Fig 4.2 – ABARES farm performance (avg per farm) Agribusiness Breakfast Unilever Sustainable...
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Transcript of Fig 4.2 – ABARES farm performance (avg per farm) Agribusiness Breakfast Unilever Sustainable...
Fig 4.2 – ABARES farm performance (avg per farm)
Agribusiness BreakfastUnilever Sustainable Sourcing Meeting27 August 2012
Retail
ExportMilk
production
Food serviceDist’n
MarketingImport
Inputs
supplements
water
• Rising grain prices• Limited supply of cows
and heifers• Consumers value
focussed• Retailers competing on
price
Processing/manufacturing
Rebalancing the supply chain
• Clearing stocks for exporters as prices weaken
• Strong competition for milk in southern region remains
• Pressure on domestic profit margins
• “Two speed” industry – export vs domestic regions• Weaker pricing due to commodity price falls • Demand led by China and south-east Asia
• Strong supply response from ALL exporting regions
-
1,000
2,000
3,000
4,000
5,000
6,000
Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12
US$
per
tonn
e
SMP WMP Butter Cheese
Commodity prices finding new level
Increased supply for all exporters
EU-27 US NZ Aust Argentina Brazil (1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
3,000
2008 2009 2010 2011 2012(f)
mill
ion
litre
s
Slowing US production growth
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Jan-
10Fe
b-10
Mar
-10
Apr-
10M
ay-1
0Ju
n-10
Jul-1
0Au
g-10
Sep-
10O
ct-1
0N
ov-1
0D
ec-1
0Ja
n-11
Feb-
11M
ar-1
1Ap
r-11
May
-11
Jun-
11Ju
l-11
Aug-
11Se
p-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12Fe
b-12
Mar
-12
Apr-
12M
ay-1
2Ju
n-12
Jul-1
2
Mon
thly
gro
wth
YO
Y
US more susceptible to rising grain prices
26/0
8/20
0726
/10/
2007
26/1
2/20
0726
/02/
2008
26/0
4/20
0826
/06/
2008
26/0
8/20
0826
/10/
2008
26/1
2/20
0826
/02/
2009
26/0
4/20
0926
/06/
2009
26/0
8/20
0926
/10/
2009
26/1
2/20
0926
/02/
2010
26/0
4/20
1026
/06/
2010
26/0
8/20
1026
/10/
2010
26/1
2/20
1026
/02/
2011
26/0
4/20
1126
/06/
2011
26/0
8/20
1126
/10/
2011
26/1
2/20
1126
/02/
2012
26/0
4/20
1226
/06/
2012
0
50
100
150
200
250
300
350
400
450
500IGC GOI Wheat Maize
inde
x
Major importers by volume (‘000 tonnes)
0200400600800
1,0001,2001,4001,6001,8002,000
Sth East Asia Africa Middle East Greater China
Japan Russia Mexico
2007 2008 2009 2010 2011
Chinese imports remain strongJa
n-10
Feb-
10M
ar-1
0Ap
r-10
May
-10
Jun-
10Ju
l-10
Aug-
10Se
p-10
Oct
-10
Nov
-10
Dec
-10
Jan-
11Fe
b-11
Mar
-11
Apr-
11M
ay-1
1Ju
n-11
Jul-1
1Au
g-11
Sep-
11O
ct-1
1N
ov-1
1D
ec-1
1Ja
n-12
Feb-
12M
ar-1
2Ap
r-12
May
-12
Jun-
12
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
0%
10%
20%
30%
40%
50%
60%
TotalWMP share
2011 EU NZ US Aust Latins Other 2021 -
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000
Axi
s T
itle
Changes required from major exporters 2011 to 2021(meq mill litres)
Sensitivity of long term market “balance”Growth assumptions underlying forecast
NZ production averages 2.5% p.a.
Chinese liquid milk demand 6.5% p.a.
Chinese production grows 8% p.a.
EU production grows 0.4% p.a.
US grows 1.4% p.a.
Current Australian market settings
Dairy market • Highlights
• Per capita consumption 297 litres p.a.• Wholesale value $6.4 billion
• Key influences• Retailer activity• More at home eating• Less premium and discretionary food
spending• Health and “naturalness”
• Supermarket activity• Private label milk price• Promotions
• Margin pressures remain• Cautious consumers• Competitive retailers
15-N
ov-1
04-
Dec-
1023
-Dec
-10
11-J
an-1
130
-Jan
-11
18-F
eb-1
19-
Mar
-11
28-M
ar-1
116
-Apr
-11
5-M
ay-1
124
-May
-11
12-J
un-1
11-
Jul-1
120
-Jul
-11
8-Au
g-11
27-A
ug-1
115
-Sep
-11
4-O
ct-1
123
-Oct
-11
11-N
ov-1
130
-Nov
-11
19-D
ec-1
17-
Jan-
1226
-Jan
-12
14-F
eb-1
24-
Mar
-12
23-M
ar-1
211
-Apr
-12
0
50
100
150
200
250
300Yoghurts Cheese Ice Cream Butters & spreads
Index
Weekly printed promotions of dairy products by grocery chains
Retailers under pressureQ
108
Q20
8
Q30
8
Q40
8
Q10
9
Q20
9
Q30
9
Q40
9
Q11
0
Q21
0
Q31
0
Q4
10
Q1
11
Q2
11
Q3
11
Q4
11
Q1
12
Q2
12
Q3
12
-3%
-1%
1%
3%
5%
7%
9% Woolworths Coles
Australian market trends- volume sales until end of June 2012
Custard
Cream
Dairy desserts
Yogurt
Butter / Blends
Cheese
Milk
-7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3%
QTR Jun12 % growth
MAT Jun12 % growth
Supermarket trends- volume and value until end of June 2012
Fresh Milk
UHT Milk
TOTAL Milk
Branded Milk
Private Label Milk
Butter
Dairy blends
TOTAL Dairyspreads
-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Value
Volume
Farmgate market outlook for 2012/13
Southern• Opening announcements $4.50
kg MS (34cpl)
• Full year range $4.70-$5.00 kg MS (35-38cpl)• Down 8 to 10% on 2011/12• Competition remains strong
• Assumptions underlying DA forecast were• Commodity prices to trade in range
US$3,000-$4,200 per tonne• AUD between 100 and 105 US cents
Fresh milk regions• Farmgate prices under pressure
• Supply chain profitability• New contracts• Changed retailer contracts affecting
access
• Range of impacts• Reductions in Tier 1 access• Tier 2 milk 15-18 cpl• Regional differences
• Challenge of aligning supply• Cost of year round production• Seasonal shortages• Value and usage of “excess” milk
National Dairy Farmer Survey 2012
• 1002 farmers interviewed nationally
• Fieldwork conducted from 6 to 29 February• Flooding in Northern Victoria
• Response rate rose to 72%• 63% in 2011
• Follow-up survey planned for August
050
100150200250
MD
WV
Gip
ps
SEQ
NSW SA W
A
Tas
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007 2008 2009 2010 2011 2012
% f
arm
s
Very negative
Fairly negative
Neutral/unsure
Fairly positive
Very positive
Attitude to the future of the national industry
Significant differences between regions
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Nat NV WV Gps SEQ NSW SA WA Tas
2005
2006
2007
2008
2009
2010
2011
2012
Positive attitude to industry future by region (% farms)
Source: National Dairy Farmer Survey 2005-2012
0%
10%
20%
30%
40%
50%
60%AU
ST MD
WV
Gipp
s
SDP
NSW SA W
A
TAS
2009 2010 2011 2012
% farms intending to invest in next 12 months (comparing 2009 - 2012 surveys)
Little change in 3 yr growth outlook
0%10%20%30%40%50%60%70%80%90%
100%
2004 2005 2006 2007 2008 2009 2010 2011 2012
% o
f fa
rms
not in business static decrease increase
Situation & Outlook for dairy markets
• In the short term international market needs to rebalance• Solid demand• Surging supply• Economic uncertainty
• Long term outlook remains positive but• Tight balance = volatility• Australia’s relevance?• Changes in EU and US policy and international engagement
• Domestic margins will remain under pressure• Cautious consumers• Price-focussed retailers
Situation & Outlook for Australian dairy farmers
• Southern prices down 8-10% in 2012/13
• Any upside for the price outlook?• Competition for milk• Weaker Nth Hemisphere supply• Strong demand
• In domestic regions (NSW, Qld)• Downward pressure on prices• Impact highly variable
• Milk production forecast for 2012/13 up around 2% • 9.6 to 9.65 billion litres
• 3 year milk production outlook• Surveyed intentions – based on 2011/12 production• 9.8 to 10.1 billion litres in 2014/15
Thank you!Download the full report at www.dairyaustralia.com.auNext update: 12 September