Farm Ireland

Friday 23 February 2018

Buyers and sellers double for 2011/2012 milk quota

Caitriona Murphy

Caitriona Murphy

The number of buyers and sellers in the first stage of the 2011/2012 milk quota trading scheme has more than doubled compared to last year, figures from the Department of Agriculture have revealed.

Six days before the closing date, 183 farmers have indicated that they want to buy quota, while 120 have indicated that they want to sell.

The figures have increased significantly compared with 61 buyers and 99 sellers at the same stage in the first round of the 2010/2011 exchange and 68 buyers and 61 sellers in the second round.

Padraig French, Teagasc's head of dairy production research, said the hike in quota interest was not unexpected.

"There are several factors at play here," Mr French said. "Number one, milk price has increased in the past year so farmers have the cash flow and can afford to buy quota.

"Secondly, there is a feeling that with the significant increase in milk production we saw this year and the number of replacement heifers coming on stream, we could fill quota in the past two years of the quota system. Thirdly, and this is something that has not been thrashed out yet, there is a feeling that quota could have a value for processing rights after quotas are gone."

So with the expiry date for quotas looming, at what quota price does buying additional quota stop making sense?

"That depends on each individual's profitability and is a different price for everyone," said Mr French.

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He pointed out that buying quota was essentially gambling on whether an individual farm could generate enough additional profit from additional milk production to cover a superlevy, at a cost of 27c/l, in one or both of the final two years of the quota system.

"There is a high probability that we will hit a levy in one or those two years, although that can be weather dependent," he added.

The people who could afford to pay the most for quota were those who had existing facilities and infrastructure, who could graze more cows on the milking platform and had a low cost of production.

"In other words, the most efficient producers can afford to pay the most," he said.

In the last round of quota trading in March, the market clearing price for quota in both Dairygold and Glanbia was 15c/l. Bandon was the only co-op in the country to top this at 18c/l. In Connacht Gold and Lakeland the price was significantly lower at 4c/l.

Irish Independent