Global Dairy Market Perspectives

Presented by World Perspectives, Inc.

Conference for Uruguays Dairy Industry

Embassy of the United States of America

Sponsored by the

San Jose, Uruguay October 1, 2003

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 Providing Market and Policy Analysis

Intelligence Reports
Feed Grains, Sugar, Trade Policy, and Dairy Trade Updates
Covering all aspects of the agriculture and food sector

Customized Consulting Projects

Market and Trade Developments

Aggregate milk production in 2003 is about one-half percent above 2002

US$ has depreciated against major exporters

13 pct vs EU 17 pct vs AU$ 19 pct vs NZ$

WTO settled a case against Canadas export pricing; could reduce Canadas exports

WTO Cancun Ministerial failure; trade barriers persist

Production Snapshot (25 Sept)

NZ milk production up 5 pct seasonally; forecast to be up 2-3 pct annually AU drought recovery is helping milk supplies; forecast up about 1 pct annually EU milk production is down, heat wave affected production, feed availability, milk composition US milk production is up over 2002, but tailing off after first half of 2003; herd liquidation with strong beef prices. Product processing is up with milk production.

Utilization Snapshot (25 Sept)

2003 FOB Export Prices ($USD/MT) New Zealand Australia
High
WDM
1850

Western Europe
High
2000
NA 1700

USA
Current
2389
3203 2342

Low
1600
2100 1100

Low
1625
NA 1250

Cheese 1650 Butter

1500

Utilization/Demand remains steady to strong globally; reform in Canada (and EU) keeps world market prices firm
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Highly volatile markets 50 pct fluctuation in price

GLOBAL DAIRY TRADE BARRIERS GLOBAL DAIRY TRADE BARRIERS

TARIFFS: 40-90 pct avg; can be 300 pct

TRQs & Subsidies: prohibitive over quota rate; administration of TRQ; dump market
OTHER: packaging, labeling, testing, inspection, mandatory shelf life requirements, recipe and manufacturing declaration, standards of identity
OTHER:

TWO TYPES OF DAIRY EXPORTS

COMMODITY
WDM
NDM Butter Cheese

NICHE
Specialty Products
Lactose Ice Cream Concentrates

TWO TYPES OF DAIRY EXPORTS

COMMODITY

NICHE
Defined by high value, or tariff avoidance; market often defined by regulation and barriers; not a lot of value to commercial producers
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Highly volatile, low margin, fungible standard products; markets distorted by subsidies and barriers

North America
USA TRQs domestic support = gross overproduction of NDM, minimum prices per class, standards of identity Canada TRQs,with over quota tariffs, until recently two-tiered pricing Mexico growing market; preferential treatment via NAFTA hurts 3rd parties

Asia, Middle East

Japan/Korea: growth market for cheese and ice cream; non-tariff barriers Taiwan: fairly open; imports all but fluid milk

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PRICES: export prices increase 18-40 pct for most products; 40 pct for cheese URUGUAY: could see 84 pct increase in value of cheese exports; 15 pct increase elsewhere

GLOBAL DAIRY TRADE BARRIERS GAINS FROM TRADE

NICHE: certain niche products can and are exported without trade agreements; in fact lack of agreements sometimes define the product and market

WTO: Cancun Collapse

Draft Text (#2)
Product specific AMS caps; Eliminate some export subsidies; Review Green Box; Special and Differential G21 Countries Refused to budge on market access and facilitation issues EUs GI Plan
The EU plan would extend GIs beyond TRIPS register which effects cheese, e.g. feta, parmesan, cheddar, brie Also add quality descriptions, e.g. double cream, aged)

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WTO: Cancun Fallout

Fallout is still being calculated

Brazil will not open to ag imports - Ricardo Ferreira, rep of GDA/ALG US likely to pursue even FTAs
Keep pressure on Brazil

Facilitation/Transparency

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Ice Cream
Growing export product: US ships 40 million gallons totaling $USD80-100 mln per year Japan, United Kingdom, Mexico, Canada, Hong Kong are top 5 importers

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Specialty Products
Two key niche markets in Asia served by Fonterra of New Zealand:
Stolle Milk from cows which are immunized to induce the formation of antibodies in their milk, has seen a 50 per cent rise in sales in Taiwan, since SARS (500 MT) Colostrum - first four milkings after calf birth from pasturefed, non-immunized cows, are well above forecasted levels in China (200 MT)

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US Dietary Guidelines
US Food Pyramid average diet should have 22 percent more dairy Most would be low fat products yogurt, low fat cheese Revised in 2005, new focus on weight loss properties of dairy calcium

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Washington, DC, USA (week of 22 Sep)

Cheeses of the World (cut to your order!!!)

Specialty Cheese Prices

Chevre De Belley Blue D'Auvergne (France) Caerphilly Wales Huntsman (England) Kashkaval Morbier (France) Parmesan Reggiano (Italy) Parrano Cheese (Dutch) Port Salut (France) Saint Andre - Triple Cream (France) Saint Nectare (France) Taleggio (Italy) Tilsit (Danish)

$11.99 $ 7.99 $ 6.99 $ 9.99 $ 7.99 $ 7.99 $12.99 $11.95 $17.99 $12.98 $ 9.49 $13.95 $ 8.49

Avg retail price: $10.83 USD

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Price Calculation
300-400 pct mark up FOB processor to retail to cover:
Air freight Insurance Document handling of $100 Duty of 35 percent No import license for high tier duty Brokerage, wholesale, distribution

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