Dairy Press Tour Switzerland Sunday 27 October 2013

1. Dairy Press Tour Switzerland Sunday 27 October 2013 The Abolition of Milk Quotas and the Challenges Involved Dr. Markus Zemp President BO Milch

2. Breakdown of the Agricultural Sector in 2011 Source: SFSO / FOAG

3. Export-Dependence of the Swiss Dairy Industry Domestic Milk Production: approx. 3.4 billion kg Import 430 Mio. kg Export 940 Mio. kg Inland need : approx. 2.9 billion kg Sources: TSM, SMP, VMI

4. The Milk Branch Organisation  Association set up in June 2009  The Milk Branch Organisation represents the entire value-added chain  According to its statutes, the purpose of the Milk Branch Organisation is to strengthen the efficiency of its members in the Swiss dairy industry by maintaining and promoting added value and market share in domestic and foreign markets Membership:  4 national organisations of milk producers and commercial and industrial milk processors  24 regional organisations of milk producers • 5 regional organisations of commercial milk processors • 11 industrial milk processing companies • 2 retailers

5. Market-Regulation Measures taken by the Milk Branch Organisation Standard contract for the first and second purchase of milk Aim of the standard contract:  To improve legal and contractual security at all levels according to the corresponding article in the statutes Key elements in the standard contract: • Agreement on volume, price and duration of contract • Segmentation of milk purchasing • Obligations on the part of the purchaser and the vendor • Reference to guideline prices for the individual segments • Transparency between the contracting partners

6. Segmentation of Milk Purchasing Aim of the segmentation • To ensure payment for untreated milk that corresponds to differing basic conditions depending on the market segment; • To ensure that Swiss milk, in particular surplus supply, is processed and marketed in a regulated fashion; • To reduce price pressure on the stronger market segments from the point of view of added value; • To ensure that market trends are clearly passed on and to promote market-orientated behaviour among all players in the added-value chain right down to the level of individual milk producers.

7. Segmentation of Milk Purchasing A, B and C milk segments

8. Trend in Milk Production Source: TSM

9. Number of Milk Producers According to Volume of Production / 2012 (excl. summer grazing) Mengenangaben in To. Mengenangaben in kg Source: TSM

10. Trend in Total Milk Production in Switzerland since 2005 Source: TSM

11. Trend in Producers’ Prices in Switzerland and the EU (LTO) January 2010 to July 2013 Sources: BLW / LTO

12. Guideline Prices in Cents per Kg Milk

13. Market Relief and Export Promotion by the Milk Branch Organisation Source: BO Butter

14. Results • The Milk Branch Organisation is the common platform for the entire added-value chain in the dairy industry • There are major differences in interests and the parties involved have to learn to collaborate • Milk prices fluctuate considerably depending on processing and region (distance from market). • Despite expansion of milk volumes, it has been possible to maintain the difference in milk prices in comparison with the EU

15. Results  Major structural changes  The suckler cow option is attractive (protected market)  Milk volumes since abolition have risen by 8.4%, have now levelled out, although some dairy farms are still increasing their milk yield