Milk price drop and break evens

trixi2011

So the nz milk companies have dropped the predicted milk price for the season coming by 20% and talk of further drops eminent unless something drastic happens, so what does this mean for Irish milk price? I often here of guys saying they can produce for 20c a litre but is this a true figure or do they have to pay themselves and pay the back loans after this. There is a lot of talk about the cost of production in our farming media but very little on the actual break even costs of milk production. Anyone got any views

Timmaay

Anyone who says they aren't loosing money at 20c/l is lying. What were the teagasc profit monitor breakeven costs for 2013? 32c is a figure that stands out in my mind.

Tibulus

Was at 27c last year. Wasnt caught for fodder with the late spring.

Read on the indpendent that the target price is 24c before considering expansion.

Tibulus

Was at 27c last year. Wasnt caught for fodder with the late spring.

Read on the indpendent that the target price is 24c before considering expansion.

Tibulus

Was at 27c last year. Wasnt caught for fodder with the late spring.

Read on the indpendent that the target price is 24c before considering expansion.

trixi2011

Tibulus wrote: »

Was at 27c last year. Wasnt caught for fodder with the late spring.

Read on the indpendent that the target price is 24c before considering expansion.

Is that 27c though include wages and repayments ??

Tibulus

trixi2011 wrote: »

Is that 27c though include wages and repayments ??

Farm is at a mature stage of development, father done with expansion and im back weekends only for now. So no repayments.

If I remember the intrest in repayments is taken into account but not the principle, its from profit.

Farmer wages isnt taken into account but car, phone and worker wages are.

_Brian

I see you mentioned including your own wages on the break even price.

Self employed people rarely ever do this and I can't see why farming would be different.

Break even is literally that for the self employed - the price at which the business covers all it's costs. Any price above that is your wage.

Otherwise it would be impossible to compare break even costs. Some lads would want a €30k wage from 20 cows while a lad with 80 cows might be happy with €25k wage. This would skew the numbers.

ellewood

trixi2011 wrote: »

Is that 27c though include wages and repayments ??

Or a land charge:D:D:D (ducks for cover)

mf240

ellewood wrote: »

Or a land charge:D:D:D (ducks for cover)

Or opportunity cost.

Mahoney wont get out of bed for less than 200 a day and at 20 cent wouldnt be able to afford to drive his own tractor.:D

trixi2011

_Brian wrote: »

I see you mentioned including your own wages on the break even price.

Self employed people rarely ever do this and I can't see why farming would be different.

Break even is literally that for the self employed - the price at which the business covers all it's costs. Any price above that is your wage.

Otherwise it would be impossible to compare break even costs. Some lads would want a €30k wage from 20 cows while a lad with 80 cows might be happy with €25k wage. This would skew the numbers.

I cant see why you wouldn't include a wage for yourself. I am used to company type accounts were all cost were included when working out the cost of production.

_Brian

trixi2011 wrote: »

I cant see why you wouldn't include a wage for yourself

There is nothing to stop you.
But break even prices rarely do.

Think about it. As a sole trader it's not like you're allowed a wage included in the cost of your product and then profit on top of that too.

mahoney_j

trixi2011 wrote: »

I cant see why you wouldn't include a wage for yourself

Neither do I ,we must be the only 2 who want to be paid for working.anyone who dosnt include and put a value their own time is only fiddlibg their accounts ,costings etc to make things look better.i worked off farm in a lab for a large multinational for 15 euro an hour bSic plus shift allowance etc etc ,stan eluded in a different thread he pays himself 65 k a year because he's worth it and that's what he could earn off farm.backbon topic who cares what is happening in New Zealand I have control over what goes on inside my gate ,I aim to produce as cheaply an efficiently as possible and aim to receive as high a price for my outputs as possible .couldnt care less what my neighbour dose it for nor anyone else

_Brian

I suppose it's just differing opinions on the terminology.
Including the wage I would see as the minimum sale price to achieve your desired lifestyle rather than the cost of the milk produced.
Obviously I'd include wages of anyone hired in to work/help. But as sole traders I don't think of the price including my wage as the break even price.

Brown Podzol

Included in the profit monitor is the no. of labour units needed to work your farm. This is not solely a teagasc figure but referenced across Europe.When multiplied by the national industrial wage very few if any will show a profit.

trixi2011

mahoney_j wrote: »

Neither do I ,we must be the only 2 who want to be paid for working.anyone who dosnt include and put a value their own time is only fiddlibg their accounts ,costings etc to make things look better.i worked off farm in a lab for a large multinational for 15 euro an hour bSic plus shift allowance etc etc ,stan eluded in a different thread he pays himself 65 k a year because he's worth it and that's what he could earn off farm.backbon topic who cares what is happening in New Zealand I have control over what goes on inside my gate ,I aim to produce as cheaply an efficiently as possible and aim to receive as high a price for my outputs as possible .couldnt care less what my neighbour dose it for nor anyone else

The way would look at it was the wage is for your work put in and the profit covers the extra effort and risk involved. I was only referencing nz because their milk price is following the world market so our is quite likely to follow as well.

keep going

I dont know what my breakeven price buti think we find out very shortly.

frazzledhome

My salary comes out monthly regardless of milk price.

mahoney_j

frazzledhome wrote: »

My salary comes out monthly regardless of milk price.

Exactly as it should be

stretch film

frazzledhome wrote: »

My salary comes out monthly regardless of milk price.

ditto but its just symantics. when you`ve your tax returns done then you`ve got your profit after tax, aka your true salary. you cant "pay" yourself more than you earn to state the obvious. no-one pays themselves 65k they havent got, not even if like Cheryl they`re worth it.....

stretch film

trixi2011 wrote: »

The way would look at it was the wage is for your work put in and the profit covers the extra effort and risk involved. I was only referencing nz because their milk price is following the world market so our is quite likely to follow as well.

heres hoping theres enough for both... my definition of break-even would be everything(land charge ,cap repayements etc.) except your own wage. its a true break even figure for your business. rainy day fund anyone?

moy83

frazzledhome wrote: »

My salary comes out monthly regardless of milk price.

Thats a good place to be , but not all self employed can afford to do it every month until they're well set up first .

frazzledhome

moy83 wrote: »

Thats a good place to be , but not all self employed can afford to do it every month until they're well set up first .

Grub goes on my table before an animal gets fed. I won't compromise at home but will do without the unnecessary on the farm. If it desirable but not necessary, do without it would be my view.

I do agree with you btw.

red bull

Guys, were only on this earth to supply cheap material for others to profit on. Water retails at more than milk ? Consumers have no problem paying 1euro/litre for water. The retailers have no problem with that but when it comes to milk its dog eat dog ?

milkprofit

If u have not paid your self u have not covered all costs
Or are u worth f all

milkprofit

mahoney_j wrote: »

Exactly as it should be

That's the only way to run the business
Money into a personal a/c

Tibulus

Have seen this very same discussion on boards every time the e-profit monitor is mentioned.

Think one of the main reasons that the farmers salary is not included is to allow farmers to benchmark themselves more easily.

Wouldn't be much of a comparison to compare a farmer with 40 cows and a salary of 35k to a farmer with 140 cows and a salary of 20k.

Think this tread had great potential but is getting side tracked by the ago old argument.

_Brian

I was wondering.

How could it be considered a break even figure if your earning say €40k a year included in the figure.

Lads are talking as if the farm is a separate entity and they are an employee. I'm presuming most are operating as sole traders? If so then ye aren't employees and your wages are whatever is left over after all costs are covered.
The break even figure for a sole trader shouldn't include a wage.

Now, along with the break even figure I would encourage lads to know that the price is that facilitates them their desired wage, this would be prudent to know ALONG with the break even figure.

atlantic mist

while not set up as a company, id consider my yearly break even to be my adj profit less my salary/drawing, tax liability and loan repayments anything below this and im not breaking even for the year

think like a company but returns as sole trader, pity no hourly rate would prob sink the company!!

the farm is a business and should be managed like one

desired wage/lifestyle if i got avg industrial wage or even basic min wage come to think of it for hours worked id take costing done by related industries a bit more serious

_Brian

atlantic mist wrote: »

while not set up as a company, id consider my yearly break even to be my adj profit less my salary/drawing, tax liability and loan repayments anything below this and im not breaking even for the year

think like a company but returns as sole trader, pity no hourly rate would prob sink the company!!

the farm is a business and should be managed like one

desired wage/lifestyle if i got avg industrial wage or even basic min wage come to think of it for hours worked id take costing done by related industries a bit more serious

I completely agree its a business and I've long since preached that lads don't know their costs and need to get an handle on them...

But in this case I feel including a wage in the break even cost of milk isn't correct...

milkprofit

_Brian wrote: »

I completely agree its a business and I've long since preached that lads don't know their costs and need to get an handle on them...

But in this case I feel including a wage in the break even cost of milk isn't correct...

Yep your labor is worth f!!! so dont include

atlantic mist

_Brian wrote: »

I completely agree its a business and I've long since preached that lads don't know their costs and need to get an handle on them...

But in this case I feel including a wage in the break even cost of milk isn't correct...

what org do you belong to say ur preaching that?

if you dont include a wage or salary in your comp do u include the opportunity cost of land rental?
if your tryin to get cost of milk ignoring these doesnt give u a transparent figure to actual cost of milk

onyerbikepat

You should try suckling! Teagasc & IFJ see no need to even include the fixed costs there.
I think you should do all 4.:D

Profit from;
1 - Variable costs only
2 - Variable costs, fixed costs
3 - variable costs, fixed costs, labour costs (your own)
4 - variable costs, fixed costs, labour costs (your own), lost opertunity

_Brian

atlantic mist wrote: »

what org do you belong to say ur preaching that?

if you dont include a wage or salary in your comp do u include the opportunity cost of land rental?
if your tryin to get cost of milk ignoring these doesnt give u a transparent figure to actual cost of milk

I didn't say I was with an org but I work with farmers on a daily basis..

I really think we're into splittin hairs here as there are many viewpoints to be taken, each valid to the holder..

Nope, personally when I do costings I don't include the missed opportunity of renting out the land because that's a not an option I'd consider, it may work for some but we're in farming to farm and not rent the place out..

Brown Podzol

trixi2011 wrote: »

So the nz milk companies have dropped the predicted milk price for the season coming by 20% and talk of further drops eminent unless something drastic happens, so what does this mean for Irish milk price? I often here of guys saying they can produce for 20c a litre but is this a true figure or do they have to pay themselves and pay the back loans after this. There is a lot of talk about the cost of production in our farming media but very little on the actual break even costs of milk production. Anyone got any views

Break even is different for every farm. The only way to get break even for your farm is start with the profit monitor, take out depreciation and add in capital repayments, lease payments. Add in drawings, these include tax and the resulting figure is the break even cost per ltr for your farm for LAST YEAR.

milkprofit

Brown Podzol wrote: »

Break even is different for every farm. The only way to get break even for your farm is start with the profit monitor, take out depreciation and add in capital repayments, lease payments. Add in drawings, these include tax and the resulting figure is the break even cost per ltr for your farm for LAST YEAR.

very true then if anything left That IS your Profit Margin