Milk Price- Please read Mod note in post #1

kowtow wrote: »

Assuming it comes from shareholder funds or retained profits that loyalty bonus is as much farmers capital as cull cows are. Feeding and milking one element of your capital in order to be "allowed" access to another doesn't make any sense - especially if the cull loses value in the meantime.

On the subject of COP as long as we quote figures without reflecting some kind of labour & land charge we are doing ourselves a gross disservice. It is absurd that we allow our politicians (and the like) to flit around all expenses paid trumping our Irish "low cost milk" when that conceit depends upon excluding labour & land from the figures. It's a fraud on the market and a fraud on the farmers.

"Our milk is cheap because we work for nothing"

We used to say in the bond market there was never a free lunch - unless the vanity of an Irish politician was at stake. That's why so much money was made trading the distressed paper of Irish banks - which at one point I could buy at a fraction of face value, only to have the full value underwritten and repaid - with interest - because the Irish political elite did not want egg on their faces.

It would be a tragedy if the same vanity, let loose on the co-op structure and in Europe, was allowed to cripple a dairy industry which ought by rights to be a national treasure.

A lot of serious thinking is required in the coming weeks & months.

As usual knowtow bang on the money

Greengrass1 wrote: »

26 is high so imo. Those here ex repayments tax wage etc is 22c

So you claim your cop is 22c excluding the largest individual costs. Therefore you quoting 22c is meaningless. Your cost of production is far higher. I assume there is no depreciation charge either rendering your quoted 22c even more irrelevant.

freedominacup wrote: »

So you claim your cop is 22c excluding the largest individual costs. Therefore you quoting 22c is meaningless. Your cost of production is far higher. I assume there is no depreciation charge either rendering your quoted 22c even more irrelevant.

I think Teagasc said 2014 average was 26c / litre excluding own land & labour & capital repayments (and presumably therefore depreciation). They commented that 6c / litre would be a sensible figure for drawings if they did include them.

Which makes 32c the figure below which we are borrowing from someone for every litre we produce, even if someone is ourselves.

Buford T. Justice V wrote: »

The dwelling house wouldn't be part of farm assets, especially if there was a mortgage advanced towards buying it.

It would be on a separate folio and would be counted under the household debt heading.

Banks are reluctant to foreclose on farms especially if the farmhouse is on the folio so, for anyone i have been talking to using the farm as security, the farmer would normally have to set up a separate folio for the farmhouse.

I think that's probably correct and legal fees etc. of course adds to the cost of borrowing. In the UK they are now expert at dividing farms when sold - for whatever reason - but here (in my case anyway) boundaries e.t.c. which used to be internal don't seem to have been given a moments thought.

The only reason the banks are lending to farmers is the relatively high collateral position described in the survey above. They may or may not care about repayments & income (do they require accident insurance?) but at the heart of it farmers in Ireland are still over-secured. They aren't backing brave - they are repairing their own collateral positions by drawing in under-borrowed agricultural holdings to offset their insane residential mortgage book.

If you doubt this for a moment, next time you borrow anything from a bank with land as security offer them a limited charge over only the number of acres which covers 140% of what you are borrowing. The stuttering explanation could be good entertainment.

Greengrass1 wrote: »

I never said 22 was my total cop I did say it ex labour drawings tax etc
I was comparing it to what mj quoted of 26 c which also ex labour drawings tax etc

Swings and roundabouts GG, there are 2 labour units in your place, which would probably add 5c X 2 to each litre. ( unless someone is working for peanuts) and you mentioned here before that you have a number of high cost captial projects to do. Saying 22 is false economy and not sustainable long term

kowtow wrote: »

I think Teagasc said 2014 average was 26c / litre excluding own land & labour & capital repayments (and presumably therefore depreciation). They commented that 6c / litre would be a sensible figure for drawings if they did include them.

Which makes 32c the figure below which we are borrowing from someone for every litre we produce, even if someone is ourselves.

The Teagasc figure includes depreciation

If you could live on out of date cornflakes that you cycled to town once a week for and put high cell count milk on them. you could probably produce milk for 16 cent a litre.

For entertainment you could play cards by candle light.

browned wrote: »

I don't disagree with you but don't teagasc include a labour charge at walks?

Yes, and often drawings and tax as well

Buford T. Justice V wrote: »

But when comparing COP, isn't the exclusion of labour costs a true comparison of COP?

While one farm might have a lot of labour and another just one labour unit, wouldn't either figure throw any comparisons way, way off?

A note on the comparison saying labour costs of 3.5c or 5c of 7c is not included in the comparison figures would help the addition of labour in the figures?

Agree on the note but the more I reflect on it the more I think the exclusion of labour (and, perhaps more controversially, owned land) is so misleading as to raise questions as to why it is done.

I don't think anyone is arguing that milk can be produced at scale without full time labour, and - from what little I know - it seems that on a grass based or even partially grass based system the output per labour unit is going to be in the region of 400-600,000 litres. A standardised labour charge of 5 or 6c per unit really is required to make any cost of production meaningful. Presumably one would need to go pretty intensive (8000 litres+) to make much of a dent in that figure and in such a scenario feed costs etc. would be taking centre stage.

I can see why things come around this way - the traditional analysis is in favour of land usage ... tillage vs dairy, beef etc. - but the more I think about it the more it seems clear that dairy simply cannot be done without full time labour and published COP must reflect that.

To argue - as I have seen done I think in some Teagasc discussion - that with family farming lots of labour is free and family costs vary from one household to another is ridiculous and simply biases the discussion in favour of the co-ops & processors. We are talking about cost of production, not cashflow or profitability per hectare, or return on investment.

So if Teagasc is to be believed, Irelands average cost of production is 32c including depreciation but without owned land.

If we accept that, or some figure close to it, what should we be doing differently (if anything) as a dairy farming nation?

frazzledhome wrote: »

Are you suggesting that staff should be made redundant and re hire more for Jan?

Considering the average cost of hiring a new person is 14% of their salary?

no, just that you don't need to be hiring expensive replacement labour to cover for holidays etc.

mf240 wrote: »

If you could live on out of date cornflakes that you cycled to town once a week for and put high cell count milk on them. you could probably produce milk for 16 cent a litre.

For entertainment you could play cards by candle light.

How would your diet and entertainment determine your production costs? If you want to live cheap why have cornflakes when you can have porridge for 7 cent a bowl