14 March 1996

Milk super-levy for UK likely, but threat may be headed off

By Philip Clarke

MILK super-levy is looking increasingly likely, but is still not a certainty.

February production was 5% over quota, after adjusting for average butterfat of 4.13%. That takes cumulative output to 20m litres above quota, in line with FW projections last week.

UK production has stabilised at about 270m litres a week (butterfat adjusted), having climbed since January. That is equivalent to about 10m litres a week over quota. At that rate, the UK could expect to be about 64m litres over by the end of the milk year, incurring a super-levy of £18m. But the position is not as bad as that.

First, the Intervention Board recently announced that 29m litres of direct sales quota had been permanently converted to wholesale. This takes the potential surplus down from 64m litres to 35m litres.

Second, faced with super-levy, some producers may now start to apply the brakes, leading to falling production in the last few weeks of the milk year.

Three further factors could also affect the calculation:

lTemporary transfers of quota up to the new May 14 deadline.

lSelective cull of BSE cohorts.

lEvery-other-day collection.

"The amount of quota that will be temporarily transferred is a big unknown," says quota broker, Ian Potter. "There are no patterns to the figures and estimates are impossible." But the impact is likely to be small. So, too, is that of the selective cull, which has been so delayed that relatively few cows are likely to be taken out in the current milk year.

But the trend to every-other-day collection will have a marked influence. Milk Marques daily supply is put at 18m litres, of which almost 60% is collected every other day. This means a significant volume of Mar 31 milk will not be collected until Apr 1, the first day of the new quota year.

Mr Potter suggests about 6m litres could be involved, but adds that is a conservative estimate which could rise substantially given that other milk buyers also run alternate-day collection.

But assuming the UK is still over quota by the year end, individuals liability to super-levy will depend on whether their quota holder is also over, and whether there is any threshold.

If there is super-levy to pay, this currently stands at 28.18p/ litre, but should fall to nearer 27p/litre after the green £ revaluation on Mar 29.

lAgents report a weakening in the quota market, despite the latest production estimates. More clean quota has become available as producers fine-tune their requirements, and prices have dropped to 62p/litre. &#42