Industry livid over EU's milk refund cuts

- Last updated on GMT

Related tags: Milk powder, Powdered milk, Milk

British and Irish milk producers say the EU Commission has let them
down by irresponsibly chopping export refunds on both skimmed and
whole milk powder, reports Chris Mercer.

Farmers' unions across Britain, Northern Ireland and the Republic of Ireland have been meeting in Belfast to discuss their concerns over the cuts.

The Commission's Milk Management Committee voted to slash refunds on whole milk powder by 16.8 per cent, from €65 to €54 per 100kg, and skimmed milk powder by around 46 per cent, from €28 to €15 per 100kg.

The UK National Farmers' Union (NFU) said it was concerned about the possible ramifications of the cuts, which it believes were not justified by current market trends and gave a false indication of future price expectations.

NFU dairy board chairman Gwyn Jones said he was concerned about the Commission driving refund cuts before next month's scheduled reduction in EU support prices. He said the EU body must "seek to follow market developments rather than lead them"​.

The EU is set to reduce the intervention, or base line, price for skimmed milk powder by €10 to around €185 per 100kg from 1 July. The move is part of a three-year scheme to reduce dairy intervention prices as the EU reforms its Common Agricultural Policy.

A Commission source told www.DairyReporter.com​ that "if the intervention price is going down then it is normal that we would reduce the refunds as the EU price comes closer that on the world market"​.

The Commission issues refunds to EU producers exporting to countries outside of the bloc to help them remain competitive on a world market that often has lower prices.

The spokesperson added that, as EU prices were brought down, refunds must be brought down too so that the incentive for farmers to export to the wider world is not too great; something which presents a danger to the EU market itself.

The NFU's Jones rejected these arguments regarding the current cuts. "The industry consensus is that dairy markets will remain firm well after 1 July.

"We see no reason why the Commission should act preemptively on the expectation that the cuts in intervention prices will have any affect on the market,"​ he said.

His words echoes those of Michael Murphy, chairman of the Irish Farmers' Association, earlier this year: "If we have learned anything from 2004, it is that markets do not necessarily follow the CAP Reform scenario of institutional support reductions,"​ he said.

Ramsay Stewart, milk committee chairman at the Ulster Farmers' Union, said the Commission had let down local dairy farmers, "who are already facing the prospect of additional costs brought on by the Nitrates Directive process and the poor weather conditions in recent weeks"​.

Stewart said he would use his position on the Commission's milk advisory board to remind the EU body of its responsibility to consider the impact such decisions may have on local producers.

Export refunds on skimmed milk powder have been cut fairly consistently over the last two years as intervention prices have also fallen, though the Commission did raise the refund level by €10 in January this year to account for a weaker US$.

Danish dairy group Arla, which also controls the biggest branded dairy group in the UK, ArlaFoods, decided to shift milk powder production into a higher, added-vale segment of the market last year to try and offset its forecast 15 per cent decline in skimmed milk powder prices over the next four years.

The firm said last autumn that many European producers were reducing skimmed milk powder output by as much as 20 per cent in the peak season because of the impending EU price cuts.

But it is not just milk powder markets that are affected. The Commission's milk management committee has also voted to cut intervention support prices for butter by 7.5 per cent from 1 July.

Related topics: Manufacturers, Fresh Milk

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