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Fonterra to cut milk prices by month end

Wednesday 11th January 2012

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Fonterra Cooperative, the world’s biggest dairy exporter, will cut the wholesale price of milk to retailers at the end of the month.

The cut comes after the dairy cooperative put a freeze on local consumer prices and absorbed cost increases in the face of a public backlash over rising retail milk prices. Fonterra expects the lower wholesale milk price will be passed through to consumers, though that’s a decision for retailers, a spokesman told BusinessDesk in an emailed statement.

“Ultimately it is the retailer that sets the retail price for milk for New Zealand consumers,” the spokesman said. “Fonterra Brands New Zealand has notified retailers that there will be a reduction in wholesale milk price effective 30 January.”

Still, Fonterra is unsure whether the decline in wholesale milk prices will last as international prices are poised to increase.

“We will review it like any other product,” the spokesman said.

Global dairy prices have been at elevated levels for the past two years, underpinning a record pay-out to farmers last year.

Still, the price of dairy products sold on Fonterra online trading platform has declined in the past two auctions. The latest GlobalDairyTrade event on Jan 4 showed a 0.7 percent decline in the GDT-TWI Price Index to an average winning price of US$3,654 a metric tonne. 

That represents a 24 percent decrease in the GDT-TWI Price Index from when prices were at a three-year high in March 2011 - an average price of US$4,826 a metric tonne, which was the highest average since the auctions began in July 2008.

Whole milk powder has fallen 22 percent from a peak high in March 2011where it had an average price of US$4,573 a metric tonne to US$3,554 at the most recent sale.

New Zealand sold $11.67 billion of dairy products, including milk powder, butter, cheese, casein and caseinates, in the 12 months ended Nov. 30, according to government figures. That accounts for about a quarter of the nation’s $47.25 billion of annual exported goods.

Fonterra exports about 95 percent of its production.


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