Milk quota agent at hand
By Robert Harris
MILK producers could save hundreds of £s by sourcing cheaper quota, making the difference between profit and loss on many units this year.
Unfortunately, tracking down the cheapest deal remains a bit of a lottery, says Mark Perry of Taunton-based ADAS Quota Direct. There are scores of brokers across the country, all acting for the seller, and few producers can afford to spend hours seeking a best buy.
Prices are also in permanent flux – brokers with plenty of quota on their books may offer some at a lower price to kick-start the market, but such deals are quickly snapped up and easily missed, says Mr Perry.
However attractive a deal may seem, it may not represent the best value, he adds. "Many brokers simply match offered quota to the farms butterfat level. It can often pay to buy cheaper, lower butterfat quota and more of it – or vice versa, depending on the market."
That could pave the way to extra profits for producers who currently consider the potential return from leased quota too small to risk.
Leased quota may be at least 2p/litre cheaper than last year, with 4% butterfat quota typically costing 7.6p/litre.
But the rolling average milk price has slipped by about 3.5p/litre over the same period, according to ADAS figures. A 17% drop in concentrate cost over the past year has helped, but profitable production on marginal litres remains tight.
Agencies which act on behalf of the buyer may help, Mr Perry maintains. ADAS Quota Direct, based in Taunton, Somerset, is one of a handful of agencies in the country which only buys or leases quota – it does not sell at all.
"We aim to give our clients totally impartial information," he says. "Our aim is to get them the best buy available."
The agency has more than 60 quota brokers on its database, including all the big players. This enables AQD to keep tabs on quota prices across the UK. The list is updated three times a week, and brokers also contact the agency with their latest offers, says Mr Perry.
Details of each AQD client are held on a database. When one rings up to lease or buy quota, the amount required is entered, along with the relevant butterfat %. The programme automatically converts all quota on offer, regardless of butterfat, into an equivalent price and ranks it accordingly.
For example, a potential buyer who holds 1.5m litres of 4.13% butterfat quota may wish to purchase 100,000 litres of the same type. Typical price might be 37p/litre, so he would end up paying £37,000.
However, 3.73% butterfat quota on the same day may cost 32.5p/litre. The computer calculates the equivalent amount of the lower butterfat quota to maintain the farms ongoing quota. In this case, the farmer needs to buy 108,000 litres, which costs £35,500, a saving of £1900.
This instant check on ongoing quota avoids nasty surprises. If end-of-milk year calculations by the Intervention Board round up butterfat %, a producer could miss out on extra production; if it is rounded down, the farmer could receive an unexpected super-levy bill.
• ADAS Quota Direct has teamed up with FARMERS WEEKLY to provide weekly market information on milk quota lease and sale prices page.
ADAS Quota Direct
* Database includes over 60 brokers.
* Used by farmers nationwide.
* Constantly monitors quota market.
* Sources best buy instantly.
ADAS QUOTA DIRECT
• Database includes over 60 brokers.
• Used by farmers nationwide.
• Constantly monitors quota market.
• Sources best buy instantly.