The latest EU price report for the dairy market published by the Milk Market Observatory this week shows improvements in prices both for milk and skimmed milk powder, reflecting the careful handling of the stocks by the Commission.
Agriculture and rural development Commissioner Phil Hogan said: “The benefit of our cautious approach is paying off. Market balance is always our priority. It is encouraging to see an improvement in farm gate milk prices again, helped by the measures the Commission has put in place. There is, however, no place for complacency and prudential production decisions must continue to be made by reference to the realities of market conditions.”
Public intervention, managed by the European Commission, played an important role in stabilising markets between 2015 and 2017, helping to remove surpluses in an extraordinarily imbalanced scenario. The Commission opened at the end of 2016 a process of monthly and later bi-monthly public tenders to gradually put these stocks back into the market. This was done in a careful way.
The combination of a robust demand for dairy products and a contained and responsible production growth supported by the careful management of the stocks by the Commission has resulted in competitive prices for producers. The dairy sector accounts for more than half of our current EU agri-trade surplus – a fact which confirms its importance.
Prices and production
The EU Milk Market Observatory (MMO) provides the EU dairy sector with more transparency by disseminating market data and short-term analysis in a timely manner. The latest data from the Milk Market Observatory suggest steady increase in dairy prices with some fluctuation:
- Skimmed Milk Power (SMP): EU SMP prices have been fluctuating below intervention level (169.8 €/100 kg) for the past twelve months. The situation has been slightly improving since May 2018.
- Milk: After having come down to a price level of 32 cents per kilo in May 2018, an upturn has taken shape, with an average price of 35 cents reached in September 2018.
- Butter: In a trend not seen since 2017, EU butter prices have been over €5000 per tonne for the past six months.
- Cheese: EU cheese prices continue to be good despite slightly increased stocks at manufacturers' level. Consumer demand for cheese appears as robust as ever.
After strong production growth in the first half of the year, cumulative EU milk production for the whole year 2018 is projected to end up with a modest 0.8% increase.
Key factors for milk production in the last months of the year will be weather developments, but also milk and feed prices which will determine the ability of farmers to buy animal feed to compensate for lower forage availability due to the summer drought. The Commission took a number of measures this summer to provide direct support for farmers dealing with lack of fodder.