Quota bargains forecast as milk supply declines
By Robert Harris
FARMERS looking to buy milk quota should wait, says one agent who believes that prices could slip back further.
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At least 700m litres of leased milk quota is still waiting to be traded this season, says Peter Weston Davies of the Farm Consultancy Group.
But given that the UKs chances of making quota look slim, there is only limited demand for it and some could find its way onto the permanent transfer market, forcing prices down, he says.
Provisional Intervention Board figures show that just 1.02 billion butterfat-adjusted litres were delivered to dairies in November, 4% or 44m litres under quota.
This means the UK is now almost 288m litres below profile for the first two-thirds of the milk year, over a weeks worth of milk.
“December weekly figures are rising,” says Mr Weston Davies. “But we would have to put an extra 70m litres into the tanks until the end of the milk year to catch up.”
Potential lessors with little other positive income may have to sell just to keep the banks happy, says Mr Weston Davies. Prices could ease, perhaps by 1-1.5p to 17ppl.
Even if milk quota is disbanded in 2008 which, given EU enlargement, he doubts, buying at the equivalent of just 3ppl/year, including finance, looks a good bet, he says.
Mark Webb, of Wiltshire-based Webb Paton, believes the sales market is unlikely to move much more than 1p either way for some time.
Although there are plenty of potential sellers, topped up by those who have recently quit milk production, few want to sell at half the price quota has been fetching in recent years.
No-one is in a hurry to buy either, he adds. There is plenty of interest from buyers looking for big lots of 500,000 litres or more.
“But they are not pushing the market.” Better milk prices in the spring could revitalise the market, says Mr Webb.