“It doesn’t disappear. It (stored dairy product) is going to come out at some point. It doesn’t solve the problem at all,” she said.
In policies harking back to the 1980s and 1990s when European warehouses were full of stored dairy products that overshadowed the market for years, the EU Agriculture Council would consider proposals from Ireland and France to soften the impact of low milk prices.
The Irish Farmers Journal reported France proposed a NZ$320 million fund to incentivise farmers not to produce milk, the goal being to reduce 2016 production by 3%, or two billion litres, compared to 2015.
The French proposal would pay farmers NZ$160 for every 1000 litres of milk not produced compared to last year.
Member countries that did not reduce production would be financially penalised.
The EU Milk Market Observatory report noted EU milk production last year was 2.5% higher than 2014 and forecasts for 2016 were for production to be up another 1%.
Global production last year was 1.4% higher.
There were also calls for higher intervention prices and intervention ceilings, or volumes that could be stored, for skim milk powder (SMP) and butter.
The two nations sought an increase in the intervention ceiling for SMP from 109,000 tonnes a year to 160,000t but Ireland wanted the ceiling to increase to 200,000t.
France sought the intervention ceiling for butter to be lifted from 50,000t to 80,000t and for continued efforts to have the Russian trade embargo lifted.
“They say it will soften the price signals back to producers which is one aspect, but the other aspect is that the EU argues it helps put a price floor on the market, but it is an artificial price floor.”
Kimberly Crewther
Dairy Companies Assn
The report said more than 11,000t of butter was put in storage as prices, which have stayed relatively stable, started to fall.
Crewther said last week alone 10,000t of SMP was put in storage on top of 54,000t since the start of January. In total, 94,000t of SMP went into storage since July.
The report said the 109,000t SMP ceiling could be exceeded by April.
Under the system companies could offer to sell product into the intervention system at any price but in practice the EU Commission set a price close to the market.
Crewther said, if adopted, the proposals would disrupt global dairy markets.
“They say it will soften the price signals back to producers, which is one aspect, but the other aspect is that the EU argues it helps put a price floor on the market but it is an artificial price floor.”
She hoped the EU would take a market-orientated position and did not mask market signals.
Crewther’s concerns had support from the United Kingdom with the Irish Farmers Journal reporting George Eustace, the UK minister for farming, food and the marine environment, warning increasing market support or intervention would be a backward step.
In a letter to the EU Commission, Eustace said intervention detached farmers from market signals, increased consumer prices and reduced the incentive for risk-hedging instruments.
Restricting production during periods of low prices penalised the most entrepreneurial and efficient farmers.
