Super-levy fines still likely
By Simon Wragg
MILK production fell below quota profile for the first time this milk year in December, but the drop will do little to reduce the likelihood of super-levy fines, say brokers.
Butterfat-adjusted deliveries for the month totalled just over 1.12bn litres, according to provisional figures released by the Intervention Board this week. That is 21.5m litres or 1.8% below profile.
However, cumulative production for the milk year so far is still almost 120m litres over quota, and just over 180m litres ahead of last year, when the risk of super-levy was considered to be in the balance.
"We may well go into March with the brakes on, but super-levy looks inevitable," warns Jonathan Smith of BK National Quota Exchange.
With leasing now closed for this milk year, producers are restricted to buying clean quota, worth about 35-35.5p for 4% supplies, either through straight purchases or back-to-back deals.
Andrew Ranson of Banbury-based brokers Clayson Haselwood reckons costs, especially of back-to-back deals, could rise. "The threat of fines will mean the difference between clean and used quota values – currently 11p/litre – will grow. That will only increase producers costs for covering themselves."
This could force many farmers to make extreme changes to herd management to limit the cover needed. IB figures also show that a rise in average butterfat content is exacerbating the situation, accounting for an extra 10m litres of production. "Many producers response will be to cut concentrates, but it is the forage element that affects butterfat," says Tony Evans of farm business consultant Andersons.
"Even if we can cut back for the rest of the milk year, producers must work on the UK meeting quota. They must take two steps: Dont produce milk and take cover, but it must be in that order.
"Take out culls expected to go this year and consider drying off mid-lactation or stale cows. But dont mess about with spring calvers; youll need milk in April to generate cashflow," he warns.
Economics dictate that only the most efficient can afford to contemplate selling used quota and buying clean in its place, Mr Evans adds. "If the gap is 11p/litre and youre getting 16p for milk, the balance will just about cover the cost of forage let alone concentrates." *