Global Dairy Update November 2019

•First quarter business update.
•
Fonterra and BY
-HEALTH partner in health and
wellness research.
1
Global Dairy
UPDATE
•New Zealand 12-month production flat on
last period. Increase in monthly US and EU
production. Australia continues to decline.
•Exports from New Zealand and the EU show
strong growth and an increase in monthly
US exports. Australia monthly exports
continue to decline.
•Imports into China continue to grow. Asia and
La
tin America monthly imports down. Middle
East & Africa imports grew in August.
•
Fonterra’s season-to-date milk collection
across New Zealand reached 525 million kgMS,
flat on last season. Australia milk collection
decreased 13.0% to 13.5 million kgMS.
• Sweet success with reducing sugar.
•
Helping our far
mers ‘Plant for Good'.
• The next issue
of the Global Dairy Update will be published
on 31 January 2020.
Key Dates
December 2019 to February 2020
Application Period to Supply Fonterra
Late March 2020
FY20 Interim Results
Announcement
20 April 2020
Share Standard Compliance
2019/20 Season
NOVEMBER 2019
Visit our website for
more details –
Q
@
~
©
®
J©
J©

%
%
%%
%
%
%%
Change for October 2019
compared to October 2018
Change for October 2019
compared to October 2018
Change for September 2019
compared to September 2018
Change for September 2019
compared to September 2018
Change for the 12 months
to October 2019
Change for the 12 months
to October 2019
Change for the 12 months
to September 2019
Change for the 12 months
to September 2019
1.34.52.6
6.60.10.1
0.8
0.0
2
OUR MARKETS
Global Production
New Zealand 12-month
production flat on last
period. Increase in monthly
US and EU production.
Australia continues
to
decline
New Zealand milk
production¹ was down
2.6% on a litres basis (down
1.5 % on a milk solids basis)
in October compared to
the same period last year,
with last October being a
record month in terms of
volume production.
Some dryness in Waikato and
wet conditions in the lower
South Island are likely to have
had some impact on peak
production figures.
New Zealand milk production
for the 12 months to October
was flat on last year.
Fonterra collections are
reported for October, see
page 5 for details.
Australia milk
production decreased 4.5%
in September compared to
the same period last year.
Production for the 12
months to September was
down 6.6% on the previous
12 months.
Milk production continues
to contract and farmers face
an outlook of dry conditions
for the rest of the year.
Water costs remain elevated
and feed production is
mixed, with southern areas
faring better than their
northern counterparts.
Fonterra collections in
Australia are reported
for October, see page 5
for details.
EU milk production
increased by 0.8% in
September compared to the
same period last year.
Production growth can
be seen from key milk
producing countries such as
Germany (1.1%), Spain (3.2%),
The Netherlands (1.7%) and
France (0.7%).
EU milk production is likely
to drop off in the later
part of the year due to
seasonal fluctuations.
EU milk production for the
12 months to September was
relatively flat compared to
the same period last year.
US milk production
increased by 1.3% in October,
compared to the same
period last year.
A return to herd size
expansion and a continued
increase in milk per cow
in October is driving
production higher and may
indicate a sustained return
to production growth in the
coming months.
Milk production for the 12
months to October was 0.1%
lower compared to the same
period last year.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
To view a chart that
illustrates year-on-year
changes in production –
1 New Zealand production is measured in litres.
_______ )@

To view a chart that
illustrates year-on-year
changes in exports –
3
OUR MARKETS
Global Exports
Exports from New Zealand
and the EU show strong
growth and an increase
in monthly US
exports.

Australia monthly exports
continue to
decline
Total New Zealand
dairy exports increased
by 22.4%, or 35,648 MT, in
September compared to
the same period last year.
This was primarily driven by
WMP, up 23,796 MT, followed
by cheese, infant formula
and fluid milk products up a
combined 11,083  MT.
Exports for the 12 months
to September were up
8.9%, or 287,858 MT, on the
previous comparable period.
This was primarily driven by
WMP, fluid milk products
and infant formula, up a
combined 275,549  MT.
EU dairy exports
increased by 13.2%, or
56,498 MT, in August
compared to the same
period last year. This was
driven by increases across
most products but primarily
by SMP, fluid milk products
and cheese, up a combined
45,115  MT.
High cheese volumes were
recorded with demand from
the US, South Korea, Canada
and Ukraine.
Exports for the 12 months
to August were up 7.7%, or
405,296 MT, on the previous
comparable period. SMP
fluid milk products, lactose
and cheese were the main
drivers of this growth, up a
combined 415,764  MT.
US dairy exports
increased 3.3%, or 6,060  MT,
in September compared to
the same period last year,
curbing a declining trend
in recent months. The
increase was driven by SMP
and cheese, up a combined
16,277  MT.
Whey exports continue to
decline, however, as a result
of the downturn in whey
for feed due to the African
Swine Fever in China.
Exports for the 12 months to
September 2019 were down
9.5%, or 233,686 MT on the
previous comparable period.
The decrease was driven
by whey, SMP, WPC and
lactose, down a combined
243,929  MT.
Australia dairy exports
decreased by 5.6%, or
3, 478 MT, in September
compared to the same
period last year. This was
primarily driven SMP and
WMP down a combined
6, 216 MT but largely offset
by an increase in fluid milk
products of 4,608  MT.
Exports for the 12 months to
September were up 1.9%, or
14,764 MT, on the previous
comparable period.
Fluid milk products and
infant formula continue
to be the main drivers of
this 12 month growth, up a
combined 59,628 MT while
WMP, cheese and SMP
declined by 43,943  MT.
NEW ZEALANDAUSTRALIAEUROPEAN UNIONUSA
%
%
%%
%
%
%%
Change for September 2019
compared to September 2018
Change for September 2019
compared to September 2018
Change for September 2019
compared to September 2018
Change for August 2019
compared to August 2018
Change for the 12 months
to September 2019
Change for the 12 months
to September 2019
Change for the 12 months
to September 2019
Change for the 12 months
to August 2019
3.35.622.4
1.97.79.5
13.2
8.9
_______ )@

To view a chart that
illustrates year-on-year
changes in imports –
4
OUR MARKETS
Global Imports
Imports into China
continue to grow. Asia and
Latin
America mon
thly
imports
down. Middle East

& Africa grew in August
Latin America dairy
import volumes¹
decreased 6.6%, or 11,438  MT,
in August compared to the
same period last year. This
was driven by decreases in
WMP, infant formula and
whey, down a combined
9, 622  MT.
Brazil is the main driver
behind the WMP decline
year
-on-year
.
Imports for the 12 months to
August 2019 were up 2.2%,
or 42,116 MT, compared to
the same period the previous
year. Increases were recorded
across a broad range of
products with SMP, WMP,
and fluid milk products up by
a combined 56,020  MT.
Asia (excluding China)
dairy import volumes¹
decreased 7.6% or 31,537  MT,
in August compared to
the same period last year.
Decreases were recorded
across a broad range of
products with WMP, fluid
products, whey and infant
formula down 24,489  MT.
Imports for the 12 months
to August were up 4.2%, or
196,144 MT, compared to the
same period the previous
year. Growth continues
across a broad range of
products with SMP, fluid milk
products, WMP and lactose
up a combined 184,276  MT.
Middle East and Africa
dairy import volumes¹
increased 4.9% or 13,946 MT
in August 2019 compared
to the same period last year.
Increases were recorded
principally in WMP and infant
formula, up a combined
24,028 MT, mainly driven by
Nigeria. This was partially
offset by a decrease in fluid
milk products, butter and
cheese, down 14,157  MT,
mainly due to Libya and Qatar.
Imports for the 12 months
to August 2019 were
down 4.2%, or 176,384  MT,
compared to the same period
last year. This was driven
largely by cheese, WMP and
butter, down a combined
199,377 MT.
China dairy import
volumes continue to
increase, up 15.2%, or
30,187 MT, in September
compared to the same
period last year. This was
driven by increases in fluid
milk products, up 34,615 MT
consistent with the trend for
the past year.
Imports for the 12 months
to September were up 11.1%,
or 306,357 MT compared to
the same period last year.
Strong demand out of China
continued across all key
categories, fluid milk products,
WMP, SMP and infant
formula were up a combined
444,192 MT, partially offset by
a continued decline for whey,
down 98,894 MT, as a result of
the ongoing African Swine flu.
LATIN AMERICAASIAMIDDLE EAST & AFRICACHINA
1 Estimates are included for those countries that have not reported data.
%
%
%%%
%%%
Change for August 2019
compared to August 2018
Change for September 2019
compared to September 2018
Change for August 2019
compared to August 2018
Change for August 2019
compared to August 2018
Change for the 12 months
to August 2019
Change for the 12 months
to September 2019
Change for the 12 months
to August 2019
Change for the 12 months
to August 2019
15.27.66.6
4.24.211.1
4.9
2.2
_______ )@

To view a table that shows our
detailed milk collection in New
Zealand and Australia compared
to the previous season –
%
%
%%
%%%
Season to date
1 July to 31 October
Season to date
1 June to 31 October
Season to date
1 June to 31 October
Season to date
1 June to 31 October
Change for October 2019
compared to October 2018
Change for October 2019
compared to October 2018
Change for October 2019
compared to October 2018
Change for October 2019
compared to October 2018
13.02.62.02.2
18.91.80.30.5
VOLUME M LITRESDAY
JUNJULAUGSEPOCTNOVDECJANFEBMARAPRMAY









5
OUR MARKETS
Fonterra Milk Collection 2019/20 Season
NEW ZEALANDNORTH ISLANDSOUTH ISLANDAUSTRALIA
New Zealand Milk Collection
Fonterra's Australia
collections in October
were 13.5 million kgMS, down
13% on October last season.
Fonterra milk collections
continue to decline but to a
lesser extent compared to
the beginning of the season
as peak milk comes through.
High on-farm input costs,
decreased cow numbers,
combined with intense
competition for milk will
continue to impact Fonterra’s
milk supply this season.
North Island milk
collection in October was
128.7 million kgMS, down
2.0% on last October.
Season to date collection is
339.6 million kgMS, up 0.3%
on last season.
Weather conditions across
most regions were wetter
than usual and was the main
contributor to the decrease
in October collections.
South Island milk
collection in October was
86.6 million kgMS, down
2.6% on last October.
Season to date collection
is 185.1 million kgMS, down
1.8% on last season.
Wet and cold weather has
South Island collections
down relative to last year.
The Southland region has
had pasture damage due to
sustained wet conditions.
In contrast, Canterbury
collections are in line with
last season.
Fonterra's New Zealand
collection for October, was
215.3 million kgMS, down
2.2% on the same month
last season.
However, season to date
collection is 524.7 million
kgMS, which is similar to the
early part of last season.
October began with colder
and wetter conditions
than usual across most
regions which has seen milk
collections reduce. However,
recent warm weather could
see a recovery in the first half
of November.
%
Forecast Farmgate Milk Price for
the 2019/20 season
Forecast milk collection for the
2019/20 season
per
kgMS
7.0 0 -
7.6 0
1, 5 3 0
M
kgMS
Outlook
NZD
The inclusion of off-GDT
sales contributed
5 cents per kgMS to the
Milk Price for the season
to 31 October 2019.
_______ )@

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


,
,
,
.
.
. 
.
. 
PRICE INDEX
NZD  USD
OUR MARKETS
Fonterra Global Dairy Trade Results
Fonterra GDT sales
by destination:
Dairy commodity
prices and New
Zealand dollar
trend
A more positive assessment
of the ongoing trade
negotiations between the US
and China, and of the United
Kingdom’s departure from the
European Union, contributed
to lifting the NZD from a
four
-year low to settle a
t 64
US cents by month
-end.
Fonterra GDT
re sults at
last trading
event
3 December2019:
The next trading event will be held on 17 December 2019. Visit www.globaldairytrade.info for more information.
Change in Fonterra’s
weighted average product
price from previous event
0.7
Fonterra’s weighted
average product price
(USD/MT)
3,498
USD
Fonterra product quantity
sold on GDT
000’ MT
35.2
NORTH ASIA (INCLUDING CHINA)
SOUTH EAST ASIA
MIDDLE EAST AND AFRICA
LATIN AMERICA
OTHER
USD 4,8405/MT
5.2
AMF
USD 3,797/MT
2.6
CHEDDAR
USD 3,331/MT
0.3
WMP
USD 3,086/MT
1.6
SMP
USD 3,983/MT
2.2
BUTTER
USD 8,047/MT
4.9
RENNET CASEIN
35,153
MT
LATEST AUCTION
326,783
MT
FINANCIAL
YEAR‑TO‑DATE
_______ )@
►
■
■
■
■
■
t
t
t t

7
Our Performance
Fonterra and
BY-HEALTH partner
in health and
wellness research
Fonterra has created a new
research and development
partnership with BY-HEALTH
to accelerate sales growth
for its Sports and Active
Lifestyle business unit.
BY-HEALTH is a leading
global vitamin and dietary
supplement company and is
the largest in China.
Komal Mistry
-Mehta,
Director of NZMP Sports
& Active Lifestyle says
the partnership will focus
on developing innovative
nutritional solutions for the
health and wellness market.
“We’ll work together to
explore health research and
new product development
that will deliver health
benefits to consumers
around the world – and,
in particular, consumers
in China.
BY-HEALTH have been
a Fonterra customer for
12 years and now we are
taking the relationship to
another level.
Our two organisations have
complementary skills and
knowledge in the health and
wellness market. We have a
long-history of pioneering
innovation in functional
dairy proteins, Milk Fat
Globule Membrane (MFGM)
and probiotics”.
“BY-HEALTH has expertise
in vitamin and dietary
supplements which presents
a new opportunity for us.
They also have access to
extensive consumer insights
and trends through their
online sales platform which
now accounts for 20% of
their business,” she says.
With stress now being
ranked as one of the biggest
issues facing consumers,
people are becoming more
aware and proactive about
health and wellness, and
dairy nutrition plays an
important role in supporting
these nutritional needs.
“Our partnership with
BY
-HEALTH will help us
develop effective solutions
that help support people’s
health and enable them to
live the lifestyles they desire.
“In the same way we have
been unlocking the benefits
of dairy protein, we want
to do more with other
milk components, such as
probiotics and lipids, to
deliver customers highly
specialised ingredients that
address emerging needs.
“The global probiotics market
is seeing significant growth
and Euromonitor forecasts
the probiotics supplement
segment will grow by 7%
over the next five years.
“People are becoming
increasingly aware and
interested in metabolic
health, mental well-being
and anti-ageing needs
and this presents a big
opportunity for our specialty
nutrition ingredients,
including dairy proteins
and probiotic super strains
BifidoB HN019TM and
LactoB HN001T M ,”
Komal says.
Komal Mistry-Mehta, Director of
NZMP Sports & Active Lifestyle
_______ )@

Our Co-op
7
Sweet success with
reducing sugar
Picture 2, 000 bath tubs of
sugar – that’s the amount of
added sugar Fonterra Brands
New Zealand is set to
remove from its products
over the next 12 months.
A reformulated
Fresh ’n Fruity yoghurt with
40% less added sugar¹ has
hit supermarket shelves,
signalling the latest step in
Fonterra’s commitment to
limit added sugars across
its products.
Fonterra Brands
New Zealand, Managing
Director, Brett Henshaw
says, “Healthy People and
providing valuable nutrition
are a key part of our new
strategy, and our business is
doing everything we can to
make it happen.”
“The World Health
Organization recommends
less than 10% of our daily
energy intake should come
from added sugars. This
means around 12 teaspoons
of added sugars each
day for adults. However
New Zealand’s total added
sugar intake is currently
averaging 14 teaspoons per
person, each day.”
“UNICEF’s “The state of
the world's children 2019”
report ranked New Zealand
second
-worst in the OE
CD
for child obesity, with 39%
of Kiwi kids classified as
overweight or obese. We
want to be part of helping to
fix this problem,” Brett says.
“Our Co-op has nutrition
targets that are designed to
help consumers limit their
intake of added sugars. The
Fonterra Food and Nutrition
Guidelines – endorsed by
the New Zealand Nutrition
Foundation – shows that
the Co-op aims to limit
the addition of sugars to
less than 2% (2.5 tsp) of
daily energy requirements
per serve.²
“The new Fresh ’n Fruity
yoghurt comes hot on the
heels of Primo and Calci-Yum
UHT, where our team has
also reduced added sugar
levels by up to 40%.
“When we combine what
we’ve already achieved
through similar reductions
undertaken over the last 18
months, we are now putting
600 tonnes less added sugar
into our products each year.
“And the good news is we
won’t be stopping here,
our innovation team will be
getting stuck into more work
like this.
“It’s not an easy task taking
this much sugar out of
our products while also
delivering to consumers
expectations around taste.
“Our Fonterra Brands
Innovation Team have
worked hard on this over
the past year and a half, and
this has included a lot of
consumer testing.
“The overall liking of the
reformulated Fresh ’n Fruity
recipe by the sensory panel
was really positive. We’re
confident our consumers will
love the new Fresh ‘n Fruity
recipe as much as we do,”
Brett says.
1 On average compared to previous added sugar (g per 100g) across Fresh 'n Fruity range.
2
Based on an a
verage adult diet of 8,700 kJ and the World Health Organisation guidance to reduce daily free sugar intake to less than 10% of total daily energy intake. This only applies to
products positioned for everyday consumption and/or positioned for nutrition/health benefits.
_______ )@

Helping our farmers
'Plant for Good'
A healthy environment
is essential if we are to
continue meeting our
customers’ expectations and
getting the most value from
our milk.
Farmers are increasingly
being asked to do more
when it comes to improving
water quality, combating
climate change, and
reducing emissions.
“They are ready to take on
the challenge and our Co-op
will continue to support
them,” says Richard Allen,
Director of Farm Source.
“This season, our Co-op
launched the Co-operative
Difference. It brings
together existing on
-farm
requirements and makes
them easier to understand. It
also gives our farmers clear
guidance on likely future
requirements and supports
them with regional advice
and industry partnerships,”
explains Richard.
“Planting is an important
part of the solution to the
environmental challenges we
face, but it’s estimated that
nearly half of what’s planted
doesn’t survive because they
aren’t right for the region,
climate or soil.
“That’s why our Co-op has
launched ‘Plant for Good’ – a
new partnership between
Farm Source and Wildlands
that will reduce the cost of
on-farm native planting.
“Plant for Good will deliver
plants and services to all
Farm Source customers
nationwide at a discounted
rate. And quite literally, it will
mean our farmers only have
to plant once.
“Plant for Good guarantees
a survival rate of at least
90% for the first 24 months,
achieved through expert
plant selection, regionally
sourced plants and
ongoing maintenance.”
Wildlands Chief Executive
Sarah Beadel says, “we’re
really excited to offer this
exclusive pricing and service
through Farm Source. We
know farmers are keen to
plant for a variety of reasons
and we’re here to support
them, making sure that
when they plant, they plant
for good.”
Fonterra farmer
Sam Spencer-Bower from
Rangiora welcomed the news
saying, “planting is about
doing the right thing. We
have to front-foot some of
the issues that are coming at
us. We’ve got to do the right
thing for the environment
and for the farm.”
While some farms who
are ahead of the game like
Sam’s may not need this
service, Sam says it will help
others bring their farm up
to standard, especially if
they don’t have the planting
know-how or time to do
it themselves.
“All farms are different in
terms of how they are run,
how much time they have.
Some farms will struggle to
make it happen and this is a
good way to get it done.”
Sam says the advice provided
through this service will
help farmers save money
long
-term.
“Unfortunately, not enough
thought goes into what’s
being planted. A lot of
people throw things in, but
if you don’t do it properly or
have the right spacing – it’s
money down the drain. I’d
recommend chipping away
at it every year and when
you do it, do it right,” he
says. This new initiative is in
addition to the on-farm tools,
services and solutions that
the Co-op already provides
to help farmers run healthy
and sustainable businesses.
‘Plant for Good’ will
align with a farm’s Farm
Environment Plan (FEP). An
FEP is a tailored plan that
identifies opportunities for
improvement or risks that
need to be addressed.
Fonterra’s Farm Source
team is able to use its scale,
regional knowledge and
expertise to develop FEPs
with farmers at no additional
cost. Already 23% of our
farms have an FEP and we’re
on track to ensure all farms
have one by 2025.
Our Co-op
8

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 Australia and EU to September; New Zealand and US to October.
NOTE: Data for EU to August; New Zealand, Australia and US to September.
NOTE: Data for Latin America, Asia, Middle East & Africa to August; China to September.
SOURCE: Government milk production statistics/GTIS trade data/Fonterra analysis.
■
■ ■
■
■
■ ■
■
■ ■ ■ ■

WEIGHTED AVERAGE PRICEQUANTITY SOLD
APR 
MAR 
JAN 
OCT 
FEB 
JUL 
AUG 
MAY 
SEP 
NOV 
DEC 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)
OCTOBER
2019
OCTOBER
2018
MONTHLY
CHANGE
SEASON-
TO-DATE
2019/20
SEASON-
TO-DATE
2018/19
SEASON-
TO-DATE
CHANGE
Total Fonterra
New Zealand
215.3220.2(2.2%)524.7527.2(0.5%)
North Island128.7131.3(2.0%)339.6338.70.3%
South Island86.688.9(2.6%)185.1188.6(1.8%)
Fonterra Australia13.515.5
(13.0%)
36.745.3(18.9%)
Fonterra GDT results
This table provides more
information on the latest
results, including a snapshot
of the year-to-date results.
LAST TRADING EVENT
(3 DECEMBER 2019)
YEAR-T
O-DATE
(FROM 1 AUGUST 2019)
Quantity Sold on GDT
(Winning MT)
35,153326,783
Change in Quantity Sold on GDT
over same period last year
(0.7%)(4.6%)
Weighted Average Product Price
(USD/MT)
3, 4983, 374
Change in Weighted Average
Product Price over same period
last year
22.7%14.9%
Change in Weighted Average
Product Price from previous event
(0.7%)–
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 Products
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.
MPC
Milk Protein Concentrate.
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.

Glossary
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.
WPC
Whey Protein Concentrate