Global Dairy Update March 2017

1
GLOBAL DAIRY
UPDATE
MARCH 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
• European milk production decreased for
the seventh consecutive month, while the
US remains strong. The rate of decline in
New Zealand production is easing.
• US exports continue to grow with a seventh
consecutive month of positive growth. EU
exports declined for the first time in over
two years.
• Steady growth continues in Asia and
Latin America while China imports continue
to soften.
• While still down on last year collections
improved in February with better
growing conditions.
• Maximising value from late season volume growth.
• Fonterra confirmed its forecast Farmgate Milk Price under the
quarterly DIRA update at $6.00/kgMS.
• Forecast season collections were updated to 1,515m kgMS, a
3% decline on last season.
• Fonterra will provide an update on its performance as part of
the Interim Results announcement on 22 March.

2
OUR MARKETS
GLOBAL PRODUCTION
EUROPEAN MILK
PRODUCTION DECREASED
FOR THE SEVENTH
CONSECUTIVE MONTH,
WHILE THE US REMAINS
STRONG. THE RATE OF
DECLINE IN NEW ZEALAND
PRODUCTION IS EASING
Australia production in
December decreased 4%
compared to the same
month last year.
Production for the 12 months
to December is down 7%
compared to the same
period the previous year.
Fonterra collections in
Australia have been reported
for February, see page 5
for details.
Total New Zealand milk
production for January was
down 1% compared to the
same month last year.
For the 12 months to January,
milk production is down
2% compared to the same
period the previous year.
This volume represents
improved growing conditions
through January.
Fonterra collections have
been reported for February,
see page 5 for details.
Production change
for the 12 months to
December 2016
Production change
for the 12 months to
January 2017
AUSTRALIANEW ZEALAND
27
%%
US production in January
increased 2% compared to
the same month last year,
with farmers responding
to favourable weather
conditions and grain prices.
This marks the fifth
consecutive month of
monthly production
increases in excess of 2%.
Milk production for the 12
months to January increased
2% compared to the same
period the previous year.
USA
EU production continued
to slide, decreasing for the
seventh consecutive month,
with December volumes
down 3% compared to the
same month last year.
French production was
down 6% while Germany
and the UK were both down
5%. These three countries
represent nearly half of all
EU production.
Production for the 12 months
to December is in line with
the comparable period the
previous year.
Production change
for the 12 months to
December  2016
Production change

for the 12 months to
January 2017
EUROPEAN UNION
2
%
To view a chart that
illustrates year-on-year
changes in production –
0
%

3
%
OUR MARKETS
GLOBAL EXPORTS
US EXPORTS CONTINUE TO
GROW WITH A SEVENTH
CONSECUTIVE MONTH
OF POSITIVE GROWTH.
EU EXPORTS DECLINED FOR
THE FIRST TIME IN OVER
TWO  YEARS
Total New Zealand dairy
exports in December
decreased 4% compared
to the same month the
previous year. This marks the
second month of declines
and was led by SMP and
AMF both down 19%. WMP,
the largest product category
at just under half of monthly
volumes, was flat for
the month.
Exports for the 12 months
to December were up 5%,
or 151,000 MT, compared
to the same period the
previous year. The products
contributing to this increase
include infant formula up
80%, fluid and fresh dairy up
41% and cheese up 9%. The
primary offset to these gains
was WMP, down 2%.
EU dairy exports
decreased 2% in November,
or 7,000 MT, compared
to the same month the
previous year.
This is the first monthly
export decline in over two
years and was well signalled
by declining growth rates
over the past quarter.
Notable contributors to the
monthly move include fluid
and fresh dairy, down 6%
and SMP down 17%.
Export growth for the rolling
12 months continues to
slow, but remains up 8%, or
374,000 MT, compared to
the same period last year.
This is driven by fluid and
fresh dairy, up 14%, cheese
up 13% and butter up 29%.
Export change for the 12
months to December 2016
NEW ZEALANDEUROPEAN UNION
3
US dairy exports continued
their strong run through
to the end of 2016, with
December volumes up 18%
on the same period the
previous year. After a brief
period of decline, this is the
seventh consecutive monthly
increase in volumes.
December growth can
be attributed to whey
powder and WPC/WPI, up a
combined 44% or 15,000  MT.
Exports for the 12 months
to December are up 3%, or
68,000 MT, compared to the
same period last year.
This is driven by WPC/WPI,
up 26%, fluid and fresh dairy,
up 9% and whey powder,
up 7%.
Export change for the 12
months to December 2016
USA
3
Australia dairy exports
decreased 7% in December,
driven largely by a 20%
decline in SMP.
Exports for the 12 months
to December are up 3%, or
25,000 MT, compared to the
same period the previous
year. Growth contributions
from fluid and fresh dairy,
infant formula and whey
powder, up a combined 27%,
are offset to some extent
by SMP, the second largest
category, down 19%.
AUSTRALIA
Export change for the 12
months to December 2016
5
Export change for the 12
months to November 2016
8
To view a chart that
illustrates year-on-year
changes in exports –
%%%

4
OUR MARKETS
GLOBAL IMPORTS
STEADY GROWTH
IN  ASIA AND LATIN
AMERICA CONTINUES
WHILE CHINA IMPORTS
CONTINUE  TO  SOFTEN
Asia (excluding China)²
dairy import increased
7%, or 26,000 MT, in
November compared to the
same month the previous
year. SMP and cheese both
increased at 8%, while WMP
decreased 9%, or 5,000  MT.
Imports for the 12 months
to November are up 5%,
or 192,000 MT, compared
to the same period the
previous year. Increases in
fluid and fresh dairy, lactose
and whey powders, up a
combined 10%, were offset
by declines in powders, with
SMP and WMP down 1% or
20,000  MT.
Latin America¹ dairy
import increased 19%, or
25,000 MT, in November
compared to the same
month the previous year.
WMP and cheese had
increases of 46% and 51%
respectively, a collective
increase of 18,000  MT.
Imports for the 12 months
to November are up 13%,
compared to the same
period the previous year.
Core categories have led
this growth with SMP, WMP
and cheese up a combined
19%. These categories
account for over half of Latin
American imports.
ASIALATIN AMERICA
513
China dairy imports
decreased 13%, or
40,000 MT, in January
compared to the same
month last year. This marked
the second consecutive
month of declines and was
led by WMP and fluid and
fresh dairy, down 10% and
23% respectively.
Imports for the 12 months
to January are up 12%, or
247,000 MT, compared to
the same period last year.
Fluid and fresh dairy, cheese
and infant formula all had
increases in excess of 20%,
for a combined increase of
218,000  MT.
Import change for 12
months to January 2017
CHINA
12
Middle East and Africa³
dairy imports decreased
4%, or 13,000 MT, in
November compared to the
same month the previous
year. WMP and fluid and
fresh dairy were down 10%
and 2%.
Imports for the 12 months to
November are down 4%, or
175,000 MT, compared to the
same period last year.
Although this is the third
consecutive month of
decreasing imports, the rate
of growth is easing. SMP,
fluid and fresh dairy and
WMP were all down 7%, for a
combined 185,000  MT.
MIDDLE EAST & AFRICA
1 Excludes Venezuela and includes
estimates for Nicaragua ( January-
November) and Honduras (November).
2 Includes estimate for Indonesia
(August-November) and Macao
(October-November).
3 Includes estimates for Algeria
(November).
%%
%
Import change for 12
months to November 2016
Import change for 12
months to November 2016
Import change for 12
months to November 2016
4
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 28 February
2
Decrease for the season from
1 June to 28 February
AUSTRALIA
1
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 28 February
Decrease for the season from
1 June to 28 February
75
%%%
NEW ZEALAND MILK COLLECTION
VOLUME M LITRESDAY
JUNJULAUGSEPOCTNOVDECJANFEBMARAPRMAY










Fonterra’s milk
collection across
Australia for the eight
months to 28 February
reached 88 million
kgMS, 2 million kgMS
lower than last season.
In February milk collection
reached 8.6 million kgMS,
2% behind the same month
last season.
Fonterra Australia have
updated their methodology
for reporting milk collection
to include volume collected
via third parties.
For the seven months to
31 January, volumes collected
both directly and from third
parties were 79 million
kgMS, 2 million lower than at
the same date last season, a
2% decrease.
North Island milk
collection in February
reached 79 million kgMS, 5%
behind February last season.
South Island milk
collection in February
reached 62 million kgMS,
1.5% up on February
last season.
NEW ZEALAND
Fonterra’s milk
collection across New
Zealand for the nine
months to 28 February
reached 1,194 million
kgMS, 57 million kgMS
lower than last season.
Fonterra New Zealand
milk collection improved in
February compared to the
rest of the season due to
good growing conditions.
Fonterra has updated its
forecast milk collection for
the 2016/17 season – see
page 7.

6
OUR MARKETS
FONTERRA GLOBALDAIRYTRADE RESULTS
SMP
10.4
4.3
WMP
5.5
%
%
BUTTERRENNET CASEIN
4.4
%%
%
%
Fonterra GDT sales
by destination:
Dairy commodity prices
and New Zealand
dollar trend
In February, the New Zealand
dollar weakened initially,
falling off its highest level
since October, before
stabilising around 0.72 for
the remainder of the month.
Fonterra GDT results at
last trading event
21 March 2017:
The next trading event will be held on 4 April 2017. Visit www.globaldairytrade.info for more information.
To view more information,
including a snapshot of the
rolling year-to-date results –
USD 1,949/MT
USD 5,927/MTUSD 4,910/MTUSD 2,855/MT
3.4
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
3,134
USD
21.9
AMF
2.6
0.8
CHEDDAR
USD 5,799/MT
USD 3,406/MT
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
GDT PRICE INDEXNZDUSD SPOT RATE
MAR DEC MAY
AUG
OCT
JAN MAR MAY JUL OCT MAR






,
,
.

.

.
.
.
.
PRICE INDEX
NZD  USD
000’ MT
LATEST AUCTIONFINANCIAL
YEAR‑TO‑DATE
21,921
MT
421,306
MT

7
OUR PERFORMANCE
MAXIMISING VALUE FROM
LATE SEASON VOLUME GROWTH
Decrease of 3%
for the 2016/17 season
1,515M
KGMS
22 Mar
2017
Fonterra’s forecast
New Zealand milk collection
for the 2016/17 season has
been revised to 1,515 million
kgMS, reflecting improving
conditions across most parts
of the country.
Forecast Fonterra
Milk Collection Across
New Zealand
Fonterra Interim Results
for 2017 Financial Year
Better than expected
growing conditions have
meant that Fonterra’s
New Zealand milk collection
in recent months has been
better than initially forecast.
Milk collections from our
farmers were down 2%
overall for the months of
January and February, with
the South Island reporting an
actual increase in supply.
These greater volumes are
good news for farmers as it
adds to late season incomes.
Particularly when combined
with our forecast farmgate
milk price of $6.00 per
kgMS – 54% higher than last
season. Important after two
seasons of low milk prices.
It’s good news for Fonterra
too. Higher volumes in
the later months of the
season improve our overall
utilisation of our processing
assets. This helps to reduce
costs and improve margins.
While weather can change
we are reviewing options
to keep some sites open for
longer than usual in order to
process higher late season
milk if it occurs. We will use
the optionality in our asset
base to produce the best
returning products from
this milk.
We have also been
constrained in some
products in prior months
to meet growing demand.
So these volumes help us
better meet our customer’s
needs. For example, cheese
and cream based products
as used in our growing
foodservice business.
We have seen some increase
in volumes being sold
through GlobalDairyTrade
(GDT) in January and
February. This is normal
as GDT is an efficient and
valuable sales channel for
Fonterra. The most recent
announcement of GDT sales
volumes had no increase in
Fonterra product to be sold.
The timing of when we
recognise the sale of these
extra volumes can add
uncertainty to earnings
though. Depending on
exact timing of production
and available demand, we
may carry some of this
extra volume into the next
financial year.
While the forecast milk
collection is just that, a
forecast, we are watching
weather conditions and
on-farm production closely
and will continue to provide
updates to the market and
our farmers.
Fonterra will report its
financial results for the six
months to 31 January 2017 on
22 March.

8

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 FEB JAN DEC AUG OCT SEP JUL MAR 
LIQUID MILK M LITRES














,


,


NOTE: Data for EU and Australia to December and New Zealand and US to January.
NOTE: Data for EU to November; New Zealand, US and Australia to December.
NOTE: Data for Asia, Middle East and Africa and Latin America to November, China to January.
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 FEB JAN NOV DEC JUL SEP AUG MAR JUN 
MT ’
s










9
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)
FEBRUARY
2017
FEBRUARY

2016
MONTHLY
CHANGE
SEASON-
TO-DATE
2016/17
SEASON-
TO-DATE
2015/16
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
140.9144.1(2.2%)1,1941,251(4.6%)
North Island78.983.1(5.0%)732.7784.3(6.6%)
South Island62.061.11.5%461.8467.2(1.2%)
Fonterra Australia8.78.8(1.8%)87.990.1(2.4%)
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
(21 MARCH 2017)
YEAR-TO-DATE

(FROM 1 AUGUST 2016)
Quantity Sold on GDT
(Winning MT)
21,921421,306
Change in Quantity Sold on GDT
over same period last year
10.3%(9.1%)
Weighted Average Product Price
(USD/MT)
3,1343,186
Change in Weighted Average
Product Price over same period
last year
41.8%35.3%
Change in Weighted Average
Product Price from previous event
3.4%–
WEIGHTED AVERAGE PRICEQUANTITY SOLD
JAN
DEC
AUG
JUL
APR
MAY
FEB
JUN
NOV
OCT
SEP
MAR

,

,

,
,
,

,

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

10
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