Green £ revaluation makes 2p forecast
fall for milk likely
GREEN currency revaluations mean farmgate milk prices are certain to fall, but by less than some pessimistic predictions.
Milk Marque chairman Poul Christensen told producers attending a packed ADAS conference at Rossett, Flintshire, that he deplored the British habit of talking prices down. But he warned that values could fall by as much as 2p/litre.
Currency change was just one factor that would influence the new selling round, launched to the trade this week. Buyers were more sophisticated and understood the market better than at previous rounds. He expected them to stand off for some time.
Mr Christensen admitted that at present he could not even advise his son, who manages the familys dairy cows in Oxfordshire, what milk price to use for forward budgeting. Prices on world markets were becoming very volatile, and countries unfettered by quotas were expanding production.
But he warned producers not to get too despondent when they looked at the New Zealand price of 12p/litre. This was not the world price when US producers received 18 to 21p/litre.
Reform of EU milk policy and the quota system could not be postponed for too long, he added. The regime was costing £150 a cow. Personally he anticipated some phased relaxation of quotas after the year 2000, but with modulation that discriminated against bigger producers such as those in the UK. Producers must make negotiators aware of their views.
• Each 1p/litre fall in the milk price will wipe £6000 off the bottom line profit of the average dairy farm, according to ADAS business development manager, John Allen.
He based his prediction on 600,000 litres of production and an estimated average profit of 4-5p/litre. But he suggested there would be more chance to grow individual farm businesses when the current "high profit/high input cost" era ended.n
Poul Christensen deplores talking prices down, but predicts a 2p/litre fall.
Milk output nudges up
WEEKLY milk output has resumed its upward trend, following the recent cold snap. But whether it accelerates fast enough to meet quota remains in considerable doubt.
At the beginning of January, the UK was some 70m litres below quota.
To wipe out this deficit, weekly production in the final 13 weeks of the milk year would have to exceed quota by about 5.5m litres a week on a butterfat adjusted basis.
The Intervention Boards profile for the rest of the season allows for about 260.5m litres of output a week at 3.96% butterfat.
For the week ended Jan 11, (the most recent for which figures are available), output is put at 239.5m litres. But this figure only covers 95% of UK wholesale deliveries and is not adjusted for butterfat.
To make the corrections, a figure of 4.2% butterfat is assumed – slightly down on Decembers official figure. This is some 24 points over the butterfat base and for each point, actual output is raised by 0.18%.
On this basis, and correcting the weeks deliveries to 100%, butterfat adjusted production for the week ending Jan 11 is estimated at 263m litres. This is just 2.5m litres above quota, or less than half the required rate.
"Like the run rate in cricket, each time the figure falls behind target, so the amount required increases. It is becoming increasingly difficult to fill quota," said one broker.
That situation is likely to be compounded by the effect of the selective cull, if it gets underway in March. And there is also the matter of quota conversions.
Last season some 37m litres of direct sales quota was added to the wholesale quota pool as a result.n
Sheep premium deadline
SHEEP producers are once again leaving it to the last minute to submit their 1997 sheep annual premium and hill livestock compensatory allowance applications, running the risk of penalties.
With just 11 days to go to the Feb 4 deadline, less than a quarter (22%) of the expected number of claims have been received, according to MAFF. And of these, one in seven has had to be returned for not being filled out correctly, often because information on location of the flock was not provided.
Late applications can be accepted up to Mar 3, 1997, but payments will be reduced by 1% for each working day late.
Producers who need to acquire quota to cover their 1997 SAPS claim must ensure that the transfer or lease notification forms are also at their local government office by Feb 4.
• Confirmation of the final rate of sheep premium for 1996 is still awaited from MAFF. Latest estimates by the Meat and Livestock Commission put the total figure at £13.75 a head, compared with £21.26 in 1995. With £10.59 already paid out as first and second advances, this leaves only a small final payment to come. The lower rates are due to the more buoyant prices in the sheep market throughout 1996.n
By Robert Davies