Milk Price- Please read Mod note in post #1

kowtow · 02-10-2015 05:24PM

frazzledhome wrote: »

That said, a former boss told me I was unemployable;)

You and me both, I've fired everyone I ever worked for.

WheatenBriar · 02-10-2015 05:30PM

frazzledhome wrote: »

https://twitter.com/icos_bxl/status/649925117007556608

Coops not subbing milk, eh?

Think I mentioned that exact figure a few posts back

Subbing is a loaded word
Margin sharing is a better turn of phrase
They are after all supposed to be co operatives,although you wouldn't think so with one or two of them...

kowtow · 02-10-2015 05:46PM

frazzledhome wrote: »

It's quota in another guise. Spoke to someNorthern French farmers recently who reported something similar. They were talking about 1 price for 80% of their former quota 1 lower for the next 20% and a really shyte price for anything above this.

Surely at some point though the processor has to match what he can sell, and at what price, with what he will buy and at what price.

If an Irish processor can sell 1 million litres @ 28c in high value products and must effectively take anything over 1 million straight out to the spot market as powder - at 21c for example, then one way or another the suppliers to that co-op are going to bear a blended price.

If between them they supply only the 1 million, they can all have 28c
If they supply 10 million between them (and assuming the processor can't sell any more of the high priced product), then the co-op / processor is receiving 21.7c in aggregate over the whole 10 million litres.

It seems to me that the issue here is how to share this out among co-op suppliers. If you expand production, and your neighbour doesn't, you are eating into his "share" of the high value sales which can't be expanded, and you are therefore lowering the milk price he receives. Splitting people's supply into contracts reflecting the actual distribution of the milk seems a perfectly valid way of solving that problem, IMO.

Surely this is not because the co-op doesn't want to sell all it's milk at a top price, but simply because the demand for value added products will always be more limited than the supply of milk to make them with.

atlantic mist · 02-10-2015 06:34PM

we are only a small country processing wise so the value added market is far greater than what we can supply

Our premium product stands out internationally
we command 17% of the infant formula market in china (avg milk price for july was 56c devaluing currency will reduce buying power some bit prob back to 15% for coming year)
best selling foreign butter in germany
our cheeses seem to be always winning awards at those international cheese awards, but we undercut our english counterparts to get cheese on the shelf which effects their milk pricing, which in turn effects our milk pricing, if our processors undercut it is us supplier who bear the brunt not the seller, id like to see them doing a bit more work in this area as it lazy marketing to sell cheaper product and get an easy way into the supermarket its like cutting the milk price at peak production easiest way to make margin,
most of smp (probable lowest value added product we make)used to go to Algeria, think they bought else where this year.

how much of our product goes on spot prices? what % of our product goes into each category?

Dawggone · 02-10-2015 06:58PM

frazzledhome wrote: »

It's quota in another guise. Spoke to someNorthern French farmers recently who reported something similar. They were talking about 1 price for 80% of their former quota 1 lower for the next 20% and a really shyte price for anything above this.

I'm actually meeting a group on Friday from France and must quiz them.From what I read here I thought it was all added value and rosey gardens in France, seems not

Up north in the dairy country it goes something like that... Aquota gets full price and Bquota is slightly less, but Cquota gets fined 28cpl!!

Agreed that it's a 'new' form of quota but if my crowd pay me 35cpl and I'd have to cut back 500k litres then I'd have to look closely.
Their reasoning is that they can't pay top dollar for milk products that are being dumped on world markets.

Edit. The above is worst case scenario. I'm getting 31cpl until the new year but if price falls below 26cpl I'd look at it.

Dawggone · 02-10-2015 07:28PM

kowtow wrote: »

Surely at some point though the processor has to match what he can sell, and at what price, with what he will buy and at what price.

.

Carefull now Kowtow....that's quota by a different name!
Saying that, all things being equal, with a highly efficient processor manufacturing top end high margin product, what would be wrong with it?
I'd rather produce 2mil litres at 35cpl than 3mil litres at 26cpl.

Dawggone · 02-10-2015 07:38PM

atlantic mist wrote: »

we are only a small country processing wise so the value added market is far greater than what we can supply

Our premium product stands out internationally
we command 17% of the infant formula market in china (avg milk price for july was 56c devaluing currency will reduce buying power some bit prob back to 15% for coming year)
best selling foreign butter in germany
our cheeses seem to be always winning awards at those international cheese awards, but we undercut our english counterparts to get cheese on the shelf which effects their milk pricing, which in turn effects our milk pricing, if our processors undercut it is us supplier who bear the brunt not the seller, id like to see them doing a bit more work in this area as it lazy marketing to sell cheaper product and get an easy way into the supermarket its like cutting the milk price at peak production easiest way to make margin,
most of smp (probable lowest value added product we make)used to go to Algeria, think they bought else where this year.

how much of our product goes on spot prices? what % of our product goes into each category?

You've touched on a few good points there AM.
Those points are what I've been gobbing on about for ages...the modus operandi of the dairy industry in Ireland has been that we will produce cheaper than the lowest common denominator no matter what happens...and will stick at it! That (to me) is the classic NZ model. No roof on sheds, no machinery, no bother!

Can't see too many other europeans doing that...

kowtow · 02-10-2015 08:10PM

atlantic mist wrote: »

we are only a small country processing wise so the value added market is far greater than what we can supply

Our premium product stands out internationally
we command 17% of the infant formula market in china (avg milk price for july was 56c devaluing currency will reduce buying power some bit prob back to 15% for coming year)
best selling foreign butter in germany
our cheeses seem to be always winning awards at those international cheese awards, but we undercut our english counterparts to get cheese on the shelf which effects their milk pricing, which in turn effects our milk pricing, if our processors undercut it is us supplier who bear the brunt not the seller, id like to see them doing a bit more work in this area as it lazy marketing to sell cheaper product and get an easy way into the supermarket its like cutting the milk price at peak production easiest way to make margin,
most of smp (probable lowest value added product we make)used to go to Algeria, think they bought else where this year.

how much of our product goes on spot prices? what % of our product goes into each category?

Agree with all of the above - we need to do better at selling more premium goods, no question about it. But needing to do better doesn't mean that every co-op / processor will do better, all the time, every time, to match the milk flow.

Should probably point out that the cheeses we are selling into UK are block commodity cheeses for the most part, not such a great premium there.

While I can sell premium aged cheese at the milk equivalent of €1.20-1.30 a litre wholesale, I won't be indulging my teenage son in a 250 cow high yielding herd & the machinery to go with it just yet, on the off chance that I might not be able to shift their whole output that way, and I could end up having to send a tank or to down to the co-op and diluting my returns.

It's no different for an individual co-op, or for the country as a whole, and we can't pretend that it is - particularly when the short term effect of quota removal *within* Ireland has to be that the amount of milk going to the spot market increases... and therefore on balance milk prices have to be just that bit lower than they would have been without expansion.

Ireland has about 27,000 tonnes of butter and 2,000 tonnes of SMP in private storage / intervention prices of 21c litre at the moment, and the Netherlands spot price was 25c + above for September so I think it is fair to assume that there is at least a chunk of our product going out at the bottom prices in the market - not really a surprise when production is up 14%..

The real answer to this is actually a question - what we need to know, on a month by month basis, is precisely where our milk is going and at what returns. It's useful having an aggregate Ornua figure but we need something more transparent than that at the individual co-op level.

Better still we grab the bull by the horns and separate collection from processing. Then everyone could send a little milk to a high priced cheese processor, to a supermarket, to a speculative bio drink producer, to powder contracts - and to whichever destination suited their businesses and whichever processors they were prepared to contract with / invest in. The balance could go to the spot market and at least you would know what you were getting and maybe take the hint to cut production.

It's a grown up market now and "pretend" prices from co-ops aren't a basis on which to plan a serious business.

frazzledhome · 03-10-2015 07:06AM

Dawggone wrote: »

You've touched on a few good points there AM.
Those points are what I've been gobbing on about for ages...the modus operandi of the dairy industry in Ireland has been that we will produce cheaper than the lowest common denominator no matter what happens...and will stick at it! That (to me) is the classic NZ model. No roof on sheds, no machinery, no bother!

Can't see too many other europeans doing that...

All other Europeans are doing exactly that. Every supp of their surplus is going into commodities. Look at the figures for the tonnes of extra production and you'll see that we are the lowest.

As farmers we were asked what we wanted to do and we all said that we wanted to increase production therefore capacity was put in place. As we stand it looks like a foolish idea because our surplus is about 90% and everybody's jumping up and down. In the longer term it will prove to be right I've no doubt.

Milk price will average over 32c this year which in a bad year isn't half bad. People are asking at what price they'll quit? I'd say it's more a case of how long it needs to be bad before they quit?

I'm of an age where I've farmed in much more difficult times and this wouldn't be considered hardship compared to them days. Money was dear we had hyper inflation killing us.

A few things need to happen and the main one is a flattening of our milk curve. R&d is happening despite what you may read here value is being added despite what you read here not enough as of now but there's more every day.

Don't believe that were the only EU country producing powder that's simply not true. Sitting ridiculing our lower capital cost system is spin, it is a huge advantage perhaps not as evident now but when commodities are higher and they will again we are a very fit industry. The higher cost countries can compete at the moment but as sure as night follows day this will change

Dawggone · 03-10-2015 07:44AM

frazzledhome wrote: »

All other Europeans are doing exactly that. Every supp of their surplus is going into commodities. Look at the figures for the tonnes of extra production and you'll see that we are the lowest.

As farmers we were asked what we wanted to do and we all said that we wanted to increase production therefore capacity was put in place. As we stand it looks like a foolish idea because our surplus is about 90% and everybody's jumping up and down. In the longer term it will prove to be right I've no doubt.

Milk price will average over 32c this year which in a bad year isn't half bad. People are asking at what price they'll quit? I'd say it's more a case of how long it needs to be bad before they quit?

I'm of an age where I've farmed in much more difficult times and this wouldn't be considered hardship compared to them days. Money was dear we had hyper inflation killing us.

A few things need to happen and the main one is a flattening of our milk curve. R&d is happening despite what you may read here value is being added despite what you read here not enough as of now but there's more every day.

Don't believe that were the only EU country producing powder that's simply not true. Sitting ridiculing our lower capital cost system is spin, it is a huge advantage perhaps not as evident now but when commodities are higher and they will again we are a very fit industry. The higher cost countries can compete at the moment but as sure as night follows day this will change

+1 Frazz. Can't argue with that.
As for the higher cost countries...as far as I can see, most North European countries are much of a muchness as regards COP. Apart from the countries that have a 'tradition' of insane investment like UK and Holland, there is actually no *need* for them to produce at a high cost. Example. There is a nice farm for sale 50miles north of me, which would be better grass growing region, and their COP is 32cpl. Usual shyte, 4 robots, zgrazing, sheds I'd live in myself etc. no wonder it's for sale!
I'm no genius at dairy but my COP is 27cpl and that's before I pay a penny wages. If price goes below 27cpl for a prolonged period I'll get out. There is a damn good dairy farmer (Irish) that's in the heart of dairy country 400km north of me and he was telling me that there are now only 6 dairy farms in his parish, most have got out in the last few years and changed to tillage or poultry. Interestingly none have changed to beef...
I'd also add that one of my chicken houses makes more than 2million litres of milk at a guaranteed contract for 5 years. Me the fool for staying in dairy..?

kowtow · 03-10-2015 07:46AM

I thought Coveney said that grazing was an advantage in a downturn? Surely at a high milk price a man would rather have a million profitable litres to sell than half that?

Other than that agree with frazz +1

All euro countries are selling surplus to spot.. That's quite correct. If there wasn't oversupply there would not be milk on the shelves.

Milked out · 03-10-2015 08:27AM

kowtow wrote: »

I thought Coveney said that grazing was an advantage in a downturn? Surely at a high milk price a man would rather have a million profitable litres to sell than half that?

Other than that agree with frazz +1

All euro countries are selling surplus to spot.. That's quite correct. If there wasn't oversupply there would not be milk on the shelves.

But not having those extreme yielding cows allows you to reduce costs a bit by cutting meal post breeding if cinditions allows which may reduce yields but cows should do ok whereas the high yielder will need the diet regardless of milk price. Yield will be down here about 10% but solids percentage up and more cows calving down next year so yields will hopefully rise again with less carryovers without much extra feeding

frazzledhome · 03-10-2015 08:59AM

Dawggone wrote: »

+1 Frazz. Can't argue with that.
As for the higher cost countries...as far as I can see, most North European countries are much of a muchness as regards COP. Apart from the countries that have a 'tradition' of insane investment like UK and Holland, there is actually no *need* for them to produce at a high cost. Example. There is a nice farm for sale 50miles north of me, which would be better grass growing region, and their COP is 32cpl. Usual shyte, 4 robots, zgrazing, sheds I'd live in myself etc. no wonder it's for sale!
I'm no genius at dairy but my COP is 27cpl and that's before I pay a penny wages. If price goes below 27cpl for a prolonged period I'll get out. There is a damn good dairy farmer (Irish) that's in the heart of dairy country 400km north of me and he was telling me that there are now only 6 dairy farms in his parish, most have got out in the last few years and changed to tillage or poultry. Interestingly none have changed to beef...
I'd also add that one of my chicken houses makes more than 2million litres of milk at a guaranteed contract for 5 years. Me the fool for staying in dairy..?

Dawg, I've only one question wtf are you milking cows for. Those chickens sound like the job, or is it a case of not having all your eggs in the one basket or counting your chickens............... Sorry runs now:)

Milked out · 03-10-2015 09:04AM

frazzledhome wrote: »

All other Europeans are doing exactly that. Every supp of their surplus is going into commodities. Look at the figures for the tonnes of extra production and you'll see that we are the lowest.

As farmers we were asked what we wanted to do and we all said that we wanted to increase production therefore capacity was put in place. As we stand it looks like a foolish idea because our surplus is about 90% and everybody's jumping up and down. In the longer term it will prove to be right I've no doubt.

Milk price will average over 32c this year which in a bad year isn't half bad. People are asking at what price they'll quit? I'd say it's more a case of how long it needs to be bad before they quit?

I'm of an age where I've farmed in much more difficult times and this wouldn't be considered hardship compared to them days. Money was dear we had hyper inflation killing us.

A few things need to happen and the main one is a flattening of our milk curve. R&d is happening despite what you may read here value is being added despite what you read here not enough as of now but there's more every day.

Don't believe that were the only EU country producing powder that's simply not true. Sitting ridiculing our lower capital cost system is spin, it is a huge advantage perhaps not as evident now but when commodities are higher and they will again we are a very fit industry. The higher cost countries can compete at the moment but as sure as night follows day this will change

On the flattening of the milk curve do you see that happening by extended spring herd production or will there be winter contracts put into place? In DG Id say they want rid of winter milk, low bonus of 5.6c , no new entries afaik and plenty ways to not qualify for the following year. They have early and late bonuses for spring herds but nothing to write home about. Talking to neighbour it's weather conditions will determine how long he'll keep milking for, his herd is set up for spring production off grass so if he has to house cows he wont be long drying off

frazzledhome · 03-10-2015 09:08AM

kowtow wrote: »

I thought Coveney said that grazing was an advantage in a downturn? Surely at a high milk price a man would rather have a million profitable litres to sell than half that?

Other than that agree with frazz +1

All euro countries are selling surplus to spot.. That's quite correct. If there wasn't oversupply there would not be milk on the shelves.

He did and it is for us. As you've said we're effectively dumping powder ATM and wheather we were grazing or not we'd be dumping. There's no getting away from that fact therefore we need to be using whatever resourse we have to stay in the game.

This is new territory for us and has happened over night despite the fact we knew it was coming 10 yrs ago.

Have a look at the resistance that there was among farmers to commiting supply let alone forecasting their supply. Tbf coops have had a standing start and make no mistake that the dairy model of 2 mths off for the winter is over.

The demand will be for flatter supply to more manage the output and optimise the investments in out processing plants. I'm not saying that we'll get more for flatter supply but I think the seasonal farms will get less. There's going to be some rows over this and Supply agreements along with sharing up will look like hand bag stuff.

Dawggone · 03-10-2015 09:24AM

frazzledhome wrote: »

Dawg, I've only one question wtf are you milking cows for. Those chickens sound like the job, or is it a case of not having all your eggs in the one basket or counting your chickens............... Sorry runs now:)

Truth be told Frazz I'm using dairy to add much needed value to grains. Milk now has still much better returns than tillage. Farmers are moaning about contracts that were signed with me for maize crimp landed into their pit/sausage bag at €135/ton...

Yep poultry is damn good all the time but poultry houses start at €600k to build...AND, I never liked having all the eggs in one basket (one trick pony and all that:)).
Still dairy is much better than tillage at 31cpl base price. However long that lasts.
Btw there is now a major realignment of dairy going on here with the high cost producers getting out and being replaced by leaner/fitter producers. We have 3 strong Coop's in the area that will support the producers or they will be without product...

frazzledhome · 03-10-2015 09:28AM

Milked out wrote: »

On the flattening of the milk curve do you see that happening by extended spring herd production or will there be winter contracts put into place? In DG Id say they want rid of winter milk, low bonus of 5.6c , no new entries afaik and plenty ways to not qualify for the following year. They have early and late bonuses for spring herds but nothing to write home about. Talking to neighbour it's weather conditions will determine how long he'll keep milking for, his herd is set up for spring production off grass so if he has to house cows he wont be long drying off

Deffo extended spring production with a cap on peak. Your dead right no new winter contracts and I'd say no milk required for 3 weeks in December.

Dawggone · 03-10-2015 10:17AM

Why so much resistance to a flat supply curve? If your processor is going to invest in facilities surely they will need a steady supply? Can't have it every way.

At peak production here every litre is deducted 1cent and doled out equally per litre produced in the lean times. Usually get back 2 to 3cent for the 1cent iykwim.

kowtow · 03-10-2015 10:22AM

frazzledhome wrote: »

The demand will be for flatter supply to more manage the output and optimise the investments in out processing plants. I'm not saying that we'll get more for flatter supply but I think the seasonal farms will get less. There's going to be some rows over this and Supply agreements along with sharing up will look like hand bag stuff.

Yeh.. I was going to pick your brains on that. Logic suggests that a flatter supply would suit any processor where the capital investment was more onerous than the labour required to keep it running... presumably from the powder processors perspective spring grazing is inconvenient at best.

In a perfect world a processor would probably want to make cheese in spring and powder all year round...

I think the single biggest mistake that has been made by the industry and particularly politicians here is to overplay the "low cost of production card". The reality is that the total cost of production is similar - maybe a little more expensive on small farms - in Ireland to the rest of Europe on a per litre basis, once a full time wage and something for land is included. The only way for that not to be true is for the farming family to get by on 18kg of good grazing and a half tonne of nuts alongside their milkers.

Sooner or later we will all learn that, high prices or low.

The distribution mechanism - though - has a long way to go and simply encouraging co-ops to merge into one before the members realise what they are giving away is unlikely to be something our grandchildren thank us for.

What we need is a really transparent distribution / processing system that they will be proud of.

Dawggone · 03-10-2015 10:32AM

kowtow wrote: »

Yeh.. I was going to pick your brains on that. Logic suggests that a flatter supply would suit any processor where the capital investment was more onerous than the labour required to keep it running... presumably from the powder processors perspective spring grazing is inconvenient at best.

In a perfect world a processor would probably want to make cheese in spring and powder all year round...

I think the single biggest mistake that has been made by the industry and particularly politicians here is to overplay the "low cost of production card". The reality is that the total cost of production is similar - maybe a little more expensive on small farms - in Ireland to the rest of Europe on a per litre basis, once a full time wage and something for land is included. The only way for that not to be true is for the farming family to get by on 18kg of good grazing and a half tonne of nuts alongside their milkers.

Sooner or later we will all learn that, high prices or low.

The distribution mechanism - though - has a long way to go and simply encouraging co-ops to merge into one before the members realise what they are giving away is unlikely to be something our grandchildren thank us for.

What we need is a really transparent distribution / processing system that they will be proud of.

+1. Bang on the money.

kowtow · 03-10-2015 11:14AM

Dawggone wrote: »

Btw there is now a major realignment of dairy going on here with the high cost producers getting out and being replaced by leaner/fitter producers. We have 3 strong Coop's in the area that will support the producers or they will be without product...

Does "high cost" producer in that context equate to well run, high input & output, indoor in general, or just not so well run (higher input than output) or maybe well run but also highly borrowed / under capitalised?

and by "strong co-op" do we mean a buyer with a high value sales pipeline who can afford to pay well, or a co-op with a fat balance sheet (of the producers past profits) who is willing to use it to save the producer from himself?

I'm being a little tongue in cheek in my simplification above - I suspect you are going to tell me that it is a mixture of all these things, as it always is - but for a good reason.

There used to be a culture in a lot of European banks when market shocks came along to gloss over them, dress up the results, and make a few announcements ... "better days will be here in due course"..... and if that didn't work organise a quick merger and pretend that was the plan all along. Most of us would wish now that we had looked harder and learned from those real world stress tests.

In dairying, this is the time to look carefully and learn for the future.

Dawggone · 03-10-2015 12:28PM

kowtow wrote: »

Does "high cost" producer in that context equate to well run, high input & output, indoor in general, or just not so well run (higher input than output) or maybe well run but also highly borrowed / under capitalised?

and by "strong co-op" do we mean a buyer with a high value sales pipeline who can afford to pay well, or a co-op with a fat balance sheet (of the producers past profits) who is willing to use it to save the producer from himself?

I'm being a little tongue in cheek in my simplification above - I suspect you are going to tell me that it is a mixture of all these things, as it always is - but for a good reason.

There used to be a culture in a lot of European banks when market shocks came along to gloss over them, dress up the results, and make a few announcements ... "better days will be here in due course"..... and if that didn't work organise a quick merger and pretend that was the plan all along. Most of us would wish now that we had looked harder and learned from those real world stress tests.

In dairying, this is the time to look carefully and learn for the future.

High cost producers are the crazy capex.
The farm for sale that I was talking about earlier is a prime example. Farm is a partnership of 5 neighbours grouped together with 240ha between them. Built new facilities in '08 with rotary. In'12 decided to put in 4 robots to 'cut down' on labor costs even though the 5 are still in the partnership!!! Easy credit and free spending farmers are an explosive mix.

The 3 Coops are strong because of an excellent product mix with solid cash assets. However one of them used up a lot of capital supporting producers in '12/'13. Another Coop (mine!)did a jv with a Chinese company to build a baby formula plant at a cost of €35mil. Plant isn't open yet, even though it's commissioned...
Like most large companies 'vanity' of the management gets on my wick. The "because I'm worth it" arrogance. God but I'd love to take over for a while!!:)

kowtow · 03-10-2015 12:47PM

Dawggone wrote: »

Like most large companies 'vanity' of the management gets on my wick. The "because I'm worth it" arrogance. God but I'd love to take over for a while!!:)

Yeh.. trouble is when any co-op becomes a processor they "need" the producer in a different way... to finance their particular business plan (mad, bad, risky or not) and to guarantee enough milk for them to run it.. and of course to suffer the cost of success or failure in the ongoing milk price. The success of their own project has to come before the interest of the producers... and the co-op's business begins to work against the businesses which supply it and own it.

It's all hunky dory when it succeeds, for a time, and until the milk supply gets out of kilter with their sales...

Problem is you have to define your own business, and capital investments, around the geographical accident of someone else's.

If you roll all the co-ops into one you have a Stalinist mess which produces nothing worth eating and eventually irritates every producer in the land. Works for New Zealand perhaps but nobody wants to drink milk powder.

Either more, open, smaller, co-operatives perhaps sharing some strategically located processing functions for part of the milk or a cleverer system altogether is what is really needed.

The much-abused electricity model, or indeed mobile phones, keeps coming to mind where you can buy electricity from Tesco and have it delivered through existing lines ... and the balance of units, or minutes, is transferred at the end of the week between the players.

I realise this would create some traceability issues with actual milk but anything can be overcome.

How does the supermarket model in the UK work where Farmer Brown milks for Tesco? Presumably Tesco use someone elses milk lorry and collection facility?

Dawggone · 03-10-2015 01:09PM

kowtow wrote: »

Yeh.. trouble is when any co-op becomes a processor they "need" the producer in a different way... to finance their particular business plan (mad, bad, risky or not) and to guarantee enough milk for them to run it.. and of course to suffer the cost of success or failure in the ongoing milk price. The success of their own project has to come before the interest of the producers... and the co-op's business begins to work against the businesses which supply it and own it.

It's all hunky dory when it succeeds, for a time, and until the milk supply gets out of kilter with their sales...

Problem is you have to define your own business, and capital investments, around the geographical accident of someone else's.

If you roll all the co-ops into one you have a Stalinist mess which produces nothing worth eating and eventually irritates every producer in the land. Works for New Zealand perhaps but nobody wants to drink milk powder.

Either more, open, smaller, co-operatives perhaps sharing some strategically located processing functions for part of the milk or a cleverer system altogether is what is really needed.

The much-abused electricity model, or indeed mobile phones, keeps coming to mind where you can buy electricity from Tesco and have it delivered through existing lines ... and the balance of units, or minutes, is transferred at the end of the week between the players.

I realise this would create some traceability issues with actual milk but anything can be overcome.

How does the supermarket model in the UK work where Farmer Brown milks for Tesco? Presumably Tesco use someone elses milk lorry and collection facility?

+1.
There was a major push from producers here, with the end of quota, to pool all the milk and hold an auction on a regular basis to the processors. War!
It was taken to court and the court ruled that quota was owned by the Coops and not the farmers. This is now being used as a stick to beat the farmers by the likes of Lactalis. It was (to me) the fairest,most transparent way to sell milk. Now the world commodity auction on the other side of the planet dictates price...

Btw I like "you have to define your own business and capital investments around the geographical accident of someone else's". So so true.

kowtow · 03-10-2015 01:41PM

Dawggone wrote: »

+1.
There was a major push from producers here, with the end of quota, to pool all the milk and hold an auction on a regular basis to the processors. War!
It was taken to court and the court ruled that quota was owned by the Coops and not the farmers. This is now being used as a stick to beat the farmers by the likes of Lactalis. It was (to me) the fairest,most transparent way to sell milk. Now the world commodity auction on the other side of the planet dictates price...

Seems by far the fairest and most dynamic to me as well. Only a badly run co-op has anything to fear from it (and only then, in the long term, if it doesn't get its act together)

Any producer, anywhere in the country, could buy in to a number of different processors and contract with them on whatever terms were agreeable for however long...

The surplus, or balance of milk - outside the various contracts a farmer might have at any moment - would presumably be cleared by auction at the best price to whichever co-op could make the most of it and therefore would pay the most for it. Better for the farmer, better for the co-op, exciting for the industry because it would allow new rural agri-food businesses to set up and be sure of a competitive supply.

It would also enable fixed price contracts for milk, hedging mechanisms, and producer groups with real meaning.

Who here wouldn't be happier if they could split the biggest chunk of their milk among several high-value competing co-ops, with corresponding shareholdings, and then be pretty sure of getting a competitive price for any surplus?

frazzledhome · 03-10-2015 05:00PM

Mentions of dairy farmers working for nothing got me thinking, do you all pay yourselves monthly or weekly. In other words are you taking a regular amount from the business?

I pay myself monthly by dd

Timmaay · 03-10-2015 07:08PM

frazzledhome wrote: »

Mentions of dairy farmers working for nothing got me thinking, do you all pay yourselves monthly or weekly. In other words are you taking a regular amount from the business?

I pay myself monthly by dd

Started doing this after the bank adviser gave me abit of a bollocking when I was asking about a mortgage afew months ago haha, told me that my very sporatic drawings does not reflect well, and I would hugely improve my chances of mortgage approvel by having a simple clear weekly/monthly draws/savings etc.

Dawggone · 03-10-2015 10:21PM

frazzledhome wrote: »

Mentions of dairy farmers working for nothing got me thinking, do you all pay yourselves monthly or weekly. In other words are you taking a regular amount from the business?

I pay myself monthly by dd

+1. High earner!

atlantic mist · 04-10-2015 12:53PM

The supply agreements were over the top, all that future family stuff. people were locked into quota system since the 80's. Nobody got to enjoy the freedom that brought instead we were caught up in supply agreement for next 5 year which was unwarranted considering we paid for processing facilities no bank loans etc. some call it resistance i call it business men querying a deal put in front of them

Supply agreements were brought in to secure supply for the processor so they could in turn find markets for product in advance, has that happened...no were selling on spots, we are living up to our part supplies up 10% country wide pity they didnt secure buyers the same way they secured supplies!!

"The demand will be for flatter supply to more manage the output and optimise the investments in out processing plants"

Interesting statement it was outlined at meetings from top table just wonder how much imagination is going into it? it wouldnt suit some set ups and it will suit others
i asked about keeping plants running 365 as we have cows running 365 (they dont take xmas off) as it is only way to get our supply curve flattened was told no the employees must get time off for xmas, plant shutdowns for maintenance.....no milk in dec....were either going full tilt or were taking holidays which is it? whos margin is protected to achieve this? surely if they want to achieve this over next number of years the margin of the business will have to compromise as much as we will have to, cant have unhappy stakeholders(suppliers).

It costs suppliers more to provide a flatter supply curve just like it cost the producer more not to have a flattened supply, hammering us on price to achieve this is the method i see being taken
Did the grain lads in coop hav to sign 5 year contracts, do they have to flatten their supply curve for processing or is it only the 4500 dairy lads out of the 16500 farmers in the coop

Buford T. Justice XIX · 04-10-2015 01:06PM

atlantic mist wrote: »

The supply agreements were over the top, all that future family stuff. people were locked into quota system since the 80's. Nobody got to enjoy the freedom that brought instead we were caught up in supply agreement for next 5 year which was unwarranted considering we paid for processing facilities no bank loans etc. some call it resistance i call it business men querying a deal put in front of them

Supply agreements were brought in to secure supply for the processor so they could in turn find markets for product in advance, has that happened...no were selling on spots, we are living up to our part supplies up 10% country wide pity they didnt secure buyers the same way they secured supplies!!

"The demand will be for flatter supply to more manage the output and optimise the investments in out processing plants"

Interesting statement it was outlined at meetings from top table just wonder how much imagination is going into it? it wouldnt suit some set ups and it will suit others
i asked about keeping plants running 365 as we have cows running 365 (they dont take xmas off) as it is only way to get our supply curve flattened was told no the employees must get time off for xmas, plant shutdowns for maintenance.....no milk in dec....were either going full tilt or were taking holidays which is it? whos margin is protected to achieve this? surely if they want to achieve this over next number of years the margin of the business will have to compromise as much as we will have to, cant have unhappy stakeholders(suppliers).

It costs suppliers more to provide a flatter supply curve just like it cost the producer more not to have a flattened supply, hammering us on price to achieve this is the method i see being taken
Did the grain lads in coop hav to sign 5 year contracts, do they have to flatten their supply curve for processing or is it only the 4500 dairy lads out of the 16500 farmers in the coop

On flattening the curve, most processors close many of the driers for yearly maintenance and just use 1 or 2 for drying. Kerry close all and send milk to another co-op for drying.

There is very good cooperation between processors in this, in fairness.

Teagasc did a study some years ago on flattening the curve v seasonal and, iirc , maintaining seasonal left more money in farmers pockets while flattening suited processors more.

Milk Price- Please read Mod note in post #1

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