A controlled outlet is needed to get intervention stocks of skimmed milk powder off the pitch, according to the managing director of Ornua Trading and Ingredients Joe Collins.
It is up to the European Commission how it deals with the approximate 380,000t of SMP sitting in intervention and what it might do in terms of a fresh entry of powder in 2018, he added.
“We know the commission has been working on trying to find a controlled outlet for that volume into the feed sector. Certainly, if they could do that – whether it be into calves, pigs or poultry – it would be a great help to get it off the pitch.
The situation at the moment is that the product is starting to age. It’s probably of limited use in the food sector. It is a serious overhang until it gets out of the way. It’s keeping all proteins, not just skim, fairly depressed.
Collins believes that the milk price will clearly be used as a signal or tool in the future to control milk supply, given Europe’s move to a free market from a previously regulated market.
In a free market where farmers are allowed to produce as much milk as they can, ultimately the market will decide the price, he added.
Commenting on the intervention stocks of SMP, Ornua CEO Kevin Lane said: “It is creating, and has created, a massive overhang on the market. It is certainly the single biggest reason why all powder prices are so low.”
Meanwhile, in relation to milk price Lane outlined that Ornua has always highlighted that a milk price of around 30c/L including VAT is what it thinks is “sustainable from a consumer’s stand point, sustainable from a farmer’s production and income stand point and sustainable in terms of what the banks will back the industry for”.
“We have always held around 30c/L as being the mid-point in very volatile cycles, that have been as low as 22-23c/L and we have seen 39c/L during that five-year journey,” he said.