At 11am on Monday morning this week, the EU Commission closed its tender process for selling 22,150t of skimmed milk powder (SMP) out of intervention.
At 11am on Monday morning this week, the EU Commission closed its tender process for selling 22,150t of skimmed milk powder (SMP) out of intervention.
All of this product was placed into intervention before November 2015, primarily by processors from Poland, Lithuania, Belgium, France, Ireland and the UK.
This volume of SMP represents just 6% of the total amount (335,000t) of SMP presently stored in intervention across Europe.
However, the real purpose of starting this process from the EU Commission’s perspective is to test the waters of the market and send a definitive signal to potential buyers that the EU places a high value on this stock. The Commission will be eager to send a message to buyers that it is under no obligation to sell in a given tender.
The Irish Farmers Journal understands that bids of about €2,200/t have been lodged by interested parties, but this will be rejected outright by the Commission.
At the latest GDT auction in New Zealand, SMP prices traded at more than €2,400/t, meaning the EU will be reluctant to sell below these levels.
Any signals to the market by the EU Commission that it was willing to sell its SMP stock at lower prices would have a negative effect for dairy prices.
This huge stock of SMP has overhung the market for the last year and its release will have to be managed very carefully to avoid hurting a rising dairy market.
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