By Olivia Cooper

MILK quota prices have risen by 25% in the past three weeks, but are now showing signs of settling down, say traders.

Earlier in October, 4% butterfat quota was selling for 16p/litre. But a surprise jump in demand pushed the price up to peak at 19.5p/litre late last week.

Duncan Clarke of broker DCFM says: “We have seen a surge in demand as producers look to make an investment in the future.”

He explains that many farmers are planning to increase milk production next year and beyond, and he has sold regular parcels of 0.5m litres in recent weeks.

“But vendors now want 20p/litre, and buyers wont pay that, so prices are likely to weaken slightly as demand drops off.”

George Paton of Wiltshire-based Webb Paton, says: “With the lowest quota prices and lowest interest rates in years, and a high chance of exceeding quota more than twice before 2008, any price in the teens is an attractive purchase.”

He estimates that, if quota is met next year, prices will increase to 30p/litre for sales, and 5p/litre on leasing.

Meanwhile, leasing trade has remained very quiet at about 0.7p/litre for 4% butterfat, with plenty of available quota but very little demand. Some forward leasing deals have already been struck at 3p/litre for next year.