Coveney: Better risk management tools needed after quotas abolished

Agriculture Minister Simon Coveney said farmers would need additional risk management tools in place before EU milk quotas are lifted in 2015, including the creation of a futures market.

“There should be a market that is available (to hedge risk when quotas are lifted),” he told delegates at the Oxford Farming Conference.

The EU is scheduled to abolish milk quotas in April 2015 and Ireland, a low-cost producer, has already begun to expand.

CME Group operates a dairy futures contract based on US supplies, while NYSE Liffe launched an EU skimmed milk powder contract in 2010 but trading has been sparse.

The major global benchmark for dairy prices is set at twice-weekly auctions launched in 2008 by the world’s largest dairy exporter, New Zealand’s Fonterra Co-Op Group.

“At the moment, international trade in dairy markets is basically determined by New Zealand and we produce an awful lot more than they do,” he said.

— Reuters