Threats and opportunities in milk and dairy products trade

Ankara, 20th May 2014Béranger GUYONNET, CNIEL, France

2

WORLD DAIRY PRODUCTION

World dairy production (all categories included)

Geographic breakdown of world milk production in 2013 (million tonnes)

World total: 767 million tonnes

Europe 21628%

EU-27 157Russia 31Ukraine 12Belarus 7

Asia 292 38%

India 138 China 40Pakistan 39Turkey 17Africa 47

6%Sudan 8Egypt 6Kenya 5

Central America 17 2%

Mexico 11

N. America 10013%

United States 91 Canada 8

S. America 67 9%

Brazil 34Argentina 11Colombia 7

Oceania 29 4%

New Zealand 20Australia 9

FAO Food Outlook May 2014, IDF-DCANZ for NZ

4

Asia biggest contributor to milk output increase

Evolution of dairy production (all categories included) 2007 to 2013

World total: + 91 million tonnes

Europe + 2 Mt

Asia + 54 Mt

Africa + 7 Mt

South America + 11 Mt

Oceania + 3 Mt

CNIEL / IDF, FAO Food Outlook Mt: million tonnes

North & Central America + 8 Mt

World average annual growth rate

+ 2.1%

5

Growth dynamics in main dairy producing countries (1/2)

CNIEL / ZMB, FAO Food Outlook

05 06 07 08 09 10 11 12 13 (e)70

80

90

100

80.3 82.5 84.2 86.2 85.9 87.5 89.0 90.9 91.6

Rendement (kg / vache / an)

Million tonnes

+ 1,7% / year

USA

05 06 07 08 09 10 11 12 13 (e)130

135

140

145

133 132 133135 134

136139

141 142

Rendement (kg / vache / an)

�

Million tonnes

+ 1,1% / year

EU 25, EU 27(cow's milk deliveries)

- 0,7%

05 06 07 08 09 10 11 12 13 (e)10

14

18

22

14.6 15.2 15.9 15.617.0 17.1

18.920.5 20.1

Rendement (kg / vache / an)

Million tonnes

+ 4,0% / year

New Zealand

05 06 07 08 09 10 11 12 13 (e)6,000

10,000

14,000

18,000

22,000

10,026.010,867.011,279.011,255.011,583.011,916.013,802.0

15,977.815,990.1

Rendement (kg / vache / an)

Million tonnes Turkey (cow’s milk production)

+ 10,3% / year

+ 3,5% / year

+ 6,0% / year

6

Growth dynamics in main dairy producing countries (2/2)

CNIEL / IDF, FAO Food Outlook, national statistics

05 06 07 08 09 10 11 12 13 (e)20

25

30

35

25.426.7 27.6 28.4

30.031.6

32.9 33.7 34.8

Rendement (kg / vache / an)

Million tonnes

+ 4,0% / year

Brazil

05 06 07 08 09 10 11 12 13 (e)28

30

32

34

31.1 31.332.2 32.5 32.6

31.9 31.6 31.9

30.5

Rendement (kg / vache / an)

Million tonnes

- 0,2% / year

Russia

+ 1,1% / year - 1,7% / year

05 06 07 08 09 10 11 12 13 (e)25

30

35

40

27.5

31.9

35.3 35.6 35.2 35.8 36.6 37.435.3

Rendement (kg / vache / an)

Million tonnes China (cow's milk production)

+ 3,2% / year+ 13% / year - 5,6%

+ 0,6% / y.

05 06 07 08 09 10 11 12 13 (e)90

110

130

150

95 100108 112 116

122127

134141

Rendement (kg / vache / an)

Millions tonnes

+ 5,0% / year

Inde India

7

NB : deliveries in Europe

CNIEL / USDA, ZMB, PZ, DCANZ, Dairy Australia

Growth dynamics in main dairy producing countries – rolling 12 month basis

2011

2012

2013

2014

85,000

87,000

89,000

91,000

93,000

95,000millions de tonnes

USA

2011

2012

2013

2014

136,000

138,000

140,000

142,000

144,000

146,000millions de tonnes

EU 28

4,000

6,000

8,000

10,000

12,000

14,000 millions de tonnes

2011 2012 2013

Australia

2014

2011

2012

2013

2014

14,000

16,000

18,000

20,000

22,000

24,000millions de tonnes

New Zealand

In most areas, agricultural yields may drop by 2050

Projected percentage in agricultural yields by 2050 (given current agricultural practices and crop varieties)

World Bank (World Development Report 2010)8

FAO – The State of the World's Land and Water Resources for food and agriculture, 20119

Many dairy regions face water scarcity issues

Low

Moderate

High

10

WORLD DAIRY TRADE

Most emerging countries present a trade deficit for dairy products

11CNIEL

Representation of dairy product surplus and deficit countries in 2011

Trade surplus (positive balance > 2% production)

Trade deficit (negative balance < 2% production)

Trade balanced

12

World Trade

IDF, FAO Food Outlook

Global trade:

53 million tonnes

7% of global production

World trade: key exporters, export share (%) (B)

(B) Based on milk equivalents.

19%

4%

4%

7%

12%

26%

28%

0% 6% 12% 18% 24% 30%

Rest of world

Argentina

Belarus

Australia

USA

EU 27

New Zealand

13

Presence on the world marketRecent export tendencies among major suppliers of the world market

NB: Evolution of exports on a volume basis

CNIEL / USDA, Dairy Australia, Commission, ZMB, Ubifrance, national customs

EU-28Exports 2013 2 m 2014SMP -21% +49%WMP -3% +22%Butter +0% +21%Cheese +3% +0%Whey +5% +7%

New ZealandExports 2013 3 m 2014SMP +0% -25%WMP +2% +13%Butter -3% +41%Cheese +2% -9%Whey -10% -63%

AustraliaExports 2013 3 m 2014SMP -29% +34%WMP -11% +19%Cheese +1% -9%

ArgentinaExports 2013 1 m 2014WMP -10% -10%Cheese -6% -3%

United StatesExports 2013 3 m 2014SMP +25% +26%Cheese +22% +42%

*Russian imports do not account for volumes originating from BelarusNB: Evolution of imports based on volume

CNIEL / Ubifrance, national customs14

Demand is sustained on main marketsRecent import tendencies on substantial markets

United StatesImports 2013 3 m 2014Cheese -4% -2%Caseins -4% -4%

RussiaImports* 2013 3 m 2014Butter +20% +29%Cheese +3% +3%

JapanImports 2013 3 m 2014Cheese +1% -10%

ChinaImports 2013 3 m 2014SMP +40% +100%WMP +53% +72%Whey +15% -3%

AlgeriaImports 2013SMP +6%WMP -25%

BrazilImports 2013 3 m 2014WMP -23% -58%Cheese +14% -30%

15

WORLD DAIRY CONSUMPTION

Geographical variations of dairy product consumption

Apparent dairy product consumption levels in 2013 (kg per capita)

CNIEL / IDF, FAO Food Outlook, PRB

Less than 50 kg

50 to 100 kg

100 to 200 kg

More than 200 kg

China 41

India 109

Indonesia 13

Japan 70

Philippines 12

Iran 107Algeria

147Mexico 116

Argentina 232

Brazil 178

USA 275

Canada243

EU286

Russia 243

World average: 109 kg/capita Australia 309

Sudan229

Geographical variations of dairy product consumption

CNIEL / IDF, FAO Food Outlook, PRB

Apparent per capita consumption (kg – in milk equivalent)

2006 2012 %

World 101 108 +7

Asia 61 71 +16

Africa 42 48 +14

Latin America 129 151 +17

Russia + Ukraine + Belarus 253 255 +1

EU + North America + Australia+ New Zealand

290 284 -2

Dairy consumption: fast growing regions

IDF, FAO Food Outlook

Development per capita consumption in fast-growing countries per region (2012 compared to 2005)

South America Asia Africa

+ 27%

+62%

+13%

+26%

0 50 100 150 200 250

South America

Venezuela

Colombia

Brazil

kg

2012

2005

+22%

+28%

+39%

+24%

0 30 60 90 120 150

Asia

Indonesia

China

India

kg

2012

2005

+16%

+26%

+24%

+38%

0 50 100 150 200 250

Africa

Egypt

Kenya

Algeria

kg

2012

2005

NB : Human consumption of dairy products, butter excluded, in milk equivalent ; losses and dairy used as animal feed excluded.

CNIEL / FAOSTAT, FMI

0

4000

8000

12000

0

50

100

150

200

GNP per capita (USD) Dairy product consumption per capita (kg)

Russia (USSR before 1992)

0

2000

4000

6000

0

10

20

30

40

GNP per capita (USD) Dairy product consumption per capita (kg)

China

0

500

1,000

1,500

0

20

40

60

80

GNP per capita (USD) Dairy product consumption per capita (kg)

India

0

4,000

8,000

12,000

0

50

100

150

GNP per capita (USD) Dairy product consumption per capita (kg)

Brazil

Income and dairy consumption in the BRIC

Strong growth, especially in Asia

20

OECD

Middle class projections

Middle class : people living in households with daily per capita incomes of between USD10 and USD100 in Purchasing Power Parities (PPP) terms.

2009 2020 20300

1,000

2,000

3,000

4,000

5,000

Africa & Middle East

Asia Pacific

Central & South America

Europe

North America

Billion people

28%

54%

66%

36% 22% 14%

18% 10% 7%

10% 8% 6%

8%

7%

7%

4.9 Billion

3.2 Billion

1.8 Billion

21

WORLD DAIRY PRICES

22

World market prices still at high levelsFOB price in Oceania US$ 1,000 / tonne up until April 2014

CNIEL / USDA

2009 2010 2011 2012 2013 2014

1,000

2,000

3,000

4,000

5,000

6,000

WMP

2009 2010 2011 2012 2013 2014

1,000

2,000

3,000

4,000

5,000

6,000

BUTTER

2009 2010 2011 2012 2013 2014

1,000

2,000

3,000

4,000

5,000

6,000

SMP

2009 2010 2011 2012 2013 2014

1,000

2,000

3,000

4,000

5,000

6,000

CHEDDAR CHEESE

23

2011 2012 2013 20141,000

2,000

3,000

4,000

5,000

6,000

Butter SMP WMP Cheddar cheese

USD per tonneWhat next?

?

SUMMARY Bad weather + High input prices had led to a low start

in 2013 But global dairy production is now rapidly rebounding Dairy demand remains strong, esp. from emerging

markets Markets put under pressure and reached record levels Next?

Seasonal peak in Northern hemisphere End of quotas in Europe Weather & sanitary issues ...

Q&A

Thank you for your attention