current & long-term prospects for us dairy trade cooperative network dairy policy conference...
TRANSCRIPT
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Current & Long-term Prospects for US Dairy Trade
Cooperative NetworkDairy Policy Conference
April 3, 2012
Jim SleperLand O’Lakes, Inc.
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Agenda
1. What are the fundamental trends & observations for U.S. Dairy Trade?
2. Why is the U.S. in a unique position for Dairy Trade?
3. What are the key challenges for US Dairy Trade?
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Fundamental Trends & Observations
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U.S. Dairy, Agriculture, Agribusiness and the FoodIndustry 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
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Growth = Opportunity
SOURCE: FAO World Food and Agriculture to 2030/2050; FAO Expert Meeting on How to Feed the World in 2050
~1.5 X more cereals
~2 X as much meat
Primary Drivers
• Urbanization – 70% of 2050 population
• Higher calorie consumption and diet shifts – more protein, more wealth
• “Middle Class” income & population increasing substantially
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 20502 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
~2 X as much dairy
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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
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U.S. Dairy Exports Grew in 2011
We export the equivalentof Wisconsin!
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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
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2. Why is U.S. in a unique position for Dairy Trade?
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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
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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)
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3. What are the key challenges for U.S. Dairy Trade?
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Challenges for U.S. Dairy Trade
1. 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.
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Challenges for U.S. Dairy Trade2. 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
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Challenges for U.S. Dairy Trade3. 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
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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
Land O’Lakes global exposure and mindset
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