February 4, 2005

Europe's overall milk output trailing last season

Milk producers in Europe are monitoring their milk marketings as the March 31 quota year-end nears.  Reports indicate that overall milk output is trailing last season, thus producers will not need to make as many adjustments as in recent years.   Producers in France and the Netherlands are narrowing the gap and will basically finish the year at or very near quota volumes. 

Although milk output is lighter than last year at this time, some milk handlers are preparing skim milk powder for intervention offering March 1.  Most handlers and traders feel that offerings to intervention during the open season will occur, but anticipate maximum levels to not be attained.  Stocks of manufactured dairy products within Europe are reported to be available for domestic and international buyer interest. Traders indicate that buyers are starting to return to the market, but finalized contracts are still minimal.  For the most part, buyers remain very cautious and are hesitant is commit to traders in hopes of further price declines.  Most traders and handlers state that prices have weakened, but also indicate that they do not foresee much further weakness.  Prices for skim milk powder and butter are very near intervention equivalents already, thus they do not know why they would decline further.  Traders and handlers feel that lower prices and a stable Euro around 130 should encourage buyers to resume their buying patterns.

Eastern European milk production patterns remain low, although indications of seasonal increases are occurring in more areas. Winter weather conditions have been and remain typical for this region which is not hindering production growth patterns.  Stocks of manufactured dairy products are available, but are lighter than in years past.  International buyer interest is returning to the region, although not significant at this time.  Traders and handlers feel that as prices stabilize and new stocks become available, sales activity will resume as the spring unfolds.