Skimmed milk powder (SMP) in Northern Ireland will be offered for sale into intervention storage in the next few weeks as current contracts run out and market depression persists.

Dairy traders are indicating that new contracts for sale of bulk commodity products are all being offered at purchase prices below the equivalent of intervention prices. This makes intervention a better option for at least some SMP, even with the bureaucracy involved, and local processors are ready to tender for intervention.

Purchase

On enquiry by the Irish Farmers Journal, United Dairy Farmers chief executive David Dobbin confirmed that Dale Farm will offer some SMP for intervention purchase in August. He said it will be part of the mix of product sales that the company makes and returns from intervention will be combined with the better returns from other sales and added-value products to provide the best possible price for members’ milk.

Adding to calls that the European Commission should raise the intervention price, Dobbin said that the price set for intervention acts as a reference price for actual traded products on the market in Europe at a time of surplus and the whole floor of that trade could be raised if the European Commission would act.

He said that the Commission needs to recognise that increasing the price won’t necessarily result in a flood of product into intervention and it is necessary to do something now to underpin the dairy sector in Europe and avoid a serious collapse.

Butter prices are currently above intervention level but are dropping.

As Dutch prices for all dairy commodities have continued to fall since the last huge drop of 10.7% in the Global Dairy Trade internet auction, large dairy processors within the EU have been switching milk into cheese manufacture and prices for bulk cheese are now dropping fast towards the intervention level. There is no intervention for cheese but the price could be equivalent to the prices returned for the intervention products. At current rates, if both SMP and butter were being sold to intervention they would combine to give around 13.5p/litre for milk ex-farm.

That low price reflects the fact that the exchange rate has taken more than 10% off the value of all euro prices for agricultural commodities in sterling terms during the past year.

All product prices in the UK have been hit hard by the falling exchange rate of the euro relative to the pound sterling.

Meanwhile, the representative bodies of Europe’s farmers and co-operatives, Copa and Cogeca, warned at the EU Milk Market Observatory meeting this week that the EU dairy market situation has deteriorated rapidly in the past four weeks, and without EU action, many producers will be forced out of business by winter.

Market

Speaking at the meeting, Mansel Raymond, chair of the Copa-Cogeca Milk Working Party, said: “The market is in a much more perilous state than it was four weeks ago, with producer prices far below production costs. It’s a critical situation for many dairy farmers across Europe.’’

Also commenting on the state of the market was Ulster Farmers’ Union president Ian Marshall, who maintained that the industry is in a crisis. He repeated his call for the European Commission to raise intervention prices and also suggested that the 2014/15 €700m superlevy bill should be returned to the sector to help ease cashflow pressures.

He also acknowledged that other sectors of local agriculture are under significant financial pressure given the weak euro against sterling.