Milk Price- Please read Mod note in post #1

There's a charming little video here of intensive grass based dairy in the UK in the 1960's..

https://www.youtube.com/watch?v=uqu02eXMnuU&sns=em

It's striking that the margin over concentrate per cow was £120... which (wait for it) is between £2,000 and £5,000 in today's money depending on which measure you use. His gross margin per acre was £76 (£1,233 to £3,745 in today's money).

Haven't got the UK historical series to hand but land prices at the time were likely to be in the very low hundreds (if that) per acre, so the margin on a single cow would likely have bought the acre she stood on.

Doesn't hurt to ask ourselves how we managed to get this far, with all the progress.

Dawggone wrote: »

+1.

Looking at the video brought me back to childhood when our produce was seen as FOOD. Now we need subsidies to produce a 'product' so that a processor can make food from it...like...chicken nuggets!

Hmm.. no question that things cannot proceed indefinitely on the basis that the farmer risks more to get less, the consumer pays the same, and the chain pockets the difference - which although vastly oversimplified seems to be the case since about 1970 (*so* much about our life changed from 1971 onwards..)

That IFA thread sums the problem up in a nutshell though, when you start reading it you see farmers quite rightly complaining about the wider industry ripping them off.

By the time you get to the end you begin to realise how the industry gets away with it.

Dawggone wrote: »

I don't agree. It will proceed indefinitely.
It is the established infrastructure of the industry that we do business in.
For any meaningful change to that infrastructure it would take a complete reversal of attitude of both consumer and producer alike.

It's difficult to imagine the producer preferring today's returns over those referred to above? And is the consumer really more comfortable with agri-business and it's output - especially when you consider the hidden costs in healthcare & taxation he / she has to shell out to support it?

I think you are right though that neither consumer nor producer will make a change happen in their own right.

But that doesn't mean that the market itself won't.

A farm in today's world trades almost as if it was risk negative - millions invested, together with a significant quantity of valuable labour, to obtain a return which may well be less than the value of the labour itself. Even on a big farm, the returns are at or below what we would normally consider risk free assets, long duration bonds etc.

The financial return is the "price" of the risk, when you accept a low return you are paying a high price for the risk asset -

Just as we under-priced (overvalued) subprime in 2007/8 by paying 5x what we should have for baskets of rubbish debt, farmers today are holding and financing farms at imputed valuations, including their own labour, which would shame a gold plated sovereign debt - albeit that most of them are doing so from their own pockets with their own labour for perfectly admirable reasons.

But Eventually risk must re-price. A debt crisis among farmers? (imagine interest rates at 14% with land at today's prices..), a rapid collapse in land prices? A big collapse in a part of the processing chain when they finally run out of room to manoeuvre? A processed food scare/health crisis on a grand scale?

Any of them would have massive political consequences as well as economic.

* I should add that it is just about possible that farms are not overvalued, but in fact are the only thing that is correctly valued. It may be that the market is telling us that everything else is actually much riskier than we think. After all, when all the sovereign nations collapse and their debt goes up in flames, the farm and the skills you use to run it will at least feed you - provided that you are prepared to drink raw milk of course. And the processor / co-op / supply chain & the IFA will no longer be a problem.

kevthegaff wrote: »

Got an msa in post today from arrabawn!

Me too what u think ,u going to meeting tomorrow night

mahoney_j wrote: »

Me too what u think ,u going to meeting tomorrow night

I think it's not too stringent, I'll probably sign it but I'll have to read it again. Just wondering if we taken over will the msa still apply

kevthegaff wrote: »

I think it's not too stringent, I'll probably sign it but I'll have to read it again. Just wondering if we taken over will the msa still apply

You should argue against that as a point of principle although it will be very difficult to get. The value of any organisation when it comes to a merger is defined by how well it owns it's revenue stream, which is probably why MSA's are becoming a hot topic.

And the value of the organisation has a big influence on salaries and board positions in the merged entity.

But you should definitely argue for it, at least an accelerated option to exit the agreement in the event of a merger.

If you have it in front of you I'd be interested to hear what the wording is on allowing access to milk lorries for collection. Do you have to use reasonable efforts to provide access [and when] or "best efforts"?? The difference is an important one.

kevthegaff wrote: »

I think it's not too stringent, I'll probably sign it but I'll have to read it again. Just wondering if we taken over will the msa still apply

Where u at meeting Thursday night ,personally and from crowd that was at it think it is very fair and balanced .12 month rolling contract with 6 month opt out and share requirement of 1.5 cent per litre which stops when price drops below 28 and kicks back in with no claw back when it goes back over 28'.i even met and was talking to some of the refugees !!!!!!,we took in from dairygold and they had no issue with it and when question was asked of them by top table that was there response along with if they were offered that by dairygold they would of probably staid

kowtow wrote: »

Doesn't sound unreasonable on the face of it.

I've had my share of grievances with coop but even I will admit it's fair ,balanced and non penal

Milked out wrote: »

Anything in it with regard to expansion or how are ye with regard to capacity at the moment? Dg also stops drawing revolving fund below 28c I think the share up is stopped below that point as well not sure. On the shares my own issue and that of a good few people id say is that while we have enough shares they are all in the fathers name so when I take over on paper fully on my own either i'll have to have bought shares in my name or share up via the 0.5c/l payment until have enough or pay cgt if shares are transferred from the father to me.

Nope share up is a flat 1.5 cent for all milk ,a max of 0.5 litre will be deducted till u reach required level.on capacity were up beteween 10/11% this year on volume including milk we process for Lakeland and Monaghan .plant went really well this year despite addition of extra capacity and natural gas.work ongoing on bottling plant also to give more processing capacity .we are not under pressure there

mahoney_j wrote: »

Nope share up is a flat 1.5 cent for all milk ,a max of 0.5 litre will be deducted till u reach required level.on capacity were up beteween 10/11% this year on volume including milk we process for Lakeland and Monaghan .plant went really well this year despite addition of extra capacity and natural gas.work ongoing on bottling plant also to give more processing capacity .we are not under pressure there

I presume that deduction is not tax deductible similar to a straight up share purchase.

wats the craic wrote: »

ya sounds good alrite if glanbia if had offered that to us instead of the 15 yr msa that u could not leave till yr 10 . i would take hand and all speaking to a couple of local lads supplying you the difference bettween glanbia and ye is unbeliveable . you are putting yourselves in a very strong position as a coop .

The glanbia msa was scaled back to five years.

Wont be long going . Will be keeping an eye on arabawn for my few litres when time comes.