EU-28 Dairy Intervention Update – Oct ’20 – eDairyNews
Europe |29 octubre, 2020

Dairy | EU-28 Dairy Intervention Update – Oct ’20

Dairy private storage aid and intervention schemes have been made available to European dairy producers and processors in response to price declines and volatility associated with COVID-19.

Highlights through the end of Sep ’20 include:

  • EU private storage aid of butter, skim milk powder and cheese was reopened from the second week of May through the end of June. Through the closure of the scheme at the end of June, 63,300 tons of butter, 19,600 tons of skim milk powder and 42,600 tons of cheese were added to private storage aid. Combined private storage aid stocks of butter, skim milk powder and cheese have declined by a total of 27,400 tons, or 21.7%, from their peak level as of the end of Sep ’20, however.
  • Intervention schemes for skim milk powder and butter were opened at the beginning of Mar ’20, running through the end of Sep ’20. Average European skim milk powder and butter prices briefly fell below the intervention trigger price during early May ’20 but rebounded to levels 30% and 56% above the intervention trigger prices, respectively, as of the end of Sep ’20.
  • Significant quantities of skim milk powder intervention stocks were purchased throughout 2016 however stocks were rapidly withdrawn throughout the second half of 2018 and early months of 2019. Total EU-28 dairy intervention and PSA stocks were completely drawn down as of the end of Jul ’19 however stocks rebounded to an 18 month high through the end of Jun ’20, prior to declining over more recent months.

Private Storage Aid The European Commission reopened private storage aid (PSA) for butter, skim milk powder (SMP) and cheese from May 7th until Jun 30th in response to price declines and volatility associated with COVID-19. PSA is a payment made by the European Commission to processors in return for keeping products in storage and withdrawn from the market for an agreed period of time. In PSA schemes, processors retain ownership of the product but receive payments from the European Commission in return for keeping agreed quantities in storage and off the market. In return, processors are paid a rate of aid set by the European Commission that takes into account storage costs, normal depreciation of quality and any foreseeable increase in the price of the product. Temporary storage costs comprise of a fixed rate per ton, plus a set daily amount per ton. The product remains the property of the operators, who are then responsible for selling it when it comes out of storage. Within the new intervention scheme, subsidies were provided to help pay for 60 to 180 days of private storage through Dec 26th. No volume limits were set for butter or skim milk powder, although budgetary limits were in effect. The cheese PSA scheme was limited to 100,000 MT, which was allocated per member state based on their respective cheese production levels. Butter PSA stocks reached a three and a half year high of 102,000 tons during Jul ’16 prior to declining throughout the second half of 2016 and early months of 2017. PSA butter stocks had been fully withdrawn for 35 consecutive months until volumes began being entered into storage once again in May ’20. Butter PSA stocks reached a 46 month high level throughout Jul ’20, prior to declining over the two most recent months of data. As of Sep ’20, butter PSA stocks were 12,100 tons, or 18.5%, off their recent Jul ’20 peak levels.  SMP PSA stocks reached a record high of 75,000 tons during Sep ’16 but were gradually withdrawn throughout 2017. PSA SMP stocks had been fully withdrawn for 26 consecutive months until volumes began being entered into storage once again in May ’20. SMP PSA stocks rebounded to a three year high level throughout Jun ’20, prior to declining over the three month recent months of data. As of Sep ’20, SMP PSA stocks were 2,500 tons, or 12.8%, off their recent Jun ’20 peak levels.  PSA has historically been made available for only butter and SMP however PSA for cheese was reopened during Oct ’15 and again in May ’20, allowing for a maximum of 100,000 tons of cheese to be put into storage at subsidized rates, with additional volume limits for individual member states also in effect. PSA cheese stocks reached a record high level throughout Jun ’20 prior to declining to a five month low level as of the end of Sep ’20. Sep ’20, cheese PSA stocks finished 14,900 tons, or 34.8%, off their recent Jun ’20 peak levels.  Intervention Schemes EU-28 dairy intervention schemes, which involve selling quantities of products into government owned storage to help stabilize prices, have historically been made available to producers. Under intervention schemes, the European Commission can purchase up to 50,000 tons of butter and 109,000 tons of skim milk powder (SMP) and, if exceeded, a tendering process takes place for additional volumes. Intervention schemes can be seasonal or in response to exceptional market conditions. The intervention scheme is typically open from the beginning of March until the end of September each year. The 2020 intervention schemes opened at the beginning of Mar ’20 but closed as of the end of Sep ’20. The trigger price for butter intervention has traditionally been set at €2,218/ton ($1.12/lb. equivalent using a 0.90 USD/EUR exchange rate), while the SMP intervention trigger price has been traditionally set at €1,698/ton ($0.86/lb. equivalent using a 0.90 USD/EUR exchange rate). Average European SMP and butter prices briefly fell below the intervention trigger price levels during early May ’20 but rebounded to levels 30% and 56% above the intervention trigger prices, respectively, as of the end of Sep ’20. No butter or skim milk powder volumes have been entered into the 2020 intervention schemes.  Combined Stocks Significant quantities of SMP intervention stocks were purchased throughout 2016 as prices remained below intervention trigger price levels throughout the first half of the year. SMP stocks were rapidly withdrawn throughout the second half of 2018 and early months of 2019 via a tendering process, however. Total EU-28 dairy intervention and PSA stocks were completely drawn down as of the end of Jul ’19 however stocks rebounded to an 18 month high through the end of Jun ’20, prior to declining over more recent months. Sep ’20 total EU-28 dairy intervention and PSA stocks finished 27,400 tons, or 21.7%, off their recent Jun ’20 peak levels. 

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