2 June 1995

QUOTA LEASING QUANDARIES

Dairy producers are at the cross-roads. High milk quota leasing prices put many who depend on a large portion of leased quota under pressure. Some will be forced to quit the industry for good.

Pundits suggest many producers stung by crazy quota prices last winter are leasing earlier this season. With less panic-buying later in the year prices may run a more level course through 1995. What is certain is that quota will continue to be expensive for as long as milk prices are high.

But when leasing costs are over 10p/litre that milk price drops effectively to near world market prices. Not a viable return for most UK milk producers.

Those who do rely heavily on leasing in quota could do worse than examine New Zealand dairy systems.

Here the end-price for milk is 10p/litre. Yet profitability and land prices are at a peak. The reason is this. While the average New Zealand dairy farmers returns are only 30% those of his UK counterpart, he survives because his costs are only 15% of those in the UK. Efficiency is the key. That demands minimal inputs and religious use of grazed grass to reduce production costs. The policy is to use cows to harvest the grass in the field – saving on labour, time and loss in feed value.

Back to the UK and Genus farm business accounts show clearly that the most profitable dairy producers are those who maximise milk from forage.

It seems there is a further economic benefit to be had from feeding a mix of forages, according to producer-funded research. Indeed, including 75% maize in the forage portion of the ration will put an boost your margin a litre. As well as maximising milk production from grazed grass and forage, progressive producers will be looking to increase the genetic potential of their cows so that they can make most efficient use of that feed.

Dairy production research, supported by the Milk Development Council levy, will also play a vital role in safeguarding the ability of producers to improve efficiency and survive into the future.

And that is one many UK producers would prefer to face without quota constraints. But whatever the future brings, those who survive the years ahead will be those who minimise production costs a litre.