Price surge hints at better times ahead for dairy farmers

Dairy farmers’ hopes of better times ahead have been raised again, after a big surge in prices at the Fonterra dairy auction in New Zealand.

After two auctions where prices dipped marginally, they rose by more than 11% this week, which was ahead of expectations.

Particularly encouraging was a big rise of 14% in the price for whole milk powder, which is used in higher value products.

This all points to a gradually improving world market, helped by supply and demand having moved back into balance.

The Dutch dairy board price also rose this week, adding to a sense that gradual recovery is well established in Europe.

The position in the UK is being helped by the weakness of sterling boosting export prospects.

But milk prices are still generally rising by less than would be justified by the currency effect and stronger global markets. The European Commission is making much of having managed to secure agreement on a trade deal with Canada.

This almost failed at the last minute, but was saved with concessions to Belgium on protection for some agricultural products against Canadian imports.

The deal now has to be ratified by all 28 member states.

The Commission has said it will press ahead in 2017 with trade negotiations with Australia, New Zealand and Chile. These will be lengthy, as is the case with all such negotiations, but they are likely to prove a big frustration for UK ministers seeking post-Brexit trade deals.

Countries have said they are keener on pursuing deals with the EU than with the UK, and Australia and New Zealand are high on the Government’s list of targets for early deals.

The concern in agriculture remains that the UK will seek to ‘buy’ deals with tariff-free access for meat and dairy products, regardless of the impact on UK agriculture. EU farm ministers will begin debating the future of the CAP at this month’s farm council meeting in Brussels.

This will be a broad general discussion, but it is evidence that even before the 2017 mid-term review of the CAP thoughts are turning to what will replace the current policy in 2020.

The UK will opt out of those discussions, but farmers will want to see the direction in which policy might move, in the hope that the UK Government might be persuaded to be more sympathetic on support than is the case now.

The European Commission has put out a tender for funds to be used to promote the CAP to the general public, but it is unlikely any funding will come to the UK.

This is despite the CAP remaining in place until at least 2019, with a further year’s funding guaranteed by the Government if Brexit happens before 2020.

Meanwhile, the Commission has said it plans to use more aerial surveillance to monitor land on which CAP claims have been made.