Market and Trade Developments

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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 Canadas export
  pricing could reduce Canadas 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)
Utilization/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
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GLOBAL DAIRY TRADE BARRIERS
GLOBAL DAIRY TRADE BARRIERS
TARIFFS 40-90 pct avg can be 300 pct
TRQs Subsidies prohibitive over quota rate
administration of TRQ dump market
OTHER
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 America

• USA TRQs domestic support gross
  overproduction of NDM, minimum prices per class,
  standards of identity
• Canada TRQs,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 East

• Japan/Korea growth market for cheese and ice
  cream non-tariff barriers
• Taiwan fairly open imports all but fluid milk

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GAINS FROM TRADE
GLOBAL DAIRY TRADE BARRIERS
PRICES 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 Collapse

• Draft Text (2)
• Product specific AMS caps
• Eliminate some export subsidies
• Review Green Box
• Special and Differential

• EUs GI Plan
• The EU plan would extend GIs 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 Fallout

• Fallout is still being calculated
• Brazil will not open to ag imports - Ricardo
  Ferreira, rep of GDA/ALG
• US likely to pursue even FTAs
• Keep pressure on Brazil
• Facilitation/Transparency

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Ice Cream

• Growing 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 11.99 Blue D'Auvergne
(France) 7.99 Caerphilly Wales
6.99 Huntsman (England) 9.99 Kashkaval
7.99 Morbier (France) 7.99 Parmesan Reggiano
(Italy) 12.99 Parrano Cheese (Dutch) 11.95 Po
rt Salut (France) 17.99 Saint Andre - Triple
Cream (France) 12.98 Saint Nectare (France)
9.49 Taleggio (Italy) 13.95 Tilsit
(Danish) 8.49
Avg retail price 10.83 USD
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Price Calculation

• 300-400 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