Says European Milk Board
Fair price for intervention milk powder
'Intervention milk powder must yield a fair and adequate price', according to Romuald Schaber, chairman of the European Milk Board (EMB). According to the EMB, the target price for intervention milk powder is 335 euros per 100 kilos.
The milk market still does not seem to be able to deal with the excess of milk powder. There are currently 350.000 tons of skimmed milk powder stored in intervention. That volume weighs heavily on the European milk market. Although raw milk prices have increased slightly, at 33 cents per liter they are still below a cost-effective level.
215
euro
EU price is too low
The EMB chairman explains that a sharp fall in milk prices is to be expected if the various EU Member States were to sell the intervention milk powder at the current market price of 175 euros per 100 kilos. 'The price of 215 euros per 100 kilos, set by the European Union, is also far too low. That market price will also push the milk price down', says Schaber.
Intervention milk powder may only be sold at a stabilizing price. Based on the production costs of the strong intervention countries, such as France, Belgium and Germany (above 40 cents per liter of raw milk), and the addition of transport, processing and marketing costs, the result is a price of at least 335 euros per 100 kilogram of milk powder. Schaber's target price is also based on this.
Don't throw away luggage cheaply
'The European Union is in a dilemma,' says Schaber. 'Since the abolition of the milk quota in 2015, interventions and private storage have been important instruments to stabilize the milk market.' However, it has been clear for more than 2 years now that this is not the appropriate way.
'Right from the start, intervention did not lead to price increases and the stored milk powder turned out to be just heavy baggage,' says Schaber. 'However, we cannot simply throw this baggage away cheaply,' emphasizes the EMB chairman.
Production Reduction Scheme
The production cut-back scheme, introduced by the EU at the end of last year, has brought a noticeable recovery to the market. Volumes have not been produced under that regulation, which means that they have not been able to harass the sector.
This has been a one-off measure so far. The voluntary limitation of supply, including a temporary production capacity during the reduction period, will be used as a regular instrument in the EU. The EMB recommends the scheme as part of a crisis mechanism, the market responsibility programme.
Kimberly Baker
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