BROKERS BELIEVE that prices for leasing milk quota have found a bottom, after a long slide in recent weeks.
On Dec 1, farmers were paying 6.5p/litre to lease clean 4% quota, down from August highs of 9.7p/litre.
Quota broker Ian Potter believes that the UK can no longer achieve its national milk production quota this year, wiping any premium off quota sales.
“We seem to have found a bottom in the leasing market because English farmers have worked out that it‘s worth taking 6.5p/litre now by leasing quota, rather than waiting eight years for the single farm payment.”
But when prices fell to around 6p/litre recently, lessors held off to see if there was a rally in quota prices closer to the end of the milk year on March 31, Mr Potter added.
Quota sales have fallen to around the 11.7p/litre mark, down from 18.9p/litre in August, but they could still fall further, said Jonathan Smith, head of BK‘s national quota exchange.
“I have a whole list of potential purchasers with orders for millions of litres waiting to buy when the price falls below 10p/litre,” he said.
“If it does go into the 10s, people will dive in and the price will go back up.”
“Even at current prices, it represents an excellent investment for Celtic farmers, who stand to receive an estimated 15p/litre from their historically-based SFP.”