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Fonterra moves to two milk powder auctions a month

Wednesday 9th June 2010

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Fonterra Cooperative Group, the world’s biggest exporter of dairy products, will add a second online milk powder auction each month and add new items to the sale, including buttermilk powder.

“This will add more depth and credibility and even more transparency around pricing trends,” Kelvin Wickham, Fonterra’s managing director of Global Trade. “With a more frequent pricing signal, market participants will be able to have even more confidence they have up-to-date information on the current balance of supply and demand.”

The second monthly sale will start in September, Fonterra said in a statement today. In this month’s sale on the globalDairyTrade platform, which is managed by CRA International, the average price for whole milk powder fell 3.4% to US$3,790 a tonne. That’s still more than double the trough of July 2009, though the surge in prices is easing while production in the Northern Hemisphere is ramping up.

Last month Fonterra lifted its forecast pay-out for next season to $6.60 per kilogram of milk solids, while warning that market volatility could erode the surge in dairy prices over the past year.

The cooperative will add buttermilk powder starting on August 3 and will offer two new specifications of existing products – high heat/heat stable skim milk powder and anhydrous milk fat in 1,000 kilogram bulk packs, it said.

Since its inception, some 500,000 metric tonnes of product worth US$ 1.5 billion has been sold on the globalDairyTrade platform. There are now 280 qualified bidders from 56 countries, up from 107 when the auction was set up. Between 100 and 140 active bidders participate in each event, with about 65% of them going on to win product.

Wickham said Fonterra is forecasting to sell 530,000 metric tonnes of product over the next 12 months, or approximately 24% of Fonterra’s New Zealand production.

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