Producers told not to be complacent
By Simon Wragg
SHEEP quota trading has begun with a slight price increase on last years opening values, but producers are warned not to overestimate prospective payments.
According to Chris Jones of McCartneys, Bishops Castle, lease values are already in the £5 a unit bracket compared with opening bids of £4 a unit last year. And the market could soon be livelier, he says: "Its a fact theres more sheep than quota; producers will have to act."
This years significantly lower lamb prices – which affect the calculation for the subsidy – may lead some producers to anticipate a higher payment this season. Although MAFF wont be able to confirm the figure until next year, that fact combined with an utterly disappointing ewe trade – affected by the carry-over of barren/cull ewes last season and loss of the highly influential skin market – could lead to greater quota demand, argues Mr Jones.
However, MLCs Lesley Green warns producers not to over inflate expectations of subsidy payments. UK lamb prices are down this year by 25p-30p/kg for July and August. At first sight this may be expected to increase subsidy payments since these are based on average lamb prices. However, a strong £ will actually increase there value in k – the final currency on which subsidy is calculated. Despite concern that subsidy could be cut under Agenda 2000, Tom Taylor of Aberdeen-based Hayes McCubbin & Macfarlane believes that wont stop producers wanting to secure extra quota.
And some are already doing just that, adds Mr Jones. For one Welsh-borders client it will allow up to 400 barren ewes to be held over the winter until the end of the retention period in May next year.
"Those ewes are currently worth less than £10 each, but could attract a potential subsidy of £15-18 each based on the current lamb trade. Given that the cull trade probably cant get much worse, that leaves margin to spare after leasing costs. It will pay some to do it," explains Mr Jones.
Carlisle-based quota agent Christopher Gray agrees. He expects to trade 1000 units in the next fortnight adding: "More will be looking to hold on (to ewes) with poor prices. For many the quota is the only guaranteed income."
The market is currently trading at £5/unit for leasing and £12-13/unit for purchase of GB lowland supplies with slightly lower prices in Scotland. Less favoured area units continue to attract a premium reflecting the higher payments, report brokers.
A relative lack of activity is not a concern to those agents looking to close the quota deals. "Theyll come," is all one broker would say.
Townsends George Jenkinson believes few producers are aware the trading period opened on Sept 14. "However, we can normally expect to see between 60%-70% of deals completed in the last six week of the quota period to early February." *