KEY POINTS:
Fonterra has put thousands of tonnes of milk powder worth tens of millions of dollars up for sale during the first run of its online trading platform.
The dairy co-operative - the world's biggest dairy exporter - launched its online sales platform in April in an attempt keep up with volatile markets and set a global reference price for dairy products.
A total of 11,000 tonnes of whole milk powder were up for sale yesterday.
After nearly four hours of bidding the winning price for the 5000 tonnes on sale for shipment in September was confirmed at US$4330 a tonne, which if it was all sold would total US$21,650,000 ($28,487,800).
Fonterra said the clearing price for September was in line with current market prices but did not confirm any final sales volumes or the winning prices for two later delivery periods.
Managing director GlobalTrade Kelvin Wickham said the company was pleased with the first trading event.
"The level of interest and the result is a vote of confidence from our customers in the new sales platform," Wickham said.
"It is early days yet, and we expect some bumps along the way, but this is a very positive start."
The online sales process would be run once a month, with the available volumes announced in advance.
Milk powder sales during the first year were expected to be worth about $1 billion.
Online volumes were expected to grow, with other commodity groups added during the year and up to 20 per cent of New Zealand-sourced commodities sold through the system.
During an online sale customers make volume bids for different product specifications and delivery times with a number of rounds used to adjust the price to meet the level of demand.
World economic growth, reduced supply, drought in Australia and biofuel production had seen dairy commodity prices soar. The ANZ Commodity Price Index for dairy products rose for 15 consecutive months from 130.5 in September 2006 to hit 291.9 by November, before falling back to 256.7 in June.
A negotiated contract system could not react as fast to the changes in the dairy market, although bilateral negotiations would continue to account for a significant volume of Fonterra's sales.
More than 80 per cent of Fonterra's largest commodity whole milk powder customers have registered to use the globalDairyTrade online service.
The sales system would be run by an independent trading manager and could in the future be used by other companies.
A web of milk powder sales
* Fonterra potentially sold 11,000 tonnes of whole milk powder in the first run of an online sales platform.
* Whole milk powder sales are expected to hit $1 billion in the first year.
* Customers make volume bids with a number of rounds used to determine the final price.
* Online sales aim to keep up with volatile markets and set a global reference point for products.
