Milk quota and entitlement trading

Many consider at the moment that the milk quota trade is a dead duck. Certainly in the experience of Ros Rimmer at Carver Knowles, this is not the case.

Ros explains, "Although the volumes traded are nothing like those in the heyday of quota trading, many producers are seizing the opportunity to buy quota at these low prices for cheap insurance.

Compared with the cost of annual farm insurance, the cost of quota at say, 1.5 to 1.7ppl is an in-expensive form of insurance. Especially when taken over the next five years – i.e. the life of the quota. Forward thinking producers see this as a sensible option to safeguard their businesses.

There are purchasers out there looking for upwards of 500,000 litres and indeed one deal we did recently for 1,000,000 litres in a single transaction came to £22,000."

Last year saw the advent of entitlements trading. Ros and her team have used their considerable experience in dealing with milk quota sales to develop a market on entitlements. Trade for entitlements is best described as steady, with a number of potential purchasers looking to buy as they have either traded away set-aside and have naked acres or have taken on additional land without entitlements.

The principle of trading using a multiplier on the 2005 value remains for 2007 and those entitlements with dairy premium are realising a higher multiplier in the region of 1.9 times. The thorny issue of trading set-aside entitlements remains a talking point with much scaremongering to boot. Carver Knowles continue to offer two options, the warranted and non-warranted route trading away set-aside.

With the advent of more bio-ethanol and industrial contracts a number of progressive arable farmers are being paid to take set-aside and claim commercial viability. Whether or not set-aside is abolished in the review in 2008 remains to be seen, but after a long dry summer many dairy farmers do not wish to see land in set-aside.

For further details please contact the trading team at Carver Knowles, Chester on 01829 773000