Agricultural Challenges and Strategies in Europe

1. Farming and cooperative agribusiness in Central Europe:lessons learned and members’ involvement Gert van Dijk –President of COGECA, Brussels, Wageningen University andNyenrode Business University, The Netherlands FinnishCooperativeMovement 110 Years: Celebratory Conference

2. Chapter 1 Globalisation means new influences on on food, farming & agribusiness

3. Global environment • Trade • The EU has become the biggest raw material importer and biggest processed foods exporter • The Doha Round remains a priority for the EU • World economy • Current reflections are taking place against the backdrop of volatile agricultural prices and economic downturn • Climate change • Awareness of its effects is growing • It conditions much of our thinking in time and space

4. 2007 and 2008 years of ‘Agri-flation’ • In the period 2007-2008 most agri commodities have doubled in price • Global demand raw materials was higher than supply • Stock levels of commodities historic low • Net production shortage of 3-5% in cereals • Population growth • Accelerating growth in use of agricultural commodities as feedstocks to produce biofuels. • Reduced crops due to adverse weather in last 3 years in Australia, Ukraine and elsewhere. • Increasing participation of hedge funds and investment funds in commodity markets.

5. Cross border liabilities

6. Ownership cross border

8. Growth in speculativeinvestments in ‘food commodities’ Sources: Commitments of traders reports; Commodity Futures Trading Commission

10. Chapter 2 EU’s food & agribusiness has lost competitive positions to A. New Zealand dairy industry B. US food & agri-business C. US biotech & seed industry

11. Bron:rabobank

13. Chapter 3 EU antitrust policy is more favourable for retailing than for manufacturing

15. F&A&H suppliers are dealing with powerful customers Top 10 foodservice (total sales for 2006 in $bn) 1. McDonald’s 57 2. Yum! Brands 31 3. Compass Group 20 4. Sodexho Alliance 16 5. Wendy’s 14 6. Burger King 13 7. Aramark 12 8. Accor 9 9. Subway 9 10. Starbucks 8 Total: 189 Top 10 retailers (food sales for 2006 in $bn) 1. Wal-Mart Stores 159 2. Carrefour 72 3. Tesco 53 4. Ahold 47 5. Lidl 46 6. Kroger 43 7. Rewe 41 8. Aldi 40 9. Edeka 40 10. Metro 36 Total: 577 Top 10 food manufacturers (food sales for 2006 $bn) 1. Nestlé 65 2. PepsiCo 35 3. Kraft Foods 34 4. Unilever 27 5. Tyson Foods 26 6. Coca-Cola Co. 24 7. SABMiller 19 8. Danone 18 9. InBev 17 10. Heineken 15 Total: 280 As a % of the total market: 10% As a % of the total market: 9.1 % As a % of the total market: ca. 5% Source: Rabobank, 2007

17. Food distributors are at the winning end of the food chain ‘The supply chain funnel’ Key developments in food retail: -Discounter growth • Large purchase organisations • Private labels • Service retail vs discounters • Ongoing consolidation > 16 million 5,000 27 7 1,500 > 6,500 > 80,000 Source: EFMI, 2007

18. Chapter 4 Political fall out affects CAP

19. Financial conditions in memberstates • Budgetary deficits • Aging • Future pressure on labour markets: high costs for governments

20. Farming and CAP • Enlargement has laid emphasis on common market issues (levelled playing field, competition policy) • CAP determined by WTO negotiations and Ministers of Finance of member states • too big differences in agricultural development between members prevent common policy and common budget

21. alternative views on cost of CAP CAP cost in 2007 (in absolute terms) CAP cost in 2007 (in relative terms) 44% of EU budget 0.43% of EU GDP

22. Redesigning the CAP • No grand strategy / back to the drawing board? • - Wishes – Sketches - Measuring up possible effects– Planning – Specifications • Debate is down due to political fall out

23. Van Goghsvisionon CAP(according to Cropper)

24. Chapter 5 EU needs its own grand strategy which requires the participation of the entire chain – indeed also of the retail business

25. The CAP debate: seeking the common ground Agriculture is still a strategic sector in Europe Diversity of the EU agriculture should be a key element Agricultural activities should be maintained in all regions Issues arising from the Health Check debate: Decoupled payments – the most efficient means Market-orientation is desirable - but safety nets & market management instruments are required Rural development objectives continue to apply beyond 2013 Modernisation Public goods Rural society and new societal challenges (climate change) 25

26. Chapter 6 Cooperatives • Strategies • Business models • EU cooperatives needed to act as market leader Competition between cooperatives presents a new chapter

27. Strategies of coops • Forward integration/consolidation • Regional /niche • Institutional contracting support of members

28. Total turnover by cooperatives in the EU (in bln Euro)

30. Conclusions and recommendations

31. Chapter 7 Conclusions and recommendations • Futurestrategies of cooperativeswill have to bedesigned at the interfaces of • Business • Food & Farmingstrategy • Public policy 2. It is not a questionanymore of member-farmers’ involvement in cooperative business but of cooperative business involvementwithmembers