Milk Price III

kowtow · 19-02-2017 3:18am

Farmer Ed wrote:

As I said we will have to agree to disagree on this. But if you think about this logically, you can't take away from the fact that this involves farmers betting against each other. The value the Coop can make out of our milk will not be changed. Who reaps the reward will.

See below.

alps wrote:

That's the cause of of all the argument, right there....

alps wrote:

The coop don't make any extra profit from Mahoney's milk.....10% of Mahoney's milk has been sold for the next 3 years, to a buyer with ornua acting as the intermediary. Arrabawn will be paid , say 37c/l for this milk and will be able to pass this on to Mahoney less the processing cost.....

Absolutely. As long as there is a matching fixed price up the chain... in other words between ornua or another processor and the coop. Farmers taking a portion of the fix are just opting in .. the coop is taking (i assume) a similar margin to normal and the farmers are taking the risk (deliberately, on this occasion, because the risk they are taking is of a price *rise* )

But all that depends on a matching contract. If there isn't one, what Ed says is correct. The farmer ends up betting against his fellow members.... or worse still the coop goes out into the market offering fixed prices and writes betting slips on behalf of all the members.

It's really important that we make the coops disclose clearly the presence of a matching contract, and also that we highlight the distortion caused by the preference to previous scheme suppliers. That has been a depressing feature of some otherwise sensible schemes. I have some sympathy if it is really needed to get people to dip a toe in the water but it should be ditched as soon as possible if they really want to get serious about this.

It's not always possible to have a simple scheme because the terms have to work for the end buyer but it is, but making things totally transparent and leaving the choice open is definitely the best way to build confidence in these contracts.

Farmer Ed · 19-02-2017 7:23am

kowtow wrote: »

See below.

Alps Co Ops forward selling is nothing new. What is new is the way the co ops will share the gains or losses as a result of that forward selling. The amount of milk fixed with the farmer has no relevance on the net amount the co op is paid for the end product.

Absolutely. As long as there is a matching fixed price up the chain... in other words between ornua or another processor and the coop. Farmers taking a portion of the fix are just opting in .. the coop is taking (i assume) a similar margin to normal and the farmers are taking the risk (deliberately, on this occasion, because the risk they are taking is of a price *rise* )

But all that depends on a matching contract. If there isn't one, what Ed says is correct. The farmer ends up betting against his fellow members.... or worse still the coop goes out into the market offering fixed prices and writes betting slips on behalf of all the members.

It's really important that we make the coops disclose clearly the presence of a matching contract, and also that we highlight the distortion caused by the preference to previous scheme suppliers. That has been a depressing feature of some otherwise sensible schemes. I have some sympathy if it is really needed to get people to dip a toe in the water but it should be ditched as soon as possible if they really want to get serious about this.

It's not always possible to have a simple scheme because the terms have to work for the end buyer but it is, but making things totally transparent and leaving the choice open is definitely the best way to build
confidence in these contracts.

Tanks Kowtow

Would love to see someone with your level of knowledge on a Co Op board.

As for there being a simpler system?

Well ever since biscuit tins have been around people have been putting money in to them in good times and before biscuit tins they must have used something else. Possibly a hole in a ditch. it is just called putting a bit aside for a rainy day. It is not rocket science really. But instead of a rainy day fund we have been presented with a gambling fund and as the price we are paid for our milk is going to be effected whether we join or not. It's not even voluntary as such.

On a positive note at least at this point the volumes are relatively small. Let's hope it stays that way.

mf240 · 19-02-2017 11:22am

alps wrote: »

Eureka.....
.

I sell 30 Bull calves, to the same buyer, every year, for the same price... €130...this price is constant, and it has no effect on the price that I can get for the rest of the calves...the market can be above this or below this, but the fact that I sell a percentage of my calves at a fixed price, has no effect on the price of calves for anyone else...

You sell 30 calves at market price and get 130 for 1 and a 1/4 calves . This is subject to you supplying calves for the next number of years . If you have been selling calves at a fixed price below market value you may get an extra calf allowance in any scheme that has a chance of being favourable.

We may send texts and emails almost daily about so called special offers. But we will have to charge for the administration involved in settings up the fixed calf price scheme.

*(No Nigerian reps were harmed in the making of this post)*

alps · 19-02-2017 12:16pm

Farmer Ed wrote: »

Tanks Kowtow

Would love to see someone with your level of knowledge on a Co Op board.

As for there being a simpler system?

Well ever since biscuit tins have been around people have been putting money in to them in good times and before biscuit tins they must have used something else. Possibly a hole in a ditch. it is just called putting a bit aside for a rainy day. It is not rocket science really. But instead of a rainy day fund we have been presented with a gambling fund and as the price we are paid for our milk is going to be effected whether we join or not. It's not even voluntary as such.

On a positive note at least at this point the volumes are relatively small. Let's hope it stays that way.

Biscuit tin is fine Ed, as long as the full price is passed on to you, and you organise your own. Risk is you know well, is that if the "company" organises the biscuit tin, chances are the contents will get squandered.

Still like friesland campina system, where they organise a biscuit tin for the farmer and the company...

Farmer Ed · 19-02-2017 1:25pm

alps wrote: »

Biscuit tin is fine Ed, as long as the full price is passed on to you, and you organise your own. Risk is you know well, is that if the "company" organises the biscuit tin, chances are the contents will get squandered.

Still like friesland campina system, where they organise a biscuit tin for the farmer and the company...

True but the thing about the biscuit tin is that it's a lot more transparent than complicated fixed price schemes. Actually you are correct it would possibly be a bad idea for the co ops to be too involved in organising the biscuit tin. But if a farmer did feel he could afford to put a bit aside for the rainy day. Possibly a direct debt set up with the bank and paid in to a savings account would do pretty much the same thing. I honestly think we would all be better served if such a practice was promoted rather than these complex fixed price schemes that involve us all betting against each other and make milk pricing even less transparent than it already is.

mahoney_j · 19-02-2017 1:34pm

Farmer Ed wrote: »

True but the thing about the biscuit tin is that it's a lot more transparent than complicated fixed price schemes. Actually you are correct it would possibly be a bad idea for the co ops to be too involved in organising the biscuit tin. But if a farmer did feel he could afford to put a bit aside for the rainy day. Possibly a direct debt set up with the bank and paid in to a savings account would do pretty much the same thing. I honestly think we would all be better served if such a practice was promoted rather than these complex fixed price schemes that involve us all betting against each other and make milk pricing even less transparent than it already is.

How complicated is it ed ,you fix 10% of supply and u know you are guaranteed to receive x price for that 10% for a defined period ,not rocket science .dont but your point re suppliers betting against one another ,its a simple decision for a supplier ,you decide to fix or you don't ,

jaymla627 · 19-02-2017 1:47pm

Farmer Ed wrote: »

True but the thing about the biscuit tin is that it's a lot more transparent than complicated fixed price schemes. Actually you are correct it would possibly be a bad idea for the co ops to be too involved in organising the biscuit tin. But if a farmer did feel he could afford to put a bit aside for the rainy day. Possibly a direct debt set up with the bank and paid in to a savings account would do pretty much the same thing. I honestly think we would all be better served if such a practice was promoted rather than these complex fixed price schemes that involve us all betting against each other and make milk pricing even less transparent than it already is.

If a scheme akin to that operated in oz was brought-in where you can put money aside tax free into a account during good years that can be drew down In years like 2016 it would be brilliant, but given the myriad of regulations that exist created by our own law makers on top of the eu it would never see the light of day.....
I really wouldnt be getting to caught up with the fixed priced schemes the amounts offered never make anyone up especially in glanbia unless you where in the schemes from the beginning, have went through 4 fixed schemes here and applied for well in excess of 600k litres and currently have only 80k of my supply fixed

Farmer Ed · 19-02-2017 2:16pm

mahoney_j wrote: »

How complicated is it ed ,you fix 10% of supply and u know you are guaranteed to receive x price for that 10% for a defined period ,not rocket science .dont but your point re suppliers betting against one another ,its a simple decision for a supplier ,you decide to fix or you don't ,

The way the co op pays for the milk is pretty simple. Just compare it to a cake. If one person gets more cake Someone else will get less cake. How can I put it any simpler than that? You can't have winners without losers.

Jamala I agree the amounts involved are insignificant anyway. But I like the sound of the Australian scheme. No reason why something like that couldn't be introduced here if the political will was there to do it.

mahoney_j · 19-02-2017 2:25pm

Farmer Ed wrote: »

The way the co op pays for the milk is pretty simple. Just compare it to a cake. If one person gets more cake Someone else will get less cake. How can I put it any simpler than that? You can't have winners without losers.

Jamala I agree the amounts involved are insignificant anyway. But I like the sound of the Australian scheme. No reason why something like that couldn't be introduced here if the political will was there to do it.

Of course there's winners and losers ,I don't share your view on this tho ,the decision rests with each supplier to access his her business and do the best they can to guarantee income ,fixing a portion helps this .as someone who will fix this year I'll loose and the guy who dosnt fix may imply he made a great decision ,next year roles could be reversed I'll win but no point in guy who didn't fix to be whinging .

cute geoge · 19-02-2017 2:41pm

IMO it is not as clear cut as you mahony make out .
For example kerry have a very small % fixed at very good price of 34 cent but farmers who had nothing fixed really suffered last year as kerry offset any costs of the fixed price against real price .It ended up with the farmers who had nothing fixed getting worst price in country and management dictating that any farmers complaining should have fixed price

mahoney_j · 19-02-2017 3:01pm

cute geoge wrote: »

IMO it is not as clear cut as you mahony make out .
For example kerry have a very small % fixed at very good price of 34 cent but farmers who had nothing fixed really suffered last year as kerry offset any costs of the fixed price against real price .It ended up with the farmers who had nothing fixed getting worst price in country and management dictating that any farmers complaining should have fixed price

My question to u why didn't the non fixers fix ,

Water John · 19-02-2017 3:14pm

Well, in that case, the processor board fixes whatever % they want, say 10/20%. But this then applies to all their suppliers.
That would act almost the same as the rainy day fund. It would attempt to level the price out over time. Lower the modulations.
Asking each farmer to opt in or out, has the reverse effect. That increases the modulations.

pedigree 6 · 19-02-2017 3:53pm

Why can't Glanbia do what the other co-ops do and offer the schemes on a percentage of what you supplied last year?
Rather than this smoke and mirrors stuff.

Timmaay · 19-02-2017 4:15pm

mahoney_j wrote: »

My question to u why didn't the non fixers fix ,

I've fixed nothing here, no real plans to, I'm lucky enough to have been handed what I have, but I've also made the point of keeping borrowings low, low enough labour bill also. That's my insurance right there, I can stomach the low milk price years relatively well, so see no reason to get involved with complicated fixed price schemes that in my view are like an insurance policy which the processor certainly have their cut on also.

But what seems to be suggested here annoys me, that the likes of me should be pressured into fixing milk, simply because otherwise I'm going to be one of the idiots on the other side, receiving a lower milk price because the processor are balancing up the fixed price "winners" with a lower price for everyone else. That's if my interpretation of fixed price schemes is correct, I don't know if it is, but this is a big problem, we need more clarification and communication from the processors on what way the fixed price schemes work??

Farmer Ed · 19-02-2017 4:19pm

cute geoge wrote: »

IMO it is not as clear cut as you mahony make out .
For example kerry have a very small % fixed at very good price of 34 cent but farmers who had nothing fixed really suffered last year as kerry offset any costs of the fixed price against real price .It ended up with the farmers who had nothing fixed getting worst price in country and management dictating that any farmers complaining should have fixed price

That's exactly the way it works George. If a Co Op model at least, was working properly. The co op should have only a certain amount of money to pay the farmers for their milk each month. Up until now each farmer was paid the same way. But what will happen now is that if one group of farmers are paid more the other group of farmers will have to be paid less. That is how these milk price schemes work. Indeed that's how everything in a co op works. Every time a co op has to spend money. That means they have less money left to pay you for your milk. It's a very simple concept that sadly many people have difficulty grasping. That is why I have always believed we need to be sure our co op are not wasting any of our money.

Farmer Ed · 19-02-2017 4:34pm

Timmaay wrote: »

I've fixed nothing here, no real plans to, I'm lucky enough to have been handed what I have, but I've also made the point of keeping borrowings low, low enough labour bill also. That's my insurance right there, I can stomach the low mileage price years relatively well, so see no reason to get involved with complicated fixed price schemes that in my view are like an insurance policy which the processor certainly have their cut on also.

But what seems to be suggested here annoys me, that the likes of me should be pressured into fixing milk, simply because otherwise I'm going to be one of the idiots on the other side, receiving a lower milk price because the processor are balancing up the fixed price "winners" with a lower price for everyone else. That's if my interpretation of fixed price schemes is correct, I don't know if it is, but this is a big problem, we need more clarification and communication from the processors on what way the fixed price schemes work??

Unfortunately Tim even if you sign up to the fixed price scheme or not, going forward all our milk prices will be effected either or negatively or positively by these schemes. As I have said already. If you think of milk price as a cake that the co op has to share every month. If some other one gets a bigger slice, you have to get a smaller slice, or vice versa. The co ops as far as I can see are not increasing the size of the cake one bit by having these schemes. All they are doing is changing how they share the cake. In my view making the process less transparent as a result.

mahoney_j · 19-02-2017 5:09pm

Farmer Ed wrote: »

That's exactly the way it works George. If a Co Op model at least, was working properly. The co op should have only a certain amount of money to pay the farmers for their milk each month. Up until now each farmer was paid the same way. But what will happen now is that if one group of farmers are paid more the other group of farmers will have to be paid less. That is how these milk price schemes work. Indeed that's how everything in a co op works. Every time a co op has to spend money. That means they have less money left to pay you for your milk. It's a very simple concept that sadly many people have difficulty grasping. That is why I have always believed we need to be sure our co op are not wasting any of our money.

So your gripe is more with coop structure so ed than a fixed scheme ?????as I've said umpteen times already no one is forced to fix it's an option /insurance policy offered by a coop to its supplier ,I've signed up knowing I'll loose this year ,won't complain but your saying next year if fable turns you'll cry wolf if you loose even though you'll have creamed it this year .im happy and clear with my decision for the security it'll provide on a portion of my milk .someone posted earlier that probably over x period it'll balance out and I'll probably be no better off but I'll be damn glad of the cushion in a poor price year than what I'll loose in a year like this

Buford T. Justice XIX · 19-02-2017 5:14pm

jaymla627 wrote: »

If a scheme akin to that operated in oz was brought-in where you can put money aside tax free into a account during good years that can be drew down In years like 2016 it would be brilliant, but given the myriad of regulations that exist created by our own law makers on top of the eu it would never see the light of day.....
I really wouldnt be getting to caught up with the fixed priced schemes the amounts offered never make anyone up especially in glanbia unless you where in the schemes from the beginning, have went through 4 fixed schemes here and applied for well in excess of 600k litres and currently have only 80k of my supply fixed

I was really expecting a similar scheme to be introduced in the last budget but it looks like a moot point at this stage with an election likely in the next year.

You would imagine it should be simple enough to set up and enforce, even to partially tax the savings after, say, 5 or 7 years.

pedigree 6 · 19-02-2017 5:18pm

mahoney_j wrote: »

So your gripe is more with coop structure so ed than a fixed scheme ?????as I've said umpteen times already no one is forced to fix it's an option /insurance policy offered by a coop to its supplier ,I've signed up knowing I'll loose this year ,won't complain but your saying next year if fable turns you'll cry wolf if you loose even though you'll have creamed it this year .im happy and clear with my decision for the security it'll provide on a portion of my milk .someone posted earlier that probably over x period it'll balance out and I'll probably be no better off but I'll be damn glad of the cushion in a poor price year than what I'll loose in a year like this

What way do Arrabawn offer these schemes?
Is it say boxes with 10%, 20%, 30% and you tick a box.

Here you put in any figure you like and its up to management to decide what you get.

mahoney_j · 19-02-2017 5:24pm

pedigree 6 wrote: »

What way do Arrabawn offer these schemes?
Is it say boxes with 10%, 20%, 30% and you tick a box.

Here you put in any figure you like and its up to management to decide what you get.

10% of 2016 supply and you can apply to fix whatever after that depending on uptake

pedigree 6 · 19-02-2017 5:51pm

mahoney_j wrote: »

10% of 2016 supply and you can apply to fix whatever after that depending on uptake

That would never run here. Too transparent.

It's pointless filling out an application in pen here.
Might as well do it in pencil.

whelan2 · 19-02-2017 7:14pm

pedigree 6 wrote: »

That would never run here. Too transparent.

It's pointless filling out an application in pen here.
Might as well do it in pencil.

Did you apply to glanbias latest fixed price scheme?

pedigree 6 · 19-02-2017 7:57pm

whelan2 wrote: »

Did you apply to glanbias latest fixed price scheme?

Yep.
I was told I applied for too much.
I added on a 0 by mistake.

Edit: for real.

RightTurnClyde · 19-02-2017 8:58pm

The issue I have with the FP schemes is the lack of transparency. If the coops just came out an said we have a buyer that has given us a bid on X litres at Yc/L price for 3 years, so you have an option on % of you're supply.
It this sh1t of not knowing if you're hedging against another farmer or even the other 90% of your own milk pool, is where I have the issue. They are coops, we are shareholders, its our bet, we should know. Then let us take the bet, and on our heads be it. As it stands it's just a divide and conquer situation, with no one knowing weither it's the supplier next door or those around the oak table that are screwing them.
Give it a couple of years, nobody will be able to say what the actual price a coop is giving... all they need is a few suppliers either heavily fixed or heavily unfixed... and the can say "well John and Paddy are getting 40c/L, your fault your only getting 22, your tough sh1t"....coops get themselves off the hook

Keepgrowing · 19-02-2017 9:09pm

Buford T. Justice V wrote: »

I was really expecting a similar scheme to be introduced in the last budget but it looks like a moot point at this stage with an election likely in the next year.

You would imagine it should be simple enough to set up and enforce, even to partially tax the savings after, say, 5 or 7 years.

Should this scheme apply to farmers only or should it be available to all small business. Should farming companies be allowed partake?

Does income averaging not do this to some extent?

Buford T. Justice XIX · 19-02-2017 9:39pm

Keepgrowing wrote: »

Should this scheme apply to farmers only or should it be available to all small business. Should farming companies be allowed partake?

Does income averaging not do this to some extent?

Income averaging helps but tax still has to be paid on it all as a sole trader. The situation as regards tax last year paid in a poor income year for a high profit year the year before shows that something else is needed, IMO. The option should be open to all sole traders, not just farmers, and not companies as they have methods to shield revenues from taxation at 51%.

A designated account to hold a % of turnover in a good year with strict conditions attached would be very useful. If nothing withdrawn in a certain period then some would be eligible for taxation was one suggestion I heard at a meeting a while back.

Two advantages would be a large block of savings in Irish banks to help capital requirements for them and also a large block to help fund building/expansion on farms and to leverage lower interest rates from banks as risk is reduced.

It would require Revenue foregoing some revenue for a few years so I doubt that would get past them easily but I think it could be a massive help for farm financial security.

Farmer Ed · 19-02-2017 10:10pm

mahoney_j wrote: »

So your gripe is more with coop structure so ed than a fixed scheme ?????as I've said umpteen times already no one is forced to fix it's an option /insurance policy offered by a coop to its supplier ,I've signed up knowing I'll loose this year ,won't complain but your saying next year if fable turns you'll cry wolf if you loose even though you'll have creamed it this year .im happy and clear with my decision for the security it'll provide on a portion of my milk .someone posted earlier that probably over x period it'll balance out and I'll probably be no better off but I'll be damn glad of the cushion in a poor price year than what I'll loose in a year like this

That is the part you seem to have missed. If you lose someone else gains at your expense. If the price of milk falls below the fixed price, you win at the expense of the people who didnt fix. Either way we are betting against each other, even the people who didnt fix. If you feel you need a cushion would you not be better of just putting a bit of money aside for the rainy day whenever you can afford to do so?

This idea that this is directly connected to some kind of forward selling on the part of Ornua is misleading to say the least. The worrying part is, what other nonsense are we being fed that we don't properly understand? I am sorry if I come across as being negative. But I do start to lose confidence when people start to tell me stories that don't add up. I am not signaling out any co op here but clearly judging by some of the comments from people who have experience of these schemes. Not everyone seems to be happy with the way they have operated. The only positive thing I can say about them is that at least it is only 10%.

Keepgrowing · 19-02-2017 10:15pm

Buford T. Justice V wrote: »

Income averaging helps but tax still has to be paid on it all as a sole trader. The situation as regards tax last year paid in a poor income year for a high profit year the year before shows that something else is needed, IMO. The option should be open to all sole traders, not just farmers, and not companies as they have methods to shield revenues from taxation at 51%.

A designated account to hold a % of turnover in a good year with strict conditions attached would be very useful. If nothing withdrawn in a certain period then some would be eligible for taxation was one suggestion I heard at a meeting a while back.

Two advantages would be a large block of savings in Irish banks to help capital requirements for them and also a large block to help fund building/expansion on farms and to leverage lower interest rates from banks as risk is reduced.

It would require Revenue foregoing some revenue for a few years so I doubt that would get past them easily but I think it could be a massive help for farm financial security.

So it's for all non incorporated small business'?

Buford T. Justice XIX · 19-02-2017 10:31pm

Keepgrowing wrote: »

So it's for all non incorporated small business'?

I don't have all the answers, Kg, I was in an audience where it was being discussed by people who had more knowledge of the ins and outs of schemes like that but it struck me as being very applicable to farm businesses.

It's not possible to park any revenues, such as they are, as a sole trader so a reserve that could be pulled into circulation when milk/beef/weather/TB is poor would surely be an asset to a government who wouldn't have to continually have to be canvassed for funding during one of the frequent dips in prices and revenues?

Like I say, it just struck me as being a sensible policy and returns the onus onto farmers to safeguard their own businesses rather than expecting someone else to do it for us.

Anyways, we better get back to milk prices but I can pull out a few posts on this subject into a new thread if people want a thread to discuss it.

orm0nd · 19-02-2017 10:35pm

Farmer Ed wrote: »

That is the part you seem to have missed. If you lose someone else gains at your expense. If the price of milk falls below the fixed price, you win at the expense of the people who didnt fix. Either way we are betting against each other, even the people who didnt fix. If you feel you need a cushion would you not be better of just putting a bit of money aside for the rainy day whenever you can afford to do so?

This idea that this is directly connected to some kind of forward selling on the part of Ornua is misleading to say the least. The worrying part is, what other nonsense are we being fed that we don't properly understand? I am sorry if I come across as being negative. But I do start to lose confidence when people start to tell me stories that don't add up. I am not signaling out any co op here but clearly judging by some of the comments from people who have experience of these schemes. Not everyone seems to be happy with the way they have operated. The only positive thing I can say about them is that at least it is only 10%.

we didn't get to any area meetings where probarly the FP scheme was discussed, the single page application form we got in the post certainly did'nt tell us enough of the T&C to warrant applying.

I'm long time convinced that ploys like this are to benefit the co op other than the suppliers & I agree to a degree that it will rob peter to pay paul,

12 months too late in introduction & about 1.5c/ltr shy price wise for me anyhow.

mf240 · 19-02-2017 10:35pm

I keep a few bullocks. On a good year I might buy a few extra. On a bad milk year I can sell a few extra.

That and income averaging gets me along just fine.

A tax avoidance scheme for dairy farmers would be a fair hard sell to the general public.

Farmer Ed · 19-02-2017 10:41pm

mf240 wrote: »

I keep a few bullocks. On a good year I might buy a few extra. On a bad milk year I can sell a few extra.

That and income averaging gets me along just fine.

A tax avoidance scheme for dairy farmers would be a fair hard sell to the general public.

Hats off. Can't get a more transparent insurance scheme than that.:)

mahoney_j · 19-02-2017 10:44pm

orm0nd wrote: »

we didn't get to any area meetings where probarly the FP scheme was discussed, the single page application form we got in the post certainly did'nt tell us enough of the T&C to warrant applying.

I'm long time convinced that ploys like this are to benefit the co op other than the suppliers & I agree to a degree that it will rob peter to pay paul,

12 months too late in introduction & about 1.5c/ltr shy price wise for me anyhow.

Can u honestly see milk averaging over 32 cent for next 3 years ???,

mahoney_j · 19-02-2017 10:51pm

Farmer Ed wrote: »

That is the part you seem to have missed. If you lose someone else gains at your expense. If the price of milk falls below the fixed price, you win at the expense of the people who didnt fix. Either way we are betting against each other, even the people who didnt fix. If you feel you need a cushion would you not be better of just putting a bit of money aside for the rainy day whenever you can afford to do so?

This idea that this is directly connected to some kind of forward selling on the part of Ornua is misleading to say the least. The worrying part is, what other nonsense are we being fed that we don't properly understand? I am sorry if I come across as being negative. But I do start to lose confidence when people start to tell me stories that don't add up. I am not signaling out any co op here but clearly judging by some of the comments from people who have experience of these schemes. Not everyone seems to be happy with the way they have operated. The only positive thing I can say about them is that at least it is only 10%.

We suppliers all have a choice so in no way do I see it as betting against one another .its a choice and decision we have to make no point crying either way if at a time it works against u ,both sides will loose and gain at some point

orm0nd · 19-02-2017 11:05pm

mahoney_j wrote: »

Can u honestly see milk averaging over 32 cent for next 3 years ???,

Unlike you I don't think it will hold for this year, longer term who knows

I seriously think MJ you need to get the wool outa your eyes with this

lets say milk drops to to 28, you have 10% fixed at 30.5, do you think you will get 28 for your 90% ?

you will in your whole , most likely you'll get 27.85 or there abouts & i bet you will be blowing your trumpet about your 10% fixed

mahoney_j · 19-02-2017 11:12pm

orm0nd wrote: »

Unlike you I don't think it will hold for this year, longer term who knows

I seriously think MJ you need to get the wool outa your eyes with this

lets say milk drops to to 28, you have 10% fixed at 30.5, do you think you will get 28 for your 90% ?

you will in your whole , most likely you'll get 27.85 or there abouts & i bet you will be blowing your trumpet about your 10% fixed

Be blowing my hole hopefully about 20% fixed !!
I see a very strong year for milk this year on. Back of a few things namely stable oil price well above 50 dollars and the fact the the lines of the kiwis etc got such a roasting over last few years and are predicted to be back over 5% .nail my colours to Mast and predict milk price average for this year of 32/33 cent and won't shock me of higher also on what assumption to you make it that if base is 28 for amount of milk not fixed I won't get it .i know a glanbia supplier who has been in all fixed schemes to date and after numerous chats on pros and cons with him I've made my decision

Farmer Ed · 19-02-2017 11:16pm

mahoney_j wrote: »

We suppliers all have a choice so in no way do I see it as betting against one another .its a choice and decision we have to make no point crying either way if at a time it works against u ,both sides will loose and gain at some point

I am not crying. I am just stating a fact. If you get paid more it will be at the expense of people who have not fixed getting paid less and vice versa if the people who haven't fixed get paid more than you. This is a new departure from to co op ethos of using the same formula to pay everyone. That and the red herring that these schemes are somehow connected to a forward sales deal done by Ornua is the bit that worries me.

K.G. · 20-02-2017 12:12am

I read this story lately and think its very apt for this thread at the moment.
An old man and his grandson were going to town one day but they only had one donkey so thexold man left his grandson ride the donkey.along the way they met some people who said that the old man should ride the donkey as the boy would be young and fit so they swapped.they then met more people who said that it was unfair to the boy to do that so granddad got down and walked as well.they then met more people who said it was stupid to not use the donkey so they both got up.they then met more who complained it was cruel to the donkey so they decided to carry the donkey.they then came to a bridge and when they were crossing the the bridge they got a wobble and the donkey fell into the river and was drowned.the moral of the story is that if you listen to every old b#ll#cks you meet along the way you will end losing your ass in the end

pedigree 6 · 20-02-2017 12:18am

An easier and shorter anecdote would have been "Do your own thing".

kowtow · 20-02-2017 12:07pm

mahoney_j wrote: »

My question to u why didn't the non fixers fix ,

It doesn't work if everyone fixes.

Hedging is a zero sum gain, you need someone to take a loss so that you can protect yourself from a loss (make a notional gain).

This applies to the factory making the butter or whatever) just as it applies to the farmer.

It would be a very dangerous idea to have the co-op drafting everyone into fixed price (i.e. hedging the risk on members behalf). It needs to be a conscious opt in / opt out and it needs to be transparent so that the loser (if the fixer is the winner) is the manufacturing end client NOT the other farmers in the shape of the co-op.

RightTurnClyde · 20-02-2017 12:37pm

kowtow wrote: »

It doesn't work if everyone fixes.

Hedging is a zero sum gain, you need someone to take a loss so that you can protect yourself from a loss (make a notional gain).
.

But isn't this where the lack of transparency is an issue... who's to say but you could be hedging the fixed 10 or 20% against the unfixed pool, in effect your unfixed 80 or 90%.
With a lack of info from the manufacturers/processors side, the total milk price paid out can always be on the loosing side of the bet, without anyone really knowing.

kowtow · 20-02-2017 2:55pm

RightTurnClyde wrote: »

But isn't this where the lack of transparency is an issue... who's to say but you could be hedging the fixed 10 or 20% against the unfixed pool, in effect your unfixed 80 or 90%.
With a lack of info from the manufacturers/processors side, the total milk price paid out can always be on the loosing side of the bet, without anyone really knowing.

Yup, absolutely.

The whole thing about hedging is the danger of presenting it as some kind of "no lose guarantee" especially in this country and culture where the cry is always for bail out or support. There's no magic wand, and these things should be as plain and transparent as they can be precisely so that those using them understand what they are.

Farmers need to understand the risk of losing out on a fixed price contract, and then take them where appropriate because at that time on their farm the risk of loss on the fixed price worked to reduce a risk which was more of a threat to them.

That is all, that is the whole story of futures markets from the physical side.

The day you lose on a fixed price contract you should still be glad you took it, and the day you lose on an unfixed price you should still be able to look back and say that was a risk worth taking at the time, and hasn't knocked me down.

The suggestion that forward contracts are some kind of clever invention that everyone should use every time, worse still be encouraged to use by fear of losing out in the future, is very dangerous and perverts the whole purpose of hedging.

Farmer Ed · 20-02-2017 3:47pm

kowtow wrote: »

Yup, absolutely.

The whole thing about hedging is the danger of presenting it as some kind of "no lose guarantee" especially in this country and culture where the cry is always for bail out or support. There's no magic wand, and these things should be as plain and transparent as they can be precisely so that those using them understand what they are.

Farmers need to understand the risk of losing out on a fixed price contract, and then take them where appropriate because at that time on their farm the risk of loss on the fixed price worked to reduce a risk which was more of a threat to them.

That is all, that is the whole story of futures markets from the physical side.

The day you lose on a fixed price contract you should still be glad you took it, and the day you lose on an unfixed price you should still be able to look back and say that was a risk worth taking at the time, and hasn't knocked me down.

The suggestion that forward contracts are some kind of clever invention that everyone should use every time, worse still be encouraged to use by fear of losing out in the future, is very dangerous and perverts the whole purpose of hedging.

Actually the more I think about it. It's not just robbing Peter to pay Paul, but it's also robbing Paul to pay back Peter and doing it in such a way that both Peter and Paul both think they are being too clever for each other, but they are both not sure exactly what is going on.

Its a master stroke on the part of the co ops to give the perception that they are doing something to benefit farmers while at the same time making it more difficult for farmers to compare milk prices.

If they wanted to do something to help farmers maybe they should just have given us all a box of biscuits for Christmas with a card instructing us how to use the box for putting money aside for the rainy day once the biscuits had been eaten.

kowtow · 20-02-2017 5:43pm

Farmer Ed wrote: »

Actually the more I think about it. It's not just robbing Peter to pay Paul, but it's also robbing Paul to pay back Peter and doing it in such a way that both Peter and Paul both think they are being too clever for each other, but they are both not sure exactly what is going on.

Its a master stroke on the part of the co ops to give the perception that they are doing something to benefit farmers while at the same time making it more difficult for farmers to compare milk prices.

If they wanted to do something to help farmers maybe they should just have given us all a box of biscuits for Christmas with a card instructing us how to use the box for putting money aside for the rainy day once the biscuits had been eaten.

I get that completely, and I would be against any fixed price scheme which wasn't matched up the line - as I have said many times before.

However - I do have some qualified sympathy for the approach the co-ops have taken. Let's assume for a moment these schemes are matched, the problem the co-op has is to fill the matched scheme fully. To do this, they need to encourage farmers to participate in the (relatively limited) scheme(s) and Irish farmers are a difficult bunch to entice and an even more difficult bunch to please. We are greedy in all the wrong places, and the trap the co-ops have fallen into is to pander to this greed by selling these schemes too hard - particularly on the question of enticements / future scheme allocations.

If enough suppliers can't be found to fill a fixed price scheme at 30c (for example) the correct response is to go back up the chain to the buyer and tell them they'll need to bid up. This exact process happens about 100,000 times a minute in other commodity markets which are fully traded, unlike milk.

In their quest for an easy time, instead of presenting a transparent scheme and allowing informed farmers to take it up, in some cases co-ops appear (from my outsiders perspective) to have fallen for the same easy old route, saying yes to the big client, selling hard to the farmers instead of listening to their reaction, and pretending that this is free money that the "industry" has "innovated" as a benefit to farmers. To the extent that this is happening it is total nonsense. Nobody has invented anything here, it's all been around since God was a boy - everyone knows they can fix mortgage rates as long as a bank will take the other side of the trade and milk is no different.

They need a good solid programme of explanation, total transparency, and to pull their fingers out and get on with it. No more bells and whistles.

Farmers need to understand that when they lose out in a fixed price scheme it does NOT mean they made the wrong decision entering it (assuming they made it for the right reasons)

There are plenty of creative ways they could improve these schemes and take up, but this is not - so far - a very solid foundation to build on.

Farmer Ed · 20-02-2017 6:57pm

kowtow wrote: »

I get that completely, and I would be against any fixed price scheme which wasn't matched up the line - as I have said many times before.

However - I do have some qualified sympathy for the approach the co-ops have taken. Let's assume for a moment these schemes are matched, the problem the co-op has is to fill the matched scheme fully. To do this, they need to encourage farmers to participate in the (relatively limited) scheme(s) and Irish farmers are a difficult bunch to entice and an even more difficult bunch to please. We are greedy in all the wrong places, and the trap the co-ops have fallen into is to pander to this greed by selling these schemes too hard - particularly on the question of enticements / future scheme allocations.

If enough suppliers can't be found to fill a fixed price scheme at 30c (for example) the correct response is to go back up the chain to the buyer and tell them they'll need to bid up. This exact process happens about 100,000 times a minute in other commodity markets which are fully traded, unlike milk.

In their quest for an easy time, instead of presenting a transparent scheme and allowing informed farmers to take it up, in some cases co-ops appear (from my outsiders perspective) to have fallen for the same easy old route, saying yes to the big client, selling hard to the farmers instead of listening to their reaction, and pretending that this is free money that the "industry" has "innovated" as a benefit to farmers. To the extent that this is happening it is total nonsense. Nobody has invented anything here, it's all been around since God was a boy - everyone knows they can fix mortgage rates as long as a bank will take the other side of the trade and milk is no different.

They need a good solid programme of explanation, total transparency, and to pull their fingers out and get on with it. No more bells and whistles.

Farmers need to understand that when they lose out in a fixed price scheme it does NOT mean they made the wrong decision entering it (assuming they made it for the right reasons)

There are plenty of creative ways they could improve these schemes and take up, but this is not - so far - a very solid foundation to build on.

I get what you are saying here about matching the supply with the price that has been fixed by Ornua. But the reality is this has nothing to do with that, as hail rain or snow that contract will be filled without a bother the same as always, fixed price scheme or no fixed price scheme . It's not like Irish co ops are likely to run out of milk as soon as the price falls below 30 c. So in this case it's pretty clear that the Ornua forward selling story is just a red hering designed to impress star struck farmers at area meetings. That's what upsets me. It's just the spin they put out there and expect us to swallow it.

boggerman1 · 20-02-2017 10:23pm

orm0nd wrote: »

Unlike you I don't think it will hold for this year, longer term who knows

I seriously think MJ you need to get the wool outa your eyes with this

lets say milk drops to to 28, you have 10% fixed at 30.5, do you think you will get 28 for your 90% ?

you will in your whole , most likely you'll get 27.85 or there abouts & i bet you will be blowing your trumpet about your 10% fixed

Agree with the above.if milks stays around the 30 cent mark it would be okay.was talking to a friend today who knows a guy on a board of one of the local co-ops.any forward contracts for milk is only for 3 or 6 months compared to a couple of yrs previous where 12/18 mths were the norm for buyers