What is intervention and how does it work?

With milk prices throughout Europe continuing on a downward trend, there have been many calls for the intervention price to be increased.

To date, from an Irish point of view, the most significant call has come from the Minister for Agriculture, Simon Coveney.

At meeting of European Agriculture Ministers last week, he has asked EU Agriculture Commissioner Phil Hogan to give serious consideration to an intervention price increase.

The Minister said there can be no doubt that softening of global dairy markets has had an impact on dairy farmers in Ireland and throughout the EU and the possibilities remain for this to continue. In such context, the full range of measures should be under consideration in terms of any possible response.

Minister Coveney also asked the Commission to look at increasing both the volumes eligible and price paid for intervention to a level that provides a realistic safety net. It’s important to use the full range of market measures available and for the Commission to act early and decisively to put a price floor in place where appropriate.

Commissioner Hogan said that he noted that some voices claim that increasing intervention prices is the solution.

“In my view this could be counter-productive,” he said.

He said this is because that product has to be put out on the market in the future and it is of paramount importance that farmers and economic operators follow market signals.

It would do nothing but delay the inevitable necessary adjustment and make it even more painful in the future.

The Commissioner said there is need to change mindsets. He said the goal is not to produce as much as we can, but as much as we can find a market for.

The the current intervention prices include €221.75/100kg for butter and €169.8/100kg for skimmed milk powder (SMP) these prices equate to 21c/L in terms of Irish milk prices.

The last intervention purchases were made in 2009.

Under the intervention scheme, operators in the dairy sector can sell butter and SMP to public authorities at the above mentioned fixed prices up to a limit of 50,000t for butter and 109,000t for SMP from March to September each year.

In case those ceilings are met, purchases continue through a tender system.

Member State’ authorities notify to the Commission on a weekly basis the quantities for which they have received offers for sale.

As an exceptional measure, the Commission can decide that purchases can also occur outside the standard intervention period.

Such an exceptional measure has been taken following the Russian ban and is still in force. So far, no offers have been received.

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