Quota lease market quiet as lessees wait

10 April 1998

Quota lease market quiet as lessees wait

By Tim Relf

WITH the new milk year just over a week old, quota is leasing for between 6p and 7p/litre.

But the market is much quieter than in previous seasons, says Tony Carver of Carver Knowles. It was a similar story in February and March, he says, with fewer forward-leasing agreements done.

Potential lessees are saying: Why spend money on something now that I do not need until the end of the year, says Mr Carver.

"But delaying too long means you could be exposed to huge price variations. This year, more than any, it is about making your budgets work. If you can get quota at the right price for your business, get it, and do not worry about what happens to the market before or after then."

Meanwhile, a "stand-off" has developed, with lessors wanting 7p/litre and lessees reluctant to give much more than 6p/litre. But some lessors are, albeit reluctantly, doing deals at 6.5p/litre, says Caroline Carr of Ian Potter Associates. "They want some cash early."

Andrew Ranson of Clayson Haselwood agrees there is no rush to source quota early this year. But with milk prices falling some farmers may hedge their bets and get some early in the season at between 6p and 7p/litre, he reckons.

Next month will see more deals done as people review their game plan for the year. The summer will be quieter, with farmers busy on the land. September could also see people looking to source supplies, particularly if the prospect of further milk price cuts hits quota values, says Mr Ranson.

Mark Dyson of Townsend says leasing values may fall but demand will be buoyed up by farmers wish to expand to combat the smaller milk cheques.

Leasing in at current values still makes sense, says Mr Dyson. "For some farmers, 6p/litre represents about a third of the average milk price they can expect this year. At times in the past, the quota price has accounted for nearer a half." &#42

See more