Butter exports elimination could dawn in 2013, warns dairy board

THE Irish Dairy Board (IDB) warned yesterday that phasing out export refunds by 2013 could result in the total elimination of butter exports outside the European Union.

It described butter as by far the most vulnerable product and stressed that it was vital that the world trade process respects the terms of the mid-term review programme.

IDB managing director Dr Noel Cawley said that the Luxembourg Agreement does not provide for a trading environment without the inclusion of export refunds.

Nor does it allow for a balance between supply and consumption of dairy products without continued support mechanisms.

Accordingly, it is vital that the modalities of the WTO accord take this into account.

“In particular there must be no ‘frontloading’ in the phasing of the elimination of the export refunds for these products.

The outcome, should EU exports become uncompetitive, would result in a fall in EU internal prices,” he said.

Dr Cawley said 2006 will be a challenging year for the Irish dairy industry.

International demand is already resisting historically high prices, with global production increasing and CAP supports to be further dismantled.

The IDB’s response is multi-faceted and continues to focus on the branded and food ingredient business.

“An ambitious programme of new product and market development (including emerging markets such as China) is under way and its international portfolio of brands, led by Kerrygold, will be consolidated as appropriate,” he said.

The IDB’s world dairy review, published in Dublin, stated that international prices for milk products held strong for most of 2005.

EU exporters enjoyed some competitive advantage as a result of a fall in milk production in Oceania and improved exchange rate competitiveness.

However, benefits were eroded when the Commission moved aggressively to force a reduction in EU market prices with vigorous and frequent cuts in the various CAP supports and subsidies, particularly to export refunds.

Refund reductions during 2005 affected butter by €405 per tonne, skimmed milk powder (SMP) by €188 per tonne, cheddar cheese by €147 per tonne and whole milk powder (WMP) by €200 per tonne.

World market prices for cheese continued their positive trend in 2005 as both production and consumption maintained healthy growth with prices holding relatively firm.

Global prices for butter and other dairy products are at a high level at present, with some importing markets switching to vegetable oils and fats.

The pre-Ramadan market in 2005, which includes several wealthy oil-exporting nations, was subdued as a result.

On the other hand, internal EU prices suffered a decline in the second half of the year as a result of the MTR price cuts.

However, the IDB on-account price for butter was not reduced until the end of the third quarter with SMP unchanged to year end, the review stated.