4 April 1997

Rising yields make super levy odds-on

PRODUCTION continued to accelerate in the last few weeks of the milk year, making some super-levy inevitable.

Latest estimates suggest a year-end surplus of about 40m litres, giving rise to a national penalty of almost £11m. This is based on a fine of 27.23p/litre, some 4p less than last year due to the series of green £ revaluations.

Intervention Board figures for the first three weeks of March show production outstripping quota by about 13m litres a week, creating a 58m litre surplus by the end of the month.

Adding this to Februarys cumulative 20m litre excess, this would give rise to a 78m litre year-end surplus.

But from this has to be deducted the 29m litres of quota permanently converted from direct sales to wholesale last December.

Next there are temporary transfers of direct and wholesale quota to be considered. These can occur right up to May 14, though, if the last two seasons are anything to go by, they will make only a marginal difference.

The two big unknowns are the effect of every other day collection and production trends in the last week of the milk year. How much milk produced on Mar 31 will not be picked up until the new season begins on Apr 1? And how much will over-quota producers have scaled back production in the last few days of the milk year to avoid super-levy?

These two will not be known until mid-April, but could knock another 10m litres off the predicted surplus.