Intervention won’t hit milk prices hard

INTERVENTION CUTS look increasingly unlikely to have a severe impact on milk prices in the short-term, despite the dire predictions of some processors and commentators.

Milk buyers had been accused of using the 6% average decrease in the value of intervened butter and skim milk, which will take effect from July, to talk the market down and prepare producers for a fall in milk prices – as low as 15p/litre in some cases.

But independent consultant Mike Bessey said: “It‘s a non-event, the markets are looking very positive. There is very little basis for farm-gate prices to fall at the present time.”

Mr Bessey said a reduction in milk output in the UK and across the EU, firm world commodity prices, good export demand and less competition than expected from the new EU member states had helped to keep farm-gate prices firmer than expected.

Dairy Crest has now decided against a mooted price cut in July.

Arthur Reeves, the milk processor‘s purchasing director said the July reduction in intervention prices had not affected the commodity market as much as expected.

“We‘re trying very hard to make sure we don‘t talk the market down.”

But he warned: “Let us not forget that this is the first intervention price cut out of four [over four years] that will be equivalent overall to 22%.

“While prices may be defying gravity for the time being they can‘t defy gravity for ever.”

Robert Wiseman Dairies said it had not decided on a July price yet. But it is widely expected that a cut is likely, with lower returns from the cream market perhaps being blamed.