The country's largest dairy exporter has welcomed the pending
launch by the New Zealand Stock Exchange of a dairy futures
market, saying it wants such a risk management tool.
Fonterra's globalDairyTrade manager Paul Grave said that when
Fonterra established the internet-based monthly
globalDairyTrade auction, one goal was to have a system in
which derivatives could determine a market price.
"We would see it as a positive that they have chosen our
index," he said.
The exchange confirmed this week it hoped to have a dairy
futures market operating by June, initially for whole milk
powder, but extending to other dairy products.
The future's settlement price would be set by Fonterra's
monthly globalDairyTrade auction.
Fonterra has started trading anhydrous milk fat and plans to
add skim milk powder to the monthly auction.
Both were products into which futures trading could be
extended, he said.
Mr Grave said producers and customers had wanted for some
time a futures trading platform and a price reference point.
Dairy markets were likely to become more volatile because of
the weather, exchange rates, herd retirement, the
availability of fresh milk, subsidies and the price of grain
and oil.
The New Zealand-United States exchange rate alone had moved
NZ5c in three weeks, he said.
