27 June 1997

Farmers pay less to lease milk quota

By Tim Relf

MILK quota leasing prices are under pressure, with values slipping to about 10.5p/litre early this week.

In Cheshire, Frank R Marshalls auction on Monday saw an average price of 10.23p/litre.

The firms James Holdroyd says values have fallen compared with earlier in the season, when a flush of milk production generated a lot of demand. "Perhaps we set off the block a bit too sharply.

"Farmers are also conscious of falling milk prices and may be getting less for barren cows and calves." Such sentiments contributed to the clearance rate of only about 50% at the offering.

The range in prices – from 9.4p to 12p/litre – was larger than in the past, reflecting new rules banning manipulation of producers butterfat bases by multiple lotting, says Mr Holdroyd.

And prices, he suggests, could now slip further.

Justin Lowe of R B Taylor and Sons agrees, describing the auction last Friday (Jun 20) as "difficult". Clearance rate was about 35%.

Some lessors have adjusted their expectations in line with falling milk prices, but some continue to expect too much, he says.

"Farmers have plenty of other invoices coming in at this time of year and may have been cautious as a result of smaller milk cheques.

"While there may be a rush in September, leasing values could slip to between 9.5p and 10p/litre in the meantime. A lot of quota has come on to the market recently."

Impact on demand for quota

But the selective cull is having little or no impact on demand for quota, says Mr Lowe. Neither is restructuring of the dairy industry. "For every one person leaving dairying, theres another one expanding."

Other auctions on Monday saw Howkins and Harrison return an average price of 10.5p/litre at Rugby, while Symonds and Sampsons offering at Sturminster Newton levelled 11p/litre.

Symonds and Sampsons Lester Williams says a complete clearance of the 1.03m litres on offer was achieved.

Prices were, however, about 3p/litre below those seen at the auction a year earlier, reflecting the drop in milk price.