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Milk Permeate & Protein ConcentrateMarket Research and OutlookVéronique LagrangeU.S. Dairy Export Council

Milk Permeate & Protein ConcentrateMarket Research and OutlookVéronique LagrangeMarch 2008Managed by Dairy Management Inc.

U.S. Dairy Export Council• Created in 1995 byDairy Management Inc.• USDEC servesinternational markets• >70 members, 80% ofmilk supply• Headquartered inArlington, Virginia• Nine internationaloffices4

DefinitionsProducts fromultrafiltration of milk,• for the manufacture ofcheese,• for the proteinstandardization of milkpowder,• and for other productsMilkDiafiltration waterPermeateLactose, mineralsNPNRetentateProtein, fat,lactose, minerals5

Cheese milk: original source of permeate• Adoption of UF cheesetechnology in Europe• Originally ambitiousprospects fortechnology• Technical andregulatory constraints• Gradual adoption,establishedcommercial practice6

Milk permeate from cheese manufacturingBenefits of UF milk usage• Improved yield• Improved plantproductivity• Reduced input costs(rennet, cultures)• Novel cheesesIssues• Retention of wheyproteins: alter ripening• Standard of identityissues• High solid retentatemay require newequipment, higher heattreatment

Milk permeate from cheese manufacturingTechniqueTotalPartialLowFreshcheese• ConcentrationtechniquesVCF5-72-51-23-5Permeate solidsper million lbs42-52,00021-41,00010-21,00032-41,000• Total: wheylesscheese process• Partial: raise solids to35%, common for feta,most common asindirect use• Low ConcentratedRetentate (LCR):adjust cheese milk to3.8-4% protein, mostcommon in US• Fresh: cream, quarg

MPC production: Supply goes large scale• Past 10 years: increase in MPC, MPI production• Typically concentrated in large scale operationsDiagram courtesy:9GEA Filtration

Permeate from the manufacture of MPCMilkproteinlevelMPC42MPC56MPC70MPC853.4%Permeatesolids/ millionlbs skim milk13,92033,84246,30355,1023.7%Permeatesolids/ millionlbs skim milk10,70032,70046,01055,30210

Composition: Milk vs. whey permeate• Similar in total solids,protein, minerals, lactoseand minerals content• Variations linked to milkseasonality, UF processingconditions• Typically higher pH, NPNcontent• Bland flavor11

Production Case Studies: Europe• Significant volumes from theproduction of cheese and milkprotein ingredients• Much of output is used forstandardization purposes – milkpowders (since January 2008),blends• Use on-site or transfer betweencheese and powder factories12

Production Case Studies: Europe• MPC production estimated at25-28,000 mt, + 8-9,000 mt for SwitzerlandTotal: 33-37,000 mt• Permeate from MPC:25-31,000 mt +7-8,000 mt for Switzerland• Permeate from cheese: 78-140,000 mtTotal permeate production:110-180,000 mt13

Production Case Studies: Europe• Suppliers: Bongrain, LactoserumFr, Ingredia, Milei, Kerry, Cremo,MGL, Asturiana14

Market DriversLiquid andconcentratedMilk permeatepowder•Milk powderstandardization•Milk beverages•Infant formula•Juice based beverages•Milk powderstandardization•Milk beverages•Bakery, confectionery15

Value• Milk permeate powder$900-1,000/mt1600• Whey permeate1400$600/mt1200• Whey powder1000800$840/mt600• Lactose400$750/mt200Figure 17 European Union Permeate Powder and Whey Powder Prices 2002-2008Euro/MTMilk PermeateWhey PermeateWhey Powder0Jan-02Jul-02Jan-03Jul-03Jan-04Jul-04Jan-05Jul-05Jan-06Jul-06Jan-07Jul-07Jan-08Jul-08Source: DH Consulting, March 200816

Production Case Studies: New Zealand• Cheese milk standardized to 4-4.2% (from 3.71%average)Cheese production of 284,000 mt yields 17-21,000 mtpermeate solids. Outlook: growth• Milk for casein production concentrated by 1.8-2.0,yields 15-22,000 mt permeate solids• MPC production at 70-76,000 mt, yields 54-60,000mt permeate solids, slow growth

Production case studies: New Zealand• Milk at 3.71% protein = 40.50MSNF basis• In theory, industry requires124,000 mt of permeate forstandardization purposesalone• Estimated availability: only80-98,000 mt• Domestic self-sufficiencyexpected to diminish furtherPhoto courtesy: Fonterra18

Milk permeate: Technical developmentsResearch has focused on• Processing• Fermentation• Milk powderstandardization• Nutritional applications• Uses in beverages,bakery

Milk permeate: PatentsPatents• Most patents cover processing,drying• Permeate usually cited in thecontext of proteinstandardization• Low protein milk powders

Milk permeate and protein concentrates• Market currently drivenby protein uses andvalue• Milk permeatebecoming a veryvaluable component infully integrated,optimized operations• A valuable ingredient,with export potential

AcknowledgementsM. Culhane, DH Consulting, for hiscontribution to this presentation22

Thank YouVéronique LagrangeVP, Strategic Research& Business Developmentvlagrange@usdec.org23