Lessons from Sweden s Control of Salmonella and Campylobacter

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					Outlook for the Global SMP Market

USDA Agricultural Outlook Forum
March 2007
                    Fonterra
               Where are we today?
Co-operative owned by 11,000 supplier shareholders

3,000 customers across more than 100 markets

Receive supplies from 130 factories across eight countries

Fonterra processes nearly 20 billion litres of milk annually

Employs 17,500 people worldwide
   Key message for today




THINGS ARE LOOKING GOOD !
                        Background
            How big is the global SMP market?
                                              Global SMP Market
                                                 Volume 2004
            SMP Demand by Market                Vol (k MT)
              2004 – 3,225k MT                    1,000


                                                    800

                              28%
                                                    600


                                                    400


                               13%                  200

                         7%
                   5%                                 0




                                                                                                                          Thailand
                                                                                           Philippines




                                                                                                                                               Indonesia
                                                                                                         India

                                                                                                                 Russia




                                                                                                                                                           Other
                                                             EU25



                                                                          Japan

                                                                                  Mexico




                                                                                                                                     Algeria
                                                                    USA
EU25            USA                 Japan
Mexico          Philippines         India
Russia          Thailand            Algeria
Indonesia       Other                                               Imports                                  Domestic
                          Background
           Globally traded SMP a third of the market
                                                                                                                                          SMP Import Markets
                                                                                                                                        Volume 2005 = 1,009k MT
Vol (k MT)                                                                                                                                                                                                                  Regional share of SMP Exports
                                                                                                                      Imports
200


160
                                                                                                                                                                                                                                                30%
120                                                                                                                                                                                                                           10%


 80
                                                                                                                                                                                                                                    15%
                                                                                                                                                                                                                                              20%
 40


  0
                                                                                                                                                                                                                             NZ                 USA
                                         Thailand
               Philippines
                             Indonesia




                                                                                                                       Taiwan




                                                                                                                                                                                                            Yemen
                                                                                                                                                                              Kazakhstan
                                                                                                                                                Bangladesh
                                                    Malaysia




                                                                                               China




                                                                                                                                        Egypt
                                                                                     Vietnam




                                                                                                                                                                                                                    Other
      Mexico




                                                               Algeria




                                                                                                       Saudi Arabia


                                                                                                                                Japan



                                                                                                                                                             Cuba
                                                                                                                                                                    Nigeria


                                                                                                                                                                                           EU25
                                                                         Singapore




                                                                                                                                                                                                  Morocco
                                                                                                                                                                                                                             Australia          EU
                                                                                                                                                                                                                             Eastern Europe     Southern Cone
                                                                                                                                                                                                                             India              Other
                 New Zealand
       Milk production growth is slowing
                               NZ milk production (kg/ms '000)

1400


1200


1000


800


600


400


200


  0
    90

           91

                  92

                         93

                                94

                                       95

                                              96

                                                     97

                                                            98

                                                                   99

                                                                          00

                                                                                 01

                                                                                        02

                                                                                               03

                                                                                                      04

                                                                                                             05

                                                                                                                    06
  19

         19

                19

                       19

                              19

                                     19

                                            19

                                                   19

                                                          19

                                                                 19

                                                                        20

                                                                               20

                                                                                      20

                                                                                             20

                                                                                                    20

                                                                                                           20

                                                                                                                  20
                              New Zealand
                       Our product mix is changing
          250




          200




          150
'000 MT




                                 SMP
          100




          50




           0
                2001      2002              2003   2004   2005   2006


          -50                      Butter
                              New Zealand
                       Our product mix is changing
          250




          200




          150                                             WMP
'000 MT




                                 SMP
          100




          50




           0
                2001      2002              2003   2004     2005   2006


          -50
                                   Butter
                                          Australia
                                 Heavily climate dependant
                   12

                    EU
                   11 production, consumption, trade and intervention stocks (mio t)

                   10
b illio n litres




                    9

                    8

                    7

                    6
                             2



                                       3




                                                 4



                                                           5



                                                                     6




                                                                                7



                                                                                             8
                          /0



                                      /0




                                                /0



                                                          /0



                                                                    /0




                                                                               /0



                                                                                            /0
                        01



                                  02




                                            03



                                                      04



                                                                05




                                                                           06



                                                                                        07
                     20



                                 20




                                           20



                                                     20



                                                               20




                                                                          20



                                                                                       20
                                                   Australia
                                          Heavily climate dependant
                 12                                                                                                                                               60

                  EU
                 11 production, consumption, trade and intervention stocks (mio t)                                                                                55

                 10                                                                                                                                               50
billion litres




                                                                                                                                                                       % exports
                  9                                                                                                                                               45

                  8                                                                                                                                               40

                  7                                                                                                                                               35

                  6                                                                                                                                               30

                                  0   2               0   3               0   4               0   5               0   6               0   7               0   8
                           0   1/              0   2/              0   3/              0   4/              0   5/              0   6/              0   7/
                      20                  20                  20                  20                  20                  20                  20
                                                   Europe
                                       A market and industry in transition

                          1.6                                                                                               0.8
                                       EU-12                     EU-15               EU-25                 EU-27

                          1.4
                                EU production, consumption, trade and intervention stocks (mio t)

                                                               Production
                          1.2                                                                                               0.6
Production, Consumption




                          1.0




                                                                                                                                  Trade, Stocks
                          0.8                                                                                               0.4

                                                                         Exports                            Consumption
                          0.6



                          0.4                                                                                               0.2

                                                                                                     Imports
                                       Stocks
                          0.2



                          0.0                                                                                               0.0
                                1991    1993    1995   1997   1999   2001     2003   2005    2007   2009     2011    2013
                     Europe
                SMP balance sheet
'000 MT             2004    2005    2006*   2007*
Production          1 084   1 110   1 000   1 020
Imports                26       7      20      20
 Available          1 390   1 234   1 090   1 090
 Consumption          990     970     950     930
- in food            567     600      600     600
- for feed           423     370      350     300
Exports              283     194       90     120
Ending stocks        117      70       50      40
- in intervention     64       8        0       0
                     Europe
                SMP balance sheet
'000 MT             2004    2005    2006*   2007*
Production          1 084   1 110   1 000   1 020
Imports                26       7      20      20
 Available          1 390   1 234   1 090   1 090
 Consumption          990     970     950     930
- in food            567     600      600     600
- for feed           423     370      350     300
Exports              283     194       90     120
Ending stocks        117      70       50      40
- in intervention     64       8        0       0
                     Europe
                SMP balance sheet
'000 MT             2004    2005    2006*   2007*
Production          1 084   1 110   1 000   1 020
Imports                26       7      20      20
 Available          1 390   1 234   1 090   1 090
 Consumption          990     970     950     930
- in food            567     600      600     600
- for feed           423     370      350     300
Exports              283     194       90     120
Ending stocks        117      70       50      40
- in intervention     64       8        0       0
                     Europe
                SMP balance sheet
'000 MT             2004    2005    2006*   2007*
Production          1 084   1 110   1 000   1 020
Imports                26       7      20      20
 Available          1 390   1 234   1 090   1 090
 Consumption          990     970     950     930
- in food            567     600      600     600
- for feed           423     370      350     300
Exports              283     194       90     120
Ending stocks        117      70       50      40
- in intervention     64       8        0       0
  Government Stock
A shrinking buffer tank
                                           Global demand
                                   The prospects for growth are solid
                             700
                                                        Historical                                                                       CAGR ’04-14
Million milk equivalent MT




                             600


                             500




                                                                                                                          Liquid dairy
                                                                                                                                          3.0%
                             400


                             300                                                                                                                 2.7%


                             200




                                                                                                                           ingredients
                                                                                                                                          1.5%
                             100


                              -
                                   1996



                                          1998




                                                            2002



                                                                     2004




                                                                                        2008


                                                                                                  2010
                                                 2000




                                                                            2006




                                                                                                         2012



                                                                                                                2014
                                                                                                                       Cross- 1.2%
                                                                                                                       border
                                                                                                                       trade
                                                         Powder Cheese & Butter    Liquid dairy
                                         SMP pricing
                               We are entering uncharted waters
               3,100

               2,900

               2,700

               2,500

               2,300
FAS (USD/MT)




               2,100

               1,900

               1,700

               1,500

               1,300

               1,100

                900

                700

                500
                       Jan-   Jan-   Jan-   Jan-   Jan-    Jan-   Jan-    Jan-   Jan-   Jan-   Jan-   Jan-    Jan-    Jan-   Jan-   Jan-
                        92     93     94     95     96      97     98      99     00     01     02     03      04      05     06     07

                                     SM P Com m odity price (contract date)                           SM P 12-m th rolling avg
                  Conclusions
             Things are looking good

Supply factors are dominating the international dairy market
landscape

Inventories are under control

Demand remains strong

Globally traded prices will be firm through 2007

The test is whether new the market dynamics are sustainable
Thank you