Fonterra Shareholders Fund : Global Dairy Update January 2022

onlyJANUARY 2022

Global Dairy useUPDATE

Our Markets

personal	• Monthly production decline observed across
all regions.
		• Australia and US monthly exports continue
		to grow. New Zealand and EU monthly
		exports decline.
		• China and Asia monthly imports decline.
		Middle East and Africa, and Latin America
		monthly imports up.
For	• Fonterra New Zealand milk collection for
		December was 173.4 million kgMS, down 5.3%
		on December the prior season.
		• Fonterra Australia milk collection for
		December was 11.3 million kgMS, down 0.6%
		on December last season.

Our Performance

• Farmers vote in favour of Fonterra's Flexible Shareholding structure.

Our Co-op

• Anchor™ turns the tap on for a more sustainable flat white.

Key Dates

December to February 2022	17 March 2022	May 2022
Application Period to	FY22 Interim Results	FY22 Q3
Supply Fonterra	Announcement	Business Update

1

OUR MARKETS

Global Production

only
use
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illustrates year-on-year
changes in production -
	CLICK HERE
personalin December compared to

NEW ZEALAND

5.0%

Change for December 2021 compared to December 2020

0.1%

Change for the 12 months to

December 2021

Monthly production decline observed across all regions

AUSTRALIAEUROPEAN UNION USA

0.8	0.5	%	0.1	%
%
Change for November 2021	Change for October 2021	Change for December 2021
compared to November 2020	compared to October 2020	compared to December 2020
%	%	%
0.9Change for the 12 months	0.1Change for the 12 months	1.4Change for the 12 months
to November 2021	to October 2021	to December 2021

New Zealand milk production¹ decreased 5.0% on a litres basis, (down 5.5% on milk solids basis)

December the year prior.

ForWeather conditions in the early part of December provided good moisture, before becoming dry and very warm in the final week of the month in most regions.

New Zealand milk production for the 12 months to December was flat on the year prior.

Fonterra New Zealand collections are reported for December, see page 5 for details.

Australia milk production decreased 0.8% in November compared to November the year prior.

After forecasting growth of up to 2% for FY22, both Dairy Australia and Rabobank have revised their forecasts down; Rabobank to -1.8% and Dairy Australia to "unlikely to see growth in FY22".

Australia milk production for the 12 months to November was 0.9% lower than the year prior.

Fonterra collections in Australia are reported for December, see page 5 for details.

EU milk production² decreased 0.5% in October compared to the same period the year prior.

Lower production volumes year on year were driven by Germany, Netherlands and France but partially offset by an increase in Italy's production.

EU milk production for the

12 months to October was up

0.1% compared to the same period the year prior, driven by higher volumes in Italy and Ireland, but largely offset by declines in Germany, France and Netherlands.

US milk production decreased by 0.1% in December, compared to the same period the year prior.

Weaker production was driven by continuing herd size contractions and lower milk per cow yield as input costs remain high.

Milk production for the

12 months to December was

1.4% higher compared to the same period the year prior.

1. New Zealand production is measured in litres.
2. Excludes UK.

2

OUR MARKETS

Global Exports

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personaleriod the year prior.

NEW ZEALAND

0.6%

Change for November 2021 compared to November 2020

3.5%

Change for the 12 months to November 2021

Australia and US monthly exports continue to grow. New Zealand and EU monthly exports decline

AUSTRALIAEUROPEAN UNION USA

66.1	4.5%	19.8
%		%
Change for November 2021	Change for October 2021	Change for November 2021
compared to November 2020	compared to October 2020	compared to November 2020
17.8	0.4%	10.4%
%
Change for the 12 months	Change for the 12 months	Change for the 12 months
to November 2021	to October 2021	to November 2021

Total New Zealand dairy xports decreased by 0.6%,

or 2,505 MT, in November compared to the same

Lower shipments of SMP, ForAMF, WMP and butter

to South East Asia were partially offset by record shipments of fluid milk products to China.

Exports for the 12 months to November were up by 3.5%, or 121,319 MT, on the previous comparable period. This was primarily driven by WMP, fluid milk product and cheese.

Australia dairy exports increased 66.1%, or

43,558 MT, in November compared to the same period the year prior.

November exports were higher than normal, driven by high demand from China for fluid milk products, up 30,739 MT, and an increase in SMP and cheese exports.

Exports for the 12 months to November were up 17.8%, or 132,202 MT, on the previous comparable period.

This was predominantly driven by increases in fluid milk products, and also SMP and WMP, but partially offset by declines in infant formula.

EU dairy exports decreased 4.5%, or

26,476 MT, in October compared to the same period the year prior.

Lower exports of cultured products, cheese and infant formula, down a combined 27,261 MT, were partially offset by stronger demand for MPC, whey, lactose and SMP.

Exports for the 12 months to October were up 0.4%, or 25,175 MT, on the previous comparable period, driven by increases in fluid milk products and whey, and partially offset by declines in cultured products, infant formula, butter and WMP.

US dairy exports increased 19.8%, or

38,210 MT, in November compared to the same period the year prior with gains observed across most product categories.

Strong demand for SMP and cheese to Mexico, as well as lactose to China and Singapore, are driving this increase.

Exports for the 12 months to November 2021 were up 10.4%, or 260,989 MT, on the previous comparable period, driven by whey, SMP, cheese, fluid milk products and butter, up a combined 244,854 MT.

3

OUR MARKETS

Global Imports

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personalsame period the year prior.

LATIN AMERICA

6.2%

Change for October 2021 compared to October 2020

3.8%

Change for the 12 months to October 2021

China and Asia monthly imports decline. Middle East and Africa, and Latin America monthly imports up

ASIAMIDDLE EAST & AFRICA CHINA

0.4%	30.1%	13.0%
Change for October 2021	Change for October 2021	Change for December 2021
compared to October 2020	compared to October 2020	compared to December 2020
1.5Change for the 12 months	Change3.7for the 12 months	18.0Change for the 12 months
%	%	%
to October 2021	to October 2021	to December 2021

Latin America dairy import volumes¹ increased 6.2%, or 10,356 MT, in October compared to the

The increase was driven Forby higher demand for

cheese to Mexico and Dominican Republic.

Imports for the 12 months to October were up 3.8%, or 75,732 MT, compared to the same period the year prior.

Asia (excluding China) dairy import volumes¹ decreased 0.4%, or 1,441 MT, in October compared to the same period the year prior.

The decrease was driven by lower volumes of fluid milk products to Taiwan, partially offset by higher demand for whey to Indonesia

and Bangladesh.

Imports for the 12 months to October were down 1.5%, or 74,048 MT, compared to the same period the year prior, driven by lower volumes of WMP and SMP, and offset by an increase in whey and cheese.

Middle East and Africa dairy import volumes¹ increased 30.1%, or

103,043 MT, in October compared to the same period the year prior.

The increase was predominantly driven by higher volumes of SMP to Algeria, and of fluid milk products and cheese to Iraq.

Imports for the 12 months to October were up 3.7%, or 179,882 MT, compared to October the year prior, driven by increases in cheese, infant formula and ice cream.

China dairy import volumes decreased by 13.0%, or 42,365 MT, in December compared to December 2020, which was a record month for China imports.

Declines were observed in WMP and SMP import volumes as supply is limited. Whey imports were also down as hog herds in China decline, decreasing the demand for whey as feed.

Imports for the 12 months to December were up 18.0%, or 630,474 MT, driven by fluid milk products, WMP, whey and SMP, partially offset by decreases in infant formula.

1 Estimates are included for those countries that have not reported data.

4

OUR MARKETS

Fonterra Milk Collections

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use
To view a table that shows our
	detailed milk collection in New
	Zealand and Australia compared
	to the previous season -
personal		CLICK HERE
Season-to-date collections are

New Zealand Milk Collection

LITRESDAY	•
•
M
VOLUME

JUN

JUL

AUG

SEP

OCT

NOV

DEC

JAN

FEB

MAR

APR

MAY

NEW ZEALAND

5.3%

Change for December 2021 compared to December 2020

3.1%

Season-to-date

1 June to 31 December

Fonterra's New Zealand collections for December were 173.4 million kgMS,

5.3% down on last December.

874.6 million kgMS, 3.1% behind last season.

ForSettled weather across most of the country at the beginning

f December gave way to heavy rain that moved up the South Island to the lower North Island. Warm and fine weather returned in the final week of the month, leading into a very warm new year, bringing with it a watch out for heat stress in some areas.

NORTH ISLAND

7.0%

Change for December 2021 compared to December 2020

3.2%

Season-to-date

1 June to 31 December

North Island milk collections in December were

98.3 million kgMS, 7.0% lower than December last season.

Season-to-date collections are 543.1 million kgMS, 3.2% behind last season.

Near record temperatures and periods of heavy rain in many regions contributed to poor grass quality across much of the North Island. Early December collections reduced sharply before showing some recovery in the second half of the month, but not enough to make up the lost ground.

SOUTH ISLAND

2.9%

Change for December 2021 compared to December 2020

3.1%

Season-to-date

1 June to 31 December

South Island milk collections in December were

75.1 million kgMS, 2.9% lower than December last season.

Season-to-date collections are

331.4 million kgMS, 3.1% behind last season.

The South Island was generally less impacted than the North Island by the weather and pasture quality issues. Otago and Southland were the only regions in the country where December collections remained consistent at or above December last season.

AUSTRALIA

0.6%

Change for December 2021 compared to December 2020

1.2%

Season-to-date

1 July to 31 December

Fonterra'sAustralia collections for December were 11.3 million kgMS, a

0.6% decrease on December last season.

Fonterra collections across Australia for the season-to-date are 58.3 kgMS, a 1.2% decline on last season.

After wetter and cooler spring conditions, rainfall totals in December were well below average reducing growth rates and pasture availability, resulting in poor quality silage.

Outlook for Fonterra in New Zealand	NZD	8.90-
	per
	kgMS 9.50

Forecast Farmgate Milk Price for the 2021/22 season

1,500M

kgMS

Forecast milk collection for the 2021/22 season

5