Rush for lease quota boosts price
By Olivia Cooper
MILK-QUOTA markets continue to rise as producers seek to guarantee payment of milk cheques by processors.
Most milk purchasers are refusing to pay for milk that does not fall within quota, and with production continuing to be strong, leasing is a cheap form of insurance.
Leasing of 4% butterfat has risen to 1.5ppl, up about 0.1ppl in the past week.
But Charles Holt, of the Farm Consultancy Group, says there are cheaper ways to ensure milk cheques are paid.
“If you are sure that quota wont be reached, it can be cheaper to get a bank to guarantee your superlevy, so the dairy will release your milk cheque.”
This can be done at a charge of about 2% – significantly cheaper than borrowing money to lease quota.
But although it is potentially the cheapest option, HSBCs Steve Ellwood considers it to be very risky.
“You would have to be very certain we wont be over quota, as this becomes a very expensive exercise if you get it wrong.”
Meanwhile, quota sales have slowed, with prices weakening by about 0.5ppl, to 24ppl for 4% butterfat.
Supply is limited, which will keep prices steady, says Mr Webb, who predicts a 2-3p range for the rest of the milk year.