Canadian Dairy Market - An Overview

EU 1522%

South Asia20%

USA13%

Oceana4%

CIS11%

LATAM10%

Other20%

Global Dairy

- Million Tons - Calendar Year 2004

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India USA Russia Germany France Brazil China UK NewZealand

Ukraine

World Largest Producers

Canadian milk renownedCanadian milk renowned for excellence Quality Standards in farms & processing plantsQuality Standards in farms & processing plants

in 2005, dairy production generateddairy production generated farm receipts of $ 4.8 Billion$ 4.8 Billion

Dairy industryDairy industry ranks fourth in the agriculturefourth in the agriculture sector

About 81% of farms81% of farms located in Ontario and QuebecOntario and Quebec, 13% Western, 6% Atlantic

Dairy population 1,546,300 heads1,546,300 heads (approx. 1,048,600 dairy cows (Jan’06 est.)

Typical Canadian farmCanadian farm has 60 cows60 cows

Nearly 38,000 people38,000 people work on dairy farmsdairy farms, 26,000 primary processing26,000 primary processing

Canadian dairy works under Supply Management Systemworks under Supply Management System PlannedPlanned domestic productionproduction Administered pricingAdministered pricing Dairy product import controlsimport controls

In 2005, approx. 463 dairy processing plants463 dairy processing plants (295 Federally inspected plants)

Canadian Dairy at a glance

33 %

38 %

2 %

2 %

9 % 8 %3 %

4 %1 %

Production 2004/05 75,237,235 HectolitresDairy Cash Receipts (2005) $ 4,841,686,000Number of farms with shipments of milk or cream (Jul 05) 16,224Dairy Cows (Jan 05) 1,006,400Dairy Heifers (Jan 05) 498,600

…. At a glance

…. At a glance

Canadian dairy famousfamous for superior genetic qualitysuperior genetic quality of its cattle herd

Live dairy cattle exportsdairy cattle exports for breeding to NA, EU and Asia Pacific

Canadian cows enrolledcows enrolled on official milk recordingmilk recording Produce averageProduce average of 9,442 Kg9,442 Kg of milkmilk per cow (305 days lactation) Canadian milk has an average content 3.21% protein & 3.76% fataverage content 3.21% protein & 3.76% fat

The Holstein Holstein is most common dairy breedcommon dairy breed (93% of dairy herd)

OIE standardsOIE standards are being put in place

Processing of Dairy ProductsProcessing of Dairy Products

Fluid milk marketFluid milk market (table & fresh cream ) represents 38% of milk productionrepresents 38% of milk production (28.3 M Hect Ltr)

Manufactured dairy productsManufactured dairy products butter,cheese, yogurt & IC accounts 62%accounts 62% (6.5 M hectolitres)

Processing sectorProcessing sector is concentratedconcentrated 16% plants owned by 3 large processors Saputo, Agropur, Parmalat Process approx. 70% of the milk produced

…. At a glance

Quality & SafetyQuality & Safety

Government & various partnersGovernment & various partners closely coordinate movement - “Farm to consumer”“Farm to consumer”Dairy Farmers of Canada (DFC), (DFC), Dairy Processors Association of Canada (DPAC) (DPAC) The Canadian dairy commission (CDC), Provincial (CDC), Provincial Marketing Boards Boards Agriculture and Agri-Food Canada (AAFC) , (AAFC) , Canadian dairy industry industry

Canadian Dairy CommissionCanadian Dairy Commission (CDC)CDC) supports the industry

Implement National policiesNational policies AssessingAssessing changes in demanddemand for milk and dairy products ProductionProduction of milk Coordinating the pooling of milk revenuemilk revenue and market sharing systemmarket sharing system

Canadian Food Inspection Agency (CFIA)Canadian Food Inspection Agency (CFIA) responsible for

Setting standardsSetting standards for dairy products Plant inspectionsPlant inspections Regulating Regulating packaging and labelling Enforces veterinary healthveterinary health programs Ensure safety safety of dairy products

International Trade

In 2005, Canada exportedCanada exported Cheeses 27.1% Dairy spreads 18% Ice cream 16 %

Major markets for dairyMajor markets for dairy United States 48.1% EU 12.9% (UK 12.9%)

Canadian dairy exports 2005 $ 242.6 Million imports 597.6 MillionCanadian dairy exports 2005 $ 242.6 Million imports 597.6 Million

Major ImportsMajor Imports Cheeses 29.2%Casein and derivatives 18.3% Butter and fats & oils 11.6% Whole milk powder 10.6 %

Our major suppliersOur major suppliers EU-25 38.6% New Zealand 23.9% United States 22.8%

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BC AB SK MB ON QC NB NS PE

000 Hectolitres / Annum

Historical Production 2000-2005 (Marketing Year)

Farm Input Price Index 1999-2003

1992 = 100

  1999 2000 2001 2002 2003

    % Change   % Change   % Change   % Change   % Change

Building & Fencing 123.1 5.1% 119.8 -2.7% 120.00 0.2% 122.8 2.3% 122.4 -0.3%

Machinery & vehicles 125.6 1.3% 137.7 9.6% 143.70 4.4% 143.5 -0.1% 157.0 9.4%

Crop production 121.6 -2.2% 121.5 -0.1% 137.60 13.3% 135.7 -1.4% 154.7 14.0%

Seed 129.4 -1.2% 131.2 1.4% 134.50 2.5% 142.5 5.9% 149.7 5.1%

Fertilizer 125.5 -2.5% 128.1 2.1% 159.80 24.7% 137.2 -14.1% 166.7 21.5%

Pesticides 119.5 2.1% 120.2 0.6% 124.70 3.7% 127.4 2.2% 132.8 4.2%

Crop insurance 102.2 -9.4% 87.8 -14.2% 102.20 16.5% 131.7 28.9% 171.5 30.2%

Animal production 117.5 0.4% 127.8 8.8% 135.10 5.7% 132.3 -2.1% 127.8 -3.4%

Feed 109.7 -9.3% 109.2 -0.5% 120.20 10.1% 132.5 10.2% 131.2 -1.0%

Artificial insemination 131.1 -2.2% 133.4 1.8% 133.60 0.1% 138.1 3.4% 147.0 6.4%

Veterinary Services 133.1 3.9% 133.8 0.5% 137.70 2.9% 155.0 12.6% 155.8 0.5%

Supplies & Services 112.0 0.2% 118.4 5.7% 121.10 2.3% 120.7 -0.3% 127.6 5.7%

Hired Farm Labor 113.3 -1.8% 119.5 5.5% 125.40 4.9% 128.2 2.2% 129.0 0.6%

Property Tax 113.8 2.4% 114.1 0.3% 112.60 -1.3% 118.9 5.6% 126.0 6.3%

Farm Rent 120.5 -1.5% 113.8 -5.6% 113.80 0.0% 121.8 7.0% 132.1 8.5%

                   

Tota Farm Inputs 117 0.3% 124.1 6.1% 129.5 4.4% 128.5 -0.8% 132.7 3.3%

Dairy Cows & Heifers by Key Provinces

407,000

158,000

354,800

205,0001,066,400

498,600

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Heifers

Cows

No. of Official Herds

Animals on Test

Milk (Kg) Fat (Kg)Fat %

Protein (Kg)

Protein %

BCA

 

            Milk FatProtei

n

Ayrshire 288 9,828 7,354 292 3.98% 244 3.32% 211 203 213

Brown Swiss 146 1,397 7,792 319 4.12% 270 3.48% 201 205 199

Canadienne 22 216 5,377 225 4.21% 191 3.57% 190 177 196

Guernsey 38 468 6,398 286 4.50% 219 3.43% 194 173 186

Holstein 5190 264,762 9,624 354 3.71% 306 3.19% 209 208 209

Jersey 518 8,927 6,279 303 4.85% 236 3.77% 210 187 208

Milking Shorthorn 27 217 6,516 240 3.70% 214 3.30% 234 214 236

Breeds & Average Production - Nationwide

Yearly Production – 2005 basis

CountryCountry Kgs / YearKgs / Year

Canada 9,500

United States 8,235

Japan 7,400

European Union 6,000

Australia 4,906

New Zealand 3,700

Mexico 1,397

Average Raw Milk Yield per Cow

2003 Comparison

Raw Milk

Fluid Milk Products

Dairy Desserts

Recombined Products

Flavored Milk

Liquid Infant Milk

Low Lactose Milk

WholeLow fat,

Non-fat milk

Enzyme Modified

Dairy Products

Dairy Spreads

Cultured Milk

Milk PowderAnhydrous

Milk FatCheese

Milk Protein

HydrolysatesHigh Fat Low Fat

FractionatedFat

Butter Veg Fat mix

Feed Modified

Fat

Whey Products

Milk Protein Products

Dairy Products Production Possibilities

Class 138%

Class 25%

Class 336%

Class 46%

Class 4 m5%

Class 5 a,b,c6%

Class 5 d4%

CEM0%

Class 1 Class 2 Class 3 Class 4 Class 4 m Class 5 a,b,c Class 5 d CEM

Milk Utilization per Class

Class 1 Fluid milk, Fluid cream & Milk-based beverages

Class 2 Yogurt, Sour cream & Ice-creamClass 3 Speciality cheese & Cheddar

Class 4 a,b,c,d Butter, Butteroil, Powders, Concentrated milk & unclassified products

Class 4 m Marginal markets Class 5 a, b,c Special classes – Dairy ingredients

Class 5 d Special classes – Planned exports and other exports

Milk Components Content

      04/05   03/04   02/03   01/02

ONTARIO Butterfat   3.88   3.87   3.88   3.88

  Protein   3.31   3.3   3.33   3.36

  Other Solids   5.76   5.76   5.72   5.76

                   

QUEBEC Butterfat   4.02   3.97   3.98   3.98

  Protein   3.36   3.35   3.34   3.33

  Other Solids   5.65   5.7   5.71   5.68

CANADA Butterfat   3.88   3.85   3.87   3.88

  Protein   3.31   3.31   3.32   3.33

  Other Solids   5.69   5.7   5.69   5.69

kg / hl

Fluid Milk Sales - Canada

000 LitresYear (Marketing)

 

3.25% 2% 1% Skim ButtermilkChocolate

MilkEggnog Total Sales

                     

2004 / 05   407,732

1,251,859 568,047 279,417 13,612 173,950 9,619 2,704,236

2003 / 04   424,603

1,285,770 569,849 273,831 14,194 167,736 10,070 2,746,053

2002 / 03   422,715

1,270,432 544,597 272,575 13,240 156,058 10,392 2,690,009

2001 / 02   431,014

1,285,277 536,464 276,181 12,775 155,857 10,499 2,708,067

2000 / 01   435,491

1,310,815 532,740 265,664 11,996 145,932 10,635 2,713,273

Day to day Challenges to Dairy Purchasing

Closely Monitor Production Ensure Food safety Maintain a close tab on type of Cows & yields by type Support prices Other influencing factors to the dairy market Farm income Herds average age – cows on feed Quality of milk – buying discount Milk processing costs etc An eye over the industry future developments Milk collection centers performance Seasonality impacts , weather Logistics / avoid transit losses Innovation support Environmental protection Long-term contracts Strategic partnering to ensure sustained supply and desired quality Industry regulations and developments Key competition for Nestle / Key players???

Stay on top to meet or beat above Challenges