EU-28 Private Storage Aid Stocks Update
The European Commission reopened private storage aid (PSA) during Sep ’14 in response to the expectation of price volatility generated from the sudden announcement of the Russian dairy import ban. Combined butter and skim milk powder (SMP) volumes within PSA remained higher on a YOY basis for the 21st consecutive month during Jul ’16 as volumes reached levels not experienced since Aug ’03. Individually, butter PSA stocks finished up 13.9% YOY during Jul ’16 while SMP PSA stocks finished 118.9% above the previous year volumes.
PSA is a payment made by the European Commission to processors in return for keeping products in storage and withdrawn from the market for an agreed period of time. Butter placed into PSA must be stored for between 90 – 210 days, while SMP can be stored from between 90 – 210 days or for 365 days. Because of the agreed upon storage durations, not all product stored within PSA is available to be withdrawn immediately without penalty. As of Jul ’16, the largest potential withdrawal in EU-28 butter PSA is approximately 54,000 MT, or 53% of total butter volumes within PSA. Because of the variable agreed upon storage durations, actual available butter withdrawals from PSA could be considerably less.
Substantially less SMP PSA stocks are currently eligible to be withdrawn. Without incurring a penalty, the largest potential withdrawal in EU-28 SMP PSA is approximately 2,000 MT, or 4% of total SMP volumes within PSA as of Jul ’16. Considerably less SMP is available for withdrawal due to the implementation of the 365 day storage program announced during Oct ’15. The 365 day storage program provides a higher rate of aid in exchange for keeping the product off of the market for a longer duration. Over 48,000 MT of SMP has been offered into the 365 day storage program since it was initiated.
Total EU-28 butter and SMP volumes within PSA correspond to 68% and 45% of U.S. private butter and nonfat dry milk (NFDM) stocks, respectively as of Jul ’16, however only a maximum of 36% of equivalent U.S. butter stocks and 2% of equivalent U.S. NFDM stocks can currently be withdrawn without penalty.
PSA is a payment made by the European Commission to processors in return for keeping products in storage and withdrawn from the market for an agreed period of time. Butter placed into PSA must be stored for between 90 – 210 days, while SMP can be stored from between 90 – 210 days or for 365 days. Because of the agreed upon storage durations, not all product stored within PSA is available to be withdrawn immediately without penalty. As of Jul ’16, the largest potential withdrawal in EU-28 butter PSA is approximately 54,000 MT, or 53% of total butter volumes within PSA. Because of the variable agreed upon storage durations, actual available butter withdrawals from PSA could be considerably less.
Substantially less SMP PSA stocks are currently eligible to be withdrawn. Without incurring a penalty, the largest potential withdrawal in EU-28 SMP PSA is approximately 2,000 MT, or 4% of total SMP volumes within PSA as of Jul ’16. Considerably less SMP is available for withdrawal due to the implementation of the 365 day storage program announced during Oct ’15. The 365 day storage program provides a higher rate of aid in exchange for keeping the product off of the market for a longer duration. Over 48,000 MT of SMP has been offered into the 365 day storage program since it was initiated.
Total EU-28 butter and SMP volumes within PSA correspond to 68% and 45% of U.S. private butter and nonfat dry milk (NFDM) stocks, respectively as of Jul ’16, however only a maximum of 36% of equivalent U.S. butter stocks and 2% of equivalent U.S. NFDM stocks can currently be withdrawn without penalty.