new entrants into milk production post quotas

countrydude

is it just me but with all the talk about the abolition of milk quotas is it financially realistic for someone to start up from scratch suppling milk . met a lad today who is totally convinced theres money to be made from dairy farming. hes planning on borrowing heavily to set up. he has about 80 acres of land but buildings would be old and he would have to purchase all the stock. now the business head in me tells me he is nuts to contemplate this but all the experts tell this lad its going to be great .in my view the abolition of quotas is good for existing milk producers but for someone starting from scratch it is fast track to financial ruin. am i on my own in this or whats the general thoughts on the subject

solwhit2

countrydude wrote: »

is it just me but with all the talk about the abolition of milk quotas is it financially realistic for someone to start up from scratch suppling milk . met a lad today who is totally convinced theres money to be made from dairy farming. hes planning on borrowing heavily to set up. he has about 80 acres of land but buildings would be old and he would have to purchase all the stock. now the business head in me tells me he is nuts to contemplate this but all the experts tell this lad its going to be great .in my view the abolition of quotas is good for existing milk producers but for someone starting from scratch it is fast track to financial ruin. am i on my own in this or whats the general thoughts on the subject

Your spot on there they don't seem to get how much it will cost to start up.if I had to up myself I would give it a year or 2 anyway to see how its shaping up .a bad year next year and the new lads will be on the back foot very quickly.

Feckthis

countrydude wrote: »

is it just me but with all the talk about the abolition of milk quotas is it financially realistic for someone to start up from scratch suppling milk . met a lad today who is totally convinced theres money to be made from dairy farming. hes planning on borrowing heavily to set up. he has about 80 acres of land but buildings would be old and he would have to purchase all the stock. now the business head in me tells me he is nuts to contemplate this but all the experts tell this lad its going to be great .in my view the abolition of quotas is good for existing milk producers but for someone starting from scratch it is fast track to financial ruin. am i on my own in this or whats the general thoughts on the subject

If you are a good business man/woman you will make it work. I.e knows there costs of production, doesn't over spend, is good with cows and is willing to work very very hard. Yes it is a big risk but no great business ever started without abit of risk!

J DEERE

countrydude wrote: »

is it just me but with all the talk about the abolition of milk quotas is it financially realistic for someone to start up from scratch suppling milk . met a lad today who is totally convinced theres money to be made from dairy farming. hes planning on borrowing heavily to set up. he has about 80 acres of land but buildings would be old and he would have to purchase all the stock. now the business head in me tells me he is nuts to contemplate this but all the experts tell this lad its going to be great .in my view the abolition of quotas is good for existing milk producers but for someone starting from scratch it is fast track to financial ruin. am i on my own in this or whats the general thoughts on the subject

Same experts advocating outdoor pads and bull beef I'm sure

Sam Kade

countrydude wrote: »

is it just me but with all the talk about the abolition of milk quotas is it financially realistic for someone to start up from scratch suppling milk . met a lad today who is totally convinced theres money to be made from dairy farming. hes planning on borrowing heavily to set up. he has about 80 acres of land but buildings would be old and he would have to purchase all the stock. now the business head in me tells me he is nuts to contemplate this but all the experts tell this lad its going to be great .in my view the abolition of quotas is good for existing milk producers but for someone starting from scratch it is fast track to financial ruin. am i on my own in this or whats the general thoughts on the subject

Will he even get a loan? The banks won't be willing to throw money at him if he needs as much as you say without any stock or proper buildings.

frazzledhome

J DEERE wrote: »

Same experts advocating outdoor pads and bull beef I'm sure

How exactly does that post add to this thread?

Debt is going to be a big issue and needs to be well planned. All won't succeed but I'm sure many will

Don't go blaming advisors, its what you do with the advise that's important. For a start these new entrants won't have 3c quota costs attached to dairy farming.

Dairy is simple keep costs, system simple while matching SR to what grass your farm can grow. It's the shyte robots, zgrazers, big phuck off sheds and gimmicks that'll sink any hi borrowed new entrant.

I know many who've gotten in within the last few years having bought quota, developed farm and bought stock and their doing fine

J DEERE

frazzledhome wrote: »

How exactly does that post add to this thread?

Debt is going to be a big issue and needs to be well planned. All won't succeed but I'm sure many will

Don't go blaming advisors, its what you do with the advise that's important. For a start these new entrants won't have 3c quota costs attached to dairy farming.

Dairy is simple keep costs, system simple while matching SR to what grass your farm can grow. It's the shyte robots, zgrazers, big phuck off sheds and gimmicks that'll sink any hi borrowed new entrant.

I know many who've gotten in within the last few years having bought quota, developed farm and bought stock and their doing fine

Re-read OPs post. He says that the experts are telling him it's going to be great. Just as they told farmers that outdoor pads were the new way of wintering cows and that store beef was inefficient and bull beef was the way to go. Same experts are telling young farmers with no dairying experience to borrow heavily to enter. I know it's at everyone's discretion to follow their advice but believe it or not some farmers tend to trust their advisors on issues like this

frazzledhome

J DEERE wrote: »

Re-read OPs post. He says that the experts are telling him it's going to be great. Just as they told farmers that outdoor pads were the new way of wintering cows and that store beef was inefficient and bull beef was the way to go. Same experts are telling young farmers with no dairying experience to borrow heavily to enter. I know it's at everyone's discretion to follow their advice but believe it or not some farmers tend to trust their advisors on issues like this

Firstly OPs referring to his friend

I don't know of any adviser advocating over borrowing to get into cows. Who are these experts your referring to?

whelan2

countrydude wrote: »

is it just me but with all the talk about the abolition of milk quotas is it financially realistic for someone to start up from scratch suppling milk . met a lad today who is totally convinced theres money to be made from dairy farming. hes planning on borrowing heavily to set up. he has about 80 acres of land but buildings would be old and he would have to purchase all the stock. now the business head in me tells me he is nuts to contemplate this but all the experts tell this lad its going to be great .in my view the abolition of quotas is good for existing milk producers but for someone starting from scratch it is fast track to financial ruin. am i on my own in this or whats the general thoughts on the subject

op dont worry about him/her.....dont know how many people I have heard on about other peple doing similar, what they are doing is their own business.

Greengrass1

Been on a few farms over last yr or two ofnew eentrants.
Very good business men..if you want to make it work you will but theres no doubt about it its tough to get going it will take 5 yrs before ye really reap the rewards.
Main poing I seen with them all if they were very good suckler/beef/sheep men they were very good at dairying.
Attitude is everything and how you approach things

Sam Kade

whelan2 wrote: »

op dont worry about him/her.....dont know how many people I have heard on about other peple doing similar, what they are doing is their own business.

Exactly, it's amazing the amount of people on boards who start threads on behalf of their friends neighbours even though the majority of the time it's themselves they are talking about.

frazzledhome

Sam Kade wrote: »

Exactly, it's amazing the amount of people on boards who start threads on behalf of their friends neighbours even though the majority of the time it's themselves they are talking about.

So true

Tibulus

frazzledhome wrote: »

I know many who've gotten in within the last few years having bought quota, developed farm and bought stock and their doing fine

I think milk pre 2015 and post 2015 needs to be be considered differently.

The margin in mik is set to reduce to as supply increases.

I think that the established dairy farmers can survive if they are smart about it. If price drops to 32c/l and cost of production is 25c/l (at best) I would not like to have to be making repayments off my 7c/l profit.

Have no idea what the cost of production would be with a zero grazer and would not like to find out.

rangler1

J DEERE wrote: »

Re-read OPs post. He says that the experts are telling him it's going to be great. Just as they told farmers that outdoor pads were the new way of wintering cows and that store beef was inefficient and bull beef was the way to go. Same experts are telling young farmers with no dairying experience to borrow heavily to enter. I know it's at everyone's discretion to follow their advice but believe it or not some farmers tend to trust their advisors on issues like this

Lots of farmers out there just looking for someone to blame for their own stupidity, have had plenty of examples in the last year. John Bryan always preached that export was the best place for Friesian calves....yet who's in the firing line

F.D

Greengrass1 wrote: »

Been on a few farms over last yr or two ofnew eentrants.
Very good business men..if you want to make it work you will but theres no doubt about it its tough to get going it will take 5 yrs before ye really reap the rewards.
Main poing I seen with them all if they were very good suckler/beef/sheep men they were very good at dairying.
Attitude is everything and how you approach things

Your spot on the money Greengrass, and i don't think any new entrant or person considering going into it is expecting to make a fortune in the next 5 years anyway, especially if they are coming from the beef or suckler sector they are probably used to running at break even and having to really think carefully about where they spend money along the way
so even if it takes 7-10 years to get the enterprise off the ground and then have a business that pays set up for the future

and i also agree its the best of the other sectors that will make a real go of the dairying if they do make the change

freedominacup

F.D wrote: »

Your spot on the money Greengrass, and i don't think any new entrant or person considering going into it is expecting to make a fortune in the next 5 years anyway, especially if they are coming from the beef or suckler sector they are probably used to running at break even and having to really think carefully about where they spend money along the way
so even if it takes 7-10 years to get the enterprise off the ground and then have a business that pays set up for the future

and i also agree its the best of the other sectors that will make a real go of the dairying if they do make the change

Pedigree suckler herd from this area supposed to have been in tullamore on Tuesday. 140 head. 20 unit parlour going in. Farm already fairly well paddocked. Plenty of modern housing which should be straightforward to convert. This guy has at least one bull in an ai stud. I'd have no fear for him tbh.

frazzledhome

freedominacup wrote: »

Pedigree suckler herd from this area supposed to have been in tullamore on Tuesday. 140 head. 20 unit parlour going in. Farm already fairly well paddocked. Plenty of modern housing which should be straightforward to convert. This guy has at least one bull in an ai stud. I'd have no fear for him tbh.

In general that's the calibre of new entrant I'm noticing. Good guys doing their sums and researching really well.

The new guys are going to leave quiet a few of the more established inefficient guys for dust.

I wouldn't be one bit worried about them

have2flushtwice

A guy in my parish renting land, 225p.ac for dairy. Its close to his own dairy. Hard to see a profit from that.
For a lad starting out, ya would want your own land, repayments on borrowings plus rent wud be enormus.

mahoney_j

have2flushtwice wrote: »

A guy in my parish renting land, 225p.ac for dairy. Its close to his own dairy. Hard to see a profit from that.
For a lad starting out, ya would want your own land, repayments on borrowings plus rent wud be enormus.

Ya think 225 is mad ,what would u think of 350 an acre.even if a block next to my parlour came up I'd be fairly hard pushed to justify paying anything near that

F.D

freedominacup wrote: »

Pedigree suckler herd from this area supposed to have been in tullamore on Tuesday. 140 head. 20 unit parlour going in. Farm already fairly well paddocked. Plenty of modern housing which should be straightforward to convert. This guy has at least one bull in an ai stud. I'd have no fear for him tbh.

Its a shame there is lads having to convert and giving up a herd like that, probably took years of work to built up with not enough reward
Once your up to that sort of stocking rate it does tie up a lot of your time even if you have an off farm job,
so i dont think been tied to it or the change over will be much of a shock to the system either

At the end of the day i would say like the example above you would want to have a lot of stock to cash in and have a lot of the ground work done over a few years before changing,

frazzledhome

mahoney_j wrote: »

Ya think 225 is mad ,what would u think of 350 an acre.even if a block next to my parlour came up I'd be fairly hard pushed to justify paying anything near that

Beside parlour I don't think I'd chance you, wouldn't take it me arse

Coonagh

90% of new entrants will be fine, they have the figures done and they have the luxury of starting from scratch which is a huge advantage in terms of getting the right production system in place from day one. The smart ones will keep capital expenditure to a minimum and put money into quick pay back items such as cows, grass and grazing infrastructure.

I wonder do the people who persist in throwing ****e at new entrants know the cost of production on their own farm.

mahoney_j

frazzledhome wrote: »

Beside parlour I don't think I'd chance you, wouldn't take it me arse

Would be given serious consideration but 350 an acre would make me question wether financially it would be a good idea rather than just taking it cause it's beside the parlour.itd be hard say no granted!!

frazzledhome

mahoney_j wrote: »

Would be given serious consideration but 350 an acre would make me question wether financially it would be a good idea rather than just taking it cause it's beside the parlour.itd be hard say no granted!!

Go way to phuck, you sell a kidney and support Leinster before you'd let it pass.

I know sometimes it just too dear

kowtow

frazzledhome wrote: »

The new guys are going to leave quiet a few of the more established inefficient guys for dust.

I wouldn't be one bit worried about them

I think there is a lot of truth in that.

But I also think some entrants may get disillusioned before they have time to really make it work - especially if milk prices & or interest rates go hard against them.

And some entrants may well underestimate just how complicated high performance dairying is - I'm generally a fairly quick learner but the sheer variety of moving parts in dairy continues to amaze me. When I look at the successful dairy guys I know I think there is an element of 'vocation' in it which goes way beyond simply choosing the most profitable farming system for a given block of land.

rangler1

F.D wrote: »

Its a shame there is lads having to convert and giving up a herd like that, probably took years of work to built up with not enough reward
Once your up to that sort of stocking rate it does tie up a lot of your time even if you have an off farm job,
so i dont think been tied to it or the change over will be much of a shock to the system either

At the end of the day i would say like the example above you would want to have a lot of stock to cash in and have a lot of the ground work done over a few years before changing,

A lot of those guys would have a substantial SFP to ease the transition

keep going

To be honest im more worried about myself than newentrants, I know what my costs are and the margin is getting tighter allthe time

freedominacup

frazzledhome wrote: »

Go way to phuck, you sell a kidney and support Leinster before you'd let it pass.

I know sometimes it just too dear

He might sell the kidney but the other would be a step too far.

kowtow

freedominacup wrote: »

He might sell the kidney

Well as long as it's a grass-fed kidney.

awaywithyou

frazzledhome wrote: »

Go way to phuck, you sell a kidney and support Leinster before you'd let it pass.

I know sometimes it just too dear

what would it cost in repayments if he was t buy it? surely paying 350/acre to rent it would be no bother??

Timmaay

awaywithyou wrote: »

what would it cost in repayments if he was t buy it? surely paying 350/acre to rent it would be no bother??

Doing some quick sums here (which I might be out on!). Anyways assume the land can be bought for 10k/acre, and is paid for with a 100% mortgage over 20yrs at a fixed rate of 5% interest, the total interest over the 20years would be in around 5250, or 262e/year averaged out (starting out at 500e 1st year). Including the capital, the repayments average out at 763e/year.

frazzledhome

Timmaay wrote: »

Doing some quick sums here (which I might be out on!). Anyways assume the land can be bought for 10k/acre, and is paid for with a 100% mortgage over 20yrs at a fixed rate of 5% interest, the total interest over the 20years would be in around 5250, or 262e/year averaged out (starting out at 500e 1st year). Including the capital, the repayments average out at 763e/year.

You forgot income tax

jaymla627

awaywithyou wrote: »

what would it cost in repayments if he was t buy it? surely paying 350/acre to rent it would be no bother??

350 an acre works out at around 850 a hectare, if we assume you go with 10 bags of fert for the grazing season with a price of say 17 euro a bag average you are now gone to a cost of 1020 euro a hectare, if we assume this ground grows 10 tons of utilized dry matter its costing in our around 100 euro a ton our 10 cent kilo/dm.
Then we add in the other costs reseeding/roadways/water/fencing etc, you would nearly be aswell of to call in the meal lorry considering current concentrate prices then take ground at 350 an acre.

Timmaay

frazzledhome wrote: »

You forgot income tax

Hmm yep on the capital. What would be a reasonable guess at the tax rate for this? Is it all on the high rate as you still got to live yourself so are probably drawing down up to at least the bottom of the higher rate, in that case, looking at my previous figures, the 10k/acre will basically mean you need to draw 20k from the farm account, and give the taxman about 50%? So back to the figures I had before, the repayments on average over the 20years are 1260euros. Hmmm 350e for rent suddenly doesn't look too crazy ha?

mf240

jaymla627 wrote: »

350 an acre works out at around 850 a hectare, if we assume you go with 10 bags of fert for the grazing season with a price of say 17 euro a bag average you are now gone to a cost of 1020 euro a hectare, if we assume this ground grows 10 tons of utilized dry matter its costing in our around 100 euro a ton our 10 cent kilo/dm.
Then we add in the other costs reseeding/roadways/water/fencing etc, you would nearly be aswell of to call in the meal lorry considering current concentrate prices then take ground at 350 an acre.

Youd be way better off without it.

You also have the cost of stocking it. Spraying weeds maintaing fences extra labour.

You can buy gold to dear.

frazzledhome

If for instance you were farming 100 acres around parlour and 25 came up next door at 350, would it be a runner then?

Greengrass1

frazzledhome wrote: »

If for instance you were farming 100 acres around parlour and 25 came up next door at 350, would it be a runner then?

Entirely depends on personal situation or farm situation imo. I know if it came up beside me I wouldn't be able to afford it.
Theres no point in taking extra land on your milking block if your own land isnt in top order

Milked out

frazzledhome wrote: »

If for instance you were farming 100 acres around parlour and 25 came up next door at 350, would it be a runner then?

If it was replacing rented land further away I would.as it's near on a 1.5 to 2 hr round trip.for one bit of ground we have rented. Also if u could stock it with cows without needing extra silage ground or heifer ground I would also. If it wasn't allowing those scenarios I'd have to think long and hard about it

kowtow

jaymla627 wrote: »

350 an acre works out at around 850 a hectare, if we assume you go with 10 bags of fert for the grazing season with a price of say 17 euro a bag average you are now gone to a cost of 1020 euro a hectare, if we assume this ground grows 10 tons of utilized dry matter its costing in our around 100 euro a ton our 10 cent kilo/dm.
Then we add in the other costs reseeding/roadways/water/fencing etc, you would nearly be aswell of to call in the meal lorry considering current concentrate prices then take ground at 350 an acre.

Whenever I work out the cost of grass it comes in between 7 and 13 cents / kilo DM depending on yield and whether grazed, ensiled, hayed, etc.

Anything else would require land to be free and fertiliser to fall like manna from heaven, neither of which are the case under this present Government.

kowtow

Greengrass1 wrote: »

Entirely depends on personal situation or farm situation imo. I know if it came up beside me I wouldn't be able to afford it.
Theres no point in taking extra land on your milking block if your own land isnt in top order

If you are buying land next to the parlour, you are making a capital investment in the ability to feed more cows relatively cheaper in future years. You are in effect buying an option, the question is how to value it.

Assume that grass is often or usually the cheapest feed and will remain so in the future.

Further assume that grass is 7c / kg grazed and 13 / c kg ensiled, hayed, or zero grazed and drawn in. Others will have a better view of these figures but the important thing is the difference - in this case, say, 6 c a kilo. That 6c /kg does not apply throughout the year as a portion of the grass will be conserved anyway for winter feed, so you would need to work out a blended cost - if 50% was conserved you could assume 3c / kg DM.

When you pay a premium for land you can graze directly you are paying for that 3c / kgDM advantage. Whatever the premium is on the next door land, compared to alternative cheaper silage ground for example - that 3c / kg must pay for it.

The above is a simplification of course, there are management costs, time & machinery to consider unless drawing in significant fodder is already part of your setup or will need to be in the future.

jaymla627

kowtow wrote: »

Whenever I work out the cost of grass it comes in between 7 and 13 cents / kilo DM depending on yield and whether grazed, ensiled, hayed, etc.

Anything else would require land to be free and fertiliser to fall like manna from heaven, neither of which are the case under this present Government.

The thing is that with grass it varies such much rom year to year and land type also plays a big part , along with relying on the weather going with you and not against you, having spent north of 50,000 reseeding/reclaiming/putting in roadways the last 18 months keeping good grassland motoring and growing 12 tons plus of dm every year carries a significant cost and one that is often not factored in properly when lads say what its costing them to grow a kilo of dm

kowtow

jaymla627 wrote: »

The thing is that with grass it varies such much rom year to year and land type also plays a big part , along with relying on the weather going with you and not against you, having spent north of 50,000 reseeding/reclaiming/putting in roadways the last 18 months keeping good grassland motoring and growing 12 tons plus of dm every year carries a significant cost and one that is often not factored in properly when lads say what its costing them to grow a kilo of dm

All good points, particularly on quality and not just yield.

Be interesting to develop a realistic index of prices for grass, grazed or cut, and corrected for quality from year to year. I suspect some would look at their budgets and profit monitors in a different way.