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1
Global Dairy Market PerspectivesPresented by World Perspectives, Inc.
Conference for Uruguay’s Dairy IndustrySponsored by the
Embassy of the United States of America
San Jose, UruguayOctober 1, 2003
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… 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
€
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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.
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Utilization Snapshot (25 Sept)2003 FOB Export Prices ($USD/MT)
New ZealandAustralia
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 2342Utilization/Demand remains steady to strong globally; reform in Canada (and EU) keeps world market prices firm
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Highly volatile markets – 50 pct fluctuation in price
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” marketOTHER:
OTHER: packaging, labeling, testing, inspection, mandatory shelf life requirements, recipe and manufacturing declaration, standards of identity
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TWO TYPES OF DAIRY EXPORTS
COMMODITY
WDM
NDM
Butter
Cheese
NICHE
Specialty Products
Lactose
Ice Cream
Concentrates
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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
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North AmericaUSA – 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
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Asia, Middle EastJapan/Korea: growth market for cheese and ice cream; non-tariff barriers
Taiwan: fairly open; imports all but fluid milk
GLOBAL DAIRY TRADE BARRIERS
GAINS FROM TRADEPRICES: 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
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WTO: Cancun CollapseDraft 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
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WTO: Cancun FalloutFallout 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
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Ice CreamGrowing export product: US ships 40 million
gallons totaling $USD80-100 mln per year
Japan, United Kingdom, Mexico, Canada, Hong Kong are top 5 importers
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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)
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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
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Specialty Cheese PricesWashington, DC, USA (week of 22 Sep)
Cheeses of the World (cut to your order!!!)
Chevre De Belley $11.99Blue D'Auvergne (France) $ 7.99Caerphilly Wales $ 6.99Huntsman (England) $ 9.99Kashkaval $ 7.99Morbier (France) $ 7.99Parmesan Reggiano (Italy) $12.99Parrano Cheese (Dutch) $11.95Port Salut (France) $17.99Saint Andre - Triple Cream (France) $12.98Saint Nectare (France) $ 9.49Taleggio (Italy) $13.95Tilsit (Danish) $ 8.49
Avg retail price:
$10.83 USD
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Price Calculation300-400 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