Fonterra says that milk production in Australia dropped 8.4 percent in July compared with the same period last year, while the Kiwi dairy giant's milk collection from the region plunged 25.5 percent in August.
High farm input costs, challenging seasonal conditions and increased competition in Australia have hurt its milk supply, the cooperative said.
- Fonterra gets back to basics as it tries to move on from $605m loss
- Fonterra cuts bonuses, freezes 6000 top workers pay
In New Zealand - where Fonterra sources most of its milk - production rose marginally in August, amid slightly higher rainfall and better pasture cover.
New Zealand milk production rose 0.8 percent in August from a year ago, while collection grew 1.1 percent, the dairy company said in a statement.
The company's dairy exports to China grew 14 percent in July, Fonterra said, driven by increased demand for products such as skim milk, cream, condensed milk and yoghurt.
Last week, in a highly anticipated turnaround plan, the dairy company called a halt to its ambitious and ill-fated overseas expansion and pledged to turn its focus back home, after posting a record annual loss.
The company has been buffeted by strong criticism from the 10,000-plus farmers who make up its cooperative as its foray into countries like China and value-added consumer products hurt its profits in recent times.