Quota activity up 50% as milk market turns

21 November 1997

Quota activity up 50% as milk market turns

MILK quota markets have bounced back, with agents reporting a sharp increase in the number transactions and a 1p-1.5p/litre lift in lease values.

Huw Rees of the Milk Marque quota agency has seen a 50% rise in the number of deals as the countdown to the end of the lease period begins. As FW went to Press (Nov 19) he reported most 4% butterfat quota changing hands at 8.5p/litre, though one lot of 3.92% had made 9p.

Activity in auctions has also picked up, with total clearances at most of the offerings around the country this week.

On Monday (Nov 17), Craven Cattle Marts cleared 617,000 litres at Skipton for an average 8.56p/litre (3.86% butterfat) and a top price of 9.2p paid for a 4.2% lot. "This is over 1p/litre more than we were expecting," said auctioneer Paddy Wrightson. "The recent production figures seems to have galvanised people into chasing quota."

Greenslade Taylor Hunt cleared 1m litres in Sherborne, Dorset on Tuesday night at an average 9.4p/litre for 4.03%. Auctioneer Justin Lowe believed some were taking cover to avoid the risk of having milk cheques withheld later in the milk year.

And on Wednesday Barber & Sons leased 500,000 litres of 3.95% quota at Market Drayton for 9p – almost 2p more than the same auction two weeks ago. Auctioneer Mike Taylor blamed a shortage of supply, with more farmers looking to sell their quota for capital gains tax relief purposes.

But procurement agents say would-be lessees are now backing off, as the market has gone up too far, too fast.

Charles Holt of Charles Holt Associates blames the rise partially on the arrival of IACS cheques on some mixed farms, and partially on market hype, with brokers phoning many of his clients last weekend claiming they were running out of quota.

At a milk price of 20p/litre, leasing at 9p would only leave 11p to cover all other costs. For many of his clients that was the break- even figure and they would be better off doing back-to-back deals or waiting for leasing to come down.

With lease volumes well back on last year, he predicted large amounts of quota yet to come forward and believed there would be wide price swings in December.n

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