Fonterra says at the peak of this season a record amount of milk has been turned into value added products, like cheese and longlife UHT milk.
In late October, Fonterra collected almost 87 million litres- its peak milk supply for the 2015/16 season, which was down by about three percent down on last year's amount.
Global operations managing director Robert Spurway said the drop in milk was expected and was in line with the co-operative's expectation that overall supply would fall by about 5 percent this season.
He said value added products had been a focus, and new processing plants had opened all over New Zealand.
"We have the Clandeboye mozzarella plant up and running. We've also invested in UHT in Waitoa and expansion at our cream cheese facility at Te Rapa, so all those assets are now running milk, which gives us a higher proportion of milk going into those value add food service consumer facilities."
He said making food service products was fully led by demand.
"We're seeing growth across Asia and China in particular, as consumers in those markets move towards more westernised diets and more out of home eating, so it's an exciting time for Fonterra," he said.
Mr Spurway said the company's product mix was adjusted every fortnight, following the global dairy trade auction results.
He said while more milk was being turned into value add products, the company was not limiting the amount of milk powder it made because of low international dairy prices.
"We're not restricting the amount of product we're making. Our forecast for the milk price this year is we believe we'll see a recovery in whole milk powder and skim milk powder across the year, but it would be unwise to make any more specific comments on where we think the market will head to," he said.