European Dairy Market Summary

MADISON - Mar 2/06 - 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 OVERVIEW:  Milk production trends in Europe continue to build
seasonally although overall volumes are trailing last year by about
1%.  For some producers, this is not a disappointing position to be
in.  Producers, especially those that are running over their quota
volumes, may not have to reduce their marketing as much by March 31
which is the end of the current milk quota year.  For the most part,
milk volumes are sufficient to maintain steady inventory growth.
International sales remain light and unaggressive with market activity
centering around internal or domestic needs.  Most products and prices
remain steady, although skim milk powder prices and demand have jumped
sharply.  One of the factors contributing to the sharp turnaround in
the skim milk powder market is the strong demand from animal feed
buyers.   Demand for meat products within Europe is sparking a strong
interest for veal and other non poultry meat products.  An increased
demand for non poultry meat products and dairy items is being
triggered by the potentially wider coverage area, including some areas
of Europe, of the avian bird flu virus.  Another factor contributing
to firm skim prices is from those powder buyers that are holding
export refunds that will expire by the end of March.  Traders are
trying to put together sales which will absorb the existing refund or
they will face penalties for non compliance.  At this point, sales
activity for future deliveries, after March 31, remains light, but
traders and handlers remain optimistic that sales will pickup after
that time.  Intervention for butter and skim milk powder is now open.
It is felt that butter offerings will be heavy and will probably
surpass the 50,000 metric ton ceiling while skim milk powder
clearances will be minimal.  All of these projections could change
quickly if milk production does not develop as projected or
international sales, especially for powder, do not resume.


EASTERN OVERVIEW:  Winter weather conditions and cold temperatures
continue to impact milk production growth in Eastern European regions.
Some milk producing regions are realizing strong growth in
relationship to quota volumes and will need to adjust marketing or
face penalties.  Some sales activity is being reported from this
region, although for the most part they remain equally slow as in
Western Europe.  Stocks are increasing slowly as the new milk
production season develops.

0930c steve Schneeberger  (608)250-3204

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STAT News Service