Milk Price- Please read Mod note in post #1

Greengrass1 · 18-10-2014 08:45PM

frazzledhome wrote: »

Well that's not what I meant.
One question what do you use to pay the tax on the capital repayments on the new loan?

What I mean is rent land set up parlour, load with cows pay landlord and use profit along with home farm profit to buy new land

Now I get you. That makes sense your home farm would need to be running on all 4 cylinders before you think about this

kowtow · 19-10-2014 09:53AM

Greengrass1 wrote: »

Ive heard you say this before but I dont understand what you mean? Maybe im stupid:)

From a purely financial perspective leased land is a way better deal than purchased land as long as land prices are anywhere near ours.

Take a rent of €350 per €12,000 acre, is a yield of less than 3% - if I put my hedge fund hat on that is far too rich a price (too small a yield) for a long term illiquid asset with high transaction costs. Take that off me for five years and you are getting the better end of the bargain.

If you buy land expecting it to appreciate in value - of course - the picture is different. Our parents and grandparents experience of land purchase (not to mention other property) was that the value growth far outweighed the interest costs primarily because for the last century or so we have lived in inflationary times.

Look back further however and you will see that fifty or a hundred years of land price growth have often been followed by deflation and depression - the US in the 30's is the best example in living memory. You could hardly give land away.

And look at Japan.

We live in interesting times, unfortunately.

Brown Podzol · 19-10-2014 11:16AM

kowtow wrote: »

From a purely financial perspective leased land is a way better deal than purchased land as long as land prices are anywhere near ours.

Take a rent of €350 per €12,000 acre, is a yield of less than 3% - if I put my hedge fund hat on that is far too rich a price (too small a yield) for a long term illiquid asset with high transaction costs. Take that off me for five years and you are getting the better end of the bargain.

If you buy land expecting it to appreciate in value - of course - the picture is different. Our parents and grandparents experience of land purchase (not to mention other property) was that the value growth far outweighed the interest costs primarily because for the last century or so we have lived in inflationary times.

Look back further however and you will see that fifty or a hundred years of land price growth have often been followed by deflation and depression - the US in the 30's is the best example in living memory. You could hardly give land away.

And look at Japan.

We live in interesting times, unfortunately.

Different dynamic in Ireland as regards land though.

The object of the excersise is to make a profit. What do you do with it. Deposit interest rates are too low and other asset classes haven't been performing and need a lot of hands on management. Fund managers just screw you, allocation amounts and fund percentage fees.

Greengrass1 · 19-10-2014 12:05PM

kowtow wrote: »

From a purely financial perspective leased land is a way better deal than purchased land as long as land prices are anywhere near ours.

Take a rent of €350 per €12,000 acre, is a yield of less than 3% - if I put my hedge fund hat on that is far too rich a price (too small a yield) for a long term illiquid asset without high transaction costs. Take that off me for five years and you are getting the better end of the bargain.

If you buy land expecting it to appreciate in value - of course - the picture is different. Our parents and grandparents experience of land purchase (not to mention other property) was that the value growth far outweighed the interest costs primarily because for the last century or so we have lived in inflationary times.

Look back further however and you will see that fifty or a hundred years of land price growth have often been followed by deflation and depression - the US in the 30's is the best example in living memory. You could hardly give land away.

And look at Japan.

We live in interesting times, unfortunately.

Its ideal situation for a young farmer but young farmer needs the money and experience and a good head on his shoulders to do it. Most of the young lads doing it nearly always clued in as it is any way
Land wouldn't want to have cost you more than 350e in first yr if you have to reseed it

darragh_haven · 19-10-2014 12:06PM

And the "its my field" mentality. I have it. And lots of others have it. If I have the money, or have the capability to pay a loan off on the purchase of land......I will buy it. Even if the option of leasing was still available

keep going · 19-10-2014 07:13PM

the only advantage i see to buying land is securing my business phyiscally but it is only replacing one risk with another ie interest rates

kowtow · 19-10-2014 07:28PM

Brown Podzol wrote: »

Different dynamic in Ireland as regards land though.

Deposit interest rates are too low and other asset classes haven't been performing and need a lot of hands on management.

Deposit rates are negative, as a matter of fact, in real terms.

But that sort of deflation is extreme; and always short term. If low interest rates continue, it is because we are in a deflationary spiral - and a deflationary spiral must sooner or later begin to hit both incomes (which are way over the top in Ireland), high street prices (also way over the top) and - through a combination of de-leveraging and/or radical government action - the usual stores of wealth, which in Ireland is land & property.

If you think of land as a 20 year purchase, it is a fairly safe bet that while you are paying for it interest rates will either revert to the mean and beyond (i.e. 5-10%) or we will enter a period of acute deflation with all the social & financial upheaval that entails. Either one of these situations adds significant downside risk to land purchases made at high prices when interest rates are compressed, as they are now.

Land bought at €15,000 an acre is not "expensive" at all, if everything else is yielding zero or worse. But when interest rates rise or real deflation sets in, it may begin to look very expensive and damned hard to get rid of.

Brown Podzol · 19-10-2014 08:17PM

kowtow wrote: »

Deposit rates are negative, as a matter of fact, in real terms.

But that sort of deflation is extreme; and always short term. If low interest rates continue, it is because we are in a deflationary spiral - and a deflationary spiral must sooner or later begin to hit both incomes (which are way over the top in Ireland), high street prices (also way over the top) and - through a combination of de-leveraging and/or radical government action - the usual stores of wealth, which in Ireland is land & property.

If you think of land as a 20 year purchase, it is a fairly safe bet that while you are paying for it interest rates will either revert to the mean and beyond (i.e. 5-10%) or we will enter a period of acute deflation with all the social & financial upheaval that entails. Either one of these situations adds significant downside risk to land purchases made at high prices when interest rates are compressed, as they are now.

Land bought at €15,000 an acre is not "expensive" at all, if everything else is yielding zero or worse. But when interest rates rise or real deflation sets in, it may begin to look very expensive and damned hard to get rid of.

I've read your post a few times and I must go and think and study it. Fixing interest rates is one hedge and if the land is used for dairying it is a good bet that the yield would be around 7/8% at 12k an acre and swing with the inflation/deflation. It's what we know and while it won't blow the lights out its a steady, if low yielding,investment. Would land prices be linked to food price?, every one is telling us that demand is going to increase and so should increase the demand for land.

kowtow · 19-10-2014 09:29PM

Brown Podzol wrote: »

I've read your post a few times and I must go and think and study it. Fixing interest rates is one hedge and if the land is used for dairying it is a good bet that the yield would be around 7/8% at 12k an acre and swing with the inflation/deflation. It's what we know and while it won't blow the lights out its a steady, if low yielding,investment. Would land prices be linked to food price?, every one is telling us that demand is going to increase and so should increase the demand for land.

Fixing interest rates is definitely a hedge if you can do it that far out ... easy for a few years as the yield curve is flat in the short term.

And land prices certainly have some link to food price .. question is, what sort of link, and what sort of food price? will we continue to see food inflation? If we get a true deflationary spiral then food prices can drop like everything else. There is an awful lot of fiat money circulating in the world, and eventually it must be absorbed by either inflation, or deflation - and whatever they say Governments always prefer inflation because the odd food riot is preferable to mass unemployment, starvation, and looting. Either bad inflation or deflation tend to bring strong social measures to re-distribute wealth, from which agricultural wealth is unlikely to escape indefinitely.

Inflation, of course, will bring back interest rates with all the associated issues for asset prices.

In this context a long term lease has it's attractions - someone elses capital is at risk - but owned or rented, always always always, positive cash flow & profitability. One of the dangers of the grass only mantra is the lack of flexibility (i.e. the grazing platform required)... at least the nuts can be driven past your greedy neighbour in a lorry.

Brown Podzol · 19-10-2014 11:35PM

kowtow wrote: »

Fixing interest rates is definitely a hedge if you can do it that far out ... easy for a few years as the yield curve is flat in the short term.

And land prices certainly have some link to food price .. question is, what sort of link, and what sort of food price? will we continue to see food inflation? If we get a true deflationary spiral then food prices can drop like everything else. There is an awful lot of fiat money circulating in the world, and eventually it must be absorbed by either inflation, or deflation - and whatever they say Governments always prefer inflation because the odd food riot is preferable to mass unemployment, starvation, and looting. Either bad inflation or deflation tend to bring strong social measures to re-distribute wealth, from which agricultural wealth is unlikely to escape indefinitely.

Inflation, of course, will bring back interest rates with all the associated issues for asset prices.

In this context a long term lease has it's attractions - someone elses capital is at risk - but owned or rented, always always always, positive cash flow & profitability. One of the dangers of the grass only mantra is the lack of flexibility (i.e. the grazing platform required)... at least the nuts can be driven past your greedy neighbour in a lorry.

Had to Google fiat money, thought 'twas a misprint. What are the the chances of a deflationary spiral, I assume on a global scale, seeing as we are on world market prices and export so much of our agricultural produce. 20 year euribor swap rate is 1.72 so fixing long term is not prohibitively expensive.

kowtow · 20-10-2014 08:37AM

Brown Podzol wrote: »

20 year euribor swap rate is 1.72 so fixing long term is not prohibitively expensive.

If you can sell a 20 year euribor swap against an Irish farm asset in the high street you are a better man than me!

Is any Irish commercial bank fixing that far out?

But to answer your question - the fact that long term interest rates are flat on the ground strongly suggests that there is deflation to come. In vastly oversimplified terms, the market doesn't want to pay up today for ready money when assets will be cheaper next year.

frazzledhome · 20-10-2014 09:15AM

http://joedelves.blogspot.ie/2014/10/milk-price-drops-focus-on-whats.html?spref=tw&m=1

mahoney_j · 20-10-2014 04:35PM

39.654 cent per litre for September ,3.82 p 4.23 fat .base price 33.87.arrabawns top 10% got 41.229 with solids of 4.72 fat and 3.93 p.thought I was a great lad till I saw that bit!!!.still happy enough cows averaged over 23 ltrs for the month and I reckon top 10% were well off that

Deepsouthwest · 20-10-2014 04:47PM

mahoney_j wrote: »

39.654 cent per litre for September ,3.82 p 4.23 fat .base price 33.87.arrabawns top 10% got 41.229 with solids of 4.72 fat and 3.93 p.thought I was a great lad till I saw that bit!!!.still happy enough cows averaged over 23 ltrs for the month and I reckon top 10% were well off that

Top 10% are probably milking crossbreds OAD getting half those litres, like me!

Greengrass1 · 20-10-2014 05:30PM

mahoney_j wrote: »

39.654 cent per litre for September ,3.82 p 4.23 fat .base price 33.87.arrabawns top 10% got 41.229 with solids of 4.72 fat and 3.93 p.thought I was a great lad till I saw that bit!!!.still happy enough cows averaged over 23 ltrs for the month and I reckon top 10% were well off that

Feck ye. Here you don't need that 3c :P
Fair play to ye.
Solids pay !

RightTurnClyde · 20-10-2014 05:33PM

36.89 c/l with base of 30.41 and 4.25b, 3.90p.
This was OAD from the middle of September, average yield for the month was 21 litres on 0.5kg meal

I could easily get used to this OAD thing.

pS, they're now doing OAD 17litres @ 4.83b and 4.40p, still just getting 0.5kgs

mahoney_j · 20-10-2014 06:15PM

Deepsouthwest wrote: »

Top 10% are probably milking crossbreds OAD getting half those litres, like me!

Yep your right with half the running costs of parlour ,evening free and proab minimum meal Whereas I'm slaving morning and evening and feeding 3 kgðŸ˜„

orm0nd · 20-10-2014 07:42PM

mahoney_j wrote: »

39.654 cent per litre for September ,3.82 p 4.23 fat .base price 33.87.arrabawns top 10% got 41.229 with solids of 4.72 fat and 3.93 p.thought I was a great lad till I saw that bit!!!.still happy enough cows averaged over 23 ltrs for the month and I reckon top 10% were well off that

39.469 c/ltr
3.77 % P
4.35% bf
yield 21.14 ltr/day no meals cos of quota

is the base price stated on the new statements?, can't find it, otherwise new statement lay out is a good improvemnt

RightTurnClyde · 20-10-2014 07:52PM

mahoney_j wrote: »

Yep your right with half the running costs of parlour ,evening free and proab minimum meal Whereas I'm slaving morning and evening and feeding 3 kgðŸ˜„

You'd have to wonder alright. Have to say its a completely different days work when you're milking OAD. Lots of jobs getting done here once the milking is done in the morning. Great not having to face them in the evening. The two biggest problems I would see with it is, SCC obviously, and the other is the wrong cow type getting fat. A few of the ladies here have some BFr in them and they are the first to start drying them selves off and putting the pounds on their backs. The very milky Ho, seems to be taking to it like a duck to water.
You'd have to wonder if expanding meant having to get help in, would going OAD be a better option instead.

mahoney_j · 20-10-2014 08:03PM

RightTurnClyde wrote: »

You'd have to wonder alright. Have to say its a completely different days work when you're milking OAD. Lots of jobs getting done here once the milking is done in the morning. Great not having to face them in the evening. The two biggest problems I would see with it is, SCC obviously, and the other is the wrong cow type getting fat. A few of the ladies here have some BFr in them and they are the first to start drying them selves off and putting the pounds on their backs. The very milky Ho, seems to be taking to it like a duck to water.
You'd have to wonder if expanding meant having to get help in, would going OAD be a better option instead.

Bil and his dad switched to oad a few years ago and have finally got the correct cow for it.they go for very milky Holstein with 35 kg solids and good fertility figures.they had mostly br fr at start but they would be practically dry come mid September.the Holstein will peak at around 22/23 ltrs and is fed no more than 3.5 kg meal and grass.bil has off farm business and dad wanted to take things easy so it worked out very well.there was initial cc issues but now well under control.think they averaged 110 last year and fertility and cow condition is excellent

RightTurnClyde · 20-10-2014 09:53PM

mahoney_j wrote: »

Bil and his dad switched to oad a few years ago and have finally got the correct cow for it.they go for very milky Holstein with 35 kg solids and good fertility figures.they had mostly br fr at start but they would be practically dry come mid September.the Holstein will peak at around 22/23 ltrs and is fed no more than 3.5 kg meal and grass.bil has off farm business and dad wanted to take things easy so it worked out very well.there was initial cc issues but now well under control.think they averaged 110 last year and fertility and cow condition is excellent

Mj, they must be doing 4500-5000litres, do you know what kind of solids are they getting. I assume if the litres/cow is down, their grass intake is down aswell.
If going OAD meant carrying an extra 10 or so % to make up the kgms/ha it wouldn't be the end of the world. I've been thinking for the last few weeks, if you were only milking every morning, you could face into ALOT of cows.
I'll bet they're saving on replacement rates too.

Deepsouthwest · 20-10-2014 10:08PM

RightTurnClyde wrote: »

Mj, they must be doing 4500-5000litres, do you know what kind of solids are they getting. I assume if the litres/cow is down, their grass intake is down aswell.
If going OAD meant carrying an extra 10 or so % to make up the kgms/ha it wouldn't be the end of the world. I've been thinking for the last few weeks, if you were only milking every morning, you could face into ALOT of cows.
I'll bet they're saving on replacement rates too.

Milking OAD here as well for the last few wks and it's the business. Inside putting the kids to bed every evening reminds me there's more to life than milking cows. Wonder has anyone got any results on maybe milking twice a day until mid August or 1st sept, then switching to OAD. Have 40 acres of silage ground over a mile from the parlour, but could prob get cows there after peak yield and peak growth have tailed off. Would help to keep a higher stocking rate through the earlier part of the yr

mahoney_j · 20-10-2014 10:22PM

RightTurnClyde wrote: »

Mj, they must be doing 4500-5000litres, do you know what kind of solids are they getting. I assume if the litres/cow is down, their grass intake is down aswell.
If going OAD meant carrying an extra 10 or so % to make up the kgms/ha it wouldn't be the end of the world. I've been thinking for the last few weeks, if you were only milking every morning, you could face into ALOT of cows.
I'll bet they're saving on replacement rates too.

Off hand think there doing about 5300 ltrs ,calving starts in mid January and usually wrapped up by early April.solids last year was 4.54 fat and 3.57 p.calving is compact and cow condition is excellent.its working extremely well.busy mornings but evenings are pretty leasuirly

Timmaay · 20-10-2014 10:49PM

We're down to 13.5L on twice a day milking, last test F 4.90 P 3.94. I'd defo be only milking OAD if I could get away with it, but SCC still an issue, hard to get it much under 250. 9 autumn calvers in the mix also, 8 of them heifers, I'd have no issues throwing them all OAD as well. Actually one big annoyance this time of the year is how lazy cows are, took me an extra 5/10mins in the morning to bring them up, they kept on stopping on the laneway, then after the milking I had to drive them out of the yard, and they just stayed on the laneway for ages, going OAD would mean 1/2 the messing around with the likes of that.

RightTurnClyde · 20-10-2014 10:54PM

Deepsouthwest wrote: »

Milking OAD here as well for the last few wks and it's the business. Inside putting the kids to bed every evening reminds me there's more to life than milking cows. Wonder has anyone got any results on maybe milking twice a day until mid August or 1st sept, then switching to OAD. Have 40 acres of silage ground over a mile from the parlour, but could prob get cows there after peak yield and peak growth have tailed off. Would help to keep a higher stocking rate through the earlier part of the yr

From the small bit of research I've done, a big financial bonus of all year round OAD is increased fertility. So I wonder would you loose that bonus by only starting it in September.
I agree with what you are saying about the family, it's all well and good talking big numbers and expansion but you have to have a life aswell. And the kids are only kids for a few years

RightTurnClyde · 20-10-2014 10:59PM

mahoney_j wrote: »

Off hand think there doing about 5300 ltrs ,calving starts in mid January and usually wrapped up by early April.solids last year was 4.54 fat and 3.57 p.calving is compact and cow condition is excellent.its working extremely well.busy mornings but evenings are pretty leasuirly

So they're doing ~440kgms. At an SR of say 3 that's 1300kgms/ha, nothing at all wrong with that.

whelan2 · 23-10-2014 09:46AM

http://www.agriland.ie/news/glanbias-poor-milk-price-opening-gate-strathroy/

freedominacup · 23-10-2014 10:38AM

whelan2 wrote: »

http://www.agriland.ie/news/glanbias-poor-milk-price-opening-gate-strathroy/

Looks like frazzledhome will be getting a call soon according to that article.

frazzledhome · 23-10-2014 11:42AM

freedominacup wrote: »

Looks like frazzledhome will be getting a call soon according to that article.

Without opening a can of worms, I'd need to know price per kgms.

Around here its the liquid guys with low solid milk that have moved.

freedominacup · 23-10-2014 12:21PM

frazzledhome wrote: »

Without opening a can of worms, I'd need to know price per kgms.

Around here its the liquid guys with low solid milk that have moved.

The cover for that can went off in the recycling ages ago.

Milk Price- Please read Mod note in post #1

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