European Council changes the rules on SMP intervention price

Earlier today (Monday, January 29), the European Council moved to bring in a temporary change to the operation of the public intervention mechanism for skimmed milk powder (SMP).

It did so by slightly amending the so-called ‘Fixing’ regulation, which determines measures on fixing certain aids and refunds related to the common market organisation of the markets in agricultural products.

The council decided, in particular, to set the quantitative limitation for buying-in skimmed milk powder at a fixed price at 0t (zero tonnes) for 2018.

Commenting on the matter in a statement released by the council, president of the council and minister for agriculture, food and forestry in the Republic of Bulgaria, Rumen Porodzanov, said: “The council decided to intervene to stabilise the dairy markets in 2018.

This is in line with our commitment to keep track of market developments and to make sure that the safety net is used in a timely and prudent manner – not just to react to market disruptions, but also to avoid them in the first place whenever possible.

As a consequence of the difficult situation in the dairy markets, public intervention stocks of SMP in the EU rose to almost 400,000t in 2017 – thereby risking severe pressure on the market, with a negative impact on dairy prices.

In order to avoid a drop in prices and a consequent worsening of farmers’ standards of living, the EU Commission proposed and the council decided to forego the automatic buying-in of SMP in a context in which stocks are already very high.

By setting the quantitative limit at zero for 2018, buying-in at a fixed price will not be activated automatically.

However, the safety net will still function, the council has assured – as the EU will continue to be able to buy-in SMP through a tendering procedure, and to decide on a case-by-case basis how much to buy and at what price level.

Background and going forward

According to the EU Council, the Common Market Organisation (CMO) is a set of rules which regulates agricultural markets in the European Union. This includes setting the parameters for intervening on agricultural markets through market support instruments (e.g. public intervention and private storage, emergency measures) and sector-specific support.

The period in which public intervention is open for SMP starts on March 1 and ends on September 30 every year.

The adopted regulation will enter into force on the day following its publication, scheduled for this Wednesday, January 31, 2018.

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