Fonterra milk powder falls for second month

Wednesday 3rd February 2010

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.

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, though it’s still some 78% higher than its low in July. The price of anhydrous milk fat dropped 7.9% to US$4,183 a tonne. The dairy exporter tagged skim milk powder as the next product to hit the platform in March.

“The variation between months is nothing more than what you’d normally expect in commodity prices – some are a little bit up, some are a little bit down – that suggests the market’s reasonably steady at the moment,” said Kevin Wilson, rural economist at ANZ National Bank. “What we don’t want to do is overcook it again.

The price decline is consistent with the ANZ Commodity Price Index, released earlier this week, which showed dairy prices dropped 2% in January while most other New Zealand commodities gained.

Fonterra expects dairy prices to begin easing when the milking season starts in Europe and North America in the next couple of months after prices surged as buyers restocked depleted inventories after running them down in response to the global financial crisis.

Paul Grave, globalDairyTrade manager, said dairy prices have been under pressure in Europe and the U.S., but are still high by historical standards.

ANZ National’s Wilson said the introduction of skim milk powder is part of Fonterra’s plan to have the platform used as a benchmark index for a futures market. In December, NZX Ltd., which operates the stock market, said it will use globalDairyTrade as the leading price indicator for its futures contract when it begins around April or May of this year.

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 mllion.

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

Businesswire.co.nz

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