European Dairy Market Summary

MADISON - Mar 18/04 - 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

OVERVIEW:  WESTERN EUROPE:  Milk production throughout Europe continues to
increase seasonally, although reports vary as the milk quota year-end nears.
Often, milk producers are closely monitoring their marketings to avoid over
production penalties as 31 March nears, thus true gains are hard to monitor at
this time.  After April 1, most milk handlers anticipate receipts to increase
significantly.  The biggest topic of discussion in Western Europe is the
recent subsidy cuts for various dairy products and their impact on prices and
sales activity.  Current refunds are now at levels of about a year and half
ago.  The cuts were 100 Euros for skim milk powder and butter with whole milk
powder being reduced by 105 Euros.  The recent reductions bring the skim milk
powder export refund to 545 Euros, whole milk powder to 930, and butter to
1680 per ton.  These reductions have increased the base fob price for these
products, but basically, no sales are being reported unless traders are
holding old refunds and are able to finalize the transaction by the end of
April.  There is buyer interest occurring, but many traders and handlers state
that this interest is for post May 1 delivery at which time there will no
longer be refunds in the format as now.  At that time, although the exact date
has not yet been established, the EU will start allocating export refunds by a
tendering system.  This new and highly controversial program is not being
looked upon favorably by many producers, handlers, and traders.  Many are
questioning the workings of the program, but are getting few answers.
European prices are often higher, although many refer to their quoted price
levels as nominal.  Traders have indicated that US importers are inquiring
about EU sourced butter for their needs.  At this time, there are no export
refunds for US business, thus EU sourced butter is too expensive.

EASTERN EUROPE:  Milk production in Eastern Europe continues to seasonally
build.  Recent temperatures have been cooler than usual for this time of the
year, but within the last week, more spring like conditions are being
reported.  Eastern European dairy product traders are indicating that buyer
interest has been active, mainly due to the inability of many EU sources to
acknowledge this interest at this time.

0930c steve schneeberger  (608)224-5084

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STAT News Service

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