Sellers slow to exploit strong quota market
By James Garner
LOWLAND suckler cow premium quota started trading at record levels this week, as agents reported many more buyers than sellers.
With demand reportedly outstripping supply tenfold, the market is likely to stay firm and early deals show that trade has surged upwards with English lowland quota changing hands at about £255/unit, up 33% from last years average of £190.
English lowland leasing is at £75, compared with an average of £54/unit last year.
Few deals have been done so far because the transfer period only opened officially on Tuesday this week.
Less Favoured Area quota is likely to be a quieter trade because it covers the regions which were hit hardest by foot-and-mouth disease last year, says Joanne Sowter, head of sales for Ian Potter Associates.
"But it looks much more expensive to buy or lease this year," she adds.
Current values for LFA are at the £240 mark, compared with an average of £181 last year, she says. Leasing is at £65, almost twice the £37 it levelled at last year.
But even with prices at these levels, sellers appear unwilling to trade, says David Thompson, owner of Hereford-based agent Thompsons.
"Bidders want to pay £240-260 and vendors want £280-300. We have had enquiries for 2000 units and only have about 200 for sale."
Mrs Sowter reckons the suckler cow premium rule changes have stimulated demand this year as producers can make 40% of their SCP claims on heifers. More dairy farms are switching to beef, due to low milk prices, but she notes that numbers are no higher than usual.
Duncan Clark, managing director of quota agent DCFM, believes the total premium available for suckler cows is one of the main factors driving the market.
Producers making the most of their SCP claims this year could receive payments up to £190/unit, including extensification premium at the higher rate of about £48/head and a beef top-up payment from the national envelope, worth a further £21/unit. Even those suckler herds not qualifying for extensification still stand to claim about £140/unit.
"No more quota is being made available, so its not difficult to see why prices have gone up."
Whether the investment is justifiable though depends on the overall business, says Mr Thompson.
"It is a debatable point, but the common argument is that it should be worth about one-and-a-half times the premium value to buy and that would generally push top end values towards £300." *