Top of 28c in round two of quota exchange

By Jack Kennedy

Wexford Co-op has once again topped the Milk Quota Exchange table. The market-clearing price increased to 28 cent/litre from 23 cent/litre in the first exchange in early February. Dairygold Co-op moved into second position with a 26 cent/litre clearing price, up 3 cent/litre from the last exchange. The smaller Newmarket co-op moved up 5 cent/litre from 20 cent/litre in the last exchange, claiming a share of third spot.

Most farmers used the last exchange as the baseline and increased bids by between 2 and 5 cent/litre.

Of the other major co-ops, the market clearing price for Glanbia increased by only 1 cent/litre to 21 cent/litre. Market clearing price for Kerry actually dropped 1 cent/litre to 16 cent/litre. These prices reflect the supply demand profile for quota in these regions.

At the other end of the scale, market-clearing price for Connacht Gold dropped 3 cent/litre to 9 cent/litre. Lakeland price remained the same at 11 cent/litre. It must be remembered that farmers in these regions have not been restricted by quota to the same extent as farmers down south.

On average, farmers will receive 80% of what they requested. So if they asked for 13,000 gallons they will be able to buy just over 10,400 gallons. In some of the co-ops, such as Glanbia and Arrabawn, farmers will receive almost 100% of what they requested. This has been achieved because the amount offered and demanded has been very close.

The Department will be happy that more quota was traded in this exchange. Over both exchanges 4% of national quota was traded or just under 200 million litres. About 6% was offered for sale. They say that with the exchanges rather than the old restructuring scheme more quota is going to farmers who want quota and more milk is going to young farmers. A Department spokesperson said farmers are still learning about the new scheme and it will take a while to become familiar with the new mechanism.

The difference in milk price between regions has opened up further with 9 cent/litre market clearing price in Connacht Gold and 28 cent/litre in Wexford. These are the extremes and reflect the demand and supply constraints in each region. This will add further fuel to the fire burning down the ring-fencing walls. The 19 cent/litre difference (86 cent/gal) will almost definitely push some towards a national exchange in the next round once the election is out of the way. A farmer selling 50,000 gallons in the West would only get €20,500 for his milk while the same farmers in Wexford would get €63,600 and difference of over €43,000.

A further exchange is planned for October this year. Before that a full review of both exchanges is due to take place in the next few weeks with ICOS and the farm organisations before any details for the next exchange are released. IFA dairy committee chairman Richard Kennedy said that he would like to meet the Department as soon as possible to see how next year's exchange can be improved.

Comparison of processors on quota exchange clearing price between first and second round ranked on second round price