9p/litre for milk quota is too high

26 November 1999

9p/litre for milk quota is too high

By Jessica Buss

RADICAL action may be more profitable than leasing milk quota on some dairy farms after last weeks increase in price to 9p/ litre.

Increasing herd size, cows milking well and cash from IACS cheques must be behind the recent increase in quota leasing prices, say experts. But the only justification for paying that price is super-levy avoidance, according to Staffs-based Ian Browne of the Farm Consultancy Group.

Even top farms with the lowest feed costs can only justify paying 7p a litre; paying above that can be for the love of being busy, he says.

ADAS head of dairying John Allen agrees that at 9p/litre for leasing producers are no longer looking at profitable milk production, especially after the recent fall in milk price.

When milk has already been produced there is little choice but to lease with high risk of super levy this year, says Mr Browne.

Intervention Board figures (Business, Nov 12) show production slightly ahead of last year. "But its difficult to guess how much producers will cut back on output and how many will quit dairying before March."

Mr Browne expects most producers will meet their own quota, so taking a gamble on there being no super levy is unwise. This year, super levy is expected to cost 25p a litre.

Those requiring more quota to cover production for the remainder of the quota year should consider ceasing milking, advises Mr Allen.

"Everyone must sit down and do their own calculations to decide what action to take." But if you are going to produce 1m litres and are 400,000 litres short of quota with that amount still to produce in the next five months, do those calculations against production for the rest of the year, rather than that for the whole year.

"For some it may be best to dry off cows over five months calved and put them on a maintenance diet for the rest of the winter."

He admits its a challenge to manage these dry cows to avoid them putting on body condition and then to prepare them for lactation well at the end of the dry period. Its also wise to seek vet advice on dry cow therapy for these cows, he says.

But early drying off can be a better way to lower production than underfeeding high merit cows. Butterfat % tends to increase with underfeeding and that may cancel out much of the saving from lower yield, he adds.

Fine tuning

However, when production only requires fine tuning to meet quota available, cost the options of feeding milk to calves, altering feeding or paying super levy. Mr Allen uses a spreadsheet package to help with these decisions.

Mr Browne adds that there may be opportunities to challenge cows to produce more milk from forage as high quality forage is available on many farms.

Although cutting back on concentrate can lower production costs, it may have less effect than anticipated: Yields may stay the same and when yields do fall, fat % can increase, he cautions.

"But its better to make a small change now than more drastic changes later."

Buying quota and spreading the cost over more years is another option worth considering. When quota purchase costs are less than 5p a year over the next six years, its worth considering whether its economic. There are tax implications, but few dairy farms will be paying tax in the near future, predicts Mr Browne.

But he warns that its vital for those without enough quota this year to consider next years plan to avoid getting caught out again. "Consider the structure you will employ for the future."


&#8226 Super levy gamble risky.

&#8226 Dry off cows early.

&#8226 Small cuts by feeding.


&#8226 Super levy gamble risky.

&#8226 Dry off cows early.

&#8226 Small cuts by feeding.

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