16 April 2008

2 minute read

Oceania

Up to 20 per cent of Fonterra’s New Zealand-sourced commodities will be sold through an online trading platform, called globalDairyTrade. In the first year around NZ$1 billion of Milk Powder is expected to be traded, with volumes growing over time. Other commodity groups will be added throughout the year.

Fonterra’s customers will tender for commodity products each month through globalDairyTrade, which will be run by an independent trading manager. The first trading session is scheduled for July.

Once globalDairyTrade is established, Fonterra expects to open it up to its supply partners and potentially its competitors. This is likely to lead to enhanced price transparency and trading through electronic means in the global dairy market. With that an international dairy futures or derivates market, as exists with other commodities such as oil, sugar and coal may develop.

Fonterra Chief Executive Andrew Ferrier says the new channel allows Fonterra and its customers to be more responsive to shifting global prices.

“globalDairyTrade represents a significant shift away from some of the contracting practices that we have traditionally used and is a great example of Fonterra showing industry leadership for the benefit of both our shareholders and customers,” he says.

“The global dairy market is evolving due to changes in supply and demand, as well as in global stock levels. We expect more price volatility for the foreseeable future. globalDairyTrade has been designed as a step along the way to help Fonterra and its customers manage price exposure in this sort of market, but will be equally effective in any market conditions.”

Key sales results from globalDairyTrade will be made publicly available. Fonterra expects that over time a global benchmark will emerge, and farmers and customers will be able to see trends clearly through the season, helping their decision making.

Managing Director Fonterra GlobalTrade, Kelvin Wickham says customers and shareholders have been briefed at a high level on the electronic trading platform and the initial response has been positive.

Mr Wickham says the key features of globalDairyTrade are as follows:

• It is open, fair, objective and simple
• It is run by an independent, expert manager
• It encourages participation by Fonterra’s valued customers
• It is internet based with a global reach
• It will commence with a single product group, on a modest scale, with capability to expand over time
• It will be sufficiently flexible to adapt to changes based on customer feedback

TheCattleSite News Desk