LandboSyd møde 29. sept Markedsudviklingen

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1 LandboSyd møde 29. sept Markedsudviklingen Før, nu og forventninger Thomas Carstensen, September 29, 2014

2 Siden 1880'erne har mælkeproducenter slået sig sammen i andelsselskaber 2

3 3 I dag er vores andelsselskab ejet af mere end landmænd fra 7 lande.

4 Vores mission: Vi vil sikre den højeste værdi for vores landmænds mælk og skabe muligheder for deres vækst 4

Five key areas within GCO Trade & Planning Inbound

and B2B Inbound logistics Outbound logistics

D, NL, UK, DK and S have first priority for the

buffer role The residual milk is for B2B Forecasted

5 Five key areas within GCO Trade & Planning Inbound & Outbound logistics, Planning, Product Management and B2B Inbound logistics Outbound logistics Planning Our B2C business groups for the areas Row, D, NL, UK, DK and S have first priority for the collected milk Product Management B2B Manage the buffer role The residual milk is for B2B Forecasted sale 2014: 200,000 mt powder 90,000 mt cheese 15,000 mt butter 6

6 We take lead in balancing the demand, supply and capacity for Arla Foods, in order to contribute to the highest possible milk price (to secure the highest value for our owners milk) 7

7 Supply and Demand Demand uncertainties Effects of the ban in Russia: An estimated millions. tons EU milk needs to find a new home. China s demand for powder is slightly leveling out at a high level last year s growth rate was 30%, estimated growth rate in 2014 is 15% - talks about stocks. Supply Development 1st Half 2014: NZ (Fonterra) fantastic milk season +16% which has impacted their volume (too)positive in the powder market EU milk production +4,93% Jan-Jun the growth started before the stop of quota on the back of higher milk prices. US milk production up 1.7% but momentum is building from only +1.7% in 1 st half to an estimated +4% in 2nd half 2014.

8 Available Export volumes are in this season significant higher than last year due to a high world milk production March/April +5%

9 Russia and China imports have significant increased during the last 5 years 10 29/09/2014

Why do China and Russia matter: China and Russia s stake of the dairy world trade has quadrupled since 2008 2008:

10 Why do China and Russia matter: China and Russia s stake of the dairy world trade has quadrupled since : China and Russia 6% 2014: China and Russia 28% 94% Other countries 72% Other countries 11 Sources: USDA, Fonterra

China what is happening? China in 2013 1. Q1+Q2 Cow reduction due to illness, beef prices etc. which led to milk production reduction. 2. Lost local consumption lost dairy revenue 3.

11 China what is happening? China in Q1+Q2 Cow reduction due to illness, beef prices etc. which led to milk production reduction. 2. Lost local consumption lost dairy revenue 3. Increase local milk price 25% 4. Import of quality cows Q1-3: cows Q cows 5. China takes all WMP volume at record prices China WMP imports 90% NZ World China WMP Imports in January-March at record volume and record cost 2. Local Milk intake up 10% - milk price 4.50 rmb (51 c/kg) 3. Price increases brings historical volume growth from 10-12% to +1.5% NZ 4. Stock building of both imported and local dairy products. Its rumoured that stocks could be as high as tons. 5. No Chinese buyers at the GDT normal accounting for 50% of the sales. What's next: Growth in local milk consumption needs to be re-established and will likely lead to local farm milk price reduction (currently 44 c) and lower consumer prices on local dairy products to secure consumption / /2014 It s estimated that a max of 12 traders (NZagents) is sitting on tons WMP of which one alone is holding tons.

expected to grow in the coming year All additional milk consumption growth is to come from local farming After

12 Goldman Sachs: China s import will not increase. Instead milk consumption growth will be covered by an increase in local milk production China s import is not expected to grow in the coming year All additional milk consumption growth is to come from local farming After the melamine crisis in 2008 a 5 year growth plan to secure a 15 % growth was initiated. 5 year period HOWEVER it has not been realized Is the planned growth to come now? 13

13 Russian Embargo Impact 14

Russian Embargo Impact 30% of EU Cheese Export went to Russia Equals 2,6% of EU Total production Total embargo value + 5 Bill Euro s Arla direct business 150 Mill

14 Russian Embargo Impact 30% of EU Cheese Export went to Russia Equals 2,6% of EU Total production Total embargo value + 5 Bill Euro s Arla direct business 150 Mill Euro s Will create disturbance & new opportunities Austria - Switzerland Argentina - N.Z. for dairy Brazil Turkey Chile - Egypt Ecuador Uruguay for other foodstuff 15

15 EU Dairy Market reaction on reduced global demand and higher supply Cheese: When import ban was announced EU was holding tons Edam/Gouda in stock and tons in transit. Immediately price effect to clear stocks and trucks with prices down to euro/kg cheese YC Private label contracts now below 3.00 /kg down 15-20% and Industry trading at /kg. Q4 level not yet above 3.00 /kg but away from the bottom so small positive steps..

16 Butter Shift away from cheese production towards butter/smp had an immediately negative effect on Industry sales of butter and shortly thereafter private label butter. Industry butter trading at 2.80 /kg and PL 2.95 /kg. Cream still seems to be available in large quantity but season higher consumption and lower production could impact positively 17

EU Dairy Market reaction on reduced global demand and higher supply WMP on Global Dairy Trade. Fonterra has reduced their peak sales volume 15% the last 4 weeks taking more than 70.

17 EU Dairy Market reaction on reduced global demand and higher supply WMP on Global Dairy Trade. Fonterra has reduced their peak sales volume 15% the last 4 weeks taking more than tons out of the GDT. WMP is trading at $/ton down 50% since 1. March. Volume pressure will not ease until Q Will NZ redirect WMP production to Cheese to fill the gap in Russia? And thereby reduce output further..

of Arla s sale on GDT has dropped 55 % since Jan. 1.

18 Since primo 2014 China s import has dropped 19 GDT AUCTION st auction January 1 st auction June The Chinese share of Arla s sale on GDT has dropped 55 % since Jan Chinese customers 800 Other customers Jan-14 June 2014

Fonterra volumes offered at the GDT are unpredictable 70,000 MT = difference between Jan. and June forecasts for the period July-Oct. 2014 January: Forecasted volume July-Oct. = 222.

19 Fonterra volumes offered at the GDT are unpredictable 70,000 MT = difference between Jan. and June forecasts for the period July-Oct January: Forecasted volume July-Oct. = MT Difference 70,000 MT June: Forecasted volume July-Oct. = MT Less than prior years Significant more than prior years F12 M: +34% to t 20 Forecasts week 1 & 22, 2014

20 SMP World market prices almost as bumpy as WMP from 4.780$ to 2600$ in 6 months. Reduced demand in China. Higher production in EU as from August due to milk shift from Cheese. Slightly more positive signals from export markets (mainly China) so demand will correct before WMP. 21

Opsummering Optimisten Russisk importforbud ophører tidligere end ventet Kina vil komme til at mangle mælk på lagrene vi vil opleve det, når de finder ud af det Kinesiske butikspriser vil finde et

21 Opsummering Optimisten Russisk importforbud ophører tidligere end ventet Kina vil komme til at mangle mælk på lagrene vi vil opleve det, når de finder ud af det Kinesiske butikspriser vil finde et normalt niveau Vejret ser ikke ud til, at det vil reducere produktionen i New Zealand Mere positiv tro på økonomien og øget efterspørgsel Pessimisten EU kvoterne ophører 1. april 2015, dette vil øge mælkeudbuddet til et meget højere niveau, end vi kan forestille os Den økonomiske krise er ikke ovre endnu Den amerikanske dollar bliver styrket yderligere det er ikke et problem for eksportørerne, men et stort problem for importørerne på vækstmarkederne 22

22 Arla afholder to møder for banker og landbrugets rådgivere Fortæl gerne jeres rådgivere om møderne Formål: at sikre at rådgiverne er opdateret på markedssituationen og Arlas strategi, så de er klædt på til bedst muligt at kunne hjælpe Arlas andelshavere igennem budgetfasen Program: Markedsudsigter netop nu - Thomas Carstensen, Arla Økonomiforhold - Arla Foods Finance Arla Foods strategi - Peder Tuborgh, Adm. dir. Arla Tid og sted Mandag 27. oktober kl Tirsdag 28. oktober kl Helnan Hotel Marselis, Strandvejen 25, 8000 Aarhus C. 23

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LandboSyd møde 29. sept. 2014 Markedsudviklingen

LandboSyd møde 29. sept. 2014 Markedsudviklingen Før, nu og forventninger Thomas Carstensen, September 29, 2014 Siden 1880'erne har mælkeproducenter slået sig sammen i andelsselskaber 2 3 I dag er vores