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Organization of the dairy industry
in Europe
Overview
Clotilde Patry, Xavier David, Didier Boichard, Eric Venot, Vincent Ducrocq, 06/05/2014
C.PATRY, 06/05/14, Uberaba, Brazil
Contribution of EU in the dairy
worldwide market
_01
.02
Innovation in the dairy Brazilian sector: agenda for development
Cow milk production (Millions of tons)
Total world > 770 millions of ton (all species)
Milk production in the world
EU: 217 31%
Asia: 257 36%
NA: 95 13%
NZ: 26 4%
SA: 61 30%
CA: 16 2%
BRZ: 29
EU-27: 156 20%
Source: FNCL
Innovation in the dairy Brazilian sector: agenda for development
Global consumption
Cheese, butter, WMP, SMP, Whey powders consumption
79 % of the global production, 57% of the consumption
Innovation in the dairy Brazilian sector: agenda for development
Europe: Production and consumption
Milions of tons Figures in 2013 (EU-28)
Production 156
Delivery 141
Imports 1
Exports 16 (10%)
Domestic consumption 142 (90%)
Consumption (kg / inhabitant) 279
Source: Economie de l’élevage, 2013, IDELE
Innovation in the dairy Brazilian sector: agenda for development
2 markets:
1. Home consumption and Europe:
Very saturated (cheese)
2. Export towards emerging countries
A high demand(milk powder)
Dairy processing in the economy:
12,000 milk processing sites
10% of the people working in the European food and drink industry
13% of the turnover for the total food and drink industry in Europe.
2013: How milk deliveries were used (% of the Dry Useful Matter)
Dairy products in Europe
Source: Economie de l’élevage, 2013, IDELE
Cheese
Powders
Innovation in the dairy Brazilian sector: agenda for development
External trade of dairy products
Limited import: < 1% of the EU consumption Cheese from Switzerland Butter from NZ Increasing export: 9,2 Mrds € (28,7 Mrds $R) Cheese (40%): EU = the exporter 1st worldwide Milk powder (30%) Whey powder (10%)
10%
Innovation in the dairy Brazilian sector: agenda for development
EU: one of the major exporters
Export (Millions of tons of milk)
Source: IDELE
10%
Few international exchanges
Innovation in the dairy Brazilian sector: agenda for development
EU: world market share
Source: EU commission
30%
20%
C.PATRY, 06/05/14, Uberaba, Brazil
The specificities of the dairy
industry in Europe A common political framework
_02
.010
Innovation in the dairy Brazilian sector: agenda for development
Regulated milk market in the EU
1984: implementation of a quota system by the Common Agricultural Policy
• Every member state has a national production quota distributed to farmers.
• Whenever a member state exceeds its quota, it has to pay a penalty to the EU (0,3426 € / L)
• Objectives:
- Limit the continuous increase of the Milk Production,
- Balance between consumption & production,
- Reduce the EU supports (storage intervention, export refunds, special marketing aid)
Innovation in the dairy Brazilian sector: agenda for development
2005: decrease of the penalty level 2009: ‘Health Check’ reform national quotas increased by 1% every year April 2015: expiration of the quota system liberalization of the production
End of the regulated milk market in the EU
Innovation in the dairy Brazilian sector: agenda for development
Evolution of EU milk deliveries and direct sales vs quotas
Source: EU, DG Agri, H. Versteijlen
Innovation in the dairy Brazilian sector: agenda for development
Impact on prices and competitivity
20,00
25,00
30,00
35,00
40,00 1
99
1
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Source: Milk market observatory
36,51
29,67
€ / 100 kg
average European milk (raw) prices
Innovation in the dairy Brazilian sector: agenda for development
Impact on prices and competitivity
Source: EU, DG Agri, H. Versteijlen
C.PATRY, 06/05/14, Uberaba, Brazil
The specificities of the dairy
industry in Europe Diversity of structures: farm, delivery,
process
_04
.016
Innovation in the dairy Brazilian sector: agenda for development
Milk production: different volumes, various farming systems
Very specialized farms: -Pasture oriented: IRL, GBR Large herd size, low production costs but milk production seasonality -Inbarn feeding: NLD, DNK, Germany (East) Large herd size, concentration of the services, large investments, high productivity -Mountain area: France Local products with high added value Farms (associated with other agricultural activities), smaller herd size Ex: France, Germany (West) Autonomous / Feed but high production costs
Milk deliveries per country (Millions of tons)
Innovation in the dairy Brazilian sector: agenda for development
5 out of the TOP 10 global dairy industry are European
80% of the EU dairy companies are SMEs
In the North (NLD, DNK): Monopolistic cooperatives with more than 80% of the market share
France, Germany, GBR, IRL: many more stakeholders
•International leader (private) • Cooperatives •SMEs (local products)
Dairy processing industry: different strategies
Innovation in the dairy Brazilian sector: agenda for development
Strengths and challenges of the European dairy industry
Strengths:
• Well structured dairy sector
• Diversity & complemtarity: market diversity
• Quality: Genetics, Hygiene, Nutrition
• Environment & animal welfare concern
Innovation in the dairy Brazilian sector: agenda for development
Challenges:
• Volatility of the milk price and the intrants and the revenue
• Competition with cereals and biofuel
• Societal expectations: Environment, Animal health & welfare
• Precise dairy farming: need for investment in research
• Needs of the farmers’ community
- Farmer population getting older: replacement?
- Need for training
Strengths and challenges of the European dairy industry
C.PATRY, 06/05/14, Uberaba, Brazil
The European dairy industry:
what’s next?
_05
.021
Innovation in the dairy Brazilian sector: agenda for development
Dairy product consumption increasing steadily
Source: European Dairy Assocation 2012, as calculated by IDF
Innovation in the dairy Brazilian sector: agenda for development
Production vs consumption: need for more international exchange
surplus
balance
deficit
Innovation in the dairy Brazilian sector: agenda for development
2010 2020
Number of dairy cows (millions) 23.3 20.5 - 12%
Yield (kg/dairy cows) 6278 7643 + 22%
Production (millions of tons) 146.4 156.3 + 7%
Milk price(€/t) 305.6 353.2 + 16 %
Source: DG AGRI /OCDE, Fao et World Bank
After the milk quota abolition:
How the EU commission see the future?
Innovation in the dairy Brazilian sector: agenda for development
Need for adaptation
• At the farm level: - More specialised and integrated farms - Take advantage of the diversity (production, genetics, processing) to adapt to various markets
• At the industry level: need for enterprises with a capacity of:
-Innovation: products, marketing -International development
Innovation in the dairy Brazilian sector: agenda for development
Conclusion
So far, Europe is among the leaders in the dairy sector A changing context:
•increased demand •increased competition (market liberalization)
Adaptation: need and capacity
• Modern production and processing tools
• Cooperative organization
• Diversity of the practices, complementarity
• Towards more international development
Thank you for your attention! Obrigada