European Dairy Market Summary

MADISON - Apr 15/04 - 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 in Europe continues to build
seasonally, although reports indicate that the growth is lagging last year at
this time.  A recent report stated that March?s output in the EU was down 2.4%
from last March.  Once March 31 arrived and the milk quota year ended, many
milk handlers anticipated receipts in April to increase quite rapidly, but
this was not the case this year.  Cooler temperatures have limited pasture
growth, thus grazing of the dairy herd will be postponed for a while longer,
slowing milk production growth.  Most traders and handlers of manufactured
dairy products in Europe state that business is very quiet.  Stocks of
manufactured dairy products are available with pricing basically nominal and
unchanged from recent weeks due to the very light sales activity at this time.
 With the addition of 10 new countries (Poland, Cyprus, the Czech Republic,
Estonia, Hungry, Latvia, Lithuania, Malta, Slovakia, and Slovenia) to the EU
on May 1 and the uncertain export refund situation, traders in the EU are
indicating difficulty in negotiating potential sales contracts.  There is
active buyer interest for post May 1 deliveries but the uncertainty about
export refunds is limiting these negotiations.  The first round of tendering
for skim milk powder, butter, and butteroil under the new system closed on
April 14.  The EU Dairy Commission met on April 15 and acted on many dairy
issues.  The Commission reduced the refund levels for most dairy products
quite sharply.  They reduced skim milk powder by 21.8% to 400 Euros per ton,
butter by 10% to 1,500, butteroil by 9.5% to 1,900, and cheese by 6.5%.
Under the tendering system, bids for a large volume of product were submitted
with the commission awarding refunds for a much smaller quantity.  For skim
milk powder, 37,000 MT of powder were bid with the Commission awarding refunds
for 3,000 MT at 46.9 Euros per 100 kg.  For butter, 6,752 MT were submitted
with 300 MT accepted at 157.9 Euros per 100 KG and 5,486 MT of butteroil were
submitted with 300 MT accepted at 197.4 per 100 KG.  The next round of tenders
will close on April 28 with the Commission meeting the following day.  Now
that a first round of export refund values have been established, most traders
and handlers feel that they will be able to better negotiate potential sales
and submit bids.  Much of this buyer interest is for June/July shipment.
Intervention clearances for butter and skim milk powder continue, although the
offerings have been light.

EASTERN EUROPE:  Milk production continues to increase seasonally, although
cooler temperatures are slowing overall growth.  The main topic of discussion
in this region of Europe is the addition of many of these countries to the EU
on May 1.  Shipments are being finalized from many of these countries under
current programs, for after May 1, the rules change for those countries that
will be joining the existing EU 15.  With the addition of the 10 new countries
to the EU, a transition period of three years will be in place for those
countries to bring their dairy plants and products into line with EU hygiene
rules.  For those plants that met the guidelines, their products will be able
to immediately become available and qualify for export refunds under the
tendering system, for those plants and products not meeting the standards,
those products will be limited to sales within their countries or local
markets.  Many traders and handlers anticipate that during this transition
time, there will potentially be a split market price wise, for products within
these countries.

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STAT News Service