About time for quota price rise says producer

Monday, March 10, 2008

by DON STONEMAN

Miller, a member of the Simcoe dairy producer committee, says on the last 11 exchanges, quota prices have been held at $850 a kg lower than before a quota policy was enacted more than a year ago. By itself that "may not be significant," he says. Yet there was also, on average, 25 per cent less quota sold every month, sometimes 700 kg rather than close to 1,000. Normally, "shorting the market" should result in a price increase, Miller says.

There have been a number of changes in policy about how quota should change hands in the last 18 months. The most significant change in the quota policy was made in November of 2006 when the "pay what you bid" rule was put in place and the transfer assessment was brought back, says Bill Mitchell, spokesperson for DFO.

There is lots of speculation as to why quota isn't moving as fast, Miller says. Perhaps the 15 per cent assessment that was brought into place to stifle speculation has caused less quota to come up for sale. "Maybe there was more speculation than we thought," Miller says. There was talk last fall that the assessment would be reconsidered by the Dairy Farmers of Ontario board but nothing changed, Miller says. Perhaps some producers were waiting for the assessment to end before they sold out.

On the other side, quota prices might be going up now because the dairy market is growing, Miller says, although not as fast and as much as producers would like. Producers are frustrated by the length of time it has taken to grow markets, he says. "It takes too much time."

Another reason for quota prices to rise now is that with higher prices in the offing for soybeans and wheat, farmers in general are more optimistic, Miller says. The optimism may be keeping dairy farmers farming. "We may be seeing a new era in agriculture, and that is pretty exciting," Miller says.

Mitchell adds that last year, producers were able to produce milk using "credit days" for a significant part of the year. Two days of credits is equal to having an extra six per cent of quota available to a producer. There has been at least one credit day every month since March, 2007, he says, but there are no credit days in March 2008. There was also 3.9 per cent more quota added to the system in the last year, Mitchell says. BF