21 March 1997


By Jessica Buss

WHILE milk quota remains producers must make decisions on buying and leasing on fact not fiction.

It would then be possible, said Ian Stockley, agricultural manager of the Lloyds TSB group, to make an informed decision on whether to lease, buy or ignore extra quota.

The average marginal cost was around 12p/litre – so leasing at 13p and selling at 25p/litre was not profitable, he added.

"However, premium producers have higher outputs than average producers, yet their fixed costs show little difference, so a substantial amount of the extra income is kept as profit." Banks would want to know if you were a premium or average producer, he claimed. But you also needed to know the strengths and weaknesses of the business in order to target areas that show potential for improvement.

The Lloyds TSB group wanted customers that knew where they were, that were aware of the environment around the industry and that made plans.

"Farming businesses today also need to produce a product that the customer wants, at a price they will pay and at a profit that allows you to reinvest," said Mr Stockley.

The environment around the industry meant that the number of producers and buyers would decline. There would be fewer larger organisations in every sector including banking – such as the Lloyds and TSB merger – that we have to accept, he added.

Technical efficiency must continually improve and businesses must also be financially efficient and show an understanding of farm accounts.


&#8226 Make quota decisions on fact.

&#8226 Keep more income as profit.

&#8226 Know their strengths and weaknesses.

&#8226 Are aware of buyers needs.

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