Managed by Dairy Management Inc.™

A Globalized Dairy Market

The U.S. Dairy Industry: We’re “All In”

International Grocers Association

Atlanta, GA

October 8, 2014

Today’s Topics

2

• About USDEC

• Growth factors and prospects

‒ Milk supply assets

‒ Export commitment

‒ Portfolio expansion

• Final thoughts

• Q & A

• Independent membership organization

• 119 members

‒U.S. dairy producers

‒Dairy processors and cooperatives

‒Trading companies

‒Allied companies and organizations

• Created in 1995 by U.S. dairy farmers

• Headquartered in Arlington, Virginia

U.S. Dairy Export Council (USDEC)

3

4

Representation Around the World

Provide market insights and technical

support to local buyers and end-users

• China

• European Union*

• Japan

• Mexico, including

Central America

• Middle East &

North Africa

• South America

• South Korea

• Southeast Asia

• United States

• Vietnam

Factors Behind Growth in U.S. Milk Production

• Higher yields per cow (despite lower number of cows)

• Steady growth in dairy farm efficiency‒ Lower production costs (reduced

investment/overhead per cow)

‒ More financial stability and commitment

• Year-round production with very little seasonal variance‒ Volume

‒ Nutrient composition

• Production across the USA5

U.S. Leads the World in Milk Volume Growth

6Source: USDEC

EU-28

US

NZ

Australia

Argentina

-1,500

1,200

3,900

6,600

9,300

12,000

05 06 07 08 09 10 11 12 13

(000 M

T)

Cumulative milk production growth since 2005

EU-28 US NZ Australia Argentina

Source: USDEC - USDA

Value

(millions)

% change

vs. 2008

Volume

(MT)

% change

vs. 2008

SMP/NDM $2,050 +44% 554,752 +38%

Cheese $1,355 +138% 316,556 +141%

Whey proteins $1,210 +98% 544,584 +50%

Lactose $574 +213% 341,747 +84%

Butterfat $354 +30% 91,952 +2%

Ice cream $177 +208% 61,089 +141%

Fluid milk & cream $36 +84% 86,991 +78%

TOTAL $6,831 +78%

What We Export (2013)

7

Source: USDEC - USDA

Value

(millions)

% change

vs. 2008

Mexico $1,425 +53%

Southeast Asia $1,247 +68%

Middle East/North Africa $827 +79%

Canada $764 +57%

China/Hong Kong $750 +283%

Japan $304 +46%

Korea $303 +200%

Caribbean $193 +18%

TOTAL $6,831 +78%

Where We Export (2013)

8Source: USDEC - USDA

0.0

1.0

2.0

3.0

4.0

5.0

04 05 06 07 08 09 10 11 12 13 Jul-14

(bil

lio

n lb

s.,

to

tal m

ilk

so

lid

s)

Incremental growth in U.S. production and exports since 2003

incremental production growth incremental export growth

Increasing Percentage of “New” Milk Produced

Since 2003 for Export

Source: USDEC, NMPF

68% to Exports

9

Record U.S. Dairy Exports in 2013

10

0

420

840

1,260

1,680

2,100

$0

$1,500

$3,000

$4,500

$6,000

$7,500

05 06 07 08 09 10 11 12 13

Volu

me (

thousand m

t, T

SB

)

Valu

e (

mill

ions)

U.S. Exports - value and volume

Value Volume 19

Exports in 2013:

$6.7 billion

1.8 million MT

Export value + 31% last year

+ 21% p.a. over 10 years (CAGR)

Export volume + 19% last year

+ 12% p.a. over 10 years (CAGR)

Export % of production 15.5% up from 11% in 2008

U.S. global share[SMP, WMP, cheese, butterfat, whey]

17% up from 11% in 2009

2013 Saw Outstanding Growth

11

Most U.S. Products Hitting Higher Export Shares

12

Product 2014

(7 mos.)

2013 Avg.

‘04 – ‘08

NDM/SMP 59% 58% 42%

Cheese 7.4% 6.3% 1.9%

Dry sweet whey 53% 56% 42%

Lactose 55% 73% 56%

Butterfat 8.6% 10.7% 4.4%

Diverse, Growing Base of Markets for U.S. Dairy

Products

Source: USDEC, USDA

62% to Exports

13

U.S. DAIRY EXPORTS, TOP 10 MARKETS (in millions) (JAN.-DEC. 2013 AND % CHANGE VS. PRIOR YEAR)

CANADA

$569 m, +21%

MEXICO

$1,429 m, +16%

CARIBBEAN

$216 m, +1%

SOUTH

AMERICA

$277 m, +9%

MIDDLE EAST/

NO. AFRICA

$788 m, +83%

CHINA

$706 m, +70%

SO. KOREA

$301 m, +34%

JAPAN

$304 m, +7%

SOUTHEAST ASIA

$1,284 m, +39%

OCEANIA

$258 m, +17%

14Source: GTIS, USDEC

+7.2

+8.5+8.5

+7.2

25%

28%

17%

5%

24%

0.00

0.08

0.16

0.24

0.32

0.40

EU-28 NZ US Australia Other

pe

rce

nt

2013 Aggregate Export Volume (share) SMP, WMP, cheese, butterfat, whey

2. Rising U.S. Presence in Global Dairy Trade

Most Products Moving UpSeven Months 2014 vs. Seven Months 2013

-10%

0%

10%

20%

30%

40%

Lactose IceCream

Whey SMP/NDM

Milk &Cream*

Butter Cheese All Value

-6%

6% 7%

11%

16%

22%

31%

22%

Volume (000 MT)

*(mil. liters)

15198.5 42.5 335.1 353.0 58.6 47.9 231.2 $4,615 mil

U.S. Exports of CheeseEleven Months 2013 vs. Eleven Months 2012

0%

5%

10%

15%

20%

25%

30%

35%

40%

World Mexico Korea MiddleEast

Japan CentralAmerica

SE Asia China Caribbean

19%

24%

21%

37%

16%

10%

6%

16%

13%

Volume (000 MT) 285.5 72.9 44.7 39.3 28.2 15.4 14.1 12.2 11.8

17

Closing

Questions and Answers?

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Thank you

Vikki Nicholson, Senior Vice President

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vnicholson@usdec.org