31 May 1996

Quota holds its own in face of BSE crisis

By Tim Relf

PREDICTIONS that the BSE crisis would knock the bottom out of the quota market have been proved wrong.

The backlog of older cows retained on-farm, combined with the arrival of warmer weather and grass growth in some areas, have resulted in a firm demand.

This is reflected in recent auctions, which pegged leasing values between 12p and 13p/litre early this week.

At Chelford, Cheshire, for example, 2.7m litres averaged 12.5p/litre on Monday. Topping the trade was 4.29% butterfat, which made 13.5p/litre.

"If output was over quota last year – despite the summer drought – then the extra production from retained cows means it is almost a foregone conclusion that production will be over quota again this year," says auctioneer James Holdroyd at Chelford.

"The only thing that could affect this would be a dramatic and severe culling policy. But, even were that to happen, it might not take effect for a long-time."

Meanwhile, the leasing market will remain firm and volatile, he predicts. "It will continue to be viewed by many farmers as a short-term solution to a short-term problem." And the leasing trade will put a bottom in sale values, as well.

"Farmers are in an awkward predicament. Many face cashflow problems from having to keep cows – but they also need extra quota as a result."

Continued uncertainty has prompted many to source some of their requirements early and that has supported the trade, observes Jonathan Davies at Milk Marque.

"People are also delaying leasing-out, in the hope of getting a better price later in the year. And if the cows milk well this summer, they might well be proved right." The market seemed slightly quieter at the beginning of this week, he added. &#42