World Dairy Summit 2013

(BMT: Wednesday 30 October 8pm)

Well I’m 30 minutes later starting my blog this morning, which means I’m finally becoming acclimatised to the time zone here in Japan. For anybody planning a holiday, who is also keen on weight loss, I can recommend Japan. Not because the food isn’t delicious, just because you simply don’t eat many carbohydrates, the Japanese diet is so different.

Yesterday’s conference session themes were Dairy Policies and Economics and the presentations by Ulla Holm from Tetra Pak and Kevin Bellamy from Rabobank (past MDC economist) both focused on developing the local, often subsistence dairy farmers.

Ulla Holm explained that Tetra Pak have viewed the development of dairy in developing countries very much as a holistic activity. It’s not just about trying to sell goods and services in the short-term, it has to be about developing the whole economy and the consumption trends of the people. The introduction of the school milk scheme and dairy hubs allows farmers to make the next step from subsistence to business farming. Plus there is the potential to increase yields, profitability and quality of dairy locally.

This is a long term approach, but it made me realise, what an extensive exercise it is to develop a presence a market place unfamiliar with your goods or services. These experiences and activities are relevant when we consider the potential for growth of the UK dairy industry into these developing markets.

Kevin Bellamy went on to discuss the economic considerations of companies and institutions looking at new regions for the development of dairy consumption and production whether that is produced in that country/region or imported. The costs of developing local dairy production or supply streams from the developed world are similar and both sensitive to input price volatility.

Of course, as a banker, Kevin was able to give his valuable insight into the issue of credit and access to capital. Without banking tools, development of dairy in emerging markets is clearly challenging. Banks need to be sure of low corruption levels, safety and security for staff, political stability, before significant investment in banking facilities are made, to support developing industrial partners.

The common thread to both these presentations, is that while markets for dairy are growing globally, there will always be competition. UK farmers will have excellent opportunities to access these markets, if the farming and processing sector in the UK works together to break into new markets and to produce the products that those markets demand.

Dairy farmers investing the future of dairy (mature and emerging markets) in the afternoon.

Chris James, AHDB DairyCo sector director gave an inspirational account of his pursuit of efficiency, profit, job satisfaction and a connection with the public. And our own NFU dairy board Chairman Mansel Raymond participated in the session as an official moderator, giving his perspective on the challenges facing dairy farmers at home and globally.

Speaking to delegates, I keep hearing that China and the far-east are markets that are already being targeted hard by well-established exporters like Fonterra. The Middle East however is the next big opportunity for export growth. Hopefully more UK processors will attend the IDF conference 2014 in Tel Aviv due to the huge opportunities to cultivate local partners and experts in these important emerging markets – it’s time the UK grabbed its slice of the action.

Today is our last day here in Yokohama and the presentations include nutrition and health and dairy farming. Due to travel plans early tomorrow morning, I’m afraid this will be my last instalment from Yokohama. If members wish to hear more about the World Dairy Congress in Yokohama, Mansel and I will endeavour to answer questions in person if we’re visiting your region or by email/phone.

Good bye for now,

Rob

(BMT: Tuesday 29th 7:30pm)

Every cloud has a silver lining right? Well my cloud out here in Yokohama is jet lag and tiredness. The time is 4.30am, which to you at home (and to my brain) is 7.30pm BMT - a time at which sleeping seems impossible! The silver lining to this situation is I now have the perfect opportunity to write my blog and update you on issues discussed by the world leaders of our dairy industry.

Speaking of world leaders, the morning session here at the WDC yesterday showcased some of the top dairy people - and made an incredibly interesting start to the day.

The afternoon session included a roundup of global dairy developments and policies, including an excellent presentation from outgoing Dairy UK chief executive Jim Begg. However, for today’s blog, I will focus on the thoughts and words of the dairy leaders.

 

 

 

The core message from Tetra Pak was that growth, globalisation and rising incomes present an opportunity for dairy farmers and processors all over the world. Dennis Jönsson presented delegates with the contrast between bulk milk distribution in India, where consumers scoop milk from open tankers and the system of distribution offered by his company with aseptic conditions and logistics solutions. He predicts changing production trends will lead to larger farms, centralised processing and consumer demand for safe dairy produce with a long shelf life – making the role of Tetra Pak significant in allowing developing markets to mature.

Discussion of growth was echoed by Peder Turborogh from Arla amba.

“We will continue to grow stronger, it’s in our DNA and it’s our business plan.”

Major investment in market development in China is being made through its relationship with Mengniu. But Peder recognised that one of the biggest challenges of growing in global emerging markets is understanding specific market needs and different regional trends. Bespoke product solutions are necessary and scale to invest is how to make the most of these challenges and achieve ‘good growth’ - cooperative, responsible, natural and healthy.

One such complex market is the Chinese. The rapid shift in demand for western consumer trends has seen internet shopping through smartphones become massively important in China. Yiping Sun also highlighted the trust in food safety Chinese consumers have in western products. Something Theo Spiering also discussed in relation to its foods scare earlier in the year.

It’s also been interesting to hear about the Japanese market. It’s evolved from nothing in the 1940’s and is like the UK in that it’s founded on the liquid market. The reliance on imported forage (lucern hay from USA) and manure management, due to the island being densely populated, pose challenge for production and profitability in Japan.

Mansel and I were able to explore these issues with a delegation of Japanese dairy farming officials last night over dinner. I was particularly fascinated to learn how embryo transfer meant that dairy producers could start to take advantage of the huge local market for Wagyu beef.

We sat shoeless and cross legged in the traditional surroundings of a Japanese restaurant, boiling our own finely sliced Wagyu beef, and learnt a great deal about this delicacy.

It was delicious and was probably the second best piece of beef I’ve ever eaten. The first is reserved for a South Devon sirloin steak I had in a pub on Dartmoor years ago!

 

We can only thank our hosts for their kind hospitality, friendly welcome and open and informative discussion.

Today Mansel will address the conference as part of a session looking at role and value of dairy in society globally. Clearly we believe that British dairy will become more and more important on the global stage as we highlight in the ‘Compete to Grow’ report.

Bye for now,

Rob

 

(BMT: Monday 28 October 9.30pm)

Yesterday saw the opening of the conference and various points of business and policy for the International Dairy Federation.

Ahead of these meetings and presentations, Mansel Raymond and I attended a workshop and meeting of the International Farm Consultants Network.

We started with some statistics. The world has 122 million dairy farmers and the average herd size is currently at 2.9 cows per herd, with an average yield of 2100kg milk/cow/year. The range in costs of production of these 112 million dairy farmers globally is between $4 and $128 per 100kg of milk produced.

While these figures will not be a massive surprise to some people, they certainly highlight the opportunities that exist for developed dairy industries like the UK. There is opportunity in investment and expansion from an average herd size of 125 cows with yield in excess of 7500kg.

So, what of the market opportunities in this market environment. Firstly, we need to recognise the global dairy industry is changing. In 2012, for the first time, German costs of production fell below those of dairy farmers in Wisconsin USA. To put this into context, milk production costs in China are around 50 per cent higher than those in either Germany or the USA. And price volatility means that in a 3-6 year time window, feed, labour, land and currency can cause production costs to double.

Despite this price volatility, it is the developed dairy industry’s costs that are improving and the developing countries that are deteriorating. Social changes and new earning opportunities mean that families with one or two cows that maintain the 2.9 cow average statistic are less and less willing or able to work for nothing to produce milk – this sounds awfully familiar! The upshot is the global average herd size will increase with time and the role of commercial scale dairy farming (like the UK) will become increasingly important for feeding the rising global population. And in developing countries subsistence farming will no longer be the norm.

In terms of the market, the IFCN tell us that by 2023, the global demand for dairy will crack the one billion tonnes of milk. This represents a global increase in demand of 29 per cent in the next 10 years or 2.3 per cent per year. These figures equate to 10 times the New Zealand milk volume! This is just what the NFU has been saying in the ‘Compete to Grow’ strategy - the market is growing, and we can either be part of that, or be left behind.

The next question is where will all this milk come from?

At this stage, we don’t know.

Europe certainly has considerable growth potential – IFCN believe output can rise from 16.1 million tonnes to 27.1 (11Mt), relative to New Zealand’s output rising from 21.4 to 29.7 (8.5Mt) million tonnes. Australia and the US are only predicted to increase output by 0.7Mt and 5.5Mt respectively.

So with the EU set to be a major growth engine for the future, why shouldn’t UK farmers be at the centre of that growth potential? The reasons certainly are not technical, rather a matter of confidence. The key issue is how that confidence is improved in the timeframe available – better contracts and a demonstrably fair milk price are surely a good starting point?

Rob

Monday 28 October 6am

(BMT: Sunday 27 October 9pm)

I feel very honoured and privileged to be attending the International Dairy Federation (IDF), World Dairy Summit 2013, on behalf of the NFU. All the major global dairy players will be participating; this includes Danone, Dairy Farmers of America, Nestle, Fonterra, Dairy Australia, Arla Foods and Meiji. With in excess of 2000 delegates, this is THE global dairy industry gathering.

While we are here, Mansel Raymond (NFU dairy Board Chairman), and I will be keen to learn about contractual arrangements, export opportunities, producer organisations and a range of other issues that we can bring home to the UK. What’s more we’ve been asked by a number of countries for more information about the Voluntary Code for contracts, plus our perspective on life post quotas.

We only arrived last night, so while I’m looking forward to programme of events and speakers, at this stage I can only tell you about my journey here! Flight reservations were made to Japan with Virgin Atlantic, I was looking forward to the glamour of red dress clad stewardesses and gleaming aviator wearing pilots, as promised by Richard Branson’s famous TV advertisements. However, on closer inspection of my ticket, I discovered I was in fact travelling with Nipon Airways.

The twelve hour flight was a little cramped and I didn’t sleep much but this means my body clock has well and truly been bumped into the new time zone.

Last night a small NFU and DairyCo contingent, organised by the UK dairy industry’s ‘Japanese friend in London’ Yurie Fujihara, enjoyed a traditional Japanese meal near to the conference hotel. While I was tempted by the hard Rock café and McDonald’s, we dined on Sushi and a range of other traditional fare and I’m really glad we did. After this most enjoyable meal and thirty four hours without sleep on, I was glad of my bed.

This morning (9pm Sunday to you back in the UK), I am revitalised, time zone adjusted and looking forward to a presentation from the International Farm Consultants Network (IFCN). They gather global trends on production costs, farm types and other business factors, to give a perspective of where we stand relative to our competitors overseas.

Until my next instalment, good morning/good night for now.

Rob