7 ms·

The title of the article states that milk producers are "going bankrupt," but then cites the rising costs of raw milk, which seems like a good thing for a milk

• koboll 7y ago
  If you can't discharge student loans in bankruptcy, you damn well shouldn't be able to discharge pensions you've promised your employees for decades.
  • specialist 7y ago
    Pensions are just deferred compensation, part of the total benefits package (salary, health insurance, etc). They're not entitlements, giveaways, lottery tickets, whatever. Maybe the most insidious side effect of transition to 401k was tricking people without pensions that somehow pensioners are unfairly compensated.
    • KKRCo 7y ago
      Would you be willing to elaborate more on this comment?
    • gimmeThaBeet 7y ago
      I disagree with a lot of that. Defined benefit plans make all the sense in the world sort of empirically or like maybe narratively(?), but the problem is that risk isn't handled equitably. 'Unfair' feels like it has more connotations than my liking, but the main source of that feeling imo is that pensions have frequently made implied rates of return that had little to no chance of realization. It's easy to thumb your nose and say "well that's the company's problem", but what it does illustrate in a more general sense is that counterparty risk is very real, especially in underfunded pensions. While pension plans have a large amount of money saved, the reality of the situation is that part of a pensions mechanics look like a claim on a company's future earnings. That's what grinds my gears about pensions, there's a lot more risk than people think, and it's foolhardy to assume the employer assumes all the risk in theory or practice. The best thing about the transition to 401ks imo was that it made it abundantly clear that there is a large amount of risk in funding retirement. The downside is yes, companies made it clear they were no longer willing to assume any of that risk themselves.
      • specialist 7y ago
        You disagree with honoring commitments? Pensioners should accept the looting or chronic under funding because something something balance sheets?
  • asdf21 7y ago
    Humans still exist and live on after bankruptcy.. companies are dissolved.
  • gruez 7y ago
    How would this work? If the company goes bankrupt and sold all its assets, who will you take the money from?
    • ilikehurdles 7y ago
      The same people you get your 401k matching money from when a company goes bankrupt and sells its assets. The money assigned to pensions, like the money assigned to 401ks, should not be something the company can ever take money out of or under-fund.
    • hamstercat 7y ago
      The money is supposed to be invested in part by the employee and the employer at the time of payroll. This money is then moved to a fund, impossible to be touched by the company forever and ever. The fund invests the money, it grows, and then you can get an income in retirement after many years. The same could be done by the employee itself by just saving part of his paycheck and investing in a mutual fund, but most people don't have the discipline to do that so a defined-benefit pension protect the employee from itself. That's how it works in other countries like Canada. It's relatively easy and failsafe if well implemented, I really don't understand how it can be legal for a company to access the fund like in the story. It's a shame so many of them are so badly managed/corrupted though. As usual, most stories about pension failing are about gross mismanagement (not paying into the plan as required) or corruption (drawing into the plan innapropriatly).
      • bregma 7y ago
        So, what happened at Nortel?
        • hamstercat 7y ago
          Unfortunately I don't know enough about it to offer an opinion on this specific case. I only know it will pay only part of the promised benefits. But from other pension plans I've seen, this happens because the plan is undercapitalized. This usually happens because of: a) missing employer contribution to the fund on every paycheck b) mismanagement of the fund The second point can be very varied and only limited by imagination, from embezzlement to government action. I've seen laws passed in the past passed about being able to take a loan on certain public pension funds without interest, which shows the complete lack of understanding about how these pensions are supposed to work and the actuarial math behind it.
  • refurb 7y ago
    Companies need to pay government insurance on their pension and if they go bankrupt, the insurance pays out a capped amount (~$60K per year) on behalf of the fund.
• roenxi 7y ago
  Prices might well be rising because producers are going bankrupt. One of the signs of a healthy markets is low profits & low costs although of course 'low' is all relative. But yeah, probably trying to get out of pension liabilities.
• mcv 7y ago
  I keep reading weird stuff from the US about employee pension obligations being a burden on companies, and those savings getting eaten or stolen in all sorts of corporate shenanigans. Are these things really not handled by life insurance companies and subject to all sorts of regulation? That sounds woefully irresponsible.
  • ldoughty 7y ago
    Most of the time it's seen by management as an expense with no positive business value (they pay out to people that are no longer useful to the company)... Therefore it's a major target for elimination if possible. Bankruptcy is a great way to do this. If you remember that the "best" leaders from a stock investor (or greedy owner) perspective are psychopaths (lack empathy), and these people actually look really great on paper (lower costs, no/little immediate impact on profits), it's not surprising.
    • mcv 7y ago
      That's exactly why it shouldn't even be on the company's budget. They should pay for it to an insurance company while the employee works there, and once the employee doesn't, the insurance takes care of it. Take the employer out of the equation once they're no longer relevant.
      • asdf21 7y ago
        >Take the employer out of the equation once they're no longer relevant. Not exactly, if the company is willing to go so far as bankruptcy / reincorporation... how will any previous contracts with whatever insurance company last through that?
        • Retric 7y ago
          The idea is an employee’s pension must be fully funded before they leave and then handled by a 3rd party. At that point the company could dissolve without impacting retired workers.
• bluGill 7y ago
  Rising cost of milk isn't everything. The cost of production is important. I once met a farmer with ~3000 cows - in 2014 he was selling milk for $25 (hundred weight I think is the unit) and losing $100,000 a month, when I met him a couple years latter he was selling mild for $17 and making money hand over fist. The difference is in 2014 corn was $7/bushel, and it dropped to $4, and other such input costs.
• nkrisc 7y ago
  Presumably they meant producers of the commercial product that ends up in stores, but it certainly is confusing. I thought the same thing as well.
• ryanmercer 7y ago
  One of the issues is that Walmart opened a new dairy plant here in Indiana which considerably increased milk processing capabilities for the region, as a result companies like Dean Foods had to turn around and cancel contracts with farmers in Indiana, Ohio, Pennsylvania, New York, Kentucky, Tennessee, North Carolina and South Carolina. That allowed Walmart to gobble up the best of those farms (30 something farms between Indiana and Michigan), for cheaper. Given that they're processing, bottling, and distributing it to their own stores let's them sell it cheaper too, which then makes companies like Dean Foods lost contracts and now suddenly have pretty stiff competition. Walmart didn't replace all of those contracts Dean cancelled (and I imagine other processors/distributors too) which really hurts the small guys that have 50, 100, 200 cows. Keep in mind a cow is only good for 6-7 gallons a day, so these smaller farms just aren't worth it for a massive company like Walmart. Within 2 hours or so of the plant they're servicing close to a thousand stores (if not more once you include the grocery-only ones) so those smaller farms basically end up screwed with no one to sell that milk to. It's not like you can just go "ok we'll let's butcher some of those cows and make some money while we figure something else out" either because, dairy cows are generally older and only good for ground beef and really cheap cuts. Even with a beef cow you're only going to get $700 or so. At 25lbs~ of dry weight food a day per cow, you might get a little over a year of hay for one dairy cow sold for ground beef - basically those contracts getting cancelled just kill the small dairy farmers.