European Dairy Market Summary

MADISON - Feb 1/07 - 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:  The high winds of two weeks ago have subsided and
winter weather conditions returned to many parts of the region, but
again have become milder than usual for this time of the season.
Producers and handlers are quite surprised at how this winter season
has developed.  Many continue to state that February and March can be
unforgiving weather pattern months, which could greatly impact the
beginning of the new milk production season.  Milk production reports
indicate that milk output is seasonally ahead of last year at this
time, although many countries will not need to adjust their milk
marketings to remain within quota levels by the end of March.
Starting February 1, skim milk powder and butter can be generated for
intervention offering during the open season which resumes March 1.
Most manufacturers and handlers do not feel that much volume of either
product will be offered to the program early on.  Most feel that
higher internal butter prices (versus the intervention price) along
with good demand will limit offerings early in the season.  Some feel
that PSA will probably receive heavier offerings.  This year, 40,000
MT of butter will be the maximum amount allowed into intervention and
receive full payment, which is 10,000 MT less than last year.  Skim
milk powder offerings will also be limited due to firm internal prices
and potentially good internal and international buyer interest. At the
most recent Dairy Management Committee meeting last week, the most
significant change came in the elimination of the export subsidy for
whole milk powder.  Since the first of the year, the whole milk export
subsidy has been reduced from 210 Euros per MT to 0 in two consecutive
adjustments.  Many attribute the reduction to heavy applications for
the refund.  Traders were hopeful for a refund, but were not surprised
at the Commissions adjustment.  The only dairy commodities that still
have common refunds are butter at 93 Euros per MT and various refund
values for various cheeses.


EASTERN OVERVIEW:  Winter weather conditions in Eastern Europe remain
milder than usual.  At this point, milk production remains at seasonal
low levels, although producers and manufacturers are preparing for the
new season which will resume in 6 weeks or so.  Stocks of manufactured
dairy product are low, but orders continue to be filled from these
volumes.  Some new buyer interest is being reported, although most of
this demand will be filled from new production.

0930c steve Schneeberger  (608)250-3204

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STAT News Service