Milk Price- Please read Mod note in post #1

jaymla627 · 30-05-2016 08:20PM

Buford T. Justice V wrote: »

The true return would have to be compared to what you would receive if you rented the land out.

I would get a higher return if I had let my farm out for the last few years. But next year I will be making more than the rental price so it's a moot comparison for me.

But I have been aware that better returns were there if I wanted/needed them but the farm is now beyond that development stage.

Tbh, it's an important figure to keep in mind. If you are consistently getting lower returns from the system you're farming than you would from renting, there is a huge opportunity cost in not letting it and finding other work, if that's what you want to do.

But some people (like me) choose not to rent at times.

I find the whole rental opportunity cost a double edged sword,.
Of course you could rent out the farm for 200 a acre and think your doing great work, but if you have the wrong tenant that mines the place of p and k puts out noting but urea/can and let's the place fall down around him in terms of fencing/hedges/poaching ground when you get the land handed back to you it will cost you a solid fortune to get it back right

kowtow · 30-05-2016 09:19PM

WheatenBriar wrote:

That with respect is a ridiculous comparison Not relevant to imaginary land charges as the land owned by the farmer is the tool used to make new income The farmer isn't selling a perch a day I may aswell say a wellington charge to myself is appropriate as I'm wearing Daddies wellies even though I own them

It wasn't intended to be a direct analogy, but if it was, the land would be the shop - not the diamonds.

I'm astonished that anyone would not want to have an accurate idea of return on capital ... which requires a reasonable provision for land and labour.

If we value our land at nothing and our time at less it's no wonder that others are so quick to pay us accordingly.

Farmer Ed · 30-05-2016 09:40PM

kowtow wrote: »

It wasn't intended to be a direct analogy, but if it was, the land would be the shop - not the diamonds.

I'm astonished that anyone would not want to have an accurate idea of return on capital ... which requires a reasonable provision for land and labour.

If we value our land at nothing and our time at less it's no wonder that others are so quick to pay us accordingly.

I was talking about this today to someone and we came to the conclusion that when people value their time a lot depends on what other options they may have. The two most high profile cases that came to mind as good examples are our two last minister's for agricultural. Both their father's where also politicians and in their day it probably made perfect business sence to hire a farm manager and continue farming their own farms. I'm sure the two younger politicians would have also done the figures and have reached the decision that the returns from their farms would no longer cover the land value and labour costs. So they took what they felt was the correct action and got out of farming. Increasingly the margins have been getting tighter with a long time.

browned · 30-05-2016 10:04PM

kowtow wrote: »

It wasn't intended to be a direct analogy, but if it was, the land would be the shop - not the diamonds.

I'm astonished that anyone would not want to have an accurate idea of return on capital ... which requires a reasonable provision for land and labour.

If we value our land at nothing and our time at less it's no wonder that others are so quick to pay us accordingly.

Would putting a value on land and labour be a similar to the inclusion of depreciation in profit monitors?

Brown Podzol · 30-05-2016 10:12PM

mf240 wrote: »

What effect would a brexit have on milk price do ye think??

kowtow wrote: »

The means of finance (i.e. mortgage, lottery win etc, theft by ancestor) is irrelevant, as is the purchase price. You base the land cost on a sensible rental value and the labour cost on some standardised wage - it actually doesn't need endless discussion, it just needs to be there. I've seen the average industrial wage mentioned in Teagasc figures, no reason not to use that.

Very good point about New Zealand - keep expanding based on cheap (notional) variable costs and when things get tough you find labour has to be paid & fixed costs & capital have to be serviced....[/

Average industrial wage is €44,101 for 36 hour week, €23/hour not including paid holidays etc. Dairy farmers work on average 64 hours/week. Works out about €13 an hour. Fcuk that.

red bull · 31-05-2016 01:17AM

Guys, He or She who works for nothing will never be out of work. Be aware harvest 2020 was never about looking after farmers, it was and is an aspiration as to how much farmers can produce to provide jobs in the processing sector.

billie holiday · 31-05-2016 05:46AM

There was a programme called 'first time farmers' or something similar on English tv couple of years ago.
The youngsters had mentoring from older experienced farmers one of whom said:
'20 years ago if you had good land and a good work ethic you were guaranteed an income from farming
Now the margins are so tight that you can very easily lose money farming'

For real. True that motherf***er

20silkcut · 31-05-2016 09:17AM

Doing my own calculations I am at absolutely nothing if it wasn't for the SFP/BPS .
If a farmer was to rent out his land the loss of BPS/DAS/GLAS would have to be factored in as an opportunity lost.

WheatenBriar · 31-05-2016 09:20AM

kowtow wrote: »

It wasn't intended to be a direct analogy, but if it was, the land would be the shop - not the diamonds.

I'm astonished that anyone would not want to have an accurate idea of return on capital ... which requires a reasonable provision for land and labour.

If we value our land at nothing and our time at less it's no wonder that others are so quick to pay us accordingly.

That's a complete mis understanding and misrepresentation of my point though
Of course there's a measure of a return on capital
Of course there's a measure of opportunity cost
Of course there's a value on land
If you want a measure of those,they are there
But owned unencumbered land is not a cost against the enterprise farmed on it,never was,never can be and never will be,because it's not tangible without impacting the enterprise you're wanting to charge it to
You could probably vary its value in the books over a life time alright but you'll find that a neutral or more than likely a positive impact on profit is not a cost
Rent it out or sell and you don't have the enterprise you farmed on it,you are no longer a farmer

Bass Reeves · 31-05-2016 09:25AM

kowtow wrote: »

It wasn't intended to be a direct analogy, but if it was, the land would be the shop - not the diamonds.

I'm astonished that anyone would not want to have an accurate idea of return on capital ... which requires a reasonable provision for land and labour.

If we value our land at nothing and our time at less it's no wonder that others are so quick to pay us accordingly.

This sounds great in theory however it is incumbent on farmers not overpaying for rent or being those that have pushed the price of land harder than any other sector. It also pushed the case that farmers must have a flexible business that is easy to exit and reenter and that the capital is flexible. You then question as what purpose this added extra cost adds to the business case.

Worker A hand produces Slevets he makes a living at it selling this produce for Chinese medicine.As there is a large quanity of raw material around and the skill set required to make the Slevets is limited. It is highly profitable and he makes a good living.

Worker B realizes you can automate this process and gets machinery made, builds a factory and starts producing slevets in huge quanties. The prices of Slevets falls He puts worker A out of business. However the raw material for Slevets is limited and after two years because of the limit in material and it increase in price.he has to increase the price substantially demand drops and he goes broke. he feels hard done by as he feels he is entitles to a return on his capital and a fair wage related to his possible output.

Worker A goes back into business. He buys Workers B factory at 3c in the euro reduces supply, lets raw material build up and charges a price acceptable to the end user. He now plays golf and is overweight.

Buford T. Justice XIX · 31-05-2016 09:54AM

WheatenBriar wrote: »

That's a complete mis understanding and misrepresentation of my point though
Of course there's a measure of a return on capital
Of course there's a measure of opportunity cost
Of course there's a value on land
If you want a measure of those,they are there
But owned unencumbered land is not a cost against the enterprise farmed on it,never was,never can be and never will be,because it's not tangible without impacting the enterprise you're wanting to charge it to
You could probably vary its value in the books over a life time alright but you'll find that a neutral or more than likely a positive impact on profit is not a cost
Rent it out or sell and you don't have the enterprise you farmed on it,you are no longer a farmer

That's fine as long as your aspiration is to be a farmer.

If your aspiration is to make as good a living for your family as possible then you have to compare farming to what the land would make from rental and follow which course suits your aspirations better.

patsy_mccabe · 31-05-2016 10:17AM

My view on it is, you have to look at 3 different profits. Gross margin, net margin (includes fixed costs) and then return on capital. The later includes every cost right down to farmers own labour, land costs, lost opportunity etc etc.
Strange as it may seem, the last value should never be positive for any sustained period. This will attract investors from outside farming. This is last thing you need. In a way, it is the farmers own labour and expertise that protects him from outside investment, competition for land etc.

Sam Kade · 31-05-2016 10:26AM

A farmer near me who was dairying rented out his land this year for €290:acre and his single payment on top. He keeps and feeds heifers belonging to the lessor for the winter for extra money. It beats milking cows for a living.

Bass Reeves · 31-05-2016 10:40AM

Sam Kade wrote: »

A farmer near me who was dairying rented out his land this year for €290:acre and his single payment on top. He keeps and feeds heifers belonging to the lessor for the winter for extra money. It beats milking cows for a living.

Milk price is too high at 25c/L it should be reduced to sub 20c/L

Jaysus Christ · 31-05-2016 10:42AM

So none of ye know the wage yer on.

How much income tax did ye pay last year would be a rough idea. That's if ye pay tax.

Bass Reeves · 31-05-2016 10:55AM

Jaysus Christ wrote: »

So none of ye know the wage yer on.

How much income tax did ye pay last year would be a rough idea. That's if ye pay tax.

Most farmers work on drawing not on a wage. In reality you may need to extract a certain amount each year to make land repayments and for family needs. However you may limit drawings when you hit 52% Tax, USC and PRSI to the minimum possible. This is often where farmers get caught paying up front for anything brings large tax liability on year one however capital allowances are handy in years after that as it defrays tax bill. Lately farmers lease dairy farmers especially this is hugely tax efficient.

However it has disadvantages as it is hard when milk prices drop to meets repayment. lately i saw another disadvantage. Local small contractor bought a 2nd hand Kuhn conditioner mower. it was a farmers machine that was 3 years old his opinion was that at most it had at most 300 acres cut. He could not understand why the farmer traded it in against a new machine. It got me thinking and the only reason I taught of was there was a balancing payment and because of the year and the tax he was afraid to pay this. He would have struggled to get the value of the machine in a trade in and it was just about run in.

It is impossible to evade tax as a farmer you can try to avoid as much as possible

WheatenBriar · 31-05-2016 11:24AM

Methinks the poster most of who's post's I dont see thanks to the ignore function is still trolling if he doesnt know most farmers use drawings from their farm current account to live on up to the point they cant due to passing their overdraft limit,then its just obvious his lack of knowledge of this proves hes never run a farm

Why he continues to waste bandwith with 9 out of 10 troll posts is a mystery
Last time I was generous and thought he should go to the pub instead if hes old enough and daddy and mammy has given him enough pocket money
But todayhe can clean out a few calf houses wearing a wooly jumper tbh
Yawn

Goodbye everyone by the way

Jaysus Christ · 31-05-2016 12:12PM

I hope yer all proud of yourselves. ^^^^^

I run this place like a business and all goin well will be a ltd company within 5 years.

By the way. Hello everybody.

kowtow · 31-05-2016 12:15PM

Bass Reeves wrote: »

This sounds great in theory however it is incumbent on farmers not overpaying for rent or being those that have pushed the price of land harder than any other sector.

Absolutely.

In fact, not accounting for the notional land cost in COP might well contribute to farmers overpaying for land.

For example..

If I inherit 100 acres FOC, and in my private reckoning of COP I count nothing for land (because I inherited it)... and then I decide to rent an additional 100 acres..

The 2nd 100 acres will figure in my COP, but it will be diluted by the effect of the first 100 acres Free of Cost. In effect, I am only reckoning half the land charge I might be if I attempted a realistic COP. I might well be tempted to pay a little more for the 100 acres because of this, and I'd be tempted to think I had an inherently profitable business when in fact the profitability depended on the "free" land. This is something which would hit home quickly if I expanded to 500 paid for acres, because the original land would be a much smaller factor.

I can't stress enough that this is not tax accounting - nor yet profit monitors for comparing with other farms - it's simply a realistic approach to reckoning the true cost of production. As someone points out above, you need several sets of figures to understand your business properly - they don't have to be 100% accurate, but they have to be there somewhere.

(As my Father in Law used to say, for tax purposes it helps if two of the three sets of figures are written in pencil)

If - and most of us thankfully can - you can work at a lower cash cost of production in the bad years then thank your lucky stars, because you'll be able to last longer and build a business which is hopefully capable of standing on it's own feet through good times and bad..

patsy_mccabe · 31-05-2016 12:34PM

:rolleyes:

whelan2 · 31-05-2016 01:33PM

WheatenBriar wrote: »

Methinks the poster most of who's post's I dont see thanks to the ignore function is still trolling if he doesnt know most farmers use drawings from their farm current account to live on up to the point they cant due to passing their overdraft limit,then its just obvious his lack of knowledge of this proves hes never run a farm

Why he continues to waste bandwith with 9 out of 10 troll posts is a mystery
Last time I was generous and thought he should go to the pub instead if hes old enough and daddy and mammy has given him enough pocket money
But todayhe can clean out a few calf houses wearing a wooly jumper tbh
Yawn

Goodbye everyone by the way

Again! These people closing accounts jaysus christ

Buford T. Justice XIX · 31-05-2016 01:36PM

WheatenBriar wrote: »

Methinks the poster most of who's post's I dont see thanks to the ignore function is still trolling if he doesnt know most farmers use drawings from their farm current account to live on up to the point they cant due to passing their overdraft limit,then its just obvious his lack of knowledge of this proves hes never run a farm

Why he continues to waste bandwith with 9 out of 10 troll posts is a mystery
Last time I was generous and thought he should go to the pub instead if hes old enough and daddy and mammy has given him enough pocket money
But todayhe can clean out a few calf houses wearing a wooly jumper tbh
Yawn

Goodbye everyone by the way

Don't let the fekkers win, WB:mad:

I hope he re regs, another good poster gone:(

Bass Reeves · 31-05-2016 01:42PM

Sam Kade wrote: »

A farmer near me who was dairying rented out his land this year for €290:acre and his single payment on top. He keeps and feeds heifers belonging to the lessor for the winter for extra money. It beats milking cows for a living.

kowtow wrote: »

Absolutely.

In fact, not accounting for the notional land cost in COP might well contribute to farmers overpaying for land.

For example..

If I inherit 100 acres FOC, and in my private reckoning of COP I count nothing for land (because I inherited it)... and then I decide to rent an additional 100 acres..

The 2nd 100 acres will figure in my COP, but it will be diluted by the effect of the first 100 acres Free of Cost. In effect, I am only reckoning half the land charge I might be if I attempted a realistic COP. I might well be tempted to pay a little more for the 100 acres because of this, and I'd be tempted to think I had an inherently profitable business when in fact the profitability depended on the "free" land. This is something which would hit home quickly if I expanded to 500 paid for acres, because the original land would be a much smaller factor.

I can't stress enough that this is not tax accounting - nor yet profit monitors for comparing with other farms - it's simply a realistic approach to reckoning the true cost of production. As someone points out above, you need several sets of figures to understand your business properly - they don't have to be 100% accurate, but they have to be there somewhere.

(As my Father in Law used to say, for tax purposes it helps if two of the three sets of figures are written in pencil)

If - and most of us thankfully can - you can work at a lower cash cost of production in the bad years then thank your lucky stars, because you'll be able to last longer and build a business which is hopefully capable of standing on it's own feet through good times and bad..

I said I would quote both of these together. I highlighted the first. IMO if the above case is true the lessor is away with the fairies. No matter how accessible the land is and what is cost base is, it is hard to imagine that this lad is making making money on this land. Along with that he is pushing up rents locally on other farmers. Yet dairy farmers at present are the biggest offenders, historically it was tillage and potato men.

TBH this idea of including a land cost in a cost of production senario solves nothing. rather you have to look at each individual area rented see what it cost and the value it adds to the operation. But at present dairy farmers tend to lump all costs together. Adding an unrealistic rental price and a labour cost for yourself solves nothing.

Rather you have to look at each individual part of the operation and see if it makes sense and if it is washing it face. This is best business practice this is what decide's if you are a busy fool. There is no point in costing your labour at 15/hour for an 80 hour week and saying add this to my COP. When you may still have the same profit by reducing o/p by 30% and not taking up leases in the example above.

This then lends to the situation where a farmer with a 100 acre farm thinks the real rental value is 28K+SFP when in reality this is not sustainable

atlantic mist · 31-05-2016 02:07PM

As we move forward i think land cost will become a feature in irish cop. We dont seem to value our land our time or what we produce. We are afraid to include rent and wages in our cop as it has a real impact on the bottom line. Really like the german model of entrepreneurial profit, it shows the individual value have they really added from their farm after all items in system costed.

More land will be rented reduced farming numbers.....if were following the nz model the famers/banks of today could be the landlords of the future....where do we get the share milkers from to work themselves and the land to the bone thou, we will always have cheaper competitors, look at nz farmers who have exited nz and moved to chile, or the uk farmers (20years ago) who invested in oz instead of continuing investment at home think thats more of the reason with processing issues in uk, i know a few uk farmers who all own farms in uk, rent them out and used rental to fund expansion in cheaper regions

we rent over 70% of farm so is a realistic figure for us, next door neighbor is a limited company and rent is shown in his accounts also so it aids in us comparing systems....

another farmer bounding is looking for 300 an acre for rented land in grass and looking for sfp to be paid on top, think half that figure would be a fair price for both

Sam Kade · 31-05-2016 02:24PM

Bass Reeves wrote: »

I said I would quote both of these together. I highlighted the first. IMO if the above case is true the lessor is away with the fairies. No matter how accessible the land is and what is cost base is, it is hard to imagine that this lad is making making money on this land. Along with that he is pushing up rents locally on other farmers. Yet dairy farmers at present are the biggest offenders, historically it was tillage and potato men.

TBH this idea of including a land cost in a cost of production senario solves nothing. rather you have to look at each individual area rented see what it cost and the value it adds to the operation. But at present dairy farmers tend to lump all costs together. Adding an unrealistic rental price and a labour cost for yourself solves nothing.

Rather you have to look at each individual part of the operation and see if it makes sense and if it is washing it face. This is best business practice this is what decide's if you are a busy fool. There is no point in costing your labour at 15/hour for an 80 hour week and saying add this to my COP. When you may still have the same profit by reducing o/p by 30% and not taking up leases in the example above.

This then lends to the situation where a farmer with a 100 acre farm thinks the real rental value is 28K+SFP when in reality this is not sustainable

It is true, prime dairy land on cork. I've heard prices of up to €500/acre.

Timmaay · 31-05-2016 02:30PM

Buford T. Justice V wrote: »

That's fine as long as your aspiration is to be a farmer.

If your aspiration is to make as good a living for your family as possible then you have to compare farming to what the land would make from rental and follow which course suits your aspirations better.

This is the key point! We are all here arguing over the COP etc from the point if the processors using it as a stick to beat us with, and the public perception of the cost to produce milk, whereas at the end of the day it's us ourselves who get the most benefit from knowing where we stand on cost. Farmers will continue working regardless of what arbitrary labour or opportunity rental figures are put on their business once they know themselves they can stay afloat and generate a salary (or drawing) they can live off.

Much more importantly in my view is changing the "cost of production" phrase to something like EBITL (earnings before investment/tax/labour), which might do something to change the government and public perception that dairyfarmers can knock out unlimited volumes of milk for 20c/l etc.

Milked out · 31-05-2016 03:15PM

Sam Kade wrote: »

Bass Reeves wrote: »

I said I would quote both of these together. I highlighted the first. IMO if the above case is true the lessor is away with the fairies. No matter how accessible the land is and what is cost base is, it is hard to imagine that this lad is making making money on this land. Along with that he is pushing up rents locally on other farmers. Yet dairy farmers at present are the biggest offenders, historically it was tillage and potato men.

TBH this idea of including a land cost in a cost of production senario solves nothing. rather you have to look at each individual area rented see what it cost and the value it adds to the operation. But at present dairy farmers tend to lump all costs together. Adding an unrealistic rental price and a labour cost for yourself solves nothing.

Rather you have to look at each individual part of the operation and see if it makes sense and if it is washing it face. This is best business practice this is what decide's if you are a busy fool. There is no point in costing your labour at 15/hour for an 80 hour week and saying add this to my COP. When you may still have the same profit by reducing o/p by 30% and not taking up leases in the example above.

This then lends to the situation where a farmer with a 100 acre farm thinks the real rental value is 28K+SFP when in reality this is not sustainable

It is true, prime dairy land on cork. I've heard prices of up to 500/acre.

Tbh when I hear figures like that I'd have to call bs. Again the furthest I've 'heard' is two lads bidding up to 350/acre dairy and tillage with tillage man winning out. Unless someone says theyre paying it or receiving it I couldn't believe the 500/acre

Waffletraktor · 31-05-2016 03:49PM

Milked out wrote: »

Tbh when I hear figures like that I'd have to call bs. Again the furthest I've 'heard' is two lads bidding up to 350/acre dairy and tillage with tillage man winning out. Unless someone says theyre paying it or receiving it I couldn't believe the 500/acre

I hope mr tillage man grows veg or drugs as that's just shy of what a wheat crop will cost him.

kowtow · 31-05-2016 04:24PM

Waffletraktor wrote: »

I hope mr tillage man grows veg or drugs as that's just shy of what a wheat crop will cost him.

From what I can see part of the problem is an unnaturally illiquid land rental market - with it's origins in conacre, no doubt - where people pay up even for 11 months, for fear of "losing" the ground to someone else when prices turn for the better. All this despite the fact that they know they are only burning diesel working the ground for the coming season.

Not sure what the solution is to this - it will take many years to work itself out, for certain, arguably big shocks like a true farming recession, a land price crash, or sharp interest rate rises are the only events that will shake it up.

Waffletraktor · 31-05-2016 05:18PM

kowtow wrote: »

From what I can see part of the problem is an unnaturally illiquid land rental market - with it's origins in conacre, no doubt - where people pay up even for 11 months, for fear of "losing" the ground to someone else when prices turn for the better. All this despite the fact that they know they are only burning diesel working the ground for the coming season.

Not sure what the solution is to this - it will take many years to work itself out, for certain, arguably big shocks like a true farming recession, a land price crash, or sharp interest rate rises are the only events that will shake it up.

Well, I can't argue with that but one thing I would suggest we are looking at a long recession simply due to us having got too good at produce bulk quantities of relatively cheap food. The fact us in Western Europe have increased our cost base for stuff and are struggling to make a margin is of little consequence until we get a food price spike or we take a hit and everyone else catches up.

Milk Price- Please read Mod note in post #1

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