EU dairy market balance is reliant on increasing exports

Download Report

Transcript EU dairy market balance is reliant on increasing exports

LP(16)9244
Export opportunities for the
EU dairy sector
Copa Cogeca WP Milk
Brussels, 27.10.2016
Outline
 Where are we today?
 EU’s position on the global market
 Export perspectives & promising markets
 FTAs, FTAs, FTAs
 Conclusions
The last 2 years
have not been
great…
But markets are recovering since
June thanks to lower milk
production
Main reasons for the long down
cycle:
 Global oversupply, on the
back of high prices, led by
the EU & amplified by quota
abolition
 Temporary slow down in
demand growth (Russian
embargo, stock building in
China, oil prices, political
Source: EU Commission
unrest…)
DG Agri
Short term outlook: is the
current recovery sustainable?
 Sentiment vs fundamentals
 Milk production of key exporters:
 How long will EU flows continue to decrease? Strength of spring flush?
 A bad season expected for Australia but what about New Zealand?
 USA production: powering through
 Argentina production likely to continue its decline over coming months
 High intervention and other stocks
 How will EU exports perform at higher prices?
 Many buyers are still well covered
 Consistent but not spectacular demand globally
 More balanced situation overall
Outline
 Where are we today?
 EU’s position on the global market
 Export perspectives & promising markets
 FTAs, FTAs, FTAs
 Conclusions
EU’s weight in global
milk production
Source: IDF World dairy situation 2015
Global dairy trade flows
Source: Rabobank 2011
World market: concentrated on
the export side
Cheese
Butter
SMP
WMP
Whey powder
Infant formula
Liquid milk
Main EU export markets
for all dairy products (in value - €)
2005
2010
2015
2026
?
Outline
 Where are we today?
 EU’s position on the global market
 Export perspectives & promising markets
 FTAs, FTAs, FTAs
 Conclusions
And tomorrow?
Is past behaviour a
reliable indicator
for future
performance?
Global trade will continue to
increase
• Drivers of global demand growth
for dairy (+2,3% per year):
Annual change in dairy trade flows (in ME):
- population growth
- GDP per capita (+growing middle class)
- changing diets
- urbanisation
- development of modern retail
• Global trade will likely continue to
increase faster than consumption as
major growth regions (South-East
Asia, MENA and Sub Saharan Africa)
will become increasingly import
dependent
• EU should be well placed to
respond to the increasing demand!
Source: EU Commission DG AGRI
Promising markets - Asia
• China
– Will remain worlds largest importer and key for EU exports
– Increasing population (still), increasing middle-class, more westernized eating habits
– GDP growth slowing down as central government attempts its difficult rebalancing of
the economy
– Further increases in imports (in milk equivalent) expected as domestic production will
struggle to keep up.
- Product mix is changing: the share of WMP, SMP likely to decrease, while more infant
formula and UHT (and cheese?) will be imported
- High dairy product prices limit consumption growth
• South East Asia
– All countries are net importers with impressive population and consumption growth
– Today importing mainly powders (SMP, WMP, whey), tomorrow?
• South Korea:
– cheese consumption (mainly food service) is growing faster than global average, thus
supporting EU (and US) exports; very positive effect of the FTA
• Japan:
– Worlds leading cheese importer
– Growth potential for EU exports will depend a lot on market access granted under the
future FTA
Promising markets
– MENA & SSA
• MENA
– Increasing population (60% of population of Arab countries below 25
years)
– Middle and high income countries
– Imports 90% of the food it consumes (Middle East)
– Food service is booming, explaining rapid cheese growth
– SMP imports also growing fast, while WMP remains main product. Butter
imports increasing steadily
• Sub Saharan Africa
– Growing demand due to demographic boom is not met by production
increases
– Fat-filled milk powder remains by far the main product
– Buying power?
Promising markets –
Americas & Russia?
• USA
– A net exporter – but domestic consumption is booming, supporting EU exports of
cheese and butter
– How much can US exports increase? – USDA expects 44% increase over 10 years
•
Mexico
– Big for all dairy products, became largest SMP importer in 2015
– Modernisation of FTA needed (with dairy access) to compete with the US
• Brazil
– Huge & fast growing market but tariffs and NTBs are blocking access. Good potential
for EU exports if the barriers are addressed in an FTA with Mercosur
• Russia
– Reopening of the market nowhere in sight
– Even if embargo is abolished, EU exports will not reach pre-embargo levels but
perhaps 30%-40% (lack of buying power as economy is down, depreciation of the
rouble, other exporters)
– Replacement of milk fat by vegetable fat
– Domestic production?
Possible development of
EU production & exports
Export share of EU milk production
180000000
160000000
140000000
120000000
100000000
80000000
60000000
40000000
20000000
9,53%
0
12,28%
2005
18,14%
2015
2026
EU Exports in tonnes of ME
EU dairy cow milk production in tonnes
Outline
 Where are we today?
 EU’s position on the global market
 Export perspectives & promising markets
 FTAs, FTAs, FTAs
 Conclusions
Global demand for dairy
will increase BUT:
Improved market access is essential!
Can EU deliver?
EU trade policy needs to get over the
current crisis quickly!
NZ
VS
USA
Some key FTA negotiations
for EU dairy
• TTIP – duty free access would be very beneficial for EU dairy
(cheese) exports; no movement for the next 6 months at least and
future very uncertain
• Japan – very protectionist on dairy, outcome and timing uncertain
• CETA - would be beneficial for EU cheese exports but will it ever be
signed and ratified?
• Mexico: one of worlds largest dairy importers; modernisation of
current FTA required to bring EU on level playing field with US
• Mercosur (Brazil): a lot of potential, a lot of challenges
• ASEAN – Vietnam (awaiting signature), Indonesia and Philippines
– high growth markets with already low duties on dairy but zero
duty would put us on par with New Zealand
• What about China?
Conclusions
• In principle the future is looking good: global consumption and trade will continue
to increase and the EU is well placed to serve the additional demand
• EU dairy market balance is reliant on increasing exports
• The share of EU exports in global trade will depend on the outcome of ongoing
and future FTA negotiations led by the EU and our competitors.
• Other factors and uncertainties:
– Stability and continued market orientation of EU dairy policy
– Integrity of the EU and its single market (Brexit, mandatory origin labelling…), overall
increase of protectionism
– Political instability in key import regions
– Price volatility is here to stay – risk management!
– Key economic factors such as exchange rates and oil prices
– Growing trend of vegan/‘non-dairy‘ in certain developed markets
– Impact of climate change and other environmental constraints
– Russia
Thank you for your attention!
Questions?
Jukka Likitalo
Secretary General
www.eucolait.eu
@eucolait