European Dairy Market Summary

MADISON - Jan 6/05 - SNS -- Dairy market conditions in western and eastern Europe were reviewed in the latest report on the sector released by the USDA today.

WESTERN AND EASTERN EUROPE

OVERVIEW:  WESTERN EUROPE:  The winter season is now at hand in Europe.  Cold
temperatures are being reported, although overall conditions are not overly
adverse to milk production.  Milk output is seasonally low, although producers
and handlers are looking forward to the upcoming new production season.
Reports continue to indicate that output is trailing last season, although
some producers will need to adjust their milk marketings as the quota yearend
nears.  Trading activity remains slow.  Traders and exporters report that the
yearend holidays are still a factor, but attribute slow sales to a weaker
market.  Prices are adjusting lower as the dollar firms against the Euro.
Often when prices are adjusting lower, it takes awhile for buyers to return to
the market in hopes of attaining the lowest price before placing orders.
Stocks of manufactured dairy products are available for renewed buyer
interest.  Traders and handlers indicate that the new milk production season
is just around the corner, thus additional new stocks will be generated.  As
of January 1, 2005, the EU will modify its' Common Agricultural Policy so the
most direct subsidies are de-coupled from markets and production volumes.
Under the new program, a single farm payment or single payment scheme (SPS)
will be made independent of production.  The payments will be linked to
environmental, animal and plant health, food safety, and animal welfare
standards.  The SPS applies to main market sectors which include milk.  Member
states had the option to apply for the SPS between 2005 and 2007.  Ten member
states (Austria, Belgium, Denmark, Germany, Ireland, Italy, Luxembourg,
Portugal, Sweden, and the UK) will begin operations under this new system in
2005, 5 states (Finland, France, Greece, the Netherlands, and Spain) in 2006,
and 2 new states (Malta and Slovenia) in 2007.

EASTERN EUROPE OVERVIEW:  In Eastern Europe, milk production trends are
following typical patterns for this time of the season.  Most producers are at
seasonal low levels, but are optimistic about the upcoming new season.
Temperatures are cold, although overall winter weather conditions are not as
negative for milk production as in previous years at this time.  Stocks of
manufactured dairy products are available for potential buyer interest.  Lower
prices are being reported with traders and handlers hopeful that this will
encourage buyers to return to the market place.

0930c steve schneeberger  (608)224-5084

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STAT News Service