Given the arla news...

[dinderleat]

But it's how arla pricing works. Doesn't have to be paid in Jan just needs to be contracted for 24 year. Jan milk price should be expected 12 months income divided by 12 months litres. Feb is 11 and so on

That’s not exactly how I understand it basically what is paid in, in the last three months is then paid out in the milk price with an over view of making sure we hit the profit range of 2.8-3.2% going forward @foab may give a slightly different view. The new contracts will soon come into the equation but the money needs to be received before it affects the milk price .

 

[dinderleat]

I suspect they have 1, 3, 6 and 12m projections and tweak as required. Others may delay a rise if they think a fall is going to follow, but I think Arla pretty much pay what they can when they can on the basis that there will be a target 13th payment to balance the books.

Read that Campina went up 4c/l in Dec and are dropping 1.5c for Jan....one swallow does not make a spring

Rfc are in quite a difficult position they have seen quite a drop in milk volumes in holland but haven’t yet cut their cost accordingly so have an issue. They are now looking to cut 1200 jobs and save 400million a year. They also haven’t paid a 13th payment for the last 3 years so their December increase was more to balance the books for the year end than actual milk price rise which is probably why they needed a correction in January as not to over pay.

 

[buffalo_soldier]

Ok after getting concerned that I may have misunderstood just how the price for the majority of my income is arrived at, I spoke with someone much higher up the food chain than me this morning.

Without going into too much detail because of private conversations v public forum.
My understanding is correct.

 

[buffalo_soldier]

That’s not exactly how I understand it basically what is paid in, in the last three months is then paid out in the milk price with an over view of making sure we hit the profit range of 2.8-3.2% going forward @foab may give a slightly different view. The new contracts will soon come into the equation but the money needs to be received before it affects the milk price .

Yes, that’s similar to what I’ve been told also

 

[frederick]

Yes, that’s similar to what I’ve been told also

I defer to recent updates my understanding was based on discussions that would have been 5 years ago.

I do struggle to see why January milk price would have much to do with the last 3 months rather than a budget of the next three.
It is also the reason why January has the biggest risk of an unexpected price reduction even though market change didn't seem obvious because all the money was paid out for last year in December which can inflate Decembers price and cause a cut in Jan just like RFC have done.

 

[buffalo_soldier]

It’s pay out what is rather than what might be.

Having been on the what might be side of the coin previously, I much prefer Arla’s position.

 

[buffalo_soldier]

Non of this helps Lazys malaise as I’m still quite optimistic

 

[farmer on a bike]

I defer to recent updates my understanding was based on discussions that would have been 5 years ago.

I do struggle to see why January milk price would have much to do with the last 3 months rather than a budget of the next three.
It is also the reason why January has the biggest risk of an unexpected price reduction even though market change didn't seem obvious because all the money was paid out for last year in December which can inflate Decembers price and cause a cut in Jan just like RFC have done.

The January price is actually not far off the last 3 months, Arla we’re still playing catch up from over paying in H1 last year, but by December it was pretty clear Jan would be 3c above November based on the situation then, the extra 1c coming from improved contracts in the new year, to make the 4c since November. @dinderleat iscloser to my understanding of how it works. The price is based on where we are now and current contracts plus sales expectations in various sectors looking forward, but probably only over the next Q at most with the aim of hitting at least 2.8% profit. I think where @frederick is partly right is when there is a very clear market signal up or down, which is certainly not the current situation.

 

[farmer on a bike]

I suspect they have 1, 3, 6 and 12m projections and tweak as required. Others may delay a rise if they think a fall is going to follow, but I think Arla pretty much pay what they can when they can on the basis that there will be a target 13th payment to balance the books.

Read that Campina went up 4c/l in Dec and are dropping 1.5c for Jan....one swallow does not make a spring

I think the Campina pricing has been misunderstood, they now base their pricing around a basket of competitors and they admitted they had slightly underpaid so in Dec played catch up to put that right before their year end. The price has then reverted to a level to match the basket of competitor. To me it seems a strange system for a co-op but I think I have that right.

Historically they then paid a 13th payment on top which could be quite large when they were performing well, but their problems have led them to not paying any extra in the last few years. I guess they can work this way because historically they have a very high capital base and are able to borrow as required to make this work, however you can’t keep doing that if you are consistently underperforming/ losing milk intake, hence the big drive to cut costs.

 

[DairyNerd]

@Jdunn55 I think you should be pushing milk from grass a bit more than that in those first months at least (late March, April, May, early June) otherwise you are just getting substitution of grass for cake. Once you get into July and grass quality declines then with your type of cow you probably want to keep the litres up and add some extra concentrates in and they will pay you back for it. Target 18-20L from grass for those months.

As others have said just focus on getting a profitable system and largely ignore the milk price. We are average at best at this job, we were getting just over 30ppl in May and June with seasonality but were making a MOPF of just under £8 a cow a day. Our November milk price was 47ppl and we were not even making half that. Whatever cows or system you have Spring grass is magical stuff for fresh cows, make sure you use it.

 

[In the pit]

“””and grass quality declines”””
Grass quality doesn’t decline if managed properly

 

[Enry]

I think the Campina pricing has been misunderstood, they now base their pricing around a basket of competitors and they admitted they had slightly underpaid so in Dec played catch up to put that right before their year end. The price has then reverted to a level to match the basket of competitor. To me it seems a strange system for a co-op but I think I have that right.

Historically they then paid a 13th payment on top which could be quite large when they were performing well, but their problems have led them to not paying any extra in the last few years. I guess they can work this way because historically they have a very high capital base and are able to borrow as required to make this work, however you can’t keep doing that if you are consistently underperforming/ losing milk intake, hence the big drive to cut costs.

That's exactly how most finishers buy store cattle, they see what everyone else is paying and pay a bit more, regardless of their own finances...same applies for land for forage and FBT's

 

[Enry]

I think the Campina pricing has been misunderstood, they now base their pricing around a basket of competitors and they admitted they had slightly underpaid so in Dec played catch up to put that right before their year end. The price has then reverted to a level to match the basket of competitor. To me it seems a strange system for a co-op but I think I have that right.

Historically they then paid a 13th payment on top which could be quite large when they were performing well, but their problems have led them to not paying any extra in the last few years. I guess they can work this way because historically they have a very high capital base and are able to borrow as required to make this work, however you can’t keep doing that if you are consistently underperforming/ losing milk intake, hence the big drive to cut costs.

Sounds like a big DFoB

 

[farmer on a bike]

Sounds like a big DFoB

Except they have a very very strong capital base, their borrowing is much less than many co-ops with net debt still less than 9% of capital despite increasing 26% last year. In comparison Arla’s net debt is six times as much and still remain financially strong. Personally I prefer Arla’s model as we need the money on farm to fund reinvestment on farm, if we can use other people’s money to fund our co-op at reasonable rates.

 

[Enry]

Except they have a very very strong capital base, their borrowing is much less than many co-ops with net debt still less than 9% of capital despite increasing 26% last year. In comparison Arla’s net debt is six times as much and still remain financially strong. Personally I prefer Arla’s model as we need the money on farm to fund reinvestment on farm, if we can use other people’s money to fund our co-op at reasonable rates.

fair point, but a slippery slope paying out of reserves rather than trading profits

 

[farmer on a bike]

fair point, but a slippery slope paying out of reserves rather than trading profits

To be fair you would expect net debit to increase last year due to the much increased value of stocks held. If you were paying 50+c in late 2022 compared to 40c/litre in late 2021 to build cheese stock and other stocks then net debt needs to increase to cover that, so adding around 200m debt on 14bn euro turnover is pretty good going and perhaps less than might be expected.

 

[Enry]

To be fair you would expect net debit to increase last year due to the much increased value of stocks held. If you were paying 50+c in late 2022 compared to 40c/litre in late 2021 to build cheese stock and other stocks then net debt needs to increase to cover that, so adding around 200m debt on 14bn euro turnover is pretty good going and perhaps less than might be expected.

they are some mindblowing numbers indeed...

 

[Cows 'n grass]

“””and grass quality declines”””
Grass quality doesn’t decline if managed properly

It certainly does if you farm in a dry area. Most summer's there will be a period where we will grow nothing but seed heads.

 

[In the pit]

It certainly does if you farm in a dry area. Most summer's there will be a period where we will grow nothing but seed heads.

Period of no growth means you have nothing the it rains and quality is of the scale
Did a trail with mvf years ago ,had grass samples took weekly and me didn’t drop below 11.8 all year mid jan /mid dec but the dry matter altered on a weekly basis
That was on a dry farm

 

[andrew830]

Period of no growth means you have nothing the it rains and quality is of the scale
Did a trail with mvf years ago ,had grass samples took weekly and me didn’t drop below 11.8 all year mid jan /mid dec but the dry matter altered on a weekly basis
That was on a dry farm

If grass quality stays the same then why is my first cut better than all the other cuts we do.