Milk powder mountain continues to grow as EU struggles to find solutions

Sales of Skimmed Milk Powder (SMP) into intervention has reached 216,791t since the start of the year and is now almost over the already extended limit of  218,000t.

At the rate powder is being sold into intervention it will break the 300,000t mark in June. To put that into context 300,000t is as much as 75% of New Zealand’s annual production.

On Monday of this week alone, almost 7,500t of SMP was offered to public intervention with Ireland leading the charge on the day, offering some 55% of the product on the day.

Last week, some 26,000t of SMP was offered to intervention by EU Member States as dairy markets continue to slump across the continent.

The European Commission has come under pressure to further increase the ceiling on the amount of milk powder that can be put into intervention.

While they’re likely to cave into the pressure, they are by now realising such a vast build-up of stock (which will eventually have to be put back onto the market) will only delay any recovery.

And it’s not only in Europe where intervention decisions are important. Increasingly EU SMP intervention is being seen by those in the trade as the “glue” holding a fairly tentative global market bottom together.

Solutions

Unfortunately for European decision makers, there are no easy solutions to the current market strife.

Last September, the Commission bandied together the not too insignificant sum of €500m to sort out the problem, however, now, the figure looks paltry as the dairy sector descends into a full-on market crisis.

Furthermore, Agriculture Commissioner Phil Hogan has stressed that there is no more EU taxpayer money to plunder at this stage unless it’s to come from farmers own pockets.

For some in Europe, the problem is one of overproduction and groups like the European Milk Board are driving a mandatory pan-European milk supply reduction agenda as a solution.

Phil Hogan Brexit intervention
European Commissioner for Agriculture and Rural Development, Phil Hogan

With the much-heralded removal of EU milk quotas effective for just over 12 months, a return to such a measure even by a different name would be a massive change in direction for the current ‘market-oriented’ European Commission.

There has been some talk in recent days that the Commission might be considering policies used in the US and overseas such as margin protection where farmers are insured against the margin between feed and milk prices.

However, in the short-term the only solution seems to be further increasing the powder mountain as milk production peaks in many European countries.