Fonterra boosts internet sales

Photo / Northern Advocate

Fonterra plans to double commodity sales on its internet platform, globalDairyTrade, where it has regular independently run auctions.

"We plan to increase volumes and introduce new products," said Kelvin Wickham, managing director of the globalDairyTrade operation, which sells about $1 billion of whole milkpowder on the platform annually.

The auctions were announced last July as a response to increased price volatility in international markets.

At present the company sells only about 10 per cent of its product online - all full cream milkpowder - and Wickham said the expansion of internet sales would deepen the market. It plans to boost this to 20 per cent of its NZ-sourced product.

Wickham said Fonterra was also looking for other international dairy companies to join the auctions.

"We'd welcome other sellers who want to join in the march to a more stable, less risky future," he said. "The move towards more open and transparent commodity markets is inescapable."

It was better for industry players to have some say in the development of tools for farmers and customers to moderate risk, because otherwise changes could be dictated by non-dairy parties speculating on commodities.

Wickham said commodity markets were facing their most volatile period in 50 years. "Prices have soared and slumped. Demand has waxed and waned," he said. "Farmers have gone from confidence to concern.

"We have all watched the horror movie that is the crumbling of global financial markets and institutions."

But Fonterra still had to get the best price available for its farmers' milk in a global industry making the painful transition from protection and subsidy to a free market.

"Currently, we're stuck somewhere in the middle," he said. "Subsidies and support systems mean farmers don't get the right signals from the market.

"End result, stockpiles which overhang the market, drag prices down and slow any chance of an upturn."

Customers and producers required a transparent market where all parties had access to a valid market price.

The global industry also needed standardisation of contracts for commodity products.

- NZPA