10 Jul 2015
REVIEW OF INTERVENTION SAFETY NET ABOUT SETTING HIGHER FLOOR AND SPEEDING MARKET TURN-AROUND, NOT CREATING ALTERNATIVE MARKETDairy
Restating IFA’s policy, supported by EU farm organisation COPA and the EU Parliament, on the need for a review with a view to an increase of the dairy intervention ‘safety net’, IFA National Dairy Committee Chairman, Sean O’Leary said that in seeking this review, IFA is merely looking to the EU Commission to fulfil its legal duty under CAP legislation.
He said this was about sending a clear message to the marketplace that current dairy price levels are unsustainable and, without creating an alternative to the real market, it would influence buyers’ assessment of just how low they can expect prices to fall and encourage them to engage again. He said this was an important consideration for the long term, as the ‘safety net’ was clearly intended by the EU legislation to keep track of production cost and market trends.
“The EU Commission is obligated, under Article 7.2 of CAP EP and EU Commission Regulation 1308/2013, to keep the “reference thresholds”, i.e., intervention prices under review, taking account of production and input costs, and market trends. It is also obligated, when necessary, to update the said “reference thresholds,” Mr O’Leary said.
“The current intervention butter and SMP “reference thresholds” of €2,463.90 and €1,698.00 per tonne respectively are equivalent to a farm gate price equivalent of no more than 21c/l – at least 4c/l lower than the average Irish production costs, as calculated by Teagasc in the National Farm Survey, and significantly lower again than most European dairy farmers’ production costs. This level cannot credibly be described using the EU Commission term of ‘safety net’, when it is so far out of range of realistic EU production costs,” he added.
“For the EU Commission to fulfil its legal duty by announcing and undertaking a review will not result in a massive return to intervention buying-in, as we would envisage the review would not conclude with a price increase above production cost break-even. However, it would send a very clear message to markets in the short term and the longer term, that rising cost trends have made the production of milk costlier – a fact well documented by FAO, Rabobank, EU Commission and many other international analyses – and that buyers cannot simply hang around waiting for prices to fall to unsustainable levels as is the case at present,” he concluded.