January 7, 2005

European Milk Production Not Affected By Winter Season

Although the winter season is ongoing in Europe, overall conditions are not overly adverse to milk production.  Milk output is seasonally low, although producers and handlers are looking forward to the upcoming new production season.

Reports continue to indicate that output is trailing last season, although some producers will need to adjust their milk marketings as the quota year-end nears.  Trading activity remains slow.  Traders and exporters report that the year-end holidays are still a factor, but attribute slow sales to a weaker market.  Prices are adjusting lower as the dollar firms against the Euro.

Often when prices are adjusting lower, it takes awhile for buyers to return to the market in hopes of attaining the lowest price before placing orders. Stocks of manufactured dairy products are available for renewed buyer interest.  Traders and handlers indicate that the new milk production season is just around the corner, thus additional new stocks will be generated. 

As of January 1, 2005, the EU will modify its Common Agricultural Policy so the most direct subsidies are de-coupled from markets and production volumes. Under the new program, a single farm payment or single payment scheme (SPS) will be made independent of production.  The payments will be linked to environmental, animal and plant health, food safety, and animal welfare standards.  The SPS applies to main market sectors which include milk.  Member states had the option to apply for the SPS between 2005 and 2007. 

Ten member states (Austria, Belgium, Denmark, Germany, Ireland, Italy, Luxembourg, Portugal, Sweden, and the UK) will begin operations under this new system in 2005, 5 states (Finland, France, Greece, the Netherlands, and Spain) in 2006, and 2 new states (Malta and Slovenia) in 2007.

In Eastern Europe, milk production trends are following typical patterns for this time of the season.  Most producers are at seasonal low levels, but are optimistic about the upcoming new season. Temperatures are cold, although overall winter weather conditions are not as negative for milk production as in previous years at this time.  Stocks of manufactured dairy products are available for potential buyer interest.  Lower prices are being reported with traders and handlers hopeful that this will encourage buyers to return to the market place.