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NZX plans to introduce milk futures

Rural News
NZX plans to introduce milk futures

Stock exchange operator NZX is launching a futures market for trading whole milkpowder, but says the contracts will be settled only in cash, rather than physical delivery reports Business Day. The nation's main dairy company, Fonterra, supplies nearly 40% of the global whole milkpowder (WMP) market and the exchange said "market volatility" had led to demand for a risk management tool similar to other commodity markets. "It's a natural fit for NZ to host the trading of milk derivative contracts, and to meet the global demand for risk management tools in the dairy industry," said NZX's new head of traded products, Fiona Mackenzie. Ms Mackenzie has been setting up NZX's Auckland office to oversee a planned suite of new tradable futures and commodities products. NZX has plans to launch equity options, index futures and dairy commodity derivatives products over the coming year. It has said it will consult farmers and market participants over details of the futures contract, with trading expected to start by the end of the year. It will open a new clearing house on November 20. Fonterra , which controls about a third of the world's dairy exports , plans separately to expand its own online auction system, known as globalDairyTrade, as a platform for international markets. The world's largest and most diverse derivatives exchange, Chicago Mercantile Exchange Inc, earlier this year launched deliverable nonfat milkpowder futures and options on those futures, in parallel with existing contracts for cash-settled futures in the same skim-milk commodity. The contracts are for 44,000 pounds (20 tonnes) of Grade A milk. These contracts trade 23 hours a day. Some are bought and sold by speculative investors, but others are used by dairy farmers trying to manage the risks posed by uncertain milk prices.

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