Global Dairy Overview & Outlook

April 3, 2012

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Hoogwegt Groep BV

• Founded in 1965, based in Arnhem, The Netherlands

• International marketers of dairy ingredients & commodities

• Largest private dairy trading company with global network of 13 distinct business units

3

Worldwide networkHoogwegt International

Hoogwegt Milk

Havero Hoogwegt

Hoogwegt Cheese

Apollo Milk

Rumi

Rumi Algeria

Hoogwegt Poland

Hoogwegt U.S., Inc.

Good Home Foods LLC

Hoogwegt Purchases

Hoogwegt Australia

Pacific Dairy Ingredients

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Hoogwegt - A True Global View

• Active in all major producing and consuming markets

• Export to over 110 countries worldwide• Network provides Hoogwegt with critical

market access and market information • Rich history of trading skills and volatility

management

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Outline

• International trade landscape

• Implications for U.S. dairy industry

• U.S. is at a crossroads

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Milk Production

Sources: EuroStat, USDA, DCANZ, DairyAustralia, Argentine Secretary of Agriculture, GTIS. EU and Argentina are milk deliveries.

EU US India Russia China Brazil NZ Argentina Ukraine Australia -

30,000

60,000

90,000

120,000

150,000

Cows Milk Production and Exports - 2011

Domestic use Exports

(000

MT)

7

Milk Production – Major Exporters

05 06 07 08 09 10 11

-2,000

0

2,000

4,000

6,000

8,000

10,000

EU

US

NZ

Australia

Argentina

Cumulative milk production growth since 2005

EU US NZ Australia Argentina

(000

MT)

Source: EuroStat, USDA, DCANZ, DairyAustralia, Argentine Secretary of Agriculture. EU and Argentina are milk deliveries.

8

Dairy Product Production – Major Exporters

Source: USDA

WMP SMP Cheese Butterfat -

2,000

4,000

6,000

8,000

EU Production, 2005 vs. 2011

2005 2011

(000

MT)

WMP SMP Cheese Butterfat -

300

600

900

1,200

NZ Production, 2005 vs. 2011

2005 2011

(000

MT)

9

Dairy Product Production – Major Exporters

Source: USDA

WMP SMP Cheese Butterfat -

125

250

375

500

Australia Production, 2005 vs. 2011

2005 2011

(000

MT)

WMP SMP Cheese Butterfat -

150

300

450

600

Argentina Production, 2005 vs. 2011

2005 2011(0

00 M

T)

10

Dairy Product Production – Major Exporters

Source: USDA

WMP SMP Cheese Butterfat -

1,500

3,000

4,500

6,000

U.S. Production, 2005 vs. 2011

2005 2011

(000

MT)

11

Whole Milk Powder Exports

05 06 07 08 09 10 110

240

480

720

960

1200

EU

US

NZ

Australia

Argentina

WMP exports

EU US NZ Australia Argentina

(000

MT)

Source: GTIS

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Whole Milk Powder Imports

05 06 07 08 09 10 110

70

140

210

280

350China

Algeria

VenezuelaSingapore

Sri Lanka

WMP imports

China Algeria Venezuela Singapore Sri Lanka

(000

MT)

Source: GTIS; Algeria and Venezuela extrapolated from partial-year numbers.

13

Skim Milk Powder Exports

05 06 07 08 09 10 110

120

240

360

480

600

EU

US

NZ

Australia

SMP exports

EU US NZ Australia

(000

MT)

Source: GTIS

14

Skim Milk Powder Imports

Source: GTIS. Algeria extrapolated from 11-month numbers.

05 06 07 08 09 10 110

44

88

132

176

220Mexico

ChinaIndonesia

AlgeriaPhilippines

SMP imports

Mexico China Indonesia Algeria Philippines

(000

MT)

15

Cheese Exports

05 06 07 08 09 10 110

150

300

450

600

750EU

US

NZ

Australia

Argentina

Cheese exports

EU US NZ Australia Argentina

(000

MT)

Source: GTIS

16

Cheese Imports

05 06 07 08 09 10 110

64

128

192

256

320

Russia

Japan

US

Mexico

Korea

Cheese imports

Russia Japan US Mexico Korea

(000

MT)

Source: GTIS

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Butterfat Exports

05 06 07 08 09 10 110

100

200

300

400

500

EU

US

NZ

AustraliaArgentina

Butterfat exports

EU US NZ Australia Argentina

(000

MT)

Source: GTIS

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Butterfat Imports

05 06 07 08 09 10 110

24

48

72

96

120

Russia

Iran

China

MexicoMorocco

Butterfat imports

Russia Iran China Mexico Morocco

(000

MT)

Source: GTIS. Iran data unavailable for 2005-08.

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Whey Products Exports

05 06 07 08 09 10 110

100

200

300

400

500 EU

US

NZAustralia

Argentina

Whey products exports

EU US NZ Australia Argentina

(000

MT)

Source: GTIS

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Whey Products Imports

Source: GTIS; Indonesia extrapolated from partial-year numbers.

05 06 07 08 09 10 110

80

160

240

320

400China

Indonesia

MexicoJapan

Thailand

Whey products imports

China Indonesia Mexico Japan Thailand

(000

MT)

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Aggregate Imports

Includes WMP, SMP, cheese, butterfat and whey products.Source: GTIS. Algeria extrapolated from 11-month numbers.

05 06 07 08 09 10 110

180

360

540

720

900 China

Russia

MexicoAlgeria

Indonesia

Aggregate imports - selected products

China Russia Mexico Algeria Indonesia

(000

MT)

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Aggregate Imports

Includes WMP, SMP, cheese and butterfat.Source: FAPRI. SE Asia includes Indonesia, Malaysia, Philippines, Thailand and Vietnam. ME/NA includes Algeria, Egypt and Saudi Arabia.

05 06 07 08 09 100

180

360

540

720

900

SE Asia

ME/NA

China

Russia

Mexico

Aggregate net imports - selected products

SE Asia ME/NA China Russia Mexico

(00

0 M

T)

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Benchmark Prices

Source: USDA’s “Dairy Market News.” WMP, SMP, cheese and butter are Oceania. Whey is EU.

03 04 05 06 07 08 09 10 11 120.35

0.75

1.15

1.55

1.95

2.35

2.75

0.12

0.25

0.38

0.51

0.64

0.77

0.90World dairy prices

SMP WMP Cheese Butter Whey

($/l

b. -

SMP,

WM

P, c

hees

e, b

utter

)

($/l

b. -

whe

y)

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Benchmark Prices

Source: USDA’s “Dairy Market News.” WMP, SMP, cheese and butter are Oceania. Whey is EU.

2011

3 5 7 9 11

13

15

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

2012

3 5 7 9 11

1.40

1.65

1.90

2.15

2.40

0.48

0.54

0.60

0.66

0.72

World dairy prices, 2011-12

SMP WMP Cheese Butter Whey

($/lb

. - C

he

dd

ar,

Bu

tte

r, S

MP

, WM

P)

($/lb

. - W

he

y)

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Global Marketplace: Current Situation

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Implications for the United States

Source: USDA, USDA’s “Dairy Market News.”

J-06

J J-07

J J-08

J J-09

J J-10

J J-11

J J-12

10.00

12.50

15.00

17.50

20.00

22.50

25.00

1600

2200

2800

3400

4000

4600

5200U.S. All-Milk price vs. Oceania SMP price

All-Milk price Oceania SMP price

(US

All-

Milk

Pri

ce, $

/cw

t)

(Oce

ania

SM

P pr

ice,

$/t

on)

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Volatility

80 83 86 89 92 95 98 01 04 07 1011.00

14.30

17.60

20.90

U.S. All-Milk Price

($/c

wt.

)

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In truth, it’s tough playing in the global market

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Why is U.S. behind EU and Oceania in the global market?

Export vs. customer?

Policy – support & CCC?

Federal order pricing – discourages investment?

Large internal market – exportable volumes?

Last in, first out

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Opportunities

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 110.0

3.5

7.0

10.5

14.0

U.S. exports(as percent of milk production, TSB)

Source: U.S. Dairy Export Council/National Milk Producers Federation

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Need international customers if we want to grow

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Fast-food chain growth In emerging markets

Non-U.S. stores (2010)

Change from 2009

McDonald’s 18,710 +212

KFC 11,798 +696

Subway 10,109 +1,067

Pizza Hut 5,890 +175

Starbucks 5,727 +220

Burger King 4,998 +170

Domino’s 4,422 +350

Dunkin’ Donuts 3,005 +908

Dairy Queen 802 +154

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Conclusions … we are at a crossroads

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Embrace and Adapt …

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Change…

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Policy must promote innovation, investment and growth

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Thank you.

Global Dairy Overview and Outlook

Dairy Policy Annual Conference

Dalyn DyePresident and CEO, Hoogwegt U.S., Inc.April 3, 2012

d.dye@hoogwegtus.com