Dairy prices have remained steady overnight on Fonterra’s monthly online-dairy auction. Fonterra is now publishing a dairy price index, which shows the percentage change in the average price of a “basket of products’ traded on its internet auction platform. This was down 0.8 per cent after last night’s trading reports The NZ Herald.

The new index, known as the “gDT-TWI” (globalDairyTrade Trade Weighted Index) takes changes in the online auction price and weights them based on total international dairy product trade flows. Paul Grave, globalDairyTrade Manager said the index was a good headline number for the state of the market.

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Milk powder prices surged between 21% and 25.5% in Fonterra’s April online auction as supply tightened towards the end of the Australasian production season reports interest.co. Milk powder prices have now more than doubled from their lows in July 2009 and are now less than 10% below their peak levels, raising expectations that Fonterra can increase its payout in the 2010/11 season and boost regional economies.

Fonterra’s current commodity milk price forecast is NZ$5.70/kg for the 2009/10 season, with the prospect of a further 20-30 cents of dividends from profits to lift the payout to around NZ$6/kg. The strong result helped boost the New Zealand dollar by almost a cent to 70.6 US cents in early Wednesday trade, although the currency had fallen overnight before the auction result around 7am.

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NZX will be pipped at the post in launching dairy derivatives by Chicago-based CME, the world’s largest futures exchange, which announced today it will begin trading international skimmed milk powder futures and options contracts from May 9, a month ahead of NZX’s plans to launch similar products reports Stuff.

NZX this month announced a timetable for roll-out of various dairy derivatives, starting with whole milk powder futures in June, skim milk powder futures and anhydrous milk fat futures in September, and options on dairy futures from 2011.Fonterra has laid the groundwork for New Zealand-led global dairy derivatives through the successful creation of its globalDairytrade auction platform.

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A “stable” result from Fonterra’s online global auction was a good result, reports Paul Grave “globalDairyTrade“  manager. Most interest was on how the first sale of Skim milk powder would feature at auction, in a period where prices have appeared flat. But the result of an average price of US $2927 per tonne was in line with recent sales and reflected a stable price indication in the market.

 Buyers seem to focus on the short to medium term with their purchases. Whole milk powder bucked the recent weak trend in prices with a 0.8% ($25/t) rise in value to US$3218 but Anhydrous milk fat fell by 5.4% to US$3959 per tonne. The next auction will be held on April the 6th.

Fonterra wants other large dairy companies to join its website auction for milk powder reports The Manawatu Standard. The co-operative is now selling about 20 per cent of the milk powder it produces on globalDairyTrade, but it wants to expand the web-selling mechanism. The trade manager of globalDairyTrade, Paul Grave, said web sales were a tool to manage global uncertainty over dairy prices.

“In forward sales, someone wins and someone loses. If a customer loses, they are not happy and Fonterra doesn’t want an unhappy customer. If Fonterra loses, our shareholders aren’t happy.” The price of milk powder used to change by a few hundred United States dollars a month, but now it can be US$600, Mr Grave said. “We can’t live with those fluctuations.”

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The price of whole milk powder fell for a second month in Fonterra Cooperative Group’s online trading auction amid expectations of increased output from northern hemisphere producers reports Stuff. The average price for whole milk powder fell 1.6% to US$3,256 a tonne, according to the globalDairyTrade website managed by CRA International.The price of anhydrous milk fat dropped 7.9% to US$4,183 a tonne.

“This result is positive given that over the last month dairy prices have been under pressure in Europe and the US,” said Paul Grave, globalDairyTrade manager. Prices are still high by historical standards, he said. The price decline in consistent with the ANZ Commodity Price Index, released yesterday, which showed dairy prices dropped 2% in January while most other New Zealand commodities gained.

globalDairyTrade, Fonterra’s internet-based sales platform, concluded its December trading event this morning (NZT) with the average price for Whole Milk Powder up 3.6%. The trading manager, CRA International, advised Fonterra that the average price achieved across all contracts and contract periods for Whole Milk Powder (WMP) was US$3,560 per tonne FAS. This was US$123 per tonne higher than the November event. Prices ranged from US$3,370 per tonne FAS to US$3,760 per tonne FAS.

Paul Grave, globalDairyTrade manager, said the market continued to be underpinned by tight supply conditions.“However, the economic outlook is still relatively fragile. A sustained recovery is reliant on strong consumer demand,” Mr Grave said.“WMP prices have risen by 95% since July. While the outlook remains positive, we expect more volatility as a result of supply and demand responses to this large price increase.”

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Surging dairy prices are ripe for a fall early next year when European and American farmers resume production. Until then, Fonterra wants to iron out the increasingly volatile market reports Stuff.  Fonterra managing director of global trade Kelvin Wickham says the giant dairy co-operative is “happy to be realising gains in the market”, but a pickup in supply when European and American farmers come on board will test the demand level in emerging markets and probably lead to a fall in dairy prices.

“Prices have moved above long-term sustainable levels. It’s about that point where these prices are interesting for farmers to produce milk,” Wickham says. The price of Fonterra’s milksolids jumped to a 13-month high on Fonterra’s dairy auction website globalDairyTrade, and have surged some 88 per cent from their low in July. Dairy prices have climbed for seven straight months and are 44 per cent stronger than their low in February, according to ANZ’s Commodity Price Index.

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Fonterra will review its payout to farmers next week after a 13.7 per cent rise in this morning’s online auction of whole milk powder reports Stuff. The average price on whole milk powder sold on globalDairyTrade rose for the fourth consecutive month to US$3437 (NZ$4758) per tonne, US$415 per tonne higher than the October auction.

Today’s result could be seen as a vindication of the auction criticised by Open Country Dairy for forcing prices down during the depths of the downturn because it was too transparent. Nigel Kuzemko, Fonterra’s commercial and strategy director, could not say how the rise would impact Fonterra’s forecast of $5.10 per kg of milksolids, which was revised from $4.55 after the September rise.

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globalDairyTrade, Fonterra’s internet-based sales platform, concluded its October trading event this morning (NZT) with average prices for Whole Milk Powder up 5.7%. The trading manager, CRA International, advised Fonterra that the average price achieved across all contracts and contract periods for Whole Milk Powder (WMP) was US$3,022 per tonne FAS. This was US$164 per tonne higher than the September event. Prices ranged from US$2,825 per tonne FAS to US$3,095 per tonne FAS.

Kelvin Wickham, managing director, Fonterra Global Trade, said it was expected prices would need to consolidate after the recent sharp rises. “We’ve seen a rebalancing in the market and we see market fundamentals supporting prices around their current levels,” Mr Wickham said.“In particular there’s been keener demand from customers and a tighter supply situation for most products.”

However it is interesting to note that when this 5.7% increase is adjusted to the NZ currency based on yesterdays rate this converts to a 2.2% fall in price. A graphic illustration all NZ exports are facing with the firming exchange rates. ( Editor)

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