Factory Prices General thread

Discussion in 'Stock Talk' started by nashmach, Jul 14, 2016.

  1. muckymanor

    muckymanor Well-Known Member

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    To be honest, if an ordinary Joe soap stumbled on this thread they would look at what you and I posted and say look at mucky and him making a fortune from his 20 suckler cows. He's ripping barrowsiderand his fellow finishers off, charging extortionate prices for cattle and is the root and cause of barrowsides farm being loss making.

    To be fair, I'd like to point out that if you feel that what I posted in previous posts is dismissive of the people buying my cattle then I feel that what you posted is dismissive of the people who breed and produce the cattle that you buy and feed in anticipation of meeting your expenses.

    You have other options and you can choose not to buy at all. The man who breeds them doesn't have as many options - only when to sell.

    Not having someone to buy weanlings could be a good thing for farmers selling in your area. It could encourage farmers to change their system as it has done in this area. Some have changed as we have to keeping cattle that we breed for longer. Some have gone info rearing dairy replacements. Other have gone into calf to store systems. As I said, selling weanlings has proven to be loss making for many in this area. Again, no offence to anyone, but suckler farmers had to sell at a loss for much of the time so that the next man could make a profit from it. That ship had to run aground at some stage as it isn't or wasn't (in our case) sustainable and just eroded sfp.
     
    Last edited: Sep 8, 2020
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  2. Barrowsider

    Barrowsider Well-Known Member

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    All four are new dairy entrants this year and have their sheds converted to cubicles/cow housing so they won't be buying.
     
  3. Mf240

    Mf240 Well-Known Member

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    Well that's fair enough they wont be buying so. Its unreal the amount of lads changing over to dairying
     
  4. Barrowsider

    Barrowsider Well-Known Member

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    We are in the thick of it here. 7 new entrants this year in a 5 mile radius. 3 more next year and it won't stop there.
     
  5. Arthur

    Arthur Well-Known Member

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    You cant just dump your cattle numbers at year end, probably the main reason most stay in drystock.
     
  6. Ozzy Scott

    Ozzy Scott Well-Known Member

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    why cant you? if the stock values are accurately recorded up to now, it makes no odds if its cash in the bank, or stock in hand. I have always used accurate stock values at year end, it allows me keep zero stock on 31 of Dec and wouldnt make any difference to my taxable income or loss .
     
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  7. Arthur

    Arthur Well-Known Member

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    I must have it wrong so, I thought you would be taxed on the value of disposed stock as sales.
     
  8. Ozzy Scott

    Ozzy Scott Well-Known Member

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    Well if I have in total 50, 2yr old bullocks valued at 1200 on the books last year on 31 of Dec last year, and this year I decide to sell them and on average they come into 1240. I will be taxed on the 40 above book value they made. So in relation to stock I will be taxed on the 2000.

    Similarly if they only made 1150, now I would have overvalued them, and I would be taxed on minus 2500 in relation to the stock side of the calculations.

    Of course all other costs have to be taken into account. But if you have 50 Bullock values at 1200, it's the same as having 60,000 sitting in a bank account for tax reasons



    I probably have explained it in the most confusing manner possible
     
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  9. gone

    gone Well-Known Member

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    There was an accounting practice to record stock values at between 60% and 75% of their value, this allowed expanding farms not to have to fund all extra stock out of after tax money and meant you only paid the tax on those animals when you had sold them, and not while you were very strapped for cash while trying to hold or build up numbers.
    "Stock relief" muddied the waters, it meant you were better of using 100% figure, but would have a very big bill if you destocked too soon.
     
  10. diesel power

    diesel power Well-Known Member

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    That's what I thought as well. You sell let's say 60k worth of cattle and don't replace them your taxed to the hilt on them.
     
  11. WestCorkBoy

    WestCorkBoy Well-Known Member

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    Depends on how the stock is valued in your accounts. If the values are close you've no problem. Look at last year's accounts and see what the closing stock was valued at.you might not be under as much pressure as you think to restock and with borris in charge that might be no bad thing.
     
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  12. Ozzy Scott

    Ozzy Scott Well-Known Member

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    Your taxed to the hilt if you have your animals values at say 700 in the accounts and then you sell them for 1200.

    It means you under valued them by 500 in your account down through the years to avoid paying tax
     
  13. Nashty

    Nashty Well-Known Member

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    I find this hugely interesting Mucky, as in our area I would say that most suckler to beef men and suckler to store guys have actually done the opposite and started to sell as weanlings. That trend is unlikely to change from what I can see from them and the prices they are getting for their weanlings. In your area, you are saying that the opposite is happening. I suppose if the concrete and sheds are there to winter them and sell as stores then it is a definite option and in your case, sounds like you are making more money doing this but that wouldn't be the case for everyone I guess.
     
  14. 6600

    6600 Well-Known Member

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    60% of market value at year end for immature stock and 100% for breeding stock. If you overvalued them they won't complain and it's a useful thing to be able to drop the values in a good year.
    Stock relief allows you to claim 25% of an increase in stock values as a deduction. This means that 75% of the increase adds to the bottom line. For young farmers (under 35) they can claim a 100% for increases in the first 5 years and 50% for partnerships.
    The relief can't be clawed back but cannot increase a loss. There is a limit on how much can be claimed under state aid rules but this is not restrictive on a normal sized farm.
    Growing crops and stocks of harvesyed feed/crops can be included in stock values but at the lower of cost and realisable value.
     
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  15. Ozzy Scott

    Ozzy Scott Well-Known Member

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    I also always include the feedstock in the yard at the end of the year at it's full cost value. You wouldnt have a big pit of silage and it would be worth 25k
     
  16. muckymanor

    muckymanor Well-Known Member

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    It would be very misleading for me to say that we are making more money from cattle. I can confirm that I am spending less of my SFP to keep cattle. In fact, last year I didn't spend any of it and did make a small bit to boot. Around here, that's quite an achievement in itself. I don't know if you are involved in any discussion group? We have a fairly tight knit one and there are still some people in it who are long established suckler breeders who have literally made no money on their farm for the last 4 or 5 years. I'm talking about lads that would have good solid farm payments of €10k to €15k and spend it every year to keep their farm in operation. Some people in the group have opened up about it at some of the meetings. They are literally farming for the sake of farming, turning over stock and making nothing while they rely on a spouse who is working off farm to pay the bills and put food on the table.

    The general run of it is that if you were keeping 20 suckler cows on 60 acres around here. If you were lucky and had 20 live calves. Selling weanlings in autumn you might have 20% or 5 weanlings that will sell for €2.80 to €3 per kg. You'll probably end up with an overall average sale price of under €775 (and that's being generous) for the 20 of them for the year. Your cow could have cost you €600 to keep for the year depending on the weather, but €600 is a reasonable cost for that kind of scale. So you have 20 animals with €175 profit = €3500. There is a good bit of work to keeping 20 cows. You could also calculate this figure by saying that you got €1000 for 5 giving €2000 profit and an average of €700 for the other 15 giving €100 each in profit or €1500. Total Profit = €3500

    So what people do is cut down. Say from 20 to 15. They sell the 3 or 4 that are worth €2.80 to €3 per kg and keep the 10 to 12 or so cattle on to 18 months of age. You'll keep 2 store cattle like these where you'll keep a cow and a calf and the amount of labour needed to keep them is a fraction of what it takes to keep a cow. If you are breeding reasonable CH or LM cattle and get them to 550kg, it is quite possible, even at the worst of times, to get them to €1200. What's your cost for keeping a store from the age of 9 months to 18 months? I know mine. If we estimate that its €300 (I'm not saying that it is, but I have to put some figure down for to do the calculation). Then:

    Sale price = €1200
    Cost = €600 + €300
    Profit = €300.

    So lets say I sold 4 for €1000 each and had €400 in profit on each or €1600 in total.
    And then I had 11 that were leaving €300 each or €3300.

    Total is €4900 compared to €3500. A reduced workload by having less cows to calve. Reduced mortality by having less at risk calves.

    (Please don't question my costings. I just gave them as an example. I know my own figures but I don't want to post them here. I simply can't know other people's costings. I think this is an accurate reflection of why we aren't selling weanlings)

    If you sit at a weanling sale and record the prices of 100 animals that go through the ring and then take the average, it will be no surprise as to why so many suckler farmers are making nothing.
     
    Last edited: Sep 9, 2020
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  17. Ozzy Scott

    Ozzy Scott Well-Known Member

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    Of hand i could think of lads that would be cumulative finished 10k cattle pa, gone from the business in last 12 months, Be they drastically reducing their business, gone milking or gone broke. Factories themselves seem keen to pick up the slack :rolleyes2:
     
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  18. Nashty

    Nashty Well-Known Member

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    Excellent explanation, and I wouldn't be for questioning the costings at all at all, we would be one of the few in our area keeping on our own cattle so I have a fair idea of our costings from year to year. No discussion group locally other than the dairy lads really, and even that would be weaker than other groups in other counties. I would be fairly certain in your area and all areas for that matter that there are some lads whose costs to keep the suckler cow are well in excess of 600 euro per year so your point is well made.

    The Farmers Journal article outlining the costs of keeping the suckler cow last year brought about a lot of debate locally and while they don't get everything right, it was worthwhile in that it got lads to think about what they were doing. Lads going around killing themselves, renting bits of meadows to make silage, way overstocked in general , for the privilege of losing money with their extra cows.
     
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  19. muckymanor

    muckymanor Well-Known Member

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    I didn't mean to sound like a smart bastard these last few days. I do apologise to anyone if I did especially @Barrowsider . But I do feel that we are going around in circles and not even noticing that we are moving backwards. I can't have a business plan where I can expect someone to buy my cattle at a price which causes me to make nothing or even a loss and I can't reasonably expect the person buying me paying me an amount which results in them making a loss. I'm well aware of where the problem is and it rests with neither me nor the person that used to buy my weanlings.

    I'm desensitized to the message that big lads aren't buying weanlings anymore. I'm seeing what's going on on the other side from the ground. Marts full of cull suckler cows.

    And the honest opinion is that there isn't room for everyone so some people have to get out or change their system. Its the same old cliche about continuing to do what we always did and expecting different results. It's great that lads have an option of going into dairy or a related enterprise. Sadly here that really isn't an option. So the choice is to adapt what we do and how we do it. Work smarter, not harder. The other choice around here is forestry.

    I mean I could be farming 500 acres if I wanted to. I know of 3 different large farms within a short distance of me that could be leased. But I feel that I have more than I can handle and it would be wiser to streamline what I'm doing and get more from what I have rather than trying to do take on more. I'm well able to do the physical work but to get anything out of it I need to get better at using my head.
     
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  20. Barrowsider

    Barrowsider Well-Known Member

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    No hassle Mucky, I do enjoy a lively debate and it's good to hear different viewpoints on a very important topic.
    I suppose everyone focuses on what they see in their locality. Lots of 'big' farmers around here finishing hundreds of cattle per year, employing staff and spending hundreds of thousands of euro per year in the local economy and they're not making a bob often after what might be considered a substantial SFP. Their business is providing so much for so many but they won't stay doing it for no return. They are currently voting with their feet and for the sake of all beef farmers I hope the exodus stops soon.
    Ultimately all beef farmers need to make a margin from their enterprise for the trade to work. Beef finishers need suckler and store farmers to be profitable. And vice versa. Continued success with your beef enterprise.
     
  21. WestCorkBoy

    WestCorkBoy Well-Known Member

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    This is the first year I have heard lads down here saying openly they will not buy cattle unless they can see a margin. It's mad that that isn't the default position. The roasting they took last Autumn, winter and spring and shrinking sfp are both biting I think.
     
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  22. Ozzy Scott

    Ozzy Scott Well-Known Member

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    Just doing something else and I was looking at the beef price from 2010. Average steer price for the year was €3.15. I assume that would include every bullocks irrespective of age or QA back then. Will we reach €3.70 for "inspec cattle" of an average this year.
     
  23. muckymanor

    muckymanor Well-Known Member

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    I'd say that we are seeing a lot more O and P grade cattle going through the system now compared to 2010 and far less U and R Grade. It can only bring the average one way.
     
  24. Mf240

    Mf240 Well-Known Member

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    3.60 seems to be it around here atm. No pressure on lads for grass or anything.
     
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  25. Arthur

    Arthur Well-Known Member

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    30 months is the only thing putting on pressure to sell.
     
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