Global Dairy Update February 2017

1
GLOBAL DAIRY
UPDATE
FEBRUARY 2017
KEY DATES
22 March 2017
Interim Results
Announcement
1 June 2017
Measurement Date for Share
Standard 2017/18 Season
September 2017
Annual Results
Announcement
1 December 2017
Compliance Date for Share
Standard 2017/18 Season
• Young Chilean farmers to
gain Kiwi experience.
• Milk for Schools now
reaching 70% of Kiwi
children.
• European milk production decreased for
the sixth consecutive month, volumes in
New Zealand and Australia continued to be
impacted by adverse weather conditions.
• US exports continue to grow with a sixth
consecutive month of positive growth.
Recent export strength out of NZ and the EU
appears to be softening.
• Global import growth has softened but
remains strong for the year.
• Milk collections have shown signs of
recovery, particularly in the North Island.
Season forecast revised to 5% decline from
previous 7%.
• Fonterra hosts an Investor Day focussed on the Ingredients
business unit.
• 30 investors and research analysts heard more about
Fonterra’s ability to create value across the Ingredients
value chain.

2
OUR MARKETS
GLOBAL PRODUCTION
EUROPEAN MILK
PRODUCTION DECREASED
FOR THE SIXTH
CONSECUTIVE MONTH,
VOLUMES IN NEW ZEALAND
AND AUSTRALIA CONTINUED
TO BE IMPACTED BY ADVERSE
WEATHER CONDITIONS
Australia production
in November decreased
6% compared to the same
month last year, as milk
supply continues to be
impacted by unfavourable
pasture conditions.
Production for the 12 months
to November is down 7%
compared to the same
period the previous year.
Fonterra collections in
Australia have been reported
for January, see page 5
for details.
Total New Zealand milk
production for December
was down 3% compared to
the same month last year.
For the 12 months to
December, milk production
is down 2% compared
to the same period the
previous year.
Adverse weather, particularly
through peak months
placed downward pressure
on volumes.
Fonterra collections have
been reported for January,
see page 5 for details.
Production change
for the 12 months to
November 2016
Production change
for the 12 months to
December 2016
AUSTRALIANEW ZEALAND
27
%%
US production in December
increased 2% compared to
the same month last year,
with farmers responding
to favourable weather
conditions and grain prices.
This marks the fourth
consecutive month of
monthly production
increases in excess of 2%.
Milk production for the 12
months to December is up
2% compared to the same
period the previous year.
USA
EU production decreased
for the sixth consecutive
month with November down
4% compared to the same
month last year.
Key milk producing countries
contributing to this decline
included the UK, down
11%, France, down 7%, and
Germany, down 5%.
Production for the 12
months to November is up
1% compared to the same
period the previous year.
EU Commission milk
deliveries were forecast to
increase 0.9% in 2016.¹
Production change
for the 12 months to
November  2016
Production change

for the 12 months to
December 2016
EUROPEAN UNION
2
%
To view a chart that
illustrates year-on-year
changes in production –
1
%
1 EU Commission Milk Market
Observatory – September 2016.

3
%
OUR MARKETS
GLOBAL EXPORTS
US EXPORTS CONTINUE
TO GROW WITH A SIXTH
CONSECUTIVE MONTH OF
POSITIVE GROWTH. RECENT
EXPORT STRENGTH OUT OF
NZ AND THE EU APPEARS TO
BE SOFTENING
Total New Zealand dairy
exports in November
decreased 5%, or 19,000  MT,
compared to the same
month last year.
This decline was led by
powders, with WMP, SMP
(which account for 60% of
monthly exports) down a
combined 7%.
Exports for the 12 months
to November are up 6%,
or 191,000 MT, compared
to the same period the
previous year. The products
contributing to this increase
include infant formula up
85%, fluid and fresh dairy
up 44% and SMP up 10%.
New Zealand’s largest export
category, WMP, is down 3%.
EU dairy exports
increased 3% in October,
or 10,000 MT, compared
to the same month the
previous year.
While there were gains in
smaller product categories
(proteins and lactose) the
larger contributors to volume
(fluid and fresh dairy, WMP
and cheese) were collectively
flat for the month.
Export growth for the
12 months to October
continues to slow with this
the third consecutive month
with declining growth rates.
Exports remain up 9%, or
427,000 MT, compared to
the same period last year.
This movement is led by
fluid and fresh dairy up 17%,
cheese up 14% and infant
formula up 11%.
Export change for the 12
months to November 2016
NEW ZEALANDEUROPEAN UNION
2
US dairy exports increased
27% in November, or
40,000 MT, compared
to the same month the
previous year.
The increase was driven by
whey powder up 45%, fluid
and fresh dairy up 67% and
the largest export category,
SMP, up 28%.
Exports have rallied in the
last quarter and are now
up 2% or 33,000 MT in the
12 months to November,
compared to the same
period last year.
This growth is driven by
WPC/WPI, up 23% and
SMP, up 4%. Larger export
categories (whey powder
and lactose) are up a
combined 1%.
Export change for the 12
months to November 2016
USA
4
Australia dairy exports in
November increased 10%, or
6,000 MT, compared to the
same month last year.
This increase was driven by
cheese up 11%, WMP up 51%
(albeit off a low base) and
fluid and fresh dairy up 2%.
Exports for the 12 months
to November are up 4%, or
30,000 MT, compared to the
same period the previous
year. Fluid and fresh dairy,
the largest export category,
is performing well, up 20%,
offsetting declines in other
major product groups,
cheese and SMP, down a
combined 9%.
AUSTRALIA
Export change for the 12
months to November 2016
6
Export change for the
12 months to October 2016
9
To view a chart that
illustrates year-on-year
changes in exports –
%%%

4
OUR MARKETS
GLOBAL IMPORTS
GLOBAL IMPORT
GROWTH  HAS SOFTENED
BUT REMAINS STRONG
FOR  THE YEAR
Asia (excluding China)²
dairy import volumes
decreased 1% in October
compared to the same
month the previous year,
marking the first monthly
decline in six months.
This movement is led by
powders, with SMP and
WMP down a combined
8,200 MT, or 7%.
Imports for the 12 months
to October are up 5%, or
192,000 MT, compared to
the same period the previous
year. Fluid and fresh dairy
(largest product category) is
up 15% while gains in smaller
categories (caseinate, WPC/
WPI) are in excess of 25%.
Latin America¹ dairy
import volumes increased
6%, or 9,000 MT, in October
compared to the same
month the previous year.
Cheese, AMF, Butter and
Lactose all saw growth in
excess of 30%. This was
offset by SMP and WMP
down a combined 1%.
Imports remain strong for
the 12 months to October,
up 12%, or 196,000  MT,
compared to the same
period last year. Cheese, SMP
and WMP (which collectively
account for 55% of total
import volumes) lead this
growth, up a combined 17%
or 150,000  MT.
ASIALATIN AMERICA
512
China dairy imports
decreased 2%, or 3,000 MT,
in December compared to
the same month last year.
This is largely a result of fluid
and fresh dairy, down 15%,
SMP, down 27%, and whey
powder, down 7%. These
declines are offset by WMP,
the third largest import
category, up 99%
Imports for the 12 months
to December are up 20%, or
389,000 MT, compared to
the same period last year.
Fluid and fresh dairy is up
40%, WMP up 21% and
whey powder up 14%. SMP is
the only major dairy category
to have declined, down 8%.
Import change for 12
months to December 2016
CHINA
20
Middle East and Africa
dairy imports decreased
11%, or 34,000 MT, in
October compared to the
same month the previous
year. This decrease was led
by SMP down 14% and fluid
and fresh dairy down 16%.
For the 12 months to
October, imports are
down 3%, or 134,000  MT,
compared to the same
period last year.
Declines in fluid and fresh
dairy and WMP, down 6%
and 5% respectively are
offset by gains in smaller
product categories with
cheese up 2%, MPC/MPI
up 13% and infant formula
up 2%.
MIDDLE EAST & AFRICA
1 Excludes Venezuela and includes
estimates for Chile (August‑October) and
Nicaragua ( January‑October).
2 Includes estimate for Indonesia
(August‑October) and Macao (October).
%%
%
Import change for
12 months to October 2016
Import change for
12 months to October 2016
Import change for
12 months to October 2016
3
%
To view a chart that
illustrates year-on-year
changes in imports –

5
OUR MARKETS
FONTERRA MILK COLLECTION 2016/17 SEASON
NORTH ISLAND
Decrease for the season from
1 July to 31 January
7
Decrease for the season from
1 June to 31 January
AUSTRALIA
2
SOUTH ISLAND
%
To view a table that shows our
detailed milk collection in New
Zealand and Australia compared
to the previous season –
Decrease for the season from
1 June to 31 January
Decrease for the season from
1 June to 31 January
75
%%%
NEW ZEALAND MILK COLLECTION
VOLUME M LITRESDAY
JUNJULAUGSEPOCTNOVDECJANFEBMARAPRMAY










Fonterra’s milk
collection across
Australia for the seven
months to 31 January
reached 76 million
kgMS, 5.6 million kgMS
lower than last season.
In January milk collection
reached 10 million kgMS,
2% behind the same month
last season.
North Island milk
collection in January
reached 101 million
kgMS, 3% behind January
last season.
South Island milk
collection in January
reached 72 million kgMS, 1%
up on January last season.
NEW ZEALAND
Fonterra’s milk
collection across New
Zealand for the eight
months to 31 January
reached 1,053 million
kgMS, 54 million kgMS
lower than last season.
In January, collections
reached 173 million kgMS,
1% behind the same month
last season.
Forecast decrease
for the 2016/17 season
Overall, Fonterra New
Zealand milk collections
have shown signs of
improvement following
unfavourable weather
conditions throughout the
peak months.
This has meant
season-to-date volumes
have remained 5% behind
last season. The revision
factors in drought conditions
in Northland.
We have therefore revised
the forecast milk collection
for the 2016/17 season to be
down 5% on last season from
the previous forecast decline
of 7%.
Forecast Fonterra
Milk Collection Across
New Zealand
5
%

6
OUR MARKETS
FONTERRA GLOBALDAIRYTRADE RESULTS
CHEDDAR
3.6
1.0
WMP
4.8
%
%
BUTTERAMF
4.3
%%
%%
%
Fonterra GDT sales
by destination:
Dairy commodity prices
and New Zealand
dollar trend
The New Zealand dollar
strengthened throughout the
month of January, gaining
over 5% against the USD.
Fonterra GDT results at
last trading event
7 February 2017:
The next trading event will be held on 21 February 2017. Visit www.globaldairytrade.info for more information.
To view more information,
including a snapshot of the
rolling year-to-date results –
LATEST AUCTION
FINANCIAL
YEAR-TO-DATE
USD 3,798/MT
USD 5,765/MTUSD 4,593/MTUSD 3,314/MT
0.3
Change in Fonterra’s
weighted average product
price from previous event
%
Fonterra’s weighted
average product price

(USD/MT)
Fonterra product quantity
sold on GDT
3,595
USD
20
RENNET CASEIN
0.4
12.60.9
SMPBMP
USD 6,445/MT
USD 2,432/MTUSD 2,621/MT
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
20,358
MT
357,704
MT
GDT PRICE INDEXNZDUSD SPOT RATE
FEB NOV APR  JUL  SEP  NOV  FEB APR JUL SEP FEB 




,
,
. 
. 
.
.
.
.
PRICE INDEX
NZD  USD
000’ MT

7
OUR PERFORMANCE
FONTERRA INGREDIENTS CREATING VALUE
FROM INVESTMENTS IN OPTIONALITY
Volatility in world milk
prices may be the
new normal but this
means opportunity
for Fonterra.
At a day highlighting its
ingredients business,
the Co-operative offered
investors and research
analysts a detailed look at
the ingredients operation
with the aim of generating
better understanding of
its business.
Reaction was positive, with
comments that Fonterra had
done an admirable job in
explaining the engine room
of its business.
Investors in the Fonterra
Shareholders’ Fund are
key to a well-functioning
and fairly-valued Fonterra
share price.
Ingredients – products
such as milk powder, butter
and cheese – account
for two-thirds of the
Co-operative’s earnings.
However it is no simple
commodities business.
Fonterra creates significant
value in its ingredients
operation in addition to the
Farmgate Milk Price.
It achieves this by turning
its milk into higher value
products such as cheese, and
by earning good prices out
on the global market.
Fonterra has invested
significantly in developing
processing capacity in the
last three years, and is the
world’s most efficient milk
processor. It can optimise
and switch production
quickly to take advantage of
price movements.
Whereas the Farmgate Milk
Price is based on products
such as whole and skim
milk powder, Fonterra also
makes higher value dairy
ingredients including cheese
and proteins.
These products accounted
for two-thirds of the price
achievement New Zealand
Ingredients achieved in 2016,
and significantly boosted
overall gross margins.
Over the longer term some
product streams generate
higher returns, and Fonterra
is investing to adjust
production mix accordingly,
such as the $240 million
investment in a new
mozzarella plant.
In addition the Co-operative
has invested in product
innovation and in developing
its markets around the
world. For example, cheese
consumption in Japan.
A new ingredient Fonterra
has developed for use in
sports drinks and energy
bars with 10 per cent more
protein than other offerings
is a good example.
CollectionOptimisationContractProductionShipmentCustomer
• Collect all milk
• Capture right to
earn regulated
return
• Set optimal
18-month plan
• Create
maximum value
from all product
streams
• Leverage flexibility between products, assets and customers
• Create value from this optionality
• Sell to plan
• Generate
demand and
premiums for
spec, supply,
terms, etc.
• Produce to plan
and contracted
sales
• Minimise cost
and maximise
quality
• Store and ship
• In-market
storage for
greater flexibility
• Payment on
competitive
terms
• Create value-
in-use for
customers
Monetise optionality
Value created at each stage

8
OUR CO-OP
Young Chilean farmers
to gain Kiwi experience
Fonterra and its South
American partner Prolesur
have launched an exchange
programme to bring young
Chileans to New Zealand for
a year.
The students and young
farmers from the regions of
Los Lagos and Los Rios will
live and work on a Kiwi dairy
farm for 12 months, starting
in June.
The programme has
attracted 120 applicants, and
participants will be selected
in March following personal
and technical interviews.
“This initiative seeks to
encourage the practice
and the acquisition of
knowledge, experiences
and technologies related to
the dairy industry in young
people from 18 to 35 years
old,” Prolesur CEO Juan
Carlos Petersen says.
On returning to Chile they
will be able to contribute
to the development of the
dairy sector in the country’s
southern regions, he says.
Fonterra Chief Operating
Officer Farm Source Miles
Hurrell says Fonterra farmers
are always willing to share
their farming knowledge
and expertise through
the Co-operative’s Dairy
Development Programme.
“By working with local
farmers we’re helping
to strengthen the local
dairy industry by helping
to improve food safety
and quality systems and
by developing a safe,
sustainable local milk supply
that local consumers can
have confidence in.”
During their year in
New Zealand the young
farmers will be employed
as paid farm workers,
performing the full range
of tasks including milking,
caring for the herd and farm
maintenance work.
Milk for Schools now
reaching 70% of Kiwi
children
Waikato dairy farmers Dan
and Abbie Hinton star in a
new campaign celebrating
Fonterra’s Milk for
Schools programme.
Since it was launched in 2014
the programme has grown
rapidly. Farmers donate the
milk for 2.5 million packs
of Anchor™ UHT which are
delivered to 1450 primary
schools each month.
Fonterra Milk for Schools
now reaches 70 per cent
of Kiwi primary school
children, and it is producing
results. Research released
in October last year by
the University of Auckland
showed that 12 per cent
more New Zealand children
are meeting recommended
daily dairy consumption
guidelines than before the
programme started.
Abbie Hinton says she’s seen
first-hand the benefits of
the programme at their local
Tauwhare School, where her
daughter attends.
“Not only is it improving
nutrition for our kids and
building a future generation
of milk drinkers, but there’s
other important life lessons
around leadership and
sustainability.”
Tauwhare principal
Fiona Bradley says giving the
kids milk after lunch helps
keep them focused for the
rest of the school day.
“There’s an instant feeling
of energy when the children
have their milk, they come
back to the class to learn,”
she says.

9

SUPPLEMENTARY INFORMATION
Global Dairy Market
The charts on the right
illustrate the year-on-year
changes in production,
exports and imports for a
range of countries that are
important players in global
dairy trade.
The absolute size of the
bars represents the change
in production, exports or
imports, relative to the same
period the previous year.
PRODUCTION
AUSTRALIA
UNITED STATES
NEW ZEALANDEU
NOV JUN MAY APR JAN DEC AUG OCT SEP JUL FEB MAR 
LIQUID MILK M LITRES







,
,
NOTE: Data for EU and Australia to November and New Zealand and US to December.
NOTE: Data for EU to October; New Zealand, US and Australia to November.
NOTE: Data for Asia, Middle East and Africa and Latin America to October, China to December.
SOURCE: Government milk production statistics/GTIS trade data/Fonterra analysis.
EXPORTS
AUSTRALIA
UNITED STATES
NEW ZEALANDEU
JUN MAY APR FEB JAN DEC NOV OCT SEP AUG JUL MAR 
MT ’
s







IMPORTS
MIDDLE EAST & AFRICALATIN AMERICA
ASIACHINA
OCT MAY APR JAN NOV DEC JUL SEP AUG FEB MAR JUN 
MT ’
s









10
Fonterra milk
production
The table on the right
shows Fonterra milk solids
collected in New Zealand
and Australia compared
to the previous season.

SUPPLEMENTARY INFORMATION
MILK COLLECTION
(MILLION KGMS)
JANUARY
2017
JANUARY

2016
MONTHLY
CHANGE
SEASON-
TO-DATE
2016/17
SEASON-
TO-DATE
2015/16
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
172.5175.0(1.4%)1,053.51,107.4(4.9%)
North Island100.6103.6(2.9%)653.7701.3(6.8%)
South Island71. 971.40.7%399.8406.2(1.6%)
Fonterra Australia10.310.6(2.2%)75.781.2(6.9%)
Fonterra GDT results
This table provides more
information on the latest
results, including a snapshot
of the year-to-date results.
Fonterra GDT Results
This chart shows Fonterra
GDT prices and volumes over
the past 12 months.
LAST TRADING EVENT
(7 FEBRUARY 2017)
YEAR-TO-DATE

(FROM 1 AUGUST 2016)
Quantity Sold on GDT
(Winning MT)
20,358357,704
Change in Quantity Sold on GDT
over same period last year
(14.7%)(10.7%)
Weighted Average Product Price
(USD/MT)
3,5953,180
Change in Weighted Average
Product Price over same period
last year
57.8%34.1%
Change in Weighted Average
Product Price from previous event
(0.3%)–
WEIGHTED AVERAGE PRICEQUANTITY SOLD
JAN
DEC
AUG
JUL
APR
MAY
FEB
JUN
NOV
OCT
SEP
MAR

,

,

,
,
,

,

,
,
,
,
WEIGHTED AVERAGE PRICE USDMT
QUANTITY SOLD  MT

11
AMF
Anhydrous Milk Fat.
BMP
Butter Milk Powder.
DIRA
Dairy Industry Restructuring
Act 2001 (New Zealand).
Farmgate Milk Price
The price for milk supplied in
New Zealand to Fonterra by
farmer shareholders.
Fluid and Fresh Dairy
The Fonterra grouping
of fluid milk products
(skim milk, whole milk
and cream – pasteurised
or UHT processed),
concentrated milk products
(evaporated milk and
sweetened condensed milk)
and yoghurt.
Reference Products
The dairy products used
in the calculation of the
Farmgate Milk Price, which
are currently WMP, SMP,
BMP, butter and AMF.
Season
New Zealand: A period
of 12 months to 31 May
in each year.
Australia: A period of
12 months to 30 June
in each year.
SMP
Skim Milk Powder.
WMP
Whole Milk Powder.

GLOSSARY