Author Topic: What affects production prices in the current climate?  (Read 861 times)

Offline FiBob

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What affects production prices in the current climate?
« on: December 05, 2012, 04:53:55 AM »
Hi there,

I'm looking for some inside information for a short report I've got to write. Not at a retail level, but a processing level, what affects the end costs of items like cheese and butter? What is affecting your production costs? I'm looking at recent events primarily - I've got a lot of background issues.
Also, something I'm not understanding (and not really related with the report) is how does the price of cheese affect milk prices?? Would that not be the other way round?

Thanks,

FiBob


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Offline Sailor Con Queso

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Re: What affects production prices in the current climate?
« Reply #1 on: December 05, 2012, 08:29:06 AM »
Biggest issue effecting production prices was/is last Summer's drought. With Winter coming on, hay and feed prices have gone through the roof. Milk prices in the discount grocery stores went up by almost $1/gallon yesterday. That's over a 33% increase in just one day.
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Offline linuxboy

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Re: What affects production prices in the current climate?
« Reply #2 on: December 05, 2012, 10:03:51 AM »
It's the classic business scenario... Cheese has a COGS + margin, same as any other product. Part of that COGS is the raw materials cost, which is variable. The raw material is primarily milk. On the milk side, our COGS include feed, housing, energy, etc. But as Sailor said, the biggest is feed. Feed costs are very high, and that variable cost passes through to the final end product.

There's also the subsidy issue and market pricing of milk, but that's a whole other story. Short version is that dairy people at times are forced to sell below COGS because pricing is fixed.
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Offline Sailor Con Queso

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Re: What affects production prices in the current climate?
« Reply #3 on: December 05, 2012, 10:24:52 AM »
The hay situation is so bad that theft of hay bales is soaring all over the country. When hay is valuable enough to steal, food is not far behind. Beef prices will be next, but I predict that there will be substantial increases in all food prices over the next few months. Sure am glad I have a big garden. I'm doing hydroponic lettuce and Chinese cabbage in my hoop house right now so at least I can eat salads all Winter. ;)
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Offline bbracken677

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Re: What affects production prices in the current climate?
« Reply #4 on: December 05, 2012, 10:36:35 AM »
Yeah...my local milk supplier just recently went up from 8 to $10/gallon for raw milk...when I asked why he mentioned the higher price of feed. Not much grass to feed on during the winter months....


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