Farm Ireland

Tuesday 21 November 2017

Brussels U-turn on milk price sees intervention extended

Commission decision comes as Lakeland Dairies cuts price to 28c/l

Phil Hogan in the European Parliament in Brussels.
Phil Hogan in the European Parliament in Brussels.
Darragh McCullough

Darragh McCullough

The EU Commission is to tackle falling milk prices after yesterday's farm council meeting moved to extend the intervention deadline.

The Commission had previously refused to intervene in the market. Yesterday's U-turn follows more cuts in milk prices here, with a 0.75c/l cut to 28c/l voted through by the board of Lakeland Dairies at the weekend.

It opens the way for the two biggest processors in the country - Glanbia and Dairygold - to implement further cuts when their boards meet this week.

With world milk prices close to the lows last seen during the major crash in 2009, the Commission agreed to extend the window for dairy processors to sell into intervention beyond the original September 30 deadline.

However, there have been no decisions yet on the key issue of intervention prices, which are equivalent to a farmgate price of 21c/l.

The Minister for Agriculture, Simon Coveney, accepted this week that falling dairy markets was affecting Irish dairy farmers, and that this was likely to continue for some time.

"I have asked the Commission to look at increasing both the volumes eligible and price paid for intervention to a level that provides a realistic safety net," he said in a statement from Brussels yesterday.

"It's important to use the full range of market measures available and for the Commission to act early and decisively to put a price floor in place when appropriate," .

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Last week, EU Agriculture Commissioner Phil Hogan ruled out any increase in intervention price on the basis that it would only delay an "inevitable and necessary adjustment" in European milk supplies.

However, the IFA's dairy chairman Sean O'Leary claimed that the EU Commission was obliged by law to keep intervention prices under review, by taking account of production costs and market trends.

He added that the current intervention price of 21c/l could not "credibly be described by the EU Commission as a safety net".

"Contrary to EU Commissioner Phil Hogan's statement, a review will not result in an increase in milk production as it would be unlikely to conclude with a price increase above production costs.

"Far from delaying a recovery, it would actually speed it up, by sending a very clear message to buyers that they cannot just go on waiting for EU dairy prices to fall further," he said.

"Rabobank, OECD and the EU Commission have all analysed dairy market trends and concluded that the cost of producing additional milk for export to satisfy the long term growth of global dairy demand is trending significantly up worldwide. Recognising and reflecting this in the EU 'safety net' is common sense, as well as a legal obligation," he concluded.

June is one of the key milk production months, with every 1c/l change in price equivalent to €8m in dairy farm receipts.

The deputy president of ICMSA, Pat McCormack, warned dairy processors here to pay the price equivalent to Ornua's dairy index.

"That price is well in excess of 28 cents per litre. This is a critical juncture in the cycle where farmers are on the very edge of viability in terms of the costs of production," he said.

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