13 December 1996

IB data could tempt milk producers into over-quota gamble

By Philip Clarke

WITH the end of the milk quota leasing period in sight, producers thinking of going over their individual allocations face a dilemma; gambling on there being no super-levy or lease-in to cover extra production.

Latest figures from the Intervention Board may tempt more to take the gamble. These confirmed the continuing fall in November production, with daily output ending the month at 32.4m litres – about 1m litres down on two months ago and 3.6m litres less than the same time last year.

Cumulatively, the UK is now 70m litres (0.74%) below quota, compared with 38m litres (0.45%) below at the end of October. But there are signs the slump has bottomed out, with the last week of November showing the first weekly rise for two months. Butterfats are also at a record high (4.2%), boosting adjusted deliveries.

Opinion is split on whether output can recover enough between now and the end of the milk year to hit quota. Cattle auctioneer John Thornton of Kivells, Holsworthy, believes it will. Despite an apparent shortage of dairy replacements for those culled under the over 30-month scheme, experience has shown producers are adept at adjusting winter production.

But John Elliot of ADAS is not so sure. The BSE-related cull has taken substantial numbers of out of the dairy herd, though how many will not become clear until December census results are known. And getting cows that have had the brakes applied back up to speed will not be so easy.

Other observers point to the fact cows are not milking well since housing, due in part to questions about forage quality. And there is still the possibility of a selective cull for BSE cohorts in the New Year.

"The recovery will have to be pretty dramatic to get us back to quota," said Mr Elliot. "Quota prices will have to fall sub- stantially to give producers the incentive to push production."

Latest Intervention Board figures have put some pressure on quota values, though not much. Three weeks ago, Swindon-based Lovedays was leasing at 15p to 16p for 4% butterfat lots as "large litre hunters" looked to cover themselves. An auction by the firm near Penrith on Tuesday (Dec 10) saw the average price back to 13.6p, with three-quarters of the 1.1m litres finding a market. "The unsold lots were due to unrealistic reserves," said Lovedays George Paton.

lSuper-levy is currently estimated at 29.71p/litre, compared with 31.42p/litre last year. With another green £ revaluation still on the cards for Jan 21, that could fall another 1p. &#42