QUOTA LEASE PRICE RELIEF SOON
MILK quota leasing prices are set to fall after September milk production figures show the UK even further back on last years milk output.
This is good news for an industry that has suffered high leasing prices for far too long and should at least put some sense back into the quota leasing market.
At the end of September, ADAS put total butterfat adjusted output at 226m litres (3.3%) below last year. That is equivalent to about six days supply.
October Intervention Board figures indicate that the UK could be a further 40m litres below last years butterfat adjusted production.
Indeed, by the end of December there could be 100m litres to catch on up in three months, before even starting to think about exceeding quota. This suggests production will have about 5% above last years in the rest of the season to meet quota.
Therefore it could be tempting to avoid leasing quota to cover production, in anticipation that the country will fail to trigger super-levy next year. But this tactic could prove dangerous. Clearly the position is more finely balanced than it has been for the last two years. But there is a need for caution.
Despite tight forage stocks on many dairy farms, the mild October and the autumn flush of grass allowed a late silage cut or extended grazing, with stock being kept out for longer. Furthermore, what forage there is about is generally of high quality, encouraging higher intakes.
So there could still be potential to meet and exceed quota which will trigger super-levy.
For those who do decide to lease quota, 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. This suggests that, with just over a months leasing left to go, there could still be significant supplies to lease onto the market.
Those wishing to make the most of their existing quota could consider reducing butterfat levels.
As detailed in this supplement, one Devon producer estimates that even with quota at 8p a litre to lease his success at reducing butterfat levels will save him £30,000 which would otherwise have been spent purchasing quota.
But milk quality manipulation to maximise milk price within quota allocation is no easy task. Success will depend on use of improved genetics and feeding know-how. That will still be the key to improved dairying efficiency. And with increased competition for the EUs slice of world dairy markets likely to exert a downward pressure on UK milk prices in the long-term – that efficiency will be essential to safeguard business viability.