21 March 1997

Back to back OK

INTERVENTION Board milk quota managers have given the thumbs-up to "back to back" transfers, even though they prefer to call them something else.

The move follows an argument between quota agents over the validity of deals where two producers exchange used and unused quota, with the recipient of the clean quota paying a premium.

Writing in this months Dairy Farmer, broker Ian Potter refers to "those nasty back to back transfers" which are "completely against the regulations".

But in a letter to agents, IB quota manager Hillary Carruthers says: "Every application we receive to permanently transfer milk quota is treated as a separate movement and must satisfy the regulatory requirements.

"If, for example, two applications are received, one to transfer say 100,000 litres from producer A to producer B, and one to transfer 100,000 litres from producer B to producer A, then, before action is taken to amend the register, we will check that both transfers are valid in isolation from each other."

Confusion appears to exist when the transfers are made via lease of land. But the IB says that, provided each transfer is supported by valid agreements covering separate amounts of quota attached to different areas of land, then the deal can go ahead.

Welcoming the comment, agent Hugh Townsend said: "Back to back transfers accommodate the needs of the industry by extending the leasing season."

But Mr Potter remains sceptical. "Twice in the past the Intervention Board has changed its mind, first on the issue of butterfats when converting direct sale to wholesale quota, and more recently on the rounding of butterfats to two decimal places."

He also warns of pitfalls in back to back deals. For example, given that there is a capital transfer involved, the deal may not be tax deductable.