global dairy trends, drivers & outlook 2025
TRANSCRIPT
18/11/2016 For internal use only © IFCN 2016 | 1
Global dairy trends, drivers &
outlook 2025
Milk exporters of the future
Wyrzykowski ŁukaszDirector Dairy Sector Analysis Team
18/11/2016 For internal use only © IFCN 2016 | 2
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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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
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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
0
10
20
30
40
50
60
70
199
61
99
92
00
22
00
5M
06
J 0
6S
06
D 0
6M
07
J 0
7S
07
D 0
7M
08
J 0
8S
08
D 0
8M
09
J 0
9S
09
D 0
9M
10
J 1
0S
10
D 1
0M
11
J 1
1S
11
D 1
1M
12
J 1
2S
12
D 1
2M
13
J 1
3S
13
D 1
3M
14
J 1
4S
14
D 1
4M
15
J 1
5S
15
D 1
5M
16
J 1
6S
16
US
D /
10
0 k
g E
CM
Range of IFCN milk price indicators (SMP&butter, cheese&whey, WMP)
Combined IFCN world milk price indicator
18/11/2016 For internal use only © IFCN 2016 | 6Source: 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 was
below world 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
0
10
20
30
40
50
60
70
National milk price
IFCN combined world milk price indicator
0
10
20
30
40
50
60
70
Jan-060
10
20
30
40
50
60
IFCN combined world milk price indicator
Milk p
rices in
US
D/1
00 k
g E
CM
Milk p
rices in
US
D/1
00 k
g E
CM
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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
0
10
20
30
40
50
60
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
IFCN combined world milk price indicator
IFCN world feed price indicator
0
5
10
15
20
25
30
35
40
45
50
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
Margin over compound feed costs (0.3 kg/kgmilk (ECM))Bound - average 2007-2015
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Ja
n-1
6
% 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
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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
18/11/2016 For internal use only © IFCN 2016 | 9Source: IFCN Long-term Dairy Outlook Status: 03/2016
What is the IFCN Long-term Dairy Outlook:
It has been an ongoing research project in IFCN since 2013
It is an ex-post database for 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
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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
24
3IFCN 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)
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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 conditions (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
2015preliminary 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
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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
• South 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
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 has started in June 2016 as IFCN had indicated.
Milk production has responded to low milk prices after 2 years of crisis.
=> 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
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Thank you for your attention
IFCN Dairy Research CenterNetwork 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.