Fonterra welcomes dairy futures plan

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.


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