US Milk and Dairy Products Market Outlook to 2015.pdf

2 TABLE OF CONTENTS List of Figures 4 List of Tables . 5 1. US Milk Market Introduction . 6 1.1. US Cow Milk Market Production and Fluid Milk Consumption by Volume, 2007- 2015 6 1.2. US Milk Cow Numbers and Milk Production per Cow, 2007-2015 . 8 2. US Dairy Products Market Introduction . 10 2.1. US Dairy Products Market Production by Volume, 2007-2015 . 10 2.1.1. Butter 12 2.1.2. Cheese 12 2.1.3. Skim Milk Powder . 14 2.1.4. Milk Drinks and Fermented Products 15 2.1.5. Cream . 16 2.1.6. Condensed Milk . 17 2.1.7. Whey Powder . 18 2.2. US Dairy Product Market Consumption by Volume, 2007-2015 . 19 2.2.1. Butter 19 2.2.2. Cheese 20 2.2.3. Skimmed Milk Powder 21 2.3. US Dairy Product Market Net Trade by Volume, 2007-2015 22 2.3.1. Butter 22 2.3.2. Cheese 23 2.3.3. Skimmed Milk Powder 24 3. Trends and Developments in US Milk and Dairy Products Market . 25 4. US Milk and Dairy Products Market Future Outlook 27 5. Competitive Landscape 30 3 6. Macro Economic Indicators: Current and Projections . 33 6.1. Population, 2007-2015 33 6.2. GDP, 2007-2015 34 6.3. Inflation, 2007-2015 35 6.4. Unemployment Rate as a % of Labour Force, 2007-2015 36 6.5. Demographic Distribution of Population on the basis of Age, 2009-2015 . 36 6.6. Personal Disposable Income and Number of Households in the US, 2009-2015 . 37 6.7. Distribution of Income among Households, 2009-2015 . 38 7. Appendix 40 7.1. Market Definition 40 7.2. Abbreviations 40 7.3. Research Methodology 41 Data Collection Methods . 41 Approach . 42 Reasons for the Dependent and Independent Variables 43 7.4. Disclaimer . 45 4 LIST OF FIGURES Figure 1: US Cow Milk Production and Fluid Milk Consumption along with Manufacturing Use and Exports by Volume in Thousand Tonnes, 2007-2015 . 7 Figure 2: US Milk Cow Numbers in Thousand Head and Milk Production per Cow in Kilograms, 2007-2015 . 9 Figure 3: US Total Dairy Products Market Production by Volume in Thousand Tonnes, 2007- 2015 11 Figure 4: US Butter Market Production by Volume in Thousand Tonnes, 2007-2015 . 12 Figure 5: US Cheese Market Production by Volume in Thousand Tonnes, 2007-2015 . 13 Figure 6: US Cheese Production by Type in Percentage, 2009 . 14 Figure 7: US Skim Milk Powder Market Production by Volume in Thousand Tonnes, 2007- 2015 14 Figure 8: US Milk Drinks and Fermented Products Market Production by Volume in Thousand Tonnes, 2007-2015 16 Figure 9: US Cream Market Production by Volume in Thousand Tonnes, 2007-2015 17 Figure 10: US Condensed Milk Market Production by Volume in Thousand Tonnes, 2007- 2015 18 Figure 11: US Whey Powder Market Production by Volume in Thousand Tonnes, 2007-2015 19 Figure 12: US Butter Market Consumption by Volume in Thousand Tonnes, 2007-2015 . 20 Figure 13: US Cheese Market Consumption by Volume in Thousand Tonnes, 2007-2015 . 21 Figure 14: US Skimmed Milk Powder Market Consumption by Volume in Thousand Tonnes, 2007-2015 22 Figure 15: US Butter Market Net Trade by Volume in Thousand Tonnes, 2007-2015 23 Figure 16: US Cheese Market Net Trade by Volume in Thousand Tonnes, 2007-2015 . 24 Figure 17: US Skimmed Milk Powder Market Net Trade by Volume in Thousand Tonnes, 2007-2015 25 Figure 18: US Population Trend in Million, 2007-2015 33 Figure 19: US Gross Domestic Product in USD Billion, 2007-2015 34 Figure 20: US Inflation, Average Consumer Prices in Percentage, 2007-2015 35 5 Figure 21: US Unemployment Rate as a Percentage of Labour Force, 2007-2015 . 36 LIST OF TABLES Table 1: US Cow Milk Production and Fluid Milk Consumption along with Manufacturing Use and Exports by Volume in Thousand Tonnes, 2007-2015 . 7 Table 2: US Milk Cow Numbers in Thousand Head and Milk Production per Cow in Kilograms, 2007-2015 . 9 Table 3: US Total Dairy Products Market Production by Volume in Thousand Tonnes, 2007- 2015 11 Table 4: Trend in Dairy Farm Numbers Based upon Farm Size . 26 Table 5: Evolving Distribution of Milk Production by Herd Size . 27 Table 6: Competitive Landscape of Major Diary Products Companies (Kraft Foods, Dean Foods, DFA, Land O Lakes and Schreiber) in the US . 30 Table 7: Demographic Distribution of Population in the US on the basis of Age, in Million, 2009-2015 37 Table 8: Personal Disposable Income in USD Million and Number of Households in Thousands in the US, 2009-2015 . 38 Table 9: Income Distribution among Households in thousands in the US, 2009-2015 . 39 6 1. THE US MILK MARKET INTRODUCTION The US milk industry is 6th largest in the world in terms of cow milk production and represents more than 10% of the total milk production in the world in 2010. The US Milk Market has recently recovered from the recession in 2009 which has adversely affected the production volume largely due to a plunge in farm level milk prices in 2009. The milk prices though recovered in 2010 is expected to remain volatile in the years ahead. Under the US regime, there are several factors that will be included in the farm-level milk prices. Under Federal Milk Marketing Orders, milk customers are needed to pay the class minimum price for milk according to the categorization of the dairy product in which farm milk was used for manufacturing. For example, milk that is used for beverage products is charged the high class I price, while, milk used to process cheese is charged the lower class III price. Holstein is one of the most common breed in the US which yields relatively more milk per cow than other breeds. The Holstein milk includes 88% water, 4% milk fat, and 8% skim solids. Individuals or families in the US are the primary decision makers for the production of milk. Most of the farmers are members of producer owned cooperatives. These cooperatives convene farmers milk and channelize it to processors and manufacturers. A few cooperatives run their own manufacturing and processing plant. These dairy cooperatives have now been nationalized with affiliates all over the region. 1.1. THE US COW MILK MARKET PRODUCTION AND FLUID MILK CONSUMPTION BY VOLUME, 2007-2015 The cow milk production in the historical period increased at a CAGR of 1.0% during 2007- 2009. The period registered an increase from 84,186 thousand tonnes in 2007 to 86,046 thousand tonnes in 2008. The year 2009 witnessed a global economic crisis which affected the milk production in the country. The milk production declined in 2009 and reached 85,847 thousand tonnes in 2009. Milk production in the country is expected to register a marginal increase of 0.8% in the forecasted period from 2009-2015. Most of the milk produced in the country is exported to various countries across the globe retaining only a small proportion for consumption. It is expected that the milk production would reach 90,253 thousand tonnes in 2015. 7 The fluid milk consumption decreased at a negative CAGR of 0.3% from 2007-2009. The decrease in the consumption was primarily because of the recession observed in 2009 which had a negative impact on the consumption. Considering the nature of the market which is saturated, the market is expected to grow slowly and will reach 28,721 thousand tonnes in 2015 from 27,700 thousand tonnes in 2009, registering a CAGR of 0.6%. Milk is used in producing variety of other milk products such as butter, cheese, skim powder, condensed milk, whey powder and many others. Most of the milk produced is either used in manufacturing of variety of dairy products or for exports. In 2007, the volume of milk used for manufacturing use and exports was 56,344 thousand tonnes. The volume registered an increase and reached 58,147 thousand tonnes in 2009. In the future as well the market is expected to grow and will reach 61,532 thousand tonnes in 2015. Figure 1: The US Cow Milk Production and Fluid Milk Consumption along with Manufacturing Use and Exports by Volume in Thousand Tonnes, 2007-2015 0 20,000 40,000 60,000 80,000 100,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Milk Market Size ('000s Tonnes) Cow Milk ProductionFluid Milk ConsumptionManufacturing Use and Exports Source: FAPRI, AM Mindpower Solutions Table 1: The US Cow Milk Production and Fluid Milk Consumption along with Manufacturing Use and Exports by Volume in Thousand Tonnes, 2007-2015 Years Cow Milk Production (000s Tonnes) Fluid Milk Consumption (000s Tonnes) Manufacturing Use for Dairy Products and Exports (000s Tonnes) 2007 84,186 27,842 56,344 8 2008 86,046 28,243 57,803 2009 85,847 27,700 58,147 2010 85,589 27,839 57,751 2011 86,445 27,950 58,495 2012 87,483 28,118 59,365 2013 88,396 28,272 60,123 2014 89,315 28,476 60,839 2015 90,253 28,721 61,532 Source: AM Mindpower Solutions 1.2. THE US MILK COW NUMBERS AND MILK PRODUCTION PER COW, 2007-2015 The milk cow numbers have registered a declining trend as compared to the increase in the milk production per cow. The milk production per cow has increased in both small and large farms as the less producing cows are removed from the herd and are being slaughtered for meat. This is one of the primary reasons which have decreased the US milk cow numbers but has increased the average production per cow. In the near future the milk cow numbers are further expected to decrease from 9,200 thousand in 2009 to 8,899 thousand in 2015. Meanwhile the production per cow will increase from 9,331 kilograms in 2009 to 10,141 kilograms in 2015, an increase of 1.4%. 9 Figure 2: The US Milk Cow Numbers in Thousand Head and Milk Production per Cow in Kilograms, 2007-2015 9,153 9,271 9,200 9,036 8,982 8,951 8,926 8,908 8,899 8,600 8,800 9,000 9,200 9,400 9,600 9,800 10,000 10,200 10,400 8,700 8,800 8,900 9,000 9,100 9,200 9,300 2007 2008 2009 2010 2011 2012 2013 2014 2015 Milk Production per Cow (Kg) Milk Cow Number ('000s Head) Milk Cow Numbers ('000 Head)Milk Production per Cow (Kg) Source: FAPRI, AM Mindpower Solutions Table 2: The US Milk Cow Numbers in Thousand Head and Milk Production per Cow in Kilograms, 2007-2015 Years Milk Cow Numbers (000s Head) Milk Production per Cow (Kilograms) 2007 9,153 9,198 2008 9,271 9,281 2009 9,200 9,331 2010 9,036 9,472 2011 8,982 9,624 2012 8,951 9,773 2013 8,926 9,903 2014 8,908 10,026 2015 8,899 10,141 Source: FAPRI, AM Mindpower Solutions 10 2. THE US DAIRY PRODUCTS MARKET INTRODUCTION The US dairy industry has transformed during the historical period. A reduction in the total milk cow operations has been observed and the number of large operations has increased. A considerable change has been seen in the milk cow operation size groups along with the change in the milk prices. Total milk cow operations witnessed a decrease in the historical period. A decline of 33% was observed in the milk cow operations from 97,460 in 2001 to 65,000 in 2009. The number of farms with 500 or more herds has increased by 20%. In 2001, there were 2,795 farms with more than 500 cows which increased to 3,350 in 2009. An increase of 128% was observed in case of farms with herd size of more than 2000 cows wherein the number of farms increased from 325 in 2001 to 740 in 2009. On the other hand, farms with less than 500 head count decreased from 94,665 in 2001 to 61,650 in 2009, a decline of 35%. Large operations have increased their dominance in the milk production segment accounting for more than 50% of the total milk produced in 2009 while the share of smaller operations contribute to a small share. Farms with 500 or more herds accounted for nearly 60% of the milk produced which was 39% in 2001. The share of farms with more than 2,000 cows has also increased from 13% in 2001 to 31% in 2009 in total milk production. The share of small farms with less than 500 herds has decreased from 61% in 2001 to 41% of the total milk production in 2009. 2.1. THE US DAIRY PRODUCTS MARKET PRODUCTION BY VOLUME, 2007-2015 The total dairy products market in the US has showcased an increasing trend in the historical period rising at a CAGR of 2.1% during the period from 2007-2009. The volume of dairy products increased from 10,074 thousand tonnes in 2007 to 10,509 thousand tonnes in 2009. Cheese is one of the main products obtained from milk which constitutes roughly 43% of the total dairy products. Milk drinks and fermented products is another major segment of dairy products market. The demand for dairy products in the US is expected to increase further and will reach 12,116 thousand tonnes in 2015, at a CAGR of 2.4%. The increase in the dairy products market is largely because of the anticipated increase in demand for cheese, milk drinks and fermented products in the future. 11 Figure 3: The US Total Dairy Products Market Production by Volume in Thousand Tonnes, 2007-2015 9,000 9,500 10,000 10,500 11,000 11,500 12,000 12,500 2007 2008 2009 2010 2011 2012 2013 2014 2015 Dairy Product Market Size ('000s Tonnes) Total Dairy Products Market Production Source: FAPRI, International Dairy Federation, AM Mindpower Solutions Table 3: The US Total Dairy Products Market Production by Volume in Thousand Tonnes, 2007-2015 Years Dairy Products Market Production (000s Tonnes) 2007 10,074 2008 10,418 2009 10,509 2010 10,608 2011 10,883 2012 11,136 2013 11,447 2014 11,769 2015 12,116 Source: FAPRI, International Dairy Federation, AM Mindpower Solutions 12 2.1.1. BUTTER Most of the butter production in the US comes from two regions. The west region includes California and Washington and constituted 49.4% of the total butter production in 2009. The central region which constitutes of Wisconsin, Minnesota, Michigan and Texas contributed with the rest of the production. In 2009, the lower milk prices affected the business of the dairy producers. Along with the decrease in the milk production, the butter production was also affected. Another reason for the decline in the butter production is the competition in the market. Peanut butter which is obtained from peanuts and margarine butter from margaric acid are two substitutes do not use milk for production. These substitutes have raised the competition for butter which is obtained directly from milk. These two substitutes are preferred by consumers because of their low fat content. In 2007, the butter production stood at 699 thousand tonnes. The butter production registered a growth of 6.4% in 2008 and reached 744 thousand tonnes. The year 2009 witnessed a decline in the butter production by 4.8%. Although the economy has shown signs of recovery in 2010, the market is yet to showcase a growth in the production of butter. It is expected that the butter production will rise from 2011 onwards to reach 743 thousand tonnes in 2015. Figure 4: The US Butter Market Production by Volume in Thousand Tonnes, 2007-2015 699 744 708 706 716 726 733 739 743 670 680 690 700 710 720 730 740 750 2007 2008 2009 2010 2011 2012 2013 2014 2015 Production ('000s Tonnes) Butter Production Source: FAPRI, AM Mindpower Solutions 2.1.2. CHEESE 13 In 2009, with a share of almost 25% of the total cheese production in the US, Wisconsin was the largest cheese producing state followed by California. Other prominent states included Idaho, N