No intervention SMP sold through this week's tender

Prospective buyers were invited to bid by Tuesday for around 22,000t made available at the end of last year from intervention stocks accumulated during the recent milk price crash. The Irish Farmers Journal understands that European experts rejected all offers in this round of bidding on Thursday.

Only 40t were sold when the tender first opened mid-December, at prices ranging between €2,150/t and €2,200/t.

Some 21,963t of SMP remain available for sale and bi-monthly tenders will now take place until this is exhausted. Ireland is storing 1,771t of these. Cumulated intervention stocks currently represent 353,815t of SMP across the EU, 38,660t of which are in Ireland.

SMP prices are on the rise, currently trading at €2,060/t on European markets and $2,660/t on the New Zealand-based Global Dairy Trade (GDT) platform. This is likely to make European experts stricter on the minimum price they will accept for SMP out of intervention stocks, as EU officials have emphasised that they would not make any sales that could destabilise the recovering market.

Private storage shrinking

Meanwhile, figures released by the European Commission this Thursday show that large volumes of dairy products placed into the separate Private Storage Aid (PSA) scheme during the recent milk price crash have begun to flow back into the market.

This is happening as the commodities taken off the market at the height of the crisis either come to the end of their subsidised storage period, or are taken out by their owners because they can trade them at more attractive prices. Meanwhile, volumes entering PSA have been decreasing for SMP and its use stopped last September for butter and cheese.

There were 34,876t of SMP in PSA at the end of November, compared with 74,778t one month earlier. Most of the de-stocking took place in the Netherlands, Germany and Belgium, but none in Ireland.

More than 22,000t of butter were taken out of PSA in November, accounting for nearly 30% of the volume stored under the scheme. Just over 1,500t were released out of Ireland.

Cheese stocks under PSA, too, fell by 1,326t in November out of a total of 18,372t. One-third of the cheese released came from Ireland.

Reaction

According to IFA National Dairy Chairman Sean O’Leary, this augurs well for December milk price increases for Irish dairy farmers, and for milk prices into the New Year.

This will undoubtedly improve the ability and confidence of co-ops to pay further milk price increases

"Assuming a representative Irish product mix, the prices reported for the week ending 1 January suggest gross returns of just under 38c/l, and therefore equivalent to a farm gate price of 32 to 33c/l + VAT,” O'Leary said. “A growing number of contracts signed by Irish co-ops will be for products priced nearer those higher levels, and this will undoubtedly improve the ability and confidence of co-ops to pay further milk price increases."

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