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Tuesday 17 October 2017

EU skimmed milk powder tender move boosts dairy outlook

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Ciaran Moran

Ciaran Moran

Tender offers for Skimmed Milk Powder (SMP) have been accepted by the European Commission.

The move is said to be a significant sign the dairy market is recovering despite the volumes accepted being small at 100t.

In terms of price it is understood a bid of €1,850/t from Belgium was accepted which is just over 6pc back from current market prices, but the product sold has an age profile of 18 months plus.

Sources in Brussels suggest the tender split countries on whether to accept it or not, with 21 member states for, five against and two abstentions.

The move is significant as for the first time in 2017 it reveals a baseline price that the EU will accept to start shifting the circa 350,000t of SMP they have in intervention stock across Europe.

The overhang of SMP from 2015-16 represents approximately 17pc of annual SMP trade and is 1.6pc of annual EU milk production.

Commentators have highlighted that should the sale go through it would put an estimated value on this stock of around €650 million that all traders across the world know that is there.

Agriculture and Rural Development Commissioner Phil Hogan told Agriculture MEPs skimmed milk powder remains an issue and added that it is being used by some people in the trade in order to "talk down prices in the market place".

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"We are working on proposals and we have learned from the 2009 experience when we had quotas and we had 250,000t in storage at that point even with quotas.

"We have to manage this well so that we don't drive down the price to the farmer," the commissioner said.

"We are working with third countries and various schemes are being evaluated to see what we can do to manage this particular issue over the next year or so that will not damage the price to the farmer," he said.

Gerald Quain, chair of ICMSA dairy committee, said that the volumes being sold were "statistically insignificant" in terms of the overall SMP in storage.

The 350,000 tonnes of SMP in storage represented only 3pc of total EU dairy production in a given year.

"In fairness to the Commission, we wouldn't quibble with their management of storage stocks and their timing on selling back into the market," said Mr Quain.

"What is absolutely vital as far as we are concerned is that nothing is done that would affect negatively the upwards price trend evident in the SMP market and all across the other dairy markets." He said this was still not being reflected in the Ornua Index.

€1,850 per tonne bid accepted as Brussels prepares to offload 350,000 tonnes

€1,850 per tonne bid accepted as Brussels prepares to offload 350,000 tonnes

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