European Dairy Market Summary

MADISON - Aug 3/06 - 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 in Europe continues to decline.  Hot
temperatures over much of Europe in recent weeks have eased and now milk
output appears to be leveling somewhat, or at least the decline is not as
noticeable.  Milk volumes for much of the current production season have
trailed last year, thus most milk handlers speculate that the recent drop in
production will not be favorable for the year as a whole.  Handlers state that
output usually rebounds slightly following unfavorable conditions, but
question if this will be the case this time.  For many, they are hopeful that
the decline of recent days will stabilize and milk output will remain steady
for a longer period into the fall.  Lower overall milk volumes have
contributed to lower manufacturing throughout much of Europe this year.  Some
of the lower manufacturing schedules were by choice of management while others
were not able to secure desired volumes of milk.  Stocks of manufactured dairy
products are also lower than other years, but are often not viewed as a
problem.  International buying interest remains slow and unaggressive.
Limited stocks and firm prices are two factors slowing sales negotiations with
prospective buyers.  Often potential buyers are not even looking at European
sources due to current conditions.  For the most part, sales activity is
centered around an internal or domestic market.  Some traders indicate that
some stocks, especially milk powders, are moving from Eastern Europe into
Western Europe to fill needs.  At the last Management Committee meeting on
July 27, no significant changes were reported.  Common refunds were all
unchanged.  Under the tendering system, 1,520 MT of butter were accepted into
intervention at 2320 Euros per MT.  The most recent Management Committee
meeting was the last one until September.

EASTERN OVERVIEW:  Milk production in Eastern Europe is also on the
downside of the season.  Recent hot and humid weather conditions
enhanced production declines, but the decline has slowed now that
temperatures have moderated.  Manufacturers state that milk volumes
have been sufficient for most of the season thus far to maintain
fairly active production schedules.  Most manufacturers and handlers
state that international sales activity has been slow this year,
although sales to Western European buyers is fairly active.

0930c steve Schneeberger  (608-250-3204)

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STAT News Service