Milk price drop!

Clay52 · Dec 7, 2017

Sid said:
If you need to save money in the high times to get you through the low times i would say the business is unviable.

Hahaha.

Sid · Dec 7, 2017

pappuller said:
If you have a COP of 24 ppl and milk price swings of 20/30 dont spend it all when the price goes over 24ppl, I would think thats one of the first principles of business.

I would say you need a COP of 20p then

Dragon · Dec 7, 2017

What about 15ppl.
These cost cost stripped out in lean years can have a negative effect in the good years. Vicious cycle.

pappuller · Dec 7, 2017

Sid said:
I would say you need a COP of 20p then

Nope cant go there sorry, you win I'm out

Sid · Dec 7, 2017

Dragon said:
What about 15ppl.
These cost cost stripped out in lean years can have a negative effect in the good years. Vicious cycle.

Sell on the spot market at 10p and you need a COP of 10p?

If the cycle is going to be 30 for a year then 20 for a year. Then by the time you spend to increase production in peak you will be in the trough.

Can any industry afford to break even year on year?

pappuller · Dec 7, 2017

Sid said:
Sell on the spot market at 10p and you need a COP of 10p?

If the cycle is going to be 30 for a year then 20 for a year. Then by the time you spend to increase production in peak you will be in the trough.

Can any industry afford to break even year on year?

Why would you spend to increase production at a peak ? Budget to start increasing at the bottom, then ride the wave ?

Sid · Dec 7, 2017

pappuller said:
Why would you spend to increase production at a peak ? Budget to start increasing at the bottom, then ride the wave ?

I agree but look at cow prices!

Clay52 · Dec 7, 2017

Sid said:
Sell on the spot market at 10p and you need a COP of 10p?

If the cycle is going to be 30 for a year then 20 for a year. Then by the time you spend to increase production in peak you will be in the trough.

Can any industry afford to break even year on year?

Long term profitability is the key. You cannot predict the lowest of the low prices before they happen.

Farms can be extremely profitable and still make a loss at a certain point in time.

Lowest cost of production doesn’t automatically equal most profitable.

pappuller · Dec 7, 2017

Sid said:
I agree but look at cow prices!

Thats why you try and buy before the market hots up.

Sid · Dec 7, 2017

Clay52 said:
point

Thats the key. How long is the point

jimmer · Dec 7, 2017

not read all the replies
has anyone blamed new entrants yet ?

Dragon · Dec 7, 2017

jimmer said:
not read all the replies
has anyone blamed new entrants yet ?

we can start!!

Stinker · Dec 7, 2017

Don't think the tax man will be happy about you hiding money from him in the good times to get you out of trouble in the bad times.

Rossymons · Dec 7, 2017

Stinker said:
Don't think the tax man will be happy about you hiding money from him in the good times to get you out of trouble in the bad times.

Legitimate accountancy is perfectly acceptable.

Fergieman · Dec 7, 2017

Stinker said:
Don't think the tax man will be happy about you hiding money from him in the good times to get you out of trouble in the bad times.

Was that not the whole idea of 5 year averaging.

Bald Rick · Dec 7, 2017

Clay52 said:
Long term profitability is the key. You cannot predict the lowest of the low prices before they happen.

Farms can be extremely profitable and still make a loss at a certain point in time.

Lowest cost of production doesn’t automatically equal most profitable.

Whilst I agree, there is an interesting debate at the moment around setting aside profitability and concentrating on margin.
Ultimately you can only do so much to address your COP which is why I have an ongoing dialogue with my buyer & not just rock up at the annual producer meeting in a temper because the price has dropped.

Bossfarmer · Dec 7, 2017

Farmer Bogass said:
It's still 30ppl so no need to panic yet. The Average I am working from is around 25ppl based on my previous post, so if it does go down to 16ppl I can cope for a while, but then other dairy farms running on fine margins will go bust/shut up shop, supply will drop and price will rise again. Hopefully it doesn't get that low again as the last drop ate into the below average reserve funds and has just recovered to where I want it. As HC says, low price is only an issue if it's prolonged for a long period, brining a 5 yearly average down.

is your milk contract linked to the spot price? should you not be looking to get on a cop contract to avoid the fluctuations?

pappuller · Dec 7, 2017

Bossfarmer said:
is your milk contract linked to the spot price? should you not be looking to get on a cop contract to avoid the fluctuations?

They don't just grow on trees !

Bossfarmer · Dec 7, 2017

pappuller said:
They don't just grow on trees !

so the cop ones are rare?

Fergieman · Dec 7, 2017

You can't just go and ask for one! They have been distrubuted mostly on a postcode lottery for haulage and logistic purposes.

Milk price drop!

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100% I’ve had enough of farming!

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