14 May 1999

March boost worries but…

By Robert Harris

HIGHER than expected milk production during March has increased fears that the UK will end up over quota for the 1998/99 milk year.

And the extra output has carried over into new milk year, with April production well above predicted levels.

Confirmed deliveries for March show a 4.1m litre gain on provisional figures released last month, says the Intervention Board. Overall UK production for the past milk year is now 17.6m litres above quota.

The good news is that more direct sale quota was permanently converted to wholesale by producer/processors during the year than the other way round. This resulted in a net gain of 19.1m litres for the wholesale pool.

Deducting this from the excess production pushes output back within quota, though only by 1.5m litres rather than the 5.6m litres suggested by last months provisional figures.

Producer/processors still hold the key, through temporary transfers. The bad news is they face the threat of levy payments on direct sales, and some observers predict a net loss of wholesale quota as a result. Given the reduced safety margin, the chances of UK wholesale production ending up over quota are greater, though the result is unlikely to be known before July.

"That happened two years ago and we could see the same again," says Charles Holt of the Farm Consultancy Group. However, any switch is only likely to amount to a few million litres, so only those producers who are 10% or more over quota are likely to face super-levy, he predicts.

The milky end to the 1998/99 milk year has also boosted Aprils output. Intervention Board provisional figures put butterfat adjusted deliveries at 1.27bn litres, over 43m litres or 3.52% over quota, and about 63m litres higher than last year.

Good weather and an early turnout will have boosted production too, says Jonathan Smith of Bruton Knowles. However, he believes output will settle back. "A lot of people are selling up, and many cows will go through the OTMS scheme rather than being sold on.

"And the weather has turned very wet again in many areas – some farmers have kept stock in, and those that havent may have damaged their grazing."

But the UK could still be over quota by December, he adds. Whether producers will choose to take cover or cut back remains to be seen. "If lessors can get 7p/litre they should take it. Many producers will be receiving 15p/litre for their milk after transport, and will be doing their sums very carefully."

Mr Holt agrees, suggesting farmers may feed more tightly next winter, rather than take cover at these prices. "No-one has any cash."

&#8226 This years quota profile has been altered slightly to better reflect monthly output.

Overall profile has been raised by 19m litres, allowing for last years permanent conversions of direct to wholesale quota. Some production has also been redistributed. April shows the biggest gain, at 28m litres, though May, June and July are also up by about 12m litres each. Autumn months are down as a result, with October and November losing about 20m litres apiece.