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Ex96
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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!
29/10/2008, 23:10 Link to this post PM via Email   PM via Forum
 
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Ex97
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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.
30/10/2008, 0:13 Link to this post PM via Email   PM via Forum
 
will maxwell Profile
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Ex96
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Re: United dairy farmers Dec Auction


I'm intrigued FOAF!!! C U L8R

Last edited by will maxwell, 30/10/2008, 10:39


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Farming is the oldest JOB in the world, too many people seem to have it confused with the oldest PROFESSION!
30/10/2008, 10:37 Link to this post PM via Email   PM via Forum
 
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EX90
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Re: United dairy farmers Dec Auction


So,how did last night go?
Am sure no-one got hot-tempered?? emoticon
31/10/2008, 9:23 Link to this post PM via Email   PM via Forum
 
will maxwell Profile
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Ex96
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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!
31/10/2008, 11:00 Link to this post PM via Email   PM via Forum
 
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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!!
 
2/11/2008, 21:38 Link to this post PM via Email   PM via Forum
 
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Ex97
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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.
3/11/2008, 0:22 Link to this post PM via Email   PM via Forum
 
will maxwell Profile
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Ex96
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Re: United dairy farmers Dec Auction


quote:

campbeltowncowboy wrote:
 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 ?



I'm afraid I'm not entirely sure who these mysterious persons of questionable parentage (as I've come to refer to them as in recent days!) are, perhaps someone else can offer some suggestions.

Presumably the main ones are the beloved supermarkets!

As to why milk is worth 18p this year and 32p last year, apart from the "Gloal economic slowdown" among various other contributory factors..... you've got me stumped!!

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Farming is the oldest JOB in the world, too many people seem to have it confused with the oldest PROFESSION!
3/11/2008, 14:22 Link to this post PM via Email   PM via Forum
 
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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.



3/11/2008, 20:51 Link to this post PM via Email   PM via Forum
 
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Ex96
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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 [sign in to see URL]% 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!
4/11/2008, 14:15 Link to this post PM via Email   PM via Forum
 


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