USDA review of International dairy market conditionsSunday, Jul 20, 2003
OCEANIA OVERVIEW: During the past few weeks in many dairy production areas of Oceania, low winter temperatures are being reported. Milk handlers and producers indicated that this is the first time this year that temperatures have been this low. Snowfall on the South Island of New Zealand is occurring at lower elevations and dustings of snow are reported on the North Island. In both New Zealand and Australia, low winter production continues to occur with the new milk production season still 6 - 8 weeks away. Milk handlers in both countries continue to project new season output to be around 1 - 2% over last season. Stocks of manufactured dairy products remain in balance with known needs. Most handlers and exporters indicate that it is still too early to project what volume of inventory might be available, if any at all, for spot buyer interest prior to the start of the new production season. Although most feel that they will have sufficient volumes to meet known needs, some are indicating that stocks will be pretty well cleaned out on some items prior to the new production season. Most market activity continues to centre around shipments of previously placed orders. International sales activity is slow. No new buyer interest is being reported, although negotiations are occurring for new season production. Often these conversations are occurring with regular and ongoing customers.
OVERVIEW: WESTERN EUROPE: Milk production patterns across much of Europe are declining very quickly. Much of the decline is being attributed to hot/dry weather conditions. In recent weeks, temperatures have been hot and rainfall has been very localized and spotty. Rainfall that has occurred is minimal in comparison to what is needed to maintain summer pasture conditions. Often, dairy producers are supplementing grazing with stocks of feed that they have on hand or inventoried for upcoming winter needs. Lack of moisture is also concerning farmers with their corn crops and the impact this may have on quantity and quality of their silage harvest. As milk production declines, competition for the milk is very active. As temperatures heat up, demand for liquid milk is higher, thus further limiting volumes available for manufacturing. At this point, many manufacturing facilities are working with greatly reduced volumes. International buying interest remains slow and unaggressive, although traders and handlers do report some sales activity. The Euro exchange rate continues to edge lower against the U.S. dollar, although traders feel that European product prices remain too high for potential buyer interest at this time. The EU Management Committee is holding the line on additional export subsidy adjustments even though they continue to be lobbied by traders and handlers for additional adjustments. In light of lower milk production and reduced manufacturing schedules, many producers and handlers are not overly concerned with this situation. Stocks of manufactured dairy products are reported to be adequate with these less than desirable production conditions. Continental offerings of skim milk powder to intervention are greatly reduced, while UK and Irish offerings continue. As of July 6, intervention offerings total 92,746 MT, which is considerably higher than many anticipated for the entire open season. With six weeks to go before the close of intervention, more producers and handlers are now indicating that the 109,000 MT maximum level might be attained.
EASTERN EUROPE: Hot and dry weather conditions are also being reported in Eastern Europe, thus milk production is declining more rapidly. The declining milk production trend in Poland is meeting with mixed opinions, but for producers and handlers in countries such as Russia, Ukraine, and Baltic states, the concern is intensified by already lower milk production volumes than last year. International sales are being reported out of Eastern Europe, with most of this sales activity classified as minimal volumes for near term shipment.