Cut in casein aid ‘not unexpected’

DAIRY co-ops have been warned by the IFA that it would be too simplistic to use the recent casein aid cut by the European Union to talk down milk prices.

The European Commission’s dairy management committee decided last week to reduce casein aid by 52% and whole milk powder (WMP) common export refunds by 6%.

IFA dairy committee chairman Michael Murphy said while the move was disappointing, it was not unexpected, and its impact would yet be softened by market and currency factors.

He said the positive decision to compensate half of the CAP reform 7% butter intervention support reduction for butter put into aid to private storage before July 1 would help minimise recourse to intervention and strengthen the level of support available for butter markets.

“The casein aid has been reduced by 52%. It is a very large cut which is obviously unwelcome, but not unexpected. Casein prices remain extremely strong, and Irish co-ops exporting casein have had one of their best ever years in 2004,” he said.

Mr Murphy said the whole milk powder common refund cut is much more modest, and tendered refunds available to exporters are inclined to be higher than common refunds.

The recent strengthening of the US dollar motivated this cut, and returns to exporters should therefore be largely unaffected.

Mr Murphy said there is clear evidence of booming world market demand, with EU export licences and refunds granted for about 40,000 tonne of skim milk powder in January/February to date.

A further 13,000 tonne of butter were awarded licences and refunds, and demand for EU whole milk powder on world markets is also rising.

“It is very unlikely that the maximum limits of 60,000t of butter and 109,000t of skim milk powder will be reached this year,” Mr Murphy said.

“It would be too simplistic to use the casein aid cut as an excuse to talk down milk prices, and producers will not tolerate this from their co-ops.”