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Dairy conference 3/ 2015
In Belgium
Bright or dark future? The global dairy landscape and opportunities of the EU in it
Author: Torsten Hemme, IFCN Dairy Research Center at University Kiel,Email: [email protected]
© IFCN 2015
Outline
1. IFCN research concept
2. Milk prices and its driversdemand, supply, farm economics
3. The dairy world in 10 yearsincl. view on EU after quota
4. Summing up
© IFCN 2015
IFCN is a way to understand a complex & fast changing dairy world
© IFCN 2015
2. We at IFCN - International Farm Comparison Network - started in
2000 with the basics - the cow and the dairy farmer.
Dairy Research Center
Network of companies
3. The IFCN has a Dairy Research Center with 15 dairy researchers. It has a
cooperation with University Kiel, Germany.
1. The IFCN is a global network of researchers and dairy related companies to create a better understanding of the dairy
world.
Network of researchers
IFCN - a global research network
© IFCN 2015 Brazil
India
IFCN mission: We create a better understanding of the dairy world
by providing comparable data, knowledge and inspiration
© IFCN 2015
Researchers partners f. 100 countries
Status of the IFCN Network in 2014
Supporting partners (> 100)
Farm Comparison: 51 countries & 61 dairy regions
Country Profile: 100 countries (49 other than farm comparsion)
IFCN has also partnerships with
© IFCN 2015
3
111
6
9
12
2
7
4
5
10
8
Method work
September Conference
IFCN results at public events
June Conference
Data validation & analysis
Kick off meeting Kiel
IFCN -An ongoing knowledge
creation system
Activities in the
different months of the year
© IFCN 2015
Outline
1. IFCN research concept
2. Milk prices and its driversdemand, supply, farm economics
3. The dairy world in 10 yearsincl. view on EU after quota
4. Summing up
© IFCN 2015
0
10
20
30
40
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
US
-$ /
100
kg fe
ed
0
30
60
90
12019
82
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Eur
ope
Spo
t Bre
nt P
rice
FO
B (
US
-$/b
bl)
World market prices Oil, Feed, Milk1981 – 2014 in US-$
Crude oil Feed
IFCN feed price indicator based on corn and soybean meal
0
14
28
41
55
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
US
-$ /
100
kg m
ilk E
CM
Milk
IFCN milk price indicator based on a basket of dairy products
= 2013 / 2014 high
= 2013 / 2014 low
© IFCN 2015
Combined IFCN world milk price indicator: weighted average of 3 IFCN world milk price indicators:
1. SMP & butter (35%)
2. Cheese & whey (45%)
3. WMP (20%)
Shares are based on volumes traded on the world market.
IFCN world milk price indicator 1996-20152014 Lows 33 US$, 21 GBP, 26 €
Source: IFCN Database 2014
Data until March 2015
26 pounds
33 pounds
20 pounds
39 pounds
13 pounds
© IFCN 2015
World milk prices drive national prices Monthly milk price developments 2006 – 2015 (until M arch)
Source: IFCN Database 2013
US
-$ p
er 1
00 k
g m
ilk e
cm 4
% f
at/3
,3%
pro
tein
Germany USA Brazil
© IFCN 2015
Outline
1. IFCN research concept
2. Milk prices and its driversdemand, supply, farm economics
3. The dairy world in 10 yearsincl. view on EU after quota
4. Summing up
1. Dairy trade perspective
2. Dairy demand perspective
3. Dairy supply perspective
© IFCN 2015
1. The dairy trade perspectiveGlobal dairy market 2013 in milk equivalents (millio n t)
Source: IFCN Database 2014
EU-28
Deficit in mill t
© IFCN 2015
2. Milk demand perspective World milk demand growth in mill t or %/year
Source: IFCN Database 2014
Cow and buffalo milk in ECM milk ( 4% fat, 3,3% protein)
Ø 16,8; 2,4%/ year
8,8
11
+ 8 mill t via more people
on earth
+ 12 mill t via more per
capita consumption
© IFCN 2015
IFCN milk demand figuresPer capita dairy consumption in kg milk equivalents (ME)
Source of data: National statistics, FAO, IMF.Calculation: Dairy consumption = milk production of all milk animals plus import minus export volumes plus or minus stock changes.Per capita consumption = dairy consumption in the country divided by population.Specification: Milk production data in ECM (Energy corrected milk) standardised to 4% fat and 3.3 % protein.ME (milk equivalent) based on fat and protein only.
Source: IFCN Dairy Report 2012
77
1245
130
60
126
58
187
15
>300
© IFCN 2015
3. Milk supply perspective Milk supply 2013 in mill t ECM
Total milk produced in 2013:
756 mill ton ECM
Source: IFCN Database 2014
© IFCN 2015
Where did world milk production grew? Change in milk production ø 2006-2013/ year
IFCN Dairy Report 2013 – estimates for the year 2013
Milk production decreased (inill tons/year)
Milk production increased (in mill tons/year)
EU
© IFCN 2015
World milk and feed price IFCN margin over compound feed costs
IFCN world feed price30% soyabean meal, 70%
corn
IFCN world milk price
US
-$ p
er 1
00 k
g
Dairy farm economics a key driver for milk supply growth Data f. 2007 – 3/2015 estimates
Source: Data product - Monthly real time data of milk production, milk & feed prices, status 5/2014
Explanation: Relative change of the 12-months rolling sum of milk production expresses the relative deviation of milk production in a 12 month period compared to the same period one year before. Countries included represent 92% of world milk production. Data is adjusted for leap year effect.
% change in milk production 60 countries
© IFCN 2015
Belgium milk prices and production
Source: IFCN Database 2015
Eur
ope
r 10
0 kg
milk
ecm
4% f
at/3
,3%
pro
tein
Milk price in Euro
% change in milk production
© IFCN 2015
Outline
1. IFCN research concept
2. Milk prices and its driversdemand, supply, farm economics
3. The dairy world in 10 yearsincl. view on EU after quota
4. Summing up
© IFCN 2015
Two sentences what we belief regarding forecasts
1. Predicting the future shall be done in a dialog.
2. Predicting the future shall be continued process
© IFCN 2015
History of the IFCN Dairy “Baseline”?
2011 1. Step 900 mill t in 2025 - qualitative work
2013 2. Step: Quantitative work + mile stone in IFCN dev elopment analysis and database for 1996 – 2023globally consistent and comparable
2014 3. Step: Refine, improve and deepen feedback receiv ed in 03/2014 new IFCN Baseline 2024
2015 4. Step: Improvement outlook 2015 Sources: Baseline done 3/ 2014 Dairy sector database and baseline projection product, IFCN Dairy Research Center
© IFCN 2015
Baseline assumptions - milk &feed priceWorld milk and feed price
US
-$ p
er 1
00 k
g
IFCN world feed price
IFCN world milk price
Milk price assumption 44,5 US-$; 19$/cwt
Feed price assumption 33 US-$,
IFCN Baseline process = 1. Estimating milk supply and demand growth in all countries world wide and see how the sum matches.
2. If they do not match => change the milk price assumption
Sources: Baseline done 3/ 2014 Dairy sector database and baseline projection product, IFCN Dairy Research Center
© IFCN 2015
Supply & demand balance Milk supply, demand, Imports/export Self sufficiency
Country fact sheets 1996 – 2024
Milk demand details% growth / yearPopulationPer capita consumption
Milk supply details% growth / yearCows & milk yieldFarm number and size
China
© IFCN 2015
+ 2,5%/year
China - Dairy developments until 2024 => Milk production + 4 mill t demand +3%/year , imports + 10 mill t
-13%
+ 4 mill t
+ 10 mill t milk
70%
Sources: Baseline done 3/ 2014 Dairy sector database and baseline projection product, IFCN Dairy Research Center
© IFCN 2015
Where will the world be in 10 years?Global results of IFCN Baseline 2024
Variable Results 2024 % change 2024 vs 2013
Milk production + consumption 1,023 mill t ECM+ 235 mill t to 2012
+30%
Per capita consumption 111 → 126 kg milk per capita / year
+ 14%
Population 8 bn +14%
Milk animals 399 millcows and buffalos
+ 13%
Milk yield 2.1 → 2.4 t ECM / milk animal / year
+15%
Sources: Baseline done 3/ 2014 Dairy sector database and baseline projection product, IFCN Dairy Research Center
© IFCN 2015
Where will the growth happen?IFCN Baseline results on production growth next 10 years
Milk volumes cows & buffalo milk –standardised to 4% fat and 3,3% protein
+ 25% but from lowered base
Milk delivered
Milk not delivered
+ 57%
+ 48% + 50%
+ 26%
+ 22%
+ 12%+ 15%
+ 15%
Sources: Baseline done 3/ 2014 Dairy sector database and baseline projection product, IFCN Dairy Research Center
© IFCN 2015 Source: IFCN Dairy Research Center
And what about the EU after quotas?
Is this the right question or shall we ask:
1. What opportunities we have with latest exchange rate developments?
2. How much milk will be produced at what milk/feed price scenario?
3. How can we better support dairy farmers which gr ow their farms milk output at a rate of >10% per year?
=> First thing can be stop hindering / discriminati ng.
© IFCN 2015 Source: IFCN Dairy Research Center
Costs of milk production 2000 – 2015Data for typical dairy farms (est. 2014/15)
26 pounds
Cost of milk productionExchange rate US-$/Euro
© IFCN 2015 Sources: Baseline done 3/ 2014 Dairy sector database and baseline projection product, IFCN Dairy Research Center
EU - Dairy developments until 2024 => Milk production + 12%, demand moderate , exports + 13 mill t
+ 1%/year
+12 % + 13 million t milk
18% of EU milk to be exported
© IFCN 2015
Where in Europe will milk production grow?
Milk production decreased in mill t
Milk production increased in mill t
Change 2007 - 2012 (partly est.)Change 2005 - 2008
Sources: Dairy sector database, IFCN Dairy Research Center
Annual change in milk production by region in mill t
© IFCN 2015
Criteria for winning dairy regionsFarm structure dynamics – cows / size class in 1,000’s
Poland France Denmark
cow
s pe
r he
rd s
ize
clas
s in
1,0
00’s
size classes, cows per farm: size classes, cows per farm: size classes, cows per farm:
Ø herd size change 1996-2012 2 to 6 30 to 51 47 to 147
Ø change in farm no. -78% -53% -74%
Sources: Dairy sector database product, IFCN Dairy Research Center
© IFCN 2015
Rank Company name Orgin & main operation countries
Milk intake, in mill. t milk equivalants
Turnover per kg milk, in US-$
Market share in % of world milk production
1 Dairy Farmers of America USA 27,8 0,5 3,7%
2 Fonterra Co-operative Group New Zealand/ others 22,0 0,7 2,9%
3 Groupe Lactalis (incl. Parmalat) France/others 15,0 1,3 2,0%
4 Nestlé Switzerland/others 14-15* 1,25* 2,0%
5 Arla Foods Denmark/Sweden/others 12,7 1,1 1,7%
6 FrieslandCampina Netherlands/others 10,3 1,1 1,4%
7 Dean Foods USA 10,1 0,9 1,4%
8 Danone France/others 8-9* 1,9* 1,1%
9 California Dairies USA 8,1 0,7 1,1%
10 DMK Deutsches Milchkontor Germany 6,8 1,0 0,8%
11 Saputo Canada/USA/others 6,0 1,1 0,8%
12 Glanbia Group Ireland/USA/others 6,0 0,7 0,8%
13 Land O' Lakes USA 5.4* 0,7* 0,7%
14 Groupe Sodiaal France 5,2 1,0 0,7%
15 Amul (GCMMF) India 4,8 0,5 0,6%
16 Yili Group China 4,5 - 5* 1,6* 0,6%
17 Unternehmensgruppe Theo Müller Germany/UK, others 4,4 1,5 0,6%
18 Mengniu Dairy Company China 4 - 4.5* 1,6* 0,6%
19 Bongrain France/others 4,2 1,4 0,6%
20 Darigold (Northwest Dairy Association) USA 3,6 0,6 0,5%
Sum of Top 20 184,2 1,0 25%
IFCN Processor Ranking 2014 by milk intake
Source: IFCN Dairy Research Center
Criteria for winning dairy regionsA competetive milk processors & dairy chain
© IFCN 2015
Sum up – IFCN dairy perspectives and EU dairy opportunities
Milk supply: Can meet demand growth once milk price, feed price, weather and policy is „ok“.
Source: IFCN Dairy Research Center
Milk demand: We need a >20 mill t more milk each year!
Milk price assumption 2/2014 : milk supply & demand balance out at a milk price 44,5 $ / 37 € / 100 kg milk *
EU dairy opportunities: - Once you can grow milk supply at 35-37€ - Go + grow!- More milk in the EU– most will be exported- We recommend to build regional dairy think tanks* Technical comments: There are alternative outlooks/scenarios but the one shown has for us right now the highest probability