Global Dairy Update October 2018

1
GLOBAL DAIRY
UPDATE
OCTOBER 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
6 December 2018
FY19 Q1 Business Update
• Early season production in New Zealand
stronger than last year. EU and US
production growth is slowing and Australia
is declining.
• Exports from New Zealand and the US
continued to grow in August. European
exports declined in June.
• Imports into Asia show steady growth.
Middle East and Africa is up, while
Latin America declines.
• Fonterra’s early season milk collection
across New Zealand for the four months to
30 September reached 307 million kgMS,
(but still accounts for only 20% of the
forecast season).
• Nearly one in four Kiwis have tried our new Tip Top™
Whittakers™ ice cream within two weeks of its launch.
• Fonterra has appointed an independent Sustainability
Advisory Panel to guide the Co-operative as it aims to be a
world leader in sustainably produced dairy nutrition.
• The November issue of Global Dairy Update will be
published on 6 December together with our Quarter One
Business Update.
• The following publication of the Global Dairy Update will be
published on 31 January 2019.
COMING UP...

%%%
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. EU AND
US PRODUCTION GROWTH
IS SLOWING AND AUSTRALIA
IS  DECLINING
Total New Zealand milk
production increased 6%
in September compared
to the same month last
year. Season-to-date, which
represents only about 20%
of seasonal production,
is up almost 6%. This has
been driven by favourable
weather although some
regions are beginning to
dry heading into summer.
If these conditions prevail
this early season rate of
growth will moderate as the
season progresses.
Production for the 12 months
to September was above 1%
mainly due to the growth in
recent months.
Fonterra collections have
been reported for September,
see page 5 for details.
Australian milk
production decreased 4%
in August compared to the
same period last year. This
is being driven by rising on-
farm input prices, drought
across parts of the country
and cow cull rates increasing
(up 33% in August,
year-on-year).
Production for the 12 months
to August was up 2%
compared to the same
period the previous year.
The likelihood of an El Niño
developing has lifted to
70% which will continue to
pressure milk production
throughout the season.
Fonterra collections in
Australia have been reported
for September, see page 5
for details.
EU milk production saw no
growth in August compared
to the same period last year.
The Netherlands experienced
the largest monthly decline.
The Netherlands’ milk
production on an annualised
basis has remained flat since
mid-2016. Extreme heat
impacted production in
other EU countries.
Production for the 12 months
to August was up almost
3% compared to the
same period the previous
year. Growth has slowed
but remained resilient
in the face of the recent
extreme heat. The impact
of feed availability and cost
is likely to put pressure
on production as the
season progresses.
US milk production was up
1% in September compared
to the same period last year.
The US has seen relatively
steady production growth.
Of note is the prior months'
downward revision of cow
numbers. Margins have been
squeezed and the latest
downturn in cow numbers
suggests moderation in
milk volume growth in
coming months.
Milk production for the
12 months to September
increased by 1% compared to
the same period last year.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
Production change
for the 12 months to
August 2018
Production change
for the 12 months to
September 2018
Production change
for the 12 months to
August 2018
Production change

for the 12 months to
September 2018
1213

%%
To view a chart that
illustrates year-on-year
changes in exports –
%%
3
OUR MARKETS
GLOBAL EXPORTS
EXPORTS FROM
NEW  ZEALAND AND  THE
US  CONTINUED TO GROW
IN AUGUST. EUROPEAN
EXPORTS DECLINED IN JUNE
Total New Zealand dairy
exports increased 6%,
or 7,000 MT, in August
compared to the same period
last year. This increase is driven
by AMF and butter, up a
combined 7,300 MT. However,
declines in SMP and cheese
of 2,000 MT dampened the
overall increase.
Exports for the 12 months
to August were down 1%, or
16,275 MT, on the previous
comparable period. This
continues to be driven by
lower volumes across WMP,
AMF, cheese and SMP, down
a combined 83,000 MT. Fluid
and fresh dairy and infant
formula continued strong
growth, up 72,000  MT.
In total, New Zealand exports
remain relatively flat over the
last couple of years.
EU dairy exports decreased
by 12%, or 58,000 MT, in
June compared to the same
period last year. This was
primarily driven by declines
in fluid and fresh dairy and
SMP, down a combined
40,000  MT.
Exports for the 12 months
to June were up 2%,
or 112,000 MT, on the
previous comparable period.
Continued growth in SMP
and infant formula remains
the primary driver behind
European dairy export
growth, up a combined
159,000  MT.
In total, EU exports have
continued to grow on an
annualised basis and have
just eased back from a record
peak of 5.4 million tonnes in
April 2018.
US dairy exports increased
by 11%, or 21,000 MT, in
August compared to the
same period last year.
Growth in SMP and lactose
of a combined 18,000  MT,
was the primary driver
behind this increase.
Exports for the 12 months
to August were up 11%, or
234,000 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 200,000  MT.
The US continues to show
strong export growth having
reached a record 2.4 million
tonnes on an annualised
basis through August 2018.
Australian dairy exports
increased 7%, or 3,700  MT,
in August compared to the
same period last year. This
growth was due to increases
in most categories, offset by
declines in fluid products,
WMP and other powders.
Exports for the 12 months
to August were up 4%, or
29,000 MT, on the previous
comparable period.
Fluid and fresh dairy, cheese,
and infant formula continued
to make up most of the
growth in Australian exports,
up a combined 44,000  MT.
In total, Australian exports
have continued to grow on
an annualised basis, reaching
762,000 MT, the highest
level in the last 10 years.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
114
1
2
Export change for the 12
months to August 2018
Export change for the 12
months to August 2018
Export change for the 12
months to August 2018
Export change for the 12
months to June 2018

%%%
%
To view a chart that
illustrates year-on-year
changes in imports –
4
OUR MARKETS
GLOBAL IMPORTS
IMPORTS INTO ASIA
SHOW STEADY GROWTH.
MIDDLE  EAST AND
AFRICA IS UP, WHILE
LATIN  AMERICA  DECLINES
Latin American dairy
import volumes¹ decreased
4%, or 6,000 MT, in June
compared to the same
period last year. This
decrease was driven by WMP
down 28%, or 7,000 MT. This
was partially offset by gains
in whey powder and SMP up
3,000  MT.
Imports for the 12 months
to June were down 2%,
or 40,000 MT, compared
to the same period the
previous year. This decline
was primarily driven by WMP
and AMF, and cheese down
a combined 104,000 MT. An
increase in SMP and whey
powder of 57,000 MT offset
some of the decline.
Asia (excluding China)
dairy import volumes¹
increased 1%, or 5,000 MT, in
June compared to the same
period last year. Growth in
fluid and fresh dairy, WMP
and butter of 12,000 MT
drove the increase. A decline
in SMP and cheese of
10,000 MT dampened gains.
Imports for the 12 months
to June were up 3%, or
123,000 MT, compared
to the same period the
previous year. Continued
growth in WMP and cheese
of 126,000 MT was the
primary driver.
Middle East and Africa
dairy import volumes¹
decreased 9% or 32,000 MT
in June compared to the
same period last year. Small
growth in AMF and MPC
products was offset by
declines in fluid and fresh
dairy, cheese and cultured
products of 33,000  MT.
Imports for the 12 months
to June were up 5%, or
202,000 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 119,000  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 June 2018
Import change for the 12
months to June 2018
Import change for the 12
months to June 2018
317
5
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 June volumes grew 15% 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 2018/19 SEASON
NEW ZEALANDNORTH ISLANDSOUTH ISLANDAUSTRALIA
Increase for the season from
1 June to 30 September
Increase for the season from
1 June to 30 September
Increase for the season from
1 June to 30 September
Decrease for the season
from 1 July to 30 September
2510
11
NEW ZEALAND MILK COLLECTION
Fonterra’s milk collection
across Australia for the three
months to 30 September
reached 30 million kgMS,
down 11% 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
impact milk supply during
the 2019 financial year.
North Island milk
collection in September
reached 111 million kgMS,
3% higher than September
last season.
Waikato, Taranaki and
Central Districts have had
positive starts to the season,
running above last season.
Bay of Plenty and Northland
have faced slower pasture
growth due to unfavourable
weather conditions.
North Island milk collection
for the 2018/19 season to
date reached 207 million
kgMS, up 2%.
South Island milk
collection in September
reached 68 million kgMS,
8% higher than September
last season.
All South Island regions are
tracking above last season.
Ongoing good pasture cover
should allow strong milk
flows to continue.
South Island milk collection
for the 2018/19 season to
date reached 100 million
kgMS, up 10%.
Fonterra’s milk collection
across New Zealand
for the four months to
30 September reached
307 million kgMS, up 5%
compared to last year.
New Zealand collections
in September reached
179 million kgMS, 5% up on
the same month last season.
Relatively mild winter
weather and generally
favourable on-farm
conditions continued into
September resulting in
increased milk volumes,
particularly in the
South Island.

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



,
,
,
.

.

.

.

.

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
initially weakened in
September as ongoing
US-China trade tensions and
general global risk weighed
on sentiment before positive
domestic economic data
buoyed the currency leaving
its value unchanged by
month's end.
Fonterra GDT results at
last trading event
16 October 2018:
The next trading event will be held on 6 November 2018. Visit www.globaldairytrade.info for more information.
Change in Fonterra’s
weighted average product
price from previous event
0.6
Fonterra’s weighted
average product price

(USD/MT)
2,908
USD
Fonterra product quantity
sold on GDT
000’ MT
41.3
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
USD 4,114/MT
2.4
BUTTER
USD 5,106/MT
0.7
AMF
USD 1,988/MT
0.2
SMP
USD 2,729/MT
0.9
WMP
USD 3,404/MT
1.9
CHEDDAR
USD 5,426/MT
2.3
RENNET CASEIN
41,258
MT
LATEST AUCTION
223,438
MT
FINANCIAL
YEAR‑TO‑DATE

7
OUR PERFORMANCE
A
MATCH
MADE
IN
HEAVEN
Nearly one in four Kiwis
has tried our new Tip Top™
Whittakers™ ice cream
within two weeks of
its launch.
Combining the best of Kiwi
ice cream with the best New
Zealand chocolate, the three
flavours, Vanilla & Cashew
Praline, Coffee & Cacao
and Chocolate & Pretzel,
have already smashed sales
targets and are on track to
be one of New Zealand’s
most successful new product
development launches this
year. Already sales targets
are 220% above what was
initially predicted.
Tip Top Director
Kim Ballinger says it’s
exciting to see the launch
going so well. “It’s early days
with peak ice cream season
still to come but so far the
feedback we have had has
been incredible.
“Shops were so excited to
get the ice cream on sale
some of them jumped
the gun putting it on sale
two days before they were
meant to, so we pushed go
for everyone.”
Once launched one
supermarket chain had
product on sale in 18 stores
within 10 minutes – for those
unfamiliar with the inner
workings of a supermarket
that’s quite a feat.
Kim says it’s great to see the
hype around the launch born
out of the partnership of two
proud Kiwi companies.
“When looking for
someone to partner with
we wanted someone who
like us produces a premium
product. We’re both
committed to being 100 per
cent palm oil free and our ice
cream contains all natural
colours and flavours.
Whittaker’s Marketing
Manager, Jasmine Currie,
says Tip Top was a natural
match for them.
“Whittakers is a proud
New Zealand and
family-owned company and
we love teaming-up with top
quality producers and other
iconic Kiwi brands.”
The three new flavours are
not limited-edition products
and can be enjoyed by Kiwis
and visitors year round.

8
OUR CO-OP
Fonterra has appointed
an independent
Sustainability Advisory
Panel to guide the
Co-operative as it aims
to be a world leader in
sustainably produced
dairy nutrition.
CEO Miles Hurrell says the
panel represents one part of
the Co-op’s wider strategy
to build sustainability into
everything it does.
“Our independent panel will
help ensure our strategy
is relevant to current and
evolving sustainability trends
while being integrated into
commercial objectives,”
says Hurrell.
“Some of the world’s biggest
sustainability challenges
are around food and we
believe, like many, that the
global food system must
shift from being part of the
problem to becoming a
greater part of the solution.
Our Co-op is already taking
action to support healthy
environments and strong
communities, but we know
we must do more.”
Hurrell says collaboration
is key.
“Environment Minister
David Parker and Agriculture
Minister Damien O’Connor
have just announced the
New Zealand Government’s
blueprint to improve
freshwater quality which
is encouraging to see and
we support their overall
objective. We share their
commitment to deliver
healthy waterways for
New Zealanders and
appreciate the inclusive
approach they are taking
to solve the issues we all
currently face.
“We’re keen to maximise
opportunities to accelerate
progress together,
and our Living Water
partnership working
with the Department of
Conservation in five key
freshwater catchments
is a good example. We’ve
committed to help restore
an additional 50 catchments,
working with farmers,
scientists, the Government
and councils, mana whenua
and communities.”
As part of its first meeting
this month, the Sustainability
Advisory Panel had the
chance to visit the Te Rapa
manufacturing site, a farm
in the Waikato, as well as
Fonterra’s support office
in Auckland to learn more
about the Co-op and discuss
challenges and opportunities
around sustainability.
“It speaks volumes for
Fonterra that they have
invited us in to provide
advice with absolute
transparency and openness,”
says Sir Rob Fenwick.
“It’s a chance to influence
the country’s biggest
company with a multitude of
challenges – environmental,
social and economic – that
impact not only the business
and its owners, but the
economy of the country. You
don’t get challenges like that
very often in your life. I’m
really excited about it.
“When you bring together
a group of people with very
disparate interests from
different backgrounds,
you often get surprising
answers. I think that’s the
value of these independent
advisory groups. What’s so
important about this one
is that it’s reporting to the
board of directors. We’ll
provide advice at the highest
level and that makes such
a difference.
The panel features a diverse
range of experts including:
• Sir Rob Fenwick (Chair),
who co-founded the
New Zealand Business
Council for Sustainable
Development and was
the first New Zealander
knighted for services
to both business
and conservation.
• Paul Gilding, a Fellow
at the University of
Cambridge’s Institute for
Sustainability Leadership,
author and former global
head of Greenpeace.
• Aroha Mead, a Research
Associate specialising in
Matauranga Maori and
indigenous knowledge.
• Bridget Coates,
Chairperson of White
Cloud Dairy Innovation,
Director of Tegel Group
Holdings Ltd and former
Director of the Reserve
Bank of New Zealand.
• Hugh Logan, who chaired
the Land and Water
Forum and has 40 years’
experience in natural
resource management.
• Michelle Pye, owner of
large scale agricultural
business Pye Group and
member of the Fonterra
Shareholders’ Council.

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 August; New Zealand and US to September.
NOTE: Data for EU to June; New Zealand, US and Australia to August.
NOTE: Data for China to May; Asia, Middle East and Africa, Latin America to June.
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)
SEPTEMBER
2018
SEPTEMBER

2017
MONTHLY
CHANGE
SEASON-
TO-DATE
2018/19
SEASON-
TO-DATE
2017/18
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
179.3171.14.8%307.0293.54.6%
North Island110.9107.82.9%207.4202.62.4%
South Island68.463.47.9%99.690.99.6%
Fonterra Australia12.714.8(14.2%)29.833.4(11. 0%)
Fonterra GDT results
This table provides more
information on the latest
results, including a snapshot
of the year-to-date results.
LAST TRADING EVENT
(16 OCTOBER 2018)
YEAR-TO-DATE

(FROM 1 AUGUST 2018)
Quantity Sold on GDT
(Winning MT)
41,258223,438
Change in Quantity Sold on GDT
over same period last year
17.2%11. 1%
Weighted Average Product Price
(USD/MT)
2,9082,999
Change in Weighted Average
Product Price over same period
last year
(9.3%)(9.8%)
Change in Weighted Average
Product Price from previous event
(0.6%)–
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