Little chance of milk producers exceeding quota
By Tim Relf
MILK overproduction and super- levy are looking increasingly unlikely, with cumulative output still running below quota.
The latest Intervention Board figures show butterfat-adjusted deliveries to the end of February running 0.42% below profile. Thats more than 53m litres.
It is considered unlikely that output can make up the shortfall before the Mar 31 close of the milk year, partly a legacy of last summers poor quality silage crops, says Justin Lowe of Greenslade Taylor Hunt.
And many are running well over quota, some by 5% or more. "A lot of people are risking it this year."
Against this background, demand for clean quota is slow, says Mr Lowe.
"Usually at this time of year, we are over quota and the bulk of demand is for clean," he says. The current situation could, he says, be a "lifeline" to producers. "They may not have to buy quota and are not facing superlevy."
Interest among some has, however, switched to used samples as those with expansion plans think ahead to next season, says Mr Lowe. Early this week, 4% butterfat used and clean samples were making about 32p and 33p/litre respectively. Forward leasing deals were about the 6.5p/litre mark.
"The vast majority of the market has now assumed that we will not hit quota," says Mark Bray of ADAS. "And if you had to gamble you would agree that it is unlikely."
It partly reflects, he says, the high level of stock cullings last summer. Bad weather has also taken its toll. "The cows didnt milk terribly well at housing."
Tony Carver, of Carver Knowles, says many producers are still holding off buying, waiting to see what happens in the wake of Milk Marques latest selling round early this week. Discussions as to the future of the quota regime in Brussels early this week also prompted a "wait and see" policy, he adds.
Andrew Ranson of Clayson Haselwood cautions against assuming profile will not be hit. "But the Intervention Board figures put us from a 50:50 chance of reaching quota to about a 30% likelihood.
"Dont underestimate the ability to fill quota," he says, having seen some farmers switching to three-times-a-day milking to raise output.
With the gap between used and clean quota prices narrowed, producers running well over quota should considering sourcing some as insurance against a possible superlevy bill. "A 2p insurance policy on a 25p risk looks fairly cheap." *