UK government supports dairy futures feasibility study

OXFORD, England (Reuters) - Dairy futures could help British farmers cope with volatile milk prices, UK farming and environment minister Elizabeth Truss said on Wednesday, adding the government was supporting a feasibility study conducted by the National Farmers Union. "Futures could have strong potential to bring added security to farmers," Truss said at the annual Oxford Farming Conference. She noted that milk prices received by farmers in Britain have fallen sharply from around 33.8 pence ($1) per litre at the start of last year to the low 20s in some cases now. The fall in prices has been driven by increased global production, reduced demand from China and a European supply glut resulting from Russian dairy import bans. These were imposed in retaliation for Western economic sanctions over Moscow's involvement in the Ukraine crisis. European exchanges operator Euronext has said it will launch a range of European dairy futures and options later this year which could help British farmers hedge their risk. "That is something we are discussing at the moment," Truss said when asked if British farmers could use a European contract or whether there was a need for a UK dairy futures market. The abolition of EU milk production quotas in April may also spur demand for hedging and pricing tools. Germany's Eurex exchange quotes butter, skimmed milk powder and whey powder derivatives, but traded volumes are thin. (Reporting by Nigel Hunt, editing by Louise Heavens)