EU Commission wants to start releasing some SMP as dairy markets continue very strong
The EU Commission has this week mooted the release of around 22,500t of SMP produced pre Dec
2015 from intervention storage. The product is held in Belgium, Lithuania, Poland, Ireland, France and the UK. This decision can only be made further to a positive vote at a Management Committee meeting, planned for next week (24th Nov), and it is expected to meet a lot of objections as SMP prices have not recovered to the same extent as other dairy prices.
However, the quantity is not huge, and even if it were to be released, what matters most is the price point. If OKd by the Management Committee, the product will sell by tender, and the EU Commission can decide where to draw the line on price. Having spent almost €1b supporting mostly the dairy sector in the last 12 months, it is unlikely that the EU Commission would sell SMP below the going rate – allowing for the fact that the product to be released is nearly 12 months old.
Current SMP stocks stand at around 350,000t, and no product has been sold into intervention since mid-September – since mid-August in the case of Ireland. Ireland has sold a total of 35,996t into intervention in 2016, which represents just under 11% of the total sold in – as against 15.5% for Belgium, 18.5% for Germany and nearly 20% for France.
Massive powder price lift in GDT
This week’s GDT auction saw a 4.5% lift in the index, following from a massive 11.4% in the first November auction.
Releasing intervention SMP might be made less disruptive of markets if the GDT 9.8% price increase were to influence EU prices – which it probably will! SMP GDT price is up 55% since last May.
WMP prices have also risen spectacularly, by 3.2% in the 15th November auction, and by a total of 66% since last July. Butter prices are up 56% over the same period (1.1% in the last auction).
In fact, in this auction, all products saw uplift, including an 11% increase for Cheddar prices, and a 4.4% increase for AMF (butteroil).
Expected lower volumes linked to poorer than normal immediate post peak weather conditions and (very recently) damage and disturbance caused by a series of earthquakes are all contributing to reducing output expectations in New Zealand (see below).
Fonterra have reflected improved dairy markets by increasing their forecast milk price by 75c to NZ$6/kg MS in the last day – which together with the expected Fonterra dividend would add to a payout of NZ$6.50 to 6.60/kg MS (around 30 Euro cents per litre in Irish terms).