Dairy Outlook2017-2030

Preliminary results

Dairy forum EstoniaRakvere, 07.11.2017

Sophie Hélaine

DG Agriculture and Rural Development

European Commission

2

Outline

• Foreword

• Summary of 2017 forecasts

• 2030 Outlook

• Demand

• Supply

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Foreword2017-2030 Outlook for the EU

• Preliminary results – Final Outlook and report will be published the 18 December 2017

• Based on World Outlook of the OECD-FAO, published in July 2017

• Based on OECD-FAO model, where Supply = Demand and this equilibrium determines the price level.

• Updated with

• new Macroeconomic assumptions

• Short-term Outlook for the EU published in September

• Validated

• Inside DG AGRI

• With market experts in a Workshop held in October (feedback not integrated yet)

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ForewordIt's an Outlook not a forecast

• Policy and trade agreements status quo

• CAP reform of 2013 IN

• FTA with Canada IN, FTA with Japan NOT IN

• NO BREXIT

• Russian import ban until end 2018

• After trade resumes with Russia but at much lower levels than previously

• To do what?

• To give broad indications of where we go

• To do impact assessments

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EU price developments - Milk

100

150

200

250

300

350

400

450

500

15.0

1.0

0

15.0

7.0

0

15.0

1.0

1

15.0

7.0

1

15.0

1.0

2

15.0

7.0

2

15.0

1.0

3

15.0

7.0

3

15.0

1.0

4

15.0

7.0

4

15.0

1.0

5

15.0

7.0

5

15.0

1.0

6

15.0

7.0

6

15.0

1.0

7

15.0

7.0

7

15.0

1.0

8

15.0

7.0

8

15.0

1.0

9

15.0

7.0

9

15.0

1.1

0

15.0

7.1

0

15.0

1.1

1

15.0

7.1

1

15.0

1.1

2

15.0

7.1

2

15.0

1.1

3

15.0

7.1

3

15.0

1.1

4

15.0

7.1

4

15.0

1.1

5

15.0

7.1

5

15.0

1.1

6

15.0

7.1

6

15.0

1.1

7

15.0

7.1

7

EUR/t

EU Milk Equivalent Support Price World Milk Equivalent Price

EU Milk Equivalent price EU Milk Price

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Note: World references based on butter and SMP prices in OceaniaSource: DG Agriculture and Rural Development based on European Commission and AHDB

283

265

246

227 221217

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Summary of 2017 forecasts

• Milk collection: close to + 1 million t (+0.7%)

• Mainly processed into cheese, where best returns

• Strong exports: close to + 2 million t of milk equivalent

• Continuous higher consumption of dairy products: +0.6 million t of milk equivalent

• Very low EU private stocks

2018 +1.4% milk / 2017

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2017 EU milk collection +0.7%(2018 + 1.4%)

EU milk collection forecast by quarter (1000 t)

• Milk collection Jan-August 2017 = 2016

• Increase in the 2nd half driven by higher milk prices but expected to remain below 2015

• A contrasted situation in the EU:

• Strong increase to be expected in IE, PL, IT, LU, SI, CY, BG, RO

• Increase in ES, AT

• Recovery in the UK, BE

• Stable (-0.5% // +0.5%) in: DK, EE, LV, CZ, FI, HU, LT, SK

• Decrease in: DE, FR, SE, NL, PT

32 000

34 000

36 000

38 000

40 000

42 000

Q1 Q2 Q3 Q4

2015 2016 2017

Draft Outlook 2030

Milk and dairy products

Publication in December 2017

Not to be circulated

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Main drivers of dairy market development

Growing global and EU demand

• Strong local and global demand for cheese, butter, cream

• Switch towards higher value added products

• Demand for powders remains high

• Big challenge: decrease in liquid milk consumption in the EU

• Demand is supporting milk price increase

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Continuous growth in world import demand though lower than in the past decade

Note: Based on trade of SMP, WMP, cheese and butter in milk equivalent (total solids).Source: DG Agriculture and Rural Development (draft baseline)

• +1.7% per year in world consumption and production, i.e. +16 Mt/year

• +1.7% per year in world imports of SMP, WMP, Cheese and Butter, i.e. less than 1 Mt/year

• India to increase most production (+6 Mt / year)

• China remains the first world importer, with imports up by close to 4%/year

• EU market share to expand0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8

Total WMP SMP Cheese Butter

2007-2017 2017-2030

Global dairy tradeannual increase (Mt of milk eq.)

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Diverging consumption trends in the EU:down for liquid milk

Share of individuals skipping at least 1 breakfast per week in France

Source: CREDOC, 2013 CCAF surveys

Cows’ and goats’ milk and alternative drinks: retail sales and catering use (1000 t)

52

54

56

58

60

62

64

66

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

f

Cow milk Goat milk Alternative drinks

Children Adults

Source: Euromonitor

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Increasing use of cheese and butter in the EU

0

2 000

4 000

6 000

8 000

10 000

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

b

2014

2015

2016

2017

f

Processed Hard Soft Total use

Total cheese use compared to retail sales and catering use by cheese type (1000 t)

500

1 000

1 500

2 000

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

f

Butter Margarine and spreads

Retail sales and catering use (1000 t)Butter, margarine and spreads

Note: b break in time series due to changes in German data definitionSource: DG Agriculture and Rural Development, based on Euromonitor and own calculations

Source: DG Agriculture and Rural Development, based on Euromonitor

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Main drivers of dairy market development

Growing global and EU demand

Moderate EU supply increase

• Back to dairy herd decline but at a slower pace

• Environmental constraints to play an increasing role?

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Thank you

Short-term outlookhttp://ec.europa.eu/agriculture/markets-and-prices/short-term-outlook_en

Medium-term outlookhttp://ec.europa.eu/agriculture/markets-and-prices/medium-term-outlook_en

EU agricultural outlook conferencehttp://ec.europa.eu/agriculture/events/2016-outlook-conference_en

EU Milk Market Observatoryhttps://ec.europa.eu/agriculture/market-observatory/milk_en