Milk Price- Please read Mod note in post #1

visatorro · 31-10-2015 09:48AM

Mulumpy wrote:

Erm why would our attitude change because of low price. We are there to do a job regardless of external factors. I'm a milk supplier as well so see both sides. I don't get paid during lay off periods. In 09 we were laid off for 2 months without pay when the product I make wasn't being produced. Theres too much milk coming in now for that to happen again.

I know what you mean, just wondering if milk price is low, this implies that there's no market for it. do processors react, cutting job's or overtime? or is it an attitude of plough on lads.

Timmaay · 31-10-2015 10:47AM

visatorro wrote: »

I know what you mean, just wondering if milk price is low, this implies that there's no market for it. do processors react, cutting job's or overtime? or is it an attitude of plough on lads.

Why does this matter to the milk processor, sure they still get their margin, it's the farmer who has to make the decision to plough on or not. And I guess the scary question is when is the milk price ultimately too low for us?? Disaster planning, what would yas do if it hit 20cent, or lower next spring??

Mulumpy · 31-10-2015 10:57AM

visatorro wrote:

I know what you mean, just wondering if milk price is low, this implies that there's no market for it. do processors react, cutting job's or overtime? or is it an attitude of plough on lads.

Well at moment casein and it's by products are making more than skim so majority of milk goes into that. Staff wages a is very small percentage of overheads. It's more important to look at energy and machine running costs. Most jobs in my place take at least two years to be fully skilled up so having staff coming and going is counter productive.

mahoney_j · 31-10-2015 11:14AM

Mulumpy wrote: »

Well at moment casein and it's by products are making more than skim so majority of milk goes into that. Staff wages a is very small percentage of overheads. It's more important to look at energy and machine running costs. Most jobs in my place take at least two years to be fully skilled up so having staff coming and going is counter productive.

Pay rise???will I put in a word with Conor !!!!!

jaymla627 · 31-10-2015 12:33PM

Timmaay wrote: »

Why does this matter to the milk processor, sure they still get their margin, it's the farmer who has to make the decision to plough on or not. And I guess the scary question is when is the milk price ultimately too low for us?? Disaster planning, what would yas do if it hit 20cent, or lower next spring??

At 20 cent our lower, you basically have to have other avenues of cashflow/income from different enterprises to prop up your failing dairy enterprise our your ultimately going to have to either asset strip sell anything that's not nailed down in - calf heifers/surplus cows etc, even maybe a few acres of land, our go hand in cap to your bank manager ask him for a repayment holiday along with a new loan to cover working capitial and go intrest only for a year our two....
Of course all capital expenditure can be put on hold, along with cutting back on feed maybe drop rented ground and reduce cow numbers to have a more efficent/profitable grass based only system but your output is going to collapse and you'll be unable to take advantage of any price rises down the line....
going to continue as normal here with the only exception being 70 % of the herd will go incalf to beef next year and will rear 30-40 of the early bull calves if milk indeed is on the floor might be better chance putting the milk in to these and hope to make a turn of them

Mulumpy · 31-10-2015 12:42PM

mahoney_j wrote:

Pay rise???will I put in a word with Conor !!!!!

Jaysus don't, he might decide the place needs even more managers

WheatenBriar · 31-10-2015 12:50PM

My milk lorry driver told me today they are over run with milk,never has as much in this area in Autumn
Despite lost 5 big suppliers to strathroy, they are up 3 lorry loads or about 10000 gallons a day in south wicklow alone

No worries on price or early drying here
I suppose part of it is,they were planned to calve and its lads who usually pay super levy
But it couldnt be profitable

jaymla627 · 31-10-2015 01:33PM

WheatenBriar wrote: »

My milk lorry driver told me today they are over run with milk,never has as much in this area in Autumn
Despite lost 5 big suppliers to strathroy, they are up 3 lorry loads or about 10000 gallons a day in south wicklow alone

No worries on price or early drying here
I suppose part of it is,they were planned to calve and its lads who usually pay super levy
But it couldnt be profitable

It usually takes 7-12 months in a downward milk cycle when the floor is reached before milk output starts to get affected, I don't know what other people's thought are but aimlessly expanding at the present time where significant capitial investment is needed is pretty foolhardy, come spring heading into the summer when overdrafts are maxed out and some pretty steep merchant bills have been run up lads attitudes towards keeping to load on cows might change

kowtow · 31-10-2015 01:34PM

Mulumpy wrote: »

Well at moment casein and it's by products are making more than skim so majority of milk goes into that. Staff wages a is very small percentage of overheads. It's more important to look at energy and machine running costs. Most jobs in my place take at least two years to be fully skilled up so having staff coming and going is counter productive.

I wonder realistically how big the casein market is (I know it's thriving, but in volume terms)... and how much casein can be extracted from a litre of milk?

kowtow · 31-10-2015 01:41PM

WheatenBriar wrote: »

My milk lorry driver told me today they are over run with milk,never has as much in this area in Autumn
Despite lost 5 big suppliers to strathroy, they are up 3 lorry loads or about 10000 gallons a day in south wicklow alone

No worries on price or early drying here
I suppose part of it is,they were planned to calve and its lads who usually pay super levy
But it couldnt be profitable

The thing is that at certain points of the cycle the need for cash trumps the need for profitability, it's actually one of the weaknesses of our "sustainable cash only system" - because we can temporarily ignore the costs not paid out of hand (labour, land, capital assets) we actually push harder to make up for a low price for as long as we can. The price signals the market is sending us are masked.

In effect, when milking cows loses money we milk the equity of the farm instead.

It's handy - essential actually - because it keeps cash coming in, but it also keeps milk in surplus - though in practice I doubt that Ireland's surplus will much affect world commodity prices for the time being.

A fully expanded farm with paid labour and financed or rented ground would likely slow down production a bit quicker I reckon.

rangler1 · 31-10-2015 02:18PM

Timmaay wrote: »

Why does this matter to the milk processor, sure they still get their margin, it's the farmer who has to make the decision to plough on or not. And I guess the scary question is when is the milk price ultimately too low for us?? Disaster planning, what would yas do if it hit 20cent, or lower next spring??

the processors probably take less of a margin this year because of the increase in volume....ie same fixed costs spread over more litres

atlantic mist · 31-10-2015 02:39PM

were milking on here, decision was made bout year and half ago, breeding policy set back then, monitor external factors but reacting to a milk price when we only find out what were being paid a month later isnt a strategy we follow

we were hit with all super levies for past ten years, focused us on a the world market prices and our cost of production. i used to think it was ridiculous to be getting hit with levies but looking back it prepared us for periods of low milk prices

milking the equity of the farm, everyone has done it at some point but how many farms can return this in strong periods and add to it for the next low period? sustainable for a short period but not medium to long

WheatenBriar · 31-10-2015 03:21PM

atlantic mist wrote: »

were milking on here, decision was made bout year and half ago, breeding policy set back then, monitor external factors but reacting to a milk price when we only find out what were being paid a month later isnt a strategy we follow

we were hit with all super levies for past ten years, focused us on a the world market prices and our cost of production. i used to think it was ridiculous to be getting hit with levies but looking back it prepared us for periods of low milk prices

milking the equity of the farm, everyone has done it at some point but how many farms can return this in strong periods and add to it for the next low period? sustainable for a short period but not medium to long

Oh yeah, I know
However another year of these prices and some of that equity will end up having to be physically released or other similar effecting measures

On the plus side aren't some of us long enough in the tooth at this game by now to know supply side things at these levels will be corrected soon enough elsewhere and Ireland will benefit

Ok belview is a lot messier than planned and you'll find me giving out about it and the fact our buyers are a co op in name only etc,totally out of touch with their roots (the fact they got the co op to subsidise our price with our money for example), but bigger picture, what happened to the M50? When first built it was too small,there was roadworks disruption for years to add the third lane
I guess what Im saying is,things will work out,belview will be fixed and I hope its not wishful thinking that at full swing good returns will come back to the farmer with all the baby food sold to china if you get me?
Never Ever be rash in this dairy farming lark,always keep an eye on where you want to be headed

mf240 · 31-10-2015 10:57PM

WheatenBriar wrote: »

My milk lorry driver told me today they are over run with milk,never has as much in this area in Autumn
Despite lost 5 big suppliers to strathroy, they are up 3 lorry loads or about 10000 gallons a day in south wicklow alone

No worries on price or early drying here
I suppose part of it is,they were planned to calve and its lads who usually pay super levy
But it couldnt be profitable

Even at a crap price. It makes sense to milk cows on to within 6 weeks of calving.

Fixed costs will be there whether you milk on or not and with high solids this time of year a few kgs of meal will keep lactose and solids up and cows it good nick.

kowtow · 01-11-2015 01:09AM

atlantic mist wrote:

milking the equity of the farm, everyone has done it at some point but how many farms can return this in strong periods and add to it for the next low period? sustainable for a short period but not medium to long

Exactly right.

But to get through to the long term you have to survive the short term.

If there was one change i could wave a magic wand for it would be a really sensible Profit monitor which captured the realities of dairying rather than just a set of KPI benchmarks to compare against other farms / enterprises. Even a standardised land and labour charges would help people understand better where they are / will be.

If you know your running at a book loss but cash flow positive for the time being you are actually in quite a strong position to make long term plans.

kevthegaff · 01-11-2015 09:38AM

Dried off a few last week and some off to the mart, going to milk on till mid December. Cows at 14litres fat 4.45 or 3.86 3.5kgs

rangler1 · 01-11-2015 09:46AM

kowtow wrote: »

Exactly right.

But to get through to the long term you have to survive the short term.

If there was one change i could wave a magic wand for it would be a really sensible Profit monitor which captured the realities of dairying rather than just a set of KPI benchmarks to compare against other farms / enterprises. Even a standardised land and labour charges would help people understand better where they are / will be.

If you know your running at a book loss but cash flow positive for the time being you are actually in quite a strong position to make long term plans.

Surely using a standard labour/land charge would have the same effect as leaving them out. Comparing fixed costs doesn't work, some farmers are addicted to investing in rust (machinery) or one upmanship or even to reduce tax a bit and so drive up fixed costs.
Even stage of life, I used to be always clued into what things cost but now I don't bother....happy enough to see a good bank balance at the end of year

Brown Podzol · 01-11-2015 12:08PM

rangler1 wrote: »

Surely using a standard labour/land charge would have the same effect as leaving them out. Comparing fixed costs doesn't work, some farmers are addicted to investing in rust (machinery) or one upmanship or even to reduce tax a bit and so drive up fixed costs.
Even stage of life, I used to be always clued into what things cost but now I don't bother....happy enough to see a good bank balance at the end of year

But to what extent do fixed costs affect KPI's.

Putting in all costs gives a more accurate cost of production especially if suppliers, processors and supermarkets have access to profit monitors, which they have.

rangler1 · 01-11-2015 12:25PM

Brown Podzol wrote: »

But to what extent do fixed costs affect KPI's.

Putting in all costs gives a more accurate cost of production especially if suppliers, processors and supermarkets have access to profit monitors, which they have.

That's kinda my point, can you really compare fixed costs.....state of the art milking parlour versus 'do most of the work yourself'' secondhand parlour, running old machinery versus new..
You can get some handle on comparing grass growth/ utilisation, ration usage and cost, etc

Milked out · 01-11-2015 12:50PM

rangler1 wrote: »

That's kinda my point, can you really compare fixed costs.....state of the art milking parlour versus 'do most of the work yourself'' secondhand parlour, running old machinery versus new..
You can get some handle on comparing grass growth/ utilisation, ration usage and cost, etc

I think the main point would be to have a standard figure in for own labour and land. We'll all have different drawings and repayments but if there was a figure such as the avg industrial wage or average land rental figure included as land cost it would add more of a realistic figure to the pm at least when they are being published and/ or quoted

rangler1 · 01-11-2015 01:17PM

Milked out wrote: »

I think the main point would be to have a standard figure in for own labour and land. We'll all have different drawings and repayments but if there was a figure such as the avg industrial wage or average land rental figure included as land cost it would add more of a realistic figure to the pm at least when they are being published and/ or quoted

I'd imagine all sectors of farming would be a bit of a joke if you deducted a land/labour charge off the profit

Brown Podzol · 01-11-2015 01:55PM

rangler1 wrote: »

That's kinda my point, can you really compare fixed costs.....state of the art milking parlour versus 'do most of the work yourself'' secondhand parlour, running old machinery versus new..
You can get some handle on comparing grass growth/ utilisation, ration usage and cost, etc

Well we're told that the same ingredients put through a diet feeder will give more production than if presented unprocessed. Same with feed to yield etc.
On the other side anything with auto in the title should decrease labour and improve quantity and quality of output, scrapers, cluster removers, calf feeder, drafting, moo monitors etc.
Will these fixed costs improve output without increasing variable inputs?

atlantic mist · 01-11-2015 02:35PM

profit monitor can only really be used as a tool for each farm helps lads understand their costs, with farming being such a time consuming job the financials dont get the same focus as other business the same size in the economy, i wouldnt use it as a bench mark only a small % use the service its too subjective

a lot of lads advised to go into company structure, dont really like the idea myself prefer to pay my tax and own what i own,
accounts are published on cro so it will be interesting to see how these perform, will cash get built up or will they be facing milking their personal equity to support company during certain periods, land charge will be deducted in rent, wages will be deducted by directors salary

kowtow · 01-11-2015 04:07PM

rangler1 wrote: »

That's kinda my point, can you really compare fixed costs.....state of the art milking parlour versus 'do most of the work yourself'' secondhand parlour, running old machinery versus new..
You can get some handle on comparing grass growth/ utilisation, ration usage and cost, etc

KPI's are for comparison.

A P&L exists to determine whether an individual business (farm) is accreting equity or depleting it, whether or not it is in fact a going concern in the strictest sense.

The reason I suggest adding a fixed charge for labour and land is that in tough times these will almost certainly not be paid in cash - it doesn't really matter that some people need more cash than others, needing less doesn't make the farm more profitable as a business - it just means you are more willing to work for free. Equally if you need €100K a month to keep the family quiet you probably *are* better off getting a farm manager and finding something better paid to do during the day.

So add €250 for every acre (or the real rent or finance cost if it exists) and add a standard farm managers salary. That way you can see where you are even though in reality these costs don't have to be paid in cash.

As for machinery / fixed costs of that sort it absolutely must be included. That's the only way to find out if you are going to need to sell it one day and find a more cost effective way of doing things, or - of course - expand enough to keep the tractors busy.

If you leave all these out and build a system on the basis that they can be ignored you've only really found a way of getting poor slowly... and I suspect that in reality (along with the existence of SFP) that's one of the reasons farming is where it is today.

rangler1 · 01-11-2015 06:13PM

kowtow wrote: »

KPI's are for comparison.

A P&L exists to determine whether an individual business (farm) is accreting equity or depleting it, whether or not it is in fact a going concern in the strictest sense.

The reason I suggest adding a fixed charge for labour and land is that in tough times these will almost certainly not be paid in cash - it doesn't really matter that some people need more cash than others, needing less doesn't make the farm more profitable as a business - it just means you are more willing to work for free. Equally if you need €100K a month to keep the family quiet you probably *are* better off getting a farm manager and finding something better paid to do during the day.

So add €250 for every acre (or the real rent or finance cost if it exists) and add a standard farm managers salary. That way you can see where you are even though in reality these costs don't have to be paid in cash.

As for machinery / fixed costs of that sort it absolutely must be included. That's the only way to find out if you are going to need to sell it one day and find a more cost effective way of doing things, or - of course - expand enough to keep the tractors busy.

If you leave all these out and build a system on the basis that they can be ignored you've only really found a way of getting poor slowly... and I suspect that in reality (along with the existence of SFP) that's one of the reasons farming is where it is today.

Farm bank account at the end of the year will tell you very quick where you're going, profit monitor will tell you how you got there.
Very little farmers can do about price, putting in a land/labour charge will only succeed in depressing you further, fact is that most farm are now kept going by second income, farming today is only at the level it is because of SFP, I hope the powers that be don't leave it too long to realise that.
Any way we'll have to agree to differ on whether to put a standard land/labour charge in. It's not going to make a lot of difference anyway

alps · 01-11-2015 07:13PM

rangler1 wrote: »

I'd imagine all sectors of farming would be a bit of a joke if you deducted a land/labour charge off the profit

Simple as this...and it's done in the European Dairy Farmers discussion group....

How many hours do you work a week...? Write it down and allow yourself €15 per hour.....that's what it would cost you if you had to replace yourself.

Then put in the same cost for your land as you are paying in rent or that what is paid locally....

2 very simple costings.....included as j say in the EDF cost of productions and come to very fair conclusions.

Complicated systems take more time...cost more in labour....extensive type systems require more land and cost more on rent ....the whole COP become more visible and makes more sense.

Also depreciation needs to be PROOPERLY accounted for as well...

WheatenBriar · 01-11-2015 07:31PM

I don't see the issue here
If you can't find €15 an hour for yourself out of your farm,how the fcuk can you rear a family and why the fcuk would you be doing it?

alps · 01-11-2015 07:59PM

WheatenBriar wrote: »

I don't see the issue here
If you can't find €15 an hour for yourself out of your farm,how the fcuk can you rear a family and why the fcuk would you be doing it?

Bang on the nail there, but incredibly when our DG put that very costing on our PM's teagasc and others had an issue because they were showing little or no profit....

And we couldn't have that....

pedigree 6 · 01-11-2015 09:20PM

alps wrote: »

Bang on the nail there, but incredibly when our DG put that very costing on our PM's teagasc and others had an issue because they were showing little or no profit....

And we couldn't have that....

Yea but you have to be able to compare businesses against one another.
My sister owns a shop and she has everything included her hours worked, staff,rates, everything.
You have to be able to compare one business against one another otherwise farmers are not business people it's becoming a vocation.
I can see this debate going around in circles with some wanting to keep wages, land charge out of it, as they will maintain that most farmers get handed down land.

rangler1 · 01-11-2015 09:21PM

alps wrote: »

Bang on the nail there, but incredibly when our DG put that very costing on our PM's teagasc and others had an issue because they were showing little or no profit....

And we couldn't have that....

At least it wasn't showing a loss, like beef/sheep group would......:mad:

Milk Price- Please read Mod note in post #1

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