Milk powder prices have fallen so much that the European Dairy Association (EDA) is urging the European Commission to open the Private Storage scheme. And the European Milk Board (EMB) wants the milk reduction plan to be scrapped. Telling distress signals, but is Brussels also responding to this?
The milk powder market has changed like a leaf on a tree due to the corona crisis. In the second half of 2019 and also at the beginning of this year, prices showed a strong increase. Although this was only recently, it doesn't feel that way due to the hectic pace of the past few weeks.
The DCA quotation for skimmed milk powder has already fallen by €760 to €1.890 per tonne since the start of the corona crisis in China. Whole powder and whey powder have also fallen significantly in value. Sentiment is also dark red in New Zealand and the United States. American dairy prices have fallen even faster, which means that European exporters are also at a competitive disadvantage on the world market.
A lack of sales is the big problem. The additional demand from Muslim countries, which imported larger volumes in March in the run-up to Ramadan, had little effect. In the meantime, milk powder stocks are increasing rapidly. Because cheese prices are also under pressure, 'flexible processors' are fleeing to skimmed milk powder and butter. The shelf life of these commodities is longer.
Milk production in Europe is currently increasing. From France, where the spring peak has almost been reached, (milk) concentrate is offered at dumped prices. However, factories with extra drying capacity decline this. They are afraid that their staff will fail. The DCA quotation for skimmed milk concentrate is therefore falling rapidly, this week by €683 to €950 per tonne. The lowest level in more than 2 years.
Call for intervention
In the meantime, the EDA, which represents the interests of dairy producers, has been asking the European Commission for 2 weeks to open up a private storage scheme (intervention) for skimmed milk powder. Market parties will receive a storage compensation, as was the case between 2015 and 2019. So far it has remained quiet from Brussels.
The public storage scheme, under which the European Commission buys milk powder, is open. Parties can sell their product to Brussels for €1.698 per tonne. This is only slightly less than current market prices. The Brussels warehouses have been empty since September, but it is quite possible that this will change soon. Who could have thought that a few months ago?
In North America Since this week, milk has no longer been collected in some places. A disaster for dairy farmers. In the short term they will still receive milk money for the liters not delivered, but in the long term this is an untenable situation. Especially because some American processors are in bad financial shape. It is certainly not excluded that a similar situation will also occur in Europe. In France, processors already destroy dairy products to keep milk processing going.
Milk reduction plan
The EMB, which represents the interests of dairy farmers, wants the European Commission to take immediate measures to encourage dairy farmers to scale down production. They fear the same scenarios as in the US and Canada. Brussels has not yet responded to this either. France and Italy are making plans to reduce production at national level, but it is more effective to do this at European level. The Special Committee for Agriculture will meet on Monday and the hope is that they will take the emergency calls seriously.