Current long term prospects for us dairy trade
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Current & Long-term Prospects for US Dairy Trade. Cooperative Network Dairy Policy Conference April 3, 2012 Jim Sleper Land O’Lakes, Inc. Agenda. What are the fundamental trends & observations for U.S. Dairy Trade? Why is the U.S. in a unique position for Dairy Trade?

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Current long term prospects for us dairy trade

Current & Long-term Prospects for US Dairy Trade

Cooperative Network

Dairy Policy Conference

April 3, 2012

Jim Sleper

Land O’Lakes, Inc.


Agenda

Agenda

  • What are the fundamental trends & observations for U.S. Dairy Trade?

  • Why is the U.S. in a unique position for Dairy Trade?

  • What are the key challenges for US Dairy Trade?


Fundamental trends observations

Fundamental Trends & Observations


Current long term prospects for us dairy trade

U.S. Dairy, Agriculture, Agribusiness and the Food

Industry offer high-opportunity &

high-growth platforms

  • World population to grow from 7.0 billion

    to 9.5 billion by 2050

  • Global food production will have to

    increase 70% to meet higher demand

    Source: United Nations Food and Agricultural Organization


Growth opportunity

Primary Drivers

  • Urbanization – 70% of 2050 population

  • Higher calorie consumption and diet shifts – more protein, more wealth

  • “Middle Class” income & population increasing substantially

Growth = Opportunity

~2 X

as much dairy

~2 X

as much meat

~1.5 X

more cereals

1 On a per-day basis, global food consumption is ~17 trillion Kcal in 2000, ~18 trillion Kcal in 2005, and ~28 trillion Kcal in 2050

2 From ~475 to ~892 million tons of dairy, ~1 to ~1.44 billion tons of cereals, ~227 to ~464 million tons of meat, over the period of

2000 to 2050

SOURCE: FAO World Food and Agriculture to 2030/2050; FAO Expert Meeting on How to Feed the World in 2050


Experts predict

Experts predict . . .

  • “Middle Class” (Outside the U.S.) expected to double by 2020 – approaching 1 Billion households

  • “Middle Class” in developing countries projected to increase 160% by 2020 versus only 15% in developed countries

  • World Bank has estimated the number of people in developing countries in households with incomes >$16000/year will rise from 352 million in 2000 to 2.1 Billion by 2030

Source: OGA/FAS/USDA


U s dairy exports grew in 2011

U.S. Dairy Exports Grew in 2011

We export the equivalent

of Wisconsin!


2011 record year for u s dairy export sales

2011 Record Year for U.S. Dairy Export Sales

  • Mexico

  • Canada

  • China

  • Philippines

  • Japan

  • South Korea

  • $1.2 billion +41%

  • $0.5 billion +14%

  • $0.4 billion +53%

  • $0.3 billion +55%

  • $0.3 billion +36%

  • $0.2 billion +70%

Total Value of U.S. Dairy Exports in 2011 = $4.8 billion


2 why is u s in a unique position for dairy trade

2. Why is U.S. in a unique position for Dairy Trade?


U s dairy tangibles intangibles

U.S. Dairy Tangibles & Intangibles….

  • Infrastructure

  • Water

  • Land

  • Cost-of-Production efficiencies

  • Technologies

  • Feed

  • Forages

  • Capital

  • Herd health management

  • Food Safety

  • Expertise

  • Production capacity

  • Irrigation

  • Regulatory enforcement

  • Manufacturing capabilities

  • R&D

  • Breeding/genetics

  • Nutrition management


Developing countries policies have impeded their agricultural development

Developing Countries’ Policies Have Impeded Their Agricultural Development . . .

  • Corruption and/or macroeconomic instability

  • Lack of definition or enforcement of property rights and contract sanctity

  • Underinvestment in public goods, such as rural infrastructure, education and R&D

  • Cheap food policies to keep urban consumers quiescent – often reinforced by food aid or subsidized exports

  • Lack of technology adapted to local agro-ecological conditions (soils, climate; slope)


3 what are the key challenges for u s dairy trade

3. What are the key challenges for U.S. Dairy Trade?


Challenges for u s dairy trade

Challenges for U.S. Dairy Trade

  • Need to modify U.S. Dairy Policy.

  • Historically, U.S. Dairy Policy has impeded exports

    • For decades, Government has supported the price of milk by standing ready to buy any quantity of butter, cheese and powder offered at guaranteed prices.

    • Provided little incentive for U.S. dairy to invest in innovation or marketing.

    • It became “the easy way out” to simply produce “stuff”, sell to the government, and it was then the government’s problem to get rid of the surplus.


Challenges for u s dairy trade1

Challenges for U.S. Dairy Trade

  • Export products foreign customers & consumers want.

  • For many years, the U.S. dairy industry viewed the world market as simply a place to dump surpluses.

    • Need to make appropriate investments

    • Understand what foreign consumers want to buy

    • Produce products they want to buy, not just what we always produced


Challenges for u s dairy trade2

Challenges for U.S. Dairy Trade

  • Recognize the window of opportunity is closing.

  • Intense competition for economic globalization

    • More aggressive existing competition

    • New competitors entering our industries

    • Speculators seeking “quick” gains

    • Tremendous potential for growth … in volumes and margins … lie outside our boarders

    • Global markets bring global competition


Current long term prospects for us dairy trade

Land O’Lakes global exposure and mindset

13% U.S. Milk estimated for exports in 2011

17% of Land O’Lakes’ Milk estimated for exports in 2011

25%of Land O’Lakes’ Milk projected for exports in 2012


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