Dairy Chit Chat- Please read Mod note in post #1

Tank full here lads deck I can't go spending money this year! Co op on 3days. What's the rest of ye on

Dawggone wrote:

Waiting on your simplistic (for me) explanation of commodity cycles/super cycles. Thanks.

There's some doubt about whether formal supercycles (kondratieff, Schumpeter style) actually exist, but if they do they posit large multi year cycles of about 20-30 years inside during which capitalism goes through various phases of investment, destruction, financialisation, innovation etc.

It matters little why these occur but there have been four I think since the 1890s... the second last one was odd beginning in 1969/70 and peaking quickly with the oil shock of 1974, followed by a long commodity depression through the 1980s.

The most recent cycle began around 2000- perhaps ignited by fed loosening to ameliorate the dot com bust and accompanying the rise of China... itself possibly a symptom rather than a cause of the boom. The cycle probably peaked between 2010-2012.

Commodities move in lockstep... witness the relationship between milk and oil... and within the bigger cycles there are regular production and investment cycles of maybe 3-5 years around a certain equilibrium.

If you support these theories, or simply accept the objective evidence of supercycles, then if oil finds a new and declining equilibrium during the next decade we can expect milk and grains to cycle around it for another few turns. The fact that production is not slowing as it might once have done suggests that this is already underway. What we don't know is where this equilibrium or mid level will likely be.

Cycles are a perfectly normal part of production. The more worrying issue is whether the "global milk powder trade" is itself a unique product of the most recent cycle peak from 2004 onwards, and whether it only really exists at all at market extremes.

It's not so long ago that new Zealand did lamb and excess milk was stored and traded as cheese.... is it conceivable that we could go back there?

Either way while milk will continue to peak, crash and recover (probably in 3/4 year phases) around some notional mid point for ever, we have to remember that there is no natural Justice which says that mid point must be 30, 25, or even 20c. That will be governed by where the commodity complex is overall and what direction it is going in.

Dawggone wrote:

If dairy is going down the road of globalised commodity markets, then you'll need to multiply by a factor of...?

Surely once you start scaling dairy your measure must be litres/man?

freedominacup wrote:

If it's gone that badly surely it'll be easy enough to avoid investing in land and handling facilities. It's going to be relatively easy to rent both isn't it? If labour is to be easy (which is highly doubtful, it's always a pita) expansion at this dairying lark should pretty straightforward for good managers. Get cows, find right land and facilities equation, hire labour, supervise until running efficiently, start building stock numbers for next oppurtunity. All you need is a system that can cope with the market price.

You hit on an important point which I didn't get around to in the post above.

In a prolonged move in overall commodity prices, you would expect to see land prices and major inputs shift as well as a more liquid market in land for some periods. In the 1930s for example land was worthless in many producing countries.

So a big cycle is not "like now, but worse".. it's a different landscape.

Our competitiveness - even New Zealands - was 'discovered' in a time where oil was x and milk powder was y. Feeding was expensive.... it's not just the price of milk which can shift... it's the landscape underneath.

But there are opportunities. As Dawg says, duck and dive.

kowtow wrote: »

I don't doubt it.

But I have a horrible feeling everything else will be dearer still.

Fueled by debt is it?

jaymla627 wrote: »

Your assuming dairy farmers who went on spending sprees/gave the deeds to the bank will even be in a position to rent if they exit the industry due to debt troubles, bps will always skew rental values aswell.....
With milk at sub 20 no system can realistically cope unless they mine the farm of p and k stall all capital expenditure, and in a intensive grass based system pray the weather plays ball/grass grows, can't see How employing labour is even possible either at low prices....
A grass based herd say running 250 cows doing 5000 litre average on paid labour accounted for at 50000 euro will cost 4 cent a litre alone in labour costs, say your land lease on the 300 acre block with facilities to run this herd comes to a very reasonable 50000 aswell....
Its costing you 8 cent a litre before you take into account any other costs, can you honestly say you'd have no trouble turning a profit in this case working of 12 cent a litre , and still have the finances for "the next opertiunity" it's dillousional but the sad thing is a lot of guys think they can make it work and are still mad to pile on more cows/ start up new greenfield sites

I wish my land and labour costs were that low. I know what you mean about the deeds though. I hear wealthy men on here all the time blowing about how they'd be better off renting their land out to some other poor fool.

whelan2 wrote: »

On renting/leasing how can you be sure you get the money agreed? With crap milk prices etc I am sure alot of these leases are the last thing to be paid. Would many pay up front?

You'd need a pretty good solicitors agreement with severe penelties if rent is left unpaid, maybe something like if farmer x doesn't pay rent he forfeits land/machinery to lessee, going to take a scout up to the greenfield open day and see what magic solutions they have

mf240 wrote: »

The couple of bits I rent are done on a handshake .

If you have no word you have nothing .

A lad with the best intentions in the world simply mighten have it the way things are going, if a dairy farmer is faced with choosing between paying the bank our the rent on ground but can't pay both what ones he going to choose , more extreme cases like mortgage payments simply keeping food on the table.....
Its not always black and white

kevthegaff wrote:

Sorry farming on prob the hilliest dairy farm in Munster so just my circumstance:-( tillage isn't possible on the majority of this farm,

I reckon we'd run you close.

Anything less than 10% slope here and we'd throw boards out and play polo on it.

whelan2 wrote: »

On renting/leasing how can you be sure you get the money agreed? With crap milk prices etc I am sure alot of these leases are the last thing to be paid. Would many pay up front?

I pay rent upfront but maybe I'm the fool!