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WESTERN EUROPE: Milk production trends in most European countries remain strong. Many milk handlers are reporting that milk volumes seem to be holding steady at a high level, thus indicating to them that the seasonal peak is at hand. Although some continue to report slight increases, others are reporting slight declines from recent weeks. Currently, temperatures in many milk producing regions of Europe have been reported as hot, thus this could reduce the peak of the milk production cycle quickly, but no indications of this is reported as of yet. Much conversation continues to center around the firm Euro. The recent export subsidy adjustment a few weeks ago for skim milk powder and last week's export subsidy increase for full cream powder are two factors some traders and handlers are attributing to resumed buyer interest. Although this buyer interest is not significant, suppliers are hopeful that this is the start of sales activity out of Europe. All in all, Europe is the only source for dairy products at this time.

Milk production in the Oceania region has ended for the season and orders are being filled from inventoried stocks with no significant volumes available for spot buyer needs. This situation will maintain itself for the next few months until the start of their new milk production season in August/September. South American stocks are limited and U.S. prices are too high to attract buyer interest without DEIP, although U.S. stocks are available. European traders indicate that U.S. supplies may become available under the new DEIP program after July 1 or if industry conversations of a possible CCC support tilt for butter/powder occurs. European skim milk powder continues to clear to intervention. Many traders and handlers report that intervention offerings are heavier than anticipated, but are now not surprised at the volumes in light of limited international sales. As of May 28, intervention volumes total about 48,000 mt versus 75,000 mt last year at this time. By mid June 2002, intervention had attained the 109,000 mt threshold, but most still feel that this will not be the case this year during the entire open season. Most feel that offerings will slow once international sales resume, which many feel is not too far away.

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