Dairy Support by Good International Demand

ROME - Jun 22/05 - SNS -- International milk and milk product prices have moderated in recent months, but remain at levels which are encouraging counties such as the United States to continue producing exportable surpluses, suggests the latest outlook report from the United Nation's Food and Agriculture Organization (FAO).

The FAO international dairy product price index (1990-92=100) has dropped slightly in the past few months, after reaching a 15 year peak in January. The index was 160 in April, two points lower than in January but 18% above the level 12 months earlier. "Regarding the major milk products individually, export prices from Oceania for butter are up 26% from a year ago, milk powder prices are up 19% and cheese (Cheddar) is up 11%," the FAO said.

"The European Union responded to the international price strength by cutting export refunds further in recent months. Despite the reduction, the subsidies remain high, at US$844 MT for whole milk powder, US$1,654 per metric ton (MT) for butter and US$635 MT for Gouda cheese, at the end of April.

"With the next intervention price cut in July, export subsidies, which are close to the WTO limit, may be further reduced, although much will depend on exchange rate movements. EU intervention stocks are now at their lowest level since the autumn of 2002," the FAO said.

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