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Dairy sector trembles at EU powdered milk mountain
[HERSTAL, Belgium] Hundreds of thousands of sacks of powdered milk lie stacked on pallets in a warehouse on a nondescript industrial estate in eastern Belgium: part of a vast EU stockpile that is causing dairy producers sleepless nights.
The European Union, through its member states, bought up hundreds of millions of tonnes of powder from 2015 onwards in a bid to stabilise milk prices that were in freefall as a result of overproduction and the financial crisis.
A report last week from the EU Milk Market Observatory said the powdered milk stockpile now stands at nearly 380,000 tonnes, and dairy producers are warning that selling it off risks throwing an already fragile market into turmoil.
"Powdered milk is an obstacle to the long-term recovery of the market," said Romald Schaber, head of the European Milk Board (EMB), which represents 100,000 dairy producers.
The sight of more than half a million 25-kilo sacks neatly stacked on wooden pallets in the 10,000-square metre warehouse in Herstal, eastern Belgium, left the EMB's administrator for Belgium, Erwin Schoepges, reeling.
"As a farmer, when I came in here and saw all that I almost fell over, I was so stunned," Mr Schoepges said.
And the Herstal store represents just a fraction of the EU powdered milk mountain, which is spread around the bloc, mainly in France with 72,000 tonnes, Belgium with 66,000 tonnes and Germany with just under 66,000 tonnes.
The issue is set for debate at the next meeting of EU agriculture ministers on Monday.
The EMB warns that the supplies piling up in warehouses "cannot be put back on the market" because of the risk of destabilising it further and says a cap on milk production is needed.
"We farmers need to stick together to defend a price for milk that covers production costs and pays us a salary and that means 45 cents (per kilo)," Mr Schoepges said.
While the price of fresh milk has picked up, powdered milk has crashed by a third in the space of a year. The EMB fears that selling off the EU mountain will only make matters worse.
The European Commission, which bought the milk at just under 1,700 euros (S$2,754) per tonne, has been trying to sell the stock off slowly for over a year but up to now has struggled to find a decent price on the market.
Just 220 tonnes were sold off in 2017 as a result of both caution - not wanting to crash the market - and low interest from buyers, EU Agriculture Commissioner Phil Hogan said in October.
Nearly 1,900 tonnes were sold at auction this month for 119 to 135 euros per 100 kilos, but the acceleration is still not enough for producers.
Mr Schoepges said the EU had "bought at 18-20 cents and sold at 11-12 cents".
"How is it possible to sell at a loss? You've got more than 10 million euros in storage costs across the EU. If you were the boss of a company and you worked like that you'd have questions to answer," he said.