Fonterra's DairyTrade Sales Hit $US 1 Billion

With the recent addition of Anhydrous Milk Fat, and Skim Milk Powder commencing early in 2010, Fonterra’s annual sales on the platform will exceed 400,000 tonnes of product, or around 20% of Fonterra’s 2008/2009 production.

11 Jan 2010 --- Sales on Fonterra’s internet-based trading platform, globalDairyTrade, have reached $US1 billion over the 19 trading events since launch in July 2008.

The milestone reinforces globalDairyTrade’s establishment as the global market place that discovers a reliable and trusted market reference price for dairy products.

With the recent addition of Anhydrous Milk Fat, and Skim Milk Powder commencing early in 2010, Fonterra’s annual sales on the platform will exceed 400,000 tonnes of product, or around 20% of Fonterra’s 2008/2009 production.

Kelvin Wickham, Fonterra managing director, Global Trade, said the market-based pricing globalDairyTrade offers would facilitate the creation of a futures market for dairy products like those that exist for other commodities.

The NZX has confirmed globalDairyTrade Contract Period 1 will be the settlement price for its Whole Milk Powder futures contract, which will begin trading in the first half of this year.

globalDairyTrade manager Paul Grave said participation in the monthly trading events had exceeded expectations.

“We now have over 250 registered bidders from 56 countries and it is not uncommon to have over 100 bidders participating in an event. That may not sound like a lot for those familiar with, for example, the grain or sugar markets, but in the relatively small dairy market it is a good level of liquidity.”

Mr Grave said the criticism directed at globalDairyTrade a year ago had now largely disappeared. That criticism was due in large part to the fact the platform was launched just as the global financial crisis began.

“Some commentators credited globalDairyTrade with crashing the world’s dairy markets and it took them some time to realise that all markets were undergoing a sharp correction. We now know dairy markets fared no differently from other commodity markets.”

Mr Grave said globalDairyTrade was the only channel through which volumes on offer were sold and Fonterra entities were excluded from bidding in the monthly events. A forecast of volumes expected to be offered was published 12 months in advance.

Fonterra is open to other sellers participating on the trading platform.

“Having other sellers participating would give an added level of liquidity and therefore, credibility,” Mr Wickham said.