bright or dark future? - vlaanderen conference 3/ 2015 in belgium bright or dark future? the global...

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




4. Summing up

© IFCN 2015

0

10

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1982

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US

-$ /

100

kg fe

ed

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12019

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1984

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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

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-$ /

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)


US

-$ p

er 1

00 k

g m

ilk e

cm 4

% f

at/3

,3%

pro

tein

Germany USA Brazil

© IFCN 2015

Outline




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)


EU-28

Deficit in mill t

© IFCN 2015

2. Milk demand perspective World milk demand growth in mill t or %/year


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


© 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


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




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%


© 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%


© 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%


© 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

© IFCN 2014

This presentation is the result of

a large number of people working together

since 2000

Dairy Research Center

Network of companies

Network of researchers

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