COPA * COGECAThe Outlook for EU agriculture

Brüssel, 29th June 2011

Session II

Market outlook for selected sectors, opportunities and constraints to

productivity and the Contribution of input suppliers

The Dairy sector

Dr. Stefan WeberLMS Landwirtschaftsberatung , Rostock-Germany

1

Currently a positive outlook on market for milk and dairy products

Enormus price volatalities at world markets

Land prices are rising, availability of land develops more restrictive

Heterogeneous structure of agricultural dairy farms

High production requirements results higher production costs

Dissatisfied dairy structure

Full decoupling of direct payments in Germany since 2005

Soft landing 2013to regional flat rate for farmers in 2013

Significant reductions of the provision of direct payments

Analysis of the milk market

2Dr. Stefan Weber

EU 27: Exports of Milk Products

Significantly higher sales of cheese and skimmed milk powder in 2010.

2010

in 1.000 to, January-December

2009

*einschließlich Butter öl

Butter* Käse VMP MMP KDM Molken-pulver

Kasein

Quelle: ZMB nach EurostatSeite 3Dr. Stefan Weber

Increase in purchasing power and demand for milk-products in emerging economies

8,7%

7,7%

4,7%5,3 %

4,3%

4,0%

1,4%

3,0%

4,0%

2,8%

• Crowing purchasing power inemerging economies

• Diffusion of western consumer behaviour

• Increase of demand and supply for milk products outside Europe

• Standard export products are competitive on world market

• Increase in demand by global retailers

Market situation / development Percentage change in GDP (2011)

Quelle: World Bank, DMKSeite 4Dr. Stefan Weber

Development in global Milk-Production towards 2019

• Worldwide growth Ø 2,1 % (Argentine, Brasil, China and India)

• Slow growth in the EU(Forecatss by OECD-FAO, FAPRI, EU)

• Shift in Milk Production towards Northern Europe (NL, DK, PL, D-North)

• Growth in Germany affects typical grasland regions (on the fringe of the Alps, coast-regions)

• End of Quota in 2015

Market- situation / -development

GUS, Ozeanien, Asien, Rest

Nordamerika

EU

Development of Production of Raw Materialsin Mio. kg

2019

+165,3 Mrd kg

2009 -2019

Quelle: OECD, FAO, DMKSeite 5Dr. Stefan Weber

World Population 2004: 6,4 Mrd. World Population 2050: 9,3 Mrd.

Distribution of world population on the continents

The population growth is taking place at 95 % in developing countries.

Asien AsienAfrika

Afrika

EUEU

Quelle: Deutsche Stiftung WeltbevölkerungSeite 7Dr. Stefan Weber

Population development in Germany until 2050

Germany's population will shrink further and grow old in 2050. According to recent calculations by the Federal Statistical Office, there will then be about twice as many 60-year-old as newborns.

85

80

75

70

65

60

Population in Mio.

Quelle: Grundlage: Variante 6 - W1: "relativ alte" Bevölkerung; Geburtenhäufigkeit: leicht fallend, Lebenserwartung: hoch, Wanderungssaldo: 100 000Basis: 31.12.2005; Quelle: Destatis 2006

Seite 9Dr. Stefan Weber

State of Play of the german agricultural sector? Shares of the EU-27 agricultural production 2008-2009 (in%)

Quellen: AMI10Dr. Stefan Weber

Cost of milk production in comparison to the european average, ct/kg ECM

Quelle: EDF

IRE 31,58 FR 0,02 DE-O 1,47 DK 6,31

DE-O 32,01 GB 0,13 FR 2,21 DE-O 6,58

GB 32,49 IRE 1,01 DE-W 2,29 IRE 6,86

DE-W 37,91 DE-O 1,44 IT 2,35 GB 7,62

DK 40,69 IT 2,71 GB 3,01 DE-W 7,82

FR 43,14 DK 2,72 IRE 3,93 NL 7,84

NL 45,31 DE-W 3,42 NL 4,27 IT 10,55

IT 49,83 NL 9,41 DK 5,63 FR 11,47

Vollkosten Quotenkosten Bodenkosten Arbeitserledigung

Dr. Stefan Weber

11

Dr. Stefan Weber

12

Milk production in

kg/ha LF:kg je ha LF *)

< 500501 – 1.000

1.001 – 1.5001.501 – 2.0002.001 – 3.000

> 3.000

*) Für Rheinland-Pfalz, Baden-Württemberg, Mecklenburg-Vorpommern, Sachsen und Thüringen liegen keine Milchleistungsdaten auf Kreisebene vor. Berechnung: Milchkuh (Kreis) * Ø Milchleistung (Bundesland) / ha LF (Kreis)

Quelle: Lassen et al. 2008 vTi.

Dr. Stefan Weber

13

Germany as a location for milk– by Region

Quelle: Situationsbericht BV, BZA DLG Forum Spitzenbetriebe

Kennwert Einheit Süd West Nord Ost

Anz. Betriebe mit Milchproduktion *Tsd. 63,5 16,9 20,7 4,4

in % 36,2 17,9 30,4 15,9

Anzahl Milchkühe *Tsd. 1.592 655 1.042 777

in % 39 15 25 18

Milchleistung kg / Kuh 6.939 7.918 8.408 8.675

Laufstallhaltung % 40 60 80 98

Kühe / Betrieb Anz. Tiere 26 40 52 182

VE / 100 ha LF Anz. VE 126 111 171 35

Ant. Betriebe mit > 100 Kühe % 0,5 5,0 7,9 50,8

Ant. Kühe in Betrieben mit > 100 Kühe % 2,5 16,3 20,1 89,4

Produktionskosten (incl.Faktorkosten) ct/kg ECM 40,57 36,50 33,56 31,90

The changing conditions costs agricultural diversity

Milk production is well established, competitive enterprises with heterogeneous structures

High demands on production require higher costs

Existing of (sometimes high) premiums depending in many areas

Decrease of Direct Payments, but coupled to conditions and environmental standards

Higher competition for land

Skills shortages and generational change will be increasingly difficult

Optimisation of nutrient cycling

Outlock for the milk market I.!

14Dr. Stefan Weber

Germany is and remains as a very interesting and financially strong market

Dairy structure situated unsatisfactory,

=> Targeting higher market share in domestic market and growth in exports

A Common Agricultural Policy (CAP) with equal standards

Greater acceptance of agriculture as a whole and a higher appreciation for food

Outlock for the milk market II. !

15Dr. Stefan Weber

16Dr. Stefan Weber