Global Dairy Update March 2018

1
GLOBAL DAIRY
UPDATE
MARCH 2018
KEY DATES
Late May 2018
Q3 Business Update
Announcement
1 June 2018
Measurement Date for Share
Standard 2018/19 Season
September 2018
FY18 Annual Results
Announcement
1 December 2018
Compliance Date for Share
Standard 2018/19 Season
• Demand for dairy remains strong in China.
Latin America and Asia imports decline for
the month.
• Growth in dairy exports from New Zealand
in January. Steady growth from the EU and
the US.
• Increased production from the EU in
January. New Zealand production down for
the month.
• In February, Fonterra New Zealand milk
collection was down 4% to 135 million
kgMS, and Fonterra Australia collection was
up 30% to 11 million kgMS compared to
February last year.
• Fonterra has recently announced its FY18 interim results:
• Forecast cash pay-out range for the 2017/18 season
increased to $6.80-$6.90.
• A strong Ingredients performance, generating normalised
EBIT of $558 million, up 9%.
• Operating performance
impacted by Danone
arbitration decision and
Beingmate impairment.
• Science meets art as Fonterra takes home top
cheese honours.
• Advanced technology investment set to deliver 70%
reduction in water use at Darfield.
• Fonterra launches cutting edge virtual reality technology,
taking health and safety into a future state.
Visit our website for more
details —

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illustrates year-on-year
changes in imports –
2
OUR MARKETS
GLOBAL IMPORTS
DEMAND FOR DAIRY
REMAINS STRONG
IN  CHINA. LATIN AMERICA
AND ASIA  IMPORTS DECLINE
FOR THE MONTH
Latin America’s dairy
import volumes¹
decreased 8% or 13,000 MT
in November compared
to the same month the
previous year.
Growth in SMP was offset
by declines in cheese and
WMP down 25% and 28%
respectively compared to the
same month last year.
Imports for the 12 months
to November were up 2% or
46,000 MT. This growth was
driven by increases across all
key import categories except
for WMP, which was down
21% or 61,000  MT.
Asia (excluding China)
dairy import volumes¹
decreased 4% or 15,000 MT
in November compared to
the same month last year.
SMP, the largest import
category in Asia, declined
24,000 MT or 26%.
Imports for the 12 months
to November were up 2%,
or 99,000 MT, compared
to the same period the
previous year.
Imports of cheese and
WMP were up a combined
87,000 MT or 8%, slightly
offset by declines in whey
powder, down 13,000  MT.
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 were
up 44% or 115,000 MT in
January compared to the
same month last year with
substantial growth in Fluid
and fresh dairy, WMP and
whey powder, up 92%, 28%
and 45% respectively.
Imports for the 12 months
to January were up 20%, or
454,000 MT, compared to
the same period last year.
Growth was seen across all
export categories except
casein. Fluid and fresh dairy,
WMP and infant formula had
the most significant growth,
up a combined 271,000  MT.
SMP imports were also up
42% or 77,000  MT.
LATIN AMERICAASIAMIDDLE EAST & AFRICACHINA
Import change for the 12
months to January 2018
Import change for the 12
months to October 2017
Import change for the 12
months to November 2017
Import change for the 12
months to November 2017
220
1
2
1 Estimates are included for those
countries that have not reported data.

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illustrates year-on-year
changes in exports –
3
OUR MARKETS
GLOBAL EXPORTS
GROWTH IN DAIRY
EXPORTS FROM
NEW  ZEALAND IN JANUARY.
STEADY GROWTH FROM THE
EU AND THE US
Total New Zealand dairy
exports in January increased
3% or 10,000 MT compared
to the same month last year.
Growth was driven by WMP
and fluid and fresh dairy, up a
combined 16% or 24,000 MT
for the month, however
this was slightly offset
by declines in AMF, SMP
and butter, down a combined
14,000  MT.
Exports for the 12 months
to January declined 1% or
43,000 MT on the previous
comparable period.
While exports of WMP and
fluid and fresh dairy, two
of New Zealand’s largest
export categories were up a
combined 6% or 97,000  MT,
most other categories
declined over the period.
EU dairy exports in
December increased by 2%
or 6,000 MT compared to
the same month last year.
Exports of fluid and fresh
dairy, cheese and SMP grew
a combined 9,000  MT,
however this was offset by
declines in caseinate, whey
powder and lactose.
Exports for the 12 months
to December were up 6% or
286,000 MT on the previous
comparable period.
Total exports of SMP
increased 205,000 MT
or 36% as Europe
continues to sell down
its post-intervention
SMP inventory.
US dairy exports in
January increased by 8% or
14,000 MT compared to the
same month last year.
Increases were seen across
most export categories, in
particular whey powder and
cheese, which were up a
combined 9,000  MT.
Exports for the 12 months
to January were up 5% or
108,000 MT on the previous
comparable period.
Cheese, whey powder and
SMP exports experienced
the largest growth, up a
combined 9% or 115,000  MT,
offset by declines in fluid and
fresh dairy and WMP.
Australia dairy exports
decreased 12% or 7,000 MT
in January compared to the
same month the previous
year. This was largely driven
by exports of SMP and
cheese, down 29% compared
to the same month last year.
Exports for the 12 months to
January were down 2%, or
14,000 MT on the previous
comparable period.
The decline in exports this
year was driven by WMP,
SMP and whey powder,
three of the larger export
categories, which were down
a combined 41,000 MT. This
decline was partially offset
by a 34,000 MT increase in
fluid and fresh dairy.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
52
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6
Export change for the 12
months to January 2018
Export change for the 12
months to January 2018
Export change for the 12
months to January 2018
Export change for the 12
months to December 2017

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illustrates year-on-year
changes in production –
4
OUR MARKETS
GLOBAL PRODUCTION
INCREASED
PRODUCTION  FROM
THE EU  IN JANUARY.
NEW  ZEALAND PRODUCTION
DOWN FOR THE MONTH
Total New Zealand milk
production in February was
down 2% compared to the
same month last year, as the
difficult weather conditions
that have hampered production
for most of the season continue
to impact pasture quality.
For the 12 months to February,
milk production was up 1%
compared to the same period
the previous year.
Fonterra collections have been
reported for February, see page
5 for details.
Australia milk production
in February increased 2%
compared to the same month
last year, largely due to
favourable weather conditions.
Production for the 12 months to
February was up 1% compared
to the same period the
previous year.
Milk production growth
continues to be steady,
particularly in South East
Australia, where improved
seasonal conditions and
cost efficiencies have
increased production.
Fonterra collections in Australia
have been reported for
February, see page 5 for details.
EU milk production in
January was up 4% compared
to the same month last year,
driven by continued strong
dairy prices
While production growth was
experienced across most of
Europe, Germany and Italy
had the highest growth, up
a combined 7% in January.
This was partially offset by
decreases in both Hungary
and Sweden.
Production for the 12 months to
January was up 2% compared
to the same period the
previous year.
US milk production in
January increased 2%
compared to the same month
last year.
The increase in production
is largely driven by larger
herd numbers and improved
production per cow.
Milk production for the
12 months to January increased
by 1% compared to the same
period the previous year.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
Production change
for the 12 months to
February 2018
Production change
for the 12 months to
February 2018
Production change
for the 12 months to
January 2018
Production change

for the 12 months to
January 2018
1112

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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 28 February
Decrease for the season
from 1 June to 28 February
Decrease for the season
from 1 June to 28 February
Increase for the season from
1 July to 28 February
321
28
NEW ZEALAND MILK COLLECTION
Fonterra’s milk collection
across Australia in February
reached 11 million kgMS,
3 million kgMS higher than
February last season.
February collections were
up 30% due to Fonterra’s
increased market share
and favourable seasonal
conditions that continue to
support production growth
from both existing and
new suppliers.
North Island milk
collection in February
reached 77 million kgMS,
3% down on February
last season.
South Island milk
collection in February
reached 59 million kgMS, 5%
below February last season.
Milk collections dropped
early in the month after a dry
January, however rain later
in the month has resulted
in a recovery in production
for Otago and Southland
in February.
Fonterra’s milk collection
across New Zealand
in February reached
135 million kgMS, 4% behind
February last season.
Collection volumes
decreased in most regions
in February, as the impact of
difficult weather conditions
continues to effect pasture
quality and feed growth rate.
For the nine months to
28 February, milk collection
was 1,171 million kgMS, 2%
behind last season.
Decrease of 3%
on last season
1,480M
KGMS
In March, Fonterra confirmed
its DIRA forecast milk collection
at 1,480 million kgMS.
Despite more favourable
weather conditions recently,
the Co-operative still expects its
New Zealand milk volumes to
be down for the year.
We will continue to provide
updates as the season
progresses.
Forecast Fonterra
Milk Collection Across
New Zealand

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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 JAN
MAY
AUG
OCT
JAN MAR MAY AUG OCT MAR




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.

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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 was
volatile through February but
ultimately depreciated on
the back of a recovery in the
US dollar.
Fonterra GDT results at
last trading event
20 March 2018:
The next trading event will be held on 3 April 2018. Visit www.globaldairytrade.info for more information.
Change in Fonterra’s
weighted average product
price from previous event
1.7
Fonterra’s weighted
average product price

(USD/MT)
3,766
USD
Fonterra product quantity
sold on GDT
000’ MT
17.5
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
USD 6,249/MT
0.1
AMF
USD 5,281/MT
0.0
BUTTER
USD 3,226/MT
0.2
WMP
USD 4,948/MT
3.5
RENNET CASEIN
USD 3,609/MT
4.0
CHEDDAR
USD 1,955/MT
10.3
SMP
17,452
MT
LATEST AUCTION
448,292
MT
FINANCIAL
YEAR‑TO‑DATE

SCIENCE MEETS ART AS FONTERRA
TAKES HOME TOP CHEESE HONOURS
Fonterra’s cheese makers
were in the spotlight
this month when Kapiti
and NZMP took home
three of the country’s top
awards for cheese at the
New Zealand Champion of
Cheese Awards.
Kapiti Kikorangi, one
of New Zealand’s most
honoured blue cheeses
was the Champion Export
Cheese trophy winner,
while NZMP’s Strong
Cheddar Cheese was the
Champion Cheddar of the
night. Kapiti Kahurangi
was the people’s favourite,
winning the Champion
Cheese Lover’s Choice
Award for the fourth
year running.
A team of 28 judges, led
by Australian Master Judge
Russell Smith, assessed
more than 2,000 kilograms
of cheese on presentation,
rind appearance, texture,
aroma and flavour.
The team at Fonterra’s
Eltham site in Taranaki,
where Kapiti Kikorangi
and Kapiti Kahurangi are
crafted, were anything
but blue last night. Lead
Cheese Maker, Cathy Lang
said it was fantastic for
Kapiti to be honoured with
these awards.
“We are really proud of our
blues. People might not
know that we have been
growing our own strains of
penicillium roqueforti (blue
mould) to make our blue
cheeses since 1951.”
“It is both a science and an
art, but what makes a great
cheese is the milk that
goes into it. Quality milk
from grass-fed cows means
that we can produce award
winning cheese”.
Fonterra NZMP Strong
Cheddar Cheese is crafted
at Fonterra’s Lichfield
plant in Waikato. Fonterra
Process Project Manager,
Sam Pokaitara said the
team was really happy with
the judges’ evaluation of
the cheese.
“It really recognises the
skill of our cheese makers
and the work that goes into
making the best cheese.”
7
OUR PERFORMANCE

Advanced technology
set to deliver 70%
reduction in water use
at Darfield
Good progress is being made
on advanced technology
that will reduce the amount
of groundwater extracted
for Fonterra’s Darfield
manufacturing site by
around 70%.
Darfield is already a
world-leading facility and
the committment to water
processing technology will
have a significant impact on
its environmental footprint.
“This will save the equivalent
of around 100 tanker loads
of water, every day,” says
Robert Spurway, Head of
Fonterra’s Global Operations.
“As well as reducing water
use, the new technology also
decreases the amount of
water the site discharges. It’s
a win-win situation.”
The new technology involves
a reverse osmosis technique
to purify the water extracted
from cow’s milk during the
manufacturing process.
Water is passed through a
membrane filtration system
which makes it drinkable
and suitable for use in a
range of on-site activities
such as cooling, heating
and cleaning.
“We’re prioritising our
committment to reduce
water consumption. Last
year we announced our
2020 target to reduce the
amount of water we use
across our 26 New Zealand
manufacturing sites by 20%.
“The new technology will
go a significant way toward
helping us achieve our target,
creating a manufacturing site
that’s more self-sufficient.”
The new technology is
expected to be up and
running by October this year,
in time for the 2018/2019
milk season.
Fonterra launches
cutting edge virtual
reality technology,
taking health and safety
into a future state
Fonterra and Beca have
partnered to develop a
breakthrough virtual reality
health and safety training
technology. The cutting-edge
solution lets employees
navigate the Co-operative’s
manufacturing and
distribution sites without the
need to set foot on site and
will help substantially reduce
on-boarding times. The
new technology will place
Fonterra at the forefront
of global health and safety
innovation and is part of a
business wide commitment
to become a world leader in
risk mitigation.
Fonterra Director of Health
and Safety, Resilience
and Risk Greg Lazzaro
says VR has the potential
to be a game changer at
the Co-operative.
“The opportunities for VR
are significant. With this
solution, we can replicate
the physical environment
of our sites, so staff can
undertake virtual health
and safety training in an
extremely immersive and
realistic way. That means our
people can learn about and
identify potential hazards
more quickly than ever,
encouraging more engaged
employees and better
workplace safety.
Following a successful pilot,
the new VR technology will
replace a significant portion
of the hands-on health and
safety training at Fonterra
that is often costlier and less
effective. Training can be
tailored to each of Fonterra’s
sites and tested through the
completion of modules.
Andrew Cowie, Project
Manager for Beca, says the
technology is the future of
health and safety training
and can be easily replicated
in other workplaces and
training areas.
“Walmart now trains using
VR, American footballers are
using it and so is the military.
Our clients are increasingly
interested in the application
of VR technologies and
the value it can add to
their businesses.
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 Middle East and Africa to October; Asia and Latin America to November; China to January.
NOTE: Data for EU to December; New Zealand, US and Australia to January.
NOTE: Data for EU and US to January; New Zealand and Australia to February.
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


,


,

,
,
,

,

, 
,

,
,
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)
FEBRUARY
2018
FEBRUARY

2017
MONTHLY
CHANGE
SEASON-
TO-DATE
2017/18
SEASON-
TO-DATE
2016/17
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
135.3140.9(4.0%)1,171.21,194.5(2.0%)
North Island76.778.9(2.8%)712.8732.7(2.7%)
South Island58.662.0(5.4%)458.4461.9(0.8%)
Fonterra Australia11. 08.529.9%111.087.027.6%
Fonterra GDT results
This table provides more
information on the latest
results, including a snapshot
of the year-to-date results.
LAST TRADING EVENT
(20 MARCH 2018)
YEAR-TO-DATE

(FROM 1 AUGUST 2017)
Quantity Sold on GDT
(Winning MT)
17,452448,292
Change in Quantity Sold on GDT
over same period last year
(20.4%)6.4%
Weighted Average Product Price
(USD/MT)
3,7663,311
Change in Weighted Average
Product Price over same period
last year
20.2%3.9%
Change in Weighted Average
Product Price from previous event
1.7%–
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