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The Minister for Agriculture Michael Creed this week supported a European decision to suspend automatic intervention buy-in of skimmed milk powder (SMP) at the fixed price of €1,698/t when the scheme opens for annual season on 1 March.
Instead, EU member states including Ireland have approved in principle a European Commission proposal to use tenders to decide what volumes of SMP to take off the market, if any, and at what price on a case-by-case basis.
Intervention is a key market management tool with a proven track record
The proposal has come under fire as EU ministers are due to approve it formally at their next Council meeting on 29 January.
While acknowledging that the large amount of SMP in existing intervention stocks is depressing prices, IFA dairy chairman Tom Phelan said: “Minister Creed must insist that the integrity of the regulations, and the safety net they provide, are preserved, especially as intervention is a key market management tool with a proven track record of helping rebalance market disturbances.”
Price index
ICMSA dairy chairman Gerald Quain has called for automatic buy-in to be restored if the milk price drops. “Intervention for SMP should be automatically triggered with the current 109,000 tonnes limit when the EU milk price falls below 30c/l based on Irish base constituents,” he said.
Speaking in the Seanad this week, Fianna Fáil spokesperson on agriculture Senator Paul Daly asked Minister Creed to withdraw his support for the proposed “significant reversion of EU policy” after intervention put an effective floor under SMP prices in recent years. “This safety net has given certainty to dairy farmers and removing it for any period of time is playing with fire,” Senator Daly said. “This change to SMP intervention will, as you’re quite aware, bring down the farmgate price of the litre of milk. Next year it won’t be fodder or cereals, it will be dairy farmers who will be knocking on your door.”
It is only a short-term intervention for what we hope is only a short-term problem
Minister Creed replied that priority should be given to reducing the existing stock of 390,000t of SMP worth €600m. “That overhang on the market is of itself a damper on global dairy prices,” he said. “Business as usual would exacerbate the difficult price for the product.”
Minister Creed added that while the Commission had originally presented the phasing out of fixed-price intervention buy-in as a permanent measure, this was no longer the case. “There is agreement across Europe that this is the appropriate way to continue at the moment, but it can be kept under review,” he said. Pressure from member states including Ireland ensured that “it is only a short-term intervention for what we hope is only a short-term problem,” he added.
Structural albatross
Meanwhile, commenting on the last sale of SMP out of the measure, Conor Mulvihill, Director at Dairy Industry Ireland said: “The tender result shows not only the severe pressure SMP is under in the market, but also the continued divergence between the price paid in global markets for fat versus proteins.”
Global prices for fresh SMP have dropped 22% from the peak of the dairy market last August to around €1,350 so it is no surprise to see this older stock being discounted somewhat.
“People accept that the SMP overhang in intervention is a structural albatross around dairy companies and farmers necks suppressing a price recovery of a key protein commodity for their milk, especially in butter producing countries like Ireland.
“Dairy Industry Ireland is working hard with partners in Brussels to ensure that this overhang is managed as quickly and efficiently as possible, while causing as minimum disturbance to the market as demanded in legislation.”
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