ANZ Warns of Milk Price Risks as New Dairy Season Begins
The new dairy season is kicking off with plenty of risks to the forecast farmgate price, both upside and downside, says ANZ agricultural economist Matt Dilly.
About $235m will be set aside for EU-wide incentives to persuade farmers to cut milk production.
EU's commissioner for agriculture and rural development, Phil Hogan, says in light of budgetary pressures the money is a 'robust response', raising to at least $1.5 billion the EU has assigned to farmers.
"Our ultimate goal is to see the much needed recovery of prices paid to farmers, so they make a living from their work and continue to provide safe, high quality food, and contribute to rural areas and rural jobs and the provision of public goods."
The UK will get $46m, the third-largest share in the EU.
NFU dairy board chairman Michael Oakes says the commission has once again shown support for the farmers.
However, UK farmers have already voluntarily reacted to market conditions by pulling back on production: daily deliveries for the last two weeks of June were 9% lower than the same period last year.
This is without financial incentive, he adds.
"While grateful to the commission, we all want to see a sector that is competitive and market-orientated.
"It's also essential the commission as soon as possible tells the details of the conditions for the financial support. The UK government must be given flexibility to decide how this money is used and should consult with industry to utilise this money as soon as possible."
Meanwhile members of the European Committee of the Regions (CoR) want urgent measures to limit milk production. A report to the CoR last year shows that regulation of milk production volumes would have a rapid and positive impact on the incomes of all producers.
The study shows that European regulation of production volumes would have a rapid and positive impact on farmgate milk prices.
This conclusion calls into question the theory that a decrease in production volumes at the EU level alone might not have an impact on European prices.
Temporarily capping production volumes would boost the incomes of all European producers. The baseline scenario -- a 6% cut in milk volumes over a year -- would see an increase in producers' gross margin of around $7.8b as a result of a 14.6% increase in the milk price and a 38% increase in the gross margin.
