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Milk Price- Please read Mod note in post #1

delaval

24/6/16

Recently we saw three posters close their accounts over disagreements in the dairy threads. While there is a lot of frustration and discontent with current milk prices and the processing industry, the recent tendency for dairy threads to become tit-for-tat arguments isn’t tolerable for those not involved.

All farming sectors go through difficult periods and during such times there may need to be changes in how threads are moderated.

Dairy threads are going to be more closely monitored and subject to stricter moderation for a while.

To that end we won’t tolerate baiting of posters, constantly reviving old arguments, posters with agendas or crusading for a cause.

Whether it’s discussion of the business or politics of the dairy or other sectors, we expect civility and tolerance toward each other and other opinions as diversity of opinion is needed as a source of different ways of looking at a situation.

"The aim of argument, or of discussion, should not be victory, but progress." - Joseph Joubert

Also please be aware that what you may post as light-hearted banter can be read totally differently by someone adversely affected by the subject matter and evoke a reaction you hadn’t intended.

The ‘Off-Season’ forum, and its anonymous posting, is available for anyone to chat about their situation.

The Mod Team.

I was wondering would it be a help if we posted our milk prices. I would hope that if someone is low that help could be given, on the other hand if high perhaps your tips could help us all.

I would suggest posting your processors base inc Vat for comparison
Post your Nett price for others to help or be helped
I think that solids should be included.
I suggest any seasonal/liquid contract price be excluded or seperated.

I feel that we as farmers do a lot of bitching about processor prices and rightly so IMO. I also feel that we should not worry about it as we can do nothing about base price but we certainly do something about it at farm level.

What do you all think?

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cute geoge

stanflt wrote: »

Lads I was just doing my real cost of production last night- I'm lucky I've no borrowings except a repayment of 1200 per month that will be finished in 15 months time- I've no machinery finance either- I've 60 land rented in and I put 180 land charge on my own- including drawings and tax etc its 27pl

Reading your posts all this time back ,i would consider you would be at least in the top 20% dairy farmers profits wise .Imagine the cost of production of farmers with new parlours,buildings and machinery . I am sorry to think but there will be a lot of big dairy farming casualties and they probably will bring down a lot other farming related business as well

Farmer Ed

cute geoge wrote: »

Reading your posts all this time back ,i would consider you would be at least in the top 20% dairy farmers profits wise .Imagine the cost of production of farmers with new parlours,buildings and machinery . I am sorry to think but there will be a lot of big dairy farming casualties and they probably will bring down a lot other farming related business as well

I agree. I think people with borrowings are going to find it most difficult.

This 15k of a low cost Eu loan that is being looked at will probably act as a short term measure for now as a means of helping to clear off bills with co ops and merchants Long term the farmer will still be left holding the baby.

yosemitesam1

stanflt wrote: »

Lads I was just doing my real cost of production last night- I'm lucky I've no borrowings except a repayment of 1200 per month that will be finished in 15 months time- I've no machinery finance either- I've 60 land rented in and I put 180 land charge on my own- including drawings and tax etc its 27pl

If you had an average 5-6000 litre cow would you think your cop would be much higher?

jaymla627

Farmer Ed wrote: »

I agree. I think people with borrowings are going to find it most difficult.

This 15k of a low cost Eu loan that is being looked at will probably act as a short term measure for now as a means of helping to clear off bills with co ops and merchants Long term the farmer will still be left holding the baby.

Australian government bringing in a loan scheme to sub dairy farmers to the tune of 350 million euros, that's going to help support a nice little bump in production their/keep dairy farms in business.....
With only 1.6 million cows out their it will sub suppliers to the tune of over 200 a cow, with political inference now rife through the EU/America/and now Australia with proping up prices it's growing ever more likely that the sharp correction in supply needed through farmers exiting the industry simply isn't going to happen, handouts like that probably inflict more harm then good as they help keep supply up/marginal suppliers in business for a while longer and tag on even more debt to farms...
The more I think about it, the only lifeline left to pull prices back up would be a widespread global drought that wipes out russian/Ukraine/American crops with another bumper harvest predicted worldwide that's wishful thinking

Buford T. Justice XIX

Well, lads and lassies, it's no use complaining that the figures used don't add in a wage for the farm without delivering a figure for use on the farm that can be used across all farms.

It's not an easy figure to come up with.

A farms drawing needs change dramatically over the course of a working life.

A young farmer starting off has little need for drawings, probably living at home and only needing money for his car and a few pints.
A married farmer must take a mortgage out as well and probably money for raising the kids as well even if the OH is working.
And older farmer will be near enough having the mortgage paid off but will have to take a big chunk of change for education over a decade or so for college education.
An older farmer is back again to drawing little again except for a pension and some wages for a child working on the farm again.

What figure do you put on each and how do you average them out?

Or do you take a figure, X, for drawings which might bear no relationship to actual needs and use it despite different farm sizes and enterprises?

stanflt

yosemitesam1 wrote: »

If you had an average 5-6000 litre cow would you think your cop would be much higher?

Yeah because my feed cost is only 5.5cpl and I'd have fixed cost over 300k litres less resulting in break even price of 35 based on 100k drawings

Farmer Ed

Buford T. Justice V wrote: »

Well, lads and lassies, it's no use complaining that the figures used don't add in a wage for the farm without delivering a figure for use on the farm that can be used across all farms.

It's not an easy figure to come up with.

A farms drawing needs change dramatically over the course of a working life.

A young farmer starting off has little need for drawings, probably living at home and only needing money for his car and a few pints.
A married farmer must take a mortgage out as well and probably money for raising the kids as well even if the OH is working.
And older farmer will be near enough having the mortgage paid off but will have to take a big chunk of change for education over a decade or so for college education.
An older farmer is back again to drawing little again except for a pension and some wages for a child working on the farm again.

What figure do you put on each and how do you average them out?

Or do you take a figure, X, for drawings which might bear no relationship to actual needs and use it despite different farm sizes and enterprises?

I'm sure German farmers have simular issues but they seem to be able to come up with a formula. The fact is you time has a value. The question is are you been properly paid for your time?

alps

Buford T. Justice V wrote: »

Well, lads and lassies, it's no use complaining that the figures used don't add in a wage for the farm without delivering a figure for use on the farm that can be used across all farms.

It's not an easy figure to come up with.

A farms drawing needs change dramatically over the course of a working life.

A young farmer starting off has little need for drawings, probably living at home and only needing money for his car and a few pints.
A married farmer must take a mortgage out as well and probably money for raising the kids as well even if the OH is working.
And older farmer will be near enough having the mortgage paid off but will have to take a big chunk of change for education over a decade or so for college education.
An older farmer is back again to drawing little again except for a pension and some wages for a child working on the farm again.

What figure do you put on each and how do you average them out?

Or do you take a figure, X, for drawings which might bear no relationship to actual needs and use it despite different farm sizes and enterprises?

Drawings have nothing to do with COP...

The labour charge is for the amount of hours worked which signifies the cost it would be to replace you.

If you can work your farm doing 5 hours a day, it will naturally have a smaller labour charge than a farm requiring 15 hours a day.

What's left over is your entrepreneurial profit....

But drawings are different...you could have drawings while the farm is making a loss...The concept of drawing should be removed from COP....The labour figure should only have to do with requirement to get the job done.

visatorro

stanflt wrote: »

Lads I was just doing my real cost of production last night- I'm lucky I've no borrowings except a repayment of 1200 per month that will be finished in 15 months time- I've no machinery finance either- I've 60 land rented in and I put 180 land charge on my own- including drawings and tax etc its 27pl

Super going.
What will you do when loan is paid if you don't mind me asking?
Do accountants not tell lads to always have abit of debt to avoid tax? Maybe I'm missing something.

jaymla627

stanflt wrote: »

Yeah because my feed cost is only 5.5cpl and I'd have fixed cost over 300k litres less resulting in break even price of 35 based on 100k drawings

working back on your figures I assume your sending in circa 1.2 million litres, taking 100k drawings/ 5.5 cl feed costs/36k rental costs (200) acres that would mean your total costs less feed drawings and rental are sub 12 cent a litre, pretty amazing figures given you have expanded your herd considerably and are carrying a lot of replacement stock

Milked out

Drawings come out of the wage you take from the business so are one in the same I'm. if there is profit over and above that it is there to reinvest in the business or save for downturn or give yourself a "bonus" or whatever. Even if the avg ind. wage was added in just to cover that in order to have a figure across all farms why not include it and state it. Having cop's stated without the main labour cost or land included is rediculous given the way it's thrown around the media

Buford T. Justice XIX

alps wrote: »

Drawings have nothing to do with COP...

The labour charge is for the amount of hours worked which signifies the cost it would be to replace you.

If you can work your farm doing 5 hours a day, it will naturally have a smaller labour charge than a farm requiring 15 hours a day.

What's left over is your entrepreneurial profit....

But drawings are different...you could have drawings while the farm is making a loss...The concept of drawing should be removed from COP....The labour figure should only have to do with requirement to get the job done.

Again, another variable added into the figure.

I spend my week looking after c 100 cows and 50 ewes and their replacements and it takes the full week.

A lad I know well works the same hours with 18 cows and replacements.

I just think a figure of around 40k, a good weekly wage, would be a better figure to add to all full time farms instead of splitting hairs on a figure.

I don't think it's as easy to determine a figure to use as some are making out.

Water John

It has to be a per hour rate. One is calculating the reality of COP, not some notional figure. Only that way, by standardising how its done can you evaluate how you are performing.
In many ways capital invested and hours worked interact with one another.
So a loan to do something may reduce your hours worked. That is one of the consequences of the investment. Classic being, extending a milking parlour.

kowtow

Buford T. Justice V wrote: »

What figure do you put on each and how do you average them out?

Or do you take a figure, X, for drawings which might bear no relationship to actual needs and use it despite different farm sizes and enterprises?

Yes, same as in any other industry.

You take a sensible figure for someone who can do the job - a skilled herdsman, experienced milker - whatever - and you stick with that.

Ideally it's a figure which scales if you add manpower to the costings. It doesn't have to be enough to keep you in caviar and cocaine (if that is your thing), or so little that you'd be eligible for income support - but at least with some sort of an hourly / daily labour figure you aren't pretending that cows will milk themselves.

I suppose if you had to define it it's the annual wage which would pay someone to do the daily time consuming work, rather than the strategic management.

You still have profits / losses to pay for the bigger things in life...

Edit: note that a farming enterprise is supposed to return a profit in respect of the risks taken, as well as the normal payment for labour consumed (just as you pay a contractor whether or not the crop is profitable)... the profit should be net of the land charge, in other words if you are dairying and made less profit, after paying yourself a wage, than you could have realistically rented out the land at then you are making a loss. It may be that in some years of a cycle this is the norm, but it's still as well to know what the figure is.

stanflt

visatorro wrote: »

Super going.
What will you do when loan is paid if you don't mind me asking?
Do accountants not tell lads to always have abit of debt to avoid tax? Maybe I'm missing something.

Debt doesn't avoid tax- relief can be got from cap ex which has been.significant here over the last ten years- most of it done thru cash flow which in one way is keeping us afloat

keep going

Tbh ye are wasting alot of time talking about this.the only thi g that matters is that you can pay your bills and support your family.all those figures are only for comparison and whether you include land charge or a labour charge isnt going5o be the difference between survival and going bust

Farmer Ed

keep going wrote: »

Tbh ye are wasting alot of time talking about this.the only thi g that matters is that you can pay your bills and support your family.all those figures are only for comparison and whether you include land charge or a labour charge isnt going5o be the difference between survival and going bust

Only to a point if you can earn more money by doing something else and getting rent from your land every year Then maybe that could be a better way of supporting your family. That's why you have to include labour and land costs even more important if you are leasing land as land cost in a year like this could be an immediate killer

kowtow

keep going wrote: »

those figures are only for comparison and whether you include land charge or a labour charge isnt going5o be the difference between survival and going bust

Don't agree at all - I wish people wouldn't assume that proper P&L budgeting is for comparison - that's the last thing it's for.

The purpose of a P&L is to understand the inherent profitability or otherwise of a business. It's for decision making.

Failing to include a labour or land charge in a pro forma budget would suggest that one could expand ad infinitum, with a milk price of about 25-30c / litre... which would be a critical error if at some point you expected either to be paid for your own labour or to gain a return on (or acquire more) land.

keep going

Farmer A has a cop of 28 cent but he has his allowed for wages and land rent.farmer B is paying rent and wages to someone else .at milk price of 28 cent who goes bust, they both have the same cop

rangler1

kowtow wrote: »

Don't agree at all - I wish people wouldn't assume that proper P&L budgeting is for comparison - that's the last thing it's for.

The purpose of a P&L is to understand the inherent profitability or otherwise of a business. It's for decision making.

Failing to include a labour or land charge in a pro forma budget would suggest that one could expand ad infinitum, with a milk price of about 25-30c / litre... which would be a critical error if at some point you expected either to be paid for your own labour or to gain a return on (or acquire more) land.

Anyone that expects to get land rent and paid for labour in farming is too long protected by milk quota and should seek help,
Discussing whether to include it or not is just a bit of willy waving...are dairy farmers really creaming (pun) it and can include it without going into a negative figure, if they are they could stop the incessant whingeing at least

Milked out

Keep going fair enough in discussions groups and that those figures are used for comparison but when they then get thrown out in the media without the labour or land included it only serves undermine the actual production cost.

Milked out

rangler1 wrote: »

kowtow wrote: »

Don't agree at all - I wish people wouldn't assume that proper P&L budgeting is for comparison - that's the last thing it's for.

The purpose of a P&L is to understand the inherent profitability or otherwise of a business. It's for decision making.

Failing to include a labour or land charge in a pro forma budget would suggest that one could expand ad infinitum, with a milk price of about 25-30c / litre... which would be a critical error if at some point you expected either to be paid for your own labour or to gain a return on (or acquire more) land.

Anyone that expects to get land rent and paid for labour in farming is too long protected by milk quota and should seek help,
Discussing whether to include it or not is just a bit of willy waving...are dairy farmers really creaming (pun) it and can include it without going into a negative figure, if they are they could stop the incessant whingeing at least

It's not about getting the rent it's the opportunity cost of it rangler. In my case I'm sting that cost in interest on money borrowed to buy but as you say if we are to get real if you don't include.a.land charge when doing the figures you are ignoring the possibility that you may be as well off renting the place as farming it

Buford T. Justice XIX

Milked out wrote: »

Keep going fair enough in discussions groups and that those figures are used for comparison but when they then get thrown out in the media without the labour or land included it only serves undermine the actual production cost.

That's it in a nutshell.

The purpose of those figures are inter farm comparisons of cost base and how different systems can be managed to reduce farm cost.

When they use those figures in the media, they should then publish firms profitability by adding on the cost of labour to the headline figures.

Profit monitor figures aren't accountancy figures to determine the actual profitability of farms. The profit and loss sheet from the farm is the set of figures to use for that.

Farmer Ed

Milked out wrote: »

It's not about getting the rent it's the opportunity cost of it rangler. In my case I'm sting that cost in interest on money borrowed to buy but as you say if we are to get real if you don't include.a.land charge when doing the figures you are ignoring the possibility that you may be as well off renting the place as farming it

Exactly. At the end of the day it's all about what let's you with the most money in your pocket at the end of the year. Or in a year like this. What ever leaves you with the least bills. Imagine owning a property in a prime city center location and not including the site and labour costs when deciding the best way to make a return on that asset?

rangler1

Milked out wrote: »

It's not about getting the rent it's the opportunity cost of it rangler. In my case I'm sting that cost in interest on money borrowed to buy but as you say if we are to get real if you don't include.a.land charge when doing the figures you are ignoring the possibility that you may be as well off renting the place as farming it

There's a lot of advantages to farming to consider other than money, there's a lot of disadvantages too, most would be financially better off renting but if we all did it wouldn't be long becoming a renters market.....becoming that way around here for land that's tired from long term renting/ neglect. new rents still making good money though

Farmer Ed

Our last two minister's for agricultural decided pretty quickly that they could make more money by not farming their own farms. I'm not knocking them for that. It was just the financial reality.

kevthegaff

Should sfp be included seeing it is tied to the land and should be added to the land charge or opportunity cost? Land type should account also?

Bass Reeves

Sam Kade wrote: »

All true, there will be a mass exodus of small/medium size farmers down the line.

Not so sure it is too east to work and run a medium size farm. However I think the Government have a cunning plan at present with leasing. They are encouraging lads to lease land in 10-12 years time if they change the tax regime these lads or there children will no longer be able to reenter farming. They will then either have to pay tax on the rent or sell the asset. However if a lot of land suddenly came on the market it would depress the price

WheatenBriar wrote: »

If that's the case,I don't see the point in 100 cow farmers continuing
When I was in UCD many many moons ago one of my lecturers told me ,an Ag lecturer displaying an ignorance of his field,sub 100 weren't viable
Do you know what it is,it's all nonsense
Europe should have ignored the Ukraine too and we'd have been near a 30 base price building markets in Russia but the pc brigade interference has enhanced an unnecessary extra markets head ache

The 80-120 cow man is the most viable. It is not really viable to pay labour. At present labour is heading to 15/hour very fast for good skilled workers. You will need excellent labour management skills to handle larger cow numbers

kowtow wrote: »

There's a teagasc 2011 report which I have linked previously on this thread giving all figures both methods for eu and world.

We're only competitive when land + labour is excluded. With them included we're quite far down the table. I never understood why this report had been written but was never quoted.

This fascination with land and labour cost is intriguing as loads of farmers never bought any of the land they farm. Not only that most inherit it tax free. If you are unhappy with farming returns you can sell the land and lease it back or use the money for where you consider you will have a better return opportunity. This is the decision any investor has. Farmers have to decide when enough is enough and stop looking over the ditch and comparing it to other jobs or business's. it a bit like the LUAS drivers comparing themselves to DART drivers.

cute geoge wrote: »

Reading your posts all this time back ,i would consider you would be at least in the top 20% dairy farmers profits wise .Imagine the cost of production of farmers with new parlours,buildings and machinery . I am sorry to think but there will be a lot of big dairy farming casualties and they probably will bring down a lot other farming related business as well

This will be a huge issue, I was talking to a small contractor and he is really worried about getting paid this year.

Milked out wrote: »

It's not about getting the rent it's the opportunity cost of it rangler. In my case I'm sting that cost in interest on money borrowed to buy but as you say if we are to get real if you don't include.a.land charge when doing the figures you are ignoring the possibility that you may be as well off renting the place as farming it

That is the decision you have to make as an individual. You can always rent it or sell it and then get a job that entails working to some elses agenda. It will have risk as well that during a recession you may lose your job. If you do not want to make that choice then do not complain about it.

Farmer Ed

kevthegaff wrote: »

Should sfp be included seeing it is tied to the land and should be added to the land charge or opportunity cost? Land type should account also?

Good question. I so know of guys now letting land and getting the tenant to claim the Bfp for them. Not sure of the nuts and bolts of how that works,but sounds crazy.

alps

kevthegaff wrote: »

Should sfp be included seeing it is tied to the land and should be added to the land charge or opportunity cost? Land type should account also?

Yes.....its income and it exists...you might even make a business decision to buy more....

Some have high labour, some high feeding, some high land rent, some high depreciation...They are all intertwined..For comparison, the overall...how much can this guy make,..is the message y ou want to pull from any of them..