Fonterra Shareholders Fund : Global Dairy Update April 2022

APRIL 2022

Global Dairy UPDATE

• • New Zealand, Australia and US monthly production continue to decline. EU monthly production flat.

• • New Zealand monthly exports flat, Australia and US exports up. EU monthly exports decline.

• • Sharp decline in China monthly imports. Middle East & Africa and Asia up.

  Latin America monthly imports down.

• • Fonterra New Zealand milk collections for the season-to-date were 1,296.4 million kgMS, down 3.7% on the prior season.

• • Fonterra Australia milk collections for March were 7.9 million kgMS, down 2.3% on March last season.

Key Dates

26 May 2022

FY22 Q3 Business Update

1 June 2022

Start of the 2022/23 Season

• • Fonterra's Research and Development Centre celebrates 95 years.

• • World Water Day: Prioritising water initiatives.

31 July 2022

End of FY22 Financial Year

1

Global Production

To view a chart that illustrates year-on-year changes in production -

NEW ZEALAND

New Zealand milk production¹ decreased 1.9% on a litres basis, (down 1.5% on a milk solids basis) in March compared to March the year prior.

Warm and dry conditions early in the month were replaced by significant rainfall in the North Island, benefiting pastures and production, while the South Island experienced dry and more unfavourable growing conditions.

New Zealand milk production for the 12 months to March was down 2.6% on the year prior. Fonterra New Zealand collections are reported for March, see page 5 for details.

Australia milk production decreased 6.1% in February compared to February the year prior. Production continued to decline year on year, impacted by below average rainfall and higher input prices. Australia milk production for the 12 months to February was 2.1% lower than the year prior. Both Dairy Australia and Rabobank have revised their FY22 forecasts down; Rabobank to -1.8% and Dairy Australia to -1% to -3%. Fonterra collections in Australia are reported for March, see page 5 for details.

• 1 New Zealand production is measured in litres.

• 2 Excludes UK.

New Zealand, Australia and US monthly production continue to decline, EU monthly production flat

AUSTRALIA

EUROPEAN UNION

EU milk production² was flat in January compared to the same period the year prior. Rising input costs, low-quality silage and a focus on animal welfare in Germany, as well as incentives from the Dutch Government to livestock farmers to relocate or exit the business to reduce carbon footprint, are impacting total EU production. This was offset by an increase in Italy, Poland and Austria's production. EU milk production for the 12 months to January was down 0.1% compared to the same period the year prior, driven by declines in Germany, Netherlands and France and offset by increases in Italy and Ireland.

USA

US milk production decreased by 0.5% in March, compared to the same period the year prior.

Average herd sizes remain small but have started growing again for the second consecutive month. Cost saving initiatives in response to high feed costs are limiting milk yield per cow growth.

Milk production for the 12 months to March was 0.8% higher compared to the same period the year prior.

Global Exports

To view a chart that illustrates year-on-year changes in exports -

NEW ZEALAND

New Zealand monthly exports flat, Australia and US exports up. EU monthly exports decline

AUSTRALIA

EUROPEAN UNION

USA

29.9%5.6%

Australia dairy exports increased 29.9%, or

Total New Zealand dairy exports were flat in February compared to the same period the year prior.

Stronger shipments of SMP to South East Asia and Libya, and butter and fluid milk products to China, were observed year-on-year, but offset by lower shipments of WMP to China.

Exports for the 12 months to February were up by 2.1%, or 72,964 MT, compared to the same period the year prior. This was primarily driven by increases in fluid milk product, WMP, and cheese but partially offset by declines in AMF and infant formula.

20,941 MT, in February compared to the same period the year prior.

February exports continue to be high year-on-year, driven by strong demand from China for fluid milk products, up 18,903 MT. Increases in exports of SMP and other powders were also observed.

Exports for the 12 months to February were up 21.1%, or 163,075 MT, on the previous comparable period.

This was predominantly driven by increases in fluid milk products, SMP and WMP.

EU dairy exports decreased 5.6%, or 30,532 MT, in January compared to the same period the year prior.

Lower exports of fluid milk products, SMP and whey to China, were partially offset by an increase in cultured products.

Exports for the 12 months to January were down 1.2%, or 88,467 MT, on the previous comparable period, driven by declines in infant formula, cultured products, WMP, SMP and butter and partially offset by increases in fluid milk products and ice cream.

US dairy exports increased 0.1%, or 211 MT, in February compared to the same period the year prior, which was a record exporting month.

February saw an increase in demand for lactose to China and Pakistan, cheese to Mexico and Japan and butter to Canada. This was largely offset by lower shipments of SMP due to port congestion and shipping challenges from California and smaller volumes of whey to China.

Exports for the 12 months to February were up 9.2%, or 233,638 MT on the previous comparable period, driven by cheese, SMP, whey, lactose, and fluid milk products.

Global Imports

Sharp decline in China monthly imports. Middle East and Africa and Asia up. Latin America monthlyimports down

To view a chart thatillustrates year-on-year changes in imports -

LATIN AMERICA

42.8%29.1%

Latin America dairy import volumes¹ decreased 3.7%, or 6,246 MT, in January compared to the same period the year prior.

The decrease was driven by lower demand for SMP to Columbia, Mexico and Brazil, and WMP to Brazil.

Imports for the 12 months to January were up 3.5% compared to the same period the year prior, driven by higher volumes of cheese, SMP, whey and butter and partially offset by declines in WMP.

ASIA

Asia (excluding China) dairy import volumes¹ increased 15.3%, or 56,983 MT, in January compared to the same period the year prior. The increase was driven by higher demand for SMP to the Philippines and Vietnam and whey to Vietnam.

Imports for the 12 months to January were up 1.8%, or 85,960 MT, compared to the same period the year prior, driven by higher volumes of whey, cheese, WPC and WPI and fluid milk products and partially offset by a decrease in WMP.

MIDDLE EAST & AFRICA

Middle East and Africa dairy import volumes¹ increased 42.8% or 152,195 MT in January compared to January 2021, which was an unusally low import month.

The increase was driven by higher volumes across most product categories, but most specifically of SMP to Egypt and Algeria, cheese to Iraq and Libya and fluid milk products to United Arab Emirates and Iraq. Imports for the 12 months to January were up 6.9%, or 333,521 MT, compared to January the year prior, driven by increases in fluid milk products, cheese and cultured products.

CHINA

China dairy import volumes decreased by 29.1%, or 115,101 MT, in March compared to March 2021. Compared to record import volumes in March last year, lower volumes were observed across most products. Covid-related port congestions and supply chain delays were a key driver of the decline. Whey imports decreased sharply as lower quality feed for hog herds is being used as a cheaper alternative. Fluid milk products, WMP and SMP imports also decreased.

Imports for the 12 months to March were up 5.3%, or 199,755 MT, driven by WMP, fluid milk products and SMP, partially offset by decreases in whey and infant formula.

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

Fonterra Milk Collections

To view a table that shows detailed milk collections in New Zealand and Australia comparedto the previous season -

NEW ZEALAND

Fonterra's New Zealand collections for March were 136.8 million kgMS, 1.0% lower than last March.

Season-to-date collections were 1,296.4 million kgMS, 3.7% behind last season.

March saw hot, dry conditions continue, although February's rain did set up strong growing conditions for March for much of the North Island. Further rain in the second half of March for the North Island contributed to the ongoing strong production. Conversely, the South Island struggled with a lack of rain and more challenging growing conditions.

New Zealand Milk Collections

VOLUMEMLITRESDAY



JUNJULAUG

NORTH ISLAND

North Island milk collections in March were 74.8 million kgMS, a slight increase on March last season.

Season-to-date collections were 772.1 million kgMS, 4.1% behind last season.

North Island milk collections have been strong throughout March, recovering after the February rain and supported by further rain later in the month.

SEPOCTNOVDECJAN

SOUTH ISLAND

South Island milk collections in March were 62.0 million kgMS, 2.3% lower than last March.

Season-to-date collections were 524.3 million kgMS, 3.0% behind last season.

The South Island's hot and dry conditions continued, impacting milk production. The lack of rain in the Lower South and low sunshine hours in the Central South reduced grass growth and, in turn, milk production.

FEBMARAPRMAY

AUSTRALIA

Fonterra's Australia collections for March were 7.9 million kgMS, a 2.3% decrease on March last season.

Third party volumes decreased, and farm collections increased year-on-year due to new suppliers who have joined this season.

Fonterra collections across Australia for the nine months for the season-to-date are 83.1 kgMS, a 1.2% decline on last season.