Declining powder output offset by shrinking markets Output of skim milk powder in the EU is, according to the latest estimates, likely to drop this year by at least 10% or around 120,000t. Normally this would be worrying for many sectors of the food, ice cream and animal feed industries which use large quantities for many products and where prices should rise when supplies go down. Instead, EU prices are now generally the lowest for three years and the market is becoming weaker every month. The problem faced by dairy producers of SMP is that the declining output, due to greater use of milk for other products, is more than offset by shrinking markets. Most significantly, exports outside the EU this year are likely to be down by over 50% this year to around 160,000t. This is because world demand seems to be weakening and other suppliers in Eastern Europe, the US and Australasia are picking up what business there is. EU exporters largely blame the EU Commission for this as export subsidies for EU powder were reduced to nothing in July and this has made EU export prices uncompetitive. On top of this, demand from the animal feed industry is expected to drop 25% or by over 100,000t. This is partly due to lower consumer demand on the Continent for beef and veal following BSE and foot and mouth. It is also because animal feed producers have been switching heavily this year into using whey powder, a cheaper alternative for their protein requirements. So it seems a 120,000t drop in output will be more than matched by a drop in sales of 360,000t, or 25%. This can only mean that SMP stocks will be higher by the end of the year, possibly by around 40,000t. Last year, stocks dropped sharply by 160,000t between January and December. {{CANNED GOODS }}