Dairy Industry Outlook. ADPI Board of Directors Meeting September 18, 2015

Transcription

1 Dairy Industry Outlook ADPI Board of Directors Meeting September 18,

2 Dairy Industry Outlook Agenda Global Supply and Demand Trends Population and demand growth Milk production in key regions Global trade US Dairy Industry Trends Farms - #, size, location Plants products, location US industry structure cooperatives, FMMO s, standards of identity Consumer trends Key Take-Aways 2

3 Global Supply and Demand Trends Population and Demand Growth 3

4 Global Supply and Demand Trends Milk Production United Kingdom 2% Global Cow Milk Production Other 44% Turkey 3% USA 14% New Zealand 3% India 9% China 6% Brazil 5% Germany Russia 5% France 5% 4% In 2013, global cow milk production was 636 million metric tons or over 85% of all milk produced (737 MM MT) The US was the largest cow s milk producer in the world India was the largest milk producer in the world if buffalo milk is included The top 10 countries account for about 56% of the world s cow milk supply Source: FAO 4

5 Global Supply and Demand Trends Dairy Trade Share of Global Dairy Exports Other 4% USA 17% Australia 13% EU-15 31% New Zealand 35% The major dairy exporters are those countries that have lower domestic demand than production. Global dairy trade is dominated by New Zealand (35%), EU (31%), USA (17%), and Australia (13%). Major importing countries/regions include Japan, China, USA, Mexico, Philippines, Indonesia, Russia, and EU with China and Indonesia showing the highest growth rates over the last 10 years. 5

6 US Dairy Industry Trends Dairy Farms Since 1995, US milk production has grown around 1.5% each year on average. Using a 1.7% growth rate, by 2020, the US will produce nearly 230 billion lbs of milk per year. The average dairy herd size has shown very steady growth over the last 20 years increasing 8-9 cows per year. 6

7 US Dairy Industry Trends Dairy Farms In 2012, nearly 75% of the dairy farms in the US had less than 100 cows. However, those farms only produced 14% of the milk in the US. Conversely, only 6% of the dairy farms in the US had more than 500 cows, but they produced 63% of the milk in the US. In other words, about 3,000 dairy farms produce nearly 2/3 of the milk in the US. 7

8 US Dairy Industry Trends Milk Production Growth and New Plant Capacity 15.3% -38.2% -13.0% 15.9% 53.7% 56.9% 111.5% 6.0% 34.2% 26.8% 55.9% 37.5% 17.2% -39.7% 28.6% 23.3% 10.2% 20.1% -27.1% 24.3% 47.5% 1.8% -7.0% 33.3% 20.0% -31.1% -28.5% -1.9% -36.4% -68.9% -55.5% -53.2% -11.0% -17.3% 10.1% -11.6% -1.2% -4.0% 12.8% -31.0% -19.2% -11.2% -41.1% -30.6% -20.2% Milk powder Cheese Other Milk Production % Change 10-Yr Shift Increase greater than 25% (11) Increase from 10 to 25% (10) Increase from 0 to 10% (3) Decrease from 0 to 10% (4) Decrease from 10 to 25% (7) Decrease greater than 25% (13) 74.2% -60.1% 7.4% 8

9 US Dairy Industry Trends Industry Structure Role of Cooperatives Declining number of dairy farms Large farms developing direct relationships with buyers/end-users Regulated Milk Pricing Systems Competing globally with countries without complex milk pricing structure milk flows to highest value use Updated, simplified structure needed, but change is politically difficult Standards of Identity SOI and regulated pricing inhibit new product development and negatively impact dairy industry competitiveness Need to update, but like FMMO s, change is slow and difficult 9

10 US Dairy Industry Trends Consumer Trends US consumption is expected to continue along trend higher cheese, lower fluid milk; Europe consumption flat due to steady to declining population; both countries have increasing need for exports Global dairy consumption will grow due to demand in developing countries Consumer Trust Issues Food safety Social responsibility Animal care practices Sustainability impact on the environment Science GMO s, antibiotics, etc. Supply chain transparency Challenges The consumer is changing growth of Millennials and Gen Z Methods to reach consumers are rapidly evolving 10

11 Dairy Industry Outlook Key Take-Aways Global dairy consumption will grow as large numbers of people in Asia and Africa adopt more Western diets due to income growth US and Europe are best positioned to expand production to meet the growing demand Europe will prove to be a more formidable competitor than thought 5 years ago more advanced plants and products; removal of quota program allows for growth of most efficient farms/regions The trend of fewer, larger dairy farms in the US will continue small farms increasingly focus on niche markets (e.g. organic) while large farms supply the bulk of the milk for the industry Cooperative business model will be challenged as large farms build their own plants or develop direct relationships with buyers/end-users If current trends continue, by 2020, the US will export a larger % of milk than used for fluid milk (class 1) The industry will need to do a better job with consumer trust issues and find new ways to reach consumers, both in the US and around the world 11