Thursday, 22 November, 2001

By FWi staff

DAIRY market managers in Brussels have raised export refunds for butter and milk powder to keep EU products competitive, six months after embarking on a subsidy-slashing spree.

To try to generate more trade, the EU dairy management committee has agreed a Euro100/t increase in export refunds – equivalent to about 1p/litre on the raw milk price.

The move follows weeks of falling world values, pricing EU exporters out of the international market.

Skimmed milk powder, for example, has slipped from $2100/t (1480/t) to less than $1800/t (1270) in three months.

SMP prices are now below intervention levels, and UK butter prices have also fallen, by about 6% since June.

Back in May, after a prolonged period of buoyant world prices, the EU cut subsidies hard.

SMP exports attracted a Euro490/t (300/t) subsidy in August 2000; a year later, it had disappeared.

Dairy companies reacted by cutting production, and most UK buyers called a halt to price rises this autumn, with some warning of impending cuts.

But although the increased refund may take some pressure off raw milk values, it is unlikely to lead to better prices.

Keith Bassant, milk supplies manager for Southern Co-operative Dairies says: “Any improvement in the marketing of the product will help, but by how much and when it will feed through remains unclear.”