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Milk: production is on the rise while prices fall

There is an overproduction of milk in the world according to the Milk Market Observatory which in February registered a 5.6% increase in production in the European Union alone. A decrease in the demand for milk has pushed up the percentage of processed products, such as butter (+8.2%), milk powder (approximately +35%) and cheese (+3.5%).

Despite plummeting prices, EU countries are continuing to produce and also export. European processed products are increasingly being exported to non-EU countries and have registered an increase of 12.8%. The US leads with an increase of 9%, partly due to cheese imports, followed by Japan with an increase of 6%. Milk powder is exported to Algeria, Indonesia and China.

As far as other continents are concerned, Australian exports rose in February by 1.2% and US exports rose in March by 1.8% and 2.1% on an annual basis. New Zealand registered a slight downturn (-0.8%).
It is clear that the target market is still China, which increased its butter imports by 79% and its cheese imports by 61% in the first two months of 2016. However, despite this huge demand – and not only from China – it has not been possible to control excess supply and inevitably prices have fallen.

In Italy the price of milk dropped to 22.68 cents at the beginning of May (CLAL data). Holland saw an 8% decrease; in mid March the price of milk fluctuated between 17 and 18.5 cents per litre.

So what is being done in Brussels? The answer is they are playing for time. A project involving a system of incentives to slow down production will see opposition from Ireland and Denmark. At the beginning of April the European Commission presented a proposal for voluntary milk supply reduction; at the last Council of Agriculture Ministers, EU Agriculture Commissioner Phil Hogan proposed to raise the state aid to €15,000 per company in order to tackle the crisis in the sector. However, the issue will be discussed again at the next Council of Agriculture Ministers scheduled for 27-28 June.