Global Dairy Update November 2017

1
GLOBAL DAIRY
UPDATE
NOVEMBER 2017
KEY DATES
1 December 2017
Compliance Date for Share
Standard 2017/18 Season
Early
December 2017
FY18 Investor D
ay
Early December 2017
Business Update
March 2018
Interim Results
Announcement
•Strong growth in dairy imports continues
in China and Asia. Middle East and Africa
imports continue to soften.
•
Further decline in dairy exports from
New Zealand and Australia. EU showing
strong export growth.
•
Milk production in New Zealand improved
in October. European milk production
increased for the fourth consecutive month.
•In Oc
tober, Fonterra New Zealand milk
collection increased 2% to 209 million
kgMS and Fonterra Australia milk collection
increased 31% to 18 million kgMS.
•
Foodservice business tops
$2 billion in revenue.
•F
armers band together to improve local waterway.

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To view a chart that
illustrates year-on-year
changes in imports –
2
OUR MARKETS
GLOBAL IMPORTS
STRONG GROWTH IN DAIRY
IMPORTS CONTINUES
IN CHINA AND ASIA.
MIDDLE  EAST AND AFRICA
IMPORTS CONTINUE
TO  SOFTEN
Latin America’s dairy
import volumes¹ were
flat in July compared to the
same month the previous
year as growth in SMP and
whey powder was offset by
declines in WMP and AMF.
Imports for the 12 months to
July remain strong, up 10%,
or 181,000 MT, compared
to the same period the
previous year.
Growth for the 12 months
to July was seen in almost
all import categories. In
particular, cheese and
SMP which account for
42% of total imports, were
up a combined 15%, or
112,000  MT.
Asia (excluding China)
dairy import volumes²
increased 3% in July
compared to the same
month the previous year.
Imports of SMP were up 33%,
or 21,000 MT, partially offset
by declines in fluid and fresh
dairy, lactose and cheese.
Imports for the 12 months
to July were up 9%, or
356,000 MT, compared to the
same period the previous year.
Increases were seen in all
key import categories, in
particular SMP, fluid and
fresh dairy, cheese and whey
powder up a combined 10%
or 257,000 MT for the 12
months to July.
Middle East and Africa
dairy imports³ decreased
3%, or 8,000 MT, in July
compared to the same
month the previous year.
Growth in fluid and fresh
dairy and SMP, up 10%
collectively, was more than
offset by declines in cheese,
butter and infant formula.
Imports for the 12 months
to July were down 2%, or
82,000 MT. Fluid and fresh
dairy, the region’s largest
import category, was up
57,000 MT however the
majority of key import
categories were down,
with WMP, butter, infant
formula and cheese down a
combined 131,000  MT.
China dairy imports
increased 34%, or 53,000  MT,
in September compared to
the same month last year.
WMP, infant formula and
SMP led this increase,
up a combined 96%, or
33,000  MT.
Imports for the 12 months to
September were up 12%, or
263,000 MT, compared to
the same period last year.
Imports continue to be very
strong in China, with almost
all categories showing
growth this year. WMP,
infant formula and SMP
experienced the largest
growth, up a combined 22%,
or 179,000  MT.
LATIN AMERICAASIAMIDDLE EAST & AFRICACHINA
Import change for the 12
months to September 2017
Import change for the 12
months to July 2017
Import change for the 12
months to July 2017
Import change for the 12
months to July 2017
912
2
10
1 Excludes Venezuela and Nicaragua.2 Includes estimate for Indonesia ( July)
and Macao (October‑July).
3 Includes estimate for Egypt ( July).

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To view a chart that
illustrates year-on-year
changes in exports –
3
OUR MARKETS
GLOBAL EXPORTS
FURTHER DECLINE IN DAIRY
EXPORTS FROM NEW  ZEALAND
AND AUSTRALIA. EU
SHOWING STRONG
EXPORT  GROWTH
Total New Zealand dairy
exports in September
decreased 7%, or 14,000  MT,
compared to the same
month last year.
Weak powder numbers led
the decline, with WMP and
SMP down 11% and 26%
respectively. Fluid and fresh
dairy growth continued,
up 9,000 MT or 39%
for September.
Exports for the 12 months
to September were down
2%, or 57,000 MT, on the
previous comparable period.
While fluid and fresh dairy
volumes were up 64,000  MT,
weak volumes of SMP, AMF
and butter, down 11%, 14%
and 10% respectively led to
an overall decline in exports.
EU dairy exports in July
were up 10%, or 40,000  MT,
relative to the same month
the previous year.
Exports of SMP increased
significantly, up 70% or
30,000 MT. Fluid and fresh
dairy and infant formula also
experienced solid growth,
up a combined 9%. This was
partially offset by declines
in whey powder, down 16%
in July.
Exports for the 12 months
to July were up 5%, or
227,000 MT, on the previous
comparable period. SMP,
infant formula, cheese and
lactose exports increased
significantly, up a combined
265,000 MT, or 13%, offset
by declines in fluid and fresh
dairy, butter and AMF, down
a combined 56,000  MT.
US dairy exports decreased
6% in September, or
11, 000 MT, compared
to the same month the
previous year. This is the
second consecutive month
of declining exports in
the US.
Exports for the 12 months to
September were up 11%, or
224,000 MT, on the previous
comparable period.
This increase was driven
by three of the larger
product categories, SMP,
whey powder and cheese,
up a combined 16%, or
185,000 MT, however most
key categories are up for the
period to September.
Australian dairy exports
in September decreased
3%, compared to the same
month last year
SMP and infant formula
were up a combined 25% in
September, however most
other export categories,
particularly WMP, showed
a decline.
Exports for the 12 months
to September were down
3%, or 20,000 MT, on the
previous comparable period.
Growth in fluid and fresh
dairy and infant formula, up
12,000 MT and 6,000 MT
respectively, was offset by
declines in most other export
categories, particularly WMP,
butter and AMF down a
combined 24,000  MT.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
113
2
5
Export change for
the 12 months to
September 2017
Export change for
the 12 months to
September 2017
Export change for
the 12 months to
September 2017
Export change for the
12 months to July 2017

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To view a chart that
illustrates year-on-year
changes in production –
4
OUR MARKETS
GLOBAL PRODUCTION
MILK PRODUCTION IN
NEW  ZEALAND IMPROVED IN
OCTOBER. EUROPEAN MILK
PRODUCTION INCREASED
FOR THE FOURTH
CONSECUTIVE MONTH
Total New Zealand milk
production production in
October is up 3% compared
to the same month last
year, as weather conditions
improved towards the latter
part of the month.
For the 12 months to
October, milk production is
flat compared to the same
period the previous year.
New Zealand supply typically
peaks in mid
-October,
however wet weather across
the country for most of spring
meant the peak was later and
impacted volumes in both the
North and South Islands.
Fonterra collections have
been reported for October,
see page 5 for details.
Australia production
in September decreased
1% compared to the same
month last year.
Production for the 12 months
to September was down
4% compared to the same
period the previous year.
The decline in production is
largely due to poor spring
weather conditions and
reduced herd size compared
to 2017.
Fonterra collections in
Australia have been reported
for October, see page 5
for details.
EU production in
September increased 5%
compared to the same
month last year with
Germany and France, the
two largest EU producers, up
a combined 4%.¹
September showed the
largest growth since
early 2016 as production
ramps up on the back of
increased demand.
Production for the 12 months
to September was flat.
Across this period, Germany
and France were down 2%
and 3% respectively, offset
by growth out of Italy, Ireland
and Poland, up 4%, 6% and
4% respectively.
US production in
September increased 1%
compared to the same
month last year. This is
largely due to increased
herd numbers and improved
production per cow.²
Milk production for the
12 months to September
increased 2% compared
to the same period the
previous year.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
Production change
for the 12 months to
September 2017
Production change
for the 12 months to
October 2017
Production change
for the 12 months to
September 2017
Production change

for the 12 months to
Sept
ember 2017
0420
1 http://usda.mannlib.cornell.edu/usda/
current/MilkProd/MilkProd‑
10
‑
20
‑
2017
.pdf.
1 Europ
ean production data for September
h
as been estimated based on IFCN data.

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To view a table that shows our
detailed milk collection in New
Zealand and Australia compared
to the previous season –
VOLUME M LITRESDAY
JUNJULAUGSEPOCTNOVDECJANFEBMARAPRMAY









5
OUR MARKETS
FONTERRA MILK COLLECTION 2017/18 SEASON
NEW ZEALANDNORTH ISLANDSOUTH ISLANDAUSTRALIA
Flat for the season from
1 June to 31 October
Flat for the season from
1 June to 31 October
Flat for the season from
1 June to 31 October
Increase for the season from
1 July to 31 October
000
26
NEW ZEALAND MILK COLLECTION
Fonterra’s milk
collection across
Australia for the four
months to 31 October
reached 53 million
kgMS, 11 million kgMS
higher than last season.
Collections in October were
up 31% on the same month
last year. In addition to new
farmer suppliers, growth has
been supported by strong
seasonal conditions across
all regions.
A high-quality silage and
fodder harvest, good rainfall
and soil moisture profiles,
combined with reasonable
feed, fertiliser and water
pricing continues to
underpin sustained growth
this season.
North Island milk
collection in October
reached 124 million kgMS,
2% up on October
last season.
South Island milk
collection in October
reached 85 million kgMS, 3%
up on October last season.
Fonterra’s milk
collection across
New Zealand for the five
months to 31 October
reached 502 million
kgMS, in line with the
same period last season
Collections in October
reached 209 million kgMS,
up 2% on the same month
last season, as weather
conditions began to improve
towards the end of the
month after a wet spring.
Daily collections peaked on
26 October at 82 million
litres, up 1% on last season’s
peak of 80 million litres.
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To view more information,
including a snapshot of the
rolling year-to-date results –
%
GDT PRICE INDEXNZDUSD SPOT RATE
NOV AUG JAN MAR JUN AUG NOV JAN MAR JUN NOV 



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PRICE INDEX
NZD  USD
6
OUR MARKETS
FONTERRA GLOBALDAIRYTRADE RESULTS
Fonterra GDT sales
by destination:
Dairy commodity prices
and New Zealand
dollar trend
The New Zealand dollar
declined during October due
to the strengthening of the
US dollar and uncertainty
around the change in the
New Zealand Government.
This reflected concerns
around possible changes
to the Reserve Bank of
New Zealand Act.
Fonterra GDT results at
last trading event
7 November 2017:
The next trading event will be held on 21 November 2017. Visit www.globaldairytrade.info for more information.
Change in Fonterra’s
weighted average product
price from previous event
2.9
Fonterra’s weighted
average product price

(USD/MT)
3,113
USD
Fonterra product quantity
sold on GDT
000’ MT
34.1
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
USD 1,819/MT
1.2
SMP
USD 6,894/MT
0.8
AMF
USD 4,001/MT
2.6
CHEDDAR
USD 5,465/MT
2.6
RENNET CASEIN
USD 5,516/MT
3.8
BUTTER
USD 2,852/MT
5.4
WMP
34,052
MT
LATEST AUCTION
235,215
MT
FINANCIAL
YEAR‑TO‑DATE

77
OUR PERFORMANCE
FONTERRA’S FOODSERVICE BUSINESS
TOPS $2 BILLION IN REVENUE
Fonterra’s Foodservice
business, Anchor™
Food Professionals™,
generated more than
$2 billion in annual
revenue over the
past year
Fonterra Chief Operating
Officer, Consumer and
Foodservice, Lukas
Paravacini, said the
achievement is the result
of changing lifestyles by
consumers and a new way
of working, which is about
partnering with customers
to help their businesses
succeed in this rapidly
growing industry.
“Foodservice is one of the
largest industries in the
world and encompasses
food and beverages that are
consumed out of the home
such as in restaurants, cafes
and bakeries.
“In the USA more than 50%
of all spend on food and
beverage is now out of home
and in China the market has
grown by 30% over the last
five years. As a result, the
global industry is predicted
to be worth US$3 trillion
in 2021.
“We have taken advantage
of this eating out trend
and currently Anchor™
Food Professionals™ is
growing around 10 times
faster than the global total
foodservice market.
“It is part of our strategy of
focussing on adding more
value to every drop of our
farmers’ milk. The gross
margin from foodservice
is two or three times what
we can earn from basic
ingredient products,”
said Lukas.
Global Director Foodservice,
Grant Watson, said a new
business model which
centres around providing
solutions based on customer
insights, has been central to
this success.
“We have 56 chefs in more
than 50 countries who go
into kitchens to demonstrate
the products. They get to
know their customers, work
to understand their issues
and challenges, and help us
design more new products to
help address those problems.
“We know the smallest
things can make a difference,
so we make our products last
longer, stretch further, work
faster, waste less, withstand
more. We bring together
world class dairy products
and the deep expertise of
our people to work alongside
the passionate, talented and
innovative food professionals
who are driving the
foodservice industry to new
heights,” said Grant.
“We also have a very clear
channel-led system,” adds
Grant. “This provides
foodservice kitchens around
the world with ingredients
for some of the largest
categories in the business;
Asian-style Bakeries, Italian
Kitchens and Quick Service
Restaurants. Our ingredients
include our extra stretch
mozzarella, UHT culinary
and whipping creams,
laminated butter sheets and
cream cheese.”
Lukas said that over the
past four years Fonterra has
committed $850 million
in new production
capacity for Foodservice –
$700 million of which has
been in New Zealand. These
expansions are at Waitoa
in the Waikato for UHT
creams, Eltham in Taranaki
for slice-on-slice cheese,
Clandeboye in Canterbury
for extra stretch mozzarella
and Te Rapa in the Waikato
and Darfield in Canterbury
for cream cheese.
“These investments are
helping us to match
increasing demand for our
products and ensuring
that we remain on track to
meet our annual revenue
target of $5 billion by 2023,”
said Lukas.
LUKAS PARAVICINI, CHIEF OPERATING
OFFICER CONSUMER AND
FOODSERVICE AND GRANT WATSON,
DIRECTOR GLOBAL FOODSERVICE

8
OUR CO-OP
Farmers band together
to improve local
waterway
Finding the balance between
making a profit and farming
sustainably has always been
at the forefront of Fonterra
farmer Paul Warneford’s
mind. “Swimming in our local
rivers, white baiting, doing
things us Kiwis love doing,
while having a sustainable
farming practice is the
ultimate goal,” says Paul.
In 2015, 12 dairy farmers
started the Nukuhou North
and Waiotahi River Streams
Group, aiming to improve
the sustainability of their
farming operations. The
group was formed after
agri-ecology consultant
Alison Dewes spoke to a
group of farmers about
sustainable farming and
finding a sweet spot
around environment, profit
and production.
Paul alone spends
$40,000-$60,000 every
year on fencing and riparian
planting on his 806ha farm.
“I’ve put wetlands at the
ends of all my drains to catch
any sediment and have built
20 dams around my farm
to help filter any runoff,”
says Paul.
“Wetlands are designed
by nature, we just need to
enhance them to catch the
sediment and disperse the
leaching at a slower rate.”
The Bay of Plenty Regional
Council supports this work
by co-funding riparian
fencing, planting and wetland
restoration and creation. The
council also monitors water
quality improvements in
the Nukuhou and Waiotahi
Rivers to see where more
attention is needed.
Another member of the
Nukuhou North River Stream
Group and Fonterra farmer
Norman Craig says, “We’ve
teamed up with the council
to show that we are trying
to make a difference. We
want to comply with their
standards and we encourage
them to come out and run
tests on our farms.”
“We want to find out if some
plants are better at filtering
than others or if it just looks
beautiful,” says Paul.
Each farmer in the group
contributes annually to have
their farm’s finances and
inputs analysed by external
consultant, Alison Dewes,
who then produces an
environmental and business
report. The Bay of Plenty
Regional Council also
provides up to $1,500 per
farm in support.
Within the next three years,
the group aims to identify
each farmer’s strengths
and how they can learn
from each other to reduce
their overall impact on
the environment.
The Nukuhou River is
tested five times per year,
and Bay of Plenty Regional
Council Land Management
Officer, Charles Harley, says
the results are showing
positive trends.
“While it is improving and
trends are heading in the
right direction, it’s still a work
in progress and the farmers
in the area acknowledge
this,” says Charles Harley.
In 2015, Nukuhou River
won an award for the most
improved river and since
then has shown meaningful
improvement in total
nitrogen, E. coli and clarity.

PRODUCTION
AUSTRALIAAVERAGE
UNITED STATES
NEW ZEALANDEU
NOV JUN MAY APR FEB JAN DEC AUG OCT SEP JUL MAR 
LIQUID MILK M LITRES
,



















EXPORTS
AUSTRALIA
UNITED STATES
NEW ZEALANDEU
JUL JUN MAY MAR FEB JAN DEC NOV OCT SEP AUG APR 
MT s







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








AVERAGE
9

SUPPLEMENTARY INFORMATION
Global Dairy Market
The charts on the right
illustrate the year-on-year
changes in imports, exports
and production for a range of
countries that are important
players in global dairy trade.
The absolute size of
the bars represents the
change in imports, exports
or production, relative
to the same period the
previous year.
Averages are shown where
data is complete for the
regions presented.
NOTE: Data for Asia, Middle East and Africa and Latin America to July, China to September.
NOTE: Data for EU to July; New Zealand, US and Australia to September.
NOTE: Data for EU, Australia, and US to September, New Zealand to October.
SOURCE: Government milk production statistics/GTIS trade data/Fonterra analysis.

WEIGHTED AVERAGE PRICEQUANTITY SOLD
JAN
DEC
SEP
AUG
OCT
APR
MAY
FEB
JUN
NOV
JUL
MAR

,
,

,
,
,
,
,

,
,
,
WEIGHTED AVERAGE PRICE USDMT
QUANTITY SOLD  MT
10

SUPPLEMENTARY INFORMATION
Fonterra milk
production
The table on the right
shows Fonterra milk solids
collected in New Zealand
and Australia compared
to the previous season.
MILK COLLECTION
(MILLION KGMS)
OCTOBER
2017
OCTOBER

2016
MONTHLY
CHANGE
SEASON-
TO-DATE
2017/18
SEASON-
TO-DATE
2016/17
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
208.8204.22.3%502.4500.90.3%
North Island124.3121.72.1%326.9325.70.3%
South Island84.682.52.6%175.5175.20.2%
Fonterra Australia18.414.130.6%52.641.825.8%
Fonterra GDT results
This table provides more
information on the latest
results, including a snapshot
of the year-to-date results.
LAST TRADING EVENT
(7 NOVEMBER 2017)
YEAR-TO-DATE

(FROM 1 AUGUST 2017)
Quantity Sold on GDT
(Winning MT)
34,052235,215
Change in Quantity Sold on GDT
over same period last year
28.0%2.4%
Weighted Average Product Price
(USD/MT)
3,1133,293
Change in Weighted Average
Product Price over same period
last year
(8.5%)12.7%
Change in Weighted Average
Product Price from previous event
(2.9%)–
Fonterra GDT Results
This chart shows Fonterra
GDT prices and volumes over
the past 12 months.

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.
GDT
GlobalDairyTrade, the
online provider of the twice
monthly global auctions of
dairy ingredients.
kgMS
Kilogram of milk solids, the
measure of the amount of
fat and protein in the milk
supplied to Fonterra.
LME (Liquid Milk
Equivalent)
A standard measure of the
amount of milk (in litres)
allocated to each product
based on the amount of fat
and protein (“milk solids”) in
the product relative to the
amount of fat and protein in
a standardised raw milk.
Non-Reference Products
All dairy products, except
for Reference Products,
produced by the NZ
Ingredients business.
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