Intervention proposals a threat to milk price safety net: ICMSA

PROPOSALS to fundamentally change the intervention pricing structure for dairy commodities have provoked strong criticism from the ICMSA.

The EU Commission has proposed that the fixed price for intervention buying of skim milk powder (SMP) be adjusted when the support scheme re-opens in March next year.

It has been suggested that SMP would enter intervention via a tender process after 109,000t of product was purchased at fixed prices.

However, the proposal has been rejected by the ICMSA who claimed that such a move could undermine “very significantly” the floor price offered by intervention should the market for dairy products come under pressure.

“If this proposal is agreed, it would effectively mean that the current safety net price would be removed. When the 2009 crisis hit, and again in 2016, it was this fixed intervention price that put a floor under milk prices across Europe,” said ICMSA’s Ger Quain.

“A tendering process provides no such guarantees during an extremely vulnerable period for farmers when the problem of excess volatility has in no way been addressed,” he added.

Milk prices this year have been underpinned by the buoyant trade for butter. In contrast, world markets for SMP have remained extremely sluggish, with product trading below the intervention price of €1,690/t.

The SMP market has been further undermined by the overhang of almost 380,000t of product in intervention stores.

Butter supplies

The weakness of the SMP trade was illustrated by last month’s intervention sale where there was just one offer for 40t of product at 6pc below the intervention price. It was rejected by all countries.

Mr Quain described the Commission’s proposed intervention mechanism as “risky” and urged the Minister for Agriculture Michael Creed to oppose the planned changes.

Meanwhile, butter supplies on the continent remain tight, with supermarkets struggling to purchase sufficient stocks and croissant production in France curtailed as a consequence. Last week butter hit a record price of €6/ kg in French supermarkets, with the country’s agriculture minister, Stephane Travert, forced to play down suggestions that the shortage could soon become acute.

He urged retailers and suppliers to agree price adjustments in order to maintain deliveries. Despite the price hikes at retailer levels, wholesale butter prices are on the slide with spot prices on the Dutch market back to €5,200/t, down from a high of €6,980/t in mid-September.

In other dairy news, milk production powered ahead in September, with supplies up 10.5pc on 2016 levels to almost 650 million litres.