Price cuts fears from butter sale

THE EUROPEAN Commission has started selling the 230,000t of intervention butter in its stores at levels which could put pressure on farm-gate milk prices.

At last Thursday‘s (July 15) market management meeting, almost 3200t was sold at about €280/t (£188/t).

This is 2% above the latest intervention values, but about 7% below bulk butter prices.

A total of 50,000t is currently earmarked for disposal and new tenders will be accepted every two weeks.

About 20,000t of intervened skimmed milk powder has already been sold into the subsidised animal feed market and other tenders will be discussed next week.

Independent analyst Mike Bessey said: “This makes it all the more certain that market prices will be moving down.”

But Tom Hind, NFU chief dairy adviser, said he was relieved that the price wasn‘t lower.

“The Commission rejected a lot of bids at €250-260/t, which suggests our concerted lobbying has been working.

“But we must maintain our resolve to ensure that it takes its responsibilities seriously,” he added.

It is feared by some in the industry that the EC is planning to use intervention disposals to bring down dairy market values.

This follows  expected falls that failed to materialise after butter and skimmed milk powder intervention values were cut by an average of 6% at the beginning of July.

These falls were supposed to be compensated for by the dairy premium, which will be paid to all milk producers from 2005.

But there is a feeling that the Commission was starting to feel uncomfortable it might end up giving something for nothing if milk prices remained firm.