1. Industry information K Coetzee August 2013

2. Contents International economy International dairy situation SA economic situation SA dairy situation

3. Global growth Slight improvement in 2013/ 2014 Developing countries grow at higher rate Source: WEO update, July 2013

4. FAO food price indices, Jan-10 – Jul-13 Increase in grain prices in 2012 Followed by dairy prices from mid- 2012 and in the first quarter of 2013 Source: FAO, 2013

5. Global milk production Source: IDF, November 2012

6. Production growth 2013 vs 2012 Europe –3 months -1,4% USA –4 months =0,2% Australia –5 months – 7,0% New Zealand – 3 months -4,2% Argentina –3 months -9,6% Source: CNIEL July 2013

7. Global demand Stable in spite of: –Economic conditions Global exports up 6% on 2011 China demand growth high Source: CNIEL, July2013

8. GlobalDairytrade® Sale price index Dec 2012 – Aug 2013 Prices firmed from mid-2012 Sharp increase since February 2013 Reasons Drought in NZ Slow start to EU season Low stock levels Period of adjustment after sharp increase. Source: gDt Index, August 2013

9. International prices, Jan-07 – Jul 13 Dairy prices at all-time record level Fonterra sales prices showed slight decrease Source: USDA, July 2013; Reserve Bank, 2013

10. International producer prices, June 2013 Higher producer prices in most countries Subsidies still play major role Price based on 4,2% butterfat, 3,4% protein. Source: LTO, August 2013; IFCN, 2012; MPO, 2013

11. SA economic activity Co-incident indicator show continuing growth Leading indicator recovered from July 2012 low Source: SA Reserve Bank, August 2013

12. Economic growth 2012 growth varied between 1,2% and 3,1% Weak growth in first quarter of 2013. Source: Stats SA, June 2013

13. Consumer price inflation Jan 07 – June 13 CPI inflation at or below 6% Outlook for 2013 neutral Source: Stats SA, July 2013

14. Interest rates, Jan 98 – June 13 Prime rate low Real rate at lowest level since 2009 Very little upwards pressure Source: Stats SA, July 2013

15. Household income and debt Steady improvement in income Lower consumer debt More affordable debt Unsecured debt ! Source: SA Reserve Bank, June 2013

16. Retail sales growth, Jan 08 – May 13 Positive since 2012 Volatile growth Between 2% and 6% Source: Stats SA, May 2013

17. Monthly raw milk production trend, Jan 2011 – March 2013 Milk production 2011 = 2 639 Mil.L. 2012 = 2 757 Mil. L. Jan – Jun 13 1274Mil.L. (-0,1%) Jan – April 2013 – final May – June 2013 - preliminary. Feb 2012 = 29 days Source: 2011, 2012, Jan – Apr 13 Milk SA returns; May – Jun 13, Milk SA estimate

18. Dairy retail demand & prices Product Annual volume growth (%) To December 2012 To March 2013 Fresh milk-4,8-6,5 UHT7,68,3 Flavoured milk16,07,9 Yoghurt3,92,5 Maas1,518,5 Prepacked cheese21,110.9 Butter4,34,5 Source: SAMPRO based on Nielsen report, June 2013

19. Cumulative net imports of dairy products Source: SARS as supplied by SAMPRO

20. Milk: feed price ratio, Jan 03 – July 13 Historic low Jan 13 Slight improvement since caused by lower grain prices Source: MPO calculations; Feed = 70% YM1, 30% Soy, Safex nearest month prices, producer price MPO survey

21. Producer, processor and retail price indices, Jan 00 – Jun 13 Source: Stats SA

22. Retail price 2 litre milk, Jan 00 – Jun 13