DAIRY COMMODITY values continue to defy intervention price cuts and look set to remain firm in the run up to Christmas.

Skimmed milk powder and butter prices have stayed above intervention prices since the 6% cuts in July and show no signs of any significant weakening, says Ken Boynes of the Milk Development Council.

Milk supply across the EU is down 1.4% this year and this has cut SMP production by 22.2% and butter by 3.2%. World demand is also strong and output from Australia and New Zealand down.

“Since the EU opened its SMP intervention stores it has actually increased the price,” said Mr Boynes. Over half of the 190,000t in store had already been sold with the price rising by €180/t (£126) to €2089/t (£1460) to reflect the demand.

Mr Boynes said the shortage of milk was unlikely to ease by the beginning of 2005. “There were worries over whether prices would come down in the New Year, but people now seem less concerned.”

However, he said prices may come under more pressure when the second round of intervention price cuts, set to be 5-7%, is implemented in July.

But NFU dairy board chairman Gywn Jones said a cut in support payments need not precipitate a fall in prices and at a meeting with officials warned the European Commission not to destabilise EU dairy markets.

“If the market is good, we should be allowed to capitalise on it.”