Is a futures’ milk market on the cards?

ICOS Dairy Policy Executive T J Flanagan has told Agriland that the EU Commission’s recently established Milk Market Observatory (MMO) will help provide the European dairy industry with accurate and up-to-date price information, from which more effective market management tools can be developed.

“But these are still early days,” he commented. “The MMO has the potential to be developed into a full blown dairy futures market. But for this to happen there needs to be a full buy in on the part of dairy processers, buyers and speculators with the financial resources to make it all work.

“If this could be achieved then it would be a key step forward in making volatility within international dairy markets more of a manageable challenge.”

The ICOS policy specialist went on to point out that both his organisation and the IFA are feeding information through to the MMO, courtesy of COPA-COGECA.

“There will be four MMO meetings scheduled on an annual basis. Both the IFA and ICOS attended the inaugural get-together in Brussels. It may well be the middle of next year before this opportunity arises again, given that each of the 27 EU Member States must be afforded an opportunity to attend these meetings. But attendance at MMO events is by no means the key factor in determining the potential impact which this initiative can have within the Irish dairy sector. At a very basic level the future success of MMO will hinge on the accuracy and up-to-date nature of the market information which is made available throughout its participating network of organisations.”

Commenting on the downturn in prices paid at recent Fonterra auctions T J said that commodity markets will always demonstrate the highest levels of volatility.

“And this can work in both a positive and negative sense. Prices paid for milk powders and butter will always respond much more rapidly to changes in market conditions than is the case with cheese.”

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