European Dairy Market Summary

MADISON - May 27/04 - 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 many regions of Europe has
passed the peak and is already showing signs of decline.  Early reports
indicate that milk output this season is trailing last year by 2 - 3%.  Milk
handlers attribute the lower milk volumes to various factors.  Some indicate
that cooler than usual temperatures and heavier culling with minimal
replacements are two significant factors.  Supplies of manufactured dairy
products in Europe are tight.  One trader's observation of the market is that
Europe exports about 6% of annual milk production into the international
market and with milk production already down between 2 - 3%, this potentially
limits the volume of milk (manufactured dairy products) available for export
by about one half.  This observation, overall tightness of supply, and a firm
Euro has prices firming quickly.  Some exporters that are holding refunds that
need to be used by the end of June are having difficulty with sales
negotiations due to limited supplies versus lack of customers.  The EU Dairy
Management Committee met on Thursday, May 27, and acted upon various dairy
related issues.  Under the tendering system, they received bids for 819 MT of
butter at 152.9 - 155.0 Euros per 100 KG, 1,636 MT of butteroil at 192.5 -
195.0 Euros, and 439 MT of skim milk powder at 35.2 - 37.5 Euros.  They
accepted bids for the various products at the lower ranges, but did not accept
the higher bids.  Offerings of butter and cheese to intervention have slowed
in recent weeks.  Since March 1 through May 23, 9,520 MT of skim milk powder
have cleared versus approximately 43,000 MT for the same period last season.
Butter offerings to intervention for this same period total 17,096 MT versus
24,243 MT for the same time period last year.


EASTERN EUROPE:  Milk production in Eastern Europe continues to increase
seasonally.  The spring flush in this part of Europe usually occurs about one
month later than in Western Europe.  Those Eastern European countries that
joined the EU15 May 1, continue to adjust to the many guideline changes that
impact dairy manufacturing and potential sales activity.  At this point, many
new member countries have dairy operations that are not yet up to EU
standards, thus their production is limited to internal country sales.  Prior
to the merger, many of these Eastern European countries were active in
international markets because they were not under EU quidelines.  Now
countries in the region that did not join the Union are receiving more
potential international buyer interest.

0930c steve schneeberger  (608)224-5084

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STAT News Service