21 March 1997

Examine leased quota efficiency

A LOWER milk price will mean producers must take a hard look at how efficiently litres are being produced from leased quota.

According to Wilts-based Max Sealy of the Farm Consultancy Group there may not be a big fall in the leasing price because there is little quota on the market.

"And it will take 18 months before input costs come down to compensate for the lower milk prices, although there are signs of soya prices weakening," he says.

"Some producers are in a position to tighten their belts until costs start to come down and milk price increases a little again. But those not making sufficient profits now to cover private drawings must consider getting out of milk production."

He predicts there will be opportunities for share and contract farming and partnership agreements, with some small farms joining together to get both herds of cows on one unit to improve efficiency. Small family farms will find opportunities to expand in this way, he says.

"Many dairy units have invested heavily over the past few years and this has helped improve efficiency. But these businesses may have to consider spreading borrowing over a longer period to ease the cash cost on the business."

An alternative to spreading the borrowing would be to sell surplus land while prices are good.

Those units which have not invested to improve welfare and milk hygiene standards or which have under 100 cows and high borrowings that are holding back expansion should consider the current value of their quota and land and the possibility of selling up.