Farm Ireland

Saturday 23 June 2018

EU plan won't affect global dairy prices

Rabobank's Kevin Bellamy
Rabobank's Kevin Bellamy
Declan O'Brien

Declan O'Brien

The EU's emergency milk support scheme will have little effect on world dairy prices, according to well-known dairy sector consultant Michael Keane.

The former UCC academic said the €150m package announced by Commissioner Hogan last week would probably do "a little bit of good", but he insisted that the current slowdown in global supply growth was "much more important".

The latest industry data showed that milk production in New Zealand was back 10pc in June compared to 2015, while EU supplies are expected to ease significantly this autumn.

Industry analysts believe this contraction in dairy supplies will spark a gradual recovery in milk price.

Commenting on the Commission's actions, Kevin Bellamy of Rabobank said: "…it seems likely that the world dairy market will in any case tighten later in the year and prices would have risen in 2017, with or without further measures [by the Commission] to reduce supply."

Mr Keane said there was a danger that the market benefits of this supply rebalancing would now be incorrectly attributed to Commissioner Hogan's measures.

He also pointed out that any positive market reaction to a drop in EU milk production would be of equal benefit to New Zealand and US dairy farmers since it would cut supplies to the global market.

There is growing support at the EU Council for milk supply control, with just five of the 28 member states still strongly in favour of the decision to abandon milk quotas. These include Ireland, Denmark, Holland, Sweden and Estonia.

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In contrast, up to 14 countries favour some sort of supply control, including heavyweights such as France, Italy, Spain and Poland.

However, Brussels observers believe Commissioner Hogan's package will stymie any attempts in the short-term to go beyond voluntary supply restrictions.

"This initiative will have to be given time," one industry source maintained.

Indo Farming