Bad Chinese and Cows on Holiday

[Stocker Steve]

Lots of talking heads are focused on the ongoing trade war. The Chinese are great at the long game, Americans are terrible at the long game, and not doubt they are expecting Trump to lose. So noooo rush for them.

We are seeing an ongoing margin squeeze for many producers. The thing I did not expect is the squeeze on ethanol capacity expansion. US corn is higher and Chinese placed tariffs on imported US ethanol - - so now producers are talking temporary plant shutdowns. How do you temporarily shut down a cow?

 

[Ebenezer]

Just take her out of gear and let her idle.

 

[Nesikep]

pull the bulls

 

[Caustic Burno]

pull the bulls

Agree we are our own worst enemy.
We have no control on our product prices. That's our fault we should have organized years ago like the corn lobby.

 

[sim.-ang.king]

pull the bulls

Agree we are our own worst enemy.
We have no control on our product prices. That's our fault we should have organized years ago like the corn lobby.

It's hard to lobby for better prices when the one's getting your checkoff dollars fight it at every turn.

 

[Silver]

I've often thought the Canadian dairy man is really on to something.

 

[Nesikep]

I've often thought the Canadian dairy man is really on to something.

yeah, but you have to buy quota at 20x the value of the animal.. I think the quota should have no value in and of itself

 

[Aaron]

I've often thought the Canadian dairy man is really on to something.

yeah, but you have to buy quota at 20x the value of the animal.. I think the quota should have no value in and of itself

It didn't, in the beginning. Then the marketing boards needed to figure out a way to get their cut of the pie and put a value on it. But when it came out in 1965, it had no value. It just pooled milk for volume pricing and kept guys from overproducing by limiting their expansion from when the program came in. A guy with 20 cows in 1965 couldn't just magically have 40 cows in 1966. Lots of guys, including Grandpa, quit in the late 50's and early 60's because of excess supply and zero milk price, so that helped stabilize the market a bit before it started. But as the population grew and milk needs increased, the marketing board figured that the additional quota added to the market should be worth something as it was a 'privilege' bestowed upon the common man. And of course it killed all the small farmers, including us and all our neighbors, and is slowly killing the medium sized guys with ridiculous regulations.

It was a good idea, but marketing board bureaucrats destroyed it. It is one of the most impossible industries to enter into now. You need to write a $2 million dollar quota check just to have the privilege to milk 50 cows. Add in equipment, land, cows and barns and you are well on your way past $5 million.

 

[Stocker Steve]

How does quota "kill" Canadian dairymen ?

Sounds like dairymen have the choice - - where they can sell their quota at any time and take an early retirement? :banana:

 

[Aaron]

How does quota "kill" Canadian dairymen ?

Sounds like dairymen have the choice - - where they can sell their quota at any time and take an early retirement? :banana:

Small producers couldn't afford quota to expand.

New entrants need to build brand new barn. Can't use existing barn as barn code changes every year and retrofitting would kill you. If barn is less than 5 years old you are OK, but otherwise no go.

Existing producers can be told at any time that their barn is too old and ordered to build new or get out. That is what is eliminating a lot of the medium sized guys now.

 

[farmerjan]

As you said Aaron, the quota idea was a good one as it was conceived. Many US dairyman have wished for something of the similar idea to help save the smaller, "family farmer" local dairies. The thing that has really stuck in my craw the last couple of years, is that the milk companies keep crying surplus. Tell the farmers that if they don't cut back and not expand, that things will get worse. And it did. BUT..... and this is a big one. DFA sent out a letter describing the "extra payment" incentive that the farmers would get if they shipped a 1/2 tankerload of milk or a full tanker of milk. The numbers were something like 22,000 lbs or 48,000 lbs of milk. No dairy milking 50 to 100 cows would be able to make that and most have to be milking nearly 200 to hit the 22,000 lbs. It was something like a $.40 per 100 wt. "bonus" which was called something like a quantity incentive. And it was $.60 or $.80 per 100 wt for a 48,000 or full tanker load. SO does that not say that they want the dairy farmer to expand? And why should the smaller farmer not be able to get a better price for his milk? It has to do with the milk companies not wanting to make more stops and get all their milk in one or two stops. The small farmers are paying more for their hauling costs than the big farmer too. So no matter how the small farmer tried, if he tried to keep his production down as they "asked" to not flood the market, he was being penalized for not producing the QUANTITIES needed to get the "bonus" incentive for quantity. I had a couple of dairies that went from 150 to 200 cows just to get the extra bonus.
If a farmer is getting 16.50 / 100 wt of milk and he is shipping say 10,000 lbs. That is $1650. for a pickup. That is every other day. So say 15 shipments a month.That's $24,750 gross. Then they are paying in the neighborhood of 3,000 for hauling. That's $200 for each pickup. So now he is down to $21,750. Then there are coop fees and this fee and that, but for round figures let's say 21,000. Then he gets a bonus for butterfat % above 3.5, that adds maybe $200, and a bonus for low scc that adds another $300 so they are up to 21,500. The farmer pays for everything out of that check. Feed, fuel, electricity, hired labor, mortgage debt, fertilizer, you name it. There is not much left if anything for working 7 days a week.
Again, most love what they do, are not looking to get rich.
But if he was to get paid what the farmer shipping 22,000 lbs to get the quantity incentive price..... simply on the amount of milk he is shipping.... you would add another $600 a month to his check. If they paid what the "full tanker" guys were getting, then you are looking at $1200 a month. Yet because he ships less, because he has less cows, and is not trying to "get bigger " and flood the market... he is being penalized.
I have some past milk check stubs that shows the breakdown and for a dairy that was shipping about 16,000 a day , 32,000 every other day; and it was costing him about $4000 per month for shipping. See the inequities.....
Granted it is not quite that simplistic...... but that is the general idea. His "volume bonus" was .40/100 wt.

The whole thing is DFA was talking out both sides of it's mouth. Too much milk, but we will pay you more per 100 wt if you ship more to make a quantity discount. That is why so many smaller farmers were thinking that a quota system that wouldn't let you just keep getting bigger would be more fair. But the milk companies don't want to make more stops, they don't really want to support the small farmer now that they are established big companies.

I don't know the answer, but I do know that we keep concentrating these cows into bigger and bigger farms, and one of these days there is going so be some sort of massive disease outbreak, and we are going to be screwed. On top of that, they keep putting these mega dairies in more arid regions. They are pumping water out of the aquifers and these water sources are not being replenished fast enough. What happens when there is not enough water to just water these cows, let alone for washing and cleanup and such? And the massive amount of water that is used to produce crops in these more arid/dry areas. Yes, it makes for perfect alfalfa when you water it for maximum growth, and don't have to deal with rain and wet weather to try to get it made right like we do here in the east. But when is there not going to be enough water???

 

[farmerjan]

It is also like that with the poultry farms. If you have a poultry house, broilers or turkeys, about every 5-10 years they are wanting you to do upgrades. Say you decided to start a poultry house 10 years ago. They finance them and the average payoff is 15 years on what you get out of the birds. Not bad, in 15 years you are sitting comfortable, with the house paid off, and continued income from the birds has you in a good financial position. BUT, at about 10 years, they need you to do some upgrades, change the feeder system, or change the watering system. Then the ceilings need to be replaced by some material that seals the building better so the fans are more efficient pulling the air through them. Then they want to go to different sides/windows/curtains.....
Add to this now that they will usually only give you a guarantee of a 7 year contract. It goes like this. XYZ poultry co will help finance you to build a new poultry house. They prefer that you build 2 as it is more efficient for them to have 2 on a farm. So at about 750,000 each, you have 1.5 million invested. They guarantee you a 7 year contract so they will provide birds/chicks for 7 years. Since you are figuring that you can make the averages of weight with the feed conversions, then you are good to go and they will want to keep you. So you get it all built, you do good with the first 10 flocks. Broilers are there about 40-45 days. So with down time between birds to clean out and whatever you need to do, say you get a new flock every 2 months. So 6 flocks of broilers a year. Everything is going along well. Then into the end of your 2nd year you get a batch of chicks that just are not very healthy. It costs money for antibiotics.... they don't gain good, your feed to weight conversion is terrible. Okay, that's only one flock..... but then it happens again in another year. So your income isn't what you expected but it still isn't so bad.
Then at the end of the 7 years they decide not to renew your contract. You still have payments to make and no income to make them????? Or say they do renew and things get better. But at year 12 they want you to change the feeding system. That's another 10-20,000 upgrade. Sure, charge it to the company so you are indebted for more, or for longer.

By the time the houses are paid off, they are wanting some more changes. Expensive upgrades to meet new regulations. You either go into debt again, or just quit. So what do you do with these big buildings? and how do you make other farm payments with no income? For a dairyman it is even harder because you just can't stop milking the cows to make upgrades like you can do between flocks of chickens. And once you stop milking, the possibility of getting a milk contract again is next to none. And there is no looking for increased milk payments with an industry that is so determined to not take care of the people who provide them with the product. I hope the day comes that people actually get hungry because that is what it is going to take to make some of these idiots.....LIKE AOC.... realize that the grocery store is NOT where her food comes from.

 

[Stocker Steve]

We are near the mega dairy country. The local cheese plant is one of their customers. Rumors of new 10,000 cow dairy units in our county have been circulating. Rumors of the mega dairies buying into the cheese plant are also now circulating.

Organic was the family dairy answer a few years ago. Now you can not get on the truck. Folks that got in early are breeding Jersey, grazing hard, and doing OK, but they are fairly few in number.

I think a way to offset the margin squeeze (input prices increasing faster than selling prices) for conventional ag is buying in less and having biology do more. I have been getting a few ideas from old Green Acres reruns. I also got a "Mighty Mini Microbe's Tale" coloring book from NRCS and learned about the "soil's superheroes". ;-)

I love it when a plan comes together!

 

[Nesikep]

Well said to Aaron and FarmerJan

I think there's an end game plan to these low US milk prices.. when even large dairies are having a hard time of it, something has gotta change eventually
Maybe there will be a disease outbreak (wouldn't be that surprising with 10,000 cows in one place)... Or maybe once there are no more small farmers to squeeze out and their places have been bought up, suddenly, MIRACULOUSLY, there will be a milk shortage.... Store price for milk will be $4/gal instead of $.90, and SOMEONE will be raking in some serious money.

Look at what the supposed beef shortage of 2015 did for retail prices!.. I can say that around here, retail prices haven't come down much since despite calf prices being about 65% of what they were in 2015... My ugliest dink calf that year brought $1450 and he didn't make the 400 lb mark
The smart people got out of cows entirely in 2015, the not so smart ones sold some and upgraded equipment paying cash.. even less smart ones upgraded equipment on credit, and the really dumb ones bought cows/calves

 

[Aaron]

I also got a "Mighty Mini Microbe's Tale" coloring book from NRCS and learned about the "soil's superheroes". ;-)

Did you at least stay within the lines when you started coloring it in?

 

[Aaron]

The smart people got out of cows entirely in 2015, the not so smart ones sold some and upgraded equipment paying cash.. even less smart ones upgraded equipment on credit, and the really dumb ones bought cows/calves

I knew I was a halfwit, but now I am thinking I am borderline retarded.

 

[Nesikep]

The smart people got out of cows entirely in 2015, the not so smart ones sold some and upgraded equipment paying cash.. even less smart ones upgraded equipment on credit, and the really dumb ones bought cows/calves

I knew I was a halfwit, but now I am thinking I am borderline retarded.

I'm with you there... Just by dumb luck I'd kept a lot of cows that were on the cull list for a long time and wasn't taking any more of their BS that year.. I did buy a bull though

 

[Stocker Steve]

I am too creative for that.

 

[Dixie2542]

Well said to Aaron and FarmerJan

I think there's an end game plan to these low US milk prices.. when even large dairies are having a hard time of it, something has gotta change eventually
Maybe there will be a disease outbreak (wouldn't be that surprising with 10,000 cows in one place)... Or maybe once there are no more small farmers to squeeze out and their places have been bought up, suddenly, MIRACULOUSLY, there will be a milk shortage.... Store price for milk will be $4/gal instead of $.90, and SOMEONE will be raking in some serious money.

Look at what the supposed beef shortage of 2015 did for retail prices!.. I can say that around here, retail prices haven't come down much since despite calf prices being about 65% of what they were in 2015... My ugliest dink calf that year brought $1450 and he didn't make the 400 lb mark
The smart people got out of cows entirely in 2015, the not so smart ones sold some and upgraded equipment paying cash.. even less smart ones upgraded equipment on credit, and the really dumb ones bought cows/calves

Spoken spot on.....

 

[hurleyjd]

It is also like that with the poultry farms. If you have a poultry house, broilers or turkeys, about every 5-10 years they are wanting you to do upgrades. Say you decided to start a poultry house 10 years ago. They finance them and the average payoff is 15 years on what you get out of the birds. Not bad, in 15 years you are sitting comfortable, with the house paid off, and continued income from the birds has you in a good financial position. BUT, at about 10 years, they need you to do some upgrades, change the feeder system, or change the watering system. Then the ceilings need to be replaced by some material that seals the building better so the fans are more efficient pulling the air through them. Then they want to go to different sides/windows/curtains.....
Add to this now that they will usually only give you a guarantee of a 7 year contract. It goes like this. XYZ poultry co will help finance you to build a new poultry house. They prefer that you build 2 as it is more efficient for them to have 2 on a farm. So at about 750,000 each, you have 1.5 million invested. They guarantee you a 7 year contract so they will provide birds/chicks for 7 years. Since you are figuring that you can make the averages of weight with the feed conversions, then you are good to go and they will want to keep you. So you get it all built, you do good with the first 10 flocks. Broilers are there about 40-45 days. So with down time between birds to clean out and whatever you need to do, say you get a new flock every 2 months. So 6 flocks of broilers a year. Everything is going along well. Then into the end of your 2nd year you get a batch of chicks that just are not very healthy. It costs money for antibiotics.... they don't gain good, your feed to weight conversion is terrible. Okay, that's only one flock..... but then it happens again in another year. So your income isn't what you expected but it still isn't so bad.
Then at the end of the 7 years they decide not to renew your contract. You still have payments to make and no income to make them????? Or say they do renew and things get better. But at year 12 they want you to change the feeding system. That's another 10-20,000 upgrade. Sure, charge it to the company so you are indebted for more, or for longer.

By the time the houses are paid off, they are wanting some more changes. Expensive upgrades to meet new regulations. You either go into debt again, or just quit. So what do you do with these big buildings? and how do you make other farm payments with no income? For a dairyman it is even harder because you just can't stop milking the cows to make upgrades like you can do between flocks of chickens. And once you stop milking, the possibility of getting a milk contract again is next to none. And there is no looking for increased milk payments with an industry that is so determined to not take care of the people who provide them with the product. I hope the day comes that people actually get hungry because that is what it is going to take to make some of these idiots.....LIKE AOC.... realize that the grocery store is NOT where her food comes from.

Sulphur Springs Texas at one time considered itself as being in Hopkins county the centerpiece of the dairy industry in Texas. Two dairy sales each week with 1000 to 2500 each sale. Now it is down to 1 sale a month with about 150 cows a sale. A lot of the business's in Hopkins and surrounding counties are gone also now the large dairies are biting the dust. Back in the days there was a hay yard in Sulphur Springs with dealers bringing good quality from all over to sale if you got low on hay was just the matter of fact to go to the yard and pick a load and negotiate the price. AOC is not the problem big money every where is the problem and will be the downfall of America. India and Africa are planting millions of trees in a weeks time to change their climate and make it cleaner. Could be the green deal would have more for the small family farms than for the big corporate farms that can sway the government to allow them to pollute the air and the ground water and have some folks convinced that they are the answer and can sway the ever day country living folks to back them. I am not trying to sway anyones mind here but I see things different than some people in America. This is just an observation of what is happening in my little neck of the woods.