16 August 2002

RPA error has dairy trade reeling

THE dairy industry was thrown into turmoil last week by a mistake made by the Rural Payments Agency over milk production figures.

The agency released its July estimate last Wednesday as farmers weekly went to press, a record 1.28bn litres for the month. But after surprised traders queried the figure, the RPA realised it had made a mistake and cut the level on Thursday by a massive 78m litres – equivalent to over two days production.

In that time, concerned dairy farmers traded a huge amount of quota, pushing lease prices up by between 0.25p and 0.5p/litre.

"Its just farcical," said quota trader Ian Potter.

"The market reacted instantaneously. We did a tremendous number of deals, and then had to ask producers if they were done on the back of these figures, and whether they still wanted to proceed."

A spokeswoman for the RPA admitted that it had double-counted after two companies – probably The Milk Group and Zenith Milk – merged. When asked if the RPA knew of the turmoil it had caused, she said the figures were only produced as an "aid to the industry" and the agency was under no obligation to continue this service.

The new figures, at 1.19bn litres, are the third highest on record for the month, with butterfat a record low at 3.85%. "Were still quite a long way ahead of quota," says BK National Quota Exchanges Jonathan Smith.

Although he reckons milk production will continue to be strong, low milk prices will keep the quota market at "realistic levels", he adds. &#42