Leased quota rockets in frantic trading

By FWi Staff

FRANTIC trading in the lease market resulted in the sharpest rise in quota prices seen in one week so far this quota year, noted ADAS Quota Direct today (Tuesday).

Lease quota has recovered to a price similar to that at this time last year, despite the UK butterfat adjusted production being 96 million litres behind last year, and at a lower milk price.

In Cheshire, the sudden price rise was blamed on the large dairies being over quota. At one auction last week leased quota went to local farmers, in spite of the number of large dairies bidding on the phone. This pushed the price up either further, said Rachel Rutter of Wright-Manley. “Even low butterfat at 3.24% made 7ppl.”

Many farmers are avoiding the levy on overproduction next year, explained Ms Rutter. “Many producers were stung with the overproduction levy in 1997 and will want to prevent any repetition again this season.”

The value of 4% butterfat increased to 8.6ppl this week with 3.76% at 8ppl.

These prices are not expected to ease back now as there is not so much quota on the market as there was in 1997, explained Ms Rutter. “There were more people at the auction in Crewe last week than I have ever seen before, and demand is strong.”

Continued activity and price rises in the lease market have resulted in an increased focus on the purchase market.

Until last week, the purchase market had been very quiet, said George Paton of Lovedays. If farmers write off the quota period to the end of 2006 and allow 35-36ppl over these years for the quota, it averages out at 7.5ppl. “This looks a very attractive option.”

“With 35-40% of last years quota to enter the market, leasing is over-priced,” said Mr Paton.

There has been an increase in demand this week and prices have risen slightly. Four per cent butterfat is at 36.25ppl, while 3.8% is selling for 33.5ppl.

The supply of used quota continues to increase, although the price has eased only slightly, with 4 % butterfat at 28ppl.

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