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OVERVIEW: WESTERN EUROPE: Milk production throughout Europe is increasing seasonally. The new milk quota year has just begun and milk marketings are on the increase. This trend is typical for this time of the year as milk output increases and milk shipments resume from those producers that were above quota at the end of the 2002 - 2003 quota year which ended March 31. Recently in some areas of Europe, winter weather conditions and cold temperatures returned which could slow seasonal growth. Producers and handlers indicate that a levelling of production or even a slight decline might occur, but do not look at this as being significantly detrimental to the market. Typically at this time of the year, these types of weather conditions are short lived and conditions return to normal quite quickly. Manufacturing schedules throughout Europe are increasing seasonally. In instances, production of one product is being adjusted for another to accommodate slow or lagging sales. Skim milk powder production is increasing seasonally although new international sales activity is lighter than producers and traders would desire. By the end of March, clearances of skim milk powder into intervention have been running about 25% of the level of last year. Although now with slower sales, some producers are speculating heavier offerings may be headed toward intervention. Overall international sales have been and remain slow. Traders indicated that there seems to be a little more optimism from international buyers in recent days. They attribute this to political developments in the Middle East and possibly buyers need to once again replenish depleted stocks. At this point, European traders feel that they will be in a good supply situation to address much of the potential buyer interest once it resumes.

EASTERN EUROPE: Milk production in Eastern Europe continues to increase slowly. Producers and handlers remain very optimistic about the upcoming production season. Recent international sales out of this region of Europe are currently keeping supplies in close balance with production. At this point, stocks of manufactured dairy products remain low, but as milk volumes increase, thus will inventories. New international sales activity continues to be reported as light.

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