European Dairy Market Summary

MADISON - Sep 27/07 - 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:  Milk production is declining seasonally although
some countries anticipate having a stronger second half of the quota
year than the first half.  Producer milk prices are showing
substantial increases from year ago levels.  However, thus far, the
expected producer response to increase production as a result of
higher prices has been muted.  Sizeable increases in the cost of
producing milk have thus far kept a lid on milk production increases.
Replacement heifer prices are very expensive.  Fat tests in many EU
countries have recovered from the lower than usual summer levels,
aided by less stressful weather conditions.  Milk receipts,
particularly in the Mediterranean area, have been impacted by the
unusually warm summer temperatures.  Butter remains very tight with
private stocks disappearing.  Butter remains firm with some imports
continuing.  Cheese prices are higher but often still lag the returns
from producing other dairy products.  Higher retail product prices are
facing consumers and may affect demand.  The weaker whey market is
causing some producers to increase milk replacer use and as a result
may put some extra milk volumes into the market rather than fed to
calves.  The record weak U.S. dollar compared to the Euro and weakness
against other currencies is a factor in prices reported.  The
availability of extra product for export is limited.

EASTERN OVERVIEW:  Milk production is continuing to decline seasonally.
Inventories remain lighter than desired and generally below the levels
of recent years.  Some smaller volume export deals are occurring.

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