Sales on Fonterra’s trading platform top $1 billion

Posted by Daniel Palmer on 11th January 2010

Sales on Fonterra’s internet-based trading platform, globalDairyTrade, have reached $US1 billion over the 19 trading events since launch in July 2008, with the world’s biggest dairy exporter aiming to create a futures market for dairy products.

The site, introduced to help Fonterra and its customers manage price exposure in the market, was criticised in its early days, but globalDairyTrade Manager Paul Grave said the criticism had now largely disappeared.

“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,” he said. “We now know dairy markets fared no differently from other commodity markets.”

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.

Mr Grave added that 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,” he suggested.

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 NZ giant said they were 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 concluded.