European Dairy Market Summary

MADISON - May 10/07 - 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 European milk production season continues to
build toward seasonal high levels.  In recent weeks, some milk
handlers were questioning if possibly milk might already be at
seasonal high levels due to warmer than usual temperatures and limited
rainfall.  In recent days, rainfall has been reported in many areas of
Europe with temperatures becoming more seasonal.  Due to the moisture
especially, pastures have greened and the grazing dairy herd is
responding to the new grass growth with increased milk volumes.  Most
milk handlers and manufacturers are pleased with the additional milk
flow as they were quite concerned about product availability for
commitments made earlier in the season.  Most dairy manufacturing
facilities in Europe are at or very near capacity levels.  Cheese
production continues to absorb a significant portion of the milk
volume, but some considerations are being discussed to divert some of
their milk toward powder production.  Discussions of this possibility
are more prevalent than actual diversions due to limited dryer
capacity.  Demand for manufactured dairy products continues to surpass
supply.  A strong internal or domestic demand is leaving less product
available for international buyer needs.  Traders and handlers
continue to report that the market is very volatile and daily/weekly
swings in the supply, demand, and price situation are occurring
regularly.  The Dairy Management Committee met on May 10 and took no
action on any dairy issues.  Export subsidies for butter were reduced
at their last session with cheese subsidies remaining unchanged.
Cheese producers and traders continue to speculate that cheese
subsidies will be adjusted in the near future.


EASTERN OVERVIEW:  Eastern European milk production continues to build toward
seasonal high levels.  Weather conditions in the region have been much like
Western conditions, although temperatures have not been as high.  Dry
conditions also prevail in Eastern Europe which is slowing good pasture growth
at this time of the season.  Most manufacturing facilities are nearing maximum
capacity levels.  As in Western Europe, stocks of manufactured dairy products
are limited and often fully committed to traders and buyers well into the
summer.  Eastern European suppliers state that domestic demand for dairy
products is increasing, thus limiting surplus volumes available for
international buyer interest.  Many producers and handlers do not foresee a
significant change to their supply situation in the coming months.

0930c steve Schneeberger  (608)250-3204

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STAT News Service