Milk prospects looking a little less shakey as prices rise

The European Commission’s Milk Market Observatory has published a buoyant report on dairy prospects.

The only negative is a weakening market for skim milk powder, where prices are dropping despite butter and cheese prices remaining at record levels.

This is worsening the commission’s problems in disposing of the milk powder it has in store from the 2016 dairy crisis. It has continued to reject tenders despite falling prices. However other parts of the market are good.

EU milk prices are now 2.5% ahead of the five-year average and 25% ahead of May 2016. The average EU price is likely to top 33 euro cent a litre when June figures are published.

Butter prices are at record levels and the gap between fat and protein prices has never been greater. Risk management is to move up the agenda in the discussions about the post-2020 Cap.

The incoming six-month Estonian presidency of the EU is to make this a priority and the subject of its informal farm council in September.

It believes lessons need to be learned from the EU response to the Russian import ban and the 2016 dairy crisis, which demanded funding beyond that available in the Cap crisis reserve.

It wants to see risk management made compulsory in all member states, funded under the rural development programme.

It and other new member states believe this would ease the pressure on the Cap budget, as a result of losing the UK contribution.

They believe that risk management insurance would allow more of the budget to be used to maintain direct payments, and to spread them more evenly between member states.

This would put it on a collision course with France, as the biggest beneficiary of Cap funds.

While risk management was discussed for the UK last year, it has not been mentioned in Defra Secretary Michael Gove’s recent comments on the future shape of UK farm policy. The EC has published a consultation document on tackling unfair trading practices along the food supply chain. This stems from a report by the agrimarkets task force, which identified problems farmers faced because of the power of major retailers.

These claims have been rejected by trade associations representing retailers, but the commission remains committed to action, including legislation.

It has outlined four options. These are the status quo, national guidelines with an indication of what would be best practice, laws to protect the weakest in the supply chain, mainly farmers, and wider laws to protect all businesses from unfair use of commercial strength.

The commission is committed to tabling a plan by March 2018, although its preference is still to avoid legislation. Whatever happens it will not affect the UK, because of the Grocery Code Adjudicator and because no legislation would be in place before Brexit in March 2019.