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Whole milk powder price jumps 24% in Fonterra internet auction (Update 1)

Posted in News

The price of whole milk powder jumped 24.2% in Fonterra's latest monthly internet auction, with the weighted average price of US$2,858 per tonne bringing the price back to a level not seen since October 2008. (Update 1 includes Fonterra comments.) Fonterra Global Trade Managing Director Kevin Wickham said the lift in prices was higher than expected. "However, we anticipated whole milk powder prices would lead the recovery because of low global inventories and firming demand," Wickham said. The inclusion of 2,000 tonnes of whole milk powder from Australia in the auction (up from 1,000 tonnes in August) had little downward impact on prices. New Zealand quantities of 19,000 tonnes were the same as in August and July.

"With demand returning, our customers have more confidence in refilling their supply chains. But it remains to be seen whether demand has returned to sustainable growth," Wickham said. The 24.2% price jump in September was on the back of a 25% jump in August after the average price had hit a record low of US$1,829 in July. Fonterra began the internet auctions in July 2008, with an opening average sale price of US$4,395 per tonne. Wickham said that from November 3, the auctions would include anhydrous milk fat (AMF), which was in line with Fonterra's plans to offer an expanded range of products to be sold via the web-based auctions. "This will provide for AMF the same transparent market price that globalDairyTrade is already providing for WMP," he said. The next auction will be held on October 6.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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1 Comments

In the interests of providing

In the interests of providing some balance:

The inclusion of 2,000 tonnes of whole milk powder from Australia in the auction (up from 1,000 tonnes in August) had little downward impact on prices. New Zealand quantities of 19,000 tonnes were the same as in August and July.

But against the pattern of increasing total volume as the season progressed last season: July 2008 - 11,000 tonnes, August 2008 17,500 tonnes and September 2008 - 25,000 tonnes.
Contract 1 (November delivery) 2008 - 12,000 tonnes. Contract 1 (November delivery) 2009 - 5,000 tonnes.

The total offered in the current auction was down 4,000 tonnes on the amount offerred a year ago. So much for Fonterra's stated intention of increasing the volume of powder sold through auction - July and August started down that path but the trend has certainly reversed in this auction.

Also of interest may be this Question and Answer that was on the Global Dairy site, but is now no longer:

Question 2.10 Will it be possible for Fonterra to influence prices by placing only a small volume on the trading platform?

Its not in Fonterra's interest to do so. Fonterra's interest is to allocate the available milk volume among product groups and between sales channels so as to best meet customer demand. Reducing the volume placed on globalDairyTrade simply means greater volume of other products would have to be sold through other means.

Fonterra's interests are best served by ensuring the complete integrity of global DairyTrade as a sales channel. To achieve this we will be publishing every month an updated twelve month forward forecast of available volume so that customers are fully informed.

I have looked but am not aware of where to find Fonterra's twelve month forward forecast of available volume.

I just cannot see where

I just cannot see where the demand would come from to sustain such a price rise.

My belief would be that speculators are driving up commodity prices in anticipation of a global recovery and inflation...taking dairy in the surge.

My opinion would be that the recovery has over run fundamentals and some form of correction will(is) happen (ing) over the next couple of months, taking commodity prices back with it.

What the hell, heres hoping

What the hell, heres hoping it filters through to all product ranges. Nice to see a glimmer of a smile on my hardworking dairy farmer mate down the road. We need this bad. Looking around at my own family, only one of which runs a dairy farm, we all depend hugely on dairy income filtering through to us. We have all been holding off spending because we have been scared this was going to get a lot worse. Its not going to give me confidence to buy a couple of big items I have been needing for the farm just yet though.

NZ has been saved. Now

NZ has been saved. Now let us get back to heavy borrowing to buy houses, and hope that we aren't spending too much more than we earn.

Yup exporters make the money

Yup exporters make the money importers spend it. Including importers of debt. However we cant trust the crooks that run the big companies so we dont what a piece ot the sharemarket. Only way out. Property.

Farmer Will ,got this off

Farmer Will ,got this off denninger,sound familiar?

Until now, banks have been able to keep a lid on commercial-real-estate losses by extending debt when it has matured as long as the underlying properties are generating enough cash to pay debt service. Banks have had a strong incentive to refinance because relaxed accounting standards have enabled them to avoid marking the value of the loans down.

http://www.stuff.co.nz/business/2826997/PGC-turns-up-the-intrigue

http://www.stuff.co.nz/business/market-data/2825978/PGG-seeks-new-shareh...

I think PeterR has hit the nail on the head with the Auctions, also Key is sending troops to Afghanistan and other deals with the USA, I suspect they are trying to moderate the weakness in the dairy markets,hopefully it works.

Spain

http://www.safehaven.com/article-14360.htm

Your links are always a

Your links are always a good read Andrew. It leaves one wondering how badly exposed our Aussie banks are to the rural sector, I mean they arent exactly going to yell it from the rooftops are they.
Interesting idea that JK is out there pushing dairy for help in Afganistan. Probably right. He is a dealmaker. He did the chinese dairy deal a few months ago.
PGGW is a cot case, it looks like we will have another name change. How does PggwElders sound. (maybe pigwelder isnt a goer) I hear Elders are selling a few items and fueling their warchest. Wrightson is a great business, but so badly serviced by its various owners year after year, going right back to Dalgeties, WrightStephensons. No one seems to be able to get it right.

may be watch the talleys

may be watch the talleys in relation to wrightsons

It goes like this, a

It goes like this, a client seeks for a keyword on Google. You make published an article which targets this word and have subjected it to a internet site which Google likes. The customer finds your article on page one, reads it, clicks on your website link, and calls your website. All going well, you will have about affiliate link click-throughs, and some sales in there! That's the beauty of affiliate marketing.:)