Roel Jongeneel
Petra Salamon, Myrna van Leeuwen, David Verhoog, Trevor Donnellan, Mariusz Hamulczuk, Kevin Hanrahan,
Lauri Kettunen, Fabrice Levert
AGMEMOD Partnership Zagreb, February 25-26th 2015
Selected Preliminary Results of the Baseline 2015
Dairy
Important to remember
• Data built up from MS. Roughly okay till 2012, but not exactly mirroring 2013, 2014 actually observed data. Has implication for number comparisons over time
• Focus is on specific group of MS for which data and behavioural equations have been updated
• For other MS data updates (but not complete) and some further adjustments
2
Selected highlights
• Medium run perspective of dairy is good despite short-run pressure on dairy product prices
• EU milk production projected to increase by more than 10 Mt (is likely to be conservative estimate)
• After QA the EU’s reliance on export markets will significantly increase (i.p. cheese, but also butter?)
• The EU is competitive in cheese and smp, less so in other products (but whey?)
3
Topics
• Introduction
• Milk production at EU level
• Results for selected MS
• Domestic use
• Trade & competitiveness
• Concluding remarks
4
Introduction
• What has been done? – Extensive database update (but still not
complete)
– Adjustment/recalibration of behavioural equations (fully done for selected MS)
– Final scope EU-28, but focus on selected EU MS (De, Fi, Ire, Nl, Pl, beh+data; other MS data)
– Miscellaneous • Whey market preparation (mainly infrastruct.)
• No R-factors applied (but structure in place)
5
Introduction
• Policy issues (CAP reform, ...)
– Greening (EFA) not relevant for dairy
– ... but Voluntary Coupling (all but De)
– 19 MS apply coupled payments to dairy (24 MS beef)
– “solution chosen” to cope with still lacking precise information => use existing measures
• Milk supply increase might be a bit underestimated due to ignoring vol.coupling
6
Introduction
• State of world market (€/100kg)
• Note: declining prices in ‘14-15, recovery in ’16 • Cheese is going to diverge from other dairy prods?
7
Real price dip in 2015 is likely to differ from OECD’s Agricultural
Outlook projection 2014
Milk production at EU-level
• EU-28 milk production increase of 10.8 mill.t (+8%) 10 yr)
• Average prod growth 0.8% p.a.(mostly N-Eur/old MS)
• Dairy cow stock will continue to gradually decline
8
Million ton % change
Past data Projected data
Evolution of EU milk production
9
Million ton
• No extraordinary growth rates needed to increase the EU’s milk supply to 168 million tons
• Note: more insight needed into evolution of farming systems (grass-based, factory farming) and structural change welcome (e.g. experiences outside EU)
% increase
Past data Projected data
Changes in milk production 2014-2024
• Increases in Irl (+37%), Nl (+13%), Pol (+8%), Germ (+10%)
• Decline in Finland (-4%)
11
1000 ton
Milk supply expansion 2013-2016 (%) due to quota abolition
• Irl. largest expected increase due to QA; NL corrected for env. constr.; decline for Fi expected; Fra and Germ both increase
12
% increase
Milk yield evolution
• Increase in milk yield/cow in EU-28 in coming decade is on average 1.1% p.a.
• Milk yield increase slows down over time (incr. grass-based?)
13
Kg/dairy cow
Past data Projected data
Expected dairy cow stock evolution
• Dairy cow stock will continue to gradually decline after a temporary increase in period 2012-2015
• Dairy cow stock adjustments: new architecture explaining milk supply
14
x1000 dairy
cows
Past data Projected data
Dairy cow stock evolution selected MS
• Irish and German cow stocks increase; others decline
• Q: what explains decline in dairy cow numbers?
15
x1000 dairy cows Index 2011-
2013=100
Projected data
Cost of production (cost index)
16
• (Adjusted) dairy input costs (€/kg milk) vary between MS and tend to increase over time (reflecting feed costs)
• Analysis of production costs needs more refinement in order to properly estimate future milk supply responsiveness
€/kg milk
Domestic use (product weight)
• Demand growth is limited but positive, especially for cheese, fresh dairy products, with butter use declining over time
17
x1000 tons
Past data Projected data
Trade: net exports EU-28
• Supply increase creates stronger reliance on export markets
• Cheese exports are leading in EU’s dairy exports
• Will the EU become an increasing fat exporter...? (butter)
18
1000 ton
Trade: cheese
• After QA EU’s cheese exports will increase to a structurally higher level than in the Milk Quota-era
19
1000 ton % change
Trade: price competitiveness
• The EU is/has become competitive in cheese, but differences exist between member states
20
Euro/100kg
Past data Projected data
Trade: price competitiveness
• The EU is competitive in SMP
21
Euro/100kg
Past data Projected data
Trade: price competitiveness
• The EU is not competitive in butter although its position improved • When there is a need to export butter this might create some
pressure on EU milk price
22
Euro/100kg
Past data Projected data
Trade: price competitiveness
• The EU is not competitive in WMP and is not likely to become so in the future
23
Euro/100kg
Past data Projected data
How do our results compare to others?
• EU Commission outlook
– EU milk production 169.5 Mt (2024) (168.5 Mt)
– Dairy cow stock 22.1M dairy cows (2024) (22.8M)
– Cheese prod up (14-24) by 11.5Mt (10Mt) (milk equiv)
– Trade (indicative)
• We export more cheese and butter
• We export less SMP and much less WMP
24
How do our results compare to others?
• OECD-FAO Agr. Outlook 2014-2023 – EU milk production 160.5 MT (2023) (166.7Mt)
• Dairy products
• Note: our EU-totals are still rather preliminary. We use within model predictions (2014 not adjusted to actual observation, no R-factors applied)
25
OECD-FAO AGMEMOD
product
level 2013 growth rate 2014-2023 level 2013
growth rate 2014-2023
Butter 2,330 0.09 1,856 -0.60
Cheese 10,690 1.03 10,927 1.03
Smp 1,243 0.95 1,306 -0.89
Wmp 638 0.05 548 0.46
Concluding remarks
• General medium term prospect for the dairy sector is still good
• Projected milk supply increase is 166.7 (2023), which is +3.8% as compared to OECD-FAO
• EU’s dairy sector will become more reliant to on the world: might create additional pressure on prices than is currently foreseen
• EU dairy products markets are “satiated” but still can accommodate some consumption increase (especially in some NMS)
26
Concluding remarks
• Qualifier: Note that refined analysis focused on Germ, Finl., Irl., Neth., Poland (for other MS still more work needs to be done): take our total EU-28 estimates with due care!!
• Impact of CAP reform (i.p. voluntary coupling) has not yet been adequately taken into account
27