Milk deliveries spill over profile

By Peter Grimshaw

BUTTERFAT adjusted deliveries of milk for the quota year to the end of July pulled away from quota profile with a surplus of 56.3 million litres, or 1.12% above projected quota.

July deliveries were 29.4 million litres, or 2.4% above the profile calculated for the month.

These latest production figures may have come as a surprise to some, particularly because July was dry and hot.

But the increasing tendency to switch into winter production-type rationing once grass begins to get sparse means that the significance of weather factors is diminishing.

Many producers have also been unnerved by the levy penalty at the end of the 1998-99 quota year, and by long-term inferences of the MMC report on Milk Marque.

The resulting picture in the quota marketplace is “interesting”, says Mark Jones, of ADAS National Milk Transfer Service, with bearish and bullish influences more or less in equilibrium.

“Its early enough yet for producers who want to cut production back to be able to do something about it,” he says.

Breaking through the 1% production excess barrier could however free the log-jam that has accumulated as those who may need quota waited to judge the effect of the anti-monopoly judgement on Milk Marques pricing.

Those selling quota had resisted market rates for leasing and buying as they slipped backwards during July, although some traders report high volumes sold last week.

Quota sales and leases confirmed for the current production year both show an increase in volume.

But it comes from fewer transactions in each case, indicating a strong swing to larger enterprises, as smaller producers either get out of the industry or opt to continue producing only at current levels.

This offers little comfort to those who may be hoping that the price of quota will come down as more people quit the industry.

Andrew Body, of Lodge and Thomas says it is getting harder to find buyers or sellers willing to trade in smaller lots.

The production figures however appear to have put some backbone into quota trading, with 4% quota stabilising at about 5.5ppl, while clean quota for sale has recovered to around 28.75ppl.

Mr Jones predicts that those with quota to trade will continue to try to tough it out. “It may not be a lot, but I think theyll sit back and wait for higher prices,” he predicts.

His advice to anyone who is buying is tempered by the quantity they may need.

“If they look like wanting a lot, they should be trying to get at least some cover now. It may come back a bit, but it does seem to be bottoming out.”

Andrew Body agrees. “If you have a large volume to buy or lease, some cover should be taken now.”

He believes the market has found the level it will hold for the next few weeks, at about 28ppl for sale and 5-5.5ppl to lease.

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