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Eryl Vet
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Re: United dairy farmers Dec Auction
quote:
FiringOnAllFour wrote:
I really hope for all our sakes that the english price stays up, but right now its bucking the europewide/worldwide trend of falling values.
It is a change for the 'english' price to be talked of in those terms... for a decade before last year we were way behind continental Europe .... hence why (together with a difficult season and burgeoning TB losses) production continues to fall over here. For this reason we been seeing small price rises rather than cuts this autumn ... where in the past the dairy companies would have been slashing prices by now in response to the world market. Because of a decade of poor (or no) profit, the industry has had no reinvestment and is on a knife edge that could not withstand any price cuts - lets hope that the dairy companies understand this and that our representatives are making it abundantly clear to them.
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26/10/2008, 23:29
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will maxwell
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Re: United dairy farmers Dec Auction
Cow prices remained fairly strong at Clogher on Saturday, I saw one first calver make £1400, maybe back a couple of hundred, but still very high considering the Auction result. Any of the United suppliers I spoke to were furious, alot of talk of 'getting out'
It just angers me that the supermarkets can have such sway, and good quality dairy farms, with generations of investment, knowlege and experience, will be forced to shut up shop if this worrying trend continues. Perhaps if 18ppl is a one-off 'blip' in the market we could sustain it, I'm doubtful however that it will be that, and concerned that it reflects a new direction for future milk prices.
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Farming is the oldest JOB in the world, too many people seem to have it confused with the oldest PROFESSION!
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27/10/2008, 13:15
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FiringOnAllFour
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Re: United dairy farmers Dec Auction
We have been rumbling along, making little or nothing for years, but this is perhaps the first time that we have faced making a substantial loss.
A lot of people have gone through the pain barrier of putting up slurry storage, and many have gone the extra mile and put a cubicle shed on it and bought a new parlour too. The rise in price came at the wrong time here as I said back then - it perhaps gave people a false encouragement to invest. We even had a handful of new people join the industry!
You english guys are seeing your slurry issues now with no gloss or added shine. That is a good thing.
At the end of the day, give or take a penny for processing issues (and that doesn't take away from the importance of such) - the fact is that we dropped seven ppl in a month because powder has collapsed. United doesn't have enough 'added value' outlets for its milk, so we are stuck in the meantime.
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27/10/2008, 16:35
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will maxwell
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Re: United dairy farmers Dec Auction
So how does your cyborg eye see it FOAF?!
Is this the backside falling out of the market, never to be regained or is this something that might be overcome in the longer term?
I'm glad we haven't made any major investments, although we badly need a new parlour. Dad wants to pull the pin, and (as much as I hate to say it) I'm, for the first time ever, inclined to agree. We'll see what the mood is on Thursday night, and decide where to go after that. I can't forsee much positivity though, can you?!
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Farming is the oldest JOB in the world, too many people seem to have it confused with the oldest PROFESSION!
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27/10/2008, 16:50
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FiringOnAllFour
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Re: United dairy farmers Dec Auction
The price of commodities is going to fluctuate more widely, I think even for the world as a whole, but especially for us in the EU who had the peaks and troughs ironed out. Apparently its scaring the wits out of the buyers too, so none are buying long. The EU, being a large producer of milk, probably had some stabilising effect on the world market because it was able to hold production relatively steady from year to year.
As long as world production drops, then the price will most certainly come right back up again. In order to be any good at producing commodities, I think you have to have a cost of production that allows you to sell powder at a profit more often than a loss. Well. We aren't a low cost producer, so we'll probably be losing money more often than gaining. Heading in the direction of added value products is probably right, but its all about branding and marketing - and we aint got much money for that. Its going to be a bumpy road.
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27/10/2008, 19:39
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FiringOnAllFour
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Re: United dairy farmers Dec Auction
I guess its just you and me mate.
Last one out, turn off the lights please.
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28/10/2008, 14:32
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Dairylands
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United dairy farmers Dec Auction
"The guys who are 50+ with no heir coming along (the majority of NI dairy farmers) aren't going to travel down that 'bumpy road'"
I don't know about that, I have neighbours in their 70s still milking away. I reckon old habits die hard.
On the positive Brown is doing a great job at devaluing the £ (not intentionally) - that might help the powder. Was it not the cheap dollar that made the US a profitable exporter?
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28/10/2008, 20:42
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scoobyscotlad
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Re: United dairy farmers Dec Auction
The postman delivered a "Farmfoods" flyer the other day showing our Wiseman`s milk at 2(1 litre)for a £1.Guess Lidl similar.
But we all love Farmfoods-after all they sell Tayto crisps & your other national drink....Club Orange! 
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29/10/2008, 12:57
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will maxwell
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Re: United dairy farmers Dec Auction
Ahh the Tayto Crisps (Cheese & Onion) washed down with Club Orange, only surpassed by Haggis Neeps 'n' Tatties washed doon wi Irn Bru!!
I suppose at least if we're getting pittance some customers are getting the benefit!
It's just a wee tad perverse that it has to be that way.
No doubt there'll be some silver tongued excuse tomorrow night, or a string of them! The pound's too weak, we're over supplying, circumstances beyond our control..... ect, ect. And no doubt the majority of members will sit quietly by and take it all in, and then agree to a ludicrous pay rise to the directors, I am however prepared to be pleasently surprised! I'd rather see the Chief Executive and Directors earn their keep, perhaps a 'performance related pay' arrangement would be more suitable?
Lets see what tomorrow night brings....
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Farming is the oldest JOB in the world, too many people seem to have it confused with the oldest PROFESSION!
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29/10/2008, 22:10
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FiringOnAllFour
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Re: United dairy farmers Dec Auction
quote:
will maxwell wrote:
I'd rather see the Chief Executive and Directors earn their keep, perhaps a 'performance related pay' arrangement would be more suitable?
....
I'll fill you in on that one tomorrow night.
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29/10/2008, 23:13
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scoobyscotlad
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Re: United dairy farmers Dec Auction
So,how did last night go?
Am sure no-one got hot-tempered?? 
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31/10/2008, 8:23
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will maxwell
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Re: United dairy farmers Dec Auction
Predeictable, yet surprising!!
Predictable in that everyone and everything that could be blamed, was blamed! The economic slowdown, global recession, Mariaan Fischer Boel, Our collegues in the Southern Hemisphere, the Melanin crisis in Asia. They just stopped short of blaming Russell Brand and Jonathan Ross!! If I and the other members had got £1 for every time we heard the key phrase, 'Going Forward', we wouldn't need to be worried about the milk price!!
Of course they (Davy Dobbin & Co) are doing their best to get us out of this, working flat-out!! Unfortunately most of what they are trying to do is a little too late, I think the critisism last night was 'reactive rather than proactive'!
I was however somewhat surprised by David Dobbin's attack on Farmers For Action, who had been outside distributing leaflets, but yet, after Davy Dobbins rounding on them, were strangely silent in the meeting!
I was prepared to stand up, more to make some suggestions rather than level crtisism or ask pertinent questions, but there was no opportunity! At least we got a 'lovely' goodie bag to take home and an ice-cream to help 'cool us off', if they hadn't turned the Air-con off half way through the (decidedly slick) presentations we wouldn't have needed ice-cream!!
Should be interesting to see what happens at next months auction.
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Farming is the oldest JOB in the world, too many people seem to have it confused with the oldest PROFESSION!
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31/10/2008, 10:00
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Campbeltowncowboy
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United dairy farmers Dec Auction
Will :- a couple of questions
Who are the processors that have bought the milk and what do the use it for ? Are they the same ones who bought the dear milk in late 2007 ? If there was milk going to the mainland why were these buyers not invited to bid for milk? there's nothing like a new buyer/buyers at an auction to get things going!!
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2/11/2008, 20:38
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FiringOnAllFour
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Re: United dairy farmers Dec Auction
Apparently, spot milk on the mainland is making 21-22ppl right now - and with our 3-4ppl haulage gets us the 18ppl. Extra milk was mainly bought reluctantly to stockpile powder and cheese. The driers are going to open early this season. Plus the feeling is that the NZ auction is having a negative impact on world market attitude.
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2/11/2008, 23:22
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FiringOnAllFour
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Re: United dairy farmers Dec Auction
We deal now to a large extent in the relatively small quantity of milk that is actually traded on the world market. It is this milk which is most subject to wide fluctuations in value. Liquid milk is supplied on longer contracts, which tend to ride out the peaks and troughs and instead follow the overall trend.
This puts us in a very vulnerable position needless to say, as 80% of our milk is destined for this market.
Last year, we had undersupply, due in part to the horrendous droughts in Oz and NZ, and increased demand from growing economies like china and india. Now, we have strong US supply, and improving NZ supply, coupled with a somewhat dented demand across the world, not least in china with the melamine scare. All these factors are important, but the US supply is the largest.
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3/11/2008, 19:51
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will maxwell
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Re: United dairy farmers Dec Auction
Internal squabble over price of milk
By ROD ORAM - Businessday | Sunday, 19 October 2008
Dairy farmers are furious with Fonterra. They believe the co-op's new internet auction is destroying its ability to influence markets, long seen as its key competitive advantage. As a result, they say the auction is causing world dairy prices to fall faster than justified by changes in supply and demand.
Fonterra's actions are unnecessarily lopping $500 a tonne off the price of products, one primary sector leader believes. He reckons this will cut farmers' payout by $1 billion this season.
The New Zealand dairy industry had long believed it so dominated international dairy trade that it could exercise some control over prices and markets. Now Fonterra is telling farmers such power was mostly a myth and it has undertaken studies to prove so. Where it did have a bit of influence, it was with small-scale customers in minor markets. But they were very costly to service and any premiums were temporary.
Moreover, it was locking itself into some undesirable long-term contracts with big customers. Some of them included "best price" clauses that allowed buyers to demand downward price revisions in falling markets and to refuse upward revisions in rising markets. Thus, the co-op's payout to farmers lost out both ways.
So, Fonterra says it's better to run an internet auction for a portion of its most basic commodities to create a fully informed and transparent market. Then it can charge customers on top of that benchmark for its true competitive advantages such as different formulations, superior product attributes and better supply chain service. It can also deliver a commodity return to farmers that more closely tracks world prices.
Fonterra also argues that the auction is the first step in giving buyers and sellers open pricing and a range of futures and other instruments to help them handle price volatility. These are tools long enjoyed by other food and mineral commodity markets.
Fonterra had looked at an auction system back in 2000-01 but decided against it for three reasons: it didn't have enough confidence in the then-fledgling technology of internet trading platforms; it didn't think its supply chain was ready to cope with the auction demands; and there were still a few markets where it felt it could exploit a lack of price information.
But it reckoned by early this year conditions internally and in the market had changed sufficiently to make an auction useful as a commodity benchmark price. The auctions will allow it to cut out the cost and complexity of dealing with myriad small customers, allowing it to concentrate more effectively on large ones. It says more than 90% of its sales volume is still contracted directly with customers so it can still enjoy productive relationships with them.
And as it moves further towards pegging long-term contracts to the internet benchmark, it will reduce the price discrepancies created by the old-style of contract.
Fonterra also argues that the auction price brings clarity to its business. It and its shareholders can now get an accurate fix on the commodity price of the milk and the value the co-op adds to it. This is a vital signal for guiding investment and for paying share dividends to outside shareholders, if farmers choose to bring them into the company in a capital restructuring.
Fonterra launched globalDairyTrade in July. It was designed and is run by CRA, a firm of US business consultants with a worldwide practice. It has built and run a wide range of internet markets in more than a dozen countries, selling the likes of radio spectrum, mineral rights, electricity capacity, generation and transmissions and natural gas supplies.
Each of Fonterra's four auctions so far has attracted a reasonable amount of bidding. The starting prices on nine contracts in each auction are set at 15% below the previous close.
Each auction goes through a number of rounds until the price rises to the point that the volume people are prepared to buy falls to match the volume Fonterra is selling. At that point the auction ends.
Critics cite the opening discount of 15% as one way that Fonterra is driving down the price in an already falling market. Fonterra argues this is a standard internet auction practice to encourage bidding. The same discount will apply in a rising market. Of the 36 contracts sold so far, 24 have closed above the opening price and 12 at it.
Fonterra acknowledges that the auction prices of wholemilk powder have declined sharply in the four months since the site started. But it says any auction like this is only discovering the price people are prepared to pay. The real price setter is the confluence of supply and demand pressures in the total market.
Far from being persuaded by these arguments, critics are rapidly amassing evidence that the auction is seriously ill conceived and deeply damaging to Fonterra. Their biggest points are:
The auction price is a meaningless benchmark. Fonterra is putting up for sale less than 0.25% of the industry's globally traded volume of all dairy products. And anyway, wholemilk powder is unlike true commodities such as corn it is perishable, comes in multiple specifications and its flavour, colour and other characteristics depend on the source of milk.
There is genuinely a wide range of prices across all dairy products. For example, very different factors drive prices of cheese and other commodities. Thus, it would be far more accurate to use a composite measure such as an improved version of Fonterra's existing Commodity Milk Price calculation.
The auction price is driving adverse customer behaviour. With prices volatile and falling, they are holding back from purchasing products and pushing Fonterra to give deeper discounts. Customers are also expressing grave concern about the volatility.
By putting its faith in the auction benchmark, Fonterra says it can add no value to basic commodities. This makes it easier for new entrant commodity processors such as Dairy Trust to persuade Fonterra farmers to supply them instead, thus weakening Fonterra's control.
The message of no extra value is a disastrous one to send to third party suppliers like Dairy America, a marketing company representing nine major US dairy co-ops. Fonterra is the main export sales channel for these farmers. If Fonterra is saying it can do no better job for them than any other agent, it could lose their business.
If Fonterra loses its third-party suppliers, its global strategy is in tatters. It needs their volumes to help it maintain its large share of global trade. New Zealand supply alone can never keep up with fast rising demand.
And Fonterra needs those low-cost, third party overseas products to give its global supply chain sufficient clout so it can sell the increasingly high-cost products coming out of New Zealand. If Fonterra falls back to being solely a New Zealand exporter, the game would be over for the co-op and its shareholders. On current trends, they would eventually price themselves out of world markets.
Yet, Fonterra's board and management seem deaf to these powerful arguments.
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Farming is the oldest JOB in the world, too many people seem to have it confused with the oldest PROFESSION!
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4/11/2008, 13:15
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FiringOnAllFour
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Re: United dairy farmers Dec Auction
Well? Is that a stunned silence I hear?
Or is it something like people were expecting?
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22/11/2008, 23:32
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FiringOnAllFour
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Re: United dairy farmers Dec Auction
Wow! How bad does it have to get before you get gloomy?
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24/11/2008, 10:52
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