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Save hundreds with cheaper milk quota

- 03 September 1998
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By Robert Harris


MILK producers could save hundreds of Pounds by sourcing cheaper quota, making the difference between profit and loss on many units this year.


Unfortunately, tracking down the cheapest deal remains a bit of a lottery, says Mark Perry of Taunton-based ADAS Quota Direct. There are scores of brokers across the country, all acting for the seller, and few producers can afford to spend hours seeking a best buy.


Prices are also in permanent flux – brokers with plenty of quota on their books may offer some at a lower price to kick-start the market, but such deals are quickly snapped up and easily missed, says Mr Perry.


He adds, “Many brokers simply match offered quota to the farms butterfat level. It can often pay to buy cheaper, lower butterfat quota and more of it – or vice versa, depending on the market.”


That could pave the way to extra profits for producers who currently consider the potential return from leased quota too small to risk.


Leased quota may be at least 2ppl cheaper than last year, with 4% butterfat quota typically costing 7.6ppl. But the rolling average milk price has slipped by about 3.5ppl over the same period, according to ADAS figures. A 17% drop in concentrate cost over the past year has helped, but profitable production on marginal litres remains tight.


Agencies which act on behalf of the buyer may help, Mr Perry maintains. ADAS Quota Direct (AQD), based in Taunton, Somerset, is one of a handful of agencies in the country which only buys or leases quota – it does not sell at all.


Details of each AQD client are held on a database. When one rings up to lease or buy quota, the amount required is entered, along with the relevant butterfat percentage. The programme automatically converts all quota on offer, regardless of butterfat, into an equivalent price and ranks it accordingly.


For example, a potential buyer who holds 1.5m litres of 4.13% butterfat quota may wish to purchase 100,000 litres of the same type. Typical price might be 37ppl, so he would end up paying £37,000.


However, 3.73% butterfat quota on the same day may cost 32.5ppl. The computer calculates the equivalent amount of the lower butterfat quota to maintain the farms ongoing quota. In this case, the farmer needs to buy 108,000 litres, which costs £35,500, a saving of £1900.


This instant check on ongoing quota avoids nasty surprises. If end-of-milk year calculations by the Intervention Board round up butterfat %, a producer could miss out on extra production; if it is rounded down, the farmer could receive an unexpected super-levy bill.

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