Milk Price- Please read Mod note in post #1

kowtow wrote: »

Without paid labour and with a relatively low proportion of debt and rented / financed land I suspect many would milk away as long and hard as possible to spread the cash costs.

In that sense we are very resilient, primarily because farms remain small for the most part and debt is still low in many cases.

Best case i,ve ever heard for family farms

frazzledhome wrote: »

Correct, sustainable

Sustainable to a point but resilient and sustainable are not quite the same thing, we are resilient because:

1. There is an absolute minimum of paid labour (i.e. family works for free and herd remains small enough that family can do virtually everything required)

and:

2. That there is a minimum of debt and/or rented land - ties into the point above on labour.

What this means in effect is that the "typical" family farm unexpanded as it stands today will be able to run at a loss for longer than the more expanded, commercial, enterprise simply because relatively few of it's costs are cash costs. How long people want to work for nothing is a different matter, but it is certainly true that you have to stay in the game to stand a chance of winning it.

Of course you can't have everything, so the same typical family farm will be a less profitable enterprise than it's expanded commercial equivalent which has the benefit of scale.

So having no cash and a small herd is survivable, having lots of cash (as a cyclical loss buffer) and a big efficient herd is survivable (and the most profitable).. it's being stuck in between the two which is dangerous territory.

A lot will depend, IMO, on what sort of moves we see in the global milk price over the next 12/18 months. There is a definite change in the canvas for commodities, traders beginning to look now at 1998 levels in softs & oils - although not yet dairy. As long as commodity prices in general decline, milk supply will be slow to adjust no matter what the demand picture is - because every country has their own version of "milk on and be damned" - in the US it's cheap corn, in Ireland it's free family land & labour, in New Zealand it's abundant and relatively cheap grass...

A lot rests on whether the "centre line" around which volatile high and low milk oscillate is to be 20-25, 25-30, or 30-35 (which is the case so many Irish business plans seem to have been built on)... and to my mind we don't seem to be much closer to finding that centre line today than we were on 1st January - despite all the commentators who would suggest otherwise.

Dawggone wrote: »

Bullseye.



I was looking at a bull this morning that was on a 400ha farm. Farm has 200 cow herd producing over 2 million liters per year. The whole herd is for sale because the two dairy employees are retiring. They looked at robots and decided that it was a better route to sell out and build a digester.



It's got me thinking...

So they've decided a 1000 acre dairy farm is not viable, even though all infrastructure and stock are in place. That's a v scary prospect.

Dawggone wrote: »

Ah no Dsw!

Cereals are the main enterprise with 400k chickens produced p.a. also.

So dairy is the poor relation of the three?

Dawggone wrote: »

Yes.

I can say the same for my farm.

And with some of ur COP's for milk u've put up here it makes me v worried.
As regards the other farm, 1000 acres, cereals, a heap of chicken sh1te and a digester sounds like s match made in heaven!

Dawggone wrote: »

Yes.

I can say the same for my farm.

I was going to ask in how many years is the opposite the case, but I suspect quota may have distorted things too much to make the answer of any real meaning for the future.

I suppose my point is that for about 30 years of the "modern" era - from say 1975 - 2005 corn was 200-400$ and wheat $400-600. In the same period NZ milk would have been 15-20$/100 kg.

Only since 2005 have we seen the dislocations which brought the softs up into 500-1000 & milk between $30-40/100 kg.

I wonder, at 1975-2005 prices, had there not been quota, in how many years dairy would have beaten tillage on your farm?

Dawggone wrote: »

Hmmm had there been no quota, it's anyone's guess.

From '83 'till now dairy has been well ahead of cereals.

If you take your average 100acre family farm since '83, if they were in cereals, they would be starving by now! There would certainly wouldn't have sent children to boarding schools and onto university.
You have touched on something that I've often spoken about...with quota now gone, expansion is not only necessary, but vital for survival. The 100 acre (full time) tillage/beef farm is history. Can dairy be far behind?

Every single bit of evidence suggests that the small dairy farm should vanish into history.

For cereals, it was mechanisation which drove expansion (the extra acres paid for the machines which were the only economic way to grow the crop).

For cows, at least on the Irish model, mechanisation has definite limits. If you are going to have robots you might as well house the cows and enjoy high output rather than trying to teach them to obey traffic lights and box junctions themselves to get to grass.

In the end it will all, surely, be about gross margin per labour unit (just as it was with tillage)... with cheaper feed & diesel the logical way to attain this is more robots, more tractors, more yield & less men.

The Irish model is a bit of a left fielder - but in one sense you can't argue with it - the only thing cheaper than a robot is a dairy farmer with a fully employed wife!

Buford T. Justice V wrote: »

Obviously a 102inch HDD tv with surround sound and subscriptions to 3 million channels (only 10 of which will ever be looked at) is more important than spending on food to feed their family:rolleyes:

Ah - but they can have it all, as long as the food industry keeps batting clever.

Food costs less, and people eat more - but at least they eat what they are given, because without the genius of the food industry there is no way on God's green earth a chicken nugget could ever have become a "thing".

Everyone wins - the farmer gets bigger by selling more for less, the public gets fatter by eating more for less, and the food industry increases profits by 5% plus per annum by telling everyone what to do.

Cui Bono?

kowtow wrote: »

Every single bit of evidence suggests that the small dairy farm should vanish into history.

100% agree with you there, milk producer numbers have been decreasing here over the decades, this will be accelerated over next 10 years as prices wouldnt reach those highs unless we have some catastrophic world event or our processors becoming more proactive in achieving higher prices instead of price taking

our industry (teagasc and our processors) all wishing to go the route of new zeland which to me is beyond belief, mass production low cost production,low cost selling, we could turn eventually turn out like the swiss where they cant retain young people to stay working the land or back to estates

farms have to get bigger to be able to be able to produce more to be able to survive or become a specialist in something and remain the same size which is the option im currently favoring

Milked out wrote: »

Kerry and Lake land held at 26 and 26.25 respectively

Wonder will glanbia raise their price to match

frazzledhome wrote: »

Was at a meeting of dairy farmers yesterday morning and price wasn't even mentioned. All that was discussed was how much we can add to the base with our solids. Next was how we could properly analyse our business and get better value for any monies spent on VCs.

Refreshing

That kind of comment shouldn't be on a milk price thread.

frazzledhome wrote: »

??????

I'm sure it's humorous, at least that's what I thought!

kowtow wrote: »

I suspect what frazz is reminding us of is that milk sales are actually at a substantial premium for solids over base.

On that basis presumably there is still some margin over cash COP to pay the farmer.

yes but you still have to work from the base price , all bonuses for solids etc are on top of that ... even looking at the 24cpl glanbia september price and lakelands are already 2.5cpl ahead of us, if we had 26.5 as our base price as well as our solids it would make a big difference