks like a nail.

But more importantly - of course demand is increasing, and increasing fastest (above production) in China - but that doesn't account for most of the growth in commodity prices since 2008. We're printing money, and when we print money real things (food, land, gold etc.) increase in price precisely because they are real.

I hope we will have a great 20 or 30 years in farming*, and particularly in our particular system of grass based dairy - but somehow I dont think those years will pass without hearing the complaint that "Irish farmers are being priced out of the market by the intensive feedlots and factory farms"

* Edited - btw, if we do have a farmers boom it will likely be because money printing carries on and gets faster - despite recent signals from the fed. Inflation means riots tomorrow, deflation means riots today - so it's no surprise that when push comes to shove governments print.

I think the premises that these massive farms milking 700 hundred cows plus are going to put the average small guy out of business is well wide of the mark having worked on a couple of these type farms the only thing that was standout about them was there debt levels well south of 5,000 dollars a cow, in one case where I got chatting the owner of on place who was running 1,700 cows between two farms and would of been in the top one precent of dairy farms in Australia, this guy really was a top class operator his total debt levels where 10 million dollars, but what's the saying owe the bank a couple of thousand and its your problem owe them a couple of million and its there, any severe raise in interest rates combined with a low milk price would put this man out of business almost overnight while the smaller guy will always have lot better chance of survival

Tipp Man

kowtow wrote: »

US exports are not far behind New Zealand (about 10%), but overall the US produces at least five times as much milk as New Zealand. China produces more than twice what New Zealand does, and India three times. It's a mistake to think that NZ is the only country in the world we should look at. There's an understandable focus in Ireland on New Zealand because of grass based production, when you have a hammer in your hand everything looks like a nail.

But more importantly - of course demand is increasing, and increasing fastest (above production) in China - but that doesn't account for most of the growth in commodity prices since 2008. We're printing money, and when we print money real things (food, land, gold etc.) increase in price precisely because they are real.

I hope we will have a great 20 or 30 years in farming*, and particularly in our particular system of grass based dairy - but somehow I dont think those years will pass without hearing the complaint that "Irish farmers are being priced out of the market by the intensive feedlots and factory farms"

* Edited - btw, if we do have a farmers boom it will likely be because money printing carries on and gets faster - despite recent signals from the fed. Inflation means riots tomorrow, deflation means riots today - so it's no surprise that when push comes to shove governments print.

As I intimated above it might not be a farmer boom but it will be an agriculture boom, it is up to farmers to get as much as they can from it.

QE will have nothing to do with it, this boom will long out last the current financial difficulties

Markcheese

Always thought the answer to all Irish dairy woes is low cost grass based production...
High intrest rates - low cost dairy
High grain price-low cost grass
Low milk price- low cost grass

Production isn't everything , it's long term profitability....(sustainability )

pakalasa

kowtow wrote: »

I have two charts on my screen, can't think of an easy way to put them up here.....

ctrl - alt - Prnt Scrn -
Open MS Paint, then Paste and save as a *JPEG file.
Attach file then to a post.
Simples:D

kowtow

pakalasa wrote: »

ctrl - alt - Prnt Scrn -
Open MS Paint, then Paste and save as a *JPEG file.
Attach file then to a post.
Simples:D

doesn't work that way on this particular terminal

kowtow

20silkcut wrote: »

Where is all this money that is being printed????

Actually, a good deal of it is already in the pockets of the producers and owners of resources, including farmers (if you have a 100 acre farm, how much has it risen in value since the low point post 2008?)

It's coming out of everyone's pockets in exchange for more expensive food, oil, etc. without anyone feeling richer. And it's driving a big and somewhat dangerous stock market rally. It's propping up house prices in the US and the UK.... and China .. and it's keeping nominal borrowing rates way below the place they ought to be at and will return to in the medium term.

A good deal of it is driving mini-booms in all kinds of risk assets, including emerging market property (China for example, has more ghost estates than Ireland).

In short, as fiat money printing always does, it's covering up the black hole that resulted when the last cheap credit boom collapsed...

delaval

kowtow wrote: »

Actually, a good deal of it is already in the pockets of the producers and owners of resources, including farmers (if you have a 100 acre farm, how much has it risen in value since the low point post 2008?)

It's coming out of everyone's pockets in exchange for more expensive food, oil, etc. without anyone feeling richer. And it's driving a big and somewhat dangerous stock market rally. It's propping up house prices in the US and the UK.... and China .. and it's keeping nominal borrowing rates way below the place they ought to be at and will return to in the medium term.

A good deal of it is driving mini-booms in all kinds of risk assets, including emerging market property (China for example, has more ghost estates than Ireland).

In short, as fiat money printing always does, it's covering up the black hole that resulted when the last cheap credit boom collapsed...

Are we in for an interest rate hike? If that happens I'm in bother:rolleyes:

If interest rises would it curtail the rise in land prices? BTW I see no rise in land values around here in fact most parcels remain unsold

bob charles

I find it hard to believe that people think there is no need to worry what is going on in current markets. People are talking about high grain prices, current grain for 13, 14 and 15 is cheaper than we can produce it. If we convert to calories then it is cheaper buy calories than grow calories ourselves at the moment.
If one is looking to expand and land is a limiting factor (as is the case for most farms in Ireland) then cheap grain will factor in driving numbers. If the price of inputs goes away down then I can guarantee you, your output prices will follow suit.
I would be happy to see interest rates rising (which they will) even though it would hit me hard but would sort allot of the messing out.

bob charles

Tipp Man wrote: »

[/LIST]In my opinion it is more than enough to worry about and manage those few things - thinks like the supply of money, price of corn in Chicago etc etc are completly out of our control so why even worry about them. Control your own ship and let others look after theirs is how i tend to look at it.

but if you can fix costs why not do so, as to guarantee yourself a margin.
If I can buy corn/calories cheaper than I can grow it what do you think I should do?

kowtow

delaval wrote: »

Are we in for an interest rate hike? If that happens I'm in bother:rolleyes:

If interest rises would it curtail the rise in land prices? BTW I see no rise in land values around here in fact most parcels remain unsold

Certainly the implied cost of borrowing in sovereign & bond markets is beginning to rise steeply. The UK yield curve is now implying a 50-100bps (.5-1%) interest rate rise a year earlier than it was at a few months ago, in 2014/15 at latest.

Irish borrowing margins over base are high, of course, because of the risk that Ireland presents so one way of looking at it is that if Irelands economy recovers, and prospers, whilst the EURIBOR base rate may rise, the margin might compress so that the rate you pay doesn't go too much above where we are today... at least that would be the optimistic view

Tipp Man

bob charles wrote: »

but if you can fix costs why not do so, as to guarantee yourself a margin.
If I can buy corn/calories cheaper than I can grow it what do you think I should do?

Well it's like locking in the milk price with glanbia at 32 cent I think it was, people were saying you would be locking in profits and margins. Then milk price goes up to 37 or 38 cent and a fella is suddenly losing 5 or 6 cent a litre. That means milk has to be 26 cent a litre next year to break even on the deal.

Similar thing happened with the grain prices last year. Fellas thought they were being smart locking in at 175 but come harvest they were losing 20 a ton or more

Am personally not a fan of locking yourself in like that, you loose so much flexibility, but each to their own

freedominacup

kowtow wrote: »

US exports are not far behind New Zealand (about 10%), but overall the US produces at least five times as much milk as New Zealand. China produces more than twice what New Zealand does, and India three times. It's a mistake to think that NZ is the only country in the world we should look at. There's an understandable focus in Ireland on New Zealand because of grass based production, when you have a hammer in your hand everything looks like a nail.

But more importantly - of course demand is increasing, and increasing fastest (above production) in China - but that doesn't account for most of the growth in commodity prices since 2008. We're printing money, and when we print money real things (food, land, gold etc.) increase in price precisely because they are real.

I hope we will have a great 20 or 30 years in farming*, and particularly in our particular system of grass based dairy - but somehow I dont think those years will pass without hearing the complaint that "Irish farmers are being priced out of the market by the intensive feedlots and factory farms"

* Edited - btw, if we do have a farmers boom it will likely be because money printing carries on and gets faster - despite recent signals from the fed. Inflation means riots tomorrow, deflation means riots today - so it's no surprise that when push comes to shove governments print.

You're undermining your credibility with that first paragraph TBH.

kowtow

freedominacup wrote: »

You're undermining your credibility with that first paragraph TBH.

Why?

freedominacup

kowtow wrote: »

Why?

Basic stuff India is largest global producer, U.S. has largest influenece due to their ability to turn on and off supply. Total internationally traded production globally is less than 5% i.e. most dairy production is consumed where it's produced. NZ production is used as stick to beat us but doesn't have that much effect on prices in most countries as they couldn't blow wind on supplying the total requirement of any of the larger markets. It effects us because we have a lot of product (relatively) to move internationally but has little impact on say U.S. or E.U. prices.

kowtow

freedominacup wrote: »

Basic stuff India is largest global producer, U.S. has largest influenece due to their ability to turn on and off supply. Total internationally traded production globally is less than 5% i.e. most dairy production is consumed where it's produced. NZ production is used as stick to beat us but doesn't have that much effect on prices in most countries as they couldn't blow wind on supplying the total requirement of any of the larger markets. It effects us because we have a lot of product (relatively) to move internationally but has little impact on say U.S. or E.U. prices.

I think we are agreeing aren't we?

My original point, and the point of the thread is that US input prices are relevant to the world market, and that comparing the price of our basic input (land or grass) with them on a like for like basis removes the distortion of currency and QE induced commodity inflation.

The post I was answering suggested that US input prices were irrelevant (despite the fact that they are a pretty good proxy for world grain prices) and we should look at NZ input prices.

freedominacup

kowtow wrote: »

I think we are agreeing aren't we?

My original point, and the point of the thread is that US input prices are relevant to the world market, and that comparing the price of our basic input (land or grass) with them on a like for like basis removes the distortion of currency and QE induced commodity inflation.

The post I was answering suggested that US input prices were irrelevant (despite the fact that they are a pretty good proxy for world grain prices) and we should look at NZ input prices.

I'd agree with your points generally it just undermines credibility to get basic stuff wrong. I hate being called for one esp. for things that are easy to check. U.S. dairy exports are hardly any bigger than our own but their overall production dwarves most other countries.

Stereomaniac

Sort your punctuation out and I will view your post more favourably then, as well. You are undermining people from Waterford. Anyway, very interesting points guys. I'm learning a lot here.

kowtow

freedominacup wrote: »

I'd agree with your points generally it just undermines credibility to get basic stuff wrong. I hate being called for one esp. for things that are easy to check. U.S. dairy exports are hardly any bigger than our own but their overall production dwarves most other countries.

I was a bit surprised myself when I saw the figure for US exports - it's a USDA figure and I see now that you are perfectly right. I had in front of me the sub category for cheese for which I apologise..

However - I'm not sure it changes the overall point much.

Farmer Pudsey

There seems to be a presumption that we will suffer deflation in the case of banking issue continuing, we may well see a return of inflation like the early seventies with the oil shock. If that happen those with money in banks will lose and those with money in other assets will not lose as much. This could also see a rise in commodity/physical goods prices. I am not saying this scenario will happen but it is an alternative scenario. This would reduce the real cost of debt and also cause an economic upturn in the medium term provided it was not rampant inflation

kowtow

Farmer Pudsey wrote: »

There seems to be a presumption that we will suffer deflation in the case of banking issue continuing, we may well see a return of inflation like the early seventies with the oil shock. If that happen those with money in banks will lose and those with money in other assets will not lose as much. This could also see a rise in commodity/physical goods prices. I am not saying this scenario will happen but it is an alternative scenario. This would reduce the real cost of debt and also cause an economic upturn in the medium term provided it was not rampant inflation

To a large extent that is what is happening right now.

QE has been drastic, but it was required to stave off a very very sharp deflation. The cost of debt is already very very low indeed, even negative in real terms for govt issuers like UK & Germany, certainly Switzerland. Unfortunately the transmission mechanism from financial markets to the high street is permanently kaput (in EU at least, and definitely in Ireland) so accessing debt and low interest rates is near impossible for businesses and farms.

Believe it or not, we are actually in the middle of an economic upturn relative to where we ought to have been had the deflation and credit bust run it's course unchecked in 2007-9. The increase in agricultural land prices (maybe better to look at the UK than Ireland) has been 200,250% or more since 2001.. look at any of the commodities since 2008 and you will see the unmistakeable signs of money printing far above what would be expected from supply & demand -

There are carefully controlled hints that the money tap will be turned off from the Fed... although I am not sure that they will find it easy to do so. If they do maintain QE though, I don't think we are in for an easy ride. Remember the "goldilocks economy, not too hot, not too cold" ... of a few years ago.. and the "soft landing" which followed? Now presumably we have to strap ourselves in for the "gentle takeoff".

Farmers better positioned than most though.. must be why people are leaving financial markets to farm