15 August 1997

Bluffing game over milk quota prices

A STAND-OFF has developed in the milk quota leasing market, as both sides look for signs suggesting prices will move in their favour.

Those looking to lease out point to latest milk production figures, showing butterfat adjusted deliveries in July at 1.187bn litres. This takes the UK to a cumulative 183m litres, or 3.75%, over profile.

Lessees, meanwhile, will tell you that milk prices are on the slide and some farmers could see a drop of nearly 5p/litre this year.

Meanwhile deals are being done at between 9.5p and 10p/litre for typical butterfat samples.

"Its a bluffing game," says Andrew Ranson of Clayson Haselwood. "But lessees hopes that prices could come down might be a bit more than just wishful thinking this year."

Milk is worth less and lessors are not so confident that values will rise at the end of the year, says Mr Ranson.

He attributes the output figures to bumper yields in April, when farmers "hit the new milk year running", and output was nearly 90m litres over profile. Not yet half way through the milk year, such figures are "fairly immaterial".

Plus, more people are buying quota, confident of the present regimes lifespan, reducing demand for leasing.

Intervention Board figures show by the end of July, the volume accounted for by sales was 145m litres, nearly 60% higher than at the same time last year. (The amount leased was 10% less.)

Tony Carver of Bruton Knowles National Quota Exchange says plentiful sales reflect the exit of farmers from the industry, looking to cash in on retirement relief.

"Producers have been encouraged to buy because prices have fallen below the psychological 50p/litre level."

Cat-and-mouse game

James Holdroyd of Frank R Marshall says the leasing market resembles a "cat-and-mouse game".

Some farmers are, however, taking part cover. "That way they are buying a level playing field and can gear their business around what they have paid. The 10p/litre then becomes a fixed cost."

&#8226 Thresholds, the amount by which farmers can exceed their quota before paying super-levy, will rise.

Milk Marque is telling members this week that the figure for the 1996/97 milk year is 2.2%, more than double that of the previous period.

Nestlé are announcing a doubling of thresholds to 1%. MD Foods are suggesting around 5%, compared with 1% in 1995/96. And for farmers supplying Midlands Co-op, the figure is expected to be more than 5%.

Super-levy will be charged at 27.24p/litre for wholesale deliveries.n