Milk Price- Please read Mod note in post #1

WheatenBriar · 01-11-2015 09:30PM

A shop owner doesn't charge themselves rent for the property they own
It wouldnt survive a tax audit
Comparing a farm that rents land with one that doesn't is definitely not comparing like with like anyway
Its a non sequitur
But every farmer is entitled to claim a living wage
If the farm doesn't deliver a living wage,then yeah it is a vocation
That in my opinion is the simple and fair analysis

alps · 01-11-2015 09:56PM

WheatenBriar wrote: »

A shop owner doesn't charge themselves rent for the property they own
It wouldnt survive a tax auditi/QUOTE]

I believe it could.....many farmers now rent their land to their company, and pay tax on that income.
The point I'm trying to get yo is....we need to assess if we are making money at farming, it's of no use being happy as long as you're making more than some other fella....
Are you making money?
If you cannot beat €15/hr plus a rental cost of your asset, by means of your farming enterprise then I suggest uou are not.
Investment on the farm should return you either increased output, reduced costs or reduced labour.
Investment will incur a depreciation cost. All should be included in any Cost Comparison to give any true reflection of the benifiit or otherwise of an investment, and without including labour, as well as your own, cost comparison is a nonsense.

milkprofit · 01-11-2015 09:57PM

[QUOTEm.

If u making a book loss u aee making a loss

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.[/QUOTE]

milkprofit · 01-11-2015 10:03PM

mf240 wrote: »

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.

A few kg

WheatenBriar · 01-11-2015 10:43PM

alps wrote: »

WheatenBriar wrote: »

A shop owner doesn't charge themselves rent for the property they own
It wouldnt survive a tax auditi

I believe it could.....many farmers now rent their land to their company, and pay tax on that income.
The point I'm trying to get yo is....we need to assess if we are making money at farming, it's of no use being happy as long as you're making more than some other fella....
Are you making money?
If you cannot beat €15/hr plus a rental cost of your asset, by means of your farming enterprise then I suggest uou are not.
Investment on the farm should return you either increased output, reduced costs or reduced labour.
Investment will incur a depreciation cost. All should be included in any Cost Comparison to give any true reflection of the benifiit or otherwise of an investment, and without including labour, as well as your own, cost comparison is a nonsense.

lad,If I sold my farm and put the money in the bank at 1% interest,I'd make more from it than farming it,
Heck do ya know, I'd be confident even if I got zero interest,I'd have well more than the average industrial wage to a ripe old age probably and still I'd say the brats coming after me would find it worth their while looking after me

Theres no point thinking about or counting lands opportunity cost,what we do will always lose out

Of course if farming as a company theres a charge for land issued, thats a tax measure, nothing more nothing less

mf240 · 01-11-2015 10:44PM

milkprofit wrote: »

A few kg

A ya 6 or 7. Just to get them in .........

:D

mf240 · 01-11-2015 10:49PM

On the profit monitor.

Its nice to compare costs per litre for variable costs like fert and feed but as said above fixed costs are different everywhere. If a lads buys a new landcruiser every three yearsand keeps a good tractor and teleporter his fixed costs would be off the scale.

Same with labour. Some lads could give all day fluting around the yard doing fcuk all. More lads would get through more work in half the time.

pedigree 6 · 01-11-2015 10:51PM

Just a thought on larger dairy farms is employee paid labour included in the profit monitor.
As if not this would skew the figures massively.
Also it would make it look as if the owner was making more than they actually are.
It would also do a disservice to the rest of 1 man/woman systems when calculating average income for all farmers.
It's going to be more of an issue as farmers strive/do become bigger.

frazzledhome · 01-11-2015 11:48PM

pedigree 6 wrote: »

Just a thought on larger dairy farms is employee paid labour included in the profit monitor.
As if not this would skew the figures massively.
Also it would make it look as if the owner was making more than they actually are.
It would also do a disservice to the rest of 1 man/woman systems when calculating average income for all farmers.
It's going to be more of an issue as farmers strive/do become bigger.

It is included

frazzledhome · 02-11-2015 12:14AM

I really think ye're overstating the importance of the profit monitor. The biggest failing as farmers is that only 10% are completing one.

With a non compliant cohort as large as that we're really only splitting hairs. I've said for years that land should have a charge attached but alas it hasn't.

It's not a biggy really. The business' completing PMs are probably in the top 10% for profit in any regard and one would hope that they'd be switched on enough to know the true costs of land, dep and labour

Where I'd say a lot fall down however is in the recording of fixed costs. I'd say they're massively under reported.

The PM is a list of KPIs for comparison purposes only, no more no less

keep going · 02-11-2015 12:59AM

frazzledhome wrote: »

I really think ye're overstating the importance of the profit monitor. The biggest failing as farmers is that only 10% are completing one.

With a non compliant cohort as large as that we're really only splitting hairs. I've said for years that land should have a charge attached but alas it hasn't.

It's not a biggy really. The business' completing PMs are probably in the top 10% for profit in any regard and one would hope that they'd be switched on enough to know the true costs of land, dep and labour

Where I'd say a lot fall down however is in the recording of fixed costs. I'd say they're massively under reported.

The PM is a list of KPIs for comparison purposes only, no more no less

and really you should on ly compare to people in your area or discussion group as land type and location has a big bearing on costs and you couldgive your whole life try reach a standard that is impossible for you.for once im in agreement with rangler the bank balance is king

WheatenBriar · 02-11-2015 01:10AM

A land charge is as non sensical as a charge for the air you breath on a farm
You can't farm without either
The only logical charge is the opportunity cost and shur,if you're going to charge for that,you may aswell put in for lost out fracking while you're at it if you have a shaley field and lets be even more ridiculous, the opportunity cost of not studying medicine, lunar landing craft or welding in Dubai while we're at it

In my opinion Stupid to be honest

Timmaay · 02-11-2015 07:40AM

I've said this before, the only thing we need to change is the words “cost of production", to something like "base cost excluding land and labour" or whatever.

Dawggone · 02-11-2015 07:53AM

WheatenBriar wrote: »

A land charge is as non sensical as a charge for the air you breath on a farm
You can't farm without either
The only logical charge is the opportunity cost and shur,if you're going to charge for that,you may aswell put in for lost out fracking while you're at it if you have a shaley field and lets be even more ridiculous, the opportunity cost of not studying medicine, lunar landing craft or welding in Dubai while we're at it

In my opinion Stupid to be honest

You have a point. However that is fine when making comparisons within your own parish. Otherwise it must be included. L

stretch film · 02-11-2015 08:02AM

Timmaay wrote: »

I've said this before, the only thing we need to change is the words “cost of production", to something like "base cost excluding land and labour" or whatever.

"Common costs" perhaps :-)

Real problem is the creditability these figures are given outside the farm gate..
Makes great sense to put in a standard charge for those intangible costs in that context

Sacrolyte · 02-11-2015 01:44PM

WheatenBriar wrote: »

A land charge is as non sensical as a charge for the air you breath on a farm
You can't farm without either
The only logical charge is the opportunity cost and shur,if you're going to charge for that,you may aswell put in for lost out fracking while you're at it if you have a shaley field and lets be even more ridiculous, the opportunity cost of not studying medicine, lunar landing craft or welding in Dubai while we're at it

Is it good lad. The welding like. In Dubai like?The money like?

kowtow · 02-11-2015 01:59PM

No shop owner would consider renting a second shop based on the profitability of the business he operates in the first without making a notional charge for rent in the first shop. If he did he would be hiding a risk from himself.

The purpose of P+L is to intimately understand a business model (eg. A dairying system) and to be able to assess it's options. It has little to do with cash. When you hide inherited property or unpaid labour you can't properly analyse your options, for example.

Traditional profit monitor accounting actually answers the question "what enterprise/s will give me the best return on this land of mine"... not surprising because that question is at the heart of mixed and arable farming and has been central for centuries.

Specialist dairies are businesses and benefit from more traditional accounting.

Incidentally I'm not making a case for one vs the other, you need both and you need to get comfortable thinking around them. A lot of people do this instinctively, but for others it's a helpful way to feel more confident when making choices.

For example.. i have 80 cows on 80 inherited acres, milk price remains between 26 and 31 80% of the time for the foreseeable future. What price can I profitably pay for a. 100 acres b. 150 acres? And would I be better to sell up or lease out and move to a 200 acre unit for sale at 1.95 million?

Land charges + realistic (standard) labour tell you the capacity of the business to survive and / or grow.

Edit : reading up through this thread virtually every post is perfectly correct in itself... but they tell us more about how each one of us uses accounting tools than anything else.

..

kowtow · 02-11-2015 02:13PM

WheatenBriar wrote:

A land charge is as non sensical as a charge for the air you breath on a farm

Depending on the wind direction allowing your enlarged herd of cows access to your neighbours air is probably a given.

If you want them to have his farm as well though either they are going to need very long necks or a land charge is going to come into it.

And if you do rent his land, and pay, is the system you operate on it going to really be less profitable than the same system operated on the same land by his son?

WheatenBriar · 02-11-2015 02:30PM

Rented land *obviously * should be factored into the cost of production
We're not talking about that,we're talking about the ridiculous proposal to invent a cost for owned land,a cost that doesn't exist
No cost is a cost if you are applying it yet enjoy the money element describing it independently
That goes for the accounting exercise of the farm director charging the company for land rental too,its an invention with nothing to do with milk production costs
Its ridiculous as I said,cloud cuckoo stuff

A loan with land as security is already justifiable as an inclusion obviously but Ive a fair idea what revenue would say if you wanted to double count it

kowtow · 02-11-2015 04:16PM

WheatenBriar wrote:

Rented land *obviously * should be factored into the cost of production We're not talking about that,we're talking about the ridiculous proposal to invent a cost for owned land,a cost that doesn't exist No cost is a cost if you are applying it yet enjoy the money element describing it independently That goes for the accounting exercise of the farm director charging the company for land rental too,its an invention with nothing to do with milk production costs Its ridiculous as I said,cloud cuckoo stuff

So following your logic and intensive indoor system on owned land is more profitable than a grass based system on rented land every time?

WheatenBriar · 02-11-2015 04:44PM

kowtow wrote: »

So following your logic and intensive indoor system on owned land is more profitable than a grass based system on rented land every time?

I honestly don't know where you're getting that from
All I'm saying is creating an imaginary monetary cost (if you're fortunate to not be renting)as an added cost is a farce,because the money, the earned income usually appled to furnish any cost never leaves you,its there to enjoy on anything else as you see fit

I'm saying all other things being equal, producing milk on rented land is not as effecient as on owned,non leveraged land

yosemitesam1 · 02-11-2015 05:02PM

WheatenBriar wrote: »

I honestly don't know where you're getting that from
All I'm saying is creating an imaginary monetary cost (if you're fortunate to not be renting)as an added cost is a farce,because the money, the earned income usually appled to furnish any cost never leaves you,its there to enjoy on anything else as you see fit

I'm saying all other things being equal, producing milk on rented land is not as effecient as on owned,non leveraged land

Only if you'd never change your system or consider moving/adding on a new block of land is that the case, otherwise in order to make an informed decision on how to generate the best return possible from farming it is surely an essential part of your accounts.

WheatenBriar · 02-11-2015 05:23PM

But buying land is a cost
There seems to be confusion about the issue here
Buying land is a recognisable cost against profit until it is wrote off,the money that bought it earned back or the loan paid off

Owned Land you farm outside of that has no charge to you other than the normal working of it
You need to have a reason for a land charge and thats either rent or a purchase

That said,inheritance may have a tax cost,which can fairly be accounted for usually with borrowings funding it,they're allowable too
Blindly attributing a land charge without the exceptions I've discussed is ridiculous

yosemitesam1 · 02-11-2015 05:44PM

WheatenBriar wrote: »

But buying land is a cost
There seems to be confusion about the issue here
Buying land is a recognisable cost against profit until it is wrote off,the money that bought it earned back or the loan paid off

Owned Land you farm outside of that has no charge to you other than the normal working of it
You need to have a reason for a land charge and thats either rent or a purchase

That said,inheritance may have a tax cost,which can fairly be accounted for usually with borrowings funding it,they're allowable too
Blindly attributing a land charge without the exceptions I've discussed is ridiculous

But if your goal is to maximise your total income, shouldn't you know whether you make money from renting land to yourself and/or from farming it, and although for some it will show that their farming is losing money(while they still may or may not be generating enough cash to live off) it should be the first step in figuring out a system that can both pay wages+pay a yearly return for the money tied up in owning land. Or else it will just show its impossible to make a living + return on land.

Buford T. Justice XIX · 02-11-2015 05:47PM

WheatenBriar wrote: »

But buying land is a cost
There seems to be confusion about the issue here
Buying land is a recognisable cost against profit until it is wrote off,the money that bought it earned back or the loan paid off

Owned Land you farm outside of that has no charge to you other than the normal working of it
You need to have a reason for a land charge and thats either rent or a purchase

That said,inheritance may have a tax cost,which can fairly be accounted for usually with borrowings funding it,they're allowable too
Blindly attributing a land charge without the exceptions I've discussed is ridiculous

I think what they are saying is that there should be a figure included, in publicly discussed returns, to show a return on capital, which is a fair point, imo.

WheatenBriar · 02-11-2015 06:28PM

Buford T. Justice V wrote: »

I think what they are saying is that there should be a figure included, in publicly discussed returns, to show a return on capital, which is a fair point, imo.

No it isn't in my opinion, its errant nonsense, you cannot unmix a soufflé like that,cows need grass,grass needs land etc etc,the capital is mixed in said soufflé
The parts costing you actual money are the parts affecting your profit
Upkeep of the land for example, not the actual land
If you are to charge yourself for your own land thats bringing opportunity cost into it and as I said earlier, thats pointless as it knows no bounds,you may aswell introduce the O.C of your labour, that missed education, that welding job in Dubai etc etc as I said earlier
It a nonsense
Stick to actuals,and like for like or you are at nothing

So yeah,if you're comparing 2 same size farms,same output herds but one with land rented and one with none rented,all other things being equal,the latter is the more profitable
Like should only be compared with like

RightTurnClyde · 02-11-2015 06:29PM

Buford T. Justice V wrote: »

I think what they are saying is that there should be a figure included, in publicly discussed returns, to show a return on capital, which is a fair point, imo.

Exactly. There's an opportunity value on your land. Forget about buying or selling it, that's got nothing to do with this argument. There is a value on the land (rental value), that you'll get if your not farming it yourself. So that 200,250 whatever can be earned before you ever put on a cluster. So because you can't earn that if you have a cow on that acre, the rental value of the land should be subtracted from the return from the cow.
That rental value is the return on capital and is a cost to your litre of milk.
(I'd argue the same about labour, a dairy farmer could go out and earn the average industrial wage, but because he works a labour intensive job, cows, he can't. So a wage of, say €30k should be taken away from the return of the cow aswell. )

WheatenBriar · 02-11-2015 06:44PM

Hang on a sec,I've to subtract potential rental cost of my land from profits because I'm using it myself?

Lol who has indoctrinated this into some of ye?
I've never heard such rubbish

Im off now to tell the kids in college to deduct the potential rental of their owned tv from the house rental
I'll let ye know how they get on...

RightTurnClyde · 02-11-2015 06:57PM

WheatenBriar wrote: »

Hang on a sec,I've to subtract potential rental cost of my land from profits because I'm using it myself?

Lol who has indoctrinated this into some of ye?
I've never heard such rubbish

Im off now to tell the kids in college to deduct the potential rental of their owned tv from the house rental
I'll let ye know how they get on...

Okay take the student rental example (not the TV.)
Say you had a house, say in Cork and you were renting it out to students for €1000 a
month. So your making 12k from the house
Then your kids come of age and they go to college in Cork and the tenants get turfed out so your kids can stay in the house. And you don't charge them rent. Are they staying there for free....No, they're costing you €12k because you've lost that €12k income.

kowtow · 02-11-2015 06:58PM

WheatenBriar wrote: »

Im off now to tell the kids in college to deduct the potential rental of their owned tv from the house rental
I'll let ye know how they get on...

They need to add that to the house rental, unless the landlord is providing it

Milk Price- Please read Mod note in post #1

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