SOME DAIRIES’ moves to allow producers to supply milk well over their quota allocation without withholding payment until after the year’s quota figures are finalised should not be misinterpreted as a signal to chase yields.
The amount of over-quota milk that companies and co-ops have announced they are prepared to take before withholding cheques varies from 8% over quota for Dairy Farmers of Britain to 25% for Dairy Crest, while Milk Link will pay for all milk (Business, Jan 21).
But although there could be opportunities for some herds to produce more milk, Andersons managing partner Tony Evans reckons the move is aimed at producers without quota cover. “Quota supply is tight this year as producers are holding on to it to secure single farm payment entitlements,” he says.
Arla is paying producers for 110% of quota production and it is a gamble on whether the UK reaches national quota, says Arla Foods Milk Partnership chairman Jonathan Ovens.
“The country is so far behind quota, it’s unlikely we will get near to paying superlevy,” he says. “But it’s not fair for our suppliers to buy or lease quota they don’t need to. We will review the situation in late January and possibly take it further.”
Dairy Crest can’t guarantee producers won’t pay superlevy, but a spokesman says the chances are pretty slim.
Realistically, Mr Evans feels the maths should decide whether increasing production in the short term is beneficial. Without the cost of quota, it’s a straightforward sum between extra feed and an 18-19p a litre return.
“With 1kg of feed costing up to 12p/kg to produce a one-litre response, it’s just about worth having. But this isn’t about breaking even – it’s about making profit.”
The Dairy Group’s Nick Holt-Martyn reckons some producers may be tempted to push production. The question is how effective they can be within such a short time.
“Herds that aren’t feeding a high level of concentrates have room to increase yields, but results depend on lactation stage and forage quality,” he says.
Mr Holt-Martyn says a two-litre response from 1kg concentrate is a reasonable expectation, but advises measuring actual responses in herds. “Do your own cost-benefit analysis. When it doesn’t work, revert to what you did before.”
Producer James Bowditch of Bridport, Dorset, is striving to increase production regardless of quota. He is not worried about superlevy because with production so far below profile and with a margin over purchased feed of 14.9p/litre, he believes it will be economic.
“I’ve got the feed, so I’m looking to increase production as much as I can,” he says.
But with production patterns set for winter, most producers should concentrate on maintaining planned production and ensure they generate profit from it, says Staffs-based Ian Browne of the Farm Consultancy Group.