EMB Newsletter July 2017
Dear dairy farmers and interested parties,
Almost a year ago, EU policymakers decided to award a financial incentive to dairy farmers who voluntarily reduced their production in the fourth quarter of 2016 up to January 2017. This decision contributed significantly to a change in trends on the flooded dairy market. Quotations for butter and cheese have also recovered significantly since then. Even milk prices paid to farmers rose slowly but surely to the current price between 30 and 35 euro cents. Of course, the current milk price is still not at an adequate level, but it looks like it will continue to evolve upwards.
Let us not forget: Just a short time ago - in the period between March and June 2016, the EU put the staggering volume of 335,000 tons of skimmed milk powder (SMP) into public intervention storage in order to prevent milk prices from collapsing further to well below 20 euro cents. Since then, this stock in storage is hanging like the sword of Damocles over the market and thus over milk producers as well. As opposed to butter and cheese, the price of SMP has remained around 1,800 euros per ton - slightly above the intervention price. Though milk production has remained below that of the previous year, the demand for skimmed milk powder can be fully covered by current production.
Last year itself, the EMB appealed to the European Commission to only bring milk powder from storage onto the market at a price that corresponded to a milk price of at least 40 euro cents per litre. New sales avenues, like pig feed, should otherwise be sought out. On January 23, we underlined this demand with a strong action in front of the Council building in Brussels.
After a string of calls for tender to no avail, the European Commission has now decided to release 100 tons of SMP for sale at a price of 1,850 euros per ton. This junk price constitutes a disastrous signal for market actors. Buyers in the food industry can continue to speculate with cheap milk powder. The urgently-needed, additional market recovery will be delayed or rendered completely impossible. It will have a global impact on the dairy market. It is now becoming clear that the entire exercise of unbridled production and consequent senseless storage is ridiculous. The EMB will do everything it can to prevent the further sale of stocks at dumping prices. This is an important condition if milk prices paid to farmers are to increase to the level of 40 euro cents and beyond.
As a first step, we have sent a very clearly-worded letter to Agriculture Commissioner Hogan. We have reminded the Commissioner of his responsibility toward milk price levels worldwide. These junk prices do not only hurt local milk producers, they also destroy markets in third world countries. If the Commission does not come back to its senses, we dairy farmers have no choice but to reply with strong actions.
Romuald Schaber, EMB president