Are Dairy Farmers prepared for reality post 2015?

sheebadog

As a whole are dairy farmers prepped for real business ?
I've dealt all my life with dairy farmers as a tillage farmer and agri contractor. I'm not convinced. Couple of bad years in many,many, protected, good years. Are he able for real world economics and reality? I'm not totally convinced. Discuss.

delaval

sheebadog wrote: »

As a whole are dairy farmers prepped for real business ?
I've dealt all my life with dairy farmers as a tillage farmer and agri contractor. I'm not convinced. Couple of bad years in many,many, protected, good years. Are he able for real world economics and reality? I'm not totally convinced. Discuss.

Totally, why?

sheebadog

delaval wrote: »

Totally, why?

Totally? Explain. Discuss.
Milk quota was (is) a very protected economy. How are people that are coming from an enclosed, protected system ready for real, open business ?

mf240

Yip,

There will be peaks and troughs just as there is now but they will be more pronounced. World grain price will ultimately dictate price.

Keep the head in good years and keep the faith in bad years,

sheebadog

mf240 wrote: »

Yip,

There will be peaks and troughs just as there is now but they will be more pronounced. World grain price will ultimately dictate price.

Keep the head in good years and keep the faith in bad years,

Good advice. But what experience have you got in such an envoirment? Not you especially MF, but all dairy farmers.

delaval

sheebadog wrote: »

Totally? Explain. Discuss.
Milk quota was (is) a very protected economy. How are people that are coming from an enclosed, protected system ready for real, open business ?

Open market since 07-08
Protected to me = restricted
I won't have to shell out a wad on quota to milk more or even the same amount of cows.

Milk quota was one of the things that held up my business more than anything else.

Greengrass1

If lads want to expand they will have to deal with the problems that come with it.
I'd say I'll get used to it fairly quick because I won't be used to anything else

kevthegaff

i for one will be glad of less/no restrictions, always a worry in september/october over quota wondering will there be a s/l. At least i can milk on produce to the maximum and hopefully that entails better profits.

sheebadog

delaval wrote: »

Open market since 07-08
Protected to me = restricted
I won't have to shell out a wad on quota to milk more or even the same amount of cows.

Milk quota was one of the things that held up my business more than anything else.

Yes milk quota held up your business but it also supported your business.

kevthegaff

sheebadog wrote: »

Yes milk quota held up your business but it also supported your business.

not me, im just finished paying off for quota i bought after 5 years

delaval

People get over worried about milk price instead of budgeting at a realistic milk price. Production costs are what we need to watch, 6 wk calving rate, fit cows that can eat grass. What would worry me about some is that there are so many costs built in at this stage that when we meet a bump they won't be able to cope. We also need not fear debt but be terrified of bad debt

delaval

sheebadog wrote: »

Yes milk quota held up your business but it also supported your business.

I cannot see how quota did anything for me save add cost

kevthegaff

I think animal health will become more important as lads are restricted by land blocks which is a good thing. Theres alot of lads expanding around here who dont look after theyre animals sufficiently

delaval

kevthegaff wrote: »

I think animal health will become more important as lads are restricted by land blocks which is a good thing. Theres alot of lads expanding around here who dont look after theyre animals sufficiently

It's all about looking after the animal and the land

sheebadog

Lads, remember all those days of the "white gold" ?
Those were the days other sectors ( tillage etc.) were really suffering and learning to duck and dive. I'm just saying that ye might miss the ould quota. And an open market for the last few years doesn't really prep you for real business. No matter what Teagasc tell ye.

sheebadog

delaval wrote: »

It's all about looking after the animal and the land

That's no guarantee of success. Ask any tillage man.

delaval

sheebadog wrote: »

Lads, remember all those days of the "white gold" ?
Those were the days other sectors ( tillage etc.) were really suffering and learning to duck and dive. I'm just saying that ye might miss the ould quota. And an open market for the last few years doesn't really prep you for real business. No matter what Teagasc tell ye.

I think some have past relying on Teagasc and other consultants as the reality of business has bitten long ago if any attempt at expanding was made.

How do you see the business of dairy farming changing?

Like the Anglo Irish you may becoming more French than the French themselves;););)

sheebadog

delaval wrote: »

I think some have past relying on Teagasc and other consultants as the reality of business has bitten long ago if any attempt at expanding was made.

How do you see the business of dairy farming changing?

Like the Anglo Irish you may becoming more French than the French themselves;););)

Naw Del, I'm a true believer in capitalism. Lived it all my life. However I do believe in "live and let live". I'm not so sure that all dairy farmers can cope with reality. Protectionism (quotas) gave dairy a very false idea of business. Dairy farmers broke my h*le because they could. A few years being eased into reality isn't the best introduction.

mf240

The market will always find its own level, unless your costs are way above everyone else's or you have stupid amounts of debt I think you will be fine.

awaywithyou

sheebadog wrote: »

That's no guarantee of success. Ask any tillage man.

Tillage lads get one cheque a yr.... Complete lottery whether its good or bad.... Dairying get 10 cheques a yr better chance of a decent and more sustainable income....

Dairy lads have nothing to worry bout post quota....

mf240

sheebadog wrote: »

Naw Del, I'm a true believer in capitalism. . However I do believe in "live and let live". .

Those two sentences are mutually exclusive, France has a kind of socialist brand of capitalism doesn't it?

Timmaay

As del said we have had to face the world market since 07 anyways, so it's nothing new by now. If we survived 09 we can survive anything in fairness ha! The likes of the Uk and France however, I can see why alot of dairyfarmers there are worried, dairy exports aren't a big part of their business, however hugely variable milk prices are a real threat to the intense indoor systems which typically have a large level of borrowing, and therefore interest repayments. That however of course goes for grass based systems which are borrowed to the gills, however at least cows and land will hold their value, whereas pouring aload of concrete down for indoor systems can't be turned back into cash if it all goes bellyup.

sheebadog

mf240 wrote: »

Those two sentences are mutually exclusive, France has a kind of socialist brand of capitalism doesn't it?

Yes. And yes.
What I'm saying is that the majority of Irish and French dairy farmers are ill equipped to deal with a truly open economy.
Let's face it, after buying feed and fert, (and screwing their agri contractor) that's pretty much all the business z dairy farmer does. I know I'm over simplifying !!
This is the most profitable, protected, agri business in Ireland.
Do dairy farmers reckon they can move and shake in the real world?

tomwaterford

Timmaay wrote: »

As del said we have had to face the world market since 07 anyways, so it's nothing new by now. If we survived 09 we can survive anything in fairness ha! The likes of the Uk and France however, I can see why alot of dairyfarmers there are worried, dairy exports aren't a big part of their business, however hugely variable milk prices are a real threat to the intense indoor systems which typically have a large level of borrowing, and therefore interest repayments. That however of course goes for grass based systems which are borrowed to the gills, however at least cows and land will hold their value, whereas pouring aload of concrete down for indoor systems can't be turned back into cash if it all goes bellyup.

I know f**k all about dairying,but surly if all those people who have borrowed heavily to milk 70-90 cows max,
will be under huge pressure to make it pay if you have 4-5 sustained bad years?
I would worry are banks lending 250-400K to these size farms to repair impaired balance sheets by taking on over-valued land (tbh 10K an acre is only going to pay for itself in 10-15 years if your growing weed on it:D)

as collateral...which would surly plummet in value if dairy farmers were to suffer sustained hardship,would it end up interest only payments....which is delaying inevitable for everyone involved with debt pile-up??

Blue Holland

sheebadog wrote: »

Yes. And yes.
What I'm saying is that the majority of Irish and French dairy farmers are ill equipped to deal with a truly open economy.
Let's face it, after buying feed and fert, (and screwing their agri contractor) that's pretty much all the business z dairy farmer does. I know I'm over simplifying !!
This is the most profitable, protected, agri business in Ireland.
Do dairy farmers reckon they can move and shake in the real world?

Sound like you've bit of chip on your shoulder, don't know about the French but i pay any agri contractor the price we agreed on, simple as.

sheebadog

Timmaay wrote: »

As del said we have had to face the world market since 07 anyways, so it's nothing new by now. If we survived 09 we can survive anything in fairness ha! The likes of the Uk and France however, I can see why alot of dairyfarmers there are worried, dairy exports aren't a big part of their business, however hugely variable milk prices are a real threat to the intense indoor systems which typically have a large level of borrowing, and therefore interest repayments. That however of course goes for grass based systems which are borrowed to the gills, however at least cows and land will hold their value, whereas pouring aload of concrete down for indoor systems can't be turned back into cash if it all goes bellyup.

2009 one bad year in how many good. Don't bother.

Not all indoor intensive systems are heavily borrowed. The French are allergic to borrowings. Average household borrowing here is € 11.5k.
What the French are afraid of is the ordinary (40 to 60 cows) farmer being squeezed out.

Timmaay

sheebadog wrote: »

2009 one bad year in how many good. Don't bother.

Not all indoor intensive systems are heavily borrowed. The French are allergic to borrowings. Average household borrowing here is € 11.5k.
What the French are afraid of is the ordinary (40 to 60 cows) farmer being squeezed out.

Well I guess teagasc and glanbia don't seem to give a sjite about the likes of the 40/60cow farmer either, i remember reading up on the greenfield website before that the future of milk production in Ireland was with 150cow+ herds on low input grass systems.

sheebadog

Blue Holland wrote: »

Sound like you've bit of chip on your shoulder, don't know about the French but i pay any agri contractor the price we agreed on, simple as.

Relax. No chips. I was trying to make a point. If I knew how to edit that out I would.

My point is very little real business has been done by most dairy farmers for many,many years. They don't even have to market their products.

tomwaterford

sheebadog wrote: »

Relax. No chips. I was trying to make a point. If I knew how to edit that out I would.

My point is very little real business has been done by most dairy farmers for many,many years. They don't even have to market their products.

why would they market them...when someone will come into their yard and collect it and by and large pay a good price

sheebadog

tomwaterford wrote: »

why would they market them...when someone will come into their yard and collect it and by and large pay a good price

Correct. Another business skill that has been neglected for many years.

mf240

sheebadog wrote: »

Correct. Another business skill that has been neglected for many years.

I'm not sure what you mean, farmers will continue to supply Co ops after 2015 so will be dependent on them to market the products as we are now.

I think you underestimate farmers, we will cope with whatevers thrown at us the same as we always have.

jaymla627

tomwaterford wrote: »

I know f**k all about dairying,but surly if all those people who have borrowed heavily to milk 70-90 cows max,
will be under huge pressure to make it pay if you have 4-5 sustained bad years?
I would worry are banks lending 250-400K to these size farms to repair impaired balance sheets by taking on over-valued land (tbh 10K an acre is only going to pay for itself in 10-15 years if your growing weed on it:D)

as collateral...which would surly plummet in value if dairy farmers were to suffer sustained hardship,would it end up interest only payments....which is delaying inevitable for everyone involved with debt pile-up??

If you think banks are valuing ag land at 10k and giving out loans based on this you haven't been in with a bank manager lately looking for money using land as security, Ulster bank for instance are only valuing land at 60% of book value when being used as security, if Dairying does go tits-up and highly borrowed lads fold its a win for the banks.

sheebadog

mf240 wrote: »

I'm not sure what you mean, farmers will continue to supply Co ops after 2015 so will be dependent on them to market the products as we are now.

I think you underestimate farmers, we will cope with whatevers thrown at us the same as we always have.

My point is other farming sectors are possibly better equipped to cope.
Coops kept a lot of farmers afloat last year.

Blue Holland

sheebadog wrote: »

My point is other farming sectors are possibly better equipped to cope.
Coops kept a lot of farmers afloat last year.

Would'nt agree, take away sfp which is slowly but surely been eroded and don't think any sector is as well equipped to cope as dairy.

trixi2011

Blue Holland wrote: »

Would'nt agree, take away sfp which is slowly but surely been eroded and don't think any sector is as well equipped to cope as dairy.

I'd love to see the sfp been taken away at the same times as quatos , would soon wipe out the inaficient farms and make make way for some young farmers

keep going

sheebadog wrote: »

As a whole are dairy farmers prepped for real business ?
I've dealt all my life with dairy farmers as a tillage farmer and agri contractor. I'm not convinced. Couple of bad years in many,many, protected, good years. Are he able for real world economics and reality? I'm not totally convinced. Discuss.

Cant see a problem, it will be the land of milk and money I mean honey.alot of fellas are going to make money and alot are going to lose money

bob charles

trixi2011 wrote: »

I'd love to see the sfp been taken away at the same times as quatos , would soon wipe out the inaficient farms and make make way for some young farmers

be careful what you wish for as it could wipe out all farmers as it may become unenomic to farm the majority of Ireland. We have little or no competitive advantage except for all the rain that falls

delaval

Sheeba, you were going grand and making really good points and I couldn't disagree but I think you are gone a small bit astray.


You are right we don't need to market our product, that is because we developed and own our own marketing and processing companies, paying people to manage them


Buying feed screwing contractor the only business we do. In this area we have just invested 180 million in a greenfield site to process our milk, that's in addition to what we already have.

We have created a public company that has invested in companies that for instance own major health brands world wide.

All of this is discounting the investment on farm in education, buildings and land.

blackdog1

Timmaay wrote: »

As del said we have had to face the world market since 07 anyways, so it's nothing new by now. If we survived 09 we can survive anything in fairness ha! The likes of the Uk and France however, I can see why alot of dairyfarmers there are worried, dairy exports aren't a big part of their business, however hugely variable milk prices are a real threat to the intense indoor systems which typically have a large level of borrowing, and therefore interest repayments. That however of course goes for grass based systems which are borrowed to the gills, however at least cows and land will hold their value, whereas pouring aload of concrete down for indoor systems can't be turned back into cash if it all goes bellyup.

We only got 1 09, two or three in a row and goodbye sunshine. Im personally not going to expand untill my current setup is super efficient. Then ill steadily increase...I see boys milking more cows with less money. Post 2015 efficiency will be key

househero

Pump it out lads its good for our economy.

With the price of whey increasing 3x since I got out of the whole sale market 6 years ago I'm surprised there is any talk about a suppression of Dairy prices. If Fontana start controlling glanbias market there could be big trouble for little farmers.

trixi2011

bob charles wrote: »

be careful what you wish for as it could wipe out all farmers as it may become unenomic to farm the majority of Ireland. We have little or no competitive advantage except for all the rain that falls

agree with you on some points but its a shame to drive round the country side and see so much land sitting idle or way under stocked yellow from the lack of n if it wasn't for the sfp this land would either have to be farmed in a way that it was economically viable or it would be rented or leased out

onyerbikepat

Kepp your costs down, that's the golden rule of survival. Interesting times ahead alright.



Remember at the moment, supply is matched by demand.

freedominacup

Tax bills are going to surprise a few fellas. It's all fine adding in lots of extra cows but they go straight to the bottom line, there are costs against them but they can give rise to substantial tax bills. Averaging could be your friend very quickly.

The drain on resources that producing large numbers of heifers is will also surprise people.

Farmer Ed

delaval wrote: »

Sheeba, you were going grand and making really good points and I couldn't disagree but I think you are gone a small bit astray.


You are right we don't need to market our product, that is because we developed and own our own marketing and processing companies, paying people to manage them


Buying feed screwing contractor the only business we do. In this area we have just invested 180 million in a greenfield site to process our milk, that's in addition to what we already have.

We have created a public company that has invested in companies that for instance own major health brands world wide.

All of this is discounting the investment on farm in education, buildings and land.

I am not in total agreement with Sheepdog but I think you just sort of proved his point by quoting the cost of that plant. It's like co ops are spending money like theres no tommrow. I think if you clink on the link to this study you will find that should be costing more like €70m and not €180m. We really need to be getting better value for money and no one seems to be questioning this?
http://icmsa.ie/wp-content/uploads/2011/09/Costs-in-Milk-Processing-and-Transport-to-2020.pdf

bob charles

onyerbikepat wrote: »

Kepp your costs down, that's the golden rule of survival. Interesting times ahead alright.



Remember at the moment, supply is matched by demand.

that curve isnt right as your operating with a quota.

onyerbikepat

I know, but it will kick in post quota. But now it still does apply, in that supply is held artificially low with quotas and so price is held artificially high also.

Farmer Ed

bob charles wrote: »

that curve isnt right as your operating with a quota.

I'm no fan of Quotas and never was. Funny enough I remember the IFA used to think they were a great thing But lets be real also. The co op managers are spinning the line that the new milk is going to go in to more "value added products" and will give the co op a better return than the old milk. Did you ever hear such BS in all your life. Are we all totally stupid to be listening to that kind of spin? Are they going to tell us next they are going to send a special truck to collect this special new milk? Will existing Dairy farmers have to install a second milk tank to store this special new milk? Such BS!!!!!

Clearly there is a lot of spin coming from the co ops at the moment! Seems to me it's just a ploy to get us all excited enough to believe that we have no choice but to sign their illegal contracts. Beware of the spin! As we have seen by the Glanbia climb down after the threat of competition in Wexford. Co op management will ride farmers if they can get away with it!

tomwaterford

jaymla627 wrote: »

If you think banks are valuing ag land at 10k and giving out loans based on this you haven't been in with a bank manager lately looking for money using land as security, Ulster bank for instance are only valuing land at 60% of book value when being used as security, if Dairying does go tits-up and highly borrowed lads fold its a win for the banks.

I havn't needed a loan touch wood.doubt id get approval anyway tbh:o....im glad to hear they aren't loaning at book value as it is way over-valued....even at 60% it is hairy enough to provide a return on investment over reasonable timeframe....that being said I hope it do work out for all people who are borrowing to get into dairying-a lot of good friends and neighbours around here are getting into it..i wouldn't like to see anything happen to them..
though the prospect for 4-5 bad years/collapse in prices(I doubt the Chinese miracle-can't be sustained longterm,hope it can though)
...would really worry me,if I was only starting into it...teagasc advisers are saying privately that even they doubt a lot of newcomers will survive....that could be a case of running with the hare and hunting with the hound though...I wouldn't really know tbh...if any enterprise can pay these loans realistically it will be dairying
it is great to see all the locals around here really gearing up to go at it in a big way-has worrying reminders of the great building boom though...no one tought to say stop/use worse case figure in there calculations...some didn't bother with the calculator atall-story for anther day though!!

jaymla627

tomwaterford wrote: »

I havn't needed a loan touch wood.doubt id get approval anyway tbh:o....im glad to hear they aren't loaning at book value as it is way over-valued....even at 60% it is hairy enough to provide a return on investment over reasonable timeframe....that being said I hope it do work out for all people who are borrowing to get into dairying-a lot of good friends and neighbours around here are getting into it..i wouldn't like to see anything happen to them..
though the prospect for 4-5 bad years/collapse in prices(I doubt the Chinese miracle-can't be sustained longterm,hope it can though)
...would really worry me,if I was only starting into it...teagasc advisers are saying privately that even they doubt a lot of newcomers will survive....that could be a case of running with the hare and hunting with the hound though...I wouldn't really know tbh...if any enterprise can pay these loans realistically it will be dairying
it is great to see all the locals around here really gearing up to go at it in a big way-has worrying reminders of the great building boom though...no one tought to say stop/use worse case figure in there calculations...some didn't bother with the calculator atall-story for anther day though!!

Theirs not the same enthusiasm for dairying/getting into milk at all in my area, blessing in many ways it leaves ground a lot easier to take , would totally agree re people getting into cows that are borrowing heavily combined with small milking blocks it"s a recipe for disaster, as we go past 2015 its all going to become a number game you"ll see herds getting a lot bigger with the exception of the lads who are well established and aren't carrying debt, go to any country be it Australia, New Zealand, America for instance that are operating without quotas 300 plus cow herds are the norm over their not the exception.

Mad4simmental

jaymla627 wrote: »

Theirs not the same enthusiasm for dairying/getting into milk at all in my area, blessing in many ways it leaves ground a lot easier to take , would totally agree re people getting into cows that are borrowing heavily combined with small milking blocks it"s a recipe for disaster, as we go past 2015 its all going to become a number game you"ll see herds getting a lot bigger with the exception of the lads who are well established and aren't carrying debt, go to any country be it Australia, New Zealand, America for instance that are operating without quotas 300 plus cow herds are the norm over their not the exception.

300 is very very small in nz or oz, and they have an unlimited cheep supply of meal/grain. I suppose if we all knew what was going to happen we would be rich!!

sheebadog

delaval wrote: »

Sheeba, you were going grand and making really good points and I couldn't disagree but I think you are gone a small bit astray.


You are right we don't need to market our product, that is because we developed and own our own marketing and processing companies, paying people to manage them


Buying feed screwing contractor the only business we do. In this area we have just invested 180 million in a greenfield site to process our milk, that's in addition to what we already have.

We have created a public company that has invested in companies that for instance own major health brands world wide.

All of this is discounting the investment on farm in education, buildings and land.

Ah Del, I'm talking about at farm level. I'm talking about Joe Soap farmer that has been protected for many years.
I retract my statement on screwing contractors.
Now that you mention PLC's I always thought that they answer to shareholders. If they need to make a return on investment off the back of farmers then it will happen.
Investing in Greenfield sites will be paid by farmers n shareholders. What money or investments a PLC makes is for shareholders.
The investment of farmers in education on money well spent. A small bit of knowledge of macro economics and politics is important for farmers in this day and age. Food is political, very political. One day you can be on a winner (protected markets ,quotas,subsidies) the next day you can be on a loser.
I'm talking about individual farmers that may have built up a good business on marginal land etc.
life has been very easy (economically ) for these. PLC's are not going to mind these people. It's their ability to duck and dive. Change.
Things can change fast, very fast. Ask any former developer.