Milk Price- Please read Mod note in post #1

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

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

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.

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

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.

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.

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.

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..