The GlobalDairyTrade price index dropped 3.9% this morning.
The simple explanation is that supply is greater than demand.
The inbalance is aggravated by the EU putting 22,500t of skimmed milk powder from public intervention stocks on the market.
That’s the milk powder that the EU stockpiled when the global price for dairy products plummeted a few seasons ago.
Whether it’s coincidence that the price has dropped as the market is flooded with this extra milk powder, or whether it’s the cause, it would be much better if the EU kept out of the market.
Interfering when the price drops shields farmers from the price signals which would lead them to reduce costs which in turn would lead to producing less milk.
That prolongs downturns and risks another when the milk powder is eventually put on the market.
Farmers and consumers would all benefit if the EU butted out of the milk market and let production adjust to price signals.