Global Dairy Update July 2018

1
GLOBAL DAIRY
UPDATE
JULY 2018
KEY DATES
Mid September 2018
FY18 Annual Results
Announcement
12 November 2018
Fonterra Shareholders' Fund
Annual Meeting
1 December 2018
Compliance Date for Share
Standard 2018/19 Season
December 2018
FY19 Q1 Business Update
• New Zealand production increased in June
over previous period but accounts for only a
small portion of total milk production for the
full season.
• US and European exports up. New Zealand
exports slightly down and Australian exports
flat in May.
• In March import demand grew in all regions
except Latin America and Middle East
and Africa.
• Fonterra’s early season milk collection in the
first month of the 2018/19 season, stood at
13 million kgMS. This represents less than 1%
of the full season forecast.
• Muddy Buns, Dirty Dirty Bread, or Zang Zang Bao as they’re
known in China, are creating a social media frenzy and
driving a further craving for butter around the world.
• Creative tea and coffee trends good news for
New Zealand dairy.
• Half a million litres of Pahiatua groundwater to be saved
every day.

%%%
To view a chart that
illustrates year-on-year
changes in production –
2
OUR MARKETS
GLOBAL PRODUCTION
NEW  ZEALAND
PRODUCTION INCREASED
IN JUNE OVER PREVIOUS
PERIOD BUT ACCOUNTS
FOR ONLY A SMALL
PORTION OF TOTAL MILK
PRODUCTION FOR THE
FULL SEASON
Total New Zealand milk
production increased 11% in
June, compared to the same
period last year. This early in
the season, June accounts for
only a small portion of total
milk production for the full
season. The increase over
last season partly represents
improved conditions at the
start of the season. In the
early part of the season,
supply is also supported by
winter milking.
For the 12 months to June,
milk production was flat
compared to the same
period last year.
Fonterra collections have
been reported for June, see
page 5 for details.
Australian milk
production increased
3% in May, compared to
the same period last year,
despite variable winter
conditions across key
production regions.
Production for the 12 months
to May was up 3% compared
to the same period the
previous year.
This growth continues to
be driven by south east
Australian production.
Fonterra collections
in Australia have been
reported for June, see page 5
for details.
EU milk production
increased 2% in May,
compared to the same
period last year, driven
by better than expected
weather conditions.
European growth continues
to be driven by Germany,
up 3%. Italy, France and the
United Kingdom were up 8%,
2% and 4% respectively.
Production for the 12 months
to May was up 3% compared
to the same period the
previous year.
US milk production
increased 1% in May,
compared to the same
period last year.
The US continues to
increase production per
cow, averaging 931kg, up
7kg relative to the prior
comparable period.
Milk production for the 12
months to May increased by
1% compared to the same
period the previous year.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
Production change
for the 12 months to
May 2018
Production change
for the 12 months to
June 2018
Production change
for the 12 months to
May 2018
Production change

for the 12 months to
May 2018
0313
%

%%
To view a chart that
illustrates year-on-year
changes in exports –
%%
3
OUR MARKETS
GLOBAL EXPORTS
US AND EUROPEAN
EXPORTS UP. NEW  ZEALAND
EXPORTS SLIGHTLY DOWN
AND AUSTRALIAN EXPORTS
FLAT IN MAY
Total New Zealand dairy
exports decreased 3%, or
8,000 MT, in May compared
to the same period last year.
AMF and infant formula grew
7,000 MT and 6,000  MT,
respectively. This was offset
by a decline in WMP of
23,000 MT, or 20%.
Exports for the 12 months
to May were up 1%, or
26,000 MT, on the previous
comparable period. Growth
continued to be driven by
fluid and fresh dairy up 19%,
or 50,000 MT. WMP and
infant formula were up a
combined 62,000 MT for
the period. These gains were
partially offset by a combined
decline of 54,000 MT in
cheese and AMF.
EU dairy exports increased
by 4%, or 14,000 MT, in
February compared to the
same period last year.
Growth was across the
majority of export categories,
in particular infant formula
and SMP, up a combined
19%, or 19,000 MT. A decline
of 11%, or 12,000 MT, was
seen in the largest category,
fluid and fresh dairy.
Exports for the 12 months
to February were up 7%,
or 341,000 MT, on the
previous comparable period.
SMP continued to be the
primary driver, up 40%, or
225,000 MT. In addition,
growth continued across
most export categories
except for caseinate and
butter, down a combined
53,000 MT, or 23%.
US dairy exports increased
by 15%, or 30,000 MT, in
May as US milk production
growth continued. SMP,
lactose and WPC and WPI
remain the primary growth
categories adding 27,000 MT
over the same period
last year.
Exports for the 12 months
to May were up 8%, or
177,000 MT, on the previous
comparable period.
Growth was seen across
all categories apart from
fluid and fresh dairy and
casein, down a combined
10,000 MT. Cheese,
SMP and lactose saw the
highest growth, adding
37,000 MT, 34,000 MT and
33,000 MT respectively.
Australian dairy exports
were flat in May compared
to the same period last
year. Combined growth in
fluid and fresh dairy and
infant formula of 3,000  MT,
was offset by a combined
decline in SMP and WMP of
3,000  MT.
Exports for the 12 months
to May were up 6%, or
41,000 MT, on the previous
comparable period.
Fluid and fresh dairy, SMP
and infant formula make
up the majority of the 6%
growth, adding a combined
60,000 MT. However, these
gains remain dampened
by declines in butter, WMP
and whey powder, down a
combined 16,000  MT.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
86
1
7
Export change for the 12
months to May 2018
Export change for the 12
months to May 2018
Export change for the 12
months to May 2018
Export change for the 12
months to February 2018

%%%
%
To view a chart that
illustrates year-on-year
changes in imports –
4
OUR MARKETS
GLOBAL IMPORTS
IN MARCH IMPORT
DEMAND GREW  IN ALL
REGIONS EXCEPT LATIN
AMERICA AND MIDDLE
EAST AND  AFRICA
Latin American dairy
import volumes¹ decreased
6%, or 10,000 MT, in
March, compared to the
same period last year. This
was driven by three out of
the four largest categories:
cheese, fluid and fresh dairy
and WMP down a combined
10,000 MT, or 13%.
Imports for the 12 months
to March were down 2%,
or 39,000 MT, compared to
the same period last year.
Large declines in WMP and
AMF of 95,000 MT and
18,000 MT respectively were
the primary cause of this
downside. This was partially
offset by continued strong
demand for SMP, which was
up 53,000  MT.
Asia (excluding China)
dairy import volumes¹
increased 6%, or 23,000  MT,
in March, compared to
the same period last year.
Increased demand for WMP,
fluid and fresh dairy and
SMP drove the upside for
the period, up a combined
24,000 MT. These gains were
partially offset by declines in
whey powder of 3,000MT.
Imports for the 12 months
to March were up 1%, or
48,000MT, compared to
the same period last year.
Continued growth in WMP
and cheese, up a combined
102,000 MT, partially offset
continued decline in SMP,
which was down 35,000  MT.
Middle East and Africa
dairy import volumes¹
decreased 2%, or 9,000  MT,
in March, compared to the
same period last year. This
was driven by fluid and fresh
dairy and cheese down
a combined 32,000  MT.
However growth in WMP
and SMP of a combined
19,000 MT, slightly offset
this downside.
Imports for the 12 months
to March were up 1%, or
30,000 MT, compared to the
same period last year. This
was driven by strong growth
in SMP and cheese, up a
combined 91,000 MT. These
gains were partially offset
by the continuing decline in
WMP of 50,000  MT.
China dairy import
volumes² increased 3%,
or 7,000 MT, in March
compared to the same period
last year. This was driven by
a combined 14,000 MT, or
22%, growth in fluid and
fresh dairy, butter and lactose
categories. Declines in WMP
of 6,000 MT partially offset
this growth.
Imports for the 12 months
to March were up 17%, or
394,000 MT, compared to
the same period last year.
Strong demand out of China
continued with imports across
all key categories up for the
period. Infant formula, WMP
and SMP imports added a
combined 220,000 MT of
additional volumes.
LATIN AMERICAASIAMIDDLE EAST & AFRICACHINA
Import change for the 12
months to March 2018
Import change for the 12
months to March 2018
Import change for the 12
months to March 2018
Import change for the 12
months to March 2018
117
1
2
1 Estimates are included for those countries that have not reported data.2 China has suspended trade data, citing system technical issues. Based on exports to
China, we estimate April volumes grew 18% compared to the previous comparable period.

%%%%
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
NEW ZEALANDNORTH ISLANDSOUTH ISLANDAUSTRALIA
Increase for the season from
1 June to 30 June
Increase for the season from
1 June to 30 June
Increase for the season from
1 June to 30 June
Increase for the 2017/18
season compared to the
previous season
14139
24
NEW ZEALAND MILK COLLECTION
Fonterra’s milk
collection across
Australia for the
2017/18 season reached
153 million kgMS,
30 million kgMS higher
than the 2016/17 season.
In June milk collection reached
10 million kgMS, 14% ahead of
the same period last season.
This was in part due to gains in
market share.
Winter conditions have been
variable across key production
regions with rainfall surpluses
(Tasmania and south-west
Victoria) and rainfall deficits
(northern Victoria and
Gippsland) typifying winter
to date. This has led to an
increasing number of suppliers
drying off herds earlier than
usual in preparation for the
2018/2019 season.
North Island milk collection
in June reached 10 million
kgMS, 14% above June
last season.
This was driven by volume
growth in Northland, Waikato,
Bay of Plenty and Taranaki.
South Island milk collection
in June reached 3 million kgMS,
9% above June last season.
Good pasture conditions in
Otago and Southland due
to favourable weather drove
the increase.
Fonterra’s early season
milk collection in the
first month of the
2018/19 season stood
at 13 million kgMS.
This represents less
than 1% of the full
season forecast.
These volumes are small in the
context of the full season, as is
usual for this time of the year.
The increases over last June are
also small and are due partly
to slightly more favourable
weather and pasture conditions
at the start of this season, in
both the North and South
Islands. A further increase
in winter milk contracts this
season has also contributed
to supply.

%%
%%%
To view more information,
including a snapshot of the
rolling year-to-date results –
%
6
%
GDT PRICE INDEXNZDUSD SPOT RATE
JUL MAY SEP DEC FEB MAY JUL SEP DEC FEB JUL 



,
,
.
.
.
.
.
PRICE INDEX
NZD  USD
OUR MARKETS
FONTERRA GLOBAL DAIRY TRADE RESULTS
Fonterra GDT sales
by destination:
Dairy commodity prices
and New Zealand
dollar trend
The New Zealand dollar fell
sharply late in the month
on the back of the stronger
US dollar.
Fonterra GDT results at
last trading event
17 July 2018:
The next trading event will be held on 7 August 2018. Visit www.globaldairytrade.info for more information.
Change in Fonterra’s
weighted average product
price from previous event
0.8
Fonterra’s weighted
average product price

(USD/MT)
3,255
USD
Fonterra product quantity
sold on GDT
000’ MT
24.7
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
USD2,973/MT
2.4
WMP
USD1,974/MT
1.5
SMP
USD 3,596/MT
3.2
CHEDDAR
USD5,629/MT
5.2
AMF
USD4,953/MT
8.1
BUTTER
USD 4,602/MT
9.6
RENNET CASEIN
24,717
MT
LATEST AUCTION
610,185
MT
FINANCIAL
YEAR‑TO‑DATE

7
OUR PERFORMANCE
'Muddy Buns' cleaning
up the butter market
Muddy Buns, Dirty Dirty
Bread, or Zang Zang Bao
as they’re known in China,
are creating a social media
frenzy and driving a further
craving for butter around
the world.
Fonterra Edgecumbe is
all geared up to handle
this global trend and is
commissioning a new
butter line which will nearly
double the factory’s butter
sheet production from
4,500 metric tonnes to
7,000 metric tonnes.
Fonterra General Manager
Marketing, Global
Foodservice, Susan Cassidy
says “The Dirty Dirty Bread
can best be described as a
chocolate croissant. People
love the flaky chocolate
pastry that’s coated in rich
chocolate ganache and
sprinkled with cocoa powder.
“It makes it impossible to
keep your face clean while
eating. They are popular with
celebrities who have taken
to social media to share
images of their ‘muddy bun
face’ experience.”
Ms Cassidy says demand
for butter is as strong as
ever. People want natural
products and they are
prepared to pay for them.
And that’s why global butter
prices, including here in
New Zealand, continue to be
strong.
“Even in temperatures of
minus ten degrees, crowds of
people are queuing for hours
to get their hands on their
Muddy Bun.”
Edgecumbe’s Operations
Manager, Allan Muggeridge,
says the first butter sheet will
roll off the new butter line on
1 September.
“We’ve been watching
demand for butter build for
a number of years now. The
building part of the project
started in May so it’s been
a quick turnaround to get
it up and running,” says
Mr Muggeridge.
Fifteen local contractors
have been employed to
complete the expansion at
the site, which employees
380 people.
“It’s been a real boost
to the local business
community, especially after
the rough past 12 months
Edgecumbe has had,” says
Mr Muggeridge.
Creative tea and coffee
trends good news for
New Zealand dairy
It’s tea, but not as you know
it. Right now people are
adding more than just milk
and sugar to their cuppa’s
and Fonterra is set to meet
the demand for adventurous
tea and coffee drinks around
the world.
Beverages made with
yoghurt, topped with
cream cheese and mixed
with cream are growing in
popularity, leading Fonterra
to establish a new channel
within its Global Foodservice
business, Beverage House.
Almost 600 million cups of
tea and coffee are consumed
out-of-home daily in the
Asia Pacific region, a 22%
increase on five years ago.
General Manager Marketing,
Global Foodservice,
Susan Cassidy says Beverage
House will provide premium
Anchor Food Professionals
products to the growing
number of modern coffee
and tea houses, beverage
kiosks and dessert bars.
“In Asia, consumers are
moving from traditional
‘straight’ brews to drinks with
dairy, as they look for a more
indulgent way to enjoy their
daily fix of coffee or tea,” says
Ms Cassidy.
The trend of adding dairy to
more traditional beverages
started in China with the tea
macchiato, which is green
tea topped with a mix of
cream and cream cheese.
“This trend was really driven
by youth and took off, with
people queuing for hours to
get the latest creation from
their favourite tea house.”
“We moved quickly and as
a result the tea macchiato
alone grew the volume of
our cream and cream cheese
sales by 47% in the first half
of the 2017/18 financial year.”
Since the start of 2018
Beverage House has sold
more than 30,000 metric
tonnes of product, enough
to create the equivalent
of more than 400 million
tea macchiatos.
“Beverage House has mainly
been focussed on China
so far, but the potential for
growth in other markets is
huge. We are now using what
we’ve learnt to look at other
markets where beverages
with dairy are growing
in popularity.”
Beverage House sits
alongside Fonterra’s existing
Foodservice channels: Quick
Serve Restaurants, Italian
Kitchen and Asian Bakery.
“Having a standalone
channel within our
Foodservice business means
we can be more targeted
with the service we offer our
beverage customers and gain
a better understanding of
changing consumer tastes
and trends,” says Ms Cassidy.
Shifting more milk, quicker,
into value-added products
through our Consumer
and Foodservice business
is a key part of Fonterra’s
strategy to add more value
to our farmers’ milk.
FONTERRA EDGECUMBE CREAM
PLANT MANAGER DOUG GERRY WITH
ENGINEERING PROJECT MANAGER
WILL ROUSE SHARING THEIR ‘MUDDY
BUN FACE’ EXPERIENCE

For more details on the
commitments –
8
OUR CO-OP
Half a million litres of
Pahiatua groundwater
to be saved every day
Half a million litres of
Pahiatua groundwater (about
the same as 18 milk tanker
loads) will be saved every day
thanks to the development
and installation of a
ground-breaking reclaimed
water system at the local
Fonterra site.
The site team came up with
an innovative way to reuse
water from condensation
that’s produced during
the milk powder
manufacturing process.
Robert Spurway, Fonterra’s
COO Global Operations,
says the water-saving
initiative is a testament
to the Pahiatua team’s
innovative and can-do
approach to sustainability.
“Pahiatua is already Fonterra
New Zealand’s most water
efficient site, and some
clever thinking has taken it
to the next level.”
“As an organisation, we’ve
committed to a 20%
reduction in water use by
2020. Pahiatua is well ahead
of the game.”
Tracey Collis, Tararua District
Council Mayor, says she
is “extremely proud of the
team at Fonterra and their
ongoing commitment to
sustainability. On several
occasions they have hosted
councillors, staff and Iwi on
site to share information on
new technology and view the
systems in action.”
“We very much appreciate
the transparency and passion
shown by Fonterra to
continually use technological
efficiencies which also have
environmental benefits. This
creates a win-win outcome
for all.”
Horizons Regional Council’s
environment committee
chair Gordon McKellar also
commends the team and
says it’s great to see Fonterra
introducing innovative
systems that will directly
reduce water use in Pahiatua.
“Practices like reclaimed
water systems are a great
way to involve staff in
sustainability initiatives
that will improve their
local environment,” says
Cr McKellar.
The P3 milk powder plant at
Pahiatua (built in 2015) was
already 100% self-sufficient
for water, meaning it does
not use any groundwater in
the manufacturing process.
However, the evaporators
often produced more water
than was required and the
excess was typically irrigated
onto surrounding farmland.
Now, rather than irrigate
the excess water, the
new reclaimed water
system treats the excess
water via reverse osmosis
and chlorination before
combining it with the site’s
main water supply for
general use.
The successful water re-use
project is a hat tip to good
old kiwi ingenuity and the
benefit of a team-based
approach to problem solving.
Site Operations Manager
Glenn Broughton says he
is incredibly proud of the
project. “After seeing an
opportunity to innovate,
the team completed the
project in an extremely
cost-effective manner.”
In 2017 Fonterra made
six commitments to
New Zealand water ways,
including reducing water
use (20% by 2020) and
improving wastewater
quality at all our
manufacturing plants.
PAHIATUA OPS SITE MANAGER
GLENN BROUGHTON WITH
FONTERRA COO GLOBAL OPERATIONS
ROBERT SPURWAY

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











,









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








AVERAGE
IMPORTS
MIDDLE EAST & AFRICALATIN AMERICA
ASIACHINA
JUL JUN APR MAR DEC JAN FEB SEP NOV OCT MAY AUG 
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 EU, US and Australia to May; New Zealand to June.
NOTE: Data for EU to February; New Zealand, US and Australia to May.
NOTE: Data for Asia, China, Middle East and Africa and Latin America to March.
SOURCE: Government milk production statistics/GTIS trade data/Fonterra analysis.

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

,

,
,
,
,
,

,
,
,
,
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)
JUNE
2018
JUNE

2017
MONTHLY
CHANGE
SEASON-
TO-DATE
2018/19
SEASON-
TO-DATE
2017/18
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
13.311. 813.0%13.311. 813.0%
North Island10.49.114.2%10.49.114.2%
South Island2.92.69.2%2.92.69.2%
MILK COLLECTION
(MILLION KGMS)
JUNE
2018
JUNE

2017
MONTHLY
CHANGE
SEASON-
TO-DATE
2017/18
SEASON-
TO-DATE
2016/17
SEASON-
TO-DATE
CHANGE
Fonterra Australia9.98.713.9%153.4123.424.3%
Fonterra GDT results
This table provides more
information on the latest
results, including a snapshot
of the year-to-date results.
LAST TRADING EVENT
(17 JULY 2018)
YEAR-TO-DATE

(FROM 1 AUGUST 2017)
Quantity Sold on GDT
(Winning MT)
24,717610,185
Change in Quantity Sold on GDT
over same period last year
(3.4%)1.8%
Weighted Average Product Price
(USD/MT)
3,2553,363
Change in Weighted Average
Product Price over same period
last year
(6.1%)4.0%
Change in Weighted Average
Product Price from previous event
(0.8%)–
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
Global Dairy Trade, 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