Document classification: Client/Third Party Confidential

HEARABOUT GLOBAL DAIRY TRENDS, DRIVERS AND

OUTLOOK FOR 2026

GENERAL SESSION

Tom BaileyExecutive Director, Dairy ResearchRabobank

Tough prices, disruptive change, growth?

Thriving in uncertainty

Global import demand has taken a step back in the face of the growing milk glut.

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-10%

-5%

0%

5%

10%

15%

Qtr

1

Qtr

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Qtr

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Qtr

4

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2011 2012 2013 2014 2015 2016 2017

Yoy

chan

ge

Year on year change in global import demand vs. exportable surplus

Demand SupplySource: Rabobank, USDA, GTIS

China has maintained pace of imports while others have stepped back.

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Year on year import change – 3 months to Nov

Source: Rabobank, GTIS

Falling prices have taken a break from precipitous declines due to NZ drought fears.

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-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

USD

/MT

Butter SMP WMP CheeseSource: USDA

Intervention adds to pricing pressure, ensuring SMP price ceiling around $2,000/MT.

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0

50

100

150

200

250

300

350

400

450

500

Jan-

15M

ar-1

5M

ay-1

5Ju

l-15

Sep

-15

Nov

-15

Jan-

16M

ar-1

6M

ay-1

6Ju

l-16

Sep

-16

Nov

-16

Jan-

17M

ar-1

7M

ay-1

7Ju

l-17

Sep

-17

Nov

-17

Jan-

18

EU intervention stocks by age

1,400

1,600

1,800

2,000

2,200

2,400

2,600

Jan-

16

Apr

-16

Jul-

16

Oct

-16

Jan-

17

Apr

-17

Jul-

17

Oct

-17

Jan-

18

Apr

-18

Jul-

18

Oct

-18

USD

/MT

European SMP price

Intervention buy price

Volumes currently on tender

Lowest accepted price on tender

Source: Milk market observatory, EEX

With pricing pressure trickling down to the farm, production growth will slow.

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-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2010 2011 2012 2013 2014 2015 2016 2017 2018

Yoy

chan

ge

Actual Forecast

Milk supply growth from the big 7

Source: Rabobank

Global economy on the cusp for an uptick in growth.

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95

96

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100

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102

103

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-10%

-5%

0%

5%

10%

15%

20%

25%

1962

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2015

2017

Tota

l CLI

Glo

bal G

DP

grow

th %

GPD CLI

Significant upside in global economic growth as developing markets get back on track

Asian financial crisis Developing market slowdown

1980s recession

Source: Bloomberg

Even with some recovery, our midterm price remains below the 10 year average.

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1,500

2,500

3,500

4,500

5,500

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Jan-

15Ju

l-15

Jan-

16Ju

l-16

Jan-

17Ju

l-17

Jan-

18Ju

l-18

Jan-

19Ju

l-19

Jan-

20Ju

l-20

Price Forecast 10 year average

Global WMP prices and forecast

Source: Rabobank, USDA

1

1

1

2

2

2

2

2

2016 2017 2018e

Mill

ion

MT

SM

P

Global SMP trade EU stocks

NAFTA and other exogenous factors may derail the outlook.

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NAFTA withdrawalAn EU stock release

2.2 mill MT

1.84 mill MT1.83 mill MT

Big 3 relative market access by exported volumes

Source: Rabobank, Twitter, GTIS, USDA

Investments along the dairy value chain – a US example.

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Processor/ Coop Brands Distribution ConsumerRetail/FSDairy

Low margins and disruptors pressuring dairy supply chain

And investments are responding accordingly.

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Brands Distribution ConsumerRetail/FSDairyProcessor

/ Coop

Foreign direct investment

A reminder of the markets we play in.

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High Risk, 4%

Risky, 30%

Moderate Risk, 52%

Low Risk, 14%

Dairy exports by geo-pol risk

Source: Rabobank, GTIS, EIU

Conclusions

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Imports have slowed in the face of rising global milk supplies

Prices have begun correcting to adjust supply growth

Demand should pick up in 2018, but not enough to absorb stocks

Low margins will precipitate consolidation and integration along the global dairy supply chain

As US supply outstrips demand more milk will be pushed into the global markets, and investors from around the world will be eyeing how they

might be best positioned to capitalize on the opportunity

HEARABOUT GLOBAL DAIRY TRENDS, DRIVERS AND

OUTLOOK FOR 2026

GENERAL SESSION