Farm Ireland

Saturday 21 April 2018

Commission holds firm on price for EU milk powder

EU Commissioner Phil Hogan
EU Commissioner Phil Hogan
Ciaran Moran

Ciaran Moran

Member States have agreed not to sell any skimmed milk powder (SMP) out of public intervention this week after the Commission recommended to refuse all the offers on the count that they were well below prevailing market prices.

Offers were received for a total of 7,490t in this current tender, the prices offered ranged from €1550/t to €1900/t, well below the minimum price set at the first tender on December 15 of €2150.1/t.

The tender, which put on sale the skimmed milk powder that entered into public intervention before November 1, (some 22,000t) started on November 25.

The quantities offered for sale represent roughly 6% of the total 354,000t which went into public storage in 2015 and 2016.

The move to release these first volumes reflects encouraging signs of recovery on the European milk market.

Following a steady slow-down, no further quantities of skimmed milk powder have been put into public intervention since September 2016.

The Commission has said that this week's decision to refuse all offers and wait for better bids at the next tender underlines once more that selling at any cost has never been an option for the Commission.

Instead, it says maintaining market balance and price recovery remain its main objectives.

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So far the EU Commission has seen just 40t leave storage, after the first tender in late December.

Buyers have shown a resistance to purchasing stock above market price, which is what the Commission is looking to achieve.

However, according to analysts at the AHDB with the EU milk production flush not all that far away, selling product from intervention may become trickier.

“Buyers are likely to wait for clearer market signals around production before any significant commitment to the market.

“A low flush could see buyers increase their offer prices, allowing the Commission to achieve its goal.

“However, a normal/high flush could alter the supply/demand balance and limit the opportunities for the Commission to sell at full market price.

"Whether the Commission then need to re-set their price aspirations will depend much on the longevity of product in storage," it said.

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