The Dairy Value Chain and Comparative Marketing Systems: An Overview

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The Dairy Value Chain and Comparative Marketing
Systems An Overview
FAO Symposium Wednesday, 15 November 2006, Rome
Philippe Jachnik International Affairs La Maison
du Lait, Paris
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The worlds major regional organisations they
make possible profitable industrial investments
in supranational zones.
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Dairy value chains and marketing systems the
basics
producers
informal milk
processors
wholesalers and retailers
food industry, food service and B2B
end-consumers
4
Four main approaches implemented (3 1 !)

• the highly "structured" dairy sectors (for
  example Canada, United States)
• the pseudo" liberal dairy sectors (for example
  New Zealand, Denmark, the Netherlands)
• the dairy sectors that have truly deregulated
  (for example Australia, the United Kingdom)
• the dairy situations where informal and/or
  traditional approaches prevail

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Global dairy top 20
Dairy turnover 2005 in billion including
mergers acquisitions 2005/06 update June 2006
including Galbani estimate
Rabobank 2006
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Global dairy top 20
Dairy turnover 2005 in US billion including
mergers acquisitions 2005/06 update June 2006
including Galbani estimate
Rabobank 2006
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Growth of dairy markets by region (mln tonnes)
Rabobank 2005
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Ranking of Milk Producing Nations

• 2005 m. t.
• India 88
• USA 80
• Russia 31
• Pakistan 29
• Germany 28
• China 28
• France 25
• Brazil 24
• N. Zealand 15
• Ukraine 14

• 2006 m. t.
• India 91
• USA 83
• China gt30
• Russia gt30
• Pakistan gt29
• Germany 28
• Brazil 25
• France 24
• N. Zealand 15
• Ukraine 14

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Share of Milk Deliveries to Processors
88.0
87.4
84.4
83.0
82.6
82.5
Average of reporting countries
76.5
73.1
69.9
69.1
67.8
65.7
10 New EU Member Countries
2000
2001
2002
2003
2004
2005
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Cow Milk Prices in Selected Countries
Argentina
15
USD/100 kg, 2005
Rural China
18
21
India
Rural Russia
22
Oceania
25
Metropolitan China
28
EU 10 (Poland)
28
Metropolitan Russia
32
Mexico
32
USA
33
EU 15
34
Canada
53
Norway
55
Switzerland
58
74
Japan
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Representation of dairy product surplus and
deficit countries in 2004
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World dairy products tradein milk equivalent
EU of 12 from 1986 to 1994, UE of 15 from 1995
to 2003, EU of 25 in 2004
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Development of world trade in dairy products
(million tonnes of milk equivalent)
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World Dairy Trade million tonnes of milk
1)
41.2
41.0
40.0
36.4
World
Oceania
EU
16.5
15.2
14.6
14.6
14.1
13.3
12.6
12.7
2000
2003
2004
2005

• Based on the solids content,
• re-converted into milk with 12,5 of solids

EU 2006 down to 12 million t
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Representation of the richest and poorest
countries in the world in 2004
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World Bank
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Breakdown of world dairy production and
population in 2005 according to income groups
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Size of country groups in relation to world milk
production, broken down according to their incomes
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Representation of countries with high and very
low potential for dairying in the world in 2005
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Variability, by country, of the ratio milk
production / inhabitant) in 2005 (kg)
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Development of milk production in countries with
low income
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Development of milk production in countries with
medium low income
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Development of milk production in countries with
high income (million tonnes)
  Austrian, Finnish and Swedish production taken
into account in 1992 although they joined the EU
in 1995   some twenty countries, the main
dairy countries being Switzerland, Norway,
Slovenia, Saudi Arabia and Israel.
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Development of milk production in the EU 15 and
the United States (million tonnes)
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Development of milk production in Oceania
(million tonnes)
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Milk pricing two determining trends

• competitiveness of the dairy processors is
  increasingly decisive for the pricing of raw
  material milk to farmers
• processors will increasingly be put under
  pressure from their suppliers to be competitive
  on the markets

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• In the present context of liberalisation and
  globalisation, what is the experience of various
  dairy sectors throughout the world ?
• Are comparisons possible ?

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Four main approaches implemented (3 1 !)

• the highly "structured" dairy sectors (for
  example Canada, United States)
• the pseudo" liberal dairy sectors (for example
  New Zealand, Denmark, the Netherlands)
• the dairy sectors that have truly deregulated
  (for example Australia, the United Kingdom)
• the dairy situations where informal and/or
  traditional approaches prevail

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The highly "structured" dairy sectors
In so-called liberal economies, long-established
and robust legal and regulatory systems have been
put in place to protect dairy farmers
initiatives and organisations. They include i.a.
milk ordering systems, classified pricing by
end-use, intervention pricing, production quotas,

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From Congress to the Cow
START
Secretary of Agriculture
Commodity Credit Corporation
National Agricultural Statistical Service
Dairy Division, Agricultural Marketing Service
Federal Milk Marketing Order Administrators
To market
END
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The pseudo" liberal dairy sectors

• In the absence of class pricing, the
  establishment of cooperative monopolies is
  boosted by their exemption from basic anti-trust
  law.
• Experience shows that these mega-coops are
  effective forms of producer organisations, also
  efficient in the field of export.

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The dairy sectors that have truly deregulated

• The recorded experiences show a destablising
  effect on the sector, which by nature requires
  stability
• The "pseudo" liberals develop quite well in the
  "truly" deregulated areas

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Prevalence of Informal Markets
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• Full liberalism does not allow strong dairy
  sectors to grow and survive.
• The supply demand relationship needs to be
  managed in one way or another !

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Paris Match April 1994GATT - WTO
The farm package for reductionary support will
be based on the coefficient margin of
Community supportability
In other words, well, now, youll just have to
fend for yourselves !
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Paris Match April 1994GATT - WTO
The farm package for reductionary support will
be based on the coefficient margin of
Community supportability
In other words, well, now, youll just have to
take care of your own ass !
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Thank you for your attention