27 July 2001

Poor quota deals as prices hit silly levels

MILK producers are paying silly prices for quota and should wait a few weeks to get a better deal, says Charles Holt of the Farm Consultancy Group.

Leased quota (4% butterfat) is trading at 1.2-1.3p/litre, twice the amount paid three weeks ago. And quota buyers are paying 16p/litre for 4% supplies, 5p above recent levels.

"These are major increases," says Mr Holt. "People have looked at June output, which showed a big increase in volume over year-ago figures. This shows the danger of using the raw data the Intervention Board now issues, which take no account of vital butterfat adjustment."

July butterfat-adjusted output was actually 12m litres below Mr Holts quota profile. And the cumulative figure for the first quarter of the milk year was 112m butterfat-adjusted litres below profile.

The trend is continuing, says Mr Holt. Extrapolating weekly IB figures suggests the UK will undershoot quota by about 35m butterfat-adjusted litres in July.

And the over-30-month-scheme is about to restart and foot-and-mouth continues, says Mr Holt. "I cant see what all the excitement in the quota market is about."

Mark Webb, of Webb Paton, reckons markets have peaked for now. "Buyers are not willing to pay any more, and there is not much quota for sale at tradable prices."

But vendors are likely to lower their sights and trade will resume, though he says prices may not fall much. "I dont think milk production will be too far away in July."

&#8226 Most of the changes in our June milk price table are due to less severe seasonal deductions compared with May.

The only underlying change is a 0.3p/litre cut in Wisemans basic price to restore competitive margins. In April, Wiseman passed on the supermarkets 2p/litre price rise for liquid milk to its suppliers. But most competitors, supplying a range of markets, spread the increase across their producer base. &#42