It is a no wonder that Dairymen think quota is a great investment, when you have Western United Quota Dairyman put a quota calculator in their quota section. It is this kind of lack of truth that got us in this problem of quota in the first place. How can you have a quota Calculator without the $.38 assessment in the calculation? Using their Calculator only gives you a half of the equation.
A friend of mine thought he was getting such a deal buying quota at these cheap prices. If he purchased 12,000 lbs. at $250 a lb. this dairymen milks 15,000 cows at 72 lbs at $.38 .cwt is ($ 125,172) a month is the QIP payment.
The total is $3,000,000
Quota Return $59,854.15 a month or a return of $718,171 a year.
Loan Cost ($ 30,373.54) a month or a return of ($ 364,482) a year. 10 year at 4%
Quota return $7,182,480
Loan cost ($3,644,760)QIP Payment ($15,020,640)
Net Investment ($11,482,920) loss
WUD tells you that you got $718,248 on a $3,000,000 investment for a return of 23.94% In reality you have a negative 60% when you factor in the QIP Charge. This gentleman is a Save QIP dairymen and instead he should be leading the charge to terminate quota.
Plug in a 300 Cow dairy at 72 lbs., buying just 100 lbs. of quota at $250 a lb. At the end of the ten years, he loses ($270,932) Such a deal. Plug in your own numbers and see if quota is such a good deal.
If you have over 70% quota, it is an excellent deal if you don’t mind screwing your neighbor to get it. Remember only 14% of the milk can be covered by quota, so most likely you will never get up the 70% needed to have such a deal.
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