Milk Price III

Finest

mahoney_j wrote: »

I beg to differ so there’s 90% ****e farmers in the country so !!!!,like grassland measuring tiny amount do iif and use agriet /pasturebsse lots others grass measure in different ways and don’t use either

The main point here is the use of the best tools for comparative analysis be it a profit monitor pasturebase milk recording etc, for some reason you seem dead set against this .

Buford T. Justice XIX

Finest wrote: »

Labour is not a common cost but is included in the pm under fixed costs this is where it should be . The big figure is gross margin it is comparable across all farms . If an advisor tells you to cut costs it's ro improve your gross margin , cutting variable costs is self explanatory and can be done in the short term . its up to individual farmers what they do with gross margin they can horde it and muck like slaves or they can reinvest back into the farm and have all the gadgets or employ labour to make life easy . Everyone is different when it comes to fixed costs and fixed costs are often long term commitments that can't be changed . It's a pity to see profit monitors knocked when people fail to understand this fundamental . By the way I'm still waiting for examples to improve on it I'm certainly open to giving something new a try

But MY labour IS a cost to the business. PM is fine for comparison purposes between farms, using a labour cost distorts the cost figures but to say that milk can be produced for 22c/l is a gross distortion of reality.


I'm not going to get up in the morning for 330 days a year at 6.30 and work all day for 0c/l.



I don't know anyone who does or will.


The COP figures published by Teagasc aren't true COP figures unless the labour who does all the work in producing that milk for 22c/l can exist on fresh air. I know I can't, I usually require food once or twice a week anyway but the published figure takes no account of that. It's a distorted figure when used for purposes other than farm comparisons.

wrangler

mahoney_j wrote: »

Point I’m msking there is they see profit monitor cop of low 20s and high teens and think farmers are minted making a fortune and should all produce milk at same level ,the reality is a million miles from that

It's not a million miles from that, even someone paying €280 /acre to the bank means they're increasing their personal wealth....couldn't really put it all against costs of milk production

kowtow

Finest wrote: »

Milk price is not just a function of a coop . Also kgs of milk solids are not of equal value on farms even where they supply the same purchaser eg. A kg of milk solids supplied with 10 kgs of water is worth more than a kg with 11kgs of water . Achieving a high output in terms of price and yield is often devalued if a herd does not have a reasonable level of replacements introduced , this is why the gross output figure on pms is so important as it allows for inventory change. Variable costs on Irish farms are easy to compare , high output farms usually have high variable costs often eroding the gross margin figure . A good gross margin gives a farmer more choice for the future of his business , he can choose to invest the margin in infrastructure or labour to make his life easier without a gross margin you're stumped. Labour costs are after gross margin this becomes hard to compare between farms . On a well developed farm labour will be low whereas a farmer starting out may have no choice but to work hard to build up his business so I don't see the point in comparing labour / kg of milk solids , in both these cases the gross margin should not be affected by circumstance.

Labour / kgms is vital. First, it should be labour units (FTE or hours) as I think I suggested in my original post - that is to eliminate the obvious differences encountered when using real drawings. Real drawings vary between farms for reasons totally unconnected with the farm itself and irrelevant for comparison purposes.

No Cost of production figure should ever be imputed without putting a figure on those labour hours, because to do so would be deeply misleading.

At the very least I would prefer to see that labour cost firmly anchored as a variable cost although I recognize that that is not the way farmers have been used to doing things to date. In part this is because the cost of production figures bandied about are meaningless without labour so far as dairy farming is concerned.

Same for land. kg/ms/ha will do here and an imputed rental value should be attached before cost of production is calculated. That takes the bought or rented piece out of the equation and rightly - people get so tied up in that debate that it is destructive (I recall one whole Teagasc presentation last year which did nothing except prove that interest rates were abnormally low. The title was something like 'optimising stocking rate')

Take your point about the c component of the milk price although there are surely clearer ways to compare than hiding it inside an overall gross margin. What about average price received /kgms ?

Incorporating stock value in gross output is a little opaque, IMO, why not simply use a figure for stock, or even LU, to account for replacement rearing etc. - average age in the herd is another useful metric.

The real problem is that the PM began as an all-purpose mixed farm tool most useful for comparing alternative enterprises within the farm gate, and morphed towards a generalized P&L account when people rightly demanded more of it. Also, many of those who complete it are concerned about the use to which the aggregated data is put and the publication of figures.

The reality is that, like any set of accounts, if you know exactly what you are looking at you can make very intelligent comparisons. I don't think the debate here is for / against profit monitors but rather are they actually the best tool for what we want to use them for (which I would suggest is bench-marking / comparing farms / making fundamental system and investment choices).

kowtow

wrangler wrote: »

It's not a million miles from that, even someone paying €280 /acre to the bank means they're increasing their personal wealth....couldn't really put it all against costs of milk production

They wouldn't be increasing their personal wealth in a falling land market.

How they come by the land is a sideshow, if you want to know how the farm is actually doing take the purchase out of the equation and impute a reasonable rental value to the acre.

mahoney_j

Finest wrote: »

The main point here is the use of the best tools for comparative analysis be it a profit monitor pasturebase milk recording etc, for some reason you seem dead set against this .

I’m not but just don’t get the fascination with what anyone else is at .oeoole have different ways and methods of doing simillar jobs farms are different

kowtow

Finest wrote: »

Labour is not a common cost but is included in the pm under fixed costs this is where it should be . The big figure is gross margin it is comparable across all farms . If an advisor tells you to cut costs it's ro improve your gross margin , cutting variable costs is self explanatory and can be done in the short term . its up to individual farmers what they do with gross margin they can horde it and muck like slaves or they can reinvest back into the farm and have all the gadgets or employ labour to make life easy . Everyone is different when it comes to fixed costs and fixed costs are often long term commitments that can't be changed . It's a pity to see profit monitors knocked when people fail to understand this fundamental . By the way I'm still waiting for examples to improve on it I'm certainly open to giving something new a try

Consider the gross margin of the following three herds

1. 90 cows spring outdoor OAD
2. 400 cows AYR indoor herringbone
3. 400 cows spring / autumn outdoor considering going indoor and robots.

If I want to understand the relative profitability of those herds to my mind I'd be better with accurate figures for hours / kgms and standardised charges in the variable costs. Without that each of those would produce wildly different gross margin figures which on their own would be little help in making a decision.

wrangler

kowtow wrote: »

They wouldn't be increasing their personal wealth in a falling land market.

And if it was a rising land market it would, you're getting flippant now

Termsandco

mahoney_j wrote: »

Right fully costed Labour for a start including family Labour ,land charge ,capital repayments on farm loans .these are a start and should be included for any published figures .look at greenfield there fully costed cop is in mid 30s I think and pm is low to mid 20s if I’m correct
There’s is many other costs like drawings ,payement to parents tax etc which are costs to the farm and have to be paid from it .some of these are personal and understandable people don’t want to divulge these .a change of figure from cop as is given currently certainly needs changing

there is a section to put in a value for rented land, nothing stopping anyone putting a whole farm land charge in there.

There is a section to put in a value for hired labour, nothing stoping the farmer putting in a figure for his own and all family and non family labour.

If I take out a loan and buy a tractor this year I will be asked to put the value of the tractor into the depreciation section and I will be asked to put the interest charged on the loan into the interest section. Should both of these sections be removed and replaced by repayment on farm loans instead?

mahoney_j

Termsandco wrote: »

there is a section to put in a value for rented land, nothing stopping anyone putting a whole farm land charge in there.

There is a section to put in a value for hired labour, nothing stoping the farmer putting in a figure for his own and all family and non family labour.

If I take out a loan and buy a tractor this year I will be asked to put the value of the tractor into the depreciation section and I will be asked to put the interest charged on the loan into the interest section. Should both of these sections be removed and replaced by repayment on farm loans instead?

How bout capital repayements they have to be paid do they not ??

wrangler

mahoney_j wrote: »

How bout capital repayements they have to be paid do they not ??

The simple fact is that if they make it too complicated it won't be done.

Termsandco

mahoney_j wrote: »

How bout capital repayements they have to be paid do they not ??

I gave an example of the capital investment of a tractor and that there is currently a charge put in for depreciation and interest of this item. Do you propose removing these sections and only having a capital repayments section or should a profit monitor include depreciation, interest and the capital repayment?

Buford T. Justice XIX

wrangler wrote: »

How do you know they're leaving out feed and fertiliser costs in the cost of production

I didn't say they were, wrangler.



But they are leaving out the farmers own labour cost.

Termsandco

Buford T. Justice V wrote: »

I didn't say they were, wrangler.



But they are leaving out the farmers own labour cost.

There is a section for hired labour in the profit monitor input sheet. The only person stopping a farmer for putting in a value for his own labour is the farmer himself.

kowtow

Termsandco wrote: »

There is a section for hired labour in the profit monitor input sheet. The only person stopping a farmer for putting in a value for his own labour is the farmer himself.

Wouldn't that make a nonsense of comparing farms though?

I've spent a lifetime reading accounts and analyses of one sort or another. If you want any template to really work well the first thing you need to do is clearly establish what it is and isn't intended for. Figure out the questions you want to answer and you'll work out what questions you need to ask.

And if you need more than one template, you need more than one template.

Termsandco

kowtow wrote: »

Wouldn't that make a nonsense of comparing farms though?

I've spent a lifetime reading accounts and analyses of one sort or another. If you want any template to really work well the first thing you need to do is clearly establish what it is and isn't intended for. Figure out the questions you want to answer and you'll work out what questions you need to ask.

And if you need more than one template, you need more than one template.

How does it make a nonsense of comparing farms?

alps

Finest wrote: »

Total rubbish a lot of private advisors use the profit monitor , a lot more private advisors give no comparative analysis at all but hey they walk the farm four times a year charge a couple of grand and talk bs I suppose different strokes for different folks . The only private company with scale that I can think of that could do this might be fdc but go on enlighten us if it's better than the pm I'm all ears . In other words please back up your statement by giving us an example you can even cross off the farmers name for the GDPR. If it's better than the pm I'll certainly give it a go it could be of great service to us all .

The original gripe here came from what I have maintained for a long time is the misuse of data...

Data can only be used for the purpose for which it is collected..


I've done PM since its inceptuon many moons ago soley for the purpose of cost comparison with others in a discussion group who knew and understood each other's business inside out.Concerned that our data was being put to use beyond this purpose, we had an agreement or understanding from teagasc that the sole use of our data was for ourselves. This was not respected, the incidents which I won't go into here.

The discussion group we're in, now work with a private advisor. We work with a very good financial template, that works far more effectively for cost comparison purposes, coupling up as a 5 or 10 year cash flow projection tool..

But the real McCoy of cost comparison tools is the European Dairy farmers one. The information derived from it is astonishing, detailed towards the needs of your discussion, be it break even points, family farm profit, or full economic costs.

KPI's can be presented in a graphical way, much as kowtow suggests, with the meaningful figures plotted on an X and Y axis...

For instance Milk yield can be plotted against meal fed,
Depreciation can be plotted against hours worked, output can be plotted against land rental value..

You end up with scatter graphs, clusters with a few outliers....these outliers being the learning points..

The cost of either of these groups is no higher that a teagasc fee..(which we pay also btw)

Buford T. Justice XIX

Termsandco wrote: »

There is a section for hired labour in the profit monitor input sheet. The only person stopping a farmer for putting in a value for his own labour is the farmer himself.

That's just going to distort the between farm comparisons. How do you reconsile some farmers putting in a cost of 1 c, 2c, 4c, 6c etc?


I have no problem putting in a hired labour charge when it's a direct farm cost in between farm comparisons.


But using our figures to say milk can be produced at 22c/l is being economical with the truth at best. The correct figure that should be used id 22c+ an imputed farmer wage/l, say 7c/l.


There's a world of difference in saying milk can be produced at 22c/l and saying it can be produced at 29c/l.


One figure is a clickbait press release, the other is a more accurate figure.


Like I said before, this has been done to death before over many threads and I'm bowing out of this one now.

kowtow

Termsandco wrote: »

How does it make a nonsense of comparing farms?

if one farm includes only external hired labour and another includes the farm family drawings?

mahoney_j

Termsandco wrote: »

I gave an example of the capital investment of a tractor and that there is currently a charge put in for depreciation and interest of this item. Do you propose removing these sections and only having a capital repayments section or should a profit monitor include depreciation, interest and the capital repayment?

All 3 yes

mahoney_j

Buford T. Justice V wrote: »

That's just going to distort the between farm comparisons. How do you reconsile some farmers putting in a cost of 1 c, 2c, 4c, 6c etc?


I have no problem putting in a hired labour charge when it's a direct farm cost in between farm comparisons.


But using our figures to say milk can be produced at 22c/l is being economical with the truth at best. The correct figure that should be used id 22c+ an imputed farmer wage/l, say 7c/l.


There's a world of difference in saying milk can be produced at 22c/l and saying it can be produced at 29c/l.


One figure is a clickbait press release, the other is a more accurate figure.


Like I said before, this has been done to death before over many threads and I'm bowing out of this one now.

Angus me fein

Termsandco

mahoney_j wrote: »

All 3 yes

So do capital repayment not include an interest rate anymore?

Termsandco

kowtow wrote: »

if one farm includes only external hired labour and another includes the farm family drawings?

In the ai section I've the cost of an ai technician included in my ai bill while other farmers who use diy don't

Termsandco

kowtow wrote: »

if one farm includes only external hired labour and another includes the farm family drawings?

I've a high depreciation figure in my profit monitor as I've put in every trivial investment for the last 15 years. I know plenty of farmers who have near zero figures who have invested a lot more than me. You can only control the figures you input into the profit monitor

kowtow

Likewise, this subject comes up again and again over the years and each time some little bit is added - as I said above I don't think anybody objects to the use of PM's, only to their mis-use (or in my case the wilful stretching of over-simplified figures. I hate over simplification)

If every farm follows the same system religiously, and fills in the PM the same way, then of course there will be some effective if basic benchmarking and some easy comparisons within a discussion group. And if every farm starts off with 50 inherited acres, and rents another 50 on an outfarm, and only pays a bit of outside labour in the Spring then probably the PM as it exists today is perfect.

The trouble is real life never works out that way. Here we are in August with diet feeders rolling away and ration running out. There would be zero grazers too, if only there was anything left to cut and carry. Like it or not nature is reminding us that the absolute purist grazing only New Zealand system is going to remain an aspiration for most farms, in some years anyway - my guess is that many of us will always be operating a mixed system, maximising our advantage in growing grass but retaining the tools and methods required to handle fragmented farms and volatile weather systems.

In that context it's more important than ever to understand, in real time, the factors influencing cost of production as well as the risk inherent in producing at that cost. And it's more than ever important that real costs aren't swept under the carpet, and figures misquoted and misused, destroying everyone's confidence in the tool set.

The PM is only an early example of the kind of decision support tools we will all need in the future.

kowtow

Termsandco wrote: »

In the ai section I've the cost of an ai technician included in my ai bill while other farmers who use diy don't

That's why your labour hours are less.

Termsandco

kowtow wrote: »

That's why your labour hours are less.

are you suggesting instead of putting in a fixed figure for ones own labour it's calculated on the hours worked instead and accumulated on a per hour worked basis

Termsandco

kowtow wrote: »

Likewise, this subject comes up again and again over the years and each time some little bit is added - as I said above I don't think anybody objects to the use of PM's, only to their mis-use (or in my case the wilful stretching of over-simplified figures. I hate over simplification)

If every farm follows the same system religiously, and fills in the PM the same way, then of course there will be some effective if basic benchmarking and some easy comparisons within a discussion group. And if every farm starts off with 50 inherited acres, and rents another 50 on an outfarm, and only pays a bit of outside labour in the Spring then probably the PM as it exists today is perfect.

The trouble is real life never works out that way. Here we are in August with diet feeders rolling away and ration running out. There would be zero grazers too, if only there was anything left to cut and carry. Like it or not nature is reminding us that the absolute purist grazing only New Zealand system is going to remain an aspiration for most farms, in some years anyway - my guess is that many of us will always be operating a mixed system, maximising our advantage in growing grass but retaining the tools and methods required to handle fragmented farms and volatile weather systems.

In that context it's more important than ever to understand, in real time, the factors influencing cost of production as well as the risk inherent in producing at that cost. And it's more than ever important that real costs aren't swept under the carpet, and figures misquoted and misused, destroying everyone's confidence in the tool set.

The PM is only an early example of the kind of decision support tools we will all need in the future.

You can apply that to every report that is generated for farmers.

The herd ebi report is just an average combined ebi of both the dam and sire and doest factor in how much of the father or how much of the mother genetics transfer to the calf. in most cases there is no correlation with the actual ebi of the calf. Ebi doesn't account for hybrid vigour in any way either

Grass measuring methods differ from farm to farm so that means that all grass growth are unreliable. Grass growth figure doesn't account for difference in soil type or climates.

Soil samples. You could take 20 different soil samples from the same paddock and they'd all come out recommending differently

The coop reports don't account for farmers who feed wholemilk to calves for 2-14weeks or those who feed milk replacer exclusively, they don't factor in a dry or a wet farm, they don't factor in high ration feeding or low ration feeding and don't factor in stocking rate on farm

Fertility reports don't account for the bcs of the cow at breeding, the fertility of the bull or ai man, the weather condition during breeding, the time of ai. Etc etc etc.

freedominacup

Termsandco wrote: »

So do capital repayment not include an interest rate anymore?

No and capital repayments never did, at least in my time farming. Capital repayments are taxable, interest is tax deductible.

Termsandco

freedominacup wrote: »

No and capital repayments never did, at least in my time farming. Capital repayments are taxable, interest is tax deductible.

how does all this read in the new profit monitor.
For example In my 2016 profit monitor a loan for a land purchase currently at €131,000 was accounted in the profit monitor as €1785.12 in interest which showed up as 0.56c/l.

In the new improved profit monitor it'll be recorded as
Land charge €21,300
Loan repayments €17,791.67
Interest €1785.12
Or 12.9c/l ?