15 January 1999

IB figures show UK milk output on the rise again

ByRobert Harris

MILK output is rising again across the UK after Novembers slump, according to latest Intervention Board figures.

Provisional butterfat adjusted deliveries for December reached 1.154bn litres, 106m litres ahead of November and topping quota by 2m litres (0.17%).

Production is, therefore, rising faster than the quota profile. But the cumulative deficit for the year is still almost 40m litres, and about 140m litres behind the 1997/98.

Mark Dyson, of Exeter-based Townsend, believes the UK is still likely to make quota. "It could be quite close. But in the past, when it became obvious we were going over quota, people put the brakes on. So they should have enough in hand to fill quota."

Judging by the rush for supplies in the dying days of the leasing period, farmers agree. The IB received a third of all leasing forms in the last 10 working days of the period, including almost 6000 on the last day.

There is a backlog of forms to be processed as a result, says the board. The latest confirmed wholesale lease figure is 1.052bn litres, 11.3% ahead of last year.

Not surprisingly, given that demand, the expected price crash after the release of November milk output figures never materialised. In fact, prices for 4% supplies rose almost 1p, ending near 9.5p/litre. Average leasing price for the year was 8.15p/litre, says Mr Dyson, or 1.73p/litre below 1997/98. This looks expensive – over the same period, the milk price fell almost 2p/litre.

Permanent transfer prices have also climbed. Demand was lagging behind last year, but by December the traded volume gap narrowed to 5%, or 337.5m litres. Clean 4% butterfat quota is worth 39.5-40p/litre, according to Hobbs Parker in Ashford, Kent. Used quota is also strong, at 31-31.5p/litre.

Mr Dyson predicts used supply values (which he puts at 32p/litre) will now level out. But he puts limited clean supplies at 39p/litre. "The boards figures are likely to keep these on the boil."

lSuper-levy may be harder to predict this year. Although it will continue at 115% of the milk target price, this value now changes daily according to the £:k exchange rate, after the abolition of the green money system. On this basis, super-levy would have varied between 25.84p and 26.13p/litre in the first week under the new system.

The ministry has suggested the March 31 milk target price will be used to calculate super-levy. &#42