HAS milk quota become irrelevant? The Dairy Group, formerly the ADAS Dairy Group, asks the question since the prospect of the UK exceeding quota looks unlikely without a radical change in the profitability of milk production.

The Dairy Group says that daily production levels show that production has been running below the quota profile since January 2005, which coincides with the reform of the CAP.

For the last 12 months, rolling production has been at levels not seen since the slump of 2000/1.

"With UK quota set to increase by 1.5% over the next three years, the prospects of the UK exceeding quota look unlikely without a radical change in the profitability of milk production."

The group says the latest report by Professor Coleman, of Manchester University, confirms that those leaving the industry would be all shapes and sizes with different levels of profitability.

"It's not just those losing money but those losing confidence," says the report, that also suggests production will remain low, possibly one billion litres below quota, for the foreseeable future.

Over the last few months costs have been rising (energy and labour) while increased market returns have failed to materialise at the farm gate.

"Coupled with the changes in the CAP, which means no support payments from January 2005 until the Single Farm Payment is paid, possibly as late as June 2006, then businesses are facing extreme financial pressure."

The group says that while milk prices remain below 19p per litre for the majority of dairy farmers, production will remain well below quota.