Break out a celebratory bottle of milk, the European Union has removed subsidies on dairy products.
Trade Minister Tim Groser said:
“International dairy prices have shown a marked improvement across the board in the last three months, reflecting a more positive outlook in international dairy markets.
“In response to this market improvement, the European Union has been gradually scaling back its export subsidies since late October. The removal of remaining export subsidies sends an encouraging message to the international dairy market and I welcome that.
“I will continue to make the point in my international contacts that it is important not to revert to subsidies as a response to market conditions.
“All countries with dairy industries have an interest in a healthy international market. This is a positive development toward that end,” Mr Groser said.
That is very good news. However, let’s not forget the dairy produce which the Eu stockpiled when prices fell.
Releasing it will increase the supply which could dampen prices.
Phil Clarke sees this from the British point of view:
One thing that will be crucial is the rate at which butter and skimmed milk powder stocks are released from intervention in the EU. Last week the commission only went so far as to say it was following things closely and would not do anything to hinder recovery.
But EU dairy body Eucolait is worried that, if the commission leaves it too late, many food processors will switch out of dairy fat and into vegetable oil – and the opportunity to reduce stocks will be missed.
It’s a difficult balancing act, but one the commission has to get right if the dairy sector is to enjoy any kind of stability.
It’s tempting to say the sooner they get rid of the stockpiles the better, but flooding the market with dairy produce which has been stockpiled would depress prices.