A Globalized Dairy Market The U.S. Dairy Industry: Were All In - PowerPoint PPT Presentation

A Globalized Dairy Market The U.S. Dairy Industry: We’re “All In” International Grocers Association Atlanta, GA October 8, 2014 Managed by Dairy Management Inc.™

Today’s Topics • About USDEC • Growth factors and prospects ‒ Milk supply assets ‒ Export commitment ‒ Portfolio expansion • Final thoughts • Q & A 2

U.S. Dairy Export Council (USDEC) • Independent membership organization • 119 members ‒ U.S. dairy producers ‒ Dairy processors and cooperatives ‒ Trading companies ‒ Allied companies and organizations • Created in 1995 by U.S. dairy farmers • Headquartered in Arlington, Virginia 3

Representation Around the World • China • European Union* • Japan • Mexico, including Central America • Middle East & North Africa • South America • South Korea • Southeast Asia • United States • Vietnam Provide market insights and technical support to local buyers and end-users 4

Factors Behind Growth in U.S. Milk Production • Higher yields per cow (despite lower number of cows) • Steady growth in dairy farm efficiency ‒ Lower production costs (reduced investment/overhead per cow) ‒ More financial stability and commitment • Year-round production with very little seasonal variance ‒ Volume ‒ Nutrient composition • Production across the USA 5

U.S. Leads the World in Milk Volume Growth Cumulative milk production growth since 2005 12,000 US 9,300 EU-28 (000 MT) 6,600 NZ 3,900 Argentina 1,200 Australia -1,500 05 06 07 08 09 10 11 12 13 EU-28 US NZ Australia Argentina 6 Source: USDEC

What We Export (2013) Value % change Volume % change (millions) vs. 2008 (MT) vs. 2008 SMP/NDM $2,050 +44% 554,752 +38% Cheese $1,355 +138% 316,556 +141% Whey proteins $1,210 +98% 544,584 +50% Lactose $574 +213% 341,747 +84% Butterfat $354 +30% 91,952 +2% Ice cream $177 +208% 61,089 +141% Fluid milk & cream $36 +84% 86,991 +78% TOTAL $6,831 +78% 7 Source: USDEC - USDA

Where We Export (2013) Value % change (millions) vs. 2008 Mexico $1,425 +53% Southeast Asia $1,247 +68% Middle East/North Africa $827 +79% Canada $764 +57% China/Hong Kong $750 +283% Japan $304 +46% Korea $303 +200% Caribbean $193 +18% TOTAL $6,831 +78% Source: USDEC - USDA Source: USDEC - USDA 8

Increasing Percentage of “New” Milk Produced Since 2003 for Export Incremental growth in U.S. production and exports since 2003 5.0 4.0 (billion lbs., total milk solids) 3.0 2.0 1.0 68% to Exports 0.0 04 05 06 07 08 09 10 11 12 13 Jul-14 incremental production growth incremental export growth 9 Source: USDEC, NMPF

Record U.S. Dairy Exports in 2013 U.S. Exports - value and volume $7,500 2,100 Exports in 2013 : Volume (thousand mt, TSB) $6,000 1,680 $6.7 billion Value (millions) 1.8 million MT $4,500 1,260 $3,000 840 $1,500 420 $0 0 05 06 07 08 09 10 11 12 13 Value Volume 19 10

2013 Saw Outstanding Growth Export value + 31% last year + 21% p.a. over 10 years (CAGR) Export volume + 19% last year + 12% p.a. over 10 years (CAGR) Export % of production 15.5% up from 11% in 2008 U.S. global share 17% up from 11% in 2009 [SMP, WMP, cheese, butterfat, whey] 11

Most U.S. Products Hitting Higher Export Shares Product 2014 2013 Avg. ‘04 – ‘08 (7 mos.) NDM/SMP 59% 58% 42% Cheese 7.4% 6.3% 1.9% Dry sweet whey 53% 56% 42% Lactose 55% 73% 56% Butterfat 8.6% 10.7% 4.4% 12

Diverse, Growing Base of Markets for U.S. Dairy Products U.S. DAIRY EXPORTS, TOP 10 MARKETS (in millions) (JAN.-DEC. 2013 AND % CHANGE VS. PRIOR YEAR ) CANADA $569 m, +21% SO. KOREA $301 m, +34% CHINA MIDDLE EAST/ JAPAN $706 m, +70% NO. AFRICA CARIBBEAN $304 m, +7% $788 m, +83% $216 m, +1% MEXICO SOUTHEAST ASIA $1,429 m, +16% $1,284 m, +39% 62% to Exports SOUTH AMERICA $277 m, +9% OCEANIA $258 m, +17% 13 Source: USDEC, USDA

2. Rising U.S. Presence in Global Dairy Trade 2013 Aggregate Export Volume (share) SMP, WMP, cheese, butterfat, whey 0.40 0.32 28% 25% +8.5 24% +8.5 0.24 percent 17% +7.2 +7.2 0.16 0.08 5% 0.00 EU-28 NZ US Australia Other 14 Source: GTIS, USDEC

Most Products Moving Up Seven Months 2014 vs. Seven Months 2013 40% 31% 30% 22% 22% 20% 16% 11% 10% 7% 6% 0% -6% -10% Lactose Ice Whey SMP/ Milk & Butter Cheese All Value Cream NDM Cream* 15 Volume (000 MT) 198.5 42.5 335.1 353.0 58.6 47.9 231.2 $4,615 mil *(mil. liters)

U.S. Exports of Cheese Eleven Months 2013 vs. Eleven Months 2012 40% 37% 35% 30% 25% 24% 21% 20% 19% 16% 16% 15% 13% 10% 10% 6% 5% 0% World Mexico Korea Middle Japan Central SE Asia China Caribbean East America 285.5 72.9 44.7 39.3 28.2 15.4 14.1 12.2 11.8 Volume (000 MT)

Closing 17

Questions and Answers? 18

Thank you Vikki Nicholson, Senior Vice President vnicholson@usdec.org 19