Dairy World & Recent Market Trends

Transcription

1 Dairy World & Recent Market Trends Competitiveness and internationalization of livestock sectors. Ministry of Agriculture and Fisheries, Food and Environment, Spain Amit Saha IFCN Senior Researcher; Dairy economist 22/03/2018 IFCN

2 World milk price is still very volatile IFCN Combined World Milk Price Indicator? 22/03/2018 IFCN

3 Agenda 1. The IFCN Network Concept 2. Globalization of dairy sector 3. Dairy markets & its drivers 4. Farm competitiveness 5. Sum up 22/03/2018 IFCN

4 IFCN - The Dairy Research Network Mission: We create a better understanding of the dairy world by providing comparable data, knowledge and inspiration. The IFCN Network approach consisting of three pillars - the IFCN Research Network of researchers - the IFCN Supporter Partner Network of companies/institutions - the IFCN Research Center with > 15 dairy economists 22/03/2018 IFCN

5 IFCN Network 2018 IFCN Country Data Partners 110 Countries, 98% of world milk production covered IFCN Supporter Partners >120 New companies in 2017/18: Milcobel, DZ Bank, AGCO, Cobank, KDD, Kalleh, Leiber, Etex, TopCon, Novozyme, Nordic dry, Kemin, Aavin, Randox, smaxtec IFCN Institutional Partners New institutions 2017: GASL, WWF, NDDB 22/03/2018 IFCN

6 Agenda 1. The IFCN Network Concept 2. Globalization of dairy sector 3. Dairy markets & its drivers 4. Farm competitiveness 5. Sum up 22/03/2018 IFCN

7 Who is importing what? Dairy imports by product groups in /03/2018 Source: IFCN Dairy Report 2016, page 81 IFCN

8 Key driver: Milk surplus & deficit by region ME = milk equivalents 22/03/2018 ME = Milk equivalents, based on fat and protein only IFCN

9 Status of milk production & delivery in EU The top 3 regions: South Asia, the EU, USA 2. Top 4 6 regions: Oceania, Brazil, China, Russia 3. Share of milk delivered 2016 in the world: 62% 22/03/2018 Source: D3.2 - Dairy Sector Analysis with IFCN Long-term Dairy Outlook 2026, status 3/2017 IFCN

10 IFCN Top 20 milk processors list 2016 Data related to the mainly 2015 Rank 2016 Company name Origin & main operation countries Milk intake, in mill. t ME Estimated turnover per kg milk, in USD Market share in % of world milk production 1 Dairy Farmers of America USA % 2 Fonterra New Zealand/ others % 3 Groupe Lactalis France/others % 4 Arla Foods Denmark/Sweden/UK % 5 Nestlé Switzerland/others 14.0* 1.9* 1.8% 6 FrieslandCampina Netherlands/others 12.6* 1.0* 1.6% 7 Dean Foods USA % 8 DMK (incl.doc Kaas) Germany/Netherlands % 9 Saputo Canada/USA/others % 10 California Dairies USA % 11 Danone France/others % 12 Yili Group China 6.8* 1.4* 0.9% 13 Amul (GCMMF) India % 14 Müller Germany/UK/others % 15 Glanbia Group Ireland/USA/others % 16 Agropur Canada/USA % 17 Land O' Lakes USA 5.8* 0.7* 0.7% 18 Mengniu China % 19 Groupe Sodiaal France % 20 Schreiber foods USA 4.5* 1.1* 0.6% Sum of Top % * IFCN estimation 22/03/2018 IFCN

11 USD/100kg ECM Transmission from world to national milk price USA Spain 1. The world milk price influences national milk prices 2. Each country follow the red line - 3. But we have special patterns like e.g. USA: EU/Spain: 2007;2017/18 22/03/2018 Source: IFCN Monthly Real Time Data IFCN

12 Rotterdam declaration: 1 billion people FAO: It is likely that the dairy sector supports the livelihoods of up to one billion people worldwide. Mathematics on dairy farms mill dairy farms 2. 5 people/ farming family => > 600 million people 2009 IDF summit 0,7-1 bill people on farm 3.09 mill Mathematics supply chain mill Jobs in the dairy chain (Range = mill) 2. 5 people/ family => >355 million people 2010 FAO/IFCN >750 mill on farm 2015 IFCN work for GDP > 950 mill One Billion people = > 600 mill farm + >355 mill chain + XXX induced jobs / spin offs 22/03/2018 IFCN

13 Agenda 1. The IFCN Network Concept 2. Globalization of dairy sector 3. Dairy markets & its drivers 4. Farm competitiveness 5. Sum up 22/03/2018 IFCN

14 USD/100kg ECM 4% fat 3.3% protein World milk price trend /2018 IFCN Combined World Milk Price Indicator The method: The price is the milk value at farm gate based on commodity prices on the world market Long-term average: : approx. 38 USD/100kg ECM? The patterns of the past (simplified) 1. The 1 st Rollercoaster Length: 3 years; +/- 50% fluctuation 2. The 1 st Zigzag 2010 Length: 1 year; +/- 10% fluctuation 3. The Dynamic Wave Length: 2 years; +/- 25% fluctuation 4. The 2 nd Rollercoaster Length approx. 4 years; +/- 50% fluctuation 5. The 2 nd Zigzag 2017/18 Length: so far 12 months; +/- 10% fluctuation 6. New cycle? When and what? 22/03/2018 Source: D3.4 - IFCN Monthly Real Time Data and Farm Economics January 2018 IFCN

15 What drives dairy economics? Why short term outlook How IFCN can support you with real time data 22/03/2018 IFCN

16 2017e World milk production change The indicator used: All milk = milk from all types of animal, standardised to 4% fat, 3.3% protein? Situation 2016: 846 mill t milk production mill t growth (+ 1.2%) = lowest growth since 1998 The trends for the last 10 years: 17 mill t / 2.3%/year Ø growth 3 crisis years: 2009; 2012; record production year: + 25 mill t 22/03/2018 IFCN

17 Current dairy world situation December 2017 February 2018 IFCN Estimates World milk and feed prices in USD / 100 kg ECM Source: Data product 3.4 IFCN Monthly Real Time Data, /03/2018 IFCN

18 Milk demand per capita 2016 The indicator: There is a comparable milk demand indicator Milk demand ranges from 13 kg in Indonesia to over 300 kg per capita in EU countries 22/03/2018 Source: D3.2 - Dairy Sector Analysis with IFCN Long-term Dairy Outlook 2026 IFCN

19 1000 t ME Dairy import changes in 2017 vs 2016 Monthly total dairy commodities imports volume by top dairy net importers in milk equivalents Total world dairy imports % change to previous year % % % Jan-Sep % 0.7 China: Imports are recovering Russia: Imports still not back on pre-ban level Algeria/ Egypt: Imports show downward trend with current devaluation against USD 22/03/2018 Source: D3.2 - Dairy Sector Analysis with IFCN Long-term Dairy Outlook 2026, status 8/2017 IFCN

20 Agenda 1. The IFCN Network Concept 2. Globalization of dairy sector 3. Dairy markets & its drivers 4. Farm competitiveness 5. Sum up 22/03/2018 IFCN

21 Farm comparison analysis in 2017 Why? Better understand and predict a specific segmentation of farm classes, we define the typical farm class. Participating countries 2017 Method concept a) Typical farm concept b) Model TIPI-CAL c) Validation loops & quality check d) The cooperation between researchers Coverage: 52 countries; 89% of world production, 159 typical farm types A typical farm type represents in each country a certain production system and x% farm and y% cows Time period: data for calendar year 2016* * Seasonal data for New Zealand 22/03/2018 IFCN

22 Examples of typical farm types PL-16E PL-65S UA-200 UA-550 ID US-80WI US-500WI ES-65NW ES-93S DE-30S DE-139N CN-200 CN-1450 KE-2 KE-10 IN-2N IN-20N NZ-369 NZ-1052 BR-23S BR-60S Legend: Countries where IFCN Typical farms are analyzed ES-65NW: Typical Average size family dairy farm in Galicia region, North West Spain- herd size of 65 cows 22/03/2018 Source: D3.2 - Dairy Sector Analysis with Long-term Outlook 2026 IFCN

23 Cost of milk production 2016 On average sized typical farms in USD/100 kg milk (ECM) Low cost (< 30 USD): New Zealand, Ukraine, Mexico, Chile and Peru, South Africa Moderate (30 50 USD): Australia, parts of L-America & Europe, US, S-Asia, Russia High cost (>50 USD): Canada, Japan, Switzerland, Scandinavia, China 22/03/2018 IFCN

24 USD / 100 Kg Milk (ECM) USD / Hour Cost and labour competitiveness 2016 Sustainable farming systems needed Economic Drivers: Milk price, cost of production, labour returns Policy drivers: Farm support Larger sized farms are more sustainable but need policy support in EU 22/03/2018 IFCN

25 Cost trend analysis of typical farms For 6 countries Spain, USA, New Zealand China, India, Brazil Costs in the ES, DE and NZ decreased from 2014 onwards Drivers for cost ( ) in ES: low feed price, euro devaln Costs are stabilizing in the range of USD per 100 kg milk (ECM) Exception: NZ:below 30 USD CN: 60 to 50 USD Cost estimations in 2017 similar to 2016 except IN, BR Precursor for increased production in >better milk price at 36 USD 2017e: estimated for /03/2018 Source: IFCN Farm Economic Data D5.1 IFCN

26 Benchmarking ideas is possible and can be used identify value creating startegies Economic sustainability Environmental sustainability Social sustainability DE-N = Base, farm now; S1 S5 = 5 different scenarios / ideas Indicator: Costs from profit and loss account non-milk returns + opportunity costs Indicator: Green House Gas Emissions calculated with a partial Life Cycle Assessment for milk production until the farm gate Indicator: Farm income (including decoupled subsidies) per hour family labour input in relation to the national minimum wage rate 22/03/2018 IFCN

27 Agenda 1. The IFCN Network Concept 2. Globalization of dairy sector 3. Dairy markets & its drivers 4. Farm competitiveness 5. Sum up 22/03/2018 IFCN

28 Our key messages today 1. Dairy Globalization: Most likely to continue at a much faster pace, new local and global markets and growth on the anvil 2. Dairy Story: 1 Billion+ people livelihood relate to dairy 3. Dairy markets: Price volatility is a reality-real time information is the key; Demand driven markets likely to remain bearish in Farm economics: Stable margin in 2017 estimated leading to increased milk supplies. Milk production costs stabilizing at USD per 100 kg ECM. 22/03/2018 IFCN

29 Thank you for your attention Network of IFCN Researchers Network of IFCN Supporters IFCN Dairy Research Center A great number of people have collaborated since the year 2000 to make this presentation possible. 22/03/2018 IFCN