European Dairy Market Summary

MADISON - Feb 5/09 - 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 topic of discussion in Europe and elsewhere in
the world continues to center around the re-activation of export
subsidies two weeks ago.  European traders and handlers welcomed the
subsidies in hopes of spurring international sales, but as of yet,
this has not happened.  Many traders indicate that the announced
common or fixed refunds for some products are still not sufficient to
compete internationally, especially for butter.  Nearly doubling the
current butter subsidy would get European butter in line with other
international price quotes.  Even with subsidy assistance, buyers
continue to exercise caution with their purchases and often remain
absent from the market place.  As has been the case for quite some
time, traders and handlers still feel that buyers anticipate lower
prices so why should they purchase now.  The winter season is still at
hand through most areas of Europe.  Heavy snowfall in some areas,
including the UK disrupted milk logistics during the week.  Milk
producers and handlers state that winter is still not over and
February and March can be very challenging when it comes to weather
patterns in the region.  Usually in February, milk production starts
to noticeably increase in some regions of Europe, but at this time, no
reports are surfacing of this development.  Butter continues to clear
to PSA, but butter for clearance to intervention still has a few days
to go before it can start to be produced.  Butter can only be produced
for intervention offering 23 days before March 1 with skim milk powder
being 28 days prior to March 1.  Traders and handlers feel that
offerings of both products may be heavy initially, especially for
butter, as 30,000 MT of butter are accepted into intervention before
maximum levels are attained.  Skim milk volumes are larger and 109,000
MT are accepted until maximum levels are attained.  Butter producers
anticipate that PSA offerings will ease during the next few weeks as
butter generated during the month can be offered to intervention at
the beginning of next month.  Pay prices to dairy producers are
declining in many parts of Europe which is causing many producers to
seriously review their milking operations.

EASTERN OVERVIEW:  Cold and snowy weather patterns in Eastern Europe
are causing milk production to maintain low levels, although typical
for this time of the season.  Typically, Eastern Europe does not
realize any significant production increase until mid to late March.
Traders and handlers continue to report stocks of various manufactured
dairy products are available for domestic and international buyers.
At this point, international sales out of the region are minimal.

0930C  steve Schneeberger  (608)250-3204

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STAT News Service