10 September 1999

Dairy prices hit by dual pressures

By Simon Wragg

DAIRY cow prices are back under pressure as the numbers offered for sale increase and producers face a further cut in the milk price.

At Lancaster, auctioneer John Hughes says the market is in the throes of a "contraction". Best quality commercial pedigree heifers are pulling back rapidly from £900-1000 to £750-800 a head, he says.

And that pressure will remain. Adding to the threat of another milk price cut, it looks like being another grassy month which may encourage production. "Its looking like being a reasonably long grass year," says Mr Hughes. "That will add pressure as production increases and some producers may have to invest in quota."

In the "cows or quota" situation, active buyers will stick to investing in heifers or cows that can give immediate payback, says Andrew Wallace of Wright-Manley. "However, that said, buyers should remember some spring calvers which are in-calf could be good value at £350-450 compared with early-lactation, first-quality types at £600-750."

But no buyer can afford to get carried away, warns Nick Hansen of Bagshaws, Uttoxeter. "Theres a good solid trade around £560 for commercial cattle, but talk of a cut in the milk price of 1ppl means theres no grounds for the trade to improve from where we are now."

As the seasonal increase in numbers offered for sale continues, producers remain spoilt for choice, both at the ringside and at on-farm dispersals which continue to fill auctioneers diaries.

Another factor holding up the dairy cattle price is a cull value of almost £300 a head. Auctioneers say many vendors are stipulating this as their reserve. Any cut in the OTMS rate will undoubtedly add more weight to bring down dairy values further.

In these circumstances, trade is selective and cautious. "Some will buy only fresh-calved types from on-farm sales as they see a genuine reason for their sale," says Mr Hansen, "but there can be unfounded doubt over those in the market."

Mr Hughes adds: "Ive seen an in-calf cow trade at a £50 discount because there was a small doubt over whether it was in-calf to a dairy or beef sire. It is a very selective trade."

Although the removal of the calf scheme may increase the use of beef sires, says Mr Hughes, a longer-term view should include careful consideration of using black and white sires on the best heifers and young cows.

"More producers are turning away from rearing their own replacements and we could see a shortage in a year or two. If I were a gambling man, my best sorts would be back to a dairy sire straight away." &#42