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EU intervention move expected to ease spring flush pressure on milk prices

A move by the European Commission to extend the volumes of skimmed milk powder and butter able to go into intervention ahead of the spring flush has been welcomed by the dairy industry.
The dairy industry hopes EU intervention will ease market pressure during the spring flush
The dairy industry hopes EU intervention will ease market pressure during the spring flush

A decision to double the EU intervention ceilings for skimmed milk powder (SMP) and butter will help resist the downward pressure on milk prices during the spring flush, according to industry representatives.


EU Agriculture Commissioner Phil Hogan announced the decision to increase the ceilings on SMP to 218,000 tonnes and to 100,000 tonnes on butter as part of a wider farm support package after a meeting of EU Ministers in Brussels on Monday.


The move was welcomed by the four UK farming unions.


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NFU president Meurig Raymond described it as a ’step in the right direction’.


"I am delighted they are raising the ceilings in the short term to take more tonnage off the market to try and stabilise the market while political discussions take place with the Russians to try and re-open that Russian market," he told BBC’s Farming Today.


He stressed the intervention price was not high enough to raise milk prices but said: "At a time when farmers are selling well below the cost of production, this is a step in the right direction."


Dairy UK chairman David Dobbin said: “Dairy UK has consistently highlighted the important role that intervention can play in the current crisis especially during this spring’s peak production period.


"With intervention currently filling up quickly, Commissioner Hogan’s proposal to double the intervention ceiling on SMP and butter is very much welcomed.


“It is essential that there is an effective floor in the market and an outlet for short term surpluses.


"This will help avoid even greater downward pressure on milk prices in the current global over supply situation. We are happy that the Commission has listened.”

MEP response


Ulster Unionist MEP Jim Nicholson, who published a report on EU the dairy sector last year, also welcomed the intervention move, which he said provided a 'degree of certainty for the dairy sector in terms of future arrangements'."


He was less enthusiastic about another key element of the package, allowing dairy producer organisations and co-ops to voluntarily regulate milk supply.


He said the measure was opposed by a number of member states, including the UK and the Republic of Ireland, ahead of the meeting.


Mr Nicholson said: "I await further details regarding this temporary measure, it will be interesting to see which member states make use of this initiative as I gather countries will have to fund it via their own funds."


He said the proposed body to monitor the beef and pigmeat markets, a so-called Meat Market Observatory 'must learn from the Milk Market Observatory'. Formed in 2014 it is yet to fully live up to expectations and is itself in need of an overhaul, he said.


Mr Nicholson expressed disappointment one of the UK’s key asks, a temporary suspension of EU tariffs and duties on imported fertiliser, was not adopted.


"The removal of these tariff barriers would help make the market more competitive and drive down prices,” he said.

Defra response

Defra Secretary Liz Truss said: “The package put forward by the EU Commission will help British farmers become more productive and competitive.


"The widespread support within the council for action to help farmers with the audit system and fertilisers also demonstrated the will within the EU to back agriculture and I look forward to working closely with Commissioner Hogan on these ideas."


Mrs Truss said she secured backing from 16 other countries for proposals to improve the current CAP audit system which she said would benefit UK farmers by reducing the risk of penalties. Mr Hogan committed to carefully considering the UK proposals after the groundswell of support around the council table, Mrs Truss said.


Although he did not mention the proposal in his speech, Mrs Truss said Mr Hogan also promised to consider a proposal to remove tariffs on imported fertiliser.


Statement by UK farming unions

The presidents of NFU, NFU Scotland, NFU Cymru and the Ulster Farmers Union welcomed 'some of the positive steps' Commissioner Hogan announced to help the sector– but urged decision makers to urgently respond to the current crisis in UK farming.


They said in a joint statement: “Commissioner Hogan’s package of measures are a step in the right direction.


"We welcome increases to the limits for dairy intervention and steps to look into a new private storage aid scheme and are very pleased to see that the commission will establish a meat market observatory – a key UK farming union ask."


The presidents met Defra Secretary Liz truss at the NFU office in Brussels ahead of the EU Ministerial meeting.


They outlined four additional steps the Commissioner and Mrs Truss could take to help farmers in these difficult times:


  • Removing tariffs on imported fertiliser is of the utmost importance. The differential between global and European fertiliser prices has now reached €100/tonne – lifting this burden could really help UK farmers to become more competitive against our global counterparts, the unions said.
  • Speeding up work with the European Investment Bank. The unions welcomed Commissioner Hogan’s announcement he will prioritise this work and urged him to 'keep his foot on the accelerator as much as possible'. "This is something we will also be urgently taking forward with Defra, the Treasury and High Street Banks."
  • Greater market transparency is key. The unions said: "We look forward to playing a key role in the setting up of the Meat Market Observatory."
  • Reviewing the dairy intervention price could stabilise prices in the milk market, providing much needed support to the sector.


Eustice explains opposition to intervention price rises

Eustice explains opposition to intervention price rises

Farming Minister George Eustice has explained why UK Ministers did not back industry calls to push for an increase in EU dairy intervention prices.


He told Farmers Guardian: "We have been supportive of private storage aid schemes. But we are sceptical about increasing the intervention price for a number of reasons.


"It tends to benefit other EU countries before it benefits the UK because our prices, although bad, are still at the upper end of the scale.


"Milk from other EU states would go into intervention first and, as intervention has to be funded by top-slicing everyone’s Basic Payment, you could have a situation where British farmers take a cut to support farmers elsewhere in Europe.


"You end up with more skimmed milk powder in storage which means when you do get a recovery it is much slower. Also it is the quickest way to kill a futures market if you have lots of random political interventions.“


"I can understand why it is superficially attractive to some, particularly in Norther Ireland but it is no panacea. There are downsides to increasing the intervention price."


Mr Eustice added: "We recognise these are just incredibly difficult times for dairy farmers.


“We have offered the Commission help on a number of different areas, for example they are interested in whether other countries could learn from some of the work we have already done on the supermarket adjudicator.


"We are also doing quite a lot of work on futures markets, what needs to happen to the Milk Marketing Observatory to try to give the clarity of market data to make it a success."


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