Intervention Board gets quota profile spot-on

By Philip Clarke

AFTER years of criticism by brokers, the Intervention Board appears to have got its milk quota profile spot on this season.

Figures for July show that, for the fourth month in a row, actual butterfat adjusted deliveries were within 1% of those projected by the Reading-based agency, while cumulative output is now just 0.01% below quota.

This early into the season, milk production has a relatively muted effect on the quota market, says Nigel Astbury of Townsend Chartered Surveyors. “But watching monthly figures remains a surprisingly popular sport.”

Of more direct impact will be Milk Marques announcement, when it comes, of producer prices for the rest of the season. This week the co-op was still in discussions with buyers to try to clear its supplies from October, with no clear idea on whether values will rise.

As such, trade in quotas is slow. Good weather has also encouraged people out of the farm office and into the field. Leasing is ticking along at 7.5ppl for 4%, with lots to sell worth about 36ppl. But this is still too expensive for many producers to make money from leased-in quota, says Tim Harper of Axient. Milkminder figures for June show that margin over purchased feed (MOPF) per litre has fallen by 3p in the past 12 months, while quota leasing costs are only 2ppl lower.

In particular, producers need to look at the marginal cost of producing the extra litre rather than the average cost, says Mr Harper. “Too many farmers still spread the lease bill over the total volume of milk they are producing, which gives them a lease cost of just a few pence a litre.”

At the margins, the calculation is very different. For a start MOPF will be considerably less than the 16ppl average June figure. After deducting the 7.5ppl lease price that leaves just a few pence to cover all other costs.

“Last seasons figures show that profits on most dairy farms were very small. The minimal return on leased-in litres available then will have disappeared altogether for many this season,” says Mr Harper.