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Saturday 16 February 2019

Intervention sales come at a heavy cost to the taxpayer

European Commissioner Phil Hogan. Photo: Reuters
European Commissioner Phil Hogan. Photo: Reuters
Ciaran Moran

Ciaran Moran

Agriculture and Rural Development Commissioner Phil Hogan recently welcomed the sale of the majority of EU public stocks milk powder, however, its likely come at a significant cost to the taxpayer.

An analysis be the AHDB in the UK shows that unlike 2012, the EU Commission was not able to recover its money in the latest intervention programme.

It says with less than 4,000 tonnes of SMP stocks left to sell, the net cost to the EU taxpayer for running the programme looks to be in the region of €220 million, including storage costs.

In total, the Commission purchased just under 395,000 tonnes of SMP at the fixed price of €1,698/tonne between July 2015 and September 2017, amassing a bill of around €670 million.

While sales through the tender process started slowly, with only 220 tonnes sold in the first year, they ramped up in the latter part of 2018, with around 65pc of stocks sold in the last six tenders.

The maximum tender price for the purchase of stocks remained below the buying in price in all but four tenders.

However, it isn’t known how much volume was actually sold at the maximum tender price.

The AHDB says based on the minimum prices fixed by the Commission in each of the successful tenders, it is estimated that a minimum of €502 million was generated from sales, considerably less than the cost of the stocks.

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Agriculture and Rural Development Commissioner Phil Hogan said the sales were a clear vindication of the Commission's prudential approach to the management of the stock of skimmed milk powder, 99pc per cent of which has now been successfully placed back on the market.

"My objective, at all times, has been to use public intervention as a measure to protect farmers' incomes and, to that extent, we resisted calls over the last three years to reduce stocks through a number of ways or even by simply destroying the stocks.

"None of these options would have achieved the outcome we have now achieved. Instead, our patient approach ensured that not only were European dairy farmers' incomes protected, but so too were the interests of the European taxpayer.

"Public intervention of skimmed milk powder has proven to be an effective tool, especially when used in a responsible and effective manner and today's and previous tenders are a clear demonstration of the European Commission's commitment to support European farmers when the circumstances demand it," he said.

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