Quota leasing not justifiable
FEW producers can justify quota leasing at current prices and should consider reducing output.
So says Melton Mowbray-based Andersons dairy consultant John Davies. The milk price in January and February will be less than 20p/litre for most producers.
He calculates that marginal milk production costs 0.5p/litre in overheads and 9.5p/litre in feed, based on an average concentrate price of £135/t and a response rate of 1 litre for each 0.7kg of feed.
A lease price above 9.5p/litre wipes out any additional margin, he says. So producers should cut production while they still can, and avoid paying a levy. But reducing yields and relying more on forage could see fat % rise, he adds, triggering upward butterfat adjustments.
Andersons partner Tony Evans also warned against gambling on threshold, with even 3% a "high risk" option.
Keeping milk production high for next spring on the basis of supplementing cows with concentrate after turnout also needs careful consideration. "Concentrate must be very cheap to justify feeding it when the milk price for a standard litre is likely to be 16p, (after seasonality deductions)," says Mr Evans. *