Production shortfall to affect quota business

By FWi staff

THE trading year for leased quota is almost over, but agents are having difficulty forecasting which way the market will turn for bought quota.

Looking at the next few months is all but impossible without a crystal ball, said one trader.

The factor likely to most affect the market until next April is the monthly milk production figures released by the Intervention Board.

But even they will give no guide to whether the country will eventually reach its milk production target, said George Paton, of Lovedays.

Mr Paton believes that there is still a reasonable amount of clean quota to sell and it is certain that not all producers in need of quota have covered themselves.

“If the country is under production over the coming months, then clean quota values could fall back to used quota levels,” he said.

But if, as in recent years, the country produces too much milk, then bought quota prices could soar has high as 45ppl, predicted Mr Paton.

“Year on year it looks as if we could be over quota,” he said. “But we dont know what production will be like in January and February.

If the production figures continue as they have done so far, the country could potentially be 35-40 million litres over.

But it is very difficult to tell because we are only being two thirds of the way through the production year.

Ian Powell of ADAS Quota Direct said that next March would be the critical month and producers who wait before buying quota are taking a big gamble.

“The big question is what clean quota will do,” he said. “It has the potential to go higher but how high can clean quota go?”