Global Dairy Update September 2018

1
GLOBAL DAIRY
UPDATE
SEPTEMBER 2018
KEY DATES
8 November 2018
Fonterra Co-operative Group
Annual Meeting
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
• Early season production in New Zealand
stronger than last year. Production down in
Australia and slowing in Europe.
• Export growth from New Zealand and the US
in July. European exports weaken in May.
• Imports in Asia show continued strong
demand. Middle East and Africa remain flat
while Latin America declines.
• Fonterra’s early season milk collection
across New Zealand for the three months to
31 August reached 127 million kgMS, around
8% of total season production.
• A little piece of Clandeboye in half a billion pizzas
• Anchor Protein+ a new twist on flavoured milk.
• Fonterra has recently announced its annual results
• Total cash pay-out for 2017/2018 of $6.79.
• An additional 465 million
LME into higher-value
Advanced Ingredients,
Consumer and
Foodservice products.
• Fonterra is pleased to welcome Brett Henshaw to the
Co-operative as Managing Director, Fonterra Brands,
New Zealand (FBNZ).
Visit our website for more
details –

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To view a chart that
illustrates year-on-year
changes in production –
2
OUR MARKETS
GLOBAL PRODUCTION
EARLY SEASON
PRODUCTION IN
NEW  ZEALAND STRONGER
THAN LAST YEAR.
PRODUCTION DOWN IN
AUSTRALIA AND SLOWING
IN  EUROPE
Total New Zealand milk
production increased 5%
in August compared to
the same month last year
although it is still early in
the season. This was driven
by favourable weather
conditions in Taranaki,
Central Districts, Canterbury
and Southland/Otago. Some
of this increase has been
offset as a result of heavy
rains in the Bay of Plenty.
For the 12 months to August,
milk production was flat
compared to the same
period last year.
Fonterra collections have
been reported for August,
see page 5 for details.
Australian milk
production decreased 4%
in July compared to the same
period last year. This is being
driven by rising on-farm
input prices, droughts across
parts of the country and cow
cull rates increasing (up 14%
in July, year-on-year).
Production for the 12 months
to July was up 2% compared
to the same period the
previous year.
The likelihood of an El Niño
developing remains at 50%
which will continue to
pressure milk production
throughout the season.
Fonterra collections in
Australia have been reported
for August, see page 5
for details.
EU milk production
increased by less than 1% in
July compared to the same
period last year as conditions
became more favourable.
Growth for the month of
July was predominantly
driven by Germany, France
and Spain up 3%, 2% and
4% respectively but weekly
production figures for
Germany and France in
August are showing negative
growth year on year.
Production for the 12 months
to July was up 3% compared
to the same period the
previous year.
US milk production was
up 1% in August compared
to the same period last year.
Hot and humid weather
conditions had the potential
to slow growth but August
milk production remained
around last year's level. An
increase in cow numbers
regardless of heavy slaughter
rates sets the US up to meet
expected annual growth
of 1%.
Milk production for the 12
months to August increased
by 1% compared to the same
period last year.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
Production change
for the 12 months to
July 2018
Production change
for the 12 months to
August 2018
Production change
for the 12 months to
July 2018
Production change

for the 12 months to
August 2018
0213
%

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To view a chart that
illustrates year-on-year
changes in exports –
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3
OUR MARKETS
GLOBAL EXPORTS
EXPORT GROWTH
FROM  NEW  ZEALAND
AND  THE US IN JULY.
EUROPEAN EXPORTS
WEAKENED IN MAY
Total New Zealand dairy
exports increased 6%, or
17,000 MT, in July compared
to the same period last
year. This increase is driven
by WMP and butter, up
a combined 32,000  MT.
However, declines in SMP
of 16,000 MT dampened
this increase.
Exports for the 12 months
to July were down 2%, or
57,000 MT, on the previous
comparable period. This
continues to be driven
by lower volumes across
WMP, AMF, cheese and
SMP, down a combined
116,000 MT. Fluid and fresh
dairy and infant formula
continued strong growth, up
76,000  MT.
EU dairy exports decreased
by 6%, or 28,000 MT, in
May compared to the same
period last year. This was
primarily driven by declines
in fluid and fresh dairy and
SMP, down a combined
30,000 MT. This was partially
offset by gains in infant
formula, up 6,000  MT.
Exports for the 12 months
to May were up 4%, or
220,000 MT, on the
previous comparable period.
Continued upside in SMP
and infant formula remain
the primary drivers behind
European dairy export
growth, up a combined
222,000  MT.
US dairy exports increased
by 12%, or 20,000 MT, in
July compared to the same
period last year. Growth
in SMP and lactose of a
combined 17,000 MT, was
the primary driver behind
this increase.
Exports for the 12 months
to July were up 10%, or
218,000 MT, on the previous
comparable period.
This increase was driven
by growth across the five
largest export categories,
SMP, lactose, cheese, whey
powder and WPC and WPI,
up a combined 185,000  MT.
Australian dairy exports
increased 4%, or 2,000  MT,
in July compared to the same
period last year. This growth
was due to upside in most
categories, up 10,000  MT,
offset by declines in butter,
SMP, cultured products,
other powders and caseinate
of a combined 8,000  MT.
Exports for the 12 months
to July were up 5%, or
33,000 MT, on the previous
comparable period.
Fluid and fresh dairy, and
infant formula continued
to make up the majority of
growth in Australian exports,
up a combined 45,000 MT
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
105
2
4
Export change for the 12
months to July 2018
Export change for the 12
months to July 2018
Export change for the 12
months to July 2018
Export change for the 12
months to May 2018

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To view a chart that
illustrates year-on-year
changes in imports –
4
OUR MARKETS
GLOBAL IMPORTS
IMPORTS IN ASIA SHOW
CONTINUED STRONG
DEMAND. MIDDLE EAST AND
AFRICA REMAIN FLAT WHILE
LATIN AMERICA DECLINES
Latin American dairy
import volumes¹ decreased
5%, or 8,000 MT, in May
compared to the same
period last year. This
decrease was driven by
cheese, SMP and AMF down
13%, or 12,000 MT. This
was partially offset by gains
in WMP and lactose, up
3,000  MT.
Imports for the 12 months
to May were down 1%, or
25,000 MT, compared to the
same period the previous
year. This decline was
primarily driven by WMP
and AMF, down a combined
88,000 MT. An increase in
SMP and whey powder of
62,000 MT offset some of
the decline.
Asia (excluding China)
dairy import volumes¹
increased 3%, or 12,000  MT,
in May compared to the
same period last year.
Growth in fluid and fresh
dairy and SMP of 22,000 MT
drove the increase. A decline
in whey powder of 7,000 MT
partially dampened gains.
Imports for the 12 months
to May were up 2%, or
102,000 MT, compared to
the same period the previous
year. Continued growth
in WMP and cheese of
96,000 MT were the primary
drivers of this upside.
Middle East and Africa
dairy import volumes¹
were mostly flat in May
compared to the same
period last year. This was
driven by strong growth in
WMP of 10,000 MT, offset
by declines in fluid and fresh
dairy of 12,000  MT.
Imports for the 12 months
to May were up 4%, or
148,000 MT, compared to
the same period the previous
year. The increase is driven
by growth in SMP, cheese
and fluid and fresh dairy, up a
combined 125,000  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 May 2018
Import change for the 12
months to May 2018
Import change for the 12
months to May 2018
217
4
1
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 June volumes grew 15% compared to the previous comparable period.

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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 2018/19 SEASON
NEW ZEALANDNORTH ISLANDSOUTH ISLANDAUSTRALIA
Increase for the season from
1 June to 31 August
Increase for the season from
1 June to 31 August
Increase for the season from
1 June to 31 August
Decrease for the season
from 1 July to 31 August
2413
8
NEW ZEALAND MILK COLLECTION
Fonterra’s milk
collection across
Australia for the two
months to 31 August
reached 17 million kgMS,
down 8% on the same
period last season.
Poor seasonal conditions
are driving up input costs
resulting in increased
cow cull rates. The poor
seasonal outlook and a very
competitive milk supply
market will more than likely
continue to impact milk
supply during the 2019
financial year.
North Island milk
collection in August
reached 70 million kgMS, in
line with August last season.
This was due to good pasture
growth rates in Northland
following improved weather
conditions. This led to more
pasture feeding and reduced
use of supplementary feeds.
North Island milk collection
for the 2018/19 season to
date reached 96 million
kgMS, up 2%.
South Island milk
collection in August
reached 26 million kgMS,
13% higher than August
last season.
This is due to favourable
weather conditions,
particularly in the upper
South Island.
South Island milk collection
for the 2018/19 season to
date reached 31 million
kgMS, up 13%.
Fonterra’s early season
milk collection across
New Zealand for
the three months to
31 August reached
127 million kgMS,
around 8% of total
season production.
New Zealand collections in
August reached 97 million
kgMS, 3% up on the same
month last season.
These volumes are small
in the context of the full
season, as is usual for this
time of the year.

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To view more information,
including a snapshot of the
rolling year-to-date results –
%
6
%
GDT PRICE INDEXNZDUSD SPOT RATE
AUG  JUN NOV FEB APR JUL SEP OCT  JAN APR SEP 


,
,
,
. 
. 
.
.
.
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
over the month of August
after the Reserve Bank
New Zealand signalled a
lower-for-longer stance on
interest rate policy. US-China
trade war talk presents a key
risk event during September.
Fonterra GDT results at
last trading event
18 September 2018:
The next trading event will be held on 2 October 2018. Visit www.globaldairytrade.info for more information.
Change in Fonterra’s
weighted average product
price from previous event
1.6
Fonterra’s weighted
average product price

(USD/MT)
2,959
USD
Fonterra product quantity
sold on GDT
000’ MT
38.4
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
USD 5,421/MT
1.8
RENNET CASEIN
USD4,270/MT
0.0
BUTTER
USD 5,294/MT
0.4
AMF
USD 1,989/MT
1.2
SMP
USD 2,768/MT
1.9
WMP
USD3,503/MT
3.5
CHEDDAR
38,438
MT
LATEST AUCTION
140,997
MT
FINANCIAL
YEAR‑TO‑DATE

7
OUR PERFORMANCE
A little piece of Clandeboye in half a billion pizzas
Some already call it the
Riviera of the South and now
Timaru could also be the pizza
capital of New Zealand, as the
region becomes the Southern
Hemisphere’s largest producer
of natural mozzarella cheese.
Fonterra’s Clandeboye site fired
up its third new mozzarella
line this month, meaning it
now produces enough of the
revolutionary cheese to top
more than half a billion pizzas
a year.
The cheese, which is made
from one of the Co-operative’s
secret recipes, is made in hours
rather than in months – the
time traditional mozzarella
takes. It’s destined for pizzas all
over the world. Fonterra cheese
already tops around 50% of
the pizzas in China – one of the
fastest growing pizza markets
in the world.
Fonterra Chief Operating
Officer Global Operations
Robert Spurway said the new
plant, which was built in under
two years, is a great example
of the Co-operative’s ambition
to move more milk into value
add products.
“We’re focussed on getting
more value from every drop
of our farmers’ milk. With the
opening of this new mozzarella
plant and recent expansion
of our Darfield site, we’re able
to produce even more higher
returning products. That’s good
news for our farmers and the
communities they live in,” said
Mr Spurway.
Fonterra GM Marketing Global
Foodservice, Susan Cassidy,
said “the new plant will
double the site’s production
of mozzarella – the world’s
most popular variety of cheese,
topping more than 80% of
pizzas in Australia, China, South
East Asia and the Middle East.
We’re excited to have a slice
of this market and are looking
forward to that slice growing.
“Globally more and more
people are eating meals out of
home, in restaurants and on the
go, and the global foodservice
market is predicted to be worth
US$3 trillion by 2021. Our
foodservice business, Anchor
Food Professionals, is still
experiencing strong growth
– and this new expansion
supports our growth.”
According to global research
company Euromonitor, demand
for Western food in China has
helped pizza sales more than
double from US$1.5 billion in
2010 to US$3.5 billion in 2015.
Timaru District Mayor
Damon Odey says “it’s fantastic
to see this plan come to reality,
as it underlines the importance
of the Timaru District as a major
food hub in New Zealand, and
as an growing exporter to the
rest of the world. We welcome
this vote of confidence
that Fonterra has made in
our community.
“More and more people are
seeing the appeal of provincial
New Zealand, and investments
like this underline that people
can move to Timaru District
and get unmatched job,
housing and lifestyle options.”
Anchor Protein+ a new twist on flavoured milk
Anchor Protein+ flavoured milk
has hit New Zealand shelves,
the first time Kiwis have been
able to buy a product of its kind
in local stores.
The new beverage features 20g
of protein per serve and unlike
most flavoured milk drinks,
contains no added sugar.
Darren Moffat, Fonterra’s
General Manager of
Ready-to-Drink Beverages, said
Fonterra’s technologists spent
two years developing a product
that’s highly nutritious, as well
as great tasting.
“Anchor Protein+ flavoured
milk is the perfect choice for
people wanting a high protein,
better-for-you beverage.
“People are increasingly
seeking out nutritious on-the-
go snack options, and there’s
a growing awareness of the
importance of protein. As a
result, demand for snacking
options with good levels of
protein has sky-rocketed over
recent years,” said Mr Moffat.
Fonterra’s Head of Nutrition
Mindy Wigzell said the
Anchor Protein+ range
provides convenient ways for
New Zealanders to consume
protein throughout the day.
“Our bodies need protein every
day and getting more than just
the minimum requirement
is good for optimal health.
Research also shows spreading
protein intake throughout the
day can help our bodies use
protein more efficiently,” said
Ms Wigzell.
As well as being high in protein,
Anchor Protein+ flavoured milk
has no added sugar.
It is the third in a string of
beverages released by Fonterra
recently with a focus on
sugar reduction.
The new Primo and Mammoth
flavoured milks both contain
40% less added sugar.
All three beverages are
produced at Apollo’s new
plant in Hawke’s Bay which
has innovative beverage
filling technology.
Anchor Protein+ flavoured milk
comes in three flavours: vanilla,
chocolate and mixed berry, all
of which are made with real
milk and no artificial colours,
flavours or preservatives.

8
OUR CO-OP
FONTERRA ANNOUNCES
MANAGING DIRECTOR
FONTERRA BRANDS
NEW ZEALAND
Fonterra is pleased to
welcome Brett Henshaw
to the Co-operative as
Managing Director, Fonterra
Brands, New Zealand
(FBNZ).
Brett is currently Managing
Director of The Griffin’s Food
Company and he will take up
his role with Fonterra in the
first week of December.
Fonterra Chief Operating
Officer, Global Consumer &
Foodservice, Lukas Paravicini,
says “we are excited about
Brett joining the team. He
has an extensive 30-year
career in FMCG and we
are pleased he is coming
on board.
“Along with his time in
New Zealand, Brett has also
worked in Sydney, Singapore,
New York and the UK, and
he has a deep understanding
of consumers, their needs
and how to deliver on
those needs.”
“Brett has a strong
commercial and strategic
focus as well as end-to-end
experience across the
supply chain, including
manufacturing and
operations. He is also
recognised for the emphasis
he places on people – a
culture of mentoring,
development, teamwork
and open communication
is important to him,” says
Mr. Paravicini.
Brett says “I’m really looking
forward to taking up this key
leadership role in Fonterra
Brands and working with the
broader Fonterra team, and
our customers right across
the country.”
“As a Kiwi, who has worked
overseas for many years
prior to joining Griffin’s, I
am delighted to have the
opportunity to work with
the Fonterra Brands team on
some of New Zealand’s most
loved brands.”
Brett has previously held
brand positions with
Unilever, and a number
of senior marketing roles
with Colgate-Palmolive
worldwide. This included
Regional General
Management roles in
Australasia and in Asia,
where he was responsible
for eleven countries. He was
appointed Chief Marketing
Officer for The Griffin’s
Food Company in 2015, and
became Managing Director
in 2016.

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 and Australia to July; New Zealand and US to August.
NOTE: Data for EU to May; New Zealand, US and Australia to July.
NOTE: Data for Asia, Middle East and Africa and Latin America to May; estimates for China for April and May.
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)
AUGUST
2018
AUGUST

2017
MONTHLY
CHANGE
SEASON-
TO-DATE
2018/19
SEASON-
TO-DATE
2017/18
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
96.593.43.3%127.7122.44.4%
North Island70.070.10.0%96.594.81.8%
South Island26.523.313.4%31.327.613.3%
Fonterra Australia9.410.5(10.5%)17.118.6(8.4%)
Fonterra GDT results
This table provides more
information on the latest
results, including a snapshot
of the year-to-date results.
LAST TRADING EVENT
(18 SEPTEMBER 2018)
YEAR-TO-DATE

(FROM 1 AUGUST 2018)
Quantity Sold on GDT
(Winning MT)
38,438140,997
Change in Quantity Sold on GDT
over same period last year
14.5%9.0%
Weighted Average Product Price
(USD/MT)
2,9593,046
Change in Weighted Average
Product Price over same period
last year
(12.9%)(10.0%)
Change in Weighted Average
Product Price from previous event
(1.6%)–
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