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USDA review of dairy market conditions in WESTERN AND EASTERN EUROPE

OVERVIEW: WESTERN EUROPE: Milk production patterns throughout most of Europe are positive, although recent warm temperatures are reducing milk volumes quickly. Milk handlers are stating that butterfat tests on incoming milk are also lower which they are attributing to the higher temperatures. Spotty rainfall is being reported throughout Europe, with milk producers in some areas desiring more than they are receiving. Pastures and summer forage conditions vary greatly, basically depending on moisture or lack thereof. Manufacturing schedules throughout Western Europe remain seasonally active. In most instances, plants are maintaining peak or near peak production schedules. International buying interest remains slow and unaggressive for European sourced dairy products. Often, European traders indicate that they are loosing sales to other sources. Most attribute this situation to price.

Many dairy product traders and handlers continue to lobby the EU Management Committee for further export refund increases. At the most recent Management Committee meeting of last week, export refunds were unchanged. Basically the committee indicated that little has changed since the adjustments of a few weeks ago to warrant additional changes at this time. The Euro remains strong against the U.S. dollar. Over the past 4 - 6 weeks, the Euro has fluctuated between 1.17 - 1.19 for 1 U.S. dollar. Lack of skim milk powder sales is encouraging heavier than anticipated offerings to intervention. As of June 8, 59,000 mt of skim milk powder have been offered since March 1. This compares to nearly 98,000 mt last year at this time. Most producers and handlers still feel that the 109,000 mt maximum levels will not be reached during the current open season which closes August 31. Many feel that as milk production declines, milk volumes may be directed away from butter/powder production toward other manufactured dairy products, thus slowing future intervention offerings.

EASTERN EUROPE: In many Eastern European countries, reports indicate that milk production has peaked and in instances, on the down side. Temperatures are increasing and dry conditions continue to persist, which could accelerate production declines. At this point, manufacturing facilities are actively generating manufactured dairy products. Stocks are reported to be available for domestic and international sales. Some sales have been reported, although lighter than desired for this time of the year.

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