1 November 1996

Quota leasing now 16p/litre

MILK quota leasing prices of about 16p/litre early this week confirm the downward direction of the market.

Unlike at this time in previous years – when analysts have been wondering how high prices will go – the question now is how much further will they slip.

"To about 12p or 13p/litre," according to Mark Dyson of Townsend. Like many, he points to the milk production figures as the key influence.

The first two weeks of October show output to be 5% and 6% under quota, he points out, which follow September statistics, showing output to be a similar amount under quota.

"Its not looking brilliant from a leasors point of view; but it is quite encouraging for potential lessees," says Mr Dyson.

Hence his advice to leasors that, with only six weeks of the leasing period remaining, they should make the most of the current prices.

Sale quota values – currently about 67p/litre – could follow the leasing trade down, he says.

Activity in the sale market has remained quiet, not least because of uncertainty over the scale of the BSE-related cull, says Mr Dyson.

Justin Lowe of R B Taylor and Sons reckons 14p/litre could be the low point in the leasing market.

Some leasors are holding out for 17p, when most deals are being done below this.

Similarly those selling are still, in many cases, holding out for 70p, when 67-69p is the more typical level at which it is changing hands, he says.

But an auction at Cardigan on Monday saw 4% samples typically changing hands at 17p/litre, points out Malgwyn Evans of J J Morris.

And as the influence of good-quality winter fodder takes effect, the boost this will have on output will shore up quota prices, predicts Jonathan Davies at Milk Marque.

"But there has not been a desperate amount of interest and no flurry of activity was seen after milk cheques arrived."