Whole milk powder price down 7.1% in latest Fonterra internet auction (Update 2, corrected)

The average whole milk powder price at Fonterra's latest monthly internet auction fell 7.1% to NZUS$3,309/tonne in January from December. (Update 2 includes second Fonterra statement on globalDairyTrade sales.) The average price is still 81% above its low of NZUS$1,829/t in July last year and is up 64% from January 2009. Update 2: On Friday, Fonterra released a statement saying sales on the globalDairyTrade platform had passed US$1 billion (NZ$1.6 billion) since the trading events began in July 2008. Fonterra said the the recent addition of Anhydrous Milk Fat, and Skim Milk Powder (in early 2010) to the sales platform will mean annual sales through the internet auction will exceed 400,000 tonnes of product, or 20% of its 2008/09 production. Fonterra also said the NZX had 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. The release is included below. Here is the initial release from Fonterra:

The trading manager, CRA International, advised Fonterra that the average price achieved across all contracts and contract periods for Whole Milk Powder (WMP) was US$3,309 per tonne FAS. This was US$251 per tonne lower than the December event. Prices ranged from US$3,230 per tonne FAS to US$3,555 per tonne FAS. Paul Grave, globalDairyTrade manager, said this represented a minor correction after five months of price rises totalling 95%. "This is one signal that the markets are now more closely in balance. The result is within the range of price movements we would expect to see in the current market environment." "Consumer demand is returning and global supply remains tight," Mr Grave said. For Anhydrous Milk Fat (AMF), the average price achieved across all contracts and contract periods was US$4,539 per tonne FAS. This was US$190 per tonne, or 4%, higher than the December event. Overall pricing decreased 5.5% across both AMF and WMP. The next globalDairyTrade trading event will be held on February 2, 2010.

Here is the subsequent release:

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.