Quota cost climbed as milk prices fell
By FWi staff
IN a year when milk prices paid to farmers seemed to fall ever lower, the cost of quota climbed in the opposite direction.
The end of the quota year ended buoyantly, with prices for leased supplies soaring as high as 9.5ppl towards the autumn.
It was a far cry from the start of the trading year in April, when quota prices were under pressure from lower milk values.
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The trading year started with a lease price of 6ppl, reflecting a downturn in milk values, but since then the cost has only fallen temporarily a couple of times. “Demand has always been stronger than supply,” said Ian Powell of ADAS Quota Direct. Throughout the season, producers switched to the cheaper short-term option of leasing rather than buying, reflecting the bleak financial climate across the industry. Early low prices were also buoyed by a shortage of supply created by potential lessors who withheld quota in the hope of leasing for more money later in the season. |
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And even when lower milk production figures were released for November, it seemed there was still no reduction in demand. The country is 20 million litres below profile and it looks though the downward movement could be repeated again for December. A shortage of quota for sale also kept prices high right until the end of trading, said George Paton of agents Lovedays. “Demand was exceptional,” he said, with a switch to producers selling clean quota and purchasing 100% used quota this year for tax purposes. |
A shortage in the supply of quota for sale saw used-quota prices stabilise at 31ppl in December with clean quota offered at 38ppl.