Fixed Price Milk Contract discussion.

Mooooo

Dairygold offering fixed price of 31.25 incl vat for 3 years. Options of 5 or 10% of 2017 supply figure. Just seen tweet on it. Dunno will I bother as 17 supply is well back on my own case so it won't add much either way for me. Will see when the letter comes out


Mod note:I've move the fixed price contract discussion into its own thread. Please keep fixed price discussion to this thread and general milk price discussion to the other thread.

Milk Price thread here..

https://www.boards.ie/vbulletin/showthread.php?p=101612404

Buford T. Justice.

alps

Mooooo wrote: »

Dairygold offering fixed price of 31.25 incl vat for 3 years. Options of 5 or 10% of 2017 supply figure. Just seen tweet on it. Dunno will I bother as 17 supply is well back on my own case so it won't add much either way for me. Will see when the letter comes out

That's a savage price relative to what your Captain is predicting...

freedominacup

alps wrote: »

That's a savage price relative to what your Captain is predicting...

It'd put you thinking wouldn't it?

Mooooo

No sure but i think take up on the last one wasn't great. I think the others were only 18 months, first one was anyway not sure on second one, I think it was also

Farmer Ed

alps wrote: »

Mooooo wrote: »

Dairygold offering fixed price of 31.25 incl vat for 3 years. Options of 5 or 10% of 2017 supply figure. Just seen tweet on it. Dunno will I bother as 17 supply is well back on my own case so it won't add much either way for me. Will see when the letter comes out

That's a savage price relative to what your Captain is predicting...

Captain can't lose either way. Its only for something like10% max so the other 90% will make up the balance regardless. But meanwhile who ever signs up for this will effectively have signed another 3 year contract and can't move to a better paying purchaser.

mahoney_j

Farmer Ed wrote: »

Captain can't lose either way. Its only for something like10% max so the other 90% will make up the balance regardless. But meanwhile who ever signs up for this will effectively have signed another 3 year contract and can't move to a better paying purchaser.

No 1 if scheme is undersubscribed and u apply to fix 30% you’ll probably get it
No 2 what other coop bar strathroy would take u in at the moment ??

Farmer Ed

mahoney_j wrote: »

Farmer Ed wrote: »

Captain can't lose either way. Its only for something like10% max so the other 90% will make up the balance regardless. But meanwhile who ever signs up for this will effectively have signed another 3 year contract and can't move to a better paying purchaser.

No 1 if scheme is undersubscribed and u apply to fix 30% you’ll probably get it
No 2 what other coop bar strathroy would take u in at the moment ??

No3 even it you could get 30% then the reminder of the milk will still have to make up the balance.
No 4 Competition is good for farmers. Big mistake for us to go signing our rights away when non of us are sure what opportunities could be around the corner.

Wildsurfer

Dairygold fixed milk price forms out today. 31.25 incl vat for 3 years, 10% max of 2017 supply. What do ye think? Some would say the average price over 3 years works out over 30c anyways so no benefit.

mahoney_j

Wildsurfer wrote: »

Dairygold fixed milk price forms out today. 31.25 incl vat for 3 years, 10% max of 2017 supply. What do ye think? Some would say the average price over 3 years works out over 30c anyways so no benefit.

I’d fix 10% and more if I could

alps

CIT putting together a course for dairy farmers to help in their decisions about taking part in these fixed price schemes, or futures if those products become available in Europe..

Will post here if I get news on dates...

kowtow

alps wrote: »

CIT putting together a course for dairy farmers to help in their decisions about taking part in these fixed price schemes, or futures if those products become available in Europe..

Will post here if I get news on dates...

Be interesting to hear what they have to say on that course.

One thing that worries me is the number of these courses and seminars which are given by futures brokers. There is also a tendency to over simplify a lot of things when presented to farmers and that is dangerous where speculative markets are concerned.

If everyone comes out of a presentation wanting to take up a fixed price offer or start selling forward then I'd be suspicious of the presenter!

Mooooo

The 10% for me won't make much odds either way, I guess it's greater bearing would be if another scheme comes out next year where you would then have this 10% + whatever is allowed in the next one. The way I'm thinking twill go price wise, could well be wrong, is this year will be in or around the 30c, next could well be lower depending on weather etc, and then rise again the following year as it has more or less done in a cyclical nature for years. So having schemes in or around the 30c is much of a muchness obviously once you can get thru the low year which is the key issue. What I am happy with is that participation is not dependant on previous participation so thats a positive imo.

kowtow

Mooooo wrote: »

What I am happy with is that participation is not dependant on previous participation so thats a positive imo.

Absolutely. Vital move towards sensible mechanisms.

alps

Mooooo wrote: »

What I am happy with is that participation is not dependant on previous participation so thats a positive imo.

So important that they stay that way....

These schemes now take over from the enforcement of MSA's as each time you commit your 10% or 5% for 3 years, you effectively (by the small print) commit your total supply for the same period...

Will the schemes in time, and as they build in volume, hide the true efficiency of each coop, as a current quoted milk price will never be indicative of the efficiency relative to current markets...

My concern in deciding to take part in the schemes, is what is likely to happen the pool of milk that is not fixed..

If for example we arrived at a position where 50% of the pool was fixed, how volatile will the remaining portion of the pool be...? When trading is done over a smaller pool, you would expect greater volatility...

Current peaks to troughs are running near 40%. What could that ratio be if only half the milk pool was being traded?

I would therefore be concerned about exposure to that type of volatility, and might colour my view on taking up the offers as they go along....

However, Coops need their milk price to appear middle ground, and no CEO will risk tying up so much of their pool, allowing so much volatility that from time to time their quoted milk price would be non aligned to neighbouring norms..

And on this, I can't see coops allowing much more than 30% to be fixed at any one time...

Mooo...that's no help to you in sure....

freedominacup

alps wrote: »

CIT putting together a course for dairy farmers to help in their decisions about taking part in these fixed price schemes, or futures if those products become available in Europe..

Will post here if I get news on dates...

I'll go as long as kt is the one giving the lectures.

Water John

Why would you pay for his advice? You can get it here, for free.

kowtow

Water John wrote: »

Why would you pay for his advice? You can get it here, for free.

I prefer to think of it as "accurately priced"!

K.G.

I cringe now when i see the words "fixed milk price"here.the angst , the preaching,the conspiracey theories.you make a call,you win you lose.

Farmer Ed

alps wrote: »

CIT putting together a course for dairy farmers to help in their decisions about taking part in these fixed price schemes, or futures if those products become available in Europe..

Will post here if I get news on dates...

Suggested course material.https://www.youtube.com/watch?v=WsN7CqzaE6A May help in the understanding of fractions and that no matter how something is divided the total sum of what is being divided will still remain the same. KG is correct under theses new fixed price schemes you can win or lose. This is a major departure form the Co Op ethos of everyone being paid the same way.

tibrok

A very good run through on options for managing volatility. "You hedge to survive, not to profit"

https://www.youtube.com/watch?v=LAEPyfoIS0M&t=2s

Farmer Ed

tibrok wrote: »

A very good run through on options for managing volatility. "You hedge to survive, not to profit"

https://www.youtube.com/watch?v=LAEPyfoIS0M&t=2s

That's all very well. But all our current fixed price schemes are doing it taking from one pocket and putting in to the other. Dairy products have always been forward sold. That is nothing new to Irish Co Ops. All that is new is the idea of subsidising one portion of the milk pool with the remaining portion of the milk pool.
Your man seemed to me more concerned that Co Op management were getting a bit of stick rather than the low milk price.

Buford T. Justice XIX

I can only comment on the Kerry fixed price scheme so it may or may not be relevant to other schemes.

Kerry agree a contract with a purchaser for a quantity of product to be supplied to them over the length of the scheme. They translate this quantity and price into Xc/l over a fixed time and farmers are allowed to apply for a certain percentage of their supply at that price.

That product and price has little or no relevance to the rest of the products that Kerry supply. It may replace a percentage of the rest of the supply but that would be sold at a variable price in the market so it could return more, or less, that the agreed price.
The advantage for the farmer is a guaranteed minimum price for a period.
The advantage for Kerry is a guaranteed price and customer for a period.
The advantage for the buyer is a guaranteed price and quantity for a period.

The rest of the buying/selling continue on as normal with no impact on the fixed portion.

Farmer Ed

Buford T. Justice V wrote: »

I can only comment on the Kerry fixed price scheme so it may or may not be relevant to other schemes.

Kerry agree a contract with a purchaser for a quantity of product to be supplied to them over the length of the scheme. They translate this quantity and price into Xc/l over a fixed time and farmers are allowed to apply for a certain percentage of their supply at that price.

That product and price has little or no relevance to the rest of the products that Kerry supply. It may replace a percentage of the rest of the supply but that would be sold at a variable price in the market so it could return more, or less, that the agreed price.
The advantage for the farmer is a guaranteed minimum price for a period.
The advantage for Kerry is a guaranteed price and customer for a period.
The advantage for the buyer is a guaranteed price and quantity for a period.

The rest of the buying/selling continue on as normal with no impact on the fixed portion.

But the thing is Kerry have always being fixing agreed prices with customers that is nothing new.
We are being sold a stone age tool repackaged as space age innovation.

mahoney_j

Farmer Ed wrote: »

But the thing is Kerry have always being fixing agreed prices with customers that is nothing new.
We are being sold a stone age tool repackaged as space age innovation.

Ok ed we get it u don’t like fixed schemes ,don’t fix and deal with the volatility up and down whatever way u wish ,there’s an option for us that want to protect a portion of our income ,we’ll win well loose i for one accept that not really bothered wether anyone else fixes or not same option is there for us all no point gloating when ur good side or whinging when your the other side

Farmer Ed

mahoney_j wrote: »

Farmer Ed wrote: »

But the thing is Kerry have always being fixing agreed prices with customers that is nothing new.
We are being sold a stone age tool repackaged as space age innovation.

Ok ed we get it u don’t like fixed schemes ,don’t fix and deal with the volatility up and down whatever way u wish ,there’s an option for us that want to protect a portion of our income ,we’ll win well loose i for one accept that not really bothered wether anyone else fixes or not same option is there for us all no point gloating when ur good side or whinging when your the other side

I am not gloating at all! I am just pointing out the obvious. And whether I fix or not, because of this new departure in the way milk is paid for the price I get paid for milk will be impacted either way. Alps called it correctly. Fixing a portion of they milk only exposes the remainder of the milk to more volatility. Actually if 100% the Co Ops milk could be fixed I wouldn't have a problem with it, but this 3 card trick serves no one except muddy the actual milk price.

mahoney_j

Farmer Ed wrote: »

I am not gloating at all! I am just pointing out the obvious. And whether I fix or not, because of this new departure in the way milk is paid for the price I get paid for milk will be impacted either way. Alps called it correctly. Fixing a portion of they milk only exposes the remainder of the milk to more volatility. Actually if 100% the Co Ops milk could be fixed I wouldn't have a problem with it, but this 3 card trick serves no one except muddy the actual milk price.

Yes but it’s optional and why be so worried about other suppliers

Farmer Ed

mahoney_j wrote: »

Farmer Ed wrote: »

I am not gloating at all! I am just pointing out the obvious. And whether I fix or not, because of this new departure in the way milk is paid for the price I get paid for milk will be impacted either way. Alps called it correctly. Fixing a portion of they milk only exposes the remainder of the milk to more volatility. Actually if 100% the Co Ops milk could be fixed I wouldn't have a problem with it, but this 3 card trick serves no one except muddy the actual milk price.

Yes but it’s optional and why be so worried about other suppliers

Because it affects the price I get.

mf240

The honey moon is over ed. Ya may move again.

Farmer Ed

mf240 wrote: »

The honey moon is over ed. Ya may move again.

Didn't know we had got married MF?

mf240

Farmer Ed wrote: »

Didn't know we had got married MF?

Was speaking metaphorically.

Farmer Ed

mf240 wrote: »

Farmer Ed wrote: »

Didn't know we had got married MF?

Was speaking metaphorically.

As long as I'm in a happy in my relationship I'm going no where. That said I don't like it when people threaten my relationship my filling my partners head up with all sort's of silly ideas.

Say my name

I always knew there was something there.
Ye make a lovely couple.

kowtow

Buford T. Justice V wrote: »

I can only comment on the Kerry fixed price scheme so it may or may not be relevant to other schemes.

Kerry agree a contract with a purchaser for a quantity of product to be supplied to them over the length of the scheme. They translate this quantity and price into Xc/l over a fixed time and farmers are allowed to apply for a certain percentage of their supply at that price.

That product and price has little or no relevance to the rest of the products that Kerry supply. It may replace a percentage of the rest of the supply but that would be sold at a variable price in the market so it could return more, or less, that the agreed price.
The advantage for the farmer is a guaranteed minimum price for a period.
The advantage for Kerry is a guaranteed price and customer for a period.
The advantage for the buyer is a guaranteed price and quantity for a period.

The rest of the buying/selling continue on as normal with no impact on the fixed portion.

I think Ed's point, in so far as it goes, is that in the past Kerry would still have entered into that contract, and if the contract ended up "in the money" the benefit would have accrued to all the suppliers one way or another.

It is - of course - equally true that any loss if the contract ended up out of the money would also have been borne by the entire supplier pool.

To my mind, I prefer the newer situation where suppliers can opt in or out of such fixed price contracts. Firstly, everybody's risk tolerance is different and the cost of a fixed contract (there is always a cost of fixing in the long term) is worth paying in the context of some farm businesses and not for others, and second - I'd rather that the co-op sold the milk more or less as agent rather than speculating on my behalf. The biggest hedging disasters I can recall are always the ones that are done "for the benefit of the members / passengers / taxpayers".

If a farmer is worried that he / she is missing out on the benefits (and losses!) of forward contracts because they are no longer entered into on behalf of the entire supplier base then the simple answer is to participate in all of them, for a limited quantity of the milk pool. If 10% of the creameries contracts are and always have been fixed, then punch 10% of your supply into each of them and you should - if the co-ops approach really is as described - be no better and no worse off than you would have been before.

It's worthwhile, I would suggest, pressing the boards of co-ops to explain their overall strategy for forward / fixed contracts in the long term rather than just selling the benefits of the current offering.

And it's vital to remember that an out-of-the-money forward contract is not a "loss" - for a supplier at least - it is simply a form of insurance. You don't (well at least you shouldn't..) regret paying for car insurance at the end of the year simply because you failed to write off the car.

Farmer Ed

kowtow wrote: »

Buford T. Justice V wrote: »

I can only comment on the Kerry fixed price scheme so it may or may not be relevant to other schemes.

Kerry agree a contract with a purchaser for a quantity of product to be supplied to them over the length of the scheme. They translate this quantity and price into Xc/l over a fixed time and farmers are allowed to apply for a certain percentage of their supply at that price.

That product and price has little or no relevance to the rest of the products that Kerry supply. It may replace a percentage of the rest of the supply but that would be sold at a variable price in the market so it could return more, or less, that the agreed price.
The advantage for the farmer is a guaranteed minimum price for a period.
The advantage for Kerry is a guaranteed price and customer for a period.
The advantage for the buyer is a guaranteed price and quantity for a period.

The rest of the buying/selling continue on as normal with no impact on the fixed portion.

I think Ed's point, in so far as it goes, is that in the past Kerry would still have entered into that contract, and if the contract ended up "in the money" the benefit would have accrued to all the suppliers one way or another.

It is - of course - equally true that any loss if the contract ended up out of the money would also have been borne by the entire supplier pool.

To my mind, I prefer the newer situation where suppliers can opt in or out of such fixed price contracts. Firstly, everybody's risk tolerance is different and the cost of a fixed contract (there is always a cost of fixing in the long term) is worth paying in the context of some farm businesses and not for others, and second - I'd rather that the co-op sold the milk more or less as agent rather than speculating on my behalf. The biggest hedging disasters I can recall are always the ones that are done "for the benefit of the members / passengers / taxpayers".

If a farmer is worried that he / she is missing out on the benefits (and losses!) of forward contracts because they are no longer entered into on behalf of the entire supplier base then the simple answer is to participate in all of them, for a limited quantity of the milk pool. If 10% of the creameries contracts are and always have been fixed, then punch 10% of your supply into each of them and you should - if the co-ops approach really is as described - be no better and no worse off than you would have been before.

It's worthwhile, I would suggest, pressing the boards of co-ops to explain their overall strategy for forward / fixed contracts in the long term rather than just selling the benefits of the current offering.

And it's vital to remember that an out-of-the-money forward contract is not a "loss" - for a supplier at least - it is simply a form of insurance. You don't (well at least you shouldn't..) regret paying for car insurance at the end of the year simply because you failed to write off the car.

OK so how come the price of milk to the farmer didn't rise straight away last year when the markets recovered? Or why now have we have not seen a price drop to the farmer as market prices have fallen?

alps

kowtow wrote: »

You don't (well at least you shouldn't..) regret paying for car insurance at the end of the year simply because you failed to write off the car.

What? At the price you pay😎

K.G.

Loath to get involved in this rubbish but i can only speak for carbery and say that each fixed milk price contract is backed by a supplier contract as other wise it represents a risk for carbery.as for the notion that they would have got that contract anyway maybe maybe not but normal contacts tend to be shorter time frame compared to fixed ones.alps mentioned cit running a course on volitility and i saw their presentation on it , one of the take home points was it wasnt the high price or the low price was the problem its the speed of the swings is the problem-costs tend to follow milk price.anyway dont mind me back to your conspiraces

Farmer Ed

K.G. wrote: »

Loath to get involved in this rubbish but i can only speak for carbery and say that each fixed milk price contract is backed by a supplier contract as other wise it represents a risk for carbery.as for the notion that they would have got that contract anyway maybe maybe not but normal contacts tend to be shorter time frame compared to fixed ones.alps mentioned cit running a course on volitility and i saw their presentation on it , one of the take home points was it wasnt the high price or the low price was the problem its the speed of the swings is the problem-costs tend to follow milk price.anyway dont mind me back to your conspiraces

Alps also said that fixed price schemes would cause greater volatility in the remaining pool of milk.

Nothing stopping any milk processor from fixing the Price of as much product as it wishes with any buyer. They have been doing that since Adam was a boy. Tying famers down with 3 year contracts by the back door and muddying the way the returns for product are returned the the farmer? Now that's the only real bit of innovation here.

kowtow

I suspect that to some extent your first question answers your second. The balance sheet of the co-op cushions the price a little. Any fixed price contracts where the co-op is the principal would also have an effect as does the coops own product portfolio... where prices would be slower to change than in the spot powder markets.

K.G's point about Carbery bears out my own. IMO they are absolutely correct to avoid longer term fixed hedging contracts unless taking them as agent for suppliers who opt in ... so the profits or losses on these longer contracts previously never available to the milk pool at large, rather they were absorbed by the end customer or transferred to a speculator via a futures market.

kowtow

kowtow wrote:

I suspect that to some extent your first question answers your second. The balance sheet of the co-op cushions the price a little. Any fixed price contracts where the co-op is the principal would also have an effect as does the coops own product portfolio... where prices would be slower to change than in the spot powder markets.

K.G. wrote:

one of the take home points was it wasnt the high price or the low price was the problem its the speed of the swings is the problem-costs tend to follow milk price

Absolutely right. It's always mismatched duration which sends people bankrupt.

The farmers costs are set over a longer time horizon - sometimes much longer, with land and capital expenditure, than the milk price.

The more a farm is geared up the bigger the potential effect of swings in milk price on that farm.

Thats what makes the one man inherited land everything paid for 70 cow herd such a resilient set up.. in most cases.

And that's what makes volatility an important topic as we move away from that model herd.

Farmer Ed

kowtow wrote: »

I suspect that to some extent your first question answers your second. The balance sheet of the co-op cushions the price a little. Any fixed price contracts where the co-op is the principal would also have an effect as does the coops own product portfolio... where prices would be slower to change than in the spot powder markets.

K.G's point about Carbery bears out my own. IMO they are absolutely correct to avoid longer term fixed hedging contracts unless taking them as agent for suppliers who opt in ... so the profits or losses on these longer contracts previously never available to the milk pool at large, rather they were absorbed by the end customer or transferred to a speculator via a futures market.

Even if that argument holds water. Securing a fixed price on even 30% of your milk is hardly put a meaningful amount of money in anyone's pocket if it results on you getting paid even less on the remaining 70% of your supply?

This is a bit like promoting paracetamol as a cure for cancer. Surely the real problem here is farmers can't survive for significant periods of time with low or zero income.

mahoney_j

Farmer Ed wrote: »

Even if that argument holds water. Securing a fixed price on even 30% of your milk is hardly put a meaningful amount of money in anyone's pocket if it results on you getting paid even less on the remaining 70% of your supply?

This is a bit like promoting paracetamol as a cure for cancer. Surely the real problem here is farmers can't survive for significant periods of time with low or zero income.

Ed I’m begening to think of u like those hardcore vegans over on twitter .....

Farmer Ed

mahoney_j wrote: »

Farmer Ed wrote: »

Even if that argument holds water. Securing a fixed price on even 30% of your milk is hardly put a meaningful amount of money in anyone's pocket if it results on you getting paid even less on the remaining 70% of your supply?

This is a bit like promoting paracetamol as a cure for cancer. Surely the real problem here is farmers can't survive for significant periods of time with low or zero income.

Ed I’m begening to think of u like those hardcore vegans over on twitter .....

That is a very mature constructive contribution to the discussion.

kowtow

Farmer Ed wrote: »

Surely the real problem here is farmers can't survive for significant periods of time with low or zero income.

That may well be the real problem, but in my opinion it has little or nothing to do with hedging / fixed price contracts / or indeed volatility.

Volatility is simply the propensity of a price to change, up or down. It is commonly used as a proxy for risk (remember that the milk price shooting upwards is a risk for the buyer of milk just as the price shooting downwards is a risk for the seller of milk). As dairy farmers we tend to refer to volatility in the context of falling prices, unsurprisingly, where in reality it goes both ways.

Profitability over the long term, land and labour included, ought to be the most vital topic at industry level, but fixed price contracts and other tools which help farms maintain sufficient medium term cash-flow to invest in a climate of price volatility have an important place too - not least because it is difficult to maintain a competitive cost of production at farm level without a fair amount of long term investment.

Buford T. Justice XIX

Mod note: Seeing as the last few pages of the Milk Price thread was taken up with discussing Fixed Price contracts and their justification or not, it probably justifies its own thread for that discussion and the Milk Price thread should be used for discussion of milk prices outside of fixed contracts. I'll move all related posts for the last few weeks on here and keep the two discussions separate.

Buford T. Justice.

Farmer Ed

kowtow wrote: »

Farmer Ed wrote: »

Surely the real problem here is farmers can't survive for significant periods of time with low or zero income.

That may well be the real problem, but in my opinion it has little or nothing to do with hedging / fixed price contracts / or indeed volatility.

Volatility is simply the propensity of a price to change, up or down. It is commonly used as a proxy for risk (remember that the milk price shooting upwards is a risk for the buyer of milk just as the price shooting downwards is a risk for the seller of milk). As dairy farmers we tend to refer to volatility in the context of falling prices, unsurprisingly, where in reality it goes both ways.

Profitability over the long term, land and labour included, ought to be the most vital topic at industry level, but fixed price contracts and other tools which help farms maintain sufficient medium term cash-flow to invest in a climate of price volatility have an important place too - not least because it is difficult to maintain a competitive cost of production at farm level without a fair amount of long term investment.

So how is getting paid more money for 30% of your milk and even less money for the remaining 70% of your milk as a result, going to achieve that?

jaymla627

Farmer Ed wrote: »

So how is getting paid more money for 30% of your milk and even less money for the remaining 70% of your milk as a result, going to achieve that?

I have 70 plus % fixed here for next year, lost a nice bit in 2017 to be fair, but the peace of mind knowing your guaranteed a good chunk of your income year in year out leaves investing for the future a lot more easier, helps with the tax bill to as your not left trying to pay for a great year like 2017 of the back of the next year when milk could be back in the low 20's

Farmer Ed

jaymla627 wrote: »

Farmer Ed wrote: »

So how is getting paid more money for 30% of your milk and even less money for the remaining 70% of your milk as a result, going to achieve that?

I have 70 plus % fixed here for next year, lost a nice bit in 2017 to be fair, but the peace of mind knowing your guaranteed a good chunk of your income year in year out leaves investing for the future a lot more easier, helps with the tax bill to as your not left trying to pay for a great year like 2017 of the back of the next year when milk could be back in the low 20's

I thought the Maxim you can fix was 30%? Either way the remainder of the milk pool be it your milk or everyone else's milk will be affected by the fixed prize paid for your milk. Sure it can be linked to long term forward sales. But realistically those customers would be the same ones forward buying from the co op anyway. So in effect it is just exposing the remaining pool to even greater volatility.

Buford T. Justice XIX

Farmer Ed wrote: »

I thought the Maxim you can fix was 30%? Either way the remainder of the milk pool be it your milk or everyone else's milk will be affected by the fixed prize paid for your milk. Sure it can be linked to long term forward sales. But realistically those customers would be the same ones forward buying from the co op anyway. So in effect it is just exposing the remaining pool to even greater volatility.

He is able to fix price during different years so his cumulative fixed percentage is 70%

mickey1985

Closing deadline for Dairygold is tomorrow are people signing?

Mooooo

I'm not anyway

kowtow

Farmer Ed wrote:

So how is getting paid more money for 30% of your milk and even less money for the remaining 70% of your milk as a result, going to achieve that?

No better or worse than getting paid less money for 30% of your milk and even more money for 70%.

It can go either way. Nobody should be trying to see the future, unless they have a crystal ball.

The only sure thing about a fixed price contract is that it will move the average price of your milk closer to the fix price than it would otherwise have been. Full stop, end of story. If you enter one for any other reason you are simply betting on the markets.

And if you want to bet on markets there are plenty of contracts more exciting than milk which all in all is a bit like watching paint dry.