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ESADA Conference 2015

GLOBAL DAIRY PRODUCTION STATUS, TRENDS, AND OUTLOOK

Dr. Dorothee BoellingIFCN Dairy Farm Analysis

Dorothee.Boelling@ifcndairy.org

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Agenda

1. The IFCN concept

2. Milk prices and their drivers

3. Outlook 2025

4. Summary

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Mission: We create a better understanding of the dairy world by providing comparable data, knowledge and inspiration.

IFCN - The Global Dairy Research Network

The network approach – consisting of three pillars - the network of researcher - 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 2015

Supporting partners (> 100)

Institutional partners

55 Countries where we collect farm economic data & country data 45 Countries where we collect country profile data

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IFCN – an ongoing knowledge creation system

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Agenda

1. The IFCN concept

2. Milk prices and their drivers

3. Outlook 2025

4. Summary

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World milk price & its volatility

Combined IFCN world milk price indicator: weighted average of three 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.

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National milk prices driven by world price

Source: D3.4 - IFCN Monthly real time data

Germany BrazilMilk prices in ZAR/100 kg ECM Milk prices in USD/100 kg ECM

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National milk price

Combined IFCN world milk price indicator

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National milk price

Combined IFCN world milk price indicator

South Africa

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Agenda

1. The IFCN concept

2. Milk prices and their drivers

3. Outlook 2025

4. Summary

1. Dairy trade perspective

2. Dairy demand perspective

3. Dairy supply perspective

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1. The dairy trade perspective Milk surplus and deficit world-wide 2014

Source: D3.2 - Dairy Sector Analysis with Base Line Projection 2025, status 3/2015

-9.6

22.1

15.8

-5.2

5.4

2.0

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1997

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mill

. t m

ilk (M

E) /

year

Since 2006: Ø 2.5%; 16.8/ year

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.

2. Dairy demand perspectiveWorld milk demand growth in mill t/year

Source: D3.2 - Dairy Sector Analysis with Base Line Projection 2025

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Avg. world milk consumption per capita in 2014: 113 kg 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.

50

difference of margin over compound feed cost to boundJanuary 2015 in %

>15%>-15% <= 15%

<= -15%no data

2. Dairy demand perspectiveMilk consumption per capita in kg ME per capita

Source: D3.2 - Dairy Sector Analysis with Base Line Projection 2025

50

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3. Dairy supply perspectiveAverage annual regional change in milk production 2014 vs. 2009

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What is driving milk supply growth Milk/feed prices and farmers margin

Milk prices in USD/100 kg (ECM) Margin over compound feed costs in USD/100kg

farm economics:very good good poor very poor

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Margin over compound feed costs (0.3 kg/kg milk)

Bound - average 2007-2014

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World milk priceWorld feed price

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Change in milk production on monthly basis

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% change to previous yearLong term average 2007-2014

milk production % growth:very good good poor very poor

Source: D3.4 - IFCN Monthly real time data

Milk prices in USD/100 kg (ECM)

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World milk priceWorld feed price

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Agenda

1. The IFCN concept

2. Milk prices and their drivers

3. Outlook 2025

4. Summary

IFCN has computed 10 year dairy outlooks annually since 2012.

We believe:

1. Predicting the future shall be done in a dialogue.

2. Predicting the future shall be

a continued process

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IFCN Baseline method creating country fact sheets 1996 – 2025

Supply & demand balance Milk supply, demand, Imports/export Self sufficiency

Milk demand details% growth / yearPopulationPer capita consumption

Milk supply details% growth / yearCows & milk yieldFarm number and size

© IFCN 2015 for internal use Source: D3.2 - Dairy Sector Analysis with Base Line Projection 2025, status 3/2015

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Dairy world in 2025 – Milk demand

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Dairy World in 2025 – Milk supply

Source: D3.2 - Dairy Sector Analysis with Base Line Projection 2025, status 3/2015

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14%

43%

19%38%

54%

33%

27%35%

World milk production growth until 2025Absolute and % change in milk volumes 2025 vs 2014 mill t ECM

Source: D3.2 - Dairy Sector Analysis with Base Line Projection 2025, status 3/2015

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IFCN Dairy Outlook for Africa 2025

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Dairy World in 2014 and 2025IFCN Baseline– produced in 3/ 2015

Unit Annual values2014 2025

Change 2025 vs 2014 % % / year

Milk Supply & Demand* mill t ECM 819 1059 29% 2.4%

Supply DriversNumber of milk animals mill head 364 407 12% 1.0%

Average milk yield t/milk animal/year 2.2 2.5 16% 1.3%

Dairy farm number Mill 120 101 - 16% -1.6%

Average farm size head/farm 2.9 3.8 34% 2.7%

Demand DriversPopulation billion 7.2 8.2 14% 1.2%

Demand per capita Kg ME/ capita/year 113 129 14% 1.2%

World dairy trade** mill t ECM 54 99 82% 5.6%

IFCN Baseline: * Milk from all animals (cows, buffalo, goat, sheep, camel) Small deviations of total supply and demand due to changes in stocks** Excl. EU28 intra-trade - Representing volume traded from surplus countries; imports from net exporters not included

Source: D3.2 - Dairy Sector Analysis with Base Line Projection 2025, status 3/2015

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Agenda

1. The IFCN concept

2. Milk prices and their drivers

3. Outlook 2025

4. Summary

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Summary

• World market price for milk are very volatile and drive national milk prices.

• Milk demand growth is strong – on average > 16.8 mill t per year. In good years we need approx. as much as the annual production of NZ.

• Milk supply growth can meet demand growth once milk prices, feed prices, weather and politics are „reasonable“.

• Dairy Outlook: In 2025 we produce and consume 240 mill t more milk. This will be three times the US milk production. 80% of this additional milk will be produced locally, 20% will be traded from milk surplus to deficit regions.

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Thank you for your attention

Dairy Research Center in Kiel, Germany

Network of researchers

Conference 2015 hosted by Gea

Network of companies

Conference 2015 hosted by Cargill and Elanco

This presentation is the result of a large number of people working together since 2000