Fonterra’s milk-powder auction gets thumbs up from MAF
July 13th, 2009
Officials at the Ministry of Agriculture and Forestry have concluded no blame for the drop in dairy prices can be sheeted home to Fonterra’s globalDairyTrade online auction. In a briefing note to Agriculture Minister David Carter, MAF says Fonterra doesn’t have the global market power to influence prices and the volumes trading in the monthly sales, at 3.7% of global milk powder production, are “hardly significant enough to cause an overall price movement.” MAF says the decline in prices in the auctions from their inception a year ago lagged behind a general downturn in dairy and has even cushioned powder sold online from the fall in FOB prices.
The findings strengthen NZ’s hand in talks with EU officials over Europe’s export subsidies, since they typically raise globalDairyTrade as part of their counter-argument. Excerpts of the report, released to Profitable Agri-Business show the online trading platform “can be a useful way to discover a competitive market price.” While starting as a mechanism for short-term product markets, the platform “can evolve into an exchange” where trading in the commodities is complemented by instruments such as futures contracts. Federated Farmers dairy spokesman Lachlan McKenzie, who has led calls for an independent review of globalDairyTrade, says the MAF report doesn’t lessen the need for a full assessment. “I give my milk to Fonterra – I want to be sure their overall marketing strategy is extracting the highest prices they can. I question whether an auction allows that.”
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