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Global dairy trends, drivers &

outlook 2025

Milk exporters of the future

Wyrzykowski Łukasz Director Dairy Sector Analysis Team

Lukasz.Wyrzykowski@ifcndairy.irg

I would use the title of the IFCN standard ppt -ok

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Agenda

1. What is IFCN?

2. Milk price developments

3. Dairy world in 2025

4. Key messages

IFCN Long-term Dairy Outlook for Germany Dear Lukas I recommedn to call chapter 2 just milk price developments ok

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Mission:

We create a better understanding of the dairy world by providing

comparable data, knowledge and inspiration.

IFCN - The Dairy Research Network

The network approach – consisting of three pillars

- the network of researchers

- the network of companies/institutions and

- the IFCN center with > 15 dairy economists.

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Research partners in > 100 countries

Status of the IFCN Network in 2016

Supporting partners (> 100)

Institutional partners

We can not skip this slide as it show the network and also marketing wise points that so far all major dairy comanies use IFCN. - ok This is a sales pitch

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IFCN World Milk Price Indicator

IFCN Combined World Milk Price Indicator in USD/100kg ECM The IFCN Combined World Milk Price

Indicator is:

1. Based on the weighted average of 3

IFCN World Milk Price Indicators:

• SMP & butter (35%)

• Cheese & whey (45%)

• WMP (20%)

2. Over 2 years below 40 USD/100kg

ECM

3. Started to recover in June 2016

where an increase of 9% was

observed

4. Since June increase of 41% is

observed (October vs May 55%)

Source: IFCN Monthly Real Time Data

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CM

Range of IFCN milk price indicators (SMP&butter, cheese&whey, WMP)

Combined IFCN world milk price indicator

Explain this long as a lot of peole are not used to it and we shall aim to make this for everybody an industry standard. - ok Ad the end pleas also add that we have given a good estimation in June.

14/11/2016 For internal use only © IFCN 2016 | 6 Source: IFCN Monthly Real Time Data

USA Poland

1. The world milk price is

the key driver for national

milk prices in all

countries.

2. USA – follows normally

but not that much 2014;

2015 & 2016.

3. Poland - follows quite

close the world price. In

September price below

wolrd price and

14$ or 13 € / 100 kg milk

lower than USA

Transmission from world to national milk price

Milk prices in USD/100 kg ECM

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National milk price

IFCN combined world milk price indicator

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IFCN combined world milk price indicator

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Milk p

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CM

I would add this in as it can tell farm input comanies that with knowing this they get a first impression how a country farm econ is affected and what can happen in he near future. At the end I recommed to be proactive in telling that we support farm input comoies in monthly real time updates to better estimate their sales to farmers. – good point

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Prices in USD/100 kg milk (ECM) Margin over compound feed costs in USD/100kg milk (ECM) Change in milk production on monthly basis

farm economics:

very good good poor very poor

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IFCN combined world milk price indicator

IFCN world feed price indicator

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Margin over compound feed costs (0.3 kg/kgmilk (ECM))Bound - average 2007-2015

-3%

-2%

-1%

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% change to previous year

Long term average 2007-2015

milk production % growth:

very good good poor very poor

Current dairy world situation Key prices, farmers margins and production growth

Source: IFCN Monthly Real Time Data

Commen 1. Please consider what message

you really what to give to the audiance – focus on last crisis and what could be needed milk price for the future to move to IFCN Long Term Dairy Outlook – i will do animations later as i send it to orgenizer for translators to prepare themselfs

2. I use this chart but hide the lated milk production trends via an animated arrow for the last 6 month. Via this we use a latest data slide but hide the key item in the PDF file once it migth be used on website etc.

3. I added a subtitle as the text on the chart is so small. – perfect – it will be shown as that

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Agenda

1. What is IFCN?

2. Milk price developments

3. Dairy world in 2025

4. Key messages

IFCN Long-term Dairy Outlook for Germany

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What is the IFCN Long-term Dairy Outlook:

It has been an ongoing research project in IFCN since 2013

It is a database ex post 1996–2015 & 10 year forecast

It covers 200 countries and has comparable data

Method – Iterative supply &demand simulation:

1. Define a scenario + technical assumptions

2. Simulate milk supply and demand per country

3. Search for the balancing world milk price level

Long-term

Outlook clock

JANUARY

Planning the next outlook

MARCH

IFCN Long-term Dairy Outlook is

ready!

JUNE

Validation at Dairy

Conference

SEPTEMBER

Validation at Supporter

Conference

IFCN Long-term Dairy Outlook - concept

Here it is important to start with just one text slide introducing the IFCN outlook, key items on concept and that a database is available for people in the dairy world ok

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Consumer preference

for milk

Policy (peace,

solving global

problems, GDP

good, open trade,

etc.)

Peaceful growth

Slower milk demand growth

(10-20 mill t/year)

Political problems

Slower milk demand

growth (10-20 mill t/year)

Political problems

Lowest demand growth

(5-10 mill t/year)

1

2 4

3 IFCN assumption

Source: IFCN Long-term Dairy Outlook Status: 03/2016

IFCN Outlook scenario assumptions Using dimensions of political stability and consumer preference for milk

Global economic prosperity

Growing milk demand

(>20 mill t/year)

For people who isten to IFCN ppt the first time the scenario matrix is by far egnough – please do not use the developments 2014 vs 2015 in the box 1. ok

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IFCN Outlook technical assumptions

1. Long term – indicators are on that level or will tend towards the defined level

a) Global GDP growth: 3.6% - 3.9% (IMF 10/2015)

• Advanced economies: 2.1% - 2.2%

• Emerging markets, Developing Economies: 4.5% - 5.1%

b) World demand growth for milk: 2.3% (IFCN estimation based on Scenario 1)

c) Exchange rate: 1.17 USD/EUR or 0.85 EUR/USD

d) Oil price: 75-80 USD/barrel in 2025 (IMF 2/2015)

e) Weather: average condition (IFCN assumption)

f) Policy: no distortion (in line with IFCN Scenario 1 defined)

g) World feed price: 27 USD/100 kg feed (OECD-FAO Outlook 7/2015)

2. Result based on milk supply and demand balance

a) World milk price: 41 USD/100 kg ECM

Source: IFCN Long-term Dairy Outlook Status: 03/2016

Technical descriptions: 1. Prices and GDP growth in real terms. 2. World milk price is a result of an iterative process simulating world milk supply and demand growth per country and results of the annual IFCN Cost of Milk Production Analysis. Sources: IMF, OECD-FAO, EU Commission, IFCN estimations

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Dairy World in 2005 / 2015 / 2025

* Small deviations of total supply and demand due to changes in stocks

** Representing volume traded from surplus countries; imports from net exporters not included

World unit

Annual values Change 2025 vs 2015

2005

2015 preliminary results,

status 3.2016 2025 Absolute %

CAGR

%/year

All milk supply and demand

Milk production ≈ milk demand* mill t ECM 657 830 1038 208 25% 2.3%

World trade

Excl. EU-28 intra trade** mill t ECM 41 53 79 26 51% 4.2%

Supply drivers

Number of milk animals mill head 327 370 405 35 9% 0.9%

Average milk yield

t / milk

animal / year 1.9 2.1 2.5 0.4 14% 1.3%

Farm number mill 111 121 103 -17.5 -15% -1.6%

Average farm size head / farm 2.8 2.9 3.7 0.8 28% 2.5%

Demand drivers

Population billion 6.4 7.3 8.2 0.9 12% 1.2%

Dairy consumption per capita

kg ME /

capita / year 101 114 127 13 12% 1.1%

Source: IFCN Long-term Dairy Outlook Status: 03/2016

Please use egnough time for this slide sand go trough step by step – may be good to use as guidanes the points we have in the article. KR Torsten - Ok , animation later

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World total milk production growth until 2025

8.4

Africa

29%

EU-28

10%

18%

50%

32%

29%

18%

30%

14%

11%

37%

Source: IFCN Long-term Dairy Outlook Status: 03/2016

• Biggest increase in milk volume until 2025: IN, EU-28, PK, US, BR

• Africa will increase milk production by 29% = +14 mill t ECM

• Korea and Japan will slightly decrease their milk production by 2025

World milk production

growth until 2025

in mil t ECM and %

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Exporters of milk now and in 2025

So far the surplus deficit map 2025 is not defines for public use. I recommend to use the status map and use arrows + annimation where we see a) New importers: India, Iran,

Norway b) Imports inresing c) Exports increasing d) Where new exported might

come Ok – arrows in, animation i will do for the event The point from the summary fits very well but please the message we have used in barabar ppt ad Supporter conference Here the points from barabar ppt: • New importers: India, Iran,

Norway • Higher imports: China, Africa,

Pakistan • New exporters: Colombia,

Romania • Higher exports: EU-28, New

Zealand, Belarus, Argentina

Dairy trade in 2015

• New exporters: Colombia, Romania, Uzbekistan

• Higher exports: EU-28, New Zealand, Belarus, Argentina

• New importers: India, Iran, Norway

• Higher imports: China, Africa, Pakistan

Increase in self-sufficiency in 2025

Decrease in self-sufficiency in 2025

Africa

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1. The current dairy crisis is the third in 10 years

Price recovery happens as IFCN has indicated in June 2016.

Milk production has after 2 years of crisis responded to low milk prices.

=> monitoring global milk production growth is key to predict the future

2. Dairy Outlook 2025: Dairy growth story is expected to continue

+208 mill t milk (ECM) – over 2 times the volume of US milk production 2015.

3. Milk “net” exporters of the future:

• New net-exporters: Colombia, Romania, Uzbekistan

• Higher net-exports: EU-28, New Zealand, Belarus, Argentina

Key messages

Source: IFCN Long-term Dairy Outlook Status: 03/2016

This is my proposal so we can also capture the the first part and the outlook and the connection to the overall topic.

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Thank you for your attention

IFCN Dairy Research Center Network of IFCN Researchers

2016 Hosted by Milcobel

Network of IFCN Supporters 2016 Hosted by FrieslandCampina & Trouw Nutrition / Nutreco

This presentation is the result of a large number of people

working together since 2000.