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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?
slide4
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

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)
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
slide30

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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