European Dairy Market Summary

MADISON - Jan 20/05 - 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

WESTERN EUROPEAN OVERVIEW:   Milk production patterns across Europe are
seasonally low and are on the eve of seasonal increases.  For the most part,
production is trailing last season, although in recent weeks, production
trends are showing strength.  Producers continue to monitor their production
volumes as the milk quota yearend nears.  Reports indicate that producers in
Germany, Austria, and Denmark are running ahead of quota volumes, thus
adjustments will need to be made to avoid quota penalties.  In most instances,
producers and handlers are looking forward to the 2005 -2006 production season
with optimism.  The European dairy market situation is undergoing some changes
from recent months.  Prices are unchanged to weaker, export refunds are being
adjusted, the Euro is weaker, and international buyers are returning to the
market place.  On January 13, the EU Dairy Management Committee met and
adjusted two export refunds. The committee increased the skim milk powder
refund by 10 Euros to 280 Euros per ton and reduced the butteroil refund by 10
Euros to 1630 per ton.  The Euro continues to weaken against the U.S. dollar
and is now down to levels that occurred in November.  Traders and handlers
look at these changes as major contributing factors in the renewed buyer
interest. Prices have weakened to the point that they are nearly at
intervention levels. Traders and handlers feel that prices have declined
significantly and they do not foresee much, if any, further weakness.  Stocks,
although not excessive, are available for buyer interest.  Traders report that
most current buyer interest is for second quarter deliveries when stocks
should be more available as the new milk production season develops.  Some
buyers, are reaching to intervention stocks for supplemental volumes.  At the
most recent Management Committee meeting, they sold slightly more than 1400 MT
of butter and 40 MT of skim milk powder out of intervention stocks.

EASTERN EUROPEAN OVERVIEW:  Milk production patterns in Eastern Europe are at
seasonally low levels, although producers and handlers are preparing for the
new production season which is about to begin.  Recent reports indicate that
overall milk volumes are steady with or slightly higher than last year at this
time.  Traders and handlers from the region indicate that prices are adjusting
lower which should help stimulate buyer interest.  Stocks are available for
immediate shipment, although most buyer interest is for a few months in the
future.

0930c steve schneeberger  (608)224-5084

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STAT News Service