The European Milk Board (EMB) calls on European Commissioner Phil Hogan to stop dumping milk powder on the European milk market, which severely hinders milk prices. The European Commission started this on 20 June. The milk powder comes from the intervention scheme.
On June 20, the European Commission sold 100 tons of skimmed milk powder from the intervention scheme at a price of €185 per 100 kilos. According to the EMB, this price level is below the real value, negatively affecting the European and international dairy market.
In addition, it goes against the EC's own statement, which has as its main goal; market balance and price recovery.
stab in the back
Romuald Schaber, chairman of the EMB, is not happy with the intervention sale, the organization said in a press release. “It is a stab in the back for European milk producers and a disastrous sign for other players in the dairy market. Other buyers can now continue to speculate with cheap milk powder. Milk prices, which were recovering, are now under pressure again.”
Fair price is €335,00
According to the EMB, milk powder may only be sold at a price that does not undermine price stability. That starts with production costs of 40 cents per kilo of raw milk. This is the norm in countries such as France, Germany and Belgium, which are affected by the intervention. Added to this are transport, processing and marketing costs. EMB estimates the price at a minimum of €335,00 per 100 kilos of milk powder. To get rid of the huge stock of 350.000 tons, other sales channels must also be explored, such as those of the animal feed industry.
Learning from your mistakes
“The committee must learn from its mistakes of the past and understand that an intervention scheme does not bring stability to the dairy market,” says Schaber. “If milk prices remain at the current low level, dairy farmers will simply produce more milk to keep the cash flow going. In the past, it has been shown that an intervention scheme only has an effect on milk prices, because it tackles direct overproduction. The EU should therefore limit the volume in the future instead of simply removing shortfalls temporarily. This delays the real solution to the problem.
EC policy is short-sighted
The reason for Commissioner Hogan to allow the sale of milk powder is the historically high milk fat price. According to the EMB a bad decision. “Fat makes up only half of the milk price. The other half is formed by the protein, in other words, the milk powder. In order for milk prices to rise, the price of milk powder must also be at an acceptable level," it wrote in a letter to Hogan. If the EC continues to offer milk powder at dumping prices, the EMB will consider legal action.
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