Warning dairy market still ‘delicate’ despite recent price rises

EU farm commissioner Phil Hogan has warned that the dairy market remains “delicate”.

Speaking at the World Dairy Summit in Belfast, he said farmers needed to remain cautious about increasing production in response to recent better prices. He said that doing so risked tipping the finely balanced market back into surplus. Milk prices across the EU are now 9% ahead of the five-year average.

Mr Hogan also warned that price volatility was here to stay, and that farmers must “innovate, cooperate and follow market signals”.

Current signals are that butter, cheese and skim milk powder (SMP) prices are coming off the highs of recent months, suggesting milk prices may have peaked.

Mr Hogan also raised the issue of the Commission’s stockpile of close to 400,000 tonnes of SMP, from intervention in 2015 and 2016.

This has proved hard to dispose of and that is even more difficult now that the SMP market is falling. The Commission wants to set the intervention ceiling at zero, meaning a tender system would be in place for the next slump.

This will make intervention less attractive and expose farmers even more to global market volatility.

There is no scientific reason for the European Commission’s proposal to reduce the relicensing of glyphosate to five years – it is simply a move to try to sway some member states to support the proposal.

Brussels believes this meaningless concession will allow member states to back its plan in sufficient numbers to get it through. This will be voted on in a standing committee of member state experts on Thursday, where a qualified majority is needed.

France will be crucial to that decision, since it voted against relicensing glyphosate at the last meeting.

EU farm ministers, meeting for their monthly farm council, will be updated on the state of play in various trade negotiations – including the controversial trade deal with the Mercosur countries of South America.

This has major implications for the beef industry, and any concessions in this area are being resisted by Ireland and France. They are ready to see the entire trade negotiation scuppered over this issue.

Brazil has said it will not back down over enhanced tariff-free access for beef, and has suggested the trade-off might be an opening of South American markets to European dairy products.

The commission will also report that it is making progress in negotiations with Mexico and that it is ready to open negotiations on a free trade deal with Australia and new Zealand – which, like Mercosur, would be a big threat to agriculture.

Negotiations are against a background of booming EU exports. That success and trade deal progress add to the trade challenges for the UK after Brexit.