What can be done with intervention stocks?

Published 28 March 18

Although the Commission has been selling SMP stocks through the tender process since December 2016, only 10,548 tonnes of SMP have been sold. The majority of this volume was sold during the last two tenders, and at prices well below market values.

Reduction of these stocks is important to enable the market for milk powder, and possibly even butter, to return to a more stable position. Currently however, there is no other plan in place to dispose of the remaining 375,000 tonnes except to sell via the tender process. 

Intervention 28/03/18

Many market observers question the Commission’s current approach, so it’s worthwhile to look at the feasibility of the suggested options.

Food aid:  Although international food aid was previously used to shift large volumes of SMP, legislation now prevents this from taking place. While there remains legislation allowing for the distribution of intervention stocks as food aid for the most deprived within the Union, it requires that they are valued at the level of the relevant fixed public intervention price (€1,698/tonne), making this an uneconomic option.

Animal feed (or other alternative markets):  It is the Commission’s position that finding market outlets is a matter for market operators. In addition, implementing a bespoke sales system for the animal feed market is costly and contradicts the requirement of the Commission to provide equal access to the stocks and equal treatment of purchasers.

Use for biomass feed:  While the SMP stocks could feasibly be used for biomass feed production, taking the supplies off the food market, it would not be economically viable. Suggestions to supplement the economic returns with a levy on SMP production are unlikely to be acceptable to the industry.

The difficulty of disposal options therefore remains, leaving the Commission subject to accepting heavily discounted prices for stocks and struggling to find large volume buyers.

To read more on intervention please see here.