The European Commission is unlikely to sell much of its skimmed milk powder (SMP) stocks out of intervention before the summer, according to AHDB dairy analyst Patty Clayton.
Traders are currently offering a maximum of €1,800/t for powder stock at the present time, she said.
“But this is some €300 below what the commercial market is offering for freshly produced powder at the present time.
“There is also a lot of SMP around at the present time, due to the growing demand for butter.”
Clayton believes that prices for most dairy products will soften in the EU, in respnse to the traditional spring milk flush.
This may well be another reason for Brussels to hold off selling product out of intervention until such times as market prices start to strengthen again.
Clayton recognises that the issue of SMP stocks being downgraded from food to animal feed status will also be a factor in the Commission’s ongoing ‘sale’ or ‘no sale’ strategy.
In the latest (fourth) tender process for SMP intervention stock, nothing was sold again. Just shy of 1,800t were applied for, ranging from €1,850/t to €1,550/t.
The results of the latest tender came after the Commission announced it is closing private storage aids (PSA) for SMP at the end of February, while keeping intervention open until September 30, 2017.
The Commission has stated it will continue to monitor the markets and will re-open PSA if it feels the market requires it.
Clayton pointed out that the size of the 2017 spring flush will determine the tone of producer returns over the coming months.
If we get a mild spell of weather over the coming weeks, then production will rise. Supply and demand factors will kick-in and the impact on farmgate returns will be downward.
“However, a return to very cold conditions could change all that.”
Meanwhile, the European Commission has confirmed that in November 2016, 11,123m litres of milk were delivered to dairies in the EU-28.
This is a decrease of 410m litres (3.6%) on November 2015. However, cumulative figures from January to November 2016 are up 0.8% compared with the same period in 2015.