16 March 2001

Compensation proposal stirs fresh leased quota market

By Robert Harris

PROPOSALS by MAFF to pay £78m in agrimoney compensation to dairy producers to ease the effects of the foot-and-mouth crisis have triggered a wave of fresh leased quota deals.

Compensation will be based on the amount of milk quota held on Mar 31 2001, which will be worth about 0.45p/litre, and quota held at Mar 30 2000 (about 0.05p/litre).

Renewed interest in leasing and the withholding of quota by some non-producers to secure agrimoney funds has stirred the market.

"We had got to the point where we were leasing quota for nothing," says Caroline Carr of Ian Potter Associates. "Leased quota (4% butterfat equivalent) is now worth 0.2p/litre."

Enquiries for forward leasing are also starting to pick up after a quiet spell last week. Prices have firmed at 2.4-2.6p/litre for 4% butterfat.

"Unless the foot-and-mouth crisis escalates dramatically, forward leasing is as low as its going to get," says Peter Weston Davies of the Farm Consultancy Group. "With monthly production figures increasing this will only put upward pressure on the quota market."

Milk production during Feb-ruary was above profile for only the second time this milk year, according to latest provisional figures released by the Intervention Board.

Last month producers delivered 1.07bn butterfat-adjusted litres, just 1m litres above profile. &#42