A quantity of skimmed milk powder purchased by the EU through intervention, is being offered for sale by the European Commission. The move has angered the European Milk Board (EMB), who say it will impact price recovery. About 6% of the 355,000t believed to be held in storage is being put up for sale.
The Commission has taken precautions against upsetting prices. It has set a high reserve on the powder and waited until dairy prices being paid to farmers had recovered by 10% before announcing the tender. Nevertheless, there are fears about how long the powder can be stored, which might encourage potential buyers to wait it out.
EU intervention is a system by which stocks are bought when prices are low and supplies are high. The Commission has been buying up milk powder for a number of years as part of its interventions to balance short-term global price fluctuations in the dairy industry.
The EMB says the sale will have a detrimental effect on milk prices despite precautions. It accuses the intervention system of being ineffectual because it postpones inevitable price fluctuations rather than dealing with the problems of supply and demand.
The EMB has planned a day of action in Brussels for January 23, when European dairy farmers are invited to protest. It released a statement which said:
“The dairy market is still stuck in a crisis. Voluntary production cuts might have led to a rise in prices, but the sale of milk powder from EU intervention stocks would, once again, put the market under pressure. It shows that measures like intervention do not attack problems at the root. We need a permanent crisis instrument that prevents surpluses on the dairy market and leads to long-term stability!”
This is the third time the European Commission has tried to sell off excess powder. Last year a 11,000t consignment failed to generate interest and a previous 20,000t offering shifted just 40t at the reserve price of €2,150/t. Milk powder prices have been rising steadily since they hit their nadir in late May. SMP on Monday January 16 was listed at $2,660/t (€2,508/t).