International Dairy Outlook 2020:
A Fonterra View
February 2013
Confidential to Fonterra Co-operative Group
International Dairy Outlook 2020: A Fonterra View
Presentation Overview
1. Macro Drivers
2. Changing Dairy
Market Dynamics
3. Future Challenges
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Global trends are driving significant
changes in dairy markets
Rise of emerging markets & urbanisation
driving strong demand for dairy nutrition
Higher prices, increased convergence, more
volatility, less regulation
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Global trends are driving significant
changes in dairy markets
Social demographics - leading to greater focus on
nutrition of paediatrics and health aging
(e.g. Aging in OECD & China)
Rising incomes and busy lifestyles convenience foods
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Global trends are driving significant
changes in dairy markets
Increased focus on sustainability
New technology & innovation
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Dairy consumption is
highly correlated to development
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An example of this is the explosion in
China’s dairy commodity imports
Total China Dairy Commodity Imports
1,600
6,000
5,000
Dairy commodity imports from the US of
USD 510 million, or 268,000 metric tonnes
1,200
4,000
1,000
800
3,000
600
Value (USD million)
Product Quantity (000 MT)
1,400
2,000
400
1,000
200
-
1996
1998
2000
2002
2004
000 Metric Tonnes
Source: Global Trade Atlas
2006
2008
USD millions
2010
2012
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Dairy has moved from a highly regulated supply
driven market to a demand led dynamic
Outlook to 20201
7%
<1% 1%
10%
4%
7%
Europe
China
<1% 1%
4%
Nth
America
2-3%
India2
4%
2%
ASEAN
MENA
1%
2% 2%
2%
LATAM
ANZ
Demand Volume
1.
2.
Demand Growth
Supply Volume
Supply Growth
Current volumes are represented by the area of the circles displayed. Growth rates represent forecast compound annual growth rates.
Although strong growth in demand is expected in India, the ability to supply is likely to remain limited. In the 12 months to May 2012, Fonterra exported 22,300 MT of product to India and total imports represented
approximately 0.2% of consumption.
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Source: Fonterra estimate
Confidential to Fonterra Co-operative Group
Dairy prices are higher, with more
convergence and volatility
Source: Fonterra analysis
Page 9
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Growth in market based tools will continue to
be important to manage dairy price volatility
Page 10
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The baby-boomers are aging and
embracing healthy aging via nutrition
Source: Percentages estimated from Fonterra/TNS research extrapolated by population growth rates
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The benefits of protein are increasingly recognised
for healthy aging.
Demand for dairy protein is growing
Potential impact of
high protein diet and
exercise
Potential
impact of high
protein diet
Source: Based on Breen and Phillips 2011
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Food security is a major, global challenge for the
21st century. Open markets to allow the free flow
of food across borders will be essential
• Rapid urbanisation
• 9 billion people by 2050
• 60% more food required
• Arable land and water
constraints
• Likely impacts of climate
change
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A greater focus is being placed on
sustainability to ensure future food production
• A challenge to do more with less
• An opportunity for dairy’s nutritional density to gain greater
recognition
Page 14
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Summary
1. Macro Drivers
–
Global trends are shaping the outlook for
dairy markets
2. Changing Dairy Market Dynamics
- The shift from a supply led to a demand
led dynamic
3. Future Challenges
–
Ongoing price volatility and food security
concerns will require market orientated
solutions
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THERE IS A BRIGHT FUTURE FOR
SUSTAINABLE, EFFICIENT,
MARKET FOCUSED DAIRY
FARMERS
Section or end slide
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New Zealand cannot meet the
significant opportunities for dairy alone
Globally
Traded
Dairy
Market
NZ
22 bn L by
2020 (2%
CAGR)
80 bn L by
2020 (4-6%
CAGR)
19
Bn
L
Source: Fonterra analysis
54
Bn L
Formal Dairy
Market
500 bn L by
2020 (3-4%
CAGR)
375 Bn L
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International Dairy Outlook 2020: A Fonterra View