Organization of the dairy industry in Europe in the dairy Brazilian sector: agenda for development Europe: Production and consumption Milions of tons Figures in 2013 (EU-28) Production

Organization of the dairy industry

in Europe

Overview

Clotilde Patry, Xavier David, Didier Boichard, Eric Venot, Vincent Ducrocq, 06/05/2014

C.PATRY, 06/05/14, Uberaba, Brazil

Contribution of EU in the dairy

worldwide market

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Innovation in the dairy Brazilian sector: agenda for development

Cow milk production (Millions of tons)

Total world > 770 millions of ton (all species)

Milk production in the world

EU: 217 31%

Asia: 257 36%

NA: 95 13%

NZ: 26 4%

SA: 61 30%

CA: 16 2%

BRZ: 29

EU-27: 156 20%

Source: FNCL


Global consumption

Cheese, butter, WMP, SMP, Whey powders consumption

79 % of the global production, 57% of the consumption


Europe: Production and consumption

Milions of tons Figures in 2013 (EU-28)

Production 156

Delivery 141

Imports 1

Exports 16 (10%)

Domestic consumption 142 (90%)

Consumption (kg / inhabitant) 279

Source: Economie de l’élevage, 2013, IDELE


2 markets:

1. Home consumption and Europe:

Very saturated (cheese)

2. Export towards emerging countries

A high demand(milk powder)

Dairy processing in the economy:

12,000 milk processing sites

10% of the people working in the European food and drink industry

13% of the turnover for the total food and drink industry in Europe.

2013: How milk deliveries were used (% of the Dry Useful Matter)

Dairy products in Europe

Source: Economie de l’élevage, 2013, IDELE

Cheese

Powders


External trade of dairy products

Limited import: < 1% of the EU consumption Cheese from Switzerland Butter from NZ Increasing export: 9,2 Mrds € (28,7 Mrds $R) Cheese (40%): EU = the exporter 1st worldwide Milk powder (30%) Whey powder (10%)

10%


EU: one of the major exporters

Export (Millions of tons of milk)

Source: IDELE

10%

Few international exchanges


EU: world market share

Source: EU commission

30%

20%


The specificities of the dairy

industry in Europe A common political framework

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Regulated milk market in the EU

1984: implementation of a quota system by the Common Agricultural Policy

• Every member state has a national production quota distributed to farmers.

• Whenever a member state exceeds its quota, it has to pay a penalty to the EU (0,3426 € / L)

• Objectives:

- Limit the continuous increase of the Milk Production,

- Balance between consumption & production,

- Reduce the EU supports (storage intervention, export refunds, special marketing aid)


2005: decrease of the penalty level 2009: ‘Health Check’ reform national quotas increased by 1% every year April 2015: expiration of the quota system liberalization of the production

End of the regulated milk market in the EU


Evolution of EU milk deliveries and direct sales vs quotas

Source: EU, DG Agri, H. Versteijlen


Impact on prices and competitivity

20,00

25,00

30,00

35,00

40,00 1

99

1

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

Source: Milk market observatory

36,51

29,67

€ / 100 kg

average European milk (raw) prices


Impact on prices and competitivity

Source: EU, DG Agri, H. Versteijlen


The specificities of the dairy

industry in Europe Diversity of structures: farm, delivery,

process

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Milk production: different volumes, various farming systems

Very specialized farms: -Pasture oriented: IRL, GBR Large herd size, low production costs but milk production seasonality -Inbarn feeding: NLD, DNK, Germany (East) Large herd size, concentration of the services, large investments, high productivity -Mountain area: France Local products with high added value Farms (associated with other agricultural activities), smaller herd size Ex: France, Germany (West) Autonomous / Feed but high production costs

Milk deliveries per country (Millions of tons)


5 out of the TOP 10 global dairy industry are European

80% of the EU dairy companies are SMEs

In the North (NLD, DNK): Monopolistic cooperatives with more than 80% of the market share

France, Germany, GBR, IRL: many more stakeholders

•International leader (private) • Cooperatives •SMEs (local products)

Dairy processing industry: different strategies


Strengths and challenges of the European dairy industry

Strengths:

• Well structured dairy sector

• Diversity & complemtarity: market diversity

• Quality: Genetics, Hygiene, Nutrition

• Environment & animal welfare concern


Challenges:

• Volatility of the milk price and the intrants and the revenue

• Competition with cereals and biofuel

• Societal expectations: Environment, Animal health & welfare

• Precise dairy farming: need for investment in research

• Needs of the farmers’ community

- Farmer population getting older: replacement?

- Need for training

Strengths and challenges of the European dairy industry


The European dairy industry:

what’s next?

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Dairy product consumption increasing steadily

Source: European Dairy Assocation 2012, as calculated by IDF


Production vs consumption: need for more international exchange

surplus

balance

deficit


2010 2020

Number of dairy cows (millions) 23.3 20.5 - 12%

Yield (kg/dairy cows) 6278 7643 + 22%

Production (millions of tons) 146.4 156.3 + 7%

Milk price(€/t) 305.6 353.2 + 16 %

Source: DG AGRI /OCDE, Fao et World Bank

After the milk quota abolition:

How the EU commission see the future?


Need for adaptation

• At the farm level: - More specialised and integrated farms - Take advantage of the diversity (production, genetics, processing) to adapt to various markets

• At the industry level: need for enterprises with a capacity of:

-Innovation: products, marketing -International development


Conclusion

So far, Europe is among the leaders in the dairy sector A changing context:

•increased demand •increased competition (market liberalization)

Adaptation: need and capacity

• Modern production and processing tools

• Cooperative organization

• Diversity of the practices, complementarity

• Towards more international development

Thank you for your attention! Obrigada

Documents

Organization of the dairy industry in Europe in the dairy Brazilian sector: agenda for development Europe: Production and consumption Milions of tons Figures in 2013 (EU-28) Production