Production fall may mean price drop for leased milk quota
By Philip Clarke
QUOTA agents are predicting that lease values will now fall after the release of September milk production figures which put the UK even further back on last years output.
Latest data shows that, for the month, butterfat adjusted deliveries came to 1.079bn litres, or 5.59% below quota. This was 95m litres (8.1%) less than last year.
On a cumulative basis, total output is now at 229m litres (3.3%) below last year – equivalent to about six days supply.
"The scale of the fall is greater than expected, as grass was not limiting for the second half of the month," said John Elliot of ADAS. "Production will have to be well above last years in the rest of the season to meet quota." Improved genetics and quality forage made this "possible but not certain".
Quota prices at the start of the week were in stalemate, with How-kins & Harrison averaging 11.8p/ litre and Loveday & Loveday seeing 12p, though more than half the quota at this auction went unsold.
Some agents believe prices must now fall. "Whatever the accuracy of the quota profile, there can be little doubt that autumn milk production will be disappointing and that demand for leasing and buying quota will be reduced," said Mark Dyson of Exeter-based Townsends.
Tony Carver, Bruton Knowles National Quota Exchange, agreed, suggesting values could fall to about 9p/litre for a while, but would settle at 10p. Only an absence of supply from lessors had enabled the market to stay at 12p for the past few weeks.
Intervention Board figures show that, to the end of September, 530m litres had been leased compared with 1038m litres for the whole of last season. The suggestion is that, with just two months leasing left to go, there are significant supplies still to come to the market.
But broker Ian Potter says this is a dangerous assumption, as last year the amount of quota available was boosted by those wishing to cash in on the high prices. He also points to a backlog of quota transfers waiting to be processed.
This is denied by other brokers, who say the Intervention Board is turning transactions round in two weeks.
"I think the supply of quota will be there. There must be loads of producers who will fall short of quota," said Mr Carver. *