Chairman Henry van der Heyden told a recent dairy farmer's conference that dairy exports from the United States would soon overtake New Zealand, Brazil had gone from being a dairy importer to exporter, and industries in low-cost producing nations such as Chile, Uruguay, Argentina, Ukraine and Russia could expand.
Global supply was growing at the rate of one New Zealand-sized industry every year and it has been estimated the world will consume an extra 150 million tonnes of milk over the next 10 years, with a third of that consumption in China.
In addition, Mr van der Heyden warned fragmentation of the New Zealand industry could weaken Fonterra's dominant position.
"Competition for milk supply in New Zealand is healthy. But reverting to what our industry looked like in the past is very dangerous for the future of New Zealand dairy farmers,'' he said.
Mr van der Heyden's comments were made in the context of the ongoing capital restructuring debate, after shareholders rejected a proposal to float part of the company.
One aspect of the debate which has not provoked much discussion to date was adding value to shareholders' investment, an issue he said could be difficult to achieve, given the rejection of the partial float.
Doing nothing about capital restructuring was not an option.
"If we do nothing we might as well write off the years of work which went into creating Fonterra and getting us where we are today.''
Mr van der Heyden said competing countries were also using new technology. China, for example, was using technology adapted from missile storage and metal extrusion to produce UHT milk.
Multinational companies were focusing on the growth sectors such as dairy, health and nutrition.
Mr van der Heyden believed that in 15 to 20 years Fonterra would be collecting between 1.6 and 1.8 billion kg of milk solids from 4000 farms, most with herds of over 1000 cows.
It would be marketing 3 million tonnes of products sourced from New Zealand and another 3 million tonnes from offshore partnerships, investments and alliances.
At present, it collects 1.2 billion kg of milk solids from about 11,000 farmers and sells 2.87 million tonnes of product.
