30 August 1996

Milk quota value hit by lotting ban

By Tim Relf

THE price gap between high and low butterfat milk quota has widened following the ban on multiple lotting.

Trading in small lots had been used by farmers to raise their butterfat base, taking advantage of the Intervention Boards old practice of rounding transactions to two decimal places. (Deals are now calculated to six points.)

The effect has been to knock about 2p and 0.5p/litre off sale and leasing values respectively, says James Holdroyd of Frank R Marshall and Co.

Attractiveness of samples

The attractiveness of different samples varies according to a farmers circumstances. But generally offerings below 3.80% butterfat have been most affected, he suggests.

At Frank R Marshalls auction on Monday at Chelford, Cheshire, average lease price was 16p/litre. Values ranged from 15.3p for 3.65% butterfat to 16.5p/litre for 4.08%.

Ros Orgee of Bruton Knowles National Quota Exchange says the fall reflects buyers increasing attention to butterfat cost. Values have fallen as purchasers seek to keep prices paid on a weight basis the same for high and low samples, she says.

Also putting the decline in value at 2p/litre is Milk Marques Jonathan Davies. Of a 3.58% lot which he was offering last week, he says: "We had no takers at 63p/litre. Not so long ago it would have made at least 65p/litre."

Elsewhere, the figure quoted varies. Mark Dyson of Townsend says it could be as much as 4p/litre. "The sale market has been most affected, with producers concerned about permanently lowering their butterfat bases."

But Lester Williams of Symonds and Sampson says that, with demand outstripping supply, any differential between high and low butterfat quota will be less than might be seen in a climate of lacklustre demand.

The gap in prices at his leasing auction in Dorset last week was less than 1p/litre between the highest and lowest butterfat samples, with 3.83% butterfat making 15.8p and 4.07% making 16.6p/litre.

Quota sold May 1995

Butterfat (%)4.023.83

Price (p/litre)5958

Butterfatvalue (£/kg)14.6715.14

Quota sold after change in lotting rules:

Butterfat (%)3.83

Butterfat value*(£/kg)14.67

Price needed toequate bf on aweight basis (p/litre)56

Fall in price (p/litre)2

*Based on 4.02%.

Source: Bruton Knowles.