Concerns over EU’s ability to stop milk prices falling ‘even further’

The market support measures currently in place in the EU are starting to show signs of strain in the face of continued high levels of milk production, according to the ADHB.

It says while there was some growth in trade in 2015, it was not enough to stop a build-up of stocks, particularly for skim milk powders (SMP).

With the spring approaching, it warns that current levels of market support may not be enough to stop prices falling even further.

Over half of the EU public intervention scheme volumes have been filled by Member States in the past eight weeks, the latest figures from the Milk Market Observatory (MMO) shows.

Last week (ending February 28), Member States offered 54,522t of Skimmed Milk Powder (SMP) to the measure.

Under the intervention scheme, operators in the dairy sector can offer SMP to the measure at fixed prices up to a limit of 109,000t. If the rate of entry continues, at the current average of 6,000 tonnes/week, intervention will be full by the end of April.

Now, just over half of that limit has been reached. If that 109,000t limit is met, purchases continue through a tender system.

To date, Ireland has offered 4,755t of SMP to intervention and some 208t was offered last week.

Ireland has already surpassed the amount offered to the measure in 2015, some 1,843t, and a total amount of 40,280t of SMP was offered by Member States into intervention in 2015.

Any product going into intervention after this time is likely to be subject to tender and will not necessarily achieve the intervention price of €1,698/tonne.

To make matters worse, the ADHB highlights that this will come at a time when a significant volume of SMP stocks will have reached their storage limit under PSA.

It says product placed into PSA during 2015 had a storage limit of 7 months (210 days), and as SMP stocks accumulated quickly at the back end of the year, there is roughly 10,000 tonnes due to come out in the peak production months of April to June.

All eyes will be on a key meeting of EU Agriculture Ministers on March 14 which will discuss the current crisis and attempt to find some solutions.