Farm Ireland

Tuesday 20 March 2018

EU may start to sell its vast stocks of milk powder in intervention

Photo: Jasper Juinen/Bloomberg
Photo: Jasper Juinen/Bloomberg
Ciaran Moran

Ciaran Moran

The EU could make the significant step of selling some of its milk powder intervention stocks in the coming weeks.

It is understood there will be a vote by Member States this Thursday on whether to go ahead with a sale of Skimmed Milk Powder (SMP) out of intervention. 

If Member States vote to pass the Commission's proposal, the first tender could open in mid-December.

While the quantities of SMP offered into public intervention have slowed considerably in recent months, there is now in excess of 350,000t of SMP in public ownership following the collapse of dairy prices since 2015. This move by the Commission would see it offload approximately 6pc of the total amount in storage.

According to Commission sources, the European milk market is showing “encouraging recovery signs, with an increase of about 10pc of the average price paid to producers in the last three months”.

“We're by no means out of the woods yet, but several indicators show an improvement of market conditions, including a much needed price recovery, albeit from a low level”.

Source: European Milk Market Observatory
Source: European Milk Market Observatory

Following a steady decrease, no more quantities of SMP have been put into public intervention since September, even though this market measure remains open.

It is understood that in order to test the market reaction, the Commission will propose to open a tender procedure for a limited quantity of skimmed milk powder currently in public intervention, equivalent to 6pc of the total amount stored since October 2015 (amounting to 355,000t).

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Opening the tender procedure does not mean selling products. The offers received will be examined and accepted only if they do not risk disrupting the market recovery, according to one person in the Commission.

“The process will be under constant reassessment. All the support measures put in place by the Commission to help dairy producers will remain in place (including public intervention),” the Commission source said.

It is understood the money obtained from selling this SMP will be used to reimburse Member States (who advanced the sums needed to purchase the products) and to finance storage costs.

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