Uncertainty over UK intervention milk powder stocks

A House of Lords committee has expressed concern over the future of intervention stocks of skim milk powder (SMP) held in public UK stores.

The stocks amount to 8,000t of the milk powder, enough to fill 32 olympic-size swimming pools, but there is currently no agreement with the EU about what will happen to the milk powder after the UK completes the Brexit process.

Farm minister George Eustice said it was “still to be determined” what would happen to these stocks if they were still in storage after the UK leaves the EU.

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He added that a decision on the stocks would likely be included in in the withdrawal agreement with the EU.

The powder was removed from the market under European Union intervention measures with the intention of stabilising dairy prices by reducing supplies across the continent.

“We were extremely surprised to learn that the UK holds such a vast quantity of skimmed milk powder and that there is no clear plan from the government on how they will sell it on after Brexit,” said the chairman of the EU Energy and Environment sub-committee, Lord Teverson.

“The government needs to have a clear agreement in place with the EU for how it will deal with this, and any other products that may also be held in stores.”

Of the 8,000t in UK storage, 78% was entered in 2015 and 2016, meaning it will soon be reaching its expiry date for human consumption and would have to be sold as animal feed if left too long.

However, the UK’s 8,000t are just a drop in the ocean (2.2%) compared with the mountains of SMP held in EU stores, which total 360,000t.

The huge stores of intervention SMP overhang the EU market and uncertainty over their future exerts constant pressure on European dairy prices.

The intervention stocks that fill stores across Europe are the legacy of years of overproduction, with only 2,000t being sold out of storage since December 2016 for the rockbottom price of €1,190/t (£1,054/t).

At the end of last month, EU agriculture commissioner Phil Hogan set a moratorium on the offering of intervention for SMP at a fixed price for 2018 and will only accept SMP between March and September through a tendering process, with prices determined on a case-by-case basis.