Milk quota prices jump

16 November 1999

Milk quota prices jump

By FWi staff

MILK quota prices have soared climbing 1ppl in recent days as producers scramble for quota to avoid a likely super-levy.

Leased quota is now trading at about 8.3ppl for 4% butterfat and clean sales at 32ppl. Used quota had climbed to 23.5ppl over the week.

The cause of the rise is a combination of the production figures released last week and the fact that producers are short of time, said Jim Leamon of Hamiltons national quota agents.

The Intervention Boards October milk production figures confirmed output was over profile again.

Cumulative output for the year now stands at about 129 million litres, or 1.55%over quota, allowing for a small downward revision of the September figure.

Compared with last year, almost 176m litres more milk have been delivered to dairies.

If you look at last year, anything could happen, said Mr Leamon. Although it now looks as if a superlevy is unavoidable, “It would take a very brave man to say that,” he said.

Even at these values, producers are buying large volumes of quota with recent IACS payments and milk cheques helping finance deals.

But many producers are looking to their banks for credit because the finance packages arent there this year, said Mr Leamon.

Quota traders all say it is very difficult to know what will happen to prices in the coming weeks, and no one knows just how much quota is available to come to the market.

So far this year, quota transactions are 25m litres up on 1998 and permanent transfers have risen 17% to 40m litres.

Theoretically there should be a shortage, said Mr Leamon. “But there have been a number of farm sales which should mean more theres more quota to trade.

“Theres no economies anymore and its almost impossible to predict.”

Mark Dyson of Exeter-based Townsend Chartered Surveyors believes there will be no shortage of quota this year.

“Producers who have recently got out of milk production are keeping hold of it and leasing out. Theres a lot [of quota] to come; I dont see a shortage,” he said.

Mr Dyson believes that if lessors all put their quota on the market at the same time it could bring the price down. “Lessors might regret holding onto quota this long.”

Buying was the best option for producers looking for quota, said My Dyson. “But its not an option for many,” he added.

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