# Presentation: 880202

## Slide 1

| Global Dairy Market Perspectives
Presented by World Perspectives, Inc.

Conference for Uruguay’s Dairy Industry
Sponsored by the 
Embassy of the United States of America |
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San Jose, Uruguay
October 1, 2003 |
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## Slide 2

| ... Providing Market and Policy Analysis

         Intelligence Reports
            Feed Grains, Sugar, Trade Policy, and Dairy Trade Updates

         Customized Consulting Projects
            Covering all aspects of the agriculture and food sector |
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## 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 Canada’s export pricing; could reduce Canada’s 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 |  | 
Western Europe |  | 

USA |
| --- | --- | --- | --- | --- | --- |
|  | 

High | 

Low | 

High | 

Low | 

Current  |
| 

WDM | 
1850  | 
1600 | 
2000 | 
1625 | 
2389 |
| 

Cheese | 
1650 | 
2100 | 
NA | 
NA | 
3203 |
| 

Butter | 
1500 | 
1100 | 
1700 | 
1250 | 
2342 |

*Utilization/Demand remains steady to strong globally; reform in Canada (and EU) keeps world market prices firm*

## Highly volatile markets – 50 pct fluctuation in price

_*Highly volatile markets – 50 pct fluctuation in price*_

## GLOBAL DAIRY TRADE BARRIERS

**GLOBAL DAIRY TRADE BARRIERS**

**GLOBAL DAIRY TRADE BARRIERS**

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

**TRQ’s & Subsidies: prohibitive over quota rate; administration of TRQ; “dump” market**

**OTHER: **

**OTHER: packaging, labeling, testing, inspection, mandatory shelf life requirements, recipe and manufacturing declaration, standards of identity**

## TWO TYPES OF DAIRY EXPORTS

**TWO TYPES OF DAIRY EXPORTS**

- COMMODITY
- WDM
- NDM
- Butter
- Cheese

- NICHE
- Specialty Products
- Lactose
- Ice Cream
- Concentrates

## TWO TYPES OF DAIRY EXPORTS

**TWO TYPES OF DAIRY EXPORTS**

- COMMODITY
- Highly volatile, low margin, fungible standard products; markets distorted  by subsidies and barriers

- NICHE
- Defined by high value, or tariff avoidance; market often defined by regulation and barriers; not a lot of value to commercial producers

## North America

**USA – TRQ’s domestic support = gross overproduction of NDM, minimum prices per class, standards of identity**
**Canada – TRQ’s,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

## GAINS FROM TRADE

**GLOBAL DAIRY TRADE BARRIERS**

**GAINS FROM TRADE**

**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**

**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

- _EU’s “GI” Plan_
- The EU plan would extend GI’s beyond TRIPS register which effects cheese, e.g. feta, parmesan, cheddar, brie
- Also add quality descriptions, e.g. double cream, aged)

- _G21 Countries_
- Refused to budge on market access and facilitation issues

## 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 FTA’s
- 		Keep pressure on Brazil
- 		Facilitation/Transparency

## 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

## 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 pasture-fed, non-immunized cows, are well above forecasted levels in China (200 MT)

## 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

## Specialty Cheese PricesWashington, DC, USA  (week of 22 Sep)

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

- Chevre De Belley 				$11.99
- Blue D'Auvergne (France)			$ 7.99
- Caerphilly Wales				$ 6.99
- Huntsman (England)			$ 9.99
- Kashkaval					$ 7.99
- Morbier (France)				$ 7.99
- Parmesan Reggiano (Italy)		$12.99
- Parrano Cheese (Dutch)			$11.95
- Port Salut (France)				$17.99
- Saint Andre - Triple Cream (France)	$12.98
- Saint Nectare (France)			$ 9.49
- Taleggio (Italy)				$13.95
- Tilsit (Danish)				$ 8.49

- Avg retail price:
- $10.83 USD

## 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