GERMANY – A surge of surplus milk from producers this summer is leading to tough pricing conditions in the market, according to a report from the German produce reporting agency ZMP.

The agency has called for processors throughout Europe to co-operate in establishing new milk price concepts to encourage late summer and winter production from dairy farms.

Throughout the EU, milk deliveries to processors for the first four months of the year were up 220,00 tonnes on the same period last year. This trend has continued through May and into June.

At the same time, demand for milk and milk products stagnated in the EU, even in the previously strong cheese sector.

The ZMP report said that extremely low milk prices in the UK have led to increased shipments of unprocessed milk to Germany and the Netherlands. By early June the spot market was near to collapse in Germany, the report claimed.

Major processors are now shipping as much produce as they can into butter and skim milk powder intervention. The European intervention store total is now at its highest for years. In the first four months of 2002, over 85,000 tonnes of butter and more than 50,000 tonnes of skim milk powder were sent into store. ZMP claims that these levels will continue to rise.

In Germany, there has been a trend over recent years for processors to reduce drying capacity and increase cheese production facilities. The result is that drying plants are currently overwhelmed and that cheese factories are slowing production of cheese as consumption levels off. Demand for sliced cheeses has even dropped.

ZMP predicted that the imbalance of supply and demand would result in falling cheese prices, and that drinking milk prices are also likely to be affected.

The agency claimed that spring and summer oversupply is worse this year because many milk producers in Western Europe had deliveries disrupted or cancelled last spring through the foot and mouth crisis.