Global Dairy Update February 2018 (Amended)

1
GLOBAL DAIRY
UPDATE
FEBRUARY 2018
KEY DATES
21 March 2018
FY18 Interim Results
Announcement
Late May 2018
Q3 Business Update
Announcement
1 June 2018
Measurement Date for Share
Standard 2018/19 Season
September 2018
FY18 Annual Results
Announcement
• Continued strong import demand for
dairy in China. Latin America and Asia
imports decrease.
• Exports from New Zealand, the US and
Australia up for the month. Further growth in
dairy exports from the EU.
• New Zealand production impacted by
difficult weather conditions. Production
increases for Australia and the EU.
• In January, Fonterra New Zealand milk
collection decreased 8% to 158 million
kgMS and Fonterra Australia milk collection
increased 32% to 14 million kgMS.
• Fonterra and The a2 Milk
Company form comprehensive
strategic relationship.
• New operators on board to
meet rising global demand
for cream cheese.

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illustrates year-on-year
changes in imports –
2
OUR MARKETS
GLOBAL IMPORTS
CONTINUED STRONG
IMPORT DEMAND
FOR DAIRY IN CHINA.
LATIN  AMERICA, AND ASIA
IMPORTS DECREASE
Latin America’s dairy
import volumes¹ decreased
7%, or 12,000 MT, in October
compared to the same
month last year. This decline
was due to WMP, cheese
and AMF, down a combined
40%, or 22,000 MT, this
month. This was offset by
SMP and whey powder, up a
combined 23%, or 9,000  MT.
For the 12 months to
October, imports were up
5%, or 90,000 MT, compared
to the same period the
previous year. This was
driven by growth in all major
categories except from WMP
and infant formula which
were down a combined
55,000  MT.
Asia (excluding China)
dairy import volumes¹
decreased 6%, or 22,000  MT,
in October compared to the
same month the previous
year. This was driven by
imports of SMP and fluid and
fresh dairy down a combined
15%, slightly offset by WMP,
up 7,000  MT.
For the 12 months to
October, imports were
up 4%, or 177,000  MT,
compared to the same
period last year.
Cheese, SMP and ice cream
grew by 130,000  MT,
accounting for around 70%
of the growth compared to
the same period last year.
Middle East and Africa
dairy imports¹ in October
decreased 3%, or 11,000  MT,
compared to the same
month the previous year. This
was mainly due to a decline
across the top three import
categories, WMP, SMP and
fluid and fresh dairy, down
a combined 13,000  MT,
partially offset by a 7%
increase in cheese imports.
Imports for the 12 months
to October were down 1%,
or 47,000 MT. Combined
declines in butter and WMP
of 10%, or 106,000  MT,
dampened large gains in
fluid and fresh dairy and
SMP of 80,000 MT and
36,000 MT respectively.
China dairy imports
increased 7%, or 13,000  MT,
in December compared to
the same month last year.
Large gains were seen in fluid
and fresh dairy, whey powder
and infant formula up 28%,
19% and 21% respectively.
Imports for the 12 months
to December were up
299,000 MT, compared
to the same period last
year. China continues their
strong imports, with all key
categories up for the period.
Infant formula, SMP and
fluid and fresh dairy imports
all grew significantly, up
77,000 MT, 63,000 MT and
52,000 MT respectively.
LATIN AMERICAASIAMIDDLE EAST & AFRICACHINA
Import change for the 12
months to December 2017
Import change for the 12
months to October 2017
Import change for the 12
months to October 2017
Import change for the 12
months to October 2017
413
1
5
1 Estimates are included for those countries that have not reported import data.

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changes in exports –
3
OUR MARKETS
GLOBAL EXPORTS
EXPORTS FROM
NEW  ZEALAND, THE US
AND AUSTRALIA UP FOR
THE  MONTH. FURTHER
GROWTH IN DAIRY EXPORTS
FROM THE  EU
Total New Zealand dairy
exports in December
increased 8%, or 31,000  MT,
compared to the same
month last year. This growth
was driven by WMP, SMP
and butter, up a combined
33,000  MT.
Exports for the 12 months to
December were down 3%, or
83,000 MT, on the previous
comparable period. Exports
declined across the majority
of categories except fluid
and fresh dairy and infant
formula, which were up a
combined 81,000 MT. SMP
and AMF showed the largest
decline, down a combined
103,000 MT on the previous
comparable period .
EU dairy exports in
November were up 11%,
or 44,000 MT, relative
to the same month the
previous year. This was due
to double-digit growth in
most export categories,
especially SMP and fluid and
fresh dairy, which increased
by a combined 20%, or
33,000  MT.
Exports for the 12 months to
November were up 5%, or
242,000 MT, on the previous
comparable period.
Cheese, SMP and
infant formula made up
292,000 MT of the increase,
offset by a combined decline
of 61,000 MT in butter and
fluid and fresh dairy.
US dairy exports increased
11% in December, or
21,000 MT, compared to the
same month the previous
year. This was driven by SMP,
lactose and whey powder
up a combined 20% or
22,000  MT.
Exports for the 12 months to
December were up 5%, or
110,000 MT, on the previous
comparable period. The
increase in exports continues
to be driven by cheese and
whey powder up a combined
97,000 MT. The largest
export category in the US,
SMP, grew 15,000 MT or 3%,
compared to the previous
comparable period.
Australia dairy exports
increased 10%, or 7,000  MT,
in December compared to
the same month last year.
Predominantly driven by
fluid and fresh dairy and
cheese which were up a
combined 11, 000 MT. These
gains were partially offset by
SMP and whey powder down
a combined 4,000  MT.
Exports for the 12 months
to December were down
1%, or 6,000 MT, on the
previous comparable period.
Momentum in fluid and fresh
dairy, infant formula and
cheese exports remained
strong, up 44,000  MT.
This was partially offset
by declines in WMP, whey
powder and butter down a
combined 35,000  MT.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
51
3
5
Export change for the 12
months to December 2017
Export change for the 12
months to December 2017
Export change for the 12
months to December 2017
Export change for the 12
months to November 2017

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illustrates year-on-year
changes in production –
4
OUR MARKETS
GLOBAL PRODUCTION
NEW ZEALAND
PRODUCTION IMPACTED
BY DIFFICULT WEATHER
CONDITIONS. PRODUCTION
INCREASES FOR AUSTRALIA
AND THE EU
Total New Zealand milk
production in January was
down 5% compared to the
same month last year. Although
rain in late December and early
January helped in some regions,
other regions were heavily
impacted by soil moisture and
pasture growth challenges
caused by difficult weather
conditions. This has impacted
overall collection volumes
throughout New Zealand.
Fonterra collections have been
reported for January, see page 5
for details.
Australia milk production
in January increased 4%
compared to the same month
last year due to favourable
seasonal conditions across milk
collection regions.
Production for the 12 months
to January was flat compared to
the same period the previous
year due to better conditions.
Fonterra collections in Australia
have been reported for January,
see page 5 for details.
EU milk production increased
1% in December compared
to the same month last
year, driven by strong global
dairy prices.
Germany, the UK and Austria
had the largest increases in
production, up 3%, 5% and 28%
respectively in December.
Production for the 12 months to
December declined 1%, on the
back of a decrease across four
of the top five EU producers,
down 3%. This was partially
offset by Ireland increasing
production by 10%.
US milk production in
December increased 1%
compared to the same
month last year largely due to
increased productivity. Milk
production per cow across all
23 major states was the highest
recorded for the month of
December since 2003¹.
Milk production for the
12 months to December
increased 1% compared to the
same period the previous year.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
Production change
for the 12 months to
January 2018
Production change
for the 12 months to
January 2018
Production change
for the 12 months to
December 2017
Production change

for the 12 months to
December 2017
1011
1 https://www.nass.usda.gov/Publications/
Todays_Reports/reports/mkpr0118.pdf

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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
Decrease for the season
from 1 June to 31 January
Decrease for the season
from 1 June to 31 January
Increase for the season from
1 June to 31 January
Increase for the season from
1 July to 31 January
320
27
NEW ZEALAND MILK COLLECTION
Fonterra’s milk
collection across
Australia for the seven
months to 31 January
reached 100 million
kgMS, 21 million kgMS
higher than last season.
Collections in January
totalled 14 million kgMS, a
32% increase on the same
month last year. This has
been driven by increased
market share and favourable
seasonal conditions across
milk collection regions.
North Island milk
collection in January
reached 90 million kgMS,
11% down on January
last season.
After a dry, hot period
through December and early
January, milk collections
were very low at the start of
January. While collections
recovered part way through
the month due to heavy rain,
the recovery was not enough
to bring the volumes back to
last season’s levels.
South Island milk
collection in January
reached 69 million kgMS, 5%
down on January last season.
Fonterra’s milk
collection across
New Zealand for
the eight months to
31 January reached
1,036 million kgMS, 2%
below the same period
last season.
January collections reached
158 million kgMS, down
8% compared to the same
period last year. This is
largely due to the difficult
weather conditions which
impacted soil moisture and
pasture quality.

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including a snapshot of the
rolling year-to-date results –
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6
GDT PRICE INDEXNZDUSD SPOT RATE
MAR DEC MAY
JUL
OCT
DEC
MAR MAY JUL OCT MAR




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.

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PRICE INDEX
NZD  USD
OUR MARKETS
FONTERRA GLOBALDAIRYTRADE RESULTS
Fonterra GDT sales
by destination:
Dairy commodity prices
and New Zealand
dollar trend
The New Zealand dollar
appreciated through January
on the back of broad-based
weakness in the US dollar.
Fonterra GDT results at
last trading event
6 March 2018:
The next trading event will be held on 20 March 2018. Visit www.globaldairytrade.info for more information.
Change in Fonterra’s
weighted average product
price from previous event
1.1
Fonterra’s weighted
average product price

(USD/MT)
3,704
USD
Fonterra product quantity
sold on GDT
000’ MT
18.0
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
USD 2,181/MT
12.8
SMP
USD 5,128/MT
3.0
RENNET CASEIN
USD 3,759/MT
2.0
CHEDDAR
USD 3,232/MT
0.4
WMP
USD 5,280/MT
1.0
BUTTER
USD 6,245/MT
3.3
AMF
18,088
MT
LATEST AUCTION
430,840
MT
FINANCIAL
YEAR‑TO‑DATE

7
FONTERRA AND THE A2 MILK
COMPANY FORM COMPREHENSIVE
STRATEGIC  RELATIONSHIP
Fonterra Co-operative
Group Limited (Fonterra)
and The a2 Milk Company
(a2MC) entered into a
comprehensive strategic
relationship.
As part of the partnership,
Fonterra will now begin
conversations with its
farmers to source an A2
milk pool for a2MC products
in New Zealand, which is
intended to significantly
expand over time to help
meet the growing demand
for a2MC products. A similar
milk pool in Australia will
also be developed.
Announcing the deal,
Fonterra CEO Theo Spierings
and a2MC Managing
Director and CEO
Geoffrey Babidge said the
partnership is designed to
generate returns for both
companies by growing
demand in both local and
international markets for
products using a2MC’s brand
strength and capabilities.
“The partnership is intended
to fast-track market growth
and this creates opportunity
for our farmers to create
additional value from their
milk,” said Mr Spierings.
“Fonterra’s high-quality milk
pools, our global supply
chain, our manufacturing
capabilities and knowledge,
and our in-market sales
and distribution expertise
is being combined with
a2MC’s brand strength to
unlock new opportunities
in a wide range of
international markets.
“We continue to see a
strong future for dairy based
on our existing range of
products, including recent
additions such as organic,
low-lactose and high protein
milk choices that consumers
seek out for a premium. The
a2MC products promoted
by this partnership sit well
within our overall portfolio
of products.
“Consumers like to have
choices and the growth of
a2MC-branded nutritional
powders and fresh milk sales
in Australia, for example,
shows the potential. This
partnership is all about
finding ways to continue to
delight our consumers and
generate more value for
our farmers.”
OUR PERFORMANCE

New operators on
board to meet rising
global demand for
cream cheese
With our global cream
cheese sales up 24% on
last year and demand
still increasing, Fonterra’s
Darfield site has welcomed
16 new employees who will
operate the first of its two
new cream cheese plants.
The site is bringing on
employees as part of a
capability and development
programme that will build
the team at Darfield to
ensure good performance
when the new plant goes
into operation in August.
The employees have been
brought on early to receive
extensive training due to the
new plant incorporating one
of the most advanced lines in
the world.
Director of Global
Foodservice, Grant Watson
says that Fonterra-first
technology will allow
for the firmness and
consistency of the cream
cheese they produce to
be dialled up or down to
meet both the needs of
chefs and deliver against
consumer preferences.
“This will mean that the
Co-operative is well placed
to meet consumer demand,
particularly in Asia where
cream cheese is undergoing
a surge in popularity,” says
Mr Watson.
“Dairy beverages such as tea
macchiato – which mixes
tea with cream and cream
cheese – demonstrate the
remarkable versatility of
dairy in markets like China.”
Acting Site Operations
Manager, Shane Taylor says
that the first Darfield plant
is on track to be completed
in the next six months with
the second to follow within
two-to-three years.
“When both lines are in
place, we will be able to
produce up to 48,000 MT
of cream cheese each year,
making our site one of the
largest producers of cream
cheese in New Zealand,” says
Mr Taylor.
“We are building and
training our teams who
will prepare the first
plant for commissioning
and transition to normal
operations. These teams will
be instrumental in setting
the plant up for the future”.
One of our new employees,
John Cordon, was running
a printing press in
Christchurch prior to joining.
“There is a lot of cross-over
on the manufacturing and
machine operating side
of things.”
“However the new job is
head and shoulders more
high-tech. The machinery
is world-leading spanking
new machinery and the
opportunity to work in a
brand new plant is exciting.”
“There is so much learning
going on. Nine of us have
been working in the dairy
industry; the rest are new
to the industry, and that
includes me. We are going
to spend a day on a dairy
farm, and go out with a
milk tanker.”
“We have a little village
next to the plant, so we see
the construction as it goes
on day-by-day, it makes us
feel involved.”
Selwyn District Mayor,
Sam Broughton says that
people are optimistic about
the growing population of
the district.
“The Darfield site has
continued to provide
employment throughout the
construction phase, and now
there are these long-term
jobs at the plant.”
“It’s great that there are
training opportunities for
people in new areas and
career paths. It enables them
to bring up their families
here amongst the fresh air
and lakes, and enjoy the
lifestyle that Selwyn has
to offer.”
Business Relationship
Manager, Justin Tipa gave a
Mihi Whakatau to welcome
the new starters to the
site, followed by a blessing
of the capability and
development programme.
8
OUR CO-OP

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
JUN MAY MAR FEB NOV 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 October, China to December.
NOTE: Data for EU to November; New Zealand, US and Australia to December.
NOTE: Data for EU and US to December, New Zealand and Australia to January.
SOURCE: Government milk production statistics/GTIS trade data/Fonterra analysis.

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

,


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,
,

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,
,

,
,
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)
JANUARY
2018
JANUARY

2017
MONTHLY
CHANGE
SEASON-
TO-DATE
2017/18
SEASON-
TO-DATE
2016/17
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
158.3172.5(8.3%)1,035.81,053.6(1.7%)
North Island89.7100.6(10.9%)636.1653.7(2.7%)
South Island68.671. 9(4.6%)399.8399.90.0%
Fonterra Australia13.910.532.4%100.078.527.4%
Fonterra GDT results
This table provides more
information on the latest
results, including a snapshot
of the year-to-date results.
LAST TRADING EVENT
(6 MARCH 2018)
YEAR-TO-DATE

(FROM 1 AUGUST 2017)
Quantity Sold on GDT
(Winning MT)
18,088430,840
Change in Quantity Sold on GDT
over same period last year
(16.8%)7.9%
Weighted Average Product Price
(USD/MT)
3,7043,292
Change in Weighted Average
Product Price over same period
last year
22.2%3.2%
Change in Weighted Average
Product Price from previous event
(1.1%)–
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