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EXCLUSIVE: Fonterra's Ferrier sees dairy prices stabilising, long-term growth

Friday 12th February 2010

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Andrew Ferrier, the head of Fonterra Global Cooperative, expects dairy prices to ease back a bit after almost doubling through the last five months of 2009 before they find a “new level.” 

Dairy prices have come back in the first two months of this year after surging 95% from their low in July on the dairy exporter’s online auction platform, and chief executive Ferrier said he expects them to stabilise.  

“It would not be a surprise if it settles down a bit, then finds a new level,” he said, speaking at the open day for the fourth drier at its Edendale plant near Invercargill.

“Given how fast it’s jumped up last year some consolidation is to be expected.” 

The average price for whole milk powder dropped 1.6% to US$3,256 a tonne on Fonterra’s global DairyTrade website this month following a 7% decline in January.

The world’s largest exporter of dairy products expected prices to slow down in March/April as European and American milking seasons began after a period of surging prices caused by buyers restocking depleted inventories.  

Ferrier said the dairy cooperative is well-positioned to “continue to grow” as the global economy continues to recover and demand for the company’s products resumes its normal pace.  

“Economically, we’re in a very good space – all of our long-term projections show healthy dairy prices,” he said.

Providing stability and liquidity will be the stock exchange’s new dairy futures market, which NZX expects to launch in June. In December, the bourse operator said it will use the Fonterra platform as the leading price indicator for its futures contract. 

New Zealand’s dairy exports tumbled in 2009, with milk powder, butter and cheese sliding 13% to $8.02 billion in the 12 months through December, and casein and caseinates sank 14% to $839 million.  

Dairy products account for about 22% of the country’s annual $39.7 billion worth of exports.

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