EU subsidies to wreck havoc

Fonterra shareholders are worried about the effects of export subsidies reintroduced by the European Union for its dairy producers. The EU move could push dairy prices down by $200/tonne at a time when depressed prices are eroding farmer returns. Fonterra Shareholders Council chairman Blue Read told Rural News he believes the EU decision will have a profound effect on the milk payout. While the EU is trying to keep its dairy farmers happy, Read says the system is discriminatory for other dairy farmers around the world. Fonterra's managing director of global trade, Kelvin Wickham, says the move could push down dairy commodity prices even further and slow their recovery. Fonterra acknowledges the considerable pressure on producers with lower prices and the credit crunch, but says bringing back subsidies will put more pressure on markets when times are already tough. However, the EU says Fonterra's on-line auction platform for milk powders had been a factor in driving down world prices to the point where it had to intervene in the marketplace. It announced export refunds, not used since June 2007. These will be paid for butter, skimmed milk powder, whole milk powder and cheese. The level of refunds will be fixed by tender every fortnight. From March 1 the EU Commission will also resume direct price intervention, with public buying of butter and skimmed milk powder.